Italia

20 percent is not always the way to go like people always seem to think. If you are CERTAIN you will keep the house *forever* and not need the money for anything else, then it is good to do that. HOWEVER, in most scenarios, if you put 3.5 percent down rather than 20 percent, even paying PMI, more interest, and other things, if you do the calculations it would take 10+ YEARS to see your money back.

Now here is the other factor: It depends on how much of your bankroll that 20 percent is. If its a lot, then dont do it. Lets say someone puts down 20 percent and its most of their money. If something were to happen to their jobs or sources of income, who cares that the payment is a hundred or two lower if they do not have the bankroll to cover the mortgage payment for 6-12mths or more. Like I said, if you KNOW youll be keeping it forever, arent spending a big chunk of your bankroll to put 20 percent down, and know for sure you have a steady income, then 20 percent is the way to go. It would take very long to see returns on your 20 percent down, and if things break loose and you sell for way higher, you wouldnt care about a few thousand you lost by not putting 20 down.

Jsmply

Interesting point. Thanks! I've thought about it like that before to. I think there are a lot of different situations in ways it would work for some people and not others (like most things).

Italia

If you arent staying forever, then sometimes it is better to give rent money away than to give interest payments away, unless you NEED them taxwise.


As for the people saying "now" is the time to buy, those people were also saying that one year ago, and even 2 yrs ago. Dont compare prices of things in 04/05 to what they are now or what you think they will be 10+ yrs from now, they may NEVER reach those prices again, even WITH INFLATION. They were artificial prices caused by so much loan fraud/faking numbers. In regards to the tax credit thing, it is like dangling a carrot. People can say there will not be one in 2010, but who knows, there could be a BIGGER one at that time to try and stimulate the market.

Italia

Id say it mostly depends on your business, what type it is, how well it does etc etc etc etc. Because, as you know, who backs your business? Not the gov, not other people, not even YOU really, it is your bankroll. If you sink 20 percent into a depreciating property that could have been helpful with the business, then its a mistake. (like I said before though, it all depends on how much percentage 20 percent is of your bankroll)


Heres another thing that I have posed to people and they at me but I think it is a sound approach...


Even if you lose 5-10-15 or so grand on a house/property because they have gone up, at least you are buying something that is appreciating rather than depreciating, and in all reality that 5-10-15k wont make much of a difference in the monthly payment, and if they are going up the chances are they will continue to go up and you would have more equity than that anyways...

Jsmply

[QUOTE=Italia,Jun 16 2009, 11:23 AM] If you arent staying forever, then sometimes it is better to give rent money away than to give interest payments away, unless you NEED them taxwise.


As for the people saying "now" is the time to buy, those people were also saying that one year ago, and even 2 yrs ago. Dont compare prices of things in 04/05 to what they are now or what you think they will be 10+ yrs from now, they may NEVER reach those prices again, even WITH INFLATION. They were artificial prices caused by so much loan fraud/faking numbers.

Italia

Yeah, those days are definitely gone, unless you are investing for rental/long term purposes. We wont see that rush because there is more scrutiny on the banks for allowing people who made 20k per year to get into 600k houses. I think you guys are definitely on the right track mentally, proceed with caution, but at the same time if a great opportunity presents itself, look into it as well. Now is the PERFECT time to study the market/certain areas/specific properties, and it doesnt cost you anything. 5 years ago, people who waited too long watched properties go up by 100k LOL, but now we will see a more *realistic* market. I dont think you have to fear them RISING up again, if they do go up, at all, it will most likely be VERY slowly, or just a small spike, and then fall back down a little bit...

Jsmply

So, in other words, a year from now (the term of a new lease) more than likely the buyer's market (prices and interest rates) will still be similar?

Italia

It's very hard to guess as you can tell. If I had to, I'd say they will either be the same or even lower. Regardless of what may be in place to "fix" the economy, it would be hard to have all the people who are unemployed back working by then, which is what it would take to REALLY get things going. All the houses that are selling right now are to investors rather than first time home buyers. Even if the banks do get more loose with the lending, who is working to be able to afford/pay back those loans? Also, we have yet to see the next real wave of foreclosures which is even worse; more foreclosures coming with people who STILL have their jobs losing their houses due to ARMS and refinancing done in the midst of the crazyness back in 05/06...

SD_S2K

Agreed.

There are huge deals out there on cars, does that mean you should run out and buy? No.

There are deals on homes, does that mean we should all run out and buy? No.

TV's, electronics, computers, all deals. Run out and buy? No.

Buy when you are ready- financially, down payment-wise, business-wise, deal-wise, etc. If you are planning to buy to stay a long time, then it really isn't that big of a deal when you buy. It is more important to save up and find the house or condo you really want. Don't run out and buy, just to run out and buy like everyone else.

And frankly, a condo in CA will not appreciate much, if at all, in the next 5-10 years. There are tens of thousands of condos here in San Diego sitting and growing dust bunnies. They will not be making anyone any money any time soon. I know a half dozen guys that had condos for 5+ years and just short sold them to get out from underneath the loans. One guy just walked away from his.

A SFH probably will appreciate, so you are better off waiting and finding a nice house to buy and hold for a long time.

As a business owner, with a young business, in a recession, you are better off holding that cash for now. You never know what can and will happen.

SD_S2K

And about your friends whispering in your ears - tell them to worry about themselves.

Obviously you don't live your life by their rules, or you wouldn't be posting here, so remember that.

If I did a lot of the things my friends said and did, I would be driving an Escalade while short selling my condo and looking for a new job. Basically, I'd be up a creek.