Category: Let's talk
hay, just wondering how many of you would see yourselfs as homeowners. some city, states and towns dont charge the handicap homeowner lots of taxes. in brownsville texas for example they charge a handicap person very little home owner taxes.
Interesting. We're homeowners, but the housing taxes you pay in the UK tend to fall on the occupier - it often doesn't matter if you're renting or owning, though some landlords will include the taxes in the price of the rent. There are obviously other costs associated with being a homeowner here, upkeep being the most obvious.
This will take me two posts or so to put in what I've been writing down, the sum total of what I've learned by observation and experience since the 90s.
Ok so I'm going to make myself quite unpopular with this post I imagine.
I have done so in offline life, and like they say, online life is really no different.
First off, you do *NOT OWN YOUR HOME UNTIL IT'S COMPLETELY PAID FOR!*
The bank does. Period, the end.
You are, however, responsible for everything. You are responsible for taxes, fees, insurance, repairs, and everything else. Even if a lot of that is bundled in escrow with your mortgage company.
Home ownership is *not* necessarily the pot at the end of the rainbow we call the American Dream. It's not necessarily an asset, in fact a home is technically a huge liability until it's paid for.
So, let's start with myth number 1:
"Stop throwing away money on rent, own your new home!" I hear bells.
So, you throw money away on rent? Who is responsible when the toilet breaks? Who is responsible when the ceiling for some reason develops a settlement crack? Any hipsters out there tell me how much that will cost you? Anyone under 30 on here? Anyone? Except you, Cody, we know you probably checked that stuff out already. lol.
Suffice it to say, that if you are not ready to drop several hundred dollars at the drop of a hat, any day of the month, for emergency expenses, you aren't really ready to own a home. I know all your friends do. I put it off for a year and heard about it from quite a few, who after the recent housing crisis consider me an ex-friend. No I didn't rub anybody's nose in anything, I stayed out of it. But everything they preached came right back home to roost.
Myth number 2: Get a no-money-down loan because then you can get started on your dream today! You can make it up in principal payments later. Again, I'm hearing bells.
I was a stupid young fool and did get a no-money-down loan. No money down, for any kidddies wanting to try this, meant around a thousand dollars in irretrievable costs. The magic show they call the closing has a lot of tricks to pay for and you can right well guess who will do the paying.
So why is that stupid? Most states will require a Mortgage Insurance payment if you don't put a certain percent down first. Again, that insurance payment is irretrievable. And you know why that insurance payment exists? It insures the mortgage company against losers who do no-money-down loans and then default. "Oh, but Leo, I'm not going to default!" Probably not. Based on the caliber of users who talk finance for real, I could name names, on this site, I'm guessing you will fall into the category of people who will not default. Know what that means? The losers have the last laugh because you get to pay for their mistakes. Put money down to exceed that insurance requirement in your area, or suffer the consequences put upon you by the losers who default.
Myth Number 3: You can save money on your taxes due to the mortgage deduction. Meh, this time it's Hell's Bells I'm hearing.
Yes, there is a mortgage deduction on your income tax. What that means for the financially challenged is you get to write off the *interest* on your mortgage that you pay, when doing your income taxes. Most my ex-friends got into a tiffy when I pointed this out: you don't subtract your interest payments from the amount you would otherwise pay in taxes. Hopefully this amount lowers your taxable income enough that you are now in a lower tax bracket, paying less to the Grubberment who is overseeing such things as the Mortgage Insurance you are paying with the no-money-down loan you just got.
Myth Number 4: Just do a refi and get your interest payment lowered. Ok this one about makes me physically sick to think about, especially in light of some of the Chick's acquaintances from then who thought I was being such a doubter and a I-can't-remember-what.
Real answer: A refi will work the way I did it, and any smart person does it. First, refi with a mortgage company who will do more than lower your interest. Someone who has something you want, like better escrow fees, etc.
Second, CASH CASH CASH! Don't go in there and buy their line about "You'll save money even if you let us cover the closing costs." They don't cover the closing costs, they add it to your loan. Do your own math, and if you can't, don't be ashamed to do as some of my ex-compats did and ask someone they called a douche, me, to do it for you and explain it to you. Don't be ahshamed to do that if you need it, and don't sit and sigh and roll your eyes at the "boring details". Because it's your nuts are in a vice, even if you're a chick and don't have a pair.
