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Hi all,
I used to be on here for career pay help, then student loan debt help, now in the natural flow of life, I'm looking for some mortgage guidance for a first time home.

Wife & I are at $100-110k in annual salary and in a few short months we'll have completed paying off her 6.5%+ school loans ($15,661.96 in the 11 months since our wedding). We currently rent at about $1k/mo and we're starting to focus our attention towards a home in the $170-220k range. I'm forecasting that we'll be able to save about $37k through the end of 2017. My goal is to start saving those aggressive student loan payment amounts towards the downpayment value for the next 12-14 months.

My mindset has been to simply get the 20% down and avoid PMI based on the messaging I've seen repeated here many many times. We live in an area where housing is fairly active but not increasing on any crazy level like a Denver. I friend also recently purchased a house and suggested she didn't have to put the 20% down or worry about PMI (alarm bells for me and skepticism!). Has the market shifted where the PMI level can be much lower than 20%? Would it make sense in some situations to just go ahead if you have, say 15-18% and accept the PMI for a short period when the savings are great enough? (I'm anticipating that our previous $1500/mo loan payment should be able to cover the mortgage and much of the increases in utilities, etc pretty well, saving us nearly $1,000 per month). Typically as a rule of thumb, I've heard to factor 1.5x the mortgage amount as peripheral housing cost increases?

Would certainly appreciate your thoughts as always! Sound like a good plan?

Member Summary
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That realtor didn't bring them a buyer out of the goodness of his or her heart.

rufflesinc (Jul. 21, 2016 @ 5:37p) |

I think this is unfortunately turning into a big distraction - I used the analogy of my brother's situation to illustrat... (more)

DigiornosHunter (Jul. 22, 2016 @ 7:46a) |

I agree. If I just moved into my first place, and it wasn't the 'dream home I'd live in forever no matter what', and I f... (more)

DigiornosHunter (Jul. 22, 2016 @ 7:48a) |

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PMI probably was built into the interest rate (higher obviously).

Nothing has changed. But possible your friend got a loan where PMI was paid upfront...

I bought and only had 10% down, had to pay PMI. Knew I would work to get rid of it after 2 years. 2 years and a couple months later, I realized rates had dropped, and if I had to pay for a new appraisal to get rid of PMI (which is what the lender's policy was), I might as well refi. Ended up with a no-cost refi, dropped the rate half a point, and got rid of PMI based on house price increase all at once (but of course extended term out another 2 years and change).

Is it the best financial move? Not exactly. But is 24 months of $72 PMI payments the worst thing in the world if it saves you other costs (potentially moving twice or other rental hassles)? I knew that whether home prices went up or down I'd be able to scrape together the money 2 years later to get rid of PMI - just so happened to not cost me anything and save me money long term to refi.

If you have 15-18% down, try to scrape together some way to get 20% down if you can.

Did your friend get a VA loan or a USDA loan?

Corndogg said:   Did your friend get a VA loan or a USDA loan?
  I don't believe it was either...

Before I bought a place for cash at a foreclosure auction, I was shopping with a 5% down no PMI loan from First Financial called the CHAMP loan. The good news is that there isn't an asterisk, they charge the market rate for interest (same APR as they had posted for 30 year fixed). The bad news is it is only in certain geographic areas, so it completely depends on what area you're looking in.

I don't know if it is still the case, but Third Federal used to let you avoid PMI with 15%. And they had the best rate I could find anywhere.

Although this was about 20 years ago, my first house was a 10+10. 10% down, and then a second mortgage for the other 10%. Didn't need PMI.

your incremental 10-15% (if you do 90LTV or 95LTV) will probably be at an effective rate near 10% or higher. Would have been cheaper to not pay off the 6.5% school loans as fast and do 80LTV.
Your friend is likely just terrible at math.  They go "Oh, it's only 0.250% higher rate for 90LTV! what a deal!  That's nothing.  Oh, another 0.25% rate for 95 LTV! what a deal!  10k lender fees for closing? sounds standard...

