Ok guys, take it a little easy on me because this is my first post of a topic in this section. I am looking for some opinions. Ok, to start off, we have been sort of looking at upgrading houses over the past few weeks because ours is a little small for us so that is what started this all. Right now is a really good time to buy, but also at the same time it doesn’t seem too bad for us to sell either. Now we don’t have a huge down payment so I would most likely go the FHA route. We have been semi-working with an agent and she stopped by our house yesterday to give us her market analysis and it turned out much better than I thought. Right now she thinks that we could list the house for “x” which if sold at that price would net me about $40-50K.
Now on to the tricky situation. We have quite a bit of credit card and student loan debt so that really hurts our debt to income ratio, BUT we have no problems making more than the minimum payments so that is not an issue. Plus, all of the large balance credit card debt is on 0% offers so its not costing us any money really, it is just taking a while to get it down. I have started thinking of a few options for us and wanted to get some thoughts. First, we have not sat down with the bank yet so I am not sure what the impact of our debt to income ratio is, we plan to sit down with someone shortly. That being said, any profit that we make on the house will go towards bills to help us improve our debt to income ratio. I know some people may not agree with this, but I would rather have the debt in the house rather than revolving debt, ESPECIALLY in my area where we were not affected by the housing crisis for the most part and our home values will only go up.
So a few things I have been thinking about is first, I could sell the house and start looking to buy a house contingent on our home selling and then use the profit to cover closing costs and the rest to pay down debt. The second option is to look in to a HEL or HELOC for the short term to pay down the credit cards and help our situation and then when the house sells we should still come out in the positive. And then my last option is to try and pay credit cards down as much as possible and then look in to buying a house. This is my least favorite option because with the market the way it is in our area and the number of houses out there, now is the perfect time to buy for many reasons.
Bt the way our HHI is about $110,000 and next year it could go up by as around $25k if my wife gets converted to a full time teacher versus the 0.6 she is at now.
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For starters, what is your total debt (broken down by student loan, CC debt, car loan etc.) and what is your total non-retirement savings (excl. the house equity). Do you have an emergency fund (6-12 months living expenses)?
You say "any profit that we make on the house will go towards bills to help us improve our debt to income ratio." Does that mean you won't have a decent down payment for the new house since the net proceeds will be used to pay debt.
Till your debts (at least all except student loans) are fully paid off (or you have the liquid cash to pay off 0% bal.), and you have a good emergency cash reserve, incl. the anticipated mortgage payment for the prospective house), don't contemplate on a new house purchase. With a 110k HHI (possibly 135k in future), you should be able to achieve this and save a 20% down payment in no time.
uutxs said:For starters, what is your total debt (broken down by student loan, CC debt, car loan etc.) and what is your total non-retirement savings (excl. the house equity). Do you have an emergency fund (6-12 months living expenses)?
You say "any profit that we make on the house will go towards bills to help us improve our debt to income ratio." Does that mean you won't have a decent down payment for the new house since the net proceeds will be used to pay debt.
Till your debts (at least all except student loans) are fully paid off (or you have the liquid cash to pay off 0% bal.), and you have a good emergency cash reserve, incl. the anticipated mortgage payment for the prospective house), don't contemplate on a new house purchase. With a 110k HHI (possibly 135k in future), you should be able to achieve this and save a 20% down payment in no time.
Most the forums I read here basically suggest being debt free, large emergency fund and 20% down. While I agree this would be nice, I don't think it is all that realistic for most people. Based on the previous post it would seem you would need ~120K+ in the bank to afford a 300K house, plus all debt (at least all except student loans) paid off.
300K house w/20% down = 60,000 6-12 months emergency fund on 110K HHI = 55,000 - 110,000
Plus pay off credit cards, car loans, etc..
What I see most people doing that seems to work ok is 3-5% down on a new house, with a few months emergency fund. Personally I wouldn't put 20% down on a house in this environment.
That said I wouldn't roll cc debt into a mortgage, I think you should definately save and pay that down first.
Message edited by: master44 on 2009-10-30 14:48:05 CDT
master44 said: Most the forums I read here basically suggest being debt free, large emergency fund and 20% down. While I agree this would be nice, I don't think it is all that realistic for most people. Based on the previous post it would seem you would need ~120K+ in the bank to afford a 300K house, plus all debt (at least all except student loans) paid off.
300K house w/20% down = 60,000 6-12 months emergency fund on 110K HHI = 55,000 - 110,000
Plus pay off credit cards, car loans, etc..
What I see most people doing that seems to work ok is 3-5% down on a new house, with a few months emergency fund. Personally I wouldn't put 20% down on a house in this environment. If your spending is equal to your income, you are not doing something right (even assuming 110k is take-home income). Lets leave the down payment percentage aside for the moment. If you are still carrying CC debt and car loans, you need to address that first.
We are in the situation today partly because people think buying a house is a MUST regardless of your financial obligations. For crying out loud it is by far the biggest purchase most people make in their life and commit usually 30 years of payments. Give that some thougt before making such a commitment. Renting is often an overlooked option.
