You are a shining example of living below your means and not playing the "keep up with the Jones's" game. Congrats.

 

Chris first of all let me say I am not picking on you but you are convenient and your situation and thought processes are common.

You comment of "I fail to see..." is probably exactly what those people in the article said.

Under their present circumstance and the economy at the time they made those purchases they failed to see what the impact of a higher cost to live, the payment increases due to their adjustable rate loans, job or situational changes, a short time without renters, damage done by renters, etc., would have upon their ability to carry the mortgage.

Now in your situation what happens if the cost of gas goes to $5 a gallon? What happens if the price of just about everything goes up because the cost to transport goods goes so high? What happens if the Dems get in power and begin to spend more on "social programs", what happens if there is a slight shift in demographics that makes the neighborhood you want to buy in less desireable, what happens if you or your wife should get hurt, you have a kid, your kids needs glasses or braces, your parents retire and no longer have the $$ to bail you out, what if we go to war with China, what if due to growth in China the costs of steel/cars/gas goes up even faster than it's going today, what if the feds quite trying to control inflation and we see inflation like in the 80's, what if ad infinitum?

None of those things I mention are out of the realm of possibility in the next 5 years. Many are actually probabilities. Will your salaries keep up? How will these things change your life and needs and your spending abilities when necessities eat up a larger and larger share of your income?

Now the sad part about my tirade is that I am an optimist. I don't see things changing so abruptly that we can't adjust our own personal thinking to find a niche that we are comfortable in. But you need the room to wiggle should even a quarter of those things happen.

Things are changing all the time, it is just that usually they are changing gradually enough we don't realize it. I remember gas at 19 cents a gallon. I remember thinking 32 cent gas was sinful. I also remember when minimum wage of $2.50 an hour.

What we "fail to see" today isn't our fault since we don't have crystal balls (big brass ones don't count). What you CAN see today are all the news articles, failures of lenders, foreclosures, prop value issues in the N.E., people in trouble, in other words the FACT & FIGURES that prove that the most risky and costly way for you to buy a property is with minimum down and stretching the qualifying guidelines. You are the only person that really cares about what happens to you.

Things have been going good for us for quite a while in the housing market so even a small burble seems gigantic. It can be gigantic if you don't prepare. The race doesn't always go to the fast nor the battle to the strong, but that is the way to place your bets.

While you might have the capability to find a 100% loan the odds are it will bite you in the end. The more you put down, the more you save, the more frugal you are about purchasing the better you will be in the end.

When hunting plan for a bear but hope you find a pussycat. In other words plan for the worst and hope for the best. If you put 10% down and things do nothing but get better how have you been hurt? But if you don't put 10% down and things do get worse can you comfortably weather it? Will it destroy you? Who knows, but plan in such a way that you minimize your downside.

Everybody's situation is different. For some a 3% down is the absolute max that they can handle. They will have more risk than someone who is able to put down 10% or more, but if they buy properly and plan to the best of their ability odds are they will come out. Houses have been money makers many more years than they have been money losers, but still the main reason you want to buy is that it fits your needs.

 

I guess he now SEES the error of his ways hahahaa.

Hind sight is 20 20.

Ok ok i'm done..

 

His eyes have been opened and he's now in contact with reality.

 

Well, I'm talking about a fixed-rate loan as a place to live, not an investment, so most of that is not applicable.

[QUOTE]Now in your situation what happens if the cost of gas goes to $5 a gallon? What happens if the price of just about everything goes up because the cost to transport goods goes so high?

 

It's definitely the fault, IMO, of both the purchasers and the lenders. The question is - what is the impact TO ME and the rest of us responsible people of bailing them out, vs not doing so? There's a certain economic impact to propper these people up, yet there's also an impact allowing these people to sink under their own foolishness regardless of what lesson it might or might not teach people.

If we force them to deal with the consequences of their failures, are we cutting off our nose to spite our face? In other words, if we give a couple hundred billion in aid to people in over their head, will the economy be improve by more than that, thereby leading to a healthier, stronger environment for those of us with investments, reasonable mortgages, etc?

FWIW, we bought our house in 2005 for 15% down and a 1.5*salary mortgage. And being in Dallas, our house price likely has increased since then rather than the double-digit declines in many places.

 

That's where you are wrong!

That's the fallacy in your whole way of thinking.

Any time you have that much money invested with a chance to gain or lose money that's an investment.

 

I think his point is, with no real intention of moving out within the next ten years, whether or not it loses or gains value is immaterial since a shift in prices is bound to happen once or twice in that period of time. A big downpayment wouldn't really do anything except lower his monthly payment slightly. His "risk" (if he has no intention of moving and is buying well within his price range) is negligible based on his intention to hold onto the house for quite a while.

We bought a house that was bigger than we needed so that we wouldn't have to sell it for quite some time, YET we still managed to buy well below our means. So, we're not worried much about value loss or gain. Our real estate market locally is very sluggish (no major movements in prices, up OR down) so we don't really need to worry about a loss, regardless.

 

IIRC, Jonboy moved from Canada to Tx. I am sure you moving to Texas wouldn't be as much of a culture shock.

Don't get me wrong, I really don't more of you yankees and californians moving to Texas but if the price and quality of life is ridiculous then why live there.

 

You were talking about not having tennents, tennent damage, etc. I would live there, not rent it out, so those risks do not apply to me.

Beyond that, Jonboy is right, I am buying with an eye towards resale, but this is primarily a place to live. My 401(k)s, IRAs, mutual funds, and money market account are my real investments.