I went into the Magic Show they called the Closing for the Refinancing, and in my foreflipper was a cashier's check.
And, don't count on being able to refi, when you buy. When you buy assume you're paying that interest or higher.
Actually, I'm now of the belief that one shouldn't even buy a home except for one reason: You intend to live there, die there, and rot in its backyard. I do love ma fair city of Portland, and someday I may buy a home again, and it would be here in Portland. But I will not meet the above requirements to do it: I'll either exceed the above requirements or not do it.
Personally I think my parents, and the Chick's parents, in their older years have done it right. My parents once, Her parents twice: Buy a home with cash and sit on it. Sit tight like you're gonna lay an egg and hatch it. Don't go looking at trying to resell and hopefully get more money out of it. Not unless you know what you're doing. I don't: I haven't studied all the contractor and permit laws. I am not a property financier and so do not have all the data on long-term marketable trends that make for real property improvements. All that shag about buy with no money and turn around and sell, all the TV commercials in the 90s, is BS for most people.
And yes, I know there are exceptions. Even after being a fool idiot and getting a no-money-down loan, and making marginal improvements, I was able to make around $12K on the place after owning it for 4 years.
Did I think I was going to? No. I thought God I hope I don't come out of this upside down! I knew 4 years is a paltry short time to own a home, but the time in that part of the country was over, and we were finally coming home.
Also, I was not then as strongly convinced as I am now that you should only buy a place if you want to stay there until after you're long gone. For a 29-year-old at the time, I did okay that way, thinking that we would probably be there quite a few years, thinking I would probably pay the thing off in 15 years or so. Doesn't mean I would recommend doing as I did, though.
And as to me ex-compatriots? Well, they all got popped for doing the dance everyone does, and although they tell some people it was the housing crisis, it was happening long before then.
If you take my road, you will be extremely unpopular with some people: having "negative energy," or "not enough faith in the American dream," or any number of other magic mumbo jumbo words they come up with.
But let me tell you: even if you are prepared, as I was reasonably so for someone my age then, the expenses will shock you and you will probably do some dumb things at dumb times like blow a thousand on your credit card to get some much-needed work done six months after you get the place. The 20% or so on that card? Not redeemable anywhere, and you can't write it off on your taxes.
Oh, and you'd better guard your receipts from all home repairs expenditures in the first couple years. See your fav tax attorney on this one, I don't mean those mob job cheapo bargain places on the Internet either. Because, there is a cute little bugger they have waiting for you when you sell. It's about taxing the rich, you see, those eveil people taking advantage of everyone. Those rich guys withg no-money-down loans. it's called the "Capital Gains" tax.
Also, if you die there, there will be an Estate tax.
Any profit you make on your place, which you'd better if you are doing this right, is subject to taxes in the double digits at least. All those cries for higher taxes against the rich on TV? That's you they're talking about, since real rich people offshore their money or put it in shell corporations so it's taxed as an entity and not a human being.
So those home repair receipts are going to let you write off a certain amount on your Crapital Gains or Capitally Screw-You tax. LegalZoo.com or Walmart is *not* going to help you with this. Don't bargain hunt, get a real tax advisor.
If you love to shop at WalMart, if you love to save money by not using real experts, if you hate math, if you like to buy now and pay later, don't buy a home. Buying a home takes a hell of a lot of disciplined effort, quite a bit of money on hand at all times, a lot of foresight, and the ability to keep your eyes off the remodeling home shows and ears closed to the foolbabies who tell you if you would just change the color of your kitchen for 1200 dollars to this hip new color, your house will be worth 5000 dollars more than it was.
Yup, when it comes to this stuff, I admit I am kind of a dick. People think the problem is the no-interest loans. I think the problem is a lot of the process to begin with.
I personally refuse to buy a house again till I have the cash to pay for it, and I do mean pay for it, bypassing the bank and the Magic Show.
