Good comparison Buying vs: Renting

[civic95]

Thought this might help a lot of people with future decisions.



Rent is not a Mortgage Payment
Let's assume you currently are renting for $1,100 a month, and you now have your sights set on owning a home with a $200,000 price tag. You put $20,000 down and qualify for a mortgage of $180,000. On a 30-year fixed rate mortgage you're looking at an interest rate of six percent these days. That works out to a mortgage of about $1,079 a month. You're thinking, "Wow, this is a piece of cake. If I can currently afford $1,100 in rent, I can certainly afford a $1,079 mortgage." Stop right there. Do not pass go. I cannot tell you how wrong you are.

The base mortgage is just the beginning of your housing costs. On average you need to add another 40-45 percent to get a more realistic total monthly cost. Yes, you read that right: 40 to 45 percent. So if your mortgage payment is $1,079, the true total cost is about $1,519 per month. Let me show you how the costs pile up.

When you buy a home you owe property tax on its value. If the house is worth $200,000 and the property tax in your area is about 1.25 percent, that is a total of $2500 a year or about $200 a month. You also need to have homeowner's insurance. That can run you $25 per $100,000 of value, or, in this case, $50 per month. And if you make a down payment of less than 20 percent, you are also going to be stuck paying Private Mortgage Insurance. That fee runs about $45 per $100,000 of mortgage. If we assume a 10 percent down payment on our $200,000 house we're talking about $90 or so a month in PMI costs. (Yes, there are ways around PMI but those will cost you too, so just stick with me here while we do the numbers.)

And we're not done with the "extras." Let's not forget all the costs of keeping the house running. Plumbing on the fritz? There's no landlord to call. If you want it fixed, it's going to have to be on your dime. So you better plan on having a reserve fund sitting around to cover repair and upkeep costs for your home. My advice is to plan on about $100 a month for that repair fund.

Add up all these costs and you're looking at a total net housing cost that can indeed be 40-45 percent more than the base mortgage. In this example it's $440 per month more than the $1079 you were thinking it was going to cost you. Yes, yes, I know what you're thinking now: What about the tax savings, Suze? Isn't that going to bring down my real costs?

The Tax Break is NOT a Reason to Buy
Listen, I will be the first to tell you that I think homeownership is the absolute best investment out there bar none. However, I want your home to be a source of joy for you, not a pain in your financial you-know-what. But I constantly hear from so many renters that the reason they want to buy a home is so they can get the great mortgage interest deduction. This makes me a bit nuts. For while it is true that interest payments on a mortgage below $1 million are tax-deductible, that alone is not a good enough reason to buy something that you may not be able to afford. First, right now our income tax brackets are at 40-year lows. If you are in the 20 percent tax bracket that means you will only get a 20 percent break on your interest payments. Let's just look at a $1,079 monthly mortgage. The total interest payments in the first year will be about $10,740. Your tax savings (20 percent of $10,740) is $2,148. Or about $180 a month. As I showed you earlier in the article, the cost of your property tax, homeowners insurance and private mortgage insurance, plus your inevitable maintenance costs, is probably going to set you back about $440 a month - about $260 more a month than your tax savings. Hey, even if we were to increase your property tax deduction another 50 bucks a month, just to be on the safe side, that's still more than $200 extra you will have to find a way to come up with each month. Now maybe that doesn't sound like a lot, but for many of you it can be. And those extra costs should be factored in when you are deciding how much home you can really afford. You might need to come down a little in price. Every $10,000 you come down in the mortgage cost will reduce your monthly payment by about $50.

[Kevykev]

Very nice!

Simply put, i would say make sure you're financially stable (in terms of what you can manage) and responsible enough to own a home.

A home is definately one of the best investments out there, just make sure you can handle what comes with the territory and you're set.

[civic95]

The total interest payments in the first year will be about $10,740. Your tax savings (20 percent of $10,740) is $2,148.

For those thinking about buying a house to turn around and make money, in this example you paid $8592 in intrest (minus your tax savings).

So after 1 year your total payments were $18228, and you've only knocked about $3K off the principal. So you still owe about $177K on the original $180K loan.

something to think about.

[john_stamos]

I CAN DO A $180,000.00 LOAN WITH PAYMENTS OF $862.50 PER MONTH.

[john_stamos]

AND I DONT AGREE WITH YO AT ALL...

