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Knucklehead97

Buying a house...

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'5. The listing has been reduced by $13k, or @16%, in only 90 days on the market. I tried to look up the assessed value of the home, but was only able to find public records on the tax assessment on the land. It was noted as a "delinquent account" despite the property tax on the land only being $118. Those two pieces of info indicate a distress sale to me and why it is being sold "as is", i.e. they don't have any money.  '

 

Interesting point, and has a bearing on PMI.    PMI is based on the value of the house, not the loan (or at least that is what worked for me). So, if the house is valued at $80 or higher, then you might be out of PMI already. Something to look into. There are also taxes and some other stuff that might get rolled into the loan. 

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I went and looked at the house yesterday. It was TRASHED. There's people living in it but they weren't willing to talk about fixing anything. They had multiple cats and there was a hole in the wall that they said the cats had been getting into some parts of insulation through. It basically gave me the vibe that they're broke and just trying to get out. I'm no longer interested in it. But, so I'm better prepared for next time, should I go ahead and talk to a bank and figure out how much I could get pre-approved for? If I can't find somewhere to rent for a reasonable price, I'm going to probably have to find a small starter home to purchase. This drive is getting old :laugh:

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2 hours ago, Knucklehead97 said:

It basically gave me the vibe that they're broke and just trying to get out. I'm no longer interested in it. But, so I'm better prepared for next time, should I go ahead and talk to a bank and figure out how much I could get pre-approved for?

 

Well, you learned that a deal that sounds too good to be true probably is (too good to be true). You dodged a bullet on that particular house, but you have now started the process of educating yourself, and that's never a bad thing.

 

IMHO, by all means talk to a bank about getting pre-approved. You need to know what your price range is -- there's no point in looking at houses that are out of your range, falling in love with one, and only then finding out that there's no way you can afford to buy it.

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5 hours ago, 75sv1 said:

'5. The listing has been reduced by $13k, or @16%, in only 90 days on the market. I tried to look up the assessed value of the home, but was only able to find public records on the tax assessment on the land. It was noted as a "delinquent account" despite the property tax on the land only being $118. Those two pieces of info indicate a distress sale to me and why it is being sold "as is", i.e. they don't have any money.  '

 

Interesting point, and has a bearing on PMI.    PMI is based on the value of the house, not the loan (or at least that is what worked for me). So, if the house is valued at $80 or higher, then you might be out of PMI already. Something to look into. There are also taxes and some other stuff that might get rolled into the loan. 

 

It's based on LTV, or Loan to Value, so it is a function of the appraised value and the loan amount/balance. 

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I'd be couscous on what a bank will loan you. It might put your budget out of whack.   I remember I was approved for about $110K. I bought my house for $65K. I was making $16/hour, no or little OT. Also, watch that you are making a bunch of OT currently. How long will that last? How stable is the housing market, were you are at? That could be neighborhood to neighborhood.  Still, get preapproved. It works in your favor.  Also, see if there are house buying classes in your area. In my area, at least it used to be, customary to put down $500 as a promise note. If you backed out of the deal, it was the sellers $$. 

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11 minutes ago, 75sv1 said:

I'd be couscous on what a bank will loan you. It might put your budget out of whack.   I remember I was approved for about $110K. I bought my house for $65K. I was making $16/hour, no or little OT. Also, watch that you are making a bunch of OT currently. How long will that last? How stable is the housing market, were you are at? That could be neighborhood to neighborhood.  Still, get preapproved. It works in your favor.  Also, see if there are house buying classes in your area. In my area, at least it used to be, customary to put down $500 as a promise note. If you backed out of the deal, it was the sellers $$. 

Thankfully I don't have to worry about OT anymore. I'm straight salary now :laugh: once I get caught up at work and get an off day I plan to go talk to banks. Maybe talk to them about foreclosed homes as well.

