patrick.net

Our tax dollars hard at work. When will this bloody madness stop!!!!!!???????

I'm all for ending our socialist welfare state, but as long as it's there, I'm taking advantage. It's the least I can do to recoup some of the tax dollar I give every year to support foreign banks. Politics aside though, I would appreciate some input from anyone knowledgeable about home buying.

Also forgot to ask, if someone co-signs the loan with us, does that make them a part owner of the house?

you're not buying a house.(read first few pages of blog)

Buying a house is paying for the house in full.

and you're not renting a house.

what are you doing then? you're borrowing the money instead of borrowing the house. wants and needs wants and needs.

Read all of Patrick's site probably before you knew it existed. Can we stick to relevant comments only? If you want to comment on the metaphysical aspects of housing, you should probably post in another section of the forum.

If I read your post right, you are looking at paying $390k ($350k loan plus $40k down) for a 1200 sq ft home?

I wonder how much effect the aggregate "$1800 Vouchers" have on propping up such outrageous house prices.

About your comment It’s the least I can do to recoup some of the tax dollar I give every year to support foreign banks. At $1800/mo I suspect you will in short order collect every tax dollar you ever paid, and then some. That in addition to benefitting from tax supported roads, schools, fire and police, and so on.

I must have misread something. It sounds too incredible that a government program exists that will pay someone's $1800/mo mortgage nut for them.

NuttBoxer says

Read all of Patrick’s site probably before you knew it existed. Can we stick to relevant comments only? If you want to comment on the metaphysical aspects of housing, you should probably post in another section of the forum.

I was reading in early 05 before you were out of highschool.
you have no business renting the money for a home you can't afford. doubt it will go through as you state. or that you would actually qualify.
if you wait three to five more years you could buy a home with your cash crop money.

Katy Perry says

NuttBoxer says

Read all of Patrick’s site probably before you knew it existed. Can we stick to relevant comments only? If you want to comment on the metaphysical aspects of housing, you should probably post in another section of the forum.

I was reading in early 05 before you were out of highschool.
you have no business renting the money for a home you can’t afford. doubt it will go through as you state. or that you would actually qualify.
if you wait three to five more years you could buy a home with your cash crop money.

Sure--most people can save $380K in 3-5 years. No problem.

HeadSet says

If I read your post right, you are looking at paying $390k ($350k loan plus $40k down) for a 1200 sq ft home?
I wonder how much effect the aggregate “$1800 Vouchers” have on propping up such outrageous house prices.
About your comment It’s the least I can do to recoup some of the tax dollar I give every year to support foreign banks. At $1800/mo I suspect you will in short order collect every tax dollar you ever paid, and then some. That in addition to benefitting from tax supported roads, schools, fire and police, and so on.
I must have misread something. It sounds too incredible that a government program exists that will pay someone’s $1800/mo mortgage nut for them.

Sorry, I believe when I ran the numbers it was house price of $350K, so after down, mortgage of $310K.

And the government doesn't pay the entire $1,800. In Section 8 you pay a percentage based on your income, and they pay the remainder up to the voucher limit. Still comes out to a nice chunk of help monthly.

Katy Perry says

NuttBoxer says

Read all of Patrick’s site probably before you knew it existed. Can we stick to relevant comments only? If you want to comment on the metaphysical aspects of housing, you should probably post in another section of the forum.

I was reading in early 05 before you were out of highschool.

you have no business renting the money for a home you can’t afford. doubt it will go through as you state. or that you would actually qualify.

if you wait three to five more years you could buy a home with your cash crop money.

I started reading in 08 when everything came down, so I stand corrected. Don't assume someone who puts up a post like this is uniformed though. I know whatever house we buy will lose value for the next couple years. This is not an investment for us, we want to have something paid off we can leave our daughters some day.