I DID NOT READ THE ENTIRE POST BECAUSE I JUST DONT HAVE TIME FOR IT.. BUT I GOT THE POINT..

YOU ARE SITTING HERE TELLING PEOPLE NOT TO BUY HOMES??? WHAT SENSE DOES THAT MAKE?

IF YOU PURCHASE A HOME.. FIRST TIME OUT YOU WILL PROBABLY NOT HAVE $20,000.00 TO THROW DOWN AS A DOWN PAYMENT...

SECONDLY THERE ARE PLENTY OF HOMES FOR THE BARGAIN PRICE OF AROUND $130,000.00 SOME MORE SOME EVEN LESS... AND IF YOU ARE PATIENT GET A GOOD FORECOSURE HOOK UP AND GET A HOME FOR AROUND $100,000.00

YOU CANT SIT THERE AND USE $200,000.00 AS A BASE PRICE FOR THE AVERAGE STARTER HOME.. THAT JUST WONT HAPPEN 9 TIMES OUT OF 10.

IF SOMEONE COMES TO ME AND SAYS THEY CAN AFFORD NO MORE THAN $1100 OER MONTH IT IS MY JOB AS THE MORTGAGE GUY TO LET THEM KNOW WHAT THEIR LOAN LIMIT IS!

AND A RESPONSIBLE MORTGAGE PROFESSIONAL WILL INCLUDE ESCROWS IN DETERMINING THIS...

AS FAR AS REPAIRS ARE CONCERNED, WITH EVERY NEW HOME PURCHASE YOU CAN BUY A WALL TO WALL WARANTY FOR NO MORE THAN $500.00 .. SO THIS TAKES THE PLACE OF YOUR LANDLORD.. IF YOU NEED PLUMBING.. PAY YOUR $50 DEDUCTIBLE ETC.. THIS IS AN EASY OUT FOR THOSE WHO MAY NOT HAVE THE CAPITAL TO COME OUT OF POCKET.. IN ADDITION MOST SELLERS PAY FOR THIS WARRANTY OUT OF THEIR NET SALES PROCEEDS

AND AS FAR AS TAX DEDUCTIONS GO.. I PERSONALLY NEED ALL THE DEDUCTIONS I CAN GET.. I DONT HAVE CHILDREN, I AM SINGLE AND ALL I HAVE IS MY HOME!

SO EVERY LITTLE BIT HELPS IN THAT REGARD

THE BOTTOM LINE IS THIS.. YOU ACTUALLY GET A RETURN ON YOUR HOME IF YOU BUY RIGHT.

I HAVE SEEN HOMES APPRECIATTE AS MUCH AS 10% ANNUALLY IN THE GWINNETT AREA.. SO NOT ONLY DO YOU HAVE A ROOF OVER YOUR HEAD, BUT YOU HAVE AN ASSET THAT YOU ARE ABLE TO LIVE IN?

CAN YOU GO TAKE $100,000.00 TO THE BANK AND ASK THE FOR A 10% RETURN ON YOUR MONEY ALL WHILE PROVIDING YOU WITH A ROOF, A BED AND A PLACE TO TAKE A SHIT.... NO!!!! YOU CANNOT

BUT THATS WHAT YOR HOME DOES FOR YOU

THIS WAS A VERY UNEDUCATED ONE-SIDED ARGUMENT YOU POSTED UP MAN! SORRY TO TEAR IT DOWN LIKE THAT... BUT IT REALLY MAKES NO SENSE! THERE ARE WAYS AROUND EVERY NEGATIVE YOU POSTED... ITS JUST UP TO THE CONSUMER TO KNOW WHAT THEY CAN AND CANNOT AFFORD!

[chrisdavis]

It was a cut and paste article from somewhere else.

It was not telling people not to buy it was dispelling the myth that it if you are paying X amount of dollars for rent and if you got a mortgage for x + a few dollars more, then your increase in bills would only be that few dollars. It was pointing out that there are additional costs (such as repairs, taxes and ins.) to take into consideration when planning a purchase.

[john_stamos]

I REALIZE THAT.. BUT YO ARE INFORMED OF ALL THAT PRIOR TO CLOSING ON AN YLOAN.. ITSN OT LIKE THAT IS A SURPRISE TO ANYONE... ITS ALL ABOUT PICKING AHOME YOU CAN AFFORD..

