Posted by JD Seller on August 29, 2018 at 20:06:07 from (208.126.198.213):
In Reply to: Real estate question. posted by SodBuster87 on August 29, 2018 at 11:36:28:
I will tell you this rent money will never add up to anything.
Now should you buy a house period??? A lot of people should never own. They are not ready financially or do not have the skills or money to maintain a house/home. The ones that fall into this group are the ones that have zero money left after they pay rent and utilities. So the people telling them to buy if their payment is equal to or less than their rent are telling them wrong. Even if your mortgage includes an escrow account for your taxes and home insurance you still have repair costs if you own. You need to have a rainy day fund saved up for these expenses. If you do not then your going to start a death spiral when you start robbing Peter to pay Paul when you need repairs. I see this happen too often. So if things are tight when renting owning will make them even tighter.
If you are paying your rent and have few other obligations plus have some saving, then by all means buy a home. Even if you do not plan to be there forever your gaining equity by making your payments. Also homes tend to be some what inflation protected. Not totally but at least some.
So if your thinking about buying a house that is worth $100K I would want to at the very least put $10K as a down payment. If you can not afford to do this you not ready to buy. Never buy a house with zero down or a real low down payment. You do not have enough equity to have any cushion if things go wrong. Plus your servicing a larger debt. Your house payment should never be more than 25% of your monthly take home pay. Meaning one weeks work should make your house payment. Total debt including the house payment and all other debt should not be over 45% of your take home pay. Try to make a 15 year mortgage work over a 30 year one. The month payments are not much different and the total pay off is HUGELY different.
Also do not use a "Contract for deed" or "Land contract" there are many pit falls in those type of contracts for you and the landlord/seller. Just do a deed and PRIVATE mortgage. The seller has the same protections if you do not pay him as he would with either of the other contracts. A deed and mortgage sales are common and the law is well versed in handling them fairly for both parties. You also have much more clearly spelled out rights and protections with a deed and mortgage. Actually the landlord does too. It is easier to forclose on a house than enforce a none payment clause on a land contract.
As for the value of the house your living in. You need to look at some local sales and try to compare them to what your looking at. Also an appraisal is not that expensive to have done and the majority of them will list the comparable sales that make up the base of their appraisal. I just had one done on a house we are looking at for another rental. The cost was $350. Really not bad for all the information I got. Truthfully showed me the house was priced too high for the area. Seemed reasonably priced to me but not for where it was at. Good place to find a good local appraiser is to asked your local bank or credit Union. Also if your thinking about buying it and using that lender they MIGHT use that appraisal when you would apply for a mortgage. So really not an extra cost.
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