The way this program works, we pay the same whether we rent or buy, so besides the downpayment, we don't put any more of our money in then we would anyway.

tatupu70 says

Sure–most people can save $380K in 3-5 years. No problem

with cash you could buy for just over $150,000-$200,000 today on a REO crap shack in Bonita or Rainbow and for sure in three to five years. prices going down not up IMO.
stop talking to the realtor and parents quit trying to keep up with your friends.
look around you. no one you're speaking with has a clue other than making babies and starting a family.
if you're in the military that's even a worse reason to rent the money right now.

put your 20 something starting a family ideas on hold till you have a great job then buy a house near where you work.. and get real. Buying a house is not to be put before a solid job.

your thinking sounds ass backwards IMO.
just say'n

Here is my best advice for you:

Do the simple formula of income x 3. Outside of that you will end up overextending your finances. I assume you don't want to end up like so many others... paying huge mortgage for 5 or 10 years and than lose it to a foreclosure because of an unfortunate event which come too often in this nation? (By unfortunate I'm referring to extended time of unemployment, medical bills, car accident, cyclical economics, some mortgage fraud, etc...)

Also aim for a 15 year loan you can afford comfortably, not 30. At certain age, incomes drop off or stagnate, and you don't want to get stuck relying on government... their help is VERY selective at times.

Very importantly don't put everything into down payment, make sure you have enough left in savings to support your house for at least 6 month to a year with no income if necessary. And absolutely negotiate all the closing costs, as they don't really need to exist. Price any repairs you have to do for the house into the cost (and demand price reduction if necessary).

Thats my best advise.

(Also if you do get bonuses, do not count those into income formula). I remember during the tech bubble one of our employees got a very expensive house at that time, because her salary was around 40,000 but bonuses were 60,000. Once her job ended she lost her house, as her income went to half and she could no longer pay for it.

Hope this helps.

nothing to see here but someone smoking the home as security crack.

you're more secure without the monster loan IMO for someone in your situation.

take your $40k and buy some good tutoring and education for your kids. college fund maybe.

NuttBoxer NuttBoxer says

... So we’ll be making a downpayment of most likely $40K, and monthly payments of $1,800. I figured under current rates for a 30 year fixed, that qualifies us for a loan of up to $350K. Does this sound right?

Not even close. 350k mortgage, at 4% interest for 30 years comes out to $1,670.95, that leaves you $129 a month to cover PMI, Home owners insurance, property taxes and the HOA fee if there is one. I highly recommend you recheck you figures. I say your looking at more like a 260k mortgage amount, this gives you a $1,250 mortgage payment, and something like $550 left over to cover PMI, Home owners and Property taxes. It's also highly dependent of what property taxes would be. Don't guess look them up for the area your planning to buy in and figure out what your tax bill will be.

PT's are around 1% thanks to Prop 13. Now the MCC will reduce the federal tax owed by up to 20% of the mortgage interest yearly. Taking that into consideration you still say $500 in addition to mortgage payment?

Just to be clear, the $35,000 is part of another FHA loan program called DCCA, not money we have saved up. This program allows us to contribute as little as 1% of the purchase price, hence $5,000 of our own money for a total of $40K. After everything we've seen in the last two years, is anyone really surprised these kinds of programs exist?

Appreciate the feedback on the numbers. As far as financial risk, there's little to none other than repairs, since the program ensures we pay the same monthly amount we would pay renting. If I were to get laid off, etc, the program maintains our payment at 30% of our income, so the amount of federal money going into the mortgage would just go up.

The rep for the program can't wait to get us buying either. The central government wants people buying houses, especially if their dependent on big brother to keep them in their home.

If you're talking about getting an FHA loan, they will crawl so far up your Economic Butt, you'll have to carry the "ONE" every time you take a crap.

If you're talking about a "CO-Signer" then you're 100R% out of luck.

You'll need a W2 from the same company for more than two years, with no lapse in employment.
Even if you left a company to go to another company that pays more money and you didn't miss a day of employment in the process. You're back at square one with the new employer. Meaning they'll view it as you having only less than one year at the job.

