Looking at Houses. Got Some Questions.

[OrlandoEastwood]

Ok, I am looking at houses and I was wondering, how long do you pay for the house? Like, is it over a span of months or years? And if so, how many?

[Steve]

You always have the option to buy the house outright if you have the cash of course. However if you have to finance the cost I think the most common mortgage terms are 15 years and 30 years.

[Moefiz]

Like Steve said..15-30yrs would be your most popular finance term, the longer you take to pay the more interest you will pay...

[OrlandoEastwood]

Ok, I wasn't sure how all this works. I'm looking at houses in Hawaii, both rental and sale properties. Mainly rentals for now, but taking a look at property for sale. I am going to have to go back and forth from where ever I am working, most likely Ohio to the Big Island. I'm setting up shop here in Ohio for my studio because it's economically cheaper to do it in Ohio, and because I have the resources here, than Hawaii.

[My_Two_Cents]

Stay away from adjustable rate mortgages these days unless you seriously understand how they work. Even then, I'd still recommend you stay with a fixed rate because rates are essentially at bottom right now, which means there's nowhere for them to go but up (which they will over the course of the next couple years).

Edit: Okay, you are only looking to rent. Should be no different than apartments.

[OrlandoEastwood]

Ok, Ricshoe. I'm def. going to be doing some serious reading on this. My executive producer and I are all ready getting the ball rolling on the next film because we're in it to win it. I've all ready discussed budgeting with my fiancee with what I make from my work and we've both worked out a decent amount to spend per year, incase of something comes up like a medical emergency, since you can never be too sure.

[Beta Man]

I can only imagine what real estate costs in Hawai'i Although the Big Island is one of the 'cheaper' ones, it's still steep!

Good luck.... If you buy, 30 year fixed in the 5% neighborhood is pretty much standard. (I just looked, the bank we have our Mortgage through is currently at 4.84% for 30 Year Fixed)

[MaCruz]

I'm hoping the low rates, and lower prices will continue for 2 more years. I plan to put a big down payment during that time. I'm looking at a fixed 30 year loan. I'm not worried about my credit score (Excellent), just some of my debt that needs to be paid off.. glad I pay off my car tomorrow, and now I Gotta $ave!

[mikejet]

If you are a first time buyer FHA is a great way to buy a house. The lower down payment requirement helps, it's a fixed rate, and they roll the property tax into the loan so you don't get surprised that you have to pay that suddenly. ARM loans don't roll property tax into the equation and on top of that many tend to be interest only, which is something you DO NOT WANT as you won't be building up any equity.

Don't buy property in Hawaii, it's not worth the cost unless you are going to rent it out while you aren't there. Plus the Big Island isn't the best of the tourist attractions with the exception of the Volcanoes National Park. I remember when we used to go to Maui with my parents in the late 80's that the condo's at Paki Maui were about 200-300K. They now sell for just over 1.2-1.5mil for a 2 bedroom.

If you really want to buy a house, save up a good 15-20% for your down payment. Even though the housing market is in bad shape now, there are people out there buying property. Interest rates are low so you can really take advantage and get a great loan. You need the large down payment though for negotiating power.

If you go FHA and have a good real estate agent though, you can get away with the 5% down that they require.

[Beta Man]

That's great advice......

We put down 25% + the closing costs, etc..... so 25% directly went to the sales price of the house........ we had to eat a lot of grilled cheese etc.... but it's worth it, rather than putting the 5% or whatever minimum is required.......

And if you do buy..... make sure you know what your monthly payments are going to be...... INCLUDING taxes...... because our taxes are outrageous, so it makes a huge difference. (then you have utilities etc. etc.)

bottom line, DO NOT BUY WHAT YOU CAN'T AFFORD...... having a more modest home and being able to go out to dinner, vacation, shop, etc.. is a much happier existence than being house poor, and living hand-to-mouth.

[mikejet]

Originally Posted by Beta Man

And if you do buy..... make sure you know what your monthly payments are going to be...... INCLUDING taxes...... because our taxes are outrageous, so it makes a huge difference. (then you have utilities etc. etc.)

On top of this I want to add that you should have a safety net of savings also on top of the down payment. Say for instance you save up the 20% down, save up an additional 6 months worth of mortgage payments as a backup just in case.

[MaCruz]

And don't use your 401K for down payment!!!

[mikejet]

Originally Posted by MaCruz

And don't use your 401K for down payment!!!

