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Thread: Scared to Buy a house

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    Featured Member Miss_Luscious's Avatar
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    Default Scared to Buy a house

    Ladies, I am scared shitless to buy a house. I've heard how big a step it is and how long it takes for someone to buy a house and I'm only 21 but I have the opportunity to buy now within the next year or year in a half. I just don't want to get in over my head and I've been researching and researching but I'm still worried I'll fall on my ass. My boyfriend and I are buying a car this year and then when my income tax return comes back we can buy another. Once I'm finished being pregnant, I can get back to dancing and start up with the private parties and my website. I know I can succede with this businees because I treat it as such but I'm still scared about this big step. I have a good realtor and he works closely with the bank. He's getting me a good deal and I can file one of those no doc loans so I won't have to confirm income. Plus he's getting me a good interest rate and I wont have to pay mortgage insurance even though I don't have to put anything down (I may put some down anyway though). I think he's kinda bending over backwards because he knows I'm a stripper but that works in my favor! I guess what I need is some advise from you ladies who have bought a house just so I can get more confident that I can do it. I make enough money and I'm smart with it, all I need is a backbone!
    "A stupid man's report of what a clever man says is never accurate because he unconsciously translates what he hears into something he can understand." - Bertrand Russell

    "It's just a matter of people having low self esteem and being way too easily offended." -Random Guy on a Internet Forum

    Quote Originally Posted by Katrine View Post
    Ya'll bitches need to calm down. Cerously.
    In other words: Boo-motherfucking-hoo

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    God/dess Emily's Avatar
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    Default Re: Scared to Buy a house

    As someone that has bought a house before, I can understand. it's a big commitment. But I think you'll find most financial advisors will say that buying real estate as a primary residence is always a good investment, so don't fret it. I don't think there's any shame in buying a starter house that costs less than what the bank says you can afford to build equity for a house later on. I'm glad I did.

    Just so you know, most realtors work closely with a bank (or rather, a mortgage broker). That's not unusual. It's a mutally beneficial relationship for both of them, if you know what I mean. Also, your realtor works as an agent for you, but the sellers of the house have an agent for them. Your agent can offer any price for a house, but they can't necessarily get you a "good deal" because the buyers and their agent will want the most they can get as well.

    The good deal comes in with the bank and make sure you shop around on mortgages. Bankrate.com is a good reference for rates. You don't have to use your agent's broker, but it's convenient, so that might be worth it to you.

    Honestly, check out the mortgage you have. If it's truly a no doc loan, you will need 20% down. There is another kind of no doc loan that's called a verified no doc loan where they just check to see if you have been working at your current place of employment for 2 years. You don't need much of a down payment for these, but it will be on your record that you are a dancer. This may or may not be a good thing for you.

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    God/dess Lena's Avatar
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    Default Re: Scared to Buy a house

    I bought a house when I was twenty. I see it as an investment... I had cash, I turned it into a house that I can live in and then in 5 years sell for more than I paid for it. It's in a rural area that's starting to be built up - in the next couple of years they're going to be putting in city water, and they're talking about building a real subdivision down the road. I figure about the time it becomes citified enough that I can't stand it here it'll be worth a lot of money LOL

    You do need to have a repair fund though. Just put like twenty or fifty dollars a month in an envelope for things that break.

    Lena



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    Banned Melonie's Avatar
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    Default Re: Scared to Buy a house

    Luscious, there are a couple of other issues to consider. #1 is the real estate market in the particular area you're thinking about buying a house in. Some areas have steady demand for real estate such that you can be reasonably sure that your house will rise in value in the future. But other areas have been hard hit by the bad economy, factory closings, layoffs etc. In these other areas, as unemployment runs out for people who have lost their jobs and can't find others that pay as well, they fall behind in their mortgage payments. Eventually this leads to foreclosures and a lot more houses finding their way on the market than there are qualified buyers for. This causes the value of ALL surrounding real estate to fall. You don't want to buy a $150,000 house if it is going to fall to $120,000 in value by next year!

