Submitted by eyeofthequeentiger t3_z8u9xj in personalfinance
[removed]
Comments
eyeofthequeentiger OP t1_iyda7fw wrote
Oh my bad I’m not trying to break any rules I truly just wanted some honest opinions
ThunderDrop t1_iydaczo wrote
I personally am happy with the post and happy to answer, just warning you it might get deleted and you might not get as many opinions as you hope.
NoFilterNoLimits t1_iyda1ae wrote
When you put down less than 20%, you pay Private Mortgage Insurance monthly, either for the life of the loan or until you hit an 80/20 ratio on the house value.
Many people try hard to avoid PMI. It is “wasted” money in some sense, but it’s not always a bad choice. PMI cost is impacted heavily by credit score. Mine is $49/month and falls off after like 19 months. It was a very small price to pay to buy sooner & keep more money invested.
Sometimes, PMI could add several hundred dollars a month for years, that changes the calculation.
These questions are generally just math and it’s just a matter of entering numbers to decide what’s financially best at a given time for a specific person & location
eyeofthequeentiger OP t1_iydakea wrote
Thank you for your response! I’ve always made it goal to put at least a little above the minimum payment on my credit cards every month (I have 2 & plan to cancel one once it’s fully paid off cause interest rates are increasing)
LOLRagezzz t1_iydb2yp wrote
don't cancel that card, just don't use it, especially if its an account you've had open for a long time
NoFilterNoLimits t1_iydcot5 wrote
The best thing you can do for your credit is to keep it open, put a small recurring charge on it like Netflix, and set it to auto pay the balance in full every month. You’ll never pay interest and demonstrate responsible credit use.
Just check it monthly to ensure everything is working as intended. Good finances can be largely automated but should never be forgotten or ignored lest you discover a surprise too late
TyrconnellFL t1_iyd9jns wrote
Assuming you have an arbitrary amount of money, it depends entirely on the interest rates. There’s no answer without real numbers.
eyeofthequeentiger OP t1_iyd9ug6 wrote
That makes sense. I’m mainly just trying to figure out how much to save up between my partner & I. Don’t need a fancy house. A 3/4 bedroom and 2/3 bathroom with a decent backyard where we can have a garden with fresh produce & flowers is what we’ve talked about.
TyrconnellFL t1_iydazbp wrote
Getting that in Cleveland or in Los Angeles is entirely different. And everything else aside, it’ll depend on the rates at the time you’re seriously looking. Mortgages at 3%? Put down just enough to avoid PMI. Mortgages at 8%? The more down, probably the better for you.
freestevenandbrendan t1_iydbneh wrote
The answers to all of your questions are basically "it depends." How much do you make? How much have you saved? Emergency fund? Investments? Retirement? How old are you? Unless you're a high earner in a LCOL area, buying a house in cash is out of the question for most people.
particular-potatoe t1_iyd9mh2 wrote
Ideally, you would want to put at least 20% down to avoid PMI. If you have a low enough interest rate, it makes more financial sense to take the loan and invest your extra money into the market instead of paying it off. On the other hand, some people like the security of not having a housing payment.
eyeofthequeentiger OP t1_iyda1le wrote
I just saw the one post of someone saying they got a letter in the mail about their mortgage increasing by $600 so I thought I’d ask! :)
Werewolfdad t1_iyda8hf wrote
That was their property taxes and is independent of the mortgage
eyeofthequeentiger OP t1_iydapr0 wrote
Thanks for letting me know, I’m newer to all of this so trying to learn as much info as I can to make the best decision for the future
NoFilterNoLimits t1_iydb382 wrote
Most people have an escrow account with their mortgage. That escrow account adds to the monthly mortgage payment but then provides funds to pay property taxes & homeowners insurance. The cost of taxes and insurance might vary from year to year, so an annual analysis of the escrow account is done, snd may result in an overage or a shortage. This is typically regulated by state law. When people experience a change in their mortgage payment, it’s usually* because they had an escrow shortfall
*I say usually because it’s also possible to have an ARM mortgage and the interest rate changes based on the terms when the mortgage started
ThunderDrop t1_iydb9ft wrote
I didn't read the other post, but it may be due to their property taxes and insurance price going up, which is happens and is inevitable.
Or it could be they got an adjustable rate mortgage while rates were crazy low and now that rates have come back up, their interest rate is rising. This doesn't happen with fixed rate mortgages, but the adjustable ones tend to have a lower initial rate and people just hope they will be in a position to refinance if the adjustable rate gets out of hand, though that depends on several factors and may involve paying several thousand in fees.
Fomention t1_iyds14k wrote
Buying outright is best - yes, even against the tax advantages of borrowing.
But buying is better than not-buying.
IndexBot t1_iyf9nby wrote
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ThunderDrop t1_iyda00i wrote
This post might get taken down as a survey question which is against guidelines.
In a perfect world, a down payment large enough to avoid pmi also proves you are good enough at squirling away funds that you can be certain you will be able to squirrel away funds for all the $10k house emergencies that occur every few years.
The fact is though we don't live in a perfect world and skyrocketing rents and housing prices for many means waiting for that 20% is unrealistic.
Its riskier, but if you feel confident in your budgeting, your job, and your desire to stay put at least 5 years, and you are in an area where prices are continously rising quickly, then getting in as soon as you qualify for anything is just a risk you have to take.