Why not if you have a large amount stored and are still young? Lets say you are 30 and have 15k in your 401k. You can borrow 10k out of it to contribute to your down payment and it's tax free. Yes you have to pay it back but it's basically an interest free loan.

[MaCruz]

Originally Posted by mikejet

Why not if you have a large amount stored and are still young? Lets say you are 30 and have 15k in your 401k. You can borrow 10k out of it to contribute to your down payment and it's tax free. Yes you have to pay it back but it's basically an interest free loan.

Yes that's true. You will have to pay it back, but I rather have the money saved up first before getting too excited and using your retirement funds just so I can buy the house now.

[Show spoiler]Did the President's tax credit of $8,000 expired? Or is that in April?

[mikejet]

Originally Posted by MaCruz

Yes that's true. You will have to pay it back, but I rather have the money saved up first before getting too excited and using your retirement funds just so I can buy the house now.

[Show spoiler]Did the President's tax credit of $8,000 expired? Or is that in April?

It's going to expire soon. No spoiler tag needed for that. The tax credit itself is a viable option for people right now that want to buy a house. It may get extended but then again my wife and I aren't planning on buying a house anytime soon. We are fine in our apartment.

[My_Two_Cents]

Originally Posted by Beta Man

We put down 25% + the closing costs, etc..... so 25% directly went to the sales price of the house........ we had to eat a lot of grilled cheese etc.... but it's worth it, rather than putting the 5% or whatever minimum is required.......

Also, unless your mortgage company is playing games, you'll end-up having to pay PMI (personal mortgage insurance) for any loan with less than 20% down. For most younger home buyers, getting together a 20%+ downpayment plus $3-4K in closing cost is tough. Three houses ago was our first without PMI, but in order to swing that our mortgage company (Countrywide ) had to play the second mortgage game. We got a first mortgage for 80% of the purchase price at the going interest rate and then they got us a second mortgage for 10% of the purchase price at a slightly higher rate. The second combined with a 10% down payment allowed us to get by without having to pay PMI. Fortunately, the housing market boomed right after that and our house value rose 35% in one year allowing us to refinance both mortgages into one at a lower rate.

We're in the process now of refinancing our current mortgage in the ~5% range with no closing costs. It'll be nice to save ~$150/month without having to do anything other than sign a bunch of papers.

[jlafrenz]

Sounds like you should get in touch with a Realtor. They can help you through the process and explain everything. A Realtor will not cost the buyer anything because their commission comes from the sellers. Avoid choosing the same Realtor that is representing the seller. That usually isn't good because they are likely to side with the seller for a higher commission. This isn't always the case, but I would get your own representation is such a huge financial purchase.

I would also be good to get some recommendations for good lending or financial institutions in your area. They can give you details about your various payment options.

[Porkchop Express]

Granted mortgage rates are relatively low right now, shop around to find the best rate. I bought my first house one year ago, and was able to get a 30 year at 4.75% which was the lowest I could find at the time. I put 20% down as well.

[My_Two_Cents]

Originally Posted by mikejet

Why not if you have a large amount stored and are still young? Lets say you are 30 and have 15k in your 401k. You can borrow 10k out of it to contribute to your down payment and it's tax free. Yes you have to pay it back but it's basically an interest free loan.

Ask any financial advisor, and they'll all tell you the same thing: Unless it's an emergency, DO NOT borrow from your 401K. Yes, it's tax-free money, but you are losing serious $$ over the life of your investments.

Do the math. For illustration purposes, I just did a simple calculation using someone 28 years old with $15K in his 401K, contributing $4K/year and earning 8% annually. At 65, that account will have grown (assuming no change in contributions or growth rate) to $1.231MM. Take the same variables, yet remove $10K and pay back $2100 annually for 5 years. At 65, you will have $1.131MM.

That $10K loan will cost you $100K by the time you are ready to retire.

[bigm]

Originally Posted by Beta Man

That's great advice......

We put down 25% + the closing costs, etc..... so 25% directly went to the sales price of the house........ we had to eat a lot of grilled cheese etc.... but it's worth it, rather than putting the 5% or whatever minimum is required.......

And if you do buy..... make sure you know what your monthly payments are going to be...... INCLUDING taxes...... because our taxes are outrageous, so it makes a huge difference. (then you have utilities etc. etc.)

bottom line, DO NOT BUY WHAT YOU CAN'T AFFORD...... having a more modest home and being able to go out to dinner, vacation, shop, etc.. is a much happier existence than being house poor, and living hand-to-mouth.

Great advice!!!