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44 minutes ago, 75sv1 said:

I'd be couscous on what a bank will loan you. It might put your budget out of whack.   I remember I was approved for about $110K. I bought my house for $65K. I was making $16/hour, no or little OT. Also, watch that you are making a bunch of OT currently. How long will that last? How stable is the housing market, were you are at? That could be neighborhood to neighborhood.  Still, get preapproved. It works in your favor.  Also, see if there are house buying classes in your area. In my area, at least it used to be, customary to put down $500 as a promise note. If you backed out of the deal, it was the sellers $$. 

I agree.. when I got preapproved, I got a value about twice what I comfortable spending.  I could have afforded it, BUT... I would have had to gone with simple things like, lights, hot water and food to pay that much.

 

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1 hour ago, Knucklehead97 said:

Thankfully I don't have to worry about OT anymore. I'm straight salary now :laugh: once I get caught up at work and get an off day I plan to go talk to banks. Maybe talk to them about foreclosed homes as well.

 

First line supervisor on Salary = pay cut for the hours you will serve/work.

 

Just the price young "people" pay for the "promise" of future gold!  Not trying to be an old grump!!  But there is some truth to that.  It is also a bigger stretch for you to make it to the AA league.

 

Sounds like you are learning a whole bunch.  First, cheap is not good.  Review the Tom Hanks movie "The Money Pit".  Funny movie, but lots of truth there.  It is like restoring a car or buying a good car someone else has restored.  Frankly, it is cheaper to buy one that someone else has done a great job restoring than than to pay for the restoration yourself.  Been there, done that, more than a couple of times.

 

Remember, low interest borrowing is your friend when your income is increasing at a faster than interest rates.  Also, the best deal about borrowing money on a home is called "leverage".

 

That means when you put up $10 and borrow $90, then the value of the property increases by $100, all the $100 increase in value belongs to YOU.  Lender gets his interest, but you get all the increase in market value.

 

Here in California, it has worked very well since WWII.

 

My/Our first home was opened in December, 1972 with 5% down.  $23K or so and $1200 down.  Total Payment was $302.48 - Double our previous rent of $150/mo.  But we when we sold the property, we walked away with $20K in 3.5 years

 

Yes, this was/is in Southern California.  So your experience in the rest of the country will not match.  But, in 3.5 years we sold the condo for $46k, purchased our next house for 54k and sold it 3 years later for $105K.  But I/we have only lost once on Southern California real estate since 1972.  That was because we simply could not ride out the down turn. So we learned how important it was to have cash reserves.

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2 hours ago, Knucklehead97 said:

Thankfully I don't have to worry about OT anymore. I'm straight salary now :laugh: once I get caught up at work and get an off day I plan to go talk to banks. Maybe talk to them about foreclosed homes as well.

 

You can ask. My guess is that they won't be interested.

 

Here's the deal. The bank is lending you money, but they aren't doing it because they're your friends. It's their business. They want to be certain that their money -- however much of it you're using -- is protected. The position they aim for is one that tries to assure (them) that, if you go belly up and default on the mortgage, they can sell the property for enough to get their money back. If it sells for more, you get the difference. But if the bank forecloses, their priority is to recoup their money. So they most likely won't be very interested in financing anything that looks like a long-term project.

 

I don't know how handy you are with homeowner stuff such as carpentry, sheetrock, plumbing, and electrical. Even if you're pro-level at all those trades -- you're working long hours at a full-time job. Realistically, you probably don't have the time to take on major repairs. Sure, you can hire it out -- but contractors charge by the hour, so there's no money to be saved by buying a house you already know you need to pour money into just to bring it up to basic standards.

 

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You can ask. My guess is that they won't be interested.
 
Here's the deal. The bank is lending you money, but they aren't doing it because they're your friends. It's their business. They want to be certain that their money -- however much of it you're using -- is protected. The position they aim for is one that tries to assure (them) that, if you go belly up and default on the mortgage, they can sell the property for enough to get their money back. If it sells for more, you get the difference. But if the bank forecloses, their priority is to recoup their money. So they most likely won't be very interested in financing anything that looks like a long-term project.
 