[civic95]

It was a cut and paste article from somewhere else.

It was not telling people not to buy it was dispelling the myth that it if you are paying X amount of dollars for rent and if you got a mortgage for x + a few dollars more, then your increase in bills would only be that few dollars. It was pointing out that there are additional costs (such as repairs, taxes and ins.) to take into consideration when planning a purchase.

Thank you, atleast you take the time to read and form your own opinion instead of this asshat. He is not someone I would want helping me with my mortgage.

[john_stamos]

Thank you, atleast you take the time to read and form your own opinion instead of this asshat. He is not someone I would want helping me with my mortgage.

WHY WOULD YOU CALL ME AN ASSHAT... YOUR POST MADE ABSOLUTELY NO FUCKING SENSE!

DONT CALL ME NAMES AND INSULT ME WHEN I AM COMMENTING ON YOUR POST.. THATS JUST NOT CALLED FOR MAN.. I DONT AGREE WITH YOU LEAVE IT AT THAT .. BUT I DIDNT CALL YOU A FUCKING IDIOT! I MEAN I THINK YOU ARE ONE.. BUT I DIDNT SAY IT

[civic95]

I REALIZE THAT.. BUT YO ARE INFORMED OF ALL THAT PRIOR TO CLOSING ON AN YLOAN.. ITSN OT LIKE THAT IS A SURPRISE TO ANYONE... ITS ALL ABOUT PICKING AHOME YOU CAN AFFORD..

This is mearly an example man, of course the #'s will differ with the loan amount. But 200K is an average price. I never said you can't buy a $130K house, cause I did myself. And your business is miss leading. I hear advertisements all the time, get a $200K loan for $800 a month. But they are not telling you this is intrest only, or a low intrest loan for 5 yrs and then the APR goes way up, and they don't show all the other factors like (insurance, PMI, Taxes, etc). I've talked to too many people that think if they spend $10K in intrest they will get it all back in taxes (which is not true). This is very informative, if you took the time to read it, maybe you'd understand.

[civic95]

WHY WOULD YOU CALL ME AN ASSHAT... YOUR POST MADE ABSOLUTELY NO FUCKING SENSE!

Alright, sorry about that. But if it doesn't make sense to you then I don't know what to say. It's pretty well explained, and I don't know how to explain it easier.

[john_stamos]

I DID READ IT AND I STILL STAND BY MY STATEMENTS... BUT THE POSITIVES OF HOME OWNERSHIP FAR OUTWEIGH THE NEGATIVES...

AND THE "AVERAGE" PURCHASE PRICE WILL VARY FROM CITY TO CITY AND STATE TO STATE... BUT IN THIS AREA, THE AVERAGE PURCHASE PRICE IS ROUGHLY $175000.00 WHICH IS A BOUT $25,000 LESS THAN YOUR ESTIMATE..


YOU MAY BE RIGHT ABOUT THE ADVERTISEMENTS.. BUT USE YOUR NUMBERS FOR EXAMPLE.. IN THE 1ST FEW YEARS OF YOUR LOAN HOW MUCH ARE YOU REALLY PAYING TOWARDS PRINCIPLE????? NOT MUCH... NOW TAKE THAT COUPLED WITH THE FACT THAT THE AVERAGE MORTGAGE LOAN IN THIS COUNTRY GETS PAID OFF WITHIN 3.5 YEARS WHETHER BY SALE OR REFINANCE..

WHY NOT DO AN INTEREST ONLY LOAN. FOR THE FIRST FEW YEARS YOUR BASICALY PAYING INTEREST ONLY ANYWAYS!

75% OF LOANS ORIGINATED THIS YEAR HAVE ALL BEEN INTEREST ONLY! AND THERE IS A REASON FOR THAT!

ONE YOU CAN GET MORE THAN YOU SHOULD BE ABLE TO AFFORD AND 2... FOR THE MORE FINANCIALLY RESPONSIBLE INDIVIDUAL THE INTEREST ONLY OPTION ENABLES YOU TO BUY DOWN YOUR PRINCIPLE BALANCE MUCH FASTER THAN THE REGULAR FULLY AMORTIZED LOAN.


