patrick.net

seaside says

Ok, define down payment and a buffer, please

http://dictionary.reference.com/browse/downpayment

http://dictionary.reference.com/browse/buffer

seaside says

5%, 10%, 20%, 50% or even higher down payment?
And for the buffer, how much do you think is good amount? What percentage of home price, or money enough for how many months w/o income?

I think those are personal choices. There is no "right" answer. How much to put down depends on a lot of factors.

On the buffer--personally I like to have at least 6 months income in liquid accounts.

What do you think?

klarek says

Though it doesn’t make any sense in the long run, the govt is effectively incentivizing them to do this: “Pay more in interest and we (other taxpayers) will subsidize it.” Read finance articles involving refinance or the MID and you’ll inevitably find testimonials of people that do this. I’ve had coworkers do it - even recommended by their financial adviser - with no realization as to how dumb it is. The bottom line is that they have more money in their spending accounts, and they maximized their deductions. It’s hard to believe that the mortgage interest deduction hasn’t been removed from our tax code. This is as bad as the credit card and car loan b.s. from the 1980’s.

I agree that the MID may not be good policy.

But, I think those people that refinance to take advantage of it aren't dumb. If you can get a refi at 5% and then get one third of that back through the MID, you are effectively paying 3.33% on the loan. If you can invest that money and make more than 3.33%/year, then you are coming out ahead.

tatupu70 says

But, I think those people that refinance to take advantage of it aren’t dumb. If you can get a refi at 5% and then get one third of that back through the MID, you are effectively paying 3.33% on the loan. If you can invest that money and make more than 3.33%/year, then you are coming out ahead.

If you're ten years into your amortization schedule, restarting the clock to maximize a govt bribe based on the amount of interest you pay is just plain dumb. I'm not saying that it's irrational or that the people doing it are stupid, but that an economic/tax policy which incentivizes some taxpayers to do this at a net cost to other taxpayers (those who do not pay less in taxes due to paying less interest) is so fundamentally stupid that nobody could justify it in an honest fashion.

klarek says

If you’re ten years into your amortization schedule, restarting the clock to maximize a govt bribe based on the amount of interest you pay is just plain dumb. I’m not saying that it’s irrational or that the people doing it are stupid, but that an economic/tax policy which incentivizes some taxpayers to do this at a net cost to other taxpayers (those who do not pay less in taxes due to paying less interest) is so fundamentally stupid that nobody could justify it in an honest fashion.

klarek says

tatupu70 says

But, I think those people that refinance to take advantage of it aren’t dumb. If you can get a refi at 5% and then get one third of that back through the MID, you are effectively paying 3.33% on the loan. If you can invest that money and make more than 3.33%/year, then you are coming out ahead.

If you’re ten years into your amortization schedule, restarting the clock to maximize a govt bribe based on the amount of interest you pay is just plain dumb. I’m not saying that it’s irrational or that the people doing it are stupid, but that an economic/tax policy which incentivizes some taxpayers to do this at a net cost to other taxpayers (those who do not pay less in taxes due to paying less interest) is so fundamentally stupid that nobody could justify it in an honest fashion.

Yep. The tax code is full of dumb write-offs...

Is it too late to get an abortion?

Nomograph says

bubblesitter says

jealousy just affects me

At least you now admit your comments are born of jealousy. Most folks are jealous of other people to some degree or another, but very few lash out like you. If you behave in real life the way you do on this forum, you’ll never get anywhere.
Let other pens dwell on guilt and misery — Jane Austen

LOL. You can never read my mind correctly. I was never jealous but you are out there giving your stupid buy now advise, clearly.

It's insane how different most of California is from the rest of the country. Here in Ohio, 675k would buy you a mega mansion...you'd have the nicest house in the county! I just can't fathom spending that much money on a house, and as an engineer I make decent money.

The thought of putting myself in a situation where I could have almost half a million dollars of debt makes me woozy. You all should just leave CA and live like kings elsewhere if you have so much money to throw away on, as Patrick said, a big box that rots in the rain.