    The second issue is of course the IRS. When you buy a house the mortgage and deed registration will now be reported as part of the Patriot Act anti-money laundering law and will alert the IRS to this fact. The IRS computers will then look through your tax returns for the past 3 years to see how your reported income matches up to the down payment and monthly mortgage payment you're taking on, plus any other financial issues their computers turn up about you such as bank accounts, investments, car loan etc. If you reported $50,000-$75,000+ in income on past tax returns, no problemo. But if you haven't reported much income and you're committing to $20,000 in closing costs plus a $1000+ per month mortgage payment, plus carrying a $400 a month car payment, plus thousands of dollars in bank and investment accounts, aaaooogah! The IRS is going to wonder where all this unreported money suddenly came from!

    You don't want to find yourself in a situation of having committed most of your ready cash to closing on your new house only to discover that an IRS audit is in the works and that they may expect you to pay $30,000-$60,000-$100,000 in back taxes and penalties on unreported income for the past 3 years. The IRS can also seize your new house and other assets if you can't pay the back taxes. Unlike years past, with the Patriot Act reporting requirements now in effect, it's really difficult to try and spend large amounts of money unless you have previously reported that money as income and paid taxes on it.

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    God/dess VenusGoddess's Avatar
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    Default Re: Scared to Buy a house

    ummm,no. It doesn't quite work that way. My boyfriend works for one of the nations largest mortgage lenders as an account excecutive. He says that the patriot act is designed to identify people, not report on your income. If what you said was true, than lenders would no longer offer alternate or no documentation loans. BTW, The bank he works for specialises in those No doc loans. There is stated income, which means that you "make up" an figure for your income, and the bank will still verify that you have a job, and you have to list your employment. Furthermore, the income you state has to make sense, so a teacher cannot get away with stating 8K a month in income. Then there is a NO DOC loan: you do not list your job or income. Some of these loans you still have to verify assets (money in the bank) and on these loans you need good to stellar credit.
    I also am a loan officer and loan processor working out of my house. If any of you girls need a mortgage or home buying advice, PM me and I will get a loan for you!

    Luscious, there are a couple of other issues to consider. #1 is the real estate market in the particular area you're thinking about buying a house in. Some areas have steady demand for real estate such that you can be reasonably sure that your house will rise in value in the future. But other areas have been hard hit by the bad economy, factory closings, layoffs etc. In these other areas, as unemployment runs out for people who have lost their jobs and can't find others that pay as well, they fall behind in their mortgage payments. Eventually this leads to foreclosures and a lot more houses finding their way on the market than there are qualified buyers for. This causes the value of ALL surrounding real estate to fall. You don't want to buy a $150,000 house if it is going to fall to $120,000 in value by next year!

    The second issue is of course the IRS. When you buy a house the mortgage and deed registration will now be reported as part of the Patriot Act anti-money laundering law and will alert the IRS to this fact. The IRS computers will then look through your tax returns for the past 3 years to see how your reported income matches up to the down payment and monthly mortgage payment you're taking on, plus any other financial issues their computers turn up about you such as bank accounts, investments, car loan etc. If you reported $50,000-$75,000+ in income on past tax returns, no problemo. But if you haven't reported much income and you're committing to $20,000 in closing costs plus a $1000+ per month mortgage payment, plus carrying a $400 a month car payment, plus thousands of dollars in bank and investment accounts, aaaooogah! The IRS is going to wonder where all this unreported money suddenly came from!

    You don't want to find yourself in a situation of having committed most of your ready cash to closing on your new house only to discover that an IRS audit is in the works and that they may expect you to pay $30,000-$60,000-$100,000 in back taxes and penalties on unreported income for the past 3 years. The IRS can also seize your new house and other assets if you can't pay the back taxes. Unlike years past, with the Patriot Act reporting requirements now in effect, it's really difficult to try and spend large amounts of money unless you have previously reported that money as income and paid taxes on it.

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    Default Re: Scared to Buy a house

    I have gone over the pro's and con's of buying a home and I fount that renting is a better chioce and here's why.

    1) you will never own your own home in this country anyway, just don't pay your taxes for a few months and you'll find out VERY quickly who really owns your home. That's where the term "real estate" comes from. Real estate comes from "Royal Estate" or property of the royalty, or government.

    2) It is a lot easier when you want to move when you are renting, just call the landlord and tell him you are planning on moving on such and such a date and that's it ! This it what I just did, I am moving to Fl from Ny Jan 1, 2004

    3) If you are renting and something serious goes wrong: well dries up, roof goes, foundation gives, flood, hurricane, ect - it is not your problem. Either the landlord has it fixed, of move elsewhere. If you own the home, this will a major problem.