I don't know how handy you are with homeowner stuff such as carpentry, sheetrock, plumbing, and electrical. Even if you're pro-level at all those trades -- you're working long hours at a full-time job. Realistically, you probably don't have the time to take on major repairs. Sure, you can hire it out -- but contractors charge by the hour, so there's no money to be saved by buying a house you already know you need to pour money into just to bring it up to basic standards.
 
I've bought two foreclosed houses. One from the bank i got the loan from and another from a third party bank. Both times the bank wanted to make the best possible deal for the bank, yes. But and a huge caveat. They could sit on that property and hope someone made a better offer at some point or go to the bargaining table with me and my pre-approved financing. Both times they were willing to bargin with me. The second house, I made a lower offer than another buyer, but having my financing in hand, I could close much more rapidly and the bank took my offer.

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Knucklehead,

The bank is not your buddy!  They want to cover their investment.  No more and no less. But they will be flexible, because the know the market is flexible (unlike ).

 

My last purchase was sold for $680K, just before the Great Resession.  The bank offered it at $479K for the first 30 days.  Then they dropped the asking price to $429K.  We purchased it at $425K    Remember, I live in San Diego.  It is a hugely different market from any place in Alabama.

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For those who do not put down at least 20% there is PMI or Personal Mortgage Insurance. PMI insures the lender that if the owner defaults the lender will be paid the amount of the loan in full. Generally 1% of the loan, in this case a $70K loan will be about $70 per month. 

Live in the house for a year, get new appraisal showing a value greater than 20% of loan, refinance or modify loan, PMI now goes away. 

 

 

A deal such as described here. 

Let's assume that this house in turn-key condition would appraise for $99K. You pick it up for $67K and have a loan of $70K. Over the course of 3-5 years you make improvements, clean up the yard, paint, new doors, new flooring, maybe build a detached garage....etc...

Let's assume the housing market remains strong or strengthens, at the end of 5 years the house appraises for $120K with improvements. You sell at $115K. 

You enjoyed the house, you lived for free, all that has been invested is now returned, you are walking away with $45K you did not have to begin with. 

This is one of many ways that people acquire wealth. 

 One of my wife's sons did exactly this and walked with $60K just last month. 

 

For a lot of people, if not most, a house is a ball and chain. 

You stated that the house was 'trashed' and sellers did not want to fix anything and would not discuss a deal and so forth.....look beyond them, it's just a box, look only at the box and the potential of the box. 

Someone posted- Do you really want a fixer upper for your first house? At 24 years old you are entitled to one thing- the opportunity to work your @$$ off, that's it, you are entitled to nothing else. 

Thursday my day began at 8AM, I worked three jobs in three different cities, drove 140 miles, day ended at 1AM, slept 5 hours, started all over again, at 53 I'm still working my @$$ off. 

 

 

I'm installing a new kitchen in an estate house that was built in 1920. 

You mentioned a hole in the wall, this is what I deal with all the time, holes ain't nothing. :P

 

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oh, the surprises you can find in old walls. :D   decades upon decades of "upgrades" and "fixes" done by people that had no real idea how structure, water, or electrons really work.  :doh: 

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2 hours ago, Jeep Driver said:

Apparently we've been talking about two different things, MPI and PMI, and things have changed.

 

http://www.fhahandbook.com/blog/do-fha-loans-require-pmi/

 

Regardless of the semantics, on an FHA loan you are now stuck with the mortgage insurance for the life of the loan, I refinanced my FHA in Dec 2012 and I was excited because I was going to be able to drop the insurance because I hit 80% Loan to Value, only to find all FHA loans now require it for the life. My mortgage insurance is $73 a month, to do away with it I would have needed to go with a conventional loan with extra closing costs etc. I think I ran the math on the price difference and the payback would have been 4-5 years. Still, at the time it made sense for me.