YOU REALLY NEED TO TALK TO SOMEONE WHO KNOWS WHAT THEY ARE TALKING ABOUT AND NOT MAKE THESE OUTLANDISH ASSUMPTIONS ON YOUR OWN MAN! NO OFFENSE.. I MEAN MOST CONSUMERS DO NOT KNOW WHAT I KNOW.. BUT I JUST DONT THINK YOU ARE QUALIFIED TO GIVE REALESTATE ADVICE

[civic95]

I didn't make assumptions, this was an article I came across written by Financial Expert : Suze Orman

http://biz.yahoo.com/pfg/e10buyrent/art011.html

[Jaimecbr900]

I didn't make assumptions, this was an article I came across written by Financial Expert : Suze Orman

http://biz.yahoo.com/pfg/e10buyrent/art011.html

Sorry bud. I normally agree with you, but on this one I totally don't. That person is no financial "expert" giving out advice like that.

Mr. Stamos may not be the most eloquent poster, but his info is accurate.

The article is very one sided.

Most people don't have that kind of money to put down on their first property. There are loan programs and strategies that we can do to get you into the property, with little to no money down, AND avoid the dreaded MI. So her example is far from an accurate portrayal of REAL life RE transactions. If someone has $20k in their pocket to buy their FIRST house, I certainly would NOT put them into a loan where they have to use ALL of that $20K in the first place. What for? The difference between putting down $10k and $20k on the monthly payment is marginal at best. I'd advice them to keep that money and invest it elsewhere. If that home were in a good area, it will probably APPRECIATE that much if not more in a year or two. So why not have both, the money in your pocket AND the equity on the house????

Something else that article isn't accurate about is maintainance costs. I've owned my own home since I was 21 yrs old. I've bought both distressed properties and brand new homes. My first home was actually a previously foreclosed property that required a good bit of work BEFORE I could even move in. And you know what??? I've never had $1200/yr worth of "repairs" in any of them AFTER I moved in. Yes, you do have to pay for your own repairs when they come up, but: #1- as Alex mentioned, there are very inexpensive insurance policies you can get at closing that can cover those for very little deductibles; and #2- it's not like it happens everyday nor every month. Unless you are buying a home built shack by a builder named Dufus, major maintainance issues don't occur everyday as the article would have you believe.

Another issue I have with the article is that it glosses over EQUITY. Equity is one of the biggest pros of purchasing vs renting. Renting you never OWN anything of value. You can't take a loan against it. You can't refinance it. You can't even make too many changes to it. When you OWN, you call most of the shots. You have something financially tangible that you can borrow against, gain equity on, and make changes to as you see fit. How many renter's monthly payments stay the same? NONE. Rental payments ALWAYS INCREASE. It may be at the end of the term of the lease or it may be month-to-month, or it may even be every year, BUT one thing is for sure....it will go UP if you stay there. So in essence, renters always have a variable "intereste rate" if you will, yet gain ZERO equity at all. How's that a bargain? You could be renting for 10 yrs. EVERY DIME of that rent goes to build someone ELSE equity, not you. Had you been paying on a mortgage instead, you'd have some equity at least. What do you have when your lease is up to show for your rental payments???? Nothing. Sure, you don't have to deal with the rigors of selling the house before moving either, but personally I'd rather deal with that AND pocket a few grand than not.

Mortgage loans are confusing for most people. There is more MISinformation out there than accurate unfortunately, and that is where WE get the raw end of the deal. Some of my fellow competitors are to blame for this, with their misleading ads. But mostly it is misinformed people, such as the author of that article, that perpetuate the never ending cycle. If you read that and didn't have anyone's rebuttal to it, you'd likely think she knows what she's talking about. Unfortunately, she doesn't. How can she when even by her own admission RE is the "BEST" investment out there, yet she is knocking it the whole time????? How's that work then?

[civic95]

Well I'm not sure she is knocking buying, she is just trying to get people to think about the "true cost". Maybe your maintenance cost won't equal $1200 a year. My 1st 2 yrs I had to replace the furnace, cooling coil, water heater, dishwasher). Which is close to that figure (again that is not what you will run inot with every house). Now imagine if you need to replace the roof after a couple years. Maybe you can get cheaper insurance, but thats a maybe. I personally wouldn't advise going with the safe auto of home insurance. The point of the article is to point out the extra expense beyond (principal and intrest) that most don't think about.