But, 0.25% extra paid on the whole loan amount is 2.25% more on the 10% from 80LTV to 90LTV (because 10% is only 1/9th of 90%).  And 0.25% extra paid on the whole loan is 4.75% on the 5% from 90LTV to 95LTV (5% is 1/19th of 95%).    Add 4.75% to 3.75% and you're already at 8.5%.  And not even addressing possible difference in the lender fees... plus I made up the numbers here of course as I don't know what rate your "friend" financed at.

Everyone wants instant gratification with 110LTV* home loans rather than saving for down payment.

*The true "value" of the house, after transaction costs, is about 90% of the "sales price".  So, a 0 down payment purchase starts out ~10% underwater.

There may be other options you have that you could scrape together the 20% more cheaply.   Retirement account loans, credit cards (I have ~40k currently out at a 1.5% effective APR right now, and they're not on the consumer credit report so don't go to credit score, although they do count for DTI), etc.  Have paid off cars with moderate values?  You can get secured loans on them for ~2%/6yrs to use for down payment, assuming you have a handful of extra points in credit score and room in the DTI.

DigiornosHunter said:   My mindset has been to simply get the 20% down and avoid PMI based on the messaging I've seen repeated here many many times.
  
Stick with that mindset.   Save the 20% and avoid PMI completely. There's no situation I can think of where paying PMI is worth it.  Sounds like you have your stuff together, so stay on that path, save the 20% and don't be that guy paying PMI if you don't have to.  

RailroadTrack said:   
DigiornosHunter said:   My mindset has been to simply get the 20% down and avoid PMI based on the messaging I've seen repeated here many many times.
  
Stick with that mindset.   Save the 20% and avoid PMI completely. There's no situation I can think of where paying PMI is worth it.  Sounds like you have your stuff together, so stay on that path, save the 20% and don't be that guy paying PMI if you don't have to.  

I know of at least one situation in which numbers were crunched and it turned out to be in the buyer's best interest to put down only 5% and pay PMI at least for a little while before either refinancing or simply making a large lump payment to increase his equity to over 20%.

I wasn't privy to the actual numbers, but I know it had to do with keeping some cash on hand to pay for immediate renovations of a home purchased in poor condition for below market pricing.

But yeah, 95% of the time, PMI should be avoided.

RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

Because I'd never seen prices on houses going up like they were, I never saw the crash coming. I figured things were going to just level off because I couldn't picture anyone selling at a loss. I never thought people would just walk away. It was a real paradigm changer or me.

Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.
 

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  In the hours since I last posted, I watch The Big Short.  I'm so proud to live in a free country!!!

RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
 

I closed recently on a refinance of my 80% and 10% loans and I somehow got a better rate by refinancing both loans (new LTV slightly under 90%) and get a mortgage with PMI. If I only refinanced the 80% loan, I was quoted 4% (with lender credits to pay closing costs). I was told that to subordinate the 2nd loan, it will require a 45 day lock (plus pay 300-500 in subordination fee). I would then also have to refinance my 10% HELOC which was at 5%. BUT, if I combine both loans and keep the LTV under 90%, my rate is 3.625 (also with lender credits) + PMI. I don't think the rate difference is just due to 30 day vs. 45 day lock but 3 lenders were consistent in the 4% range at 80% and lower rate if I refinanced both loans. I will pay $20 more with PMI and $150 less after it's taken out and I don't have to worry about refinancing my 10% HELOC. This was before Brexit so the rates are probably .25% lower now than when I locked.

mwa423 said:   Before I bought a place for cash at a foreclosure auction, I was shopping with a 5% down no PMI loan from First Financial called the CHAMP loan. The good news is that there isn't an asterisk, they charge the market rate for interest (same APR as they had posted for 30 year fixed). The bad news is it is only in certain geographic areas, so it completely depends on what area you're looking in.
  You finally settled on a place? Which side of the river?

shitrus said:   
mwa423 said:   Before I bought a place for cash at a foreclosure auction, I was shopping with a 5% down no PMI loan from First Financial called the CHAMP loan. The good news is that there isn't an asterisk, they charge the market rate for interest (same APR as they had posted for 30 year fixed). The bad news is it is only in certain geographic areas, so it completely depends on what area you're looking in.
  You finally settled on a place? Which side of the river?