StoutFiles says

It’s insane how different most of California is from the rest of the country. Here in Ohio, 675k would buy you a mega mansion…you’d have the nicest house in the county! I just can’t fathom spending that much money on a house, and as an engineer I make decent money.
The thought of putting myself in a situation where I could have almost half a million dollars of debt makes me woozy. You all should just leave CA and live like kings elsewhere if you have so much money to throw away on, as Patrick said, a big box that rots in the rain.

There's a reason why most californians choose to stay in california despite that moving to Ohio would be a financially prudent move. If the reason isn't obvious, don't worry about it. No need on trying to understand it or accepting it. Just let those who are under it's trance live it.

I will be joining you and Wagamama soon! Waiting for my short sale to go through. I have rented for 14 years because I missed the 1990's then in the early 2000's, it did not make sense bying> Now with the price back to 1990's range, and shortsale and foreclosure offeing a buffer of 20-30% to cover further price decline, it is wise jumping the ship. It is mor true for people who have skills that provide job security and are not buying as an investment, are buying what they can afford.

Congratulations Wagamama!

StoutFiles says

It’s insane how different most of California is from the rest of the country. Here in Ohio, 675k would buy you a mega mansion…you’d have the nicest house in the county! I just can’t fathom spending that much money on a house, and as an engineer I make decent money.
The thought of putting myself in a situation where I could have almost half a million dollars of debt makes me woozy. You all should just leave CA and live like kings elsewhere if you have so much money to throw away on, as Patrick said, a big box that rots in the rain.

It is insane. And we all talk about it often. But then when you look around, hit the beach in May and have 300 sunshine days...we often remind ourselves...well, this is why we all pay so much more for our houses here than elsewhere. I have done a cross country trip and I have to say...well, Ohio is...just Ohio. Very plain and very simple. You can't compare it. If CA was as cheap as Ohio, why would anybody live in Ohio?

You don't even have to go that far - you can buy a mansion for $675 here in CA. Just go outside of SF and LA...or go to Palmdale...lol.

There is a reason why a Porsche costs more than a Kia.

burritos says

There’s a reason why most californians choose to stay in california despite that moving to Ohio would be a financially prudent move. If the reason isn’t obvious, don’t worry about it. No need on trying to understand it or accepting it. Just let those who are under it’s trance live it.

These CAans you are talking about didn't pay 600+k for their homes, thats for sure.

My personal belief is that housing will still fall some (not just because of this double dip people talk about, but because of the QRM requirements that will soon be in place), but not enough to wipe out the bubble equity that you carried from your previous sale. You are one of the winners of the previous bubble. That win gives you the cushion to not worry about buying at the absolute bottom (which would be hard to time), and allows you to start living your life in the way you want. The time is right for you. Enjoy!

wagamama, I'm coming your way as well. I just entered contract to purchase an REO. Was able to get a year 2000 price with a cash offer. Sold for 340k in 1999, sold for $540k in 2001. Outstanding loan balance of $800kish at foreclosure.

Congrats!

bubblesitter says

@Suboink,
Sorry, I am still on the other side. I need to be here to create some balance. I hope you get enough crowd on your side very soon.

Looks like more people are joining the crowd after all...:)

I think OP was looking, So this message is for him :

To all my friends who are sitting on the Fence and are looking in Cambrian.

( Insider info)
This is one heck of a home,

http://www.redfin.com/CA/San-Jose/15111-Stratford-Dr-95124/home/1333989

This guy has spent money on the home like anything

SubOink says

Looks like more people are joining the crowd after all…:)

There's a difference between buying a home in this market and buying a home with the delusional expectation that prices have bottomed. One crowd capitulates knowing the risk, the others stick fingers in their ears and hum really loudly.

klarek says

SubOink says

Looks like more people are joining the crowd after all…:)

There’s a difference between buying a home in this market and buying a home with the delusional expectation that prices have bottomed. One crowd capitulates knowing the risk, the others stick fingers in their ears and hum really loudly.

I don't know anybody that buys a home because they think prices have bottomed but I do know a lot of people that are simply buying because they now can afford a home that they love. And that's how it should be.

SubOink says

I don’t know anybody that buys a home because they think prices have bottomed

I think there is at least one person on this forum did just that back in 2009. Please correct me if I am wrong.