[Jaimecbr900]

Well I'm not sure she is knocking buying, she is just trying to get people to think about the "true cost". Maybe your maintenance cost won't equal $1200 a year. My 1st 2 yrs I had to replace the furnace, cooling coil, water heater, dishwasher). Which is close to that figure (again that is not what you will run inot with every house). Now imagine if you need to replace the roof after a couple years. Maybe you can get cheaper insurance, but thats a maybe. I personally wouldn't advise going with the safe auto of home insurance. The point of the article is to point out the extra expense beyond (principal and intrest) that most don't think about.

In all honesty, I've re-read the article and she is very much knocking home purchases. Although she contradicts herself too.

Also to be honest, there are ways to avoid what you experienced too. Did you have a licensed and certified home inspector check out the house before you bought it? Did you have a RE agent represent you when you bought it?

As for replacing a roof after 2 years, that doesn't happen unless the appraiser was a blind appraiser. The appraiser has to put in their report what they feel is the expected life of the roof at the time of appraisal. If it is in such bad shape that it needs replacing in w/i 2 yrs of you moving in, 99.9% of the time the appraiser catches that and denotes in their report. At which time, WE (as the lender) would not approve the loan. So again, it's not a realistic scenario that you have to fix a MAJOR structural component of the house w/i a relatively short time of moving in IF you use your noodle from the start by putting to use the avenues afforded you legally, i.e. home inspectors, appraisers, and good RE agents. All those guys go a long way towards protecting you from getting screwed.

As for insurance, it is pretty much a fixed cost unless you have some bad claims against you. Insurance rates are calculated based on risk. So for the most part, most homeowner's quotes will be w/i a similar ballpark most of the time. If you have car insurance with someone, you may even get a lower quote because of multiple discounts. Another way to adjust your premiums is by adjusting your deductible. Another is to have monitored alarm system. Another is your vicinity to a fire station. Another is by the construction of the home. It goes on and on. My point is that insurance is a must have item. Where you get it is up to you. If you are well adviced, then you will get reasonable to great prices. If you are left to your own accord, you may not. This is where the service level of your "advisor", be it RE agent or Lender, comes into play. We all sell the same loans. We don't all have the same experience and level of customer service. Remember that.

BTW, if her point is to make people aware of additional costs that somehow are sprung on the customer at the last minute......see the above paragraph's closing sentences. All my customers KNOW what their ENTIRE payment is even before putting the application in sometimes. At the very latest, they know at application because we are required by law to show each and every customer a document called a "Good Faith Estimate". That document shows clearly, line by line, every single dime the customer is expected to pay or not pay. It also has the monthly payment broken down to each of it's components, P/I/T/I.....not just P/I. Each customer signs that document AT APPLICATION. So, there really is no way that they don't know what they're getting into or where their money is going unless they have blinders on. Can it happen? Yes. Does it happen? Sure. But if all else fails, the attorney goes over it again at the closing table to further drive the message home. Other than tattoing it onto their foreheads, that's due dilligence in my eyes. So if she is somehow trying to act as if she suddenly discovered the wheel with her findings....she's yet again wrong. My customers KNOW exactly the who/what/where/when of their money when they do their loans thru me. Ask them. There's a few of them in IA.

[ISAtlanta300]

I can vouch for you, Jaimie..

[Jaimecbr900]

I can vouch for you, Jaimie..

Thank you Vern....

[chrisdavis]

Thank you, atleast you take the time to read and form your own opinion instead of this asshat. He is not someone I would want helping me with my mortgage.

Thanks. And John Stamos (Alex) did my mortgage. And yest he did include PMI and an estimated property tax in with my mortgage payment, so I had I close idea to what my total payment would be.

[Kevykev]

Thanks. And John Stamos (Alex) did my mortgage. And yest he did include PMI and an estimated property tax in with my mortgage payment, so I had I close idea to what my total payment would be.

Holy damn!

Stamos himself did your mortgage?

WOW!

p.s

the long post king prevails.

[Julio]

Ill Buy a home whem I get married or something.. blah.

My father has owned 6 homes. And there will always be expenses and sit fucking up... Maybe not month after month... But be prepared.
Mortgage is one thing. But the shit messing up will always happen. Good investment no doubt. But def buy when you are 150 % ready and sure.

