If you're a foreclosure "victim", you get lots of free money from the government! Notice how much more money "victims" are getting than responsible home owners? There may be merit to this method...
/sarcasm
The sad part is, there is way more truth to what I said above than there should be.
If you follow this advice without doing your own research, you may just end up being another foreclosure "victim". How is this author an "expert" on Wise Bread anyway?
You really can't just trust blindly. People make mistakes. It is up to you to check your closing statement carefully and read your contracts. For example, when I first looked over our closing statement the number on the final line didn't add up with the rest of the statement. I had to go over the statement four times with the broker to get it right. A lot of people that bought homes in the last few years failed miserably because they trusted the people they worked with and didn't bother with trying to understand their mortgage contracts. So my first tip wouldn't really be learn to trust, but learn the important financial stuff such as what different mortgage types are, what different insurance options are there, and what your obligations are. Trusting others blindly without being responsible for your own affairs will get you in trouble no matter how trustworthy these people are.
I used a credit card consolidation program last year. Capital One was one of the cards I placed on my plan; if you are familiar with consolidation programs, they take what you owe and your interest rate on each card and negotiate with each CC to lower your monthly payment. The consolidation company did this, but two months in a row, the company underestimated what Cap One would accept as a payment... by $1.50 one month and $1.25 the next. The result? An APR increase from 11.9 to 23.9 because I did not make my payment in full for 2 months. After speaking to both the consolidation company and Capital One, each denied blame and Cap One absolutely refused to budge on my APR despite my ALWAYS on-time and often payment in full I provided to Cap One over the past 7 years. By all means, avoid Cap One. And Bank of America as well.
A buyer's agent gets usually a percentage of the sale cost. Their motivation is to do less work, get you to buy quicker and get your to pay more or buy more. There are also things they legally can't tell you or wont because of how they relate to other agents.
A mortgage broker (less so right now, but its still there) will try and get you as large of a mortgage as you can pay. The closing costs increase with purchase price.
Friends and family will usually impose their own needs/desires/impressions into their opinions. Its nice to have more input, or someone to mention what you may be missing, but this can steer you away from what you want and need.
In the end I think you need to but the work into it yourself. Its the largest financial decision you could make. The tendency will be for people to tell you to buy more/better than you went in thinking. If you do more research ahead of time you can find what you want, where you want for how much you want and then let the pros handle the rest.
You forgot the most important specialist you need:
a real estate lawyer. This becomes particularly true
if you are buying a condo or any other special legal entity.
But really, your Realtor is not a lawyer. Your mortgage
broker is just a salesman. There's no substitute for seeing a lawyer before you sign any contract.
Thank you for spreading the word about the important work of this organization. Continued research in the field of diabetes holds so much promise for so many people. On my blog at www.dentistryfordiabetics.com/blog I write about the many treatments that improve the lives of people with diabetes as well as the research in the field. The focus of this research team on a cure is heartening.
Charles Martin, DDS
Founder, Dentistry for Diabetics
Thanks for your comment, guest... while I don't particularly think we need to throw the word "retarded' around, you almost have a good point in that there are always disadvantages to everything.
Personally I wouldn't consider inflation a "risk" since you know it's going to happen. The money you save today is surely not going to have the same value 20 years from now. And if a bank goes bust and you lose your money - how is it a risk if the FDIC gives it back? Sure it may take awhile... but you aren't at risk at forever losing it.
What you consider to be a huge pile of cash at age 28 may not impress you quite so much when you're 40. So don't get carried away.
You will never, ever regret having more saved than you immediately need. Remember that even a short-term illness, unemployment, or other disaster can wipe it all out. So when you have that baby, be sure you're in good shape with health and life insurance to protect your savings and your kid's future.
That doesn't mean you shouldn't spend a dime on travel or other pleasures. But keep it small.
We've bought twice and sold once in the last five years. It is important to keep in mind what is rewarded on part of these experts. Realtors make money by closing sales, quickly. Not necessarily by finding just the right house for you. You need to decide what are the most important features a house should have for you. Privacy? Good schools? Access to downtown? Access to transportation? Then you need to do some research. If one of your criteria is tied to location, research the neighborhood, find out what prices are like. With publicly accessible MLS sites, you don't need a realtor for that anymore.
In the shopping process, we just used an agent to open doors so we could look. Her recommendations were often out of line for what we wanted, and that was the case across half a dozen realtors, including those that came with recommendations.