    4) When you buy a home you are still renting anyway, you are renting it form the bank, and on average you will pay back 3 times what you borrowed!

    I understand there are unique circumstances where buying a home can be beneficial. I'm not saying that nobody should buy a home. I am going to buy land and build a small home in Hawaii in 5 years because I know I am going to be there for the rest of my life. I am going to buy it cash and pay the taxes for the next 100 years up front (which are only around 200 a year per acre on the island of kauai) I feel a major reason people feel the need to buy a home is simply being materialistic and trying to "keep up with the jonses". People in this country spend money before they even make it, it's crazy! They want everything! I am not trying to discourage you from buying a home, I just think it is a good idea to know your long term plans before making such a major purchase. Buying a house can be the best or worst purchase in your life without proper planning. And like Melanie said the economy is changing in many areas. The explosive market of the late 90's is dwindling to nothing. Interest rates are going back up, property taxes are rising, and job wages are going down. There have been many lagre-scale lay-offs in recent news. This seems to be the new trend for large businesses. Everything is being made either by computer or outside of this country. Our exports are down due to the world-wide haterd of George Bush. I feel this economy is headed for very bad times, and what happens then? Interest rates soar, house prices go down and you can get stuck in a home that you dont want. Also, alot of people are getting out of the major cities and the "rat race of corporate america" and opting for a simpler, healthier and more natural life outside of the cities. I for one can't blame them.

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    Default Re: Scared to Buy a house

    Your business plans are based on your perceptions, and while I don't agree about purchasing
    versus renting that is your belief.

    I question whether any county government in the U.S. would allow any property owner
    to pay their real estate taxes upfront. AS the assessment numbers and tax rate are changed and fixed each year, it is not in any local governments interest to allow you to
    "prepay" your taxes as their wages and expenses (for the government) go up each year.

    Put simply, local government needs stable sources of rising annuity income not a flat
    annuity.

    Hawaii (like certain areas of Great Britan) is an area where land is not sold in fee simple
    but where much of the land is on land leases. You interest in property is not
    in "perpuituity" but is for a time certain, the time certain being the time allowed on the
    land lease.

    The land lease concept is very different thn the owning land fee simple SOP
    that the rest of the U.S. has.

    I might add that owning real estate without debt (and only subject to taxes) is
    an effective method to cap your expenses. (No mortgage = no bank.)

    Some of your views on urbanization, changing economy. and risk in general are an element of
    soundness. It's your conclusions that seem to stray off course.

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    God/dess Emily's Avatar
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    Default Re: Scared to Buy a house

    hey, to each their own...renting works for a lot of people.

    I know people who own property (rent it out) and still rent their primary residence.

    The way I figure is that the money is good now. If you're going to spend it on something, it might as well be something that you can enjoy and will appreciate.

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    Banned Melonie's Avatar
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    Default Re: Scared to Buy a house

    Venus, the reporting of a real estate transaction to the IRS under the Patriot Act/40 state tax enforcement consortium will be done by the state office responsible for property deed registrations, not by the seller, bank or agent. It happens regardless of whether the home is sold for cash, via a standard mortgage loan, or with a 'no doc' loan. The state agency report will include the name and address of the new deed holder (buyer), the sale price/assessed value of the property, and the name of any leinholders i.e. bank/finance company. Based on this state agency report, the IRS will most likely automatically request more financial info from the buyer's bank/finance company if they appear as leinholders. As I understand it, the same basic reporting procedure is followed as with state motor vehicle agencies generating similar reports to the IRS based on issuance of new motor vehicle titles.

    I agree that the decision to buy or rent must be based on individual factors such as ...

    Are you willing to live in the same area for say the next 5 years minimum ? (if not, transaction/agent/closing costs can be significant compared to any appreciation in value)

    Is your federal + state income tax bracket sufficiently high that home mortgage interest and property tax deductions will significantly reduce the amount of money you must pay out in income tax ? (if not, your effective cost of home ownership loses it's advantage versus renting).

    Are you prepared to cough up say $5,000 at any given moment to deal with a serious home repair issue ? (if not, a roof problem or septic problem or water problem could force you to take on a 2nd mortgage and destabilize your financial situation).

