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Old 18 December 2018, 07:03 AM   #1
breitlings
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Saving to buy a house.

I’ve come to the point in time when I should buy a real house. It occurs to me I can’t buy many more watches, tumi, etc, while I save for it and that I likely have to get a desk job to show regular income vs running small start ups.

Looking at the market in DC i can either live in a nice location and just ok house for X or good house terrible location about the same or add about 40-50% more than X and get a beautiful house.

Here’s how I am thinking about it, need 20% down and 3x the mortgage cost pretax as well as credit score in at least low 700s? Should the other house be heloc’d and rented or sold and used to fund primary?

Any advantage or disadvantage to one person owning the house compared to jointly owned?

Then I don’t know much about the new tax bill in terms of deducting state tax and mortgage interest?

Any other general advice or thoughts?
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Old 18 December 2018, 07:45 AM   #2
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i assume selling the house is more prudent vs renting only because it gives you access to cash rather than just having a secondary asset.

Just guessing, but i can tell you buying a real house... welcome to hell as im doing the same thing right now.

Its amazing how many awesome houses there are just 100k above max budget and all ones in your range look like crap in comparison. In large metro areas, a 100k difference isnt a huge percent difference anyway since they are all expensive to begin with. Ive stopped looking at houses out of budget and all of a sudden the new ones within range look pretty good again. Cap the price and DONT look


... here is what my lender gave me as far as credit scores and so it needs to be higher than your estimate if 42% are above 750 (it seems really high to me as my normal credit score on my FICO has me in the top 1% but not on this one). try pulling Equifax Beacon 5, Experian FICO-II, and TransUnion Fico Classic 04 as thats the specific scores my lender uses. They are different than my other FICO scores so your specific score they pull might be different than the one you are looking at
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Old 18 December 2018, 07:48 AM   #3
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Location, location, location! I would rather have less of a house in a good zip code than vice verse.

Credit score better if mid to high 700s; as close to 800 as possible.
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Old 18 December 2018, 07:50 AM   #4
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I can’t rightly help with too much of this. But I wish you good luck.

I’m currently way over budget for our new house. So many issues that popped up that never happened in the townhouse. I’d highly recommend ensuring you have relatively robust emergency fund.

Best wishes. Let me know if I can help with any of my recent experiences.
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Old 18 December 2018, 08:01 AM   #5
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Quote:
Originally Posted by The Libertine View Post
Location, location, location! I would rather have less of a house in a good zip code than vice verse.

Credit score better if mid to high 700s; as close to 800 as possible.
This.

You can always build a nicer house down the line (or sell your land to someone who wants to). A friend of mine bought a house 4 years ago for about $750k, tore it down and built a new house and it is worth roughly $4.5m now. If it weren't for the location, they wouldn't be getting anywhere near that
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Old 18 December 2018, 08:53 AM   #6
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Location!

A lesser house with location appreciates and sells faster than a great house in a lesser location.

If you are married go joint tenancy. If you are living with your SO. Put it in your name.

The goal is to buy the worst house in the best location. With a little fixing up you get instant appreciation.

P.S. location, location, location.

Best to you.
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Old 18 December 2018, 08:55 AM   #7
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Quote:
Originally Posted by The Libertine View Post
Location, location, location! I would rather have less of a house in a good zip code than vice verse.

Credit score better if mid to high 700s; as close to 800 as possible.
I found, I think, a happy medium to this. I think...

I could not afford the houses I wanted in the nice area. The trick in this area is to list low(ish), and incite a bidding war. Without fail, they are all successful. Cash deal I said? Lmao, my realtor barked a laugh. Everyone is a cash deal here. 100k over list. Easy. At minimum.

And the taxes are...well, they are terrible.

I found a place right on the border. Still a nice town, but no real comparison in terms of zip code. With my “improvements” I’m at the very high end of what determines the median home price. Which is okay because I plan to stay.

Do I care about the value? Yes. But it’s not an investment for me. It’s a home. And hopefully when I actually sell, the values will equal out.

I don’t disagree with the sentiment of this suggestion. But living in a “rundown” home simply to demo and build wasn’t an option for us.
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Old 18 December 2018, 09:09 AM   #8
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A must on best location possible + worst house possible. Houses can be torn apart the location cannot be moved. Older homes are actually better built structurally than new homes. Your credit score will matter but its not going to make a massive difference on your rate.

Doesnt matter its in 1 persons name or 2 person... the loan is collaterallized by the asset.

I would also urge you to not over capitalize your house and also factor in taxes. Go read about SALT. Most coastal cities are under a bit of pressure due to this, wall street and stock mkt (tech stocks).

If you decidd to do a reno, do it all at once to make everything flow and homogenous. Should be around $30/per sft for reno and about $125/sq ft for new... Higher if its the kitchen and bathrooms should u decide to go crazy with high end appliances and exotic tiles. Like i said i wouldnt over capitallized a house...and dont go too big its a waste.


I have many friends with 8-10k sft homes that now regret it...too little too late.


Good luck ��
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Old 18 December 2018, 09:10 AM   #9
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Hi breitlings...
I don't know if this is useful to you, but having a discussion with an estate/trust attorney for your state as to how to title might help you decide direction you wish to pursue.

Location!

Good luck! Happy for you.

DM
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Old 18 December 2018, 10:38 AM   #10
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I would sell your current residence and use the funds towards your next home. Odds are there are better ways to invest in real estate in your area than a single family home.