They talk about their negotiation skill, but really, all the negotiation ends up being with their client, so they can close the deal. It's never "I can get you that house for $X." It's always "If you're not ready to offer $Y, plan to lose this deal."
And the points that Xin Lu mentioned applied, both buying and selling. It took several iterations to get all the contracts right.
Buying a house is like buying a used car from a private party. You need to know what you want, what the market cost for it is, and you have to check out the one you are thinking of buying thoroughly, because when the deal is done, it's done.
I recommend donating to your local Ronald McDonald house, or to the umbrella organization: http://donate.rmhc.org/Page.aspx?pid=254. They earn 4 stars on Charity Navigator, although the individual houses have their own ratings, as well.
They have been one of our 'charities' ever since our daughter was born with a major birth defect and spent 11 days in a NICU. RMH gave us a place to stay, close to the hospital, affordable (they ask families to pay $10/night, but no one *has* to pay), and designed to accomodate families with sick kids in ways that hotels are not. For families with sick kids, RMH relieves a great burden.
You can donate cash, or they also take donations of goods such as toothpaste and boxed meals.
Placing trust in the professionals who should guide you through the process may seem a lot easier than trying to sort through all your research. But you have to do the hard work to avoid getting screwed over! Even professionals have an agenda - to make money! If not from you then from whom? If you want to be absolutely, 100 percent sure that you aren't being taken advantage of then you've got to sort through that research, learn the lingo, take some time and absorb it fully. YOU have to be the last word when it comes to YOUR deal.
As an ING customer for several years I really dont see that there is a big issue for them to sell ING branded products. It is what we do in capitalism , dont we. As a consumer you can browse but are not obligated to buy (although they do give you some sort of code which allows for a certain percentage off for people as a birthday wish if you are a ING customer)
My wife & I are big supporters of Children's Miracle Network. We especially like that the donations made locally are predominantly used locally. and we've seen firsthand babies who've benefited from equipment & services made available as a result of donations that were applied at our local county hospital.
The buy versus rent decision is a different--and I would argue far more important--question than "catching the bottom" in housing prices. I've talked about that a couple of times. My artice What your house is really worth provides a framework for doing the analysis.
Lots of people would rather own a house than rent one, and that's just fine. But many of those people try to convince themselves (or their spouses) that the boost in quality of life that comes from owning is cheap. Or free. Or even that they'll get paid to have a better quality of life because their house will soar in value. For long stretches of time rising home values have made that analysis seem true, but I think that's just an artifact of a particular time and place.
If you want to buy a place, and you find one you like, and you can afford it, then buying may well make sense. But there's really no need to snap a place up just because house prices may be bottoming.
...with Doernbecher's? From their site: Shriners Hospitals for Children is a one-of-a-kind health care system dedicated to improving the lives of children by providing pediatric specialty care, innovative research and outstanding teaching programs. Every year, the 22 hospitals provide care for thousands of kids with orthopaedic conditions, burns, spinal cord injuries, and cleft lip and palate, in a family-centered environment at no charge. It's how Shriners Hospitals has been helping kids defy the odds since 1922. I'm partial to them as my wife works there.
My recent employer found that I had reported working through lunch when I was actually taking a lunch. He told me that I was a good employee and he wanted to keep me on so he would arrange for me to make restitution for what I was over paid. I agreed. We had this conversation on Jan 5th - on Jan 7th he changed his mind and fired me anyway. Should I be able to collect unemployment?
I sold a house and condo way back in 2001 thinking the Real estate market was too 'frothy'. As it turns out, I was right but my timing sucked. However, I believe prices are turning back to at least 2001 levels and probably below that.
My wife & I would dearly love to own our own place. We are sick of renting but will have to wait a bit. I live in North San Diego county near the coast -- probably some of the priciest homes in the country! We've seen some drops in pricing but nowhere near other areas, especially inland.
The government is desperate to restart the housing bubble. They are keeping interest rates artificially low and the Fed is buying up treasuries for the same reason. As unemployment rises and qualifying for home loans become more stringent, there will be a smaller pool of would-be buyers. Less demand, more inventory = lower prices.
I expect housing prices to drop further. I think when pricing gets close to rental parity we'll be close to a bottom. Nowhere close right now. Even if I miss the exact bottom, I'm not terribly worried. We won't see the appreciation of prices like we saw during the bubble. Probably won't see that in our lifetimes.