    Is the area that you're thinking of buying a house in growing in population, a desireable place for Joe Sixpack to live and work etc. (if not, there is a good chance that future buyers will be scarce and the value of all properties in the area may fall, leaving you with a mortgage for an amount greater than your house can be sold for on the market).

    And of course the original point - do you have enough reported taxable income in previous years to justify having enough money saved to make a down payment on a house plus make monthly mortgage payments in the future ? (if not, an IRS audit may soon follow)

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    Default Re: Scared to Buy a house

    Melonie,they have been reporting realestate transactions long before the patriot act came in affect,as well as the goverment ,irs,could find out about the trasaction by your interest you pay on the loan and venus,no doc or no income verifying loans are also still known by irs and goverment,they are just ways for people to get loans that, are self employed and cant verify income.

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    Featured Member scorpio's Avatar
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    Default Re: Scared to Buy a house

    I am Venus's SO. Listen Up. The IRS can access your finacial info from a lender ONLY if you filled out an IRS form 4806. Most lenders require you to do so, in case they need to pull your tax transcripts and see if you lied about your finances on your application. The bank I work for DOES NOT make you fill out a 4806, so the IRS will not and cannot know your finacial information. I joke around that the lender I work for likes Stripper and drug dealer and gambler loans, but its true! :o


    Venus, the reporting of a real estate transaction to the IRS under the Patriot Act/40 state tax enforcement consortium will be done by the state office responsible for property deed registrations, not by the seller, bank or agent. It happens regardless of whether the home is sold for cash, via a standard mortgage loan, or with a 'no doc' loan. The state agency report will include the name and address of the new deed holder (buyer), the sale price/assessed value of the property, and the name of any leinholders i.e. bank/finance company. Based on this state agency report, the IRS will most likely automatically request more financial info from the buyer's bank/finance company if they appear as leinholders. As I understand it, the same basic reporting procedure is followed as with state motor vehicle agencies generating similar reports to the IRS based on issuance of new motor vehicle titles.

    I agree that the decision to buy or rent must be based on individual factors such as ...

    Are you willing to live in the same area for say the next 5 years minimum ? (if not, transaction/agent/closing costs can be significant compared to any appreciation in value)

    Is your federal + state income tax bracket sufficiently high that home mortgage interest and property tax deductions will significantly reduce the amount of money you must pay out in income tax ? (if not, your effective cost of home ownership loses it's advantage versus renting).

    Are you prepared to cough up say $5,000 at any given moment to deal with a serious home repair issue ? (if not, a roof problem or septic problem or water problem could force you to take on a 2nd mortgage and destabilize your financial situation).

    Is the area that you're thinking of buying a house in growing in population, a desireable place for Joe Sixpack to live and work etc. (if not, there is a good chance that future buyers will be scarce and the value of all properties in the area may fall, leaving you with a mortgage for an amount greater than your house can be sold for on the market).

    And of course the original point - do you have enough reported taxable income in previous years to justify having enough money saved to make a down payment on a house plus make monthly mortgage payments in the future ? (if not, an IRS audit may soon follow)

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    Default Re: Scared to Buy a house

    The IRS is the biggest bunch of criminals out there.

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    Default Re: Scared to Buy a house

    The IRS can access your finacial info from a lender ONLY if you filled out an IRS form 4806. Most lenders require you to do so, in case they need to pull your tax transcripts and see if you lied about your finances on your application. The bank I work for DOES NOT make you fill out a 4806, so the IRS will not and cannot know your finacial information.
    With the increased authority of the Patriot Act, and the ability to use the shared resources of the FBI, CIA, state agencies etc. I doubt that the IRS is going to quietly go away if a US bank tells them that they're not going to release detailed information because their customer has not signed a voluntary disclosure permission form. I would wager that this type of response from a bank would only heighten and widen the level of IRS interest. Maybe you're right, but I wouldn't want to bet $50,000 in back taxes or a jail term on it.

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    Pamela
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    Default Re: Scared to Buy a house

    A home is the best investment! A good time to buy always starts in the spring of every year! Right after the holidays.