  
South side of the river, got a steal on a place (roughly half the price of a comparable unit that sold a few weeks before), pretty close to Party Source and my office right across the river. I only bought what I did because I got the insane deal I got, but it'll work perfectly for what I need right now.

Dang, that's awesome. And if you do end up moving, you could probably sell it for a profit, or rent it out. The true FatWallet way.

shitrus said:   Dang, that's awesome. And if you do end up moving, you could probably sell it for a profit, or rent it out. The true FatWallet way.
  
The current plan is live in it for two years (meet my owner occupancy IRS requirement) then probably rent it out for two years and sell tax free (hopefully) doubling (or better) my money. It'll all pretty much depend on what happens in my career, for better or for worse we're doing performance reviews and there's decent odds I'll end up leaving the area for a job.  We'll see how it goes, but the real danger is I did so well with this place, I feel like I'm good at buying foreclosures...when I might just be lucky.

DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

DigiornosHunter said:   Hi all,
I used to be on here for career pay help, then student loan debt help, now in the natural flow of life, I'm looking for some mortgage guidance for a first time home.

Wife & I are at $100-110k in annual salary and in a few short months we'll have completed paying off her 6.5%+ school loans ($15,661.96 in the 11 months since our wedding). We currently rent at about $1k/mo and we're starting to focus our attention towards a home in the $170-220k range. I'm forecasting that we'll be able to save about $37k through the end of 2017. My goal is to start saving those aggressive student loan payment amounts towards the downpayment value for the next 12-14 months.

My mindset has been to simply get the 20% down and avoid PMI based on the messaging I've seen repeated here many many times. We live in an area where housing is fairly active but not increasing on any crazy level like a Denver. I friend also recently purchased a house and suggested she didn't have to put the 20% down or worry about PMI (alarm bells for me and skepticism!). Has the market shifted where the PMI level can be much lower than 20%? Would it make sense in some situations to just go ahead if you have, say 15-18% and accept the PMI for a short period when the savings are great enough? (I'm anticipating that our previous $1500/mo loan payment should be able to cover the mortgage and much of the increases in utilities, etc pretty well, saving us nearly $1,000 per month). Typically as a rule of thumb, I've heard to factor 1.5x the mortgage amount as peripheral housing cost increases?

Would certainly appreciate your thoughts as always! Sound like a good plan?

I had a choice of either paying 20% down and leaving my savings account low, or paying 15% down and $28/month PMI for 2 years. I chose to pay 15% down and had an extra $12k or so in my emergency fund. I wrote off the interest on my taxes, and got the PMI removed in 2 years based on the appreciation of the condo. I wouldn't have done it any other way. I slept better at night knowing I had a little extra money available just in case. And $28/month was a small price to pay for that. If I had waited until I had an extra $12k saved up so I could have more comfortably put 20% down, I'd have lost the opportunity to purchase my condo from my ex-landlord, would have given up the opportunity to privately purchase the unit without it going on the market, and would likely have been priced out of the market since prices were going way up very quickly  

mwa423 said:   
shitrus said:   
mwa423 said:   Before I bought a place for cash at a foreclosure auction, I was shopping with a 5% down no PMI loan from First Financial called the CHAMP loan. The good news is that there isn't an asterisk, they charge the market rate for interest (same APR as they had posted for 30 year fixed). The bad news is it is only in certain geographic areas, so it completely depends on what area you're looking in.
  You finally settled on a place? Which side of the river?

  
South side of the river, got a steal on a place (roughly half the price of a comparable unit that sold a few weeks before), pretty close to Party Source and my office right across the river. I only bought what I did because I got the insane deal I got, but it'll work perfectly for what I need right now.

  Any residence near Party Source is a good residence

rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

Some lenders offer mortgages without PMI when you make a down payment lower than 20%. Navy Federal Credit Union and NASA Federal Credit union are two examples. The rates for a lower percentage down payment are higher, but that is also true for other lenders that charge PMI.

It sounds like it's simply prudent to get rates at several %down scenarios? For example, to find out what the rate would be at 15% down, 18% down, 20% down?

DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

  They just did last weekend - getting a smaller place and using the extra cash to cover a larger % downpayment.
I don't understand why you're so hell bent on demeaning the situation.
 

DigiornosHunter said:   rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

  They just did last weekend - getting a smaller place and using the extra cash to cover a larger % downpayment.
I don't understand why you're so hell bent on demeaning the situation.
 

no, I'm not demeaning the situation. I'm pointing out that its not a meaningful profit. They were offered 20k to basically move.

I have to agree with ruff here. While his delivery isn't always the best, sometimes he does make sense. I wouldn't move if I were offered $20k if I had to sell/buy. If I was renting then hell yes.

rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

  They just did last weekend - getting a smaller place and using the extra cash to cover a larger % downpayment.
I don't understand why you're so hell bent on demeaning the situation.

no, I'm not demeaning the situation. I'm pointing out that its not a meaningful profit. They were offered 20k to basically move.

  
It's an absolutely meaningful profit.  The 2013 median household income in CO was $58k.  The people essentially got an additional 1/3rd of a year's pay to move.  I hate moving, but damned if I wouldn't do it for a third of my salary or even just $20k. 

How long does moving realistically take? 20 hours? $1k an hour? Sign me up.

mwa423 said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

  They just did last weekend - getting a smaller place and using the extra cash to cover a larger % downpayment.
I don't understand why you're so hell bent on demeaning the situation.

no, I'm not demeaning the situation. I'm pointing out that its not a meaningful profit. They were offered 20k to basically move.

  
It's an absolutely meaningful profit.  The 2013 median household income in CO was $58k.  The people essentially got an additional 1/3rd of a year's pay to move.  I hate moving, but damned if I wouldn't do it for a third of my salary or even just $20k. 

How long does moving realistically take? 20 hours? $1k an hour? Sign me up.

  The problem is the transaction costs for real estate are so high.  You lose ~10% immediately when you buy.  So, if you sell and then buy another new $200k house, you haven't made any profit if you made "$20k profit" on the prior house.  That ignores all the time and money involved with moving all your stuff, setting up services, etc etc.

Bend3r said:   
mwa423 said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

  They just did last weekend - getting a smaller place and using the extra cash to cover a larger % downpayment.
I don't understand why you're so hell bent on demeaning the situation.

no, I'm not demeaning the situation. I'm pointing out that its not a meaningful profit. They were offered 20k to basically move.

  
It's an absolutely meaningful profit.  The 2013 median household income in CO was $58k.  The people essentially got an additional 1/3rd of a year's pay to move.  I hate moving, but damned if I wouldn't do it for a third of my salary or even just $20k. 

How long does moving realistically take? 20 hours? $1k an hour? Sign me up.

  The problem is the transaction costs for real estate are so high.  You lose ~10% immediately when you buy.  So, if you sell and then buy another new $200k house, you haven't made any profit if you made "$20k profit" on the prior house.  That ignores all the time and money involved with moving all your stuff, setting up services, etc etc.

  
I don't know the people in question, but in my head, $20k is net profit, not gross.  I agree with your premise that transaction costs are high, but in this case, I assume that the $20k was after any cost of sale.  If somebody came and knocked on their door and asked to sell, I would assume they wouldn't be paying normal realtor commissions or covering closing costs and such. 

Bend3r said:   
 
  The problem is the transaction costs for real estate are so high.  You lose ~10% immediately when you buy.  So, if you sell and then buy another new $200k house, you haven't made any profit if you made "$20k profit" on the prior house.  That ignores all the time and money involved with moving all your stuff, setting up services, etc etc.

  
No, the transaction costs are on the seller and not the buyer.  I assume the 20K was after the closing costs and no realtor fee was involved since it was a direct sale.

I suspect they were well over median income if they had a house with this much potential upside.  DINKs from the sound of it.

mwa423 said:   
Bend3r said:   
mwa423 said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

  They just did last weekend - getting a smaller place and using the extra cash to cover a larger % downpayment.
I don't understand why you're so hell bent on demeaning the situation.

no, I'm not demeaning the situation. I'm pointing out that its not a meaningful profit. They were offered 20k to basically move.

