ZacFields
09-18-2007, 02:02 PM
I've got to vent about this, because I've been talking to a lot of friends at work about this and I hate how the media turns something like this into such a big deal, when in this case knowlege is most definitely power. I know there are a lot of kids on this site that are my age or younger and may be thinking about purchasing a house in the not-so-distant future (BlackVR6, since you're in a nice job situation now you should definitely listen to this).
Purchasing your own home is a part of the American dream. When you own your very own home, not only are you building equity which you can use towards the purchase of a better home down the road, but currently every dime of the mortgage interest that you pay is TAX DEDUCTIBLE. The average mortgage owner in America claims approximately $7,500 worth of mortgage interest yearly, and coupled with all other deductions and the income tax you pay, you should get the majority of that money back in your tax return. In fact, in your first year, the IRS allows you to also claim the closing costs (points) that you paid. The moral of this part of the story is buy your house in January-March, and NOT in October like I did. That way you have almost a full year of mortgage interest and also your closing costs that you can deduct in your taxes. So in short, DO buy your own home and if you're planning to do it then buy it soon while the interest rates are decent and it is most definitely a "buyer's market" right now.
To avoid having any difficulty with the "Mortgage Crisis" I have one and only one piece of advice for you and I guarantee you 100% that you will never have to worry about all this media jargon that you're seeing on TV about all the foreclosures. Here is that piece of advice:
"Stay away from the A.R.M. mortgage." Avoid it at all costs. When you purchase a home, NEVER purchase a home based on the income you think you'll have within 5 years, and never get an Adjustable Rate Mortgage. ARM's are the biggest ripoff to the average homeowner. They offer you a "teaser rate" sometimes around 3 or 4% for the first one or five years, and then after that they're allowed to raise the rates on you based on what the FED's interest rate is. This could cause your monthly mortgage rate to rise from, say, $1,000 up to perhaps $1,500 or even more in some cases, and as long as the rate is climbing, your mortgage is just going to get more expensive from there.
When you purchase a home, choose a reputable BANK for your mortgage. Don't click on some internet ad that says they will make your $200,000 mortgage payment $1,000/month and don't respond to any outrageous offers that you might get in your email or on the phone. The rule of thumb with mortgages is that "if it sounds too good to be true, it most definitely is!" For a prime example, view this article on CNN Money:
Caught in a Toxic Mortgage (http://money.cnn.com/2007/09/12/real_estate/surprising_face_of_foreclosure_Olivers/index.htm?postversion=2007091711)
Last but not least: Purchase a home with a fixed mortgage, and make SURE that you can afford it on the amount of income you have right now. You should put 20% down if you can afford it to avoid PMI insurance (~$50/month added to your mortgage), and the general rule of thumb is that your mortgage payment (principle, interest, taxes, etc...the amount you pay every month to your bank) should not exceed 30% of your monthly household income.
Remember, banks will give you money as long as they think you can afford it. However, they are very bad about letting you over-extend yourself because they know most people's first priority is to pay the mortgage, even if they have to skip out on paying other bills to do so.
Here are a few quick reminders about "unexpected expenses" that you should think about when deciding how much you can spend on a home:
-Cars break down: Do you have enough extra to afford 2 car payments? (one for you and your spouse)
-Central Air Unit breakdown: Average cost to replace is $2,500-$4,000 and may not be financeable, can you have that money available?
-Appliances (Fridge, washer, dryer): Can you afford to finance an expensive appliance if needed?
-Medical Expenses: Hospital visits can actually cost up to $10,000 AFTER insurance. Firstly, do you have medical insurance? And if not, can you afford to possibly finance upwards of $15,000 or more for an expensive operation?
-School Loans: When you're done with school, will there be jobs available to you that will allow you to afford another $250/month in student loan payments? The grace period for a FAFSA loan is 6 months after you're no longer a full time student.
-Are you an energy waster?: My electric bill in July was $215 for a 2 bedroom condo approximately 1,200 sq feet.
With mortgages, knowlege is power. If you think about all these things before you get a mortgage, then you have nothing to worry about. And you never will have anything to worry about. If you get a fixed-rate mortgage, it will never increase any significant amount (unless your county just starts to kill you with higher taxes) and you will always have the comfort of knowing how much your home will cost you every month. Keep the variable bills down (utilities) and you will be fine.
Nobody should be scared to get a mortgage. The media right now is ruining our housing market because people think that if they get a mortgage that it's going to be hell for them and they'll get foreclosed on. I guarantee if you read this article and follow the rules then you have absolutely nothing to worry about.