I know plenty of Home owners right now barely being able to pay there mortgage But you see them Stunting Out and about... Just because they start making 40 k a year, They want to buy a house not even thinking..

When the time comes hopefully, I can purchase a home from the 160's And up...
Ive Seen houses between 100k to 140's and Most of them are houses that in the most part need alot of work Or are really outdated. Not all, Just some I've seen.
Im not ready to deal with that shit, of course the return is nice when Fixed, but let someone else deal with it. Not me.

[Jaimecbr900]

^^^ That may be so, but I also see wayyyyy more "renters" go hoping in and out of leases since they really have nothing big to loose.

I have 7 rental properties. I have 2 that just became vacant this week because of dead-beat renters that can't afford $750/month. If they can't afford $750, they certainly can't afford a house...very true. But that has nothing to do with maintainance, and everything to do with being dead-beats.

Think about it; how many more "renters" do you see staying in the same place more than a yr or 2 at the most. I'd venture to say atleast 75% don't. If you had the same percentage selling their houses to "move", I'd be a multi-millionaire now. There are far more hoppers and people constantly moving in and out in the rental world than there is in the owner world.

My point is that IF some of those renters stayed put in one place for as long as most homeowners do, they'd see problems too. If you compare a new house to a new apartment complex, I'd be willing to bet you'd see much more "maintainance" issues in the apt complex since people there take far less care of the place since it's not theirs.

My house is 4 yrs old and I've been living in it for 3 of those years. The only major expenses I've accrued were all voluntary so far. Fence, widening the driveway, finishing the basement, etc were all voluntary. I had to fix little things here and there but nothing major yet. So I don't see how so many people talk about all these "hidden" costs. If you buy a POS, then it's expected and usually the price reflects that. If you don't do preventive maintainance, it will also eventually show. But that's not the house's fault, it's the negligent owner.

It's just like the old car debate of lease vs buying, except homes usually appreciate vs car's that depreciate. For some people it's better to lease for their own reasons, but for the majority of people leasing is merely renting and you'll never "own" anything. If that's your choice, cool. I just have an issue with anyone that puts out info that is clearly incorrect and skewed. If someone doesn't want to buy it's cool.

[chrisdavis]

Holy damn!

Stamos himself did your mortgage?

WOW!

p.s

the long post king prevails.

you might have helped a little

[quickdodge®]

I've been in my rental house for a year, this month. For two reasons only, I rent. 1. Credit. 2. I doubt that I can afford it. In fact, I know I can't. As much as I would love to call this..my house, I can't do iright now. It is nice, though, when something goes on the fritz, all I have to do is call the landlord and he takes care of it. I don't have to worry. But I'd rather own. Later, QD.

[john_stamos]

I didn't make assumptions, this was an article I came across written by Financial Expert : Suze Orman

http://biz.yahoo.com/pfg/e10buyrent/art011.html

well than i guess my argument is with her.....

I bet she owns a home though... She probably got burned on a bad investment and a bad loan... who knows, but her article is terribly innacurate buddy!

[civic95]

I think you guys took this whole post the wrong way. I really don't think she is against buying. You guys are used to the closing process, and are concentrating too much about that. Of course the payment is broken down at closing. She is trying to notify people of the extra 30-40% of cost beyond principal and intrest, before they even start the looking for a home process. I really don't think she is trying to make the mortgage industry look bad, or sneeky.

In other words if your maximum affordable rent is $1100. Then you need to factor in that other percentage, subract it from the $1100 to find out how much house you can really afford.

[john_stamos]

I think you guys took this whole post the wrong way. I really don't think she is against buying. You guys are used to the closing process, and are concentrating too much about that. Of course the payment is broken down at closing. She is trying to notify people of the extra 30-40% of cost beyond principal and intrest, before they even start the looking for a home process. I really don't think she is trying to make the mortgage industry look bad, or sneeky.

In other words if your maximum affordable rent is $1100. Then you need to factor in that other percentage, subract it from the $1100 to find out how much house you can really afford.

I dont think we are interpreting it the wrong way.. she is just wrong about all her points... Her factors are way too high and she really does not know what she is talking about..

So its not us... it is her and people like you who think a yahoo link sheds life on reality! your wrong shes wrong and anyone else who beleives her is wrong! thats all... have a nice day

[civic95]

So your saying Propery Taxes, PMI, Insurance, and repairs won't equate to a possible 40% more than your Principal and Intrest?