 

Lots of people have a very negative view of PMI/MPI, and I understand it. But I know people putting putting 20% down on $350k properties instead of 5% because they didn't want to pay insurance. That the difference between putting down 70k or 17.5k, or 52.5k.

 

I get that you save the $100 a month, but I would rather keep the 52.5k in the bank. At those numbers I could buy a house and then lose a job for a year and still not be out of money, thats a pretty good safety net.

 

Again, I have different thoughts and views. I purchased the house behind mine in Oct of 2016 to use as a rental. I bought it with 5% down(owner occupied financing) and spent the better part of a year working on it before renting it out(need to occupy for a year before using as dedicated rental per mortgage terms). Between the purchase price and how much I spent on improvements I think I cash wish I spent about 10-15% of the purchase price before I had it rented. Had I not chosen to upgrade the house I could have lived in it for a year and then found another house to purchase for 5% down and rented out my second house after a year of ownership. Some people do this, purchase a house with 5% down, live in it for 1-2 years, then purchase another with minimal down, you need to have the income to support two mortgages initially, but once you have 2 years of rental income on a property they will consider that part of your income and they won't consider that payment a liability against you for the next mortgage.

 

Funny enough I could have rented it right away if I bought at 20% down, but I didn't have enough cash for that, it was actually cheaper for me to buy it with 5% down, live it in as my primary residence, and pay two mortgage payments PLUS all the money I spent on improvements.

 

There's something to be said for putting down the minimum, you get to leverage your money to make more, and having cash on hand means more oppourtuinies are possible. When you have liquid assets you can do things, you cannot spend the money tied up in your house.

 

 

If you are looking for just some general knowledge and to see what many other people are asking or trying to know I recommend:

https://www.reddit.com/r/RealEstate/

 

Since I am now a landlord I also watch:

https://www.reddit.com/r/Landlord/

 

Getting off a bit to the side:

https://www.reddit.com/r/personalfinance/

 

Has lots of good general advice, but many different viewpoints and advice that works for some does not work for others......speaking of which, my advice works for me but may not be right for you.

 

Goodluck. I closed on my first house 3 weeks after I turned 20 with the help/credit of my Dad, right away I was a landlord renting the unused rooms in my house while I was in college. Roomates paid most of my mortgage and I learned first hand how leverage can work for me. I don't plan to stop and my next purchase will be something I can rent on AirBnB in the mountains here.

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The information from this thread has definitely taught me wayyy more about buying a house than I expected it to... But good news!

 

https://www.zillow.com/homedetails/8449-Thomas-Ave-Leeds-AL-35094/973581_zpid/

 

Going to look at renting this one tomorrow. Didn't want to rent but it'll give me the flexibility of moving around with work. Pretty sharp little place, I'm hoping it's not just the camera quality making it look nice.

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Never heard of a rental -- house or apartment -- that didn't include the basics of a range (including an oven) and refrigerator.

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54 minutes ago, Knucklehead97 said:

Only comes with a fridge. Going to be talking to the owners about that.

 

That is really weird.

 

Either way, renting while looking for a house is a better plan than just jumping into buying a house.  I was under duress when I bought mine, my current landlords were going to sell and I needed to find a place to go.  I don't think it affected my decision making in a positive way.

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67K is a good price for the house you described to be honest in my opinion. Congratulations on deciding to make a new step and moving to a new place to live. What you explained sounds logical and really sounds like a good plan. Here you can find latest articles about buying a house in USA,  hope it can help you in some way. 

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1 hour ago, bluenotenick said:

How did the rental turn out?

Sadly terrible. They must of been using a good camera... Cause it was not that nice at all in person. Floors were scraped up, it was across the road from the biggest Section 8 housing complex I've ever seen. And it had a weird scent to it. Also took the rental agency 3 days to return my call on Monday.

 

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On 1/14/2019 at 8:57 AM, Eagle said:

Never heard of a rental -- house or apartment -- that didn't include the basics of a range (including an oven) and refrigerator.

 

More regional thing, California its fairly common.

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