The odds are good that prices have not bottomed. The odds are good that when they do bottom finally, we won't get rampant appreciation. Plenty of time. I'm waiting.
It depends on what you mean by a 'huge pile of cash'.
I would certainly buy a house & get established before having a baby, if at all possible.
I would not put every penny down on the house, as you need to keep an emergency fund in place, especially once you own a home.
Depending on the amount of cash you have, and whether you can delay the baby issue, I would consider the following:
1. Keep your house down payment in savings until you're ready to buy. Continue adding to that savings as possible.
2. Use a specified amount to take one nice trip, as this might be more difficult after buying a house & having a baby.
3. Consider using a small amount (maybe $1-2K) to invest in the stock market.
4. Look for a better place to hold your savings than ING (which is down to about 1.49% interest now).
5. Be conservative about your spending on unnecessary items (extra clothes, accessories, eating out) and start a savings for future baby expenses.
My money is in an ING account at the moment, but I'm going to open a high-interest checking account at a local bank (4.5%) because I can meet their requirements to get that interest. I'm also looking at investing maybe $2k in the stock market, as I can afford to risk that. Not much, but I want to give it a try.
a home is very different than a stock in that you live in it. If you bought a home and it makes you happy when you live in it and it makes financial sense then I think anytime is ok. I am still waiting until it is cheaper than rent here in the Bay Area. Otherwise, we're packing up and moving.
If you saved the money for a house, and you still plan on buying a house, you should save the money for a house, unless something else more critical has come up (like the baby maybe). If you're good with the amount you have now, move on and start saving for the baby or vacation or whatever. Or increase your nest egg to make things more affordable for you. Never a bad idea!
I always hate to see people convincing themselves to time the market and potentially buying at a time that is not right for them. Trying to make sure that you don't "miss out" on an opportunity has often sent well-intentioned people into some pretty unfortunate situations down the road.
If you're a foreclosure "victim", you get lots of free money from the government! Notice how much more money "victims" are getting than responsible home owners? There may be merit to this method...
/sarcasm
The sad part is, there is way more truth to what I said above than there should be.
If you follow this advice without doing your own research, you may just end up being another foreclosure "victim". How is this author an "expert" on Wise Bread anyway?
You really can't just trust blindly. People make mistakes. It is up to you to check your closing statement carefully and read your contracts. For example, when I first looked over our closing statement the number on the final line didn't add up with the rest of the statement. I had to go over the statement four times with the broker to get it right. A lot of people that bought homes in the last few years failed miserably because they trusted the people they worked with and didn't bother with trying to understand their mortgage contracts. So my first tip wouldn't really be learn to trust, but learn the important financial stuff such as what different mortgage types are, what different insurance options are there, and what your obligations are. Trusting others blindly without being responsible for your own affairs will get you in trouble no matter how trustworthy these people are.
Charleston County SC doesnt charge.
I was able to get every episode of Star Trek on DVD, all series and audiobooks on CD to listen to while driving.
I have a blog about completing college frugally at Debt-free Scholar. Would you mind linking to some of my articles nest week?
Thanks,
Nate
I used a credit card consolidation program last year. Capital One was one of the cards I placed on my plan; if you are familiar with consolidation programs, they take what you owe and your interest rate on each card and negotiate with each CC to lower your monthly payment. The consolidation company did this, but two months in a row, the company underestimated what Cap One would accept as a payment... by $1.50 one month and $1.25 the next. The result? An APR increase from 11.9 to 23.9 because I did not make my payment in full for 2 months. After speaking to both the consolidation company and Capital One, each denied blame and Cap One absolutely refused to budge on my APR despite my ALWAYS on-time and often payment in full I provided to Cap One over the past 7 years. By all means, avoid Cap One. And Bank of America as well.
A buyer's agent gets usually a percentage of the sale cost. Their motivation is to do less work, get you to buy quicker and get your to pay more or buy more. There are also things they legally can't tell you or wont because of how they relate to other agents.
A mortgage broker (less so right now, but its still there) will try and get you as large of a mortgage as you can pay. The closing costs increase with purchase price.
Friends and family will usually impose their own needs/desires/impressions into their opinions. Its nice to have more input, or someone to mention what you may be missing, but this can steer you away from what you want and need.
In the end I think you need to but the work into it yourself. Its the largest financial decision you could make. The tendency will be for people to tell you to buy more/better than you went in thinking. If you do more research ahead of time you can find what you want, where you want for how much you want and then let the pros handle the rest.