  
It's an absolutely meaningful profit.  The 2013 median household income in CO was $58k.  The people essentially got an additional 1/3rd of a year's pay to move.  I hate moving, but damned if I wouldn't do it for a third of my salary or even just $20k. 

How long does moving realistically take? 20 hours? $1k an hour? Sign me up.

  The problem is the transaction costs for real estate are so high.  You lose ~10% immediately when you buy.  So, if you sell and then buy another new $200k house, you haven't made any profit if you made "$20k profit" on the prior house.  That ignores all the time and money involved with moving all your stuff, setting up services, etc etc.

  
I don't know the people in question, but in my head, $20k is net profit, not gross.  I agree with your premise that transaction costs are high, but in this case, I assume that the $20k was after any cost of sale.  If somebody came and knocked on their door and asked to sell, I would assume they wouldn't be paying normal realtor commissions or covering closing costs and such. 

  keep up!
their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. 
I bet the realtor got both sides

RedWolfe01 said:   
Bend3r said:   
 
  The problem is the transaction costs for real estate are so high.  You lose ~10% immediately when you buy.  So, if you sell and then buy another new $200k house, you haven't made any profit if you made "$20k profit" on the prior house.  That ignores all the time and money involved with moving all your stuff, setting up services, etc etc.

  
No, the transaction costs are on the seller and not the buyer.  I assume the 20K was after the closing costs and no realtor fee was involved since it was a direct sale.

I suspect they were well over median income if they had a house with this much potential upside.  DINKs from the sound of it.

  ffs! keep up!
their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. 
That realtor didn't bring them a buyer out of the goodness of his or her heart.

I think this is unfortunately turning into a big distraction - I used the analogy of my brother's situation to illustrate that yes, in some markets, housing is very strong right now - that's certainly the case in Colorado.

I threw out the $20k profit as a reference point when the gross number was probably 30-35. I don't know all the specifics and it's not really the main point here.

mwa423 said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
rufflesinc said:   
DigiornosHunter said:   
Chyvan said:   
RailroadTrack said:   There's no situation I can think of where paying PMI is worth it.
  
I can. When things were going gang buster leading up to the recession, my friend wanted to save up to avoid paying PMI, but at the rate housing prices were going up, he couldn't do it. He paid the PMI thinking if he didn't buy now, he might never get to.

This was my thinking as well and why I made the reference to Colorado RE. My brother and his wife bought a first home out there about 6 months ago and their realtor came back to them 3 months in with a strong buyer and ended up flipping it for over $20k. The area we're in is certainly trending up, but nothing crazy.

  $20k is not a huge profit unless you're talking about five figure prices which I dont think exists in CO

  I believe the home was in the $300k range - so true, that's only like 5-7%, but as a return in less than 6 months, not bad.

  10-14% annualized for a lot of risk. this is why I don't flip houses and prefer to watch house flipping houses and snicker at them

  They bought it as their first home following the marriage. Reason to snicker?
It wasn't intended as a flip. They just happened to have someone come in aggressively several months later and make them an offer they couldn't refuse.
This isn't a 'house flipping for profit' discussion.

  So they moved into that house expecting to live their after the wedding? That makes the offer even easier to refuse. You now have to buy another house, move, etc  etc.

  They just did last weekend - getting a smaller place and using the extra cash to cover a larger % downpayment.
I don't understand why you're so hell bent on demeaning the situation.

no, I'm not demeaning the situation. I'm pointing out that its not a meaningful profit. They were offered 20k to basically move.

  
It's an absolutely meaningful profit.  The 2013 median household income in CO was $58k.  The people essentially got an additional 1/3rd of a year's pay to move.  I hate moving, but damned if I wouldn't do it for a third of my salary or even just $20k. 

How long does moving realistically take? 20 hours? $1k an hour? Sign me up.

  I agree. If I just moved into my first place, and it wasn't the 'dream home I'd live in forever no matter what', and I felt confident I could find a good alternate and not get frozen out of the market, I'd take the cash too.



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