[Jaimecbr900]

I think you guys took this whole post the wrong way. I really don't think she is against buying. You guys are used to the closing process, and are concentrating too much about that.

To be honest, that's the only time you have a binding contract when it comes to financing a home, at closing.

She is trying to notify people of the extra 30-40% of cost beyond principal and intrest, before they even start the looking for a home process. I really don't think she is trying to make the mortgage industry look bad, or sneeky.

This is where you and I disagree.

She is not "notifying" anyone because she is using incorrect and inflated information. If she were accurate, I wouldn't have anything to say. But as we've shown here, she is in fact inaccurate about lots of things. Not some, but just about everything. So, when you pass off as an "expert" on a subject then people will tend to believe, as you have, that what she is spouting is true, when in reality it isn't. THAT right there hurts MY business directly and therefore I have a problem with it.

In other words if your maximum affordable rent is $1100. Then you need to factor in that other percentage, subract it from the $1100 to find out how much house you can really afford.

What neither you nor her are taking into consideration is that WE DO TAKE INTO CONSIDERATION P-I-T-I when quoting a customer ANYTHING. Some of these ying yang dumbasses that advertise shit, just like this lady, DON'T. But they are the minority, not the majority.

Again, I challenge you or anyone else to ask any of MY previous customers if at ANY point in the transaction they DIDN'T know their ENTIRE payment and did it ever change at the table.......Ask any ONE of them. I tell my customers UPFRONT what their payment is going to be (sometimes we have estimate) and it ALWAYS includes the taxes and insurance(s) in there. ALWAYS.

So for her to make such a big deal, like she discovered the wheel all of a sudden, and act like this is some surprise to people......it ISN'T at all....IF they use the right Lender. If they go to these assholes that advertise on the radio and TV with their false ads, they deserve what they get for not doing their research because there are infinitely better companies out there.

What someone "qualifies" for has little to do with escrows and substantially more to do with themselves. I see people everyday with 500 credit scores, self-employed filing NO income taxes, no money in the bank, YET they want a NO DOC loan with 0% down and 0% interest...... Where do you think these unrealistic expectations are coming from???? From ying yangs like this lady that are putting out FALSE information and people are believing her crap. Then they come to people like me and expect the undeliverable. This is why I have issues with FALSE or MISLEADING info like this. Not only does she scare people away, but she also makes my job 2x as hard.

Maybe one day I'll make a post about what the TRUTH is about buying and owning your own home. I'm willing to bet there will be LOTS of people that will suddenly have an epiphany.

[Jaimecbr900]

So your saying Propery Taxes, PMI, Insurance, and repairs won't equate to a possible 40% more than your Principal and Intrest?

Let me ask you something:

Why would "dry" weight of a car matter since it will NEVER run "dry"?

Reason I use that analogy is because we use PITI to QUALIFY, so why would P&I ALONE matter in the first place? We HAVE to use PITI, unless you waive escrows. Even then in most cases the UW will still factor in the amount to make sure you still qualify. So the only reasons to advertise P&I ONLY are: A: you are trying to mislead someone; or B: those are the only figures that matter to the prospective person. I see no other reason(s) that matter IMO.

So when we say, "You qualify for $_________ price house and your payment will be $_________/mo...".....We ARE talking about PITI, not just P&I.

This is why this lady is pissing me off because she assumes EVERYBODY is unscrupulous and tries to mislead their customer. That is NOT true.

[civic95]

This is why this lady is pissing me off because she assumes EVERYBODY is unscrupulous and tries to mislead their customer. That is NOT true.

Again, I don't think this is targeting lenders at all. This is just info for people before they ever visit a lender. Things some people would never think about. The smart thing to do is go to a lender first, before ever looking at a house, and see what you can get approved for, run numbers. Then, try not to buy a house at the top of your approved price range because that is just based off debt to income ratios.

Unfortunately too many people find the house first, then get a loan. And it's possible to get approved for more than you can afford.

[Jaimecbr900]

Again, I don't think this is targeting lenders at all. This is just info for people before they ever visit a lender. Things some people would never think about. The smart thing to do is go to a lender first, before ever looking at a house, and see what you can get approved for, run numbers. Then, try not to buy a house at the top of your approved price range because that is just based off debt to income ratios.