Successfully self employed people are having the hardest time, to qualify for FHA loans.

The most qualified are the Latin lady that Cleans "Crazzy Eddie's" car lot office, which she has done for the last five years. She has a better chance of getting an FHA loan than Crazy Eddie.

Now that's not to say Crazy Eddie, can't get prime financing else where if his Credit is willing.
But he wont get an FHA loan.

Sure FHA loans can go as high as 700K or something crazy like that, but the truth is, it's the people eying the 200K and less properties that are getting these loans.

Like who makes the kind of money for 300K-700K houses on a W2?

Does it sound to good to be true? Run Nuttboxer Run! you are being scamed!

NuttBoxer says

PT’s are around 1% thanks to Prop 13. Now the MCC will reduce the federal tax owed by up to 20% of the mortgage interest yearly. Taking that into consideration you still say $500 in addition to mortgage payment?

1% of what? The purchase price? If you brought a 400k house, the taxes would be 1% of that, or $4,000, that equals $333 a month, PMI is based upon what you put down in 5% increments. So if you put down 4%, it's counted as 0% down, if you put down 9% its counted as 5%, 14% down is counted as 10% when they are setting your PMI rates. PMI generally ranges from .05% to 1% of the mortgage amount, so a 350k mortgage could be any where from $1,750 to $3,500 a year, that works out to $145 to $291 a month in PMI, Home Owners insurance (fire protection) is generally around $800 to $1,000 a year, that's another $100 a month, total expenses over and above the mortgage payment, $725. If you have a HOA, that ranges anywhere from $50 to $400 a month depending on the development.

In short i say YES, at least $500 in addition to the mortgage amount. And while you make get back 20% of your mortgage yearly interest, it's is generally a tax write off not cash into your pocket, you have to have the cash upfront before you get anything back. Let just say hypothetically the government give you back a nice fat check every year for your "20% of your mortgage yearly interest" thingy, the first you you would have paid $17,382 in interest on your 350k mortgage at 4% interest, that's only $3,476, that's not going to go far when you have to cough up an extra $725 a month in extra non mortgage expenses, your money is only going to last you 4.8 months.

This is one of the reasons the home bubble was formed, people fail to take into account all of the expenses related to owning a property. These are just the absolute basics. How is the house heated, how much is that going to cost, generally larger houses cost more to heat and cool. How old is the roof? How old is the HVAC system, will you have the 10k available to fix / replace when the system craps out if you buy an older house?

Tenouncetrout says

If you’re talking about getting an FHA loan, they will crawl so far up your Economic Butt, you’ll have to carry the “ONE” every time you take a crap.
If you’re talking about a “CO-Signer” then you’re 100R% out of luck.
You’ll need a W2 from the same company for more than two years, with no lapse in employment.

Even if you left a company to go to another company that pays more money and you didn’t miss a day of employment in the process. You’re back at square one with the new employer. Meaning they’ll view it as you having only less than one year at the job.
Successfully self employed people are having the hardest time, to qualify for FHA loans.
The most qualified are the Latin lady that Cleans “Crazzy Eddie’s” car lot office, which she has done for the last five years. She has a better chance of getting an FHA loan than Crazy Eddie.
Now that’s not to say Crazy Eddie, can’t get prime financing else where if his Credit is willing.

But he wont get an FHA loan.
Sure FHA loans can go as high as 700K or something crazy like that, but the truth is, it’s the people eying the 200K and less properties that are getting these loans.
Like who makes the kind of money for 300K-700K houses on a W2?

This is under the FHA and HUD(Section 8), but it's not FHA loan. Section 8 Homeownership is basically Section 8 Rental Assistance, but they're helping you buy a house instead of rent it.

RUN don't walk RUN!

Well...I will concede it is wiser for the government to support home ownership than rentals. It's the price tag of this assistance that I can't get over.

Pottersville?

It's Christmas time Katy....go rent It's a Wonderful Life. Great movie!

