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Strategies & Market Trends : Value Investing
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To: Elroy who wrote (59246)3/20/2017 3:05:21 AM
From: Lazarus1 Recommendation

Recommended By
staring

   of 78811
 
Much of these calculations depend on AGE and STAGE of life.

I have *6 children. This is how I advise them.

If you can buy a home... go ahead.

  • Be smart about location
  • Buy with FHA if you can and put the min down - 3.5% plus closing cost.
  • Leverage as much as you can -- iow- buy all the house you can afford now (and maybe a bit more)


On a $300k home you may be able to get in with $15k down.

Forget about putting that other $25 or $50k you have in the bank towards the down payment!

Why -- because unless you have $60k to spare the extra money will not get rid of PMI. You will need 20% down to get rid of it so dont worry about it. An extra $50k down will only reduce your payment by ~ $238 per month at today's rates.

If you come up short and you're wishing your payment was $238.00 less one month or three -- you can just take if from the money you've left in savings. That $25k you left in savings can pick up the slack of $250.00 on 100 payments.

If something happens -- economy goes deep south.... dont panic. In today's market where I am a foreclosure can easily take 1 to 2 years. (I have a short sale in escrow coming up on a year where the owner has not made a payment).

Your payment on that $300k mortgage is going to be about $1800.00 per mo PITI

One of the real advantages of ownership comes in here. If you dont pay your rent you are out at the end of the month or -- if you have to be evicted a good attorney will have you out in 30 days -- 45 -50 if you counter sue.

If you own the house -- and you're in financial difficulty -- and you havent owned it long enuf to establish equity -- dont sweat it. You may get a year with no payments before foreclosure. That is $1800 per month X 12 = $21600

Now you've recouped all your down payment (and more).

No worries if you live in Calif (and some other states) since all loans for purchase of a home through FHA and Conventional are "purchase money loans" so the lender cant come after you for any deficiency. (once you refi a home that all changes and you can be held liable for deficiency -- but its been somewhat rare since the housing collapse)

Anyway -- that's how young people should approach home ownership in Calif.

Hopefully if they have money in the bank -- they can learn to invest wisely.
______

*just learned this weekend that grandchild #10 is on the way.
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