SubOink says

I do know a lot of people that are simply buying because they now can afford a home that they love. And that’s how it should be.

That's retarded. The biggest purchase in your life should be made with a little more thought and a lot less emotion. What exactly DO you know about home ownership?

Klarek, you must be one hell of a buzzkill at a party.

Possible conversation:
X: I've made eggplant parmesan for dinner.
Klarek: Why eggplant? It has no nutritional value.
X: Because I like the way it tastes.
Klarek: But it has no nutritional value; makes no sense.

X: Would you like a beer?
Klarek: No, it's a waste of money and it kills you over time.
X: But, it tastes good and is relaxing.
Klarek: But you are spending money to kill yourself.

X: How do you like our new house?
Klarek: It was a stupid purchase, you should just rent.
X: But rent was more and my family has never been happier.
Klarek: That's because you're F'n stupid.

X: I'm gonna need some more beer.

klarek says

That’s retarded. The biggest purchase in your life should be made with a little more thought and a lot less emotion

Figuring out what you can afford, is not emotional. It's very rational. You're the retard here.

@ Ch-tah - LOL!!!! Love it.

SubOink says

klarek says

That’s retarded. The biggest purchase in your life should be made with a little more thought and a lot less emotion

Figuring out what you can afford, is not emotional. It’s very rational. You’re the retard here.
@ Ch-tah - LOL!!!! Love it.

Saying someone is a retard is NOT the same as saying something is retarded. Don't do that.

That said, hardly anyone can actually afford a house, that's why almost everyone gets a loan. A loan, by definition, means you're borrowing money because you can't afford something. You should word it:

"I do know a lot of people that are simply buying because they now can get a loan for a home that they love and assume that they'll keep their current income flow in order to pay their loan"

StoutFiles says

That said, hardly anyone can actually afford a house, that’s why almost everyone gets a loan. A loan, by definition, means you’re borrowing money because you can’t afford something. You should word it:
“I do know a lot of people that are simply buying because they now can get a loan for a home that they love and assume that they’ll keep their current income flow in order to pay their loan”

So, what would you call renting then?

"I know a lot of people who are paying a lot of money to someone else becaue they can't afford to buy a home. They assume that they'll keep their current income flow in order to pay their landlord"

tatupu70 says

StoutFiles says

That said, hardly anyone can actually afford a house, that’s why almost everyone gets a loan. A loan, by definition, means you’re borrowing money because you can’t afford something. You should word it:

“I do know a lot of people that are simply buying because they now can get a loan for a home that they love and assume that they’ll keep their current income flow in order to pay their loan”

So, what would you call renting then?
“I know a lot of people who are paying a lot of money to someone else becaue they can’t afford to buy a home. They assume that they’ll keep their current income flow in order to pay their landlord”

Intelligent? If they can't afford to pay their landlord, just imagine how much worse they'd be off if they had a huge house loan they couldn't pay.

All I'm saying is we shouldn't ever use the phrase "afford to buy a house" because hardly anyone is buying it outright. It's "afford to get a loan". Thank god the loan requirements are getting stricter to save people from themselves.

StoutFiles says

All I’m saying is we shouldn’t ever use the phrase “afford to buy a house” because hardly anyone is buying it outright. It’s “afford to get a loan”. Thank god the loan requirements are getting stricter to save people from themselves.

Why the change of language now? People have been "buying" homes for the past 50 years using 30 year mortgages. No one had a problem with the language in the past. I'll agree with you if you limit it to when people only pay interest or less than interest; they should not say they bought a home until they start paying some principal.

StoutFiles says

Intelligent? If they can’t afford to pay their landlord, just imagine how much worse they’d be off if they had a huge house loan they couldn’t pay.

OK--clearly you are in the "all debt is bad" group. I just don't understand that thinking at all.

tatupu70 says

I just don’t understand that thinking at all.

Well, I've heard that all debt contributes to excessive flatulence and bad breath... so there's that.

ch_tah says

Klarek, you must be one hell of a buzzkill at a party.

I'm a buzzkill to anybody that's trying to project fantasy into reality.

SubOink says

Figuring out what you can afford, is not emotional. It’s very rational. You’re the retard here.

I can afford a Lamborghini. If I test drive one and love it, should I buy it?