So.... You have all sorts of CC balances and car loans. I'm betting at this point negative net worth.... yet your house is too small, and you need a bigger house, bigger mortgage, bigger utility bill, etc. For once, try to learn to spend less, not more.
Let me clarify some things. The current house I am in we paid $72,500 for, and for a new house we would not go above $165K. This area has a very low cost of living. The reason for last CC balances is because we had made a few large purchases for the current house to make some improvements and a while back my wife funded most of her grad school on 0% offers. So its not really poor spending habits, its just a few larger purchases.
So with the new house, I don't plan our total mortgage payment with taxes and insurance costing more than an additional $400-500 more a month at most. So its not like I am looking into jumping into a $300K house. I know many people who have $300K homes and their combined income is less than just my income alone.
I see no reason to have a large down payment on a house in my situation because our area was not affected by the housing market mess and it will only get better over the next few years so I will get 20% equity pretty quick. For example, I paid $72,500 for my current house less than 4 years ago and the agent thinks we can list for $115-125K. That's over a 50% increase in value in 4 years.
A rough breakdown of our debts(wife and I combined): Student Loans: ~55k @ 3.25%, ~43k @ 1.625%, ~20K @3.17% and ~16k @ 5% Credit Cards: ~30k, like I said though most of it is 0% so we pay very little interest
The reason I want to be in a house because I can have a house for the same price, or sometimes less, than what people charge for rent for homes.
angeezee said:xceebeex said: ESPECIALLY in my area where we were not affected by the housing crisis for the most part and our home values will only go up.
It is unwise to think that your "home values will only go up." There are no guarantees.
Of course there isn't, but take a look at my post right below yours.
In summary, I bought a house for $72,500 about 3.5 years ago and according to a market analysis from yesterday I could list today for ~$115-125K. That's a significant increase, and on top of that it happened when everyone else is having quite the opposite happen to them. So again, my situation is much different.
xceebeex said:angeezee said:xceebeex said: ESPECIALLY in my area where we were not affected by the housing crisis for the most part and our home values will only go up.
It is unwise to think that your "home values will only go up." There are no guarantees.
Of course there isn't, but take a look at my post right below yours.
In summary, I bought a house for $72,500 about 3.5 years ago and according to a market analysis from yesterday I could list today for ~$115-125K. That's a significant increase, and on top of that it happened when everyone else is having quite the opposite happen to them. So again, my situation is much different.
Past sucess does not mean future success in the real estate market. Where is this magical real estate market that is incapable of collapsing anyway?
Message edited by: slomo007 on 2009-10-30 15:17:29 CDT
slomo007 said:xceebeex said:angeezee said:xceebeex said: ESPECIALLY in my area where we were not affected by the housing crisis for the most part and our home values will only go up.
It is unwise to think that your "home values will only go up." There are no guarantees.
Of course there isn't, but take a look at my post right below yours.
In summary, I bought a house for $72,500 about 3.5 years ago and according to a market analysis from yesterday I could list today for ~$115-125K. That's a significant increase, and on top of that it happened when everyone else is having quite the opposite happen to them. So again, my situation is much different.
Past events do not affect future results in the real estate market. Where is this magical real estate market that is incapable of collapsing anyway?
Bignhamton, NY area. The house I paid $72.5K for is a 1450 sq.ft 3 bedroom, 2 bath, 2 car garage ranch on 1/3 of an acre. So that should give you an idea on how this area was never inflated like most areas which is why we were not affected for the most part.
Message edited by: xceebeex on 2009-10-30 15:19:54 CDT
xceebeex said:angeezee said:xceebeex said: ESPECIALLY in my area where we were not affected by the housing crisis for the most part and our home values will only go up.
It is unwise to think that your "home values will only go up." There are no guarantees.
Of course there isn't, but take a look at my post right below yours.
In summary, I bought a house for $72,500 about 3.5 years ago and according to a market analysis from yesterday I could list today for ~$115-125K. That's a significant increase, and on top of that it happened when everyone else is having quite the opposite happen to them. So again, my situation is much different.
Real estate is local. Just because your housing value went up when most of the country went down doesn't mean that your area is superior to all others and will only go up. However, in the same manner, real estate is local and I don't know what is going on in your particular market, which very well may be on the cusp of something great. Has someone other than a real estate professional told you that now is a great time to buy in your area?
Real estate is local. Just because your housing value went up when most of the country went down doesn't mean that your area is superior to all others and will only go up. However, in the same manner, real estate is local and I don't know what is going on in your particular market, which very well may be on the cusp of something great. Has someone other than a real estate professional told you that now is a great time to buy in your area?
Well the reason now is a good time to buy is because there are a ton of houses on the market all at once because this area just had a bunch of layoffs so many people are leaving the area, therefore selling their homes. This is also why I think the market will continue its slow but steady growth because we are at a low point for this area.
