looking to buy a house.

[tommo]

How much money should I save up before buying a house? ie: if a house costs y amount I should save up x amount.

What books should I read?

[BigBiceps]

At least 20% downpayment so that you don't have to pay for mortgage insurance.

[slambert]

[ QUOTE ]
At least 20% downpayment so that you don't have to pay for mortgage insurance.

[/ QUOTE ]

this is pretty bad advice. 20% is generally on the high end of the range of payments. there are benefits of putting a greater portion down (ie. >20% you dont usually have to pay PMI and you can get a larger loan) but these are easily outweighed by putting less down. Why wouldnt you just put 5% (or minimum possible) down and use the rest for other ventures? PMI is a fairly small amount of money and is only paid until your equity is >20% of the house VALUE. This shouldnt be your driving factor in determining your down payment.

to OP, the question depends a lot more on your credit history, income, net worth, etc. often times you can buy your first house even with almost nothing down (if you are in great standing). If you are applying for a standard loan, you will usually need about 10% to put down.

good luck.

[leftcoast72]

[ QUOTE ]
[ QUOTE ]
At least 20% downpayment so that you don't have to pay for mortgage insurance.

[/ QUOTE ]

this is pretty bad advice. 20% is generally on the high end of the range of payments. there are benefits of putting a greater portion down (ie. >20% you dont usually have to pay PMI and you can get a larger loan) but these are easily outweighed by putting less down. Why wouldnt you just put 5% (or minimum possible) down and use the rest for other ventures? PMI is a fairly small amount of money and is only paid until your equity is >20% of the house VALUE. This shouldnt be your driving factor in determining your down payment.

to OP, the question depends a lot more on your credit history, income, net worth, etc. often times you can buy your first house even with almost nothing down (if you are in great standing). If you are applying for a standard loan, you will usually need about 10% to put down.

good luck.

[/ QUOTE ]

Agreed, besides, it's pretty norm now to pay 80/10/10, or so. 1st mortgage 80%, HELOC 10%, Downpayment 10%. This way you finance 90% and avoid the PMI.

[hawk59]

[ QUOTE ]
[ QUOTE ]
At least 20% downpayment so that you don't have to pay for mortgage insurance.

[/ QUOTE ]

this is pretty bad advice. 20% is generally on the high end of the range of payments. there are benefits of putting a greater portion down (ie. >20% you dont usually have to pay PMI and you can get a larger loan) but these are easily outweighed by putting less down. Why wouldnt you just put 5% (or minimum possible) down and use the rest for other ventures? PMI is a fairly small amount of money and is only paid until your equity is >20% of the house VALUE. This shouldnt be your driving factor in determining your down payment.

to OP, the question depends a lot more on your credit history, income, net worth, etc. often times you can buy your first house even with almost nothing down (if you are in great standing). If you are applying for a standard loan, you will usually need about 10% to put down.

good luck.

[/ QUOTE ]

your argument is called 'leverage'. leverage is great when things go up, if things don't go up your are screwed, if things go down you are bankrupt. housing has been going up for so long that people forget that it routinely goes down.

[leto333]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
At least 20% downpayment so that you don't have to pay for mortgage insurance.

[/ QUOTE ]

this is pretty bad advice. 20% is generally on the high end of the range of payments. there are benefits of putting a greater portion down (ie. >20% you dont usually have to pay PMI and you can get a larger loan) but these are easily outweighed by putting less down. Why wouldnt you just put 5% (or minimum possible) down and use the rest for other ventures? PMI is a fairly small amount of money and is only paid until your equity is >20% of the house VALUE. This shouldnt be your driving factor in determining your down payment.

to OP, the question depends a lot more on your credit history, income, net worth, etc. often times you can buy your first house even with almost nothing down (if you are in great standing). If you are applying for a standard loan, you will usually need about 10% to put down.

good luck.

[/ QUOTE ]

Agreed, besides, it's pretty norm now to pay 80/10/10, or so. 1st mortgage 80%, HELOC 10%, Downpayment 10%. This way you finance 90% and avoid the PMI.

[/ QUOTE ]


That would be extremely foolish if your aim is to pay the least amount for your house.

The cheapest way to buy a house is with Cash. The next cheapest is to pay the required amount to avoid PMI (generally 20% down) and pay the rest off as fast as possible while taking the interest deduction to save on taxes.

The next cheapest way is to put less than 20% down and pay the PMI, again taking the interest deduction on your taxes.

And the most expensive way to purchase a house.... 80% conventional loan and financing 20% to avoid PMI, invariably the financing costs of the 20% exceed the amount you would have paid for the PMI, thereby making the strategy exceedingly foolish.

There are of course even more expensive ways to purchase a house but I think I have made my point.

[slambert]

[ QUOTE ]
[ QUOTE ]


this is pretty bad advice. 20% is generally on the high end of the range of payments. there are benefits of putting a greater portion down (ie. >20% you dont usually have to pay PMI and you can get a larger loan) but these are easily outweighed by putting less down. Why wouldnt you just put 5% (or minimum possible) down and use the rest for other ventures? PMI is a fairly small amount of money and is only paid until your equity is >20% of the house VALUE. This shouldnt be your driving factor in determining your down payment.

to OP, the question depends a lot more on your credit history, income, net worth, etc. often times you can buy your first house even with almost nothing down (if you are in great standing). If you are applying for a standard loan, you will usually need about 10% to put down.

good luck.

[/ QUOTE ]

your argument is called 'leverage'. leverage is great when things go up, if things don't go up your are screwed, if things go down you are bankrupt. housing has been going up for so long that people forget that it routinely goes down.

[/ QUOTE ]

what exactly are you saying? I dont entirely get it. where is the 'leverage' and what does it have to do with housing prices making you bankrupt? I was not saying to leverage the equity of another home to finance your new one (that could quickly make you bankrupt in a bad market).

If you mean that if you put 0% down and the price of a house drops you go bankrupt then you are incorrect. Obviously you are hurt if the value of your house drops, but even this is often partially offset by other benefits to owning a home (unless the price really tanks). If you are only interested in value appreciation and/or are that worried about the price dropping, you probably shouldnt be in real estate.

[haakee]

[ QUOTE ]
where is the 'leverage'

[/ QUOTE ]

lev·er·age Pronunciation Key (lvr-j, lvr-)
n.

3. The use of credit or borrowed funds to improve one's speculative capacity and increase the rate of return from an investment, as in buying securities on margin.

[prohornblower]

tommo, how much do you value peace of mind over leverage?

In my opinion, peace of mind is huge. I'm aiming to put 50% down on my first home. I want to go to bed at night knowing I do not have a gigantic mortgage haging over my head.

Another strategy, is to finance as much of the home as possible, say at 7%, and use your working capital to invest in something that might get you 8-15%. In my opinion, this is pretty dangerous.

$100K in assets and $100K in debt is the same as a net worth of zero, but more risky. The rate of your debt will likely never go down, whereas the rate of return on your assets could go down drastically.

Try to make sure your equity in the home, per year, increases at a higher rate than the housing market. Otherwise, you are going backwards.

PMI can usually be dropped once you own 22% of your home's value (including appreciation). Or, by putting 20% down before the loan begins.

[tommo]

I just started playing poker successfully and haven't saved up a lot of money. However in the past two months I've played about 100k hands and am up about 60k. I don't see any reason for this to stop (unless that damn bill gets passed).

So my net worth is about 60k right now and I'm making about 30k-60kish a month. Does this change advice at all?