You forgot the most important specialist you need:
a real estate lawyer. This becomes particularly true
if you are buying a condo or any other special legal entity.
But really, your Realtor is not a lawyer. Your mortgage
broker is just a salesman. There's no substitute for seeing a lawyer before you sign any contract.
Thank you for spreading the word about the important work of this organization. Continued research in the field of diabetes holds so much promise for so many people. On my blog at www.dentistryfordiabetics.com/blog I write about the many treatments that improve the lives of people with diabetes as well as the research in the field. The focus of this research team on a cure is heartening.
Charles Martin, DDS
Founder, Dentistry for Diabetics
Thanks for your comment, guest... while I don't particularly think we need to throw the word "retarded' around, you almost have a good point in that there are always disadvantages to everything.
Personally I wouldn't consider inflation a "risk" since you know it's going to happen. The money you save today is surely not going to have the same value 20 years from now. And if a bank goes bust and you lose your money - how is it a risk if the FDIC gives it back? Sure it may take awhile... but you aren't at risk at forever losing it.
What you consider to be a huge pile of cash at age 28 may not impress you quite so much when you're 40. So don't get carried away.
You will never, ever regret having more saved than you immediately need. Remember that even a short-term illness, unemployment, or other disaster can wipe it all out. So when you have that baby, be sure you're in good shape with health and life insurance to protect your savings and your kid's future.
That doesn't mean you shouldn't spend a dime on travel or other pleasures. But keep it small.
We've bought twice and sold once in the last five years. It is important to keep in mind what is rewarded on part of these experts. Realtors make money by closing sales, quickly. Not necessarily by finding just the right house for you. You need to decide what are the most important features a house should have for you. Privacy? Good schools? Access to downtown? Access to transportation? Then you need to do some research. If one of your criteria is tied to location, research the neighborhood, find out what prices are like. With publicly accessible MLS sites, you don't need a realtor for that anymore.
In the shopping process, we just used an agent to open doors so we could look. Her recommendations were often out of line for what we wanted, and that was the case across half a dozen realtors, including those that came with recommendations.
They talk about their negotiation skill, but really, all the negotiation ends up being with their client, so they can close the deal. It's never "I can get you that house for $X." It's always "If you're not ready to offer $Y, plan to lose this deal."
And the points that Xin Lu mentioned applied, both buying and selling. It took several iterations to get all the contracts right.
Buying a house is like buying a used car from a private party. You need to know what you want, what the market cost for it is, and you have to check out the one you are thinking of buying thoroughly, because when the deal is done, it's done.
I recommend donating to your local Ronald McDonald house, or to the umbrella organization: http://donate.rmhc.org/Page.aspx?pid=254. They earn 4 stars on Charity Navigator, although the individual houses have their own ratings, as well.
They have been one of our 'charities' ever since our daughter was born with a major birth defect and spent 11 days in a NICU. RMH gave us a place to stay, close to the hospital, affordable (they ask families to pay $10/night, but no one *has* to pay), and designed to accomodate families with sick kids in ways that hotels are not. For families with sick kids, RMH relieves a great burden.
You can donate cash, or they also take donations of goods such as toothpaste and boxed meals.
Placing trust in the professionals who should guide you through the process may seem a lot easier than trying to sort through all your research. But you have to do the hard work to avoid getting screwed over! Even professionals have an agenda - to make money! If not from you then from whom? If you want to be absolutely, 100 percent sure that you aren't being taken advantage of then you've got to sort through that research, learn the lingo, take some time and absorb it fully. YOU have to be the last word when it comes to YOUR deal.
As an ING customer for several years I really dont see that there is a big issue for them to sell ING branded products. It is what we do in capitalism , dont we. As a consumer you can browse but are not obligated to buy (although they do give you some sort of code which allows for a certain percentage off for people as a birthday wish if you are a ING customer)
My wife & I are big supporters of Children's Miracle Network. We especially like that the donations made locally are predominantly used locally. and we've seen firsthand babies who've benefited from equipment & services made available as a result of donations that were applied at our local county hospital.
The buy versus rent decision is a different--and I would argue far more important--question than "catching the bottom" in housing prices. I've talked about that a couple of times. My artice What your house is really worth provides a framework for doing the analysis.