What doesn't make sense to me is people on here have 300,400,500k dollar homes and HHI sometimes less than what we have, yet when I have debt that totals ~$225-250k with EVERYTHING jump and say this is a bad idea. I just have my debt in different places. Considering most of my debt right now is student loans which average around 2.5-3% interest and then many CC at 0% it seems like I am better off than those paying a $300k mortgage at 5-6% interest.
xceebeex said:Right now is a really good time to buy, It's always a good time to buy!!! xceebeex said:We have been semi-working with an agent and she stopped by our house yesterday to give us her market analysis and it turned out much better than I thought. There's a shocker... xceebeex said:Right now she thinks that we could list the house for “x” Sounds like she's telling you what you want to hear. What could possibly go wrong? xceebeex said:which if sold at that price would net me about $40-50K. Big if. xceebeex said:In summary, I bought a house for $72,500 about 3.5 years ago and according to a market analysis from yesterday I could list today for ~$115-125K. I admit I am commenting without any specific knowledge of the Binghampton real estate market, but I do not believe that the market is up ~60-70% from 3.5 years ago. Tell her to provide recent comparable sales to support her values.
Message edited by: Mcringring on 2009-10-30 15:45:15 CDT
jennth3 said:xceebeex said:angeezee said:xceebeex said: ESPECIALLY in my area where we were not affected by the housing crisis for the most part and our home values will only go up.
It is unwise to think that your "home values will only go up." There are no guarantees.
Of course there isn't, but take a look at my post right below yours.
In summary, I bought a house for $72,500 about 3.5 years ago and according to a market analysis from yesterday I could list today for ~$115-125K. That's a significant increase, and on top of that it happened when everyone else is having quite the opposite happen to them. So again, my situation is much different.
Real estate is local. Just because your housing value went up when most of the country went down doesn't mean that your area is superior to all others and will only go up. However, in the same manner, real estate is local and I don't know what is going on in your particular market, which very well may be on the cusp of something great. Has someone other than a real estate professional told you that now is a great time to buy in your area?
Just because a real estate agent tells you to list for $115K to $125k does not mean it will sell for that price. They want your listing, even if it means that in a couple of weeks they get you to reduce the price. Have you compared sales around your area? Also, it seems that you already have over 150K on student loans..ouch ! You are also consideing only the increase on mortgage. How about the increase in taxes, utilities, and the cost of moving?
It seems to me that your mind is made up. Not sure what kind of advice you are searching for here.
xceebeex said:jennth3 said: What doesn't make sense to me is people on here have 300,400,500k dollar homes and HHI sometimes less than what we have, yet when I have debt that totals ~$225-250k with EVERYTHING jump and say this is a bad idea. I just have my debt in different places. Considering most of my debt right now is student loans which average around 2.5-3% interest and then many CC at 0% it seems like I am better off than those paying a $300k mortgage at 5-6% interest.
Okay, lets say you have a $170K house with $250K in household debt. I have a $300K house with a $250K mortgage as my only debt. Your logic says we are equal, which is 100% wrong. I have a positive net equity of $50K, you have a negative net equity of $80K.
Message edited by: mikejanne on 2009-10-30 15:59:20 CDT
Mcringring said:xceebeex said:Right now is a really good time to buy, It's always a good time to buy!!! xceebeex said:We have been semi-working with an agent and she stopped by our house yesterday to give us her market analysis and it turned out much better than I thought. There's a shocker... xceebeex said:Right now she thinks that we could list the house for “x” Sounds like she's telling you what you want to hear. What could possibly go wrong? xceebeex said:which if sold at that price would net me about $40-50K. Big if. xceebeex said:In summary, I bought a house for $72,500 about 3.5 years ago and according to a market analysis from yesterday I could list today for ~$115-125K. I admit I am commenting without any specific knowledge of the Binghampton real estate market, but I do not believe that the market is up ~60-70% from 3.5 years ago. Tell her to provide recent comparable sales to support her values.
The whole area is not that way. We lucked out with our purchase. We were able to do the right updates to make the house more appealing and it is unique because not many ranches in this area have two full baths or a two car garage.
I understand that the credit card debt is obviously not good, but like I mentioned some of it was from before we made this money. I just graduated with my Masters in Dec of 2004. But like I mentioned in my last post, I have a hard time seeing the difference between where I am and where someone with a $300k mortgage is without including any credit card debt, student loans or vehicles. And many of those people make less money that we do.
Real estate is local. Just because your housing value went up when most of the country went down doesn't mean that your area is superior to all others and will only go up. However, in the same manner, real estate is local and I don't know what is going on in your particular market, which very well may be on the cusp of something great. Has someone other than a real estate professional told you that now is a great time to buy in your area?
Well the reason now is a good time to buy is because there are a ton of houses on the market all at once because this area just had a bunch of layoffs so many people are leaving the area, therefore selling their homes. This is also why I think the market will continue its slow but steady growth because we are at a low point for this area.
What doesn't make sense to me is people on here have 300,400,500k dollar homes and HHI sometimes less than what we have, yet when I have debt that totals ~$225-250k with EVERYTHING jump and say this is a bad idea. I just have my debt in different places. Considering most of my debt right now is student loans which average around 2.5-3% interest and then many CC at 0% it seems like I am better off than those paying a $300k mortgage at 5-6% interest.
You have $164K in UNSECURED debt. Pretty high, even for someone on HHI of $110K.
Message edited by: ratdaddy on 2009-10-30 16:51:51 CDT
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