    Good luck,
    Pamela

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    Default Re: Scared to Buy a house

    UM the irs knows about this anyways,just from interest payed yearly on the loan,as it is sent by the lender to irs,also I was told when I got my recent loan to build my house they do check what you give to them in tax statements against what the irs has on file for accuracy.

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    Default Re: Scared to Buy a house

    Also,any monies used for down payment on any loan,whether it be no doc or non income verifying,has to be in a banking or checking account for 6 months or some lenders require on year,before it can be used as a down payment.

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    God/dess Emily's Avatar
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    Default Re: Scared to Buy a house

    are you sure? because I could have sworn it was okay to take money from the sale of a previous house and use it for a new one, and most people don't wait 6+ months for closing on the 2nd house.

    When I was trying to buy a second house (didn't come through for reasons other than money) I was going to take a home equity loan on my current house and use that as a down payment, and they were okay with that.

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    Default Re: Scared to Buy a house

    Well of course you can use money from the sale of another house,thats documented,but if you are just lets say putting down 10,000 and it has not been in your checking or savings acount for that period of time you have to provide documents and proof of were it came from,if you are using the monies from sale of another property they would that would be fime,they would also see the existing morgage show up on your credit report,so they would know it to be true.

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    Default Re: Scared to Buy a house

    That is very subjecticve, saying a home is the best investment. The best investment for you maybe. A home might be the absolute worst investment for another individual.

    Actually you are right, a home is the best investment, the best investment FOR THE BANK !

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    Pamela
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    Default Re: Scared to Buy a house

    Ryan i am confused. A home is a very very good investment. THink about equity, and such. Homes go up in price.

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    Default Re: Scared to Buy a house

    Pamela, I have to come down more on Ryan's side in the first paragraph.
    Yes P, it has been a VERY good Long-term investment. Emphesis Long term. It can and does go down in value for as much as a couple years.
    Literally what Ryan says is that it is not a good investment for EVERYONE. That is true. If the buyer plans to move within 4-5 years, you may loose the equity to the sales commisions and fees. It is not a very liquid investment. Not everyone has the liquid assets to buy a house and not blow the safety margin of having a reserve.
    It can be a good long term purchase, but not at all places, times and prices. It is never a sure thing. For a large number of people it is a very good idea in most places, at most times. The second paragraph I disclaim any agreement with.

    As far as Emily and Michele's discussion, LENDERS may require you to document the crap out of money so they are convinced it is not a hidden loan and you do not have enough equity. If Mom and Dad gave you 10G's as a wedding present to use as a downpayment, be fully prepared for Mom and dad having to sign affadavits saying that it was a gift and not a loan to help you out. Any non-documentable money may be construed as a hidden loan while qualifying. Lenders are paranoid about this.

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    Default Re: Scared to Buy a house

    maybe because it's not vry liquid, it makes it a good investment. People are less likely to sell to satify a whim.

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    Default Re: Scared to Buy a house

    Emily,
    ....Or Buy either.

    I am not saying real estate is a bad idea, just not a great one FOR everyone with $40K. There are some bad risks in real estate that grow the shorter your time horizon is and how much the local real estate market is out of whack with the cost of building a new home and historic relative price relationships.
    An investment "as an investment" is relative to what you can get on other investments. I own my home and have done okay on a return on investment. That has not always been true at all times--there was a 3-6 year periods (more than 1) when I would have been better off with my money in the stock market in the S&P500. There was even a brief window where If the day I bought my house I had put it in the S&P500-- I could have bought my house for cash in 1999, owed nothing, and had money left over from the down payment--all after taxes.
    Buying a home is more properly thought of as part investment and part life-style choice--not a sure thing.

    To top that I am a real estate optomist compared to Melonie.

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    Featured Member scorpio's Avatar
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    Default Re: Scared to Buy a house

    no, no, and...na-no!

    lets start from the beginning. I have been a mortgage broker for some years now. I also work for one of the nations largest mortgage BANKS. I do know what I am talking about here. (just like I DONT pretend to know about pole tricks! LOL)
    #1/its up to the lender if they will have you fill out an IRS form 4506. Without this, the IRS CANNOT pull your account info without a subpeana. The Lender, conversely, will not pull your IRS tax transcripts to see if you are up to date, or have fudged figures on your application. If you fill out a 4506, the lender and the IRS can check records at will. Again, its up to the lender to decide how they want to report. BTW, only people with stellar credit can usually get non 4506 loans. My bank does them.