Lots of people would rather own a house than rent one, and that's just fine. But many of those people try to convince themselves (or their spouses) that the boost in quality of life that comes from owning is cheap. Or free. Or even that they'll get paid to have a better quality of life because their house will soar in value. For long stretches of time rising home values have made that analysis seem true, but I think that's just an artifact of a particular time and place.
If you want to buy a place, and you find one you like, and you can afford it, then buying may well make sense. But there's really no need to snap a place up just because house prices may be bottoming.
...with Doernbecher's? From their site: Shriners Hospitals for Children is a one-of-a-kind health care system dedicated to improving the lives of children by providing pediatric specialty care, innovative research and outstanding teaching programs. Every year, the 22 hospitals provide care for thousands of kids with orthopaedic conditions, burns, spinal cord injuries, and cleft lip and palate, in a family-centered environment at no charge. It's how Shriners Hospitals has been helping kids defy the odds since 1922. I'm partial to them as my wife works there.
My recent employer found that I had reported working through lunch when I was actually taking a lunch. He told me that I was a good employee and he wanted to keep me on so he would arrange for me to make restitution for what I was over paid. I agreed. We had this conversation on Jan 5th - on Jan 7th he changed his mind and fired me anyway. Should I be able to collect unemployment?
I sold a house and condo way back in 2001 thinking the Real estate market was too 'frothy'. As it turns out, I was right but my timing sucked. However, I believe prices are turning back to at least 2001 levels and probably below that.
My wife & I would dearly love to own our own place. We are sick of renting but will have to wait a bit. I live in North San Diego county near the coast -- probably some of the priciest homes in the country! We've seen some drops in pricing but nowhere near other areas, especially inland.
The government is desperate to restart the housing bubble. They are keeping interest rates artificially low and the Fed is buying up treasuries for the same reason. As unemployment rises and qualifying for home loans become more stringent, there will be a smaller pool of would-be buyers. Less demand, more inventory = lower prices.
I expect housing prices to drop further. I think when pricing gets close to rental parity we'll be close to a bottom. Nowhere close right now. Even if I miss the exact bottom, I'm not terribly worried. We won't see the appreciation of prices like we saw during the bubble. Probably won't see that in our lifetimes.
The odds are good that prices have not bottomed. The odds are good that when they do bottom finally, we won't get rampant appreciation. Plenty of time. I'm waiting.
It depends on what you mean by a 'huge pile of cash'.
I would certainly buy a house & get established before having a baby, if at all possible.
I would not put every penny down on the house, as you need to keep an emergency fund in place, especially once you own a home.
Depending on the amount of cash you have, and whether you can delay the baby issue, I would consider the following:
1. Keep your house down payment in savings until you're ready to buy. Continue adding to that savings as possible.
2. Use a specified amount to take one nice trip, as this might be more difficult after buying a house & having a baby.
3. Consider using a small amount (maybe $1-2K) to invest in the stock market.
4. Look for a better place to hold your savings than ING (which is down to about 1.49% interest now).
5. Be conservative about your spending on unnecessary items (extra clothes, accessories, eating out) and start a savings for future baby expenses.
My money is in an ING account at the moment, but I'm going to open a high-interest checking account at a local bank (4.5%) because I can meet their requirements to get that interest. I'm also looking at investing maybe $2k in the stock market, as I can afford to risk that. Not much, but I want to give it a try.
a home is very different than a stock in that you live in it. If you bought a home and it makes you happy when you live in it and it makes financial sense then I think anytime is ok. I am still waiting until it is cheaper than rent here in the Bay Area. Otherwise, we're packing up and moving.
My family and I bought our home in the summer of 2006 (a period that many experts consider to be the peak of the housing boom).
We waited a few years until we were financially stable and able to comfortably afford the home no matter what housing prices did.
I am still happy with our decision to buy even though our home has likely lost value since we purchased it.
Buy your home when you're ready is a lot more important than buying at the bottom and not being able to comfortably afford the home!
If you saved the money for a house, and you still plan on buying a house, you should save the money for a house, unless something else more critical has come up (like the baby maybe). If you're good with the amount you have now, move on and start saving for the baby or vacation or whatever. Or increase your nest egg to make things more affordable for you. Never a bad idea!
I always hate to see people convincing themselves to time the market and potentially buying at a time that is not right for them. Trying to make sure that you don't "miss out" on an opportunity has often sent well-intentioned people into some pretty unfortunate situations down the road.
Keep up the good work!