RealtorWhoCarries
Marksman
I just stumbled upon your post and i am not plugging my services but i believe i have answers that most Realtors will not tell you as it would conflict with their payday. I love this forum as i can ask questions about firearms education and know that not only will i get opinions from average Joe's, but also well qualified experts. I humbly say that i have sold over 400 homes, i am a Dave Ramsey Special Markets agent (which does influence a lot of my advice because....well, how do you say??? It's right just because it's right. And now that i am one of the few who successfully negotiates mortgage settlement for people who are in mortgage trouble, i can easily look back and see where they went wrong. Not that I'm a scholar, i just have the benefit of learning from their mistakes. That being said I will give you the same advice i would give my mom, brother and children (and i love them very much)Hi folks (again),
(Not soliciting realtor recommendations with this)
My wife and I have begun the search for our first home!
But I have a few questions that I'm just not sure of.
#1) Should the price range we're looking in be inclusive of our downpayment or exclusive? Pretend that we have $15k to put down, and pretend our price range is in the $150k range. Should we bother to look up to $165k and then effectively have a $150k mortgage....or make $150k the ceiling and then have a $135k mortgage? It's amazing the difference in a home that $15k can make...
#2) Should we then thus include this $8k tax rebate into the mix as well...to give us another $8k range to "play" with while we're looking? My gut on this one is "no" because it's only a 1-year deal and the chances of throwing the rebate back into the principle of the loan is about 50/50...
#3) Should we even bother looking at real estate right now due to the economic situation in the country today? It WILL get worse...especially as inflation sets in further. The jump in gas prices this week...due to the devaluation of the dollar... Wife and I have relativel steady jobs (She works for a school corp, I work for a 4-letter government agency); but layoffs in these sectors aren't unheard of. Rare in our particular sectors, but not unheard of. I'd rate the chances of being layed off in the next few years, for either of us, at 10%.
#4) Only debt load we have is $10k on her student loans; should we work on knocking that out 100% BEFORE we take on a mortgage?
Thanks.
-J-
#1 Homeownership is a blessing to those who are prepared but a curse to those who are not. How do you prepare? Excluding your home, be 100% debt free, including student loans, car payments etc; Also have 3-6 months of bill money in the bank to be able to handle the unexpected. Murphy will show up and move into your 3rd bedroom and you should be ready. This advice flies in the face of my mortgage lenders who calculate how much my buyers can afford based on a formula that does not factor in the reality of life. Roofs will leak, furncace will go bad, actually the list is endless, people get sick can't work etc. etc. etc.
#2 How much house can you afford? Dave Ramsey would say that your house payment should not exceed 25% of your monthly take home pay, on a 15 year fixed mortgage. There are a lot of people who will say that his take is unrealistic. In my humble opinion, people who say that are either spoiled and want what they want when they want it or have never had to endure a situation where scaling back was necessary. Those people are nieve because the too will be tested (I'm currently negotiating a mortgage settlement on a $1million home on Geist, point being Murphy doesn't care who you are so when he shows up you have to be able to handle him) In my experience, i have never had to deal with a mortgage settlement for someone who followed Dave Ramsey's principles. His guidence is sobering and flies in the face of our "Must have it now and i'll work out the rest" society.
#3 As for counting on the $8K tax credit. If GM can lose their pensions, California isn't paying state tax refunds, they could stop giving the $8k credit. Is it likely? No but can it happen? Yes. Therefore, treat the $8k as a freebie and do not factor it into your ability to pay or your borrowing power.
#4 I'm 41 years old and there has never been a better time to buy real estate in my lifetime. It is simply amazing, but not all people should be buying. However, if your job is stable, you are debt free, and have 3-6 months of bill money in the bank (accessible not in investments) then go take advantage of somebody else's misfortune. People get ahead when there is blood in the streets, as Andrew Carnegie said, and there is plenty of blood in the streets right now and will be for at least 2 more years. To recap this point, if you meet these stabiltiy requirements, then by all means go buy RIGHT NOW. I have met some people who say, “We’ll just wait until the market gets better.” And I look at them and respond, “Why, so you can pay more?” They just look at me and I can see their wheels turning and I can see the light bulb go on. They get it! They recognize the rare opportunity to profit and get ahead. Not to mention that interest rates are at absolute HISTORICAL LOWS. I tell them right now it’s a buyer’s market which means the buyer’s have the advantage and if they wait until the market gets better, they will lose that advantage because by that time, the sellers will have the advantage, not the buyers. BUT BY ALL MEANS DON'T MAKE A PREMATURE MOVE IF YOU ARE NOT READY. YOU WILL LEAVE TO REGRET IT. DON'T THINK YOU ARE GOING TO MISS THE WAVE. THERE WILL BE ANOTHER ONE COMING. Remember, homeownership is a curse to those who are not prepared.
I hope this helps. Good luck and God Bless
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I am reading other posts and now seeing what others have said, and want to chime in my additional 2 cents- I would really caution you as some people are boardering on a spirit of fear, in that they are saying that you might miss the deal of a lifetime. I urge you not to buy into this as in my humble opinion it is not sound advice as it only addresses the numerical equation of the situation. It does not address the life portion of reality and by that i mean, you can't control everything, but you can control what you can control. IN other words, don't take on more debt when you haven't obligated your current debt. It's better to have only a student loan and you have a job loss or a catastrphic medical event as opposed to having a big house payment on top of that.
Also, the 30% of gross formula is a customary banker formula instead of a 25% of net formula. That formula too doesn't allow for rainy day recoveries or aggressive saving, which is what really counts because when you have agressively saved, you have way above average cash reserves and then when prices drop, you're not just buying a home, you're building great wealth
As for what kind of properties to look for, i notice some have said to stay away from owner occupied, I humbly say that that is exceptionally short sighted advice. And the reason is that a seller who has been properly counseled by a good realtor will have priced their home at or slightly below market value. The bottom line is that you WILL ABSOLUTELY PAY MARKET RATE...Before you think i'm crazy, let me explain..The market is what the market is. Yes the real estate market is down from 6-12-24 months ago, values have fallen and a new baseline has been established and a new market value has been established and properties have a market value that is set by what people have recently demonstrated they will pay for them. It's worth what it's worth and regardless of what late night TV teaches, you will pay what it is worth, ie market rate. It's like gasoline. Last week it's $2.10/gal and this week it's $1.85/gal. You can't go in and say, gas it dropped and i'm only going to pay $1.50/gal. It doesn't work. So understand that you will pay market rate UNLESS YOU BUY A FIXER UPPER OR A SHORT SALE...That's a whole different lesson..Also, i have to state that some posters have placed an emphasis on ASSESSED VALUE as if that was the same thing as market value. It couldn't be farther from the truth. Assessed value has no bearing at all on what you pay for a property. If it were relevant, i wouldn't be helping people get the assessed value of their property reduced. I don't dispute that people are paying much less than assessed value, but that's becauses assessed value is so high to start with. Bottom line, assessed value is not even a topic that should come up when evaluating the value of a property.
All of my owner occupied homes are worth at or close to what they are priced at, that is because i only work with sellers who are willing to realistic. So to assume that you won't find your home in the owner occupied arena is faulty logic. Hope this helps...
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