There's nothing rational about making the biggest purchase in your life based on a) if it feels good, and b) whether you can.

The latter is the barrier to market purchase. It's fucking asinine to say "well you can so just do". That's all your argument comes down to. Hence, it's retarded. That you're standing by such a statement (after home many months of home ownership, two?) is a testament to who is acting retarded (note: I didn't say you ARE retarded, but you obviously don't know the difference).

tatupu70 says

So, what would you call renting then?

“I know a lot of people who are paying a lot of money to someone else becaue they can’t afford to buy a home. They assume that they’ll keep their current income flow in order to pay their landlord”

It's deferring the risk and the responsibility to the owner. TA DA, there's your difference.

Congrats, Wagamama! It must be exciting to finally own a house. Yes, I think there is risk to owning, but there is with renting as well (as me how i know, lol). And if you happen to lose your job, or become disabled in an accident that prevents you from working, hopefully you will have disability insurance. At the very worst, you could sell and rent again. Yes, that would be expensive (closing costs and such), but it shouldn't ruin you. Actually, at the very worst, you could lose your house, and your down payment, AND the closing costs via foreclosure. But you seem intelligent and savvy enough to avoid this. So, at worst, maybe just a short-sale? That would still be bad, but it wouldn't be enough to ruin you, probably.

Don't dwell on the negatives too much, esp now that you have jumped into the fire of home ownership. Take care of your home and your family, and you won't go wrong. Unless something terrible happens, which is always possible. But if they're going to get you, they're going to get you. No point in losing sleep over it (don't ask me how I know this, lol!).

Best wishes.

klarek says

tatupu70 says

So, what would you call renting then?
“I know a lot of people who are paying a lot of money to someone else becaue they can’t afford to buy a home. They assume that they’ll keep their current income flow in order to pay their landlord”

It’s deferring the risk and the responsibility to the owner. TA DA, there’s your difference.

That's not a shock that you see only the negatives...

tatupu70 says

That’s not a shock that you see only the negatives…

Let's talk about equity and home value appreciation then. Looking good these days?

klarek says

tatupu70 says

That’s not a shock that you see only the negatives…

Let’s talk about equity and home value appreciation then. Looking good these days?

Depends on the area. Right now, things are selling pretty well around here so we'll see where prices go this summer. But in any event, a house is not a short term investment. Let's look at nominal home prices over the last hundred years and see how often they go down versus go up.

After I bought, 2 of my frineds have jumped into the bandwagon.

Actively looking and making offers now.

SubOink says

have done a cross country trip and I have to say…well, Ohio is…just Ohio. Very plain and very simple. You can’t compare it. If CA was as cheap as Ohio, why would anybody live in Ohio?

This is not true. Overall there are many places just as nice or nicer than San Francisco for different reasons than the weather. Plus the weather in San Francisco isn't so great that it justifies such high prices. The city is very provincial. There are no world class theaters, music halls or museums that you can find in cities like New York, Chicago or Madrid. The people are very rude and obnoxious. The cultural diversity that this city boasts is mostly limited to people from south-east Asia. You will say that people are willing to pay this much money, so it must be justified, but that was true back in 2006 at the peak of the bubble, as well.

dunnross says

The cultural diversity that this city boasts is mostly limited to people from south-east Asia. You will say that people are willing to pay this much money, so it must be justified

For the amount of living space, SF and the Bay Area are Bargain Prices, and The Wide Open Spaces, compared to where they came from.

That is all that matters.

sybrib says

dunnross says

The cultural diversity that this city boasts is mostly limited to people from south-east Asia. You will say that people are willing to pay this much money, so it must be justified

For the amount of living space, SF and the Bay Area are Bargain Prices, and The Wide Open Spaces, compared to where they came from.
That is all that matters.

Chinese and Indian cities are only more expensive than SF relative to their salaries, but, in nominal terms, SF is still more expensive. But, housing in those countries currently is only affordable to the oligarchs. Eventually, when they run out of the last oligarch to buy, there will be a housing crash the likes of which hasn't been witnessed in the modern world.

Can't agree more with dunross. Money is limited and every one wants to be rich? Not possible. Economics 101!