Unfortunately too many people find the house first, then get a loan. And it's possible to get approved for more than you can afford.

Listen, I don't want to get in a big debate with you because it's not your article. But remember this: Who is it that LENDS money to people buying houses??? LENDERS. What am I? A LENDER. So therefore, I take what she is saying, which is false, seriously because it affects ME. So when she insinuates that people are only quoted P&I and are not told about MI and not told about repairs.....WHO do you think she is talking about? Firemen? Come on, you're smarter than that. She's pointing the finger right at me.

You are right about getting pre-approved before buying. It's the smartest thing to do.

[john_stamos]

Again, I don't think this is targeting lenders at all. This is just info for people before they ever visit a lender. Things some people would never think about. The smart thing to do is go to a lender first, before ever looking at a house, and see what you can get approved for, run numbers. Then, try not to buy a house at the top of your approved price range because that is just based off debt to income ratios.

Unfortunately too many people find the house first, then get a loan. And it's possible to get approved for more than you can afford.

dude... you got this of a non-realty , non-mortgage website???? This woman is not qualified to give this kind of information out.. bottom line..

I have 8 years experience in this field, own my own mortgage company and my entire family has been in the business for over 40 years.. I grew up in the business.....

now Jaimee.. Also has been in the business for several years as is his family.. he also owns his own company...

we are not some tom dick and harry just sitting here arguing with you for shits and giggles..

you are wrong here man.. we are trying to make that clear to everyone who might read this thread, not just you....... your wrong... if there is an expert in this field it is jaimee and I not this lady who writes columns for yahoo..

So stand your ground.. argue all you want.. but at the end of the day, its not the mortgage guy that misleads the public it is idiots like the person who wrote that article..

Im done arguing! have a good one man..

[Kevykev]

we are not some tom dick and harry.

seems like i hear that figure of speach pretty often :confused:

[2turbo4u]

So Jaime, when you see one of those ads that say if your paying $625 a month for rent then you can afford this house.Like the home superstore, etc.? What your out take on those ads?

[Jaimecbr900]

So Jaime, when you see one of those ads that say if your paying $625 a month for rent then you can afford this house.Like the home superstore, etc.? What your out take on those ads?

Read the FINE PRINT.

There are always bullets (*) in every single one of those ads. It is illegal in the state of GA to advertise a payment w/o additional information, so it's got to be in there somewhere. It can be a mm tall, but it's got to be. As a matter of fact, we have to include not just the raw interest rate in there, but also the APR interest rate which is always different (unless you pay no out of pocket expenses at all) than the note rate.

Most of the time they post the "payment" part really big up top, only to tell you down below that the "payment" only applies to a $100k loan w/20% down on a short term variable interest or even interest only payment which does NOT include escrow payments. It's the same misleading advertising that car dealerships use. Is it mathematically possible, sure. Is it realistic, hell no.

Ads like these are the ones that allow numb nuts like the author above to have some fuel to their fire. This is why I loathe those idiots on the radio all the time talking about "don't pay closing costs....we make enough money over the life of the loan.....refinance over and over again.....biggest no brainer.....all those other guys are predators....." Those asses are the biggest scammers there are. Totally misleading information in order to keep his phone ringing. They run sweat shops instead of real mortgage companies. They have a call center that answers these phone calls from these ads only to pick the creme de la creme to try and get a loan for. It's a numbers game to them. If the phone rings 1000 times a day, they figure to get atleast a handful of loan aps out of it. Great service there, huh?

Enough of that. Point is that reality always trumps the uninformed.

Bottomline is that if it sounds too good to be true, the majority of the time it very well is. Consult with a real professional instead of people like this lady. Don't believe everything you read, without digging further and doing your own math FIRST. Ask questions. If the person you're talking to doesn't seem to KNOW what he/she is talking about, don't deal with them.

There is no magic bullet when it comes to buying a house. It can be painless. It can be exciting and great. It can also be a nightmare IF you use the wrong people or follow the wrong advice. Be realistic and understand that unlike renting where you OWN nothing, owning your own home will have inherent costs. Do the benefits outweigh those costs? That's the real question. Everything in this life has a COST. Remember that. If you get MORE out of it than it cost you, it's a deal. Pretty simple, huh?

[2turbo4u]

Good feed back Jaime, like always very informative.