TechGromit says

NuttBoxer says

PT’s are around 1% thanks to Prop 13. Now the MCC will reduce the federal tax owed by up to 20% of the mortgage interest yearly. Taking that into consideration you still say $500 in addition to mortgage payment?

1% of what? The purchase price? If you brought a 400k house, the taxes would be 1% of that, or $4,000, that equals $333 a month, PMI is based upon what you put down in 5% increments. So if you put down 4%, it’s counted as 0% down, if you put down 9% its counted as 5%, 14% down is counted as 10% when they are setting your PMI rates. PMI generally ranges from .05% to 1% of the mortgage amount, so a 350k mortgage could be any where from $1,750 to $3,500 a year, that works out to $145 to $291 a month in PMI, Home Owners insurance (fire protection) is generally around $800 to $1,000 a yea, that’s another $100 a month, total expenses over and above the mortgage payment, $725. If you have a HOA, that ranges anywhere from $50 to $400 a month depending on the development.
in short i say YES, at least $500 in addition to the mortgage amount. any while you make get back 20% of your mortgage yearly interest, it’s is generally a tax write off not cash into your pocket, you have to have the cash upfront before you get anything back. Let just say hypothetically the government give you back a nice fat check every year for your “20% of your mortgage yearly interest” thingy, the first you you would have paid $17,382 in interest on your 350k mortgage at 4% interest, that’s only $3,476, that’s not going to go far when you have to cough up an extra $725 a month in extra non mortgage expenses, your money is only going to last you 4.8 months.
This is one of the reasons the home bubble was formed, people fail to take into account all of the expenses related to owning a property. These are just the absolute basics. How if the house heat, how much is that going to cost, generally larger houses cost more to heat and cool. How old is the roof? How old if the HVAC system, will you have the 10k available to fix / replace when the system craps out if you buy an older house?

Using this calculator I'm at $325K

http://www.mortgagecalculator.org/

Is this not a realistic calculator to use?

NuttBoxer says

This is under the FHA and HUD(Section 8), but it’s not FHA loan. Section 8 Homeownership is basically Section 8 Rental Assistance, but they’re helping you buy a house instead of rent it.

When you rent and your Heat system stops working the the dead of winter, its the landlord that footing the bill to get it fixed. maybe this is a bad example here since your in San Diego, but the principals the same weather its the A/C or the pipes or the roof leaking. You need to have enough extra cash to take care of these emergencies.

oh! OK! duh Thanks. don't we all wish it still worked like that? i do. they need a remake of the classic using todays financing.

artistsoul says

Well…I will concede it is wiser for the government to support home ownership than rentals

Neither is wise.

NuttBoxer says

Using this calculator I’m at $325K
http://www.mortgagecalculator.org/
Is this not a realistic calculator to use?

Let look at your figures:

Home Value: $325000
Credit profile: Good
Loan amount: $325000
Loan Purpose: new Purchase
Interest rate: 4%
Loan term: 30 years
Start date: Tommorrow
Property tax: 1%
PMI: 0.5%

These are the defaults, I adjust the property taxes from 1.25% to 1%, First off I think the PMI is too low, you putting almost nothing down, that spells major risk to any mortgage loaner, your PMI is going to be at least 1%. The calculator also fails to take into account home owners insurance and finally, this is assuming you will get the 4% interest rate, I say with a Section 8 mortgage this is a big IF, I would predict the rate will be higher, but I'll give the benefit of the doubt. so lets put in the numbers, I get $1,822 a month, not including Homeowners insurance and possibly condo fees.

"The DCCA gives us a loan up to 1/3 the property value or $35K"

Also this loan has to be paid back eventually too, what is the repayment structure look like? 5 year? 15? 30? whats the interest rate?

TechGromit says

NuttBoxer says

Using this calculator I’m at $325K

http://www.mortgagecalculator.org/

Is this not a realistic calculator to use?