Any other questions let me know. There's more information to know, but this is the basic stuff.
Zac
Purchasing your own home is a part of the American dream. When you own your very own home, not only are you building equity which you can use towards the purchase of a better home down the road, but currently every dime of the mortgage interest that you pay is TAX DEDUCTIBLE. The average mortgage owner in America claims approximately $7,500 worth of mortgage interest yearly, and coupled with all other deductions and the income tax you pay, you should get the majority of that money back in your tax return. In fact, in your first year, the IRS allows you to also claim the closing costs (points) that you paid. The moral of this part of the story is buy your house in January-March, and NOT in October like I did. That way you have almost a full year of mortgage interest and also your closing costs that you can deduct in your taxes. So in short, DO buy your own home and if you're planning to do it then buy it soon while the interest rates are decent and it is most definitely a "buyer's market" right now.
To avoid having any difficulty with the "Mortgage Crisis" I have one and only one piece of advice for you and I guarantee you 100% that you will never have to worry about all this media jargon that you're seeing on TV about all the foreclosures. Here is that piece of advice:
"Stay away from the A.R.M. mortgage." Avoid it at all costs. When you purchase a home, NEVER purchase a home based on the income you think you'll have within 5 years, and never get an Adjustable Rate Mortgage. ARM's are the biggest ripoff to the average homeowner. They offer you a "teaser rate" sometimes around 3 or 4% for the first one or five years, and then after that they're allowed to raise the rates on you based on what the FED's interest rate is. This could cause your monthly mortgage rate to rise from, say, $1,000 up to perhaps $1,500 or even more in some cases, and as long as the rate is climbing, your mortgage is just going to get more expensive from there.
When you purchase a home, choose a reputable BANK for your mortgage. Don't click on some internet ad that says they will make your $200,000 mortgage payment $1,000/month and don't respond to any outrageous offers that you might get in your email or on the phone. The rule of thumb with mortgages is that "if it sounds too good to be true, it most definitely is!" For a prime example, view this article on CNN Money:
Caught in a Toxic Mortgage (http://money.cnn.com/2007/09/12/real_estate/surprising_face_of_foreclosure_Olivers/index.htm?postversion=2007091711)
Last but not least: Purchase a home with a fixed mortgage, and make SURE that you can afford it on the amount of income you have right now. You should put 20% down if you can afford it to avoid PMI insurance (~$50/month added to your mortgage), and the general rule of thumb is that your mortgage payment (principle, interest, taxes, etc...the amount you pay every month to your bank) should not exceed 30% of your monthly household income.
Remember, banks will give you money as long as they think you can afford it. However, they are very bad about letting you over-extend yourself because they know most people's first priority is to pay the mortgage, even if they have to skip out on paying other bills to do so.
Here are a few quick reminders about "unexpected expenses" that you should think about when deciding how much you can spend on a home:
-Cars break down: Do you have enough extra to afford 2 car payments? (one for you and your spouse)
-Central Air Unit breakdown: Average cost to replace is $2,500-$4,000 and may not be financeable, can you have that money available?
-Appliances (Fridge, washer, dryer): Can you afford to finance an expensive appliance if needed?
-Medical Expenses: Hospital visits can actually cost up to $10,000 AFTER insurance. Firstly, do you have medical insurance? And if not, can you afford to possibly finance upwards of $15,000 or more for an expensive operation?
-School Loans: When you're done with school, will there be jobs available to you that will allow you to afford another $250/month in student loan payments? The grace period for a FAFSA loan is 6 months after you're no longer a full time student.
-Are you an energy waster?: My electric bill in July was $215 for a 2 bedroom condo approximately 1,200 sq feet.
With mortgages, knowlege is power. If you think about all these things before you get a mortgage, then you have nothing to worry about. And you never will have anything to worry about. If you get a fixed-rate mortgage, it will never increase any significant amount (unless your county just starts to kill you with higher taxes) and you will always have the comfort of knowing how much your home will cost you every month. Keep the variable bills down (utilities) and you will be fine.
Nobody should be scared to get a mortgage. The media right now is ruining our housing market because people think that if they get a mortgage that it's going to be hell for them and they'll get foreclosed on. I guarantee if you read this article and follow the rules then you have absolutely nothing to worry about.
Any other questions let me know. There's more information to know, but this is the basic stuff.
Zac