    #2/It is up to the lender to decide how they want to season funds. Gifts, savings, money under the bed. You do not have to have the money in a traceable account for any length of time with some lenders. If you purchase or put down an amount over 10K IN CASH, you must fill out an IRS form and register the transaction. This is to prevent criminals from making large purchases with dirty cash. This does not apply to money in the form of a check or other security. Some banks require you to reveal where you got your down payment, and for how long you've had that money, some dont. My bank is a maybe on this. Again, you must not have bad credit to qualify for these loans.

    #3/ real estate is not a good investment? That is the dumbest comment I think I have ever heard. You make money when you buy real estate, so yes, if you did no research, paid over market value for a crumbling shak in the middle of a crack ghetto, then yes, you might loose value-MIGHT. The national average equity increase for real estate is 8%. In some ares it is much more. If you do your homework and make a smart purchase, it is virtually impossible to loose money. Whomever made the comment that a home is a good investment for the bank is partially true, but remember: Unless you are paying cash, you are LEVERAGING money with real estate. This mean you can put a little (or none) of your own money into a home, and every year equity builds. Yes, you will pay the bank a sick amount of money over the course of the loan (there are ways around this) but you are still GAINING EQUITY. With renting a property, you are still paying a bank interest on the mortgage (your landlords) and you are gaining nothing. The analogy is this: would you rather take a $100, and throw $50 in the trash (goes to the bank in interest), while someone gives you a $10 (equity gained)...Total over the month: you are up $60...or would you rather just trash the whole $100? That is the difference between renting and buying.

    ps...why give all of your money away? Are you aware that you can get a mortgage for under 3%? If you re-invested that money into your home, you would pay less and less interest, while your loan balance rapidly dropped, while you gained equity. Its possible to pay off a 30 yr. mortgage in 15 years without sending extra money! Did you know you can buy a home with NO MONEY DOWN? Thats 100% leverage! I just bought a condo this summer with no money down (well, $2500 to cover costs and taxes) I pay 6% interest. I bought for 129K and I bought under market value. Here I am 4 month later and my place is worth around 136K. Where will I be in 3 years? With the market here in Chicago, probably somewhere around 160K My loan balance will have dropped (not by much) to maybe 125K so there, in three years= 35K in my pocket. Where would I have been if I had rented?

    btw, remember the crack house I mentioned above? You can buy homes for 10-20K in any city. Sure their peices of shit. But a mortgage on these homes might be $200. You rent them out with section 8 at $800 a month, government guaranteed rent. Thats a pretty good return. Or buy a duplex, live in one side and rent out the other...the possibilities are out there-educate yourself.

  25. #25
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    Default Re: Scared to Buy a house

    For a mortgage banker you do not know much finance.
    The amount of the mortgage you pay off is not free money, it is principal you paid down, or a forced savings so to speak.
    You may end up with $35K more cash, but the $4K lower mortgage balance is saved, not a return on investment.

    You postulate a 7.4% annualized change in value of the property for which you pay 6% interest. A 4-5% real rate of increase in prices of real estate is an overly optimistic assumption for 3 years--1-2 is more normal and comes after a rise in prices with rates falling on a year average to 6%--a 40 year low. There is no guarantee of 7.4% appreciation, especially if you subtract 6% of the gross as a real estate comission on the sale or value the time you spend to sell it yourself and pay several K to a lawyer. Add $200 a month to pay aftertax real estate taxes and $50 a month to insure it, and all the things that can go wrong and need replacing. It becomes a lot less of a slam dunk. Condos are more volatile investments than single fmily homes. Depending on location a 20% decease in value is not out of the question AS A POSSIBILITY, (not a predicted likely outcome). Condos lost that much (or more) in the East 1989-93.

    Interest in general is the time value of money, not someone screwing someone. Paying your landlord's interest is not making his savings, just paying other people to use there money. They have the money not you. Whether the landlord owns 99% or 1% of the building's value, he wants to make a return on that money, either for himself or someone he pays. Otherwise he would invest somewhere else.

    You do not have to exagerate the benefits or fake the example to make people have their own home. Add up all the costs and the strict financial advantages of home ownership are slight relative to the full costed out rental costs. And there is a risk.

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