Let look at your figures:
Home Value: $325000

Credit profile: Good

Loan amount: $325000

Loan Purpose: new Purchase

Interest rate: 4%

Loan term: 30 years

Start date: Tommorrow

Property tax: 1%

PMI: 0.5%
These are the defaults, I adjust the property taxes from 1.25% to 1%, First off I think the PMI is too low, you putting almost nothing down, that spells major risk to any mortgage loaner, your PMI is going to be at least 1%. The calculator also fails to take into account home owners insurance and finally, this is assuming you will get the 4% interest rate, I say with a Section 8 mortgage this is a big IF, I would predict the rate will be higher, but I’ll give the benefit of the doubt. so lets put in the numbers, I get $1,822 a month, not including Homeowners insurance and possibly condo fees.

Ok. The loan amount is $285,000 though assuming the full DCCA loan is approved($35,000), plus $5,000 of our own. There's actually two loans, one for the house, a 2nd for the down/closing. Assuming 4.75 interest(that's what my bank quotes for the 30year fixed), and .75PMI, it's at $1,757, plus insurance, maybe $1,825? Sounds like $300-$325K is not out of the question then.

DCCA is 3% simple interest, no payments until house is refied, or sold, and payable in one lump sum at that time.

Run!

I don't have time to run more numbers I'll look at it again tomorrow.

Are you people kidding? This is NO BRAINER this guy should BUY for sure. If prices go down he can walk away and buyer another one with sec-8 even cheaper. (I bet this program takes credit challenged people )

The feds are paying his DP + a major part of his mortgage (sec-8).

If he cant make the whole payment the feds make the whole mortgage payment (possibly he would have to 'lose hours' at work for this to happen? maybe not)

Then if the stops making payments, how long until the feds stoping paying the whole 1800? Then how long after that until the bank-i mean fannie/freddie- forecloses (2 years probably).

Its zero risk and free money.

For some reason I never knew you could BUY A HOUSE with sec-8 vouchers. I'm way past anger (mostly) and now I simply try to figure out how to get in on the action. Buy homes for cash at auction then flip to clueless sec-8/fha buyers is one way.

Read It And Weep and/or rejoice depending on if you are tax payer or eater:

http://www.hud.gov/offices/pih/programs/hcv/homeownership/

TechGromit says

I don’t have time to run more numbers I’ll look at it again tomorrow.

Appreciate the input!

You should really setup a spreadsheet to go over the numbers in detail.

Here is an example I setup (it's a google doc template anyone can use)
https://docs.google.com/previewtemplate?id=0AiAvJJV-QcyXcGVfeGRXaVVUSnF5V093MU1tQmMyQlE&mode=public

Note: This was/is a work in progress. I've had very little time to work on it.

PockyClipsNow says

Are you people kidding? This is NO BRAINER this guy should BUY for sure. If prices go down he can walk away and buyer another one with sec-8 even cheaper. (I bet this program takes credit challenged people )

I never said he shouldn't buy, it just that the numbers he was throwing up didn't add up. First it was 350k, then 325k, 285k looks more doable.

I'm passivly familar with section 8 for rentals... never heard of it for homeownerhsip.

Granted San Diego is a high cost area (in some cases, even higher than the neighborhoods I've lived in along the East Coast)

If you don't mind me being intrusive. How much do you earn "on the books" and how much do you bring in "off the record". It seems to me that if you are in the unfortunate position to be of meager enough means to qualify for financial assistance than 1) I am surprised that you have such a large amount of $$$ saved up and 2) that you can afford (on paper anyway) anything close to the going price for a small SFH in the San Diego area.

The idea of social assistance and home-ownership are mutually exclusive on the metro areas of both coasts. If you earn enough to buy something, you earn to much to qualify for section 8 or similar assistance.

With respect to how much you would qualify for (in terms of loan amount) talk with a few banks. These programs you cite are a wrinkle that negates standard income:purchase price ratios. FWIW - banks are (selectively) risk adverse.

NuttBoxer, I am with TechG so far. I understand that you want a home and you think government help is up there for you, but you shouldn't be overly excited about it, because the responsibility is real thing you're going to face. You want to make sure you can afford it, right?