My advice is to find something that needs cosmetics and has an excellent location. Nothing worse than paying more for updates that suit the previous owner and also bring you into a higher assessment in most cases.
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Old 18 December 2018, 10:47 AM   #11
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DC/NoVa market is super tough. Good luck. Was just down in Vienna/Fairfax visiting my wife’s family and pricing is a bit wild. And I’m used to high RE pricing as I lived in NYC and now Westchester County.

As far as owning property, do so if you are ready to settle in that location. There is nothing wrong with renting if you need to be mobile.
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Old 18 December 2018, 10:49 AM   #12
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Quote:
Originally Posted by The Libertine View Post
Location, location, location! I would rather have less of a house in a good zip code than vice verse.

Credit score better if mid to high 700s; as close to 800 as possible.
A good school district is a great selling point, as well!

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Old 18 December 2018, 11:51 AM   #13
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Originally Posted by breitlings View Post
I’ve come to the point in time when I should buy a real house. It occurs to me I can’t buy many more watches, tumi, etc, while I save for it and that I likely have to get a desk job to show regular income vs running small start ups.

Looking at the market in DC i can either live in a nice location and just ok house for X or good house terrible location about the same or add about 40-50% more than X and get a beautiful house.

Here’s how I am thinking about it, need 20% down and 3x the mortgage cost pretax as well as credit score in at least low 700s? Should the other house be heloc’d and rented or sold and used to fund primary?

Any advantage or disadvantage to one person owning the house compared to jointly owned?

Then I don’t know much about the new tax bill in terms of deducting state tax and mortgage interest?

Any other general advice or thoughts?

I'd prefer the OK house in a better location, especially if you can potentially improve the property. You can scrap a home in 10 years if you want something bigger/nicer. Current cost to permit and demo a 3k sqft house in my area is $20k. If you're looking at Multi-fam just be sure the HOA or co-op is on a proper budget.

Go with a higher down payment, look at shorter terms, and try and make more than your planned payment. The massive appreciation we've seen in the real estate market over the last 40 years can be simply explained by the massive reduction in borrowing cost and the extension of credit for longer terms. America has uniquely loose borrowing limitations and what 1,500 a month got you in 1985 vs 2015 is simple math.

One person vs two persons on the loan is dependent on if that person is fiscally advantageous or not. Warm bodies only count when they have a good debt to income %. 740+ credit is generally a best rate or tier 1.


Less people will be itemizing deductions this year. How the tax bill affects your purchase would require more financial information along with selling or keeping the current house. Unreasonable to share here.
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Old 18 December 2018, 12:51 PM   #14
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The best time to buy a house is when you can.

This coming from one of the over valued housing market in the world - Auckland.

Good luck.

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Old 18 December 2018, 01:00 PM   #15
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Mortgage rules are so much different in your country compared to where I live that I can’t help in that regard.

I’d simply recommend you look at something you can comfortably afford and have a decent contingency fund set aside for surprises. Houses are more expensive to maintain than Rolex’s
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Old 18 December 2018, 03:05 PM   #16
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As someone previously mentioned, SALT. Become familiar with it if you are a high income earner buying a house with high income taxes. The amount of your state and local income tax and real estate tax deductions are limited.


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Old 18 December 2018, 03:48 PM   #17
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Originally Posted by breitlings View Post

Here’s how I am thinking about it, need 20% down and 3x the mortgage cost pretax as well as credit score in at least low 700s? Should the other house be heloc’d and rented or sold and used to fund primary?

Any advantage or disadvantage to one person owning the house compared to jointly owned?

Then I don’t know much about the new tax bill in terms of deducting state tax and mortgage interest?

Any other general advice or thoughts?

Good luck in your dream. If anything I post below feels insensitive, it isn’t meant that way. It’s just the cold facts of standard lending and home ownership nowadays.


5x income of initial mortgage pmt is safer since other unexpected living expenses are inevitable.

Credit score needs to be right at 800 or over if you want best rates.

If you heloc the current house before new home is bought you’ll never qualify due to DTI ratio being too high. Unless you already own it outright. If you have the time to become a landlord maybe rental is OK - but few people are good at it without relevant experience. One bad renter can put you underwater.

The only advantage to a joint mortgage is if it helps you get lower rate, or qualify for bigger mortgage.

The tax bill may not be relevant if you have low preexisting income that’s inadequate to qually without getting a desk job to get the mortgage in the first place.

My general thought is to search for owner-provided or private mortgage sources. That way you get more creative options.


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Old 18 December 2018, 10:08 PM   #18
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IMO

1) LOCATION FIRST !

Added bonus advise, again IMO

2) If you need to finance more than fifteen years, it’s more house than you need !
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Old 18 December 2018, 10:16 PM   #19
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IMO

1) LOCATION FIRST !

Added bonus advise, again IMO

2) If you need to finance more than fifteen years, it’s more house than you need !
im in the finance for 30 camp and pay it off in 15 as you can do that too, but you have more flexibility if something comes up as far as what you have to pay every month
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Old 18 December 2018, 10:46 PM   #20
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Does “house” mean single family home? Nices homes in good areas are $1.1m+ in the DMV.

Also, as you know, we have a lot of older homes in great areas, you will need extra cash for home improvements and upgrades if you find a fixer-upper. I suggest setting aside 50-100k depending on the age of home you find.

I was told I could afford X but went with X/2, life is easier and more realistic. Banking on home prices rising is a dangerous game when it leaves you short on cash.
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Old 19 December 2018, 03:01 AM   #21
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I love DMV as I have family there but I always thought if I had to work in DC I would live in DC. Anything to avoid using a car.
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