For now, just set FHA or any government help aside for a while and do your own math as if you're a regular home buyer buying regular home w/o help for math perpose. Then add the effect of government help to it later to see what difference it can make.

All things are boiling down to one simple thing. Your ability to pay. You buy stuff when you can pay, don't if you can't. Your loan eligibility up to whatever number is not important when your actual ability to pay is less than that. So, you need to figure out your "real honest, no hopeful thinking, no freakin finance BS involved" monthly net disposable income after all the costs, small or large, you can possibly imagine. It should be at least few hundreds bucks more than your monthly payment. Otherwise, you will find yourself in trouble soon. That's the bottom line. You find yours yourself.

My question here is,
why you're in section-8 if you're able to buy 350K home?

EastCoastBubbleBoy says

I’m passivly familar with section 8 for rentals… never heard of it for homeownerhsip.
Granted San Diego is a high cost area (in some cases, even higher than the neighborhoods I’ve lived in along the East Coast)
If you don’t mind me being intrusive. How much do you earn “on the books” and how much do you bring in “off the record”. It seems to me that if you are in the unfortunate position to be of meager enough means to qualify for financial assistance than 1) I am surprised that you have such a large amount of $$$ saved up and 2) that you can afford (on paper anyway) anything close to the going price for a small SFH in the San Diego area.
The idea of social assistance and home-ownership are mutually exclusive on the metro areas of both coasts. If you earn enough to buy something, you earn to much to qualify for section 8 or similar assistance.
With respect to how much you would qualify for (in terms of loan amount) talk with a few banks. These programs you cite are a wrinkle that negates standard income:purchase price ratios. FWIW - banks are (selectively) risk adverse.

I like my privacy, so I won't get into personal financial details. I'll just say my wife qualified for the program before we met, and we only have one income(she's a stay at home Mom). What use to be the norm, now means we're poor(especially in California).

Not sure how much the Section 8 program will play into the amount we'll qualify for. We're thinking of having a family member co-sign to boost our chances/approval amount. We can have them just co-sign the mortgage without being on the deed right?

In regards to Seaside's comment, since we'll be paying less than what we currently pay in rent, we will definitely have at least a couple hundred extra a month, since that's what we have now with a higher monthly payment. Figuring out what we can afford means staying under our voucher limit since anything over that amount($1,800) would come out of our pocket.

i make a good salary but my girlfriend doesn't.

i'm going to tell her to buy one of those $350k section 8 houses so we can live there.

Nuttboxer you probably should only have been married in the church only. That way your wife is still legally single and your income wouldnt be in question and you would probably get the whole 1800 a month paid by the feds.

But if most/all of your income is 'off the books' it doesnt matter. Liberals assume 'everyone reports all income' (or they assume everyone has a government or W2 job like they do).

The fact is most people partaking of the freebies are not 100% honest with reporting income. I would certainly hide any I had if I could. Now a days (especially in CA) the prices of rents, homes, food, and school are all horribly beyond belief distorted by guv meddling. If you were a construction guy who actually reported all his income and legally married his stay at home wife(which disqualifies her from free rent,food stamps, school lunch, free child care, and later free college for kids). HOW THE HELL could anyone afford to live and raise a family with a stay at home wife if they are honest and report all income? They mostly cant so we have the two income trap.....

Anyway good luck. We didn't design this insanity but we all have to live here in it.

(and consider a divorce so you can really rake in the cheese! Shacking up and having wife on welfare is what the smart money would do? Am i wrong?).

Section 8 is a creation only in the US. In the rest of the world, subsidized housing is restricted to what is commonly known as "projects" or government housing. Of course, there's no putting that genie in the bottle too.

Here's how it usually works, you inventory every family member, dependent, pool them togeher and apply to maximize the outcome. In one case, a 200K lawyer bought a two bedroom condo in SOMA via schemes like this. Terrible policy