If you think I'm wrong on this stuff, speak up. Tell us how you intend to get out of the mess if you get a no-money-down loan, and when your job flops and you have no money to pay payments? Or how you intend to pay for the roof repair / replacement when part of it falls in and you owe in the double digit thousand dollars' range? Or, like someone I knew, when you have a contractor get behind the wall of your house only to find a whole mess of 1920s knob and tube wiring with denom insulation on it ready to fall apart, which the Inspector missed?
I'm not trying to be a downer about home ownership, believe it or not. I'm just being honest about the responsibility it implies. Man some of those chicks we knew , when I would tell them this stuff, it was as if I was the dad and they were the seven-year-olds, and I was telling them what a huge responsibility a pony would be.
I think my parents, and my parents-in-law, will both pairs of them die happy at least in the home ownership sense. Since they plan to live and die on it, they're not hopping up on goofballs over the trends. They make the changes that they want. And in both cases, my parents once and her parents twice, they paid for the place in cash. That's not how they always did it, but that's how they have in the last decades.
It's not the fifties anymore, and this is not your father's world.
Leo, your post was charming. Really. I'd love to learn more from you on this topic sometime--but you still didnt' change my mind. I'd love to own a home someday soon. We're in teh process of hunting for one right now. All of what you said makes a lot of sense though. Especially the repair costs. I guess I just hate to be on someone else's property for the rest of my years, and not working twoard somethiing of my own instead.
Leo, you make a ton of sense, but I see why Bernadetta feels the way she does. I'm not exactly set on owning a home someday, but it would be really, really nice. When you rent, you never really feel like it's yours, like you can do what you want with it And you can actually be evicted, kicked out of your own home, if times get rough enough. It's anxiety all its own. . I guess we'll see what the future brings.
I can see your points on several issue Leo, but owning a home, or I’ll say buying a home the correct way is benefitual completely.
I have owned, owned, not buying.
I have also done the buying, because I as you pointed out never paid it off, so technically I didn’t own it.
Here’s the thing.
You are completely responsible for things that go wrong, however, if you practice good home ownership, you’ll not have major things happening to you aren’t aware of.
The ceiling doesn’t just fall in, you know it has a problem before it falls. Ignore it, sure it will cost you more.
Don’t buy a shack, unless you are able to repair it. Have the place you want to live inspected by a professional if you aren’t able to do this yourself.
Yep, it is possible for a blind person to inspect a house.
You need a bit of help on the roof, but most things you can do.
Buy yourself a good insurance policy for these acts of God they call them. Storms, and such things you can’t control.
I agree, don’t put no money down. That was a fraud, and got many people in debt that were not able to handle it.
Most banks require 20% down or more, but the fat cats were selling houses to people making a fast dollar, and that is why we had the financial problem we had.
That interest Leo helped me greatly when it was tax time. The magic of that check in the mail is you use it to pay your next years property taxes, not buy the new big screen TV. Smile.
This could be a major debate, and how to, but I sincerely say, paying the money to something you can own, or renting, I’d buy. You just need to do it right.
Even if you aren’t able to repair things, there are options to keep your house doing just fine, and many methods of cutting your 30 year loan down to 15 or even 7.
A home buyer needs to be willing to learn how to fix and repair, or keep a fund for repairs, and spend that fund on preventive repairs all the time.
This subject is large, because there are so many aspects to it.
I just saw your other post Leo, and no, you don't have to intend to dye in your home you buy.
What you do is you rent it out, and you move to a larger home, or purchase several properties, like a duplex to pay for your home you live in.
Example, buying a duplex can actual make you rent free for the most part. You live in one side, rent the other side out.
Just lots of ways. We can argue each point if you like? Smmile. What say you, interested?
You toss a point, and if I can I'll rebuff it, or agree and say why.
I do like it Wayne, and I do agree.
I'm going to put some info out here first for the younger ones on what costs actually go into this. Again, I agree responsible management/ responsible home ownership can be amazing. I also agree it's worhth knowing how to fix problems that do occur.
The ceiling falling in happened shortly after the guy bought the home, because the two inspectors in Florida he paid failed to catch a couple of problems, and it wasn't a cave in but nonetheless very expensive.
Also, I have family who are not bonded contractors, but try and do certain things themselves that run their property into permit problems and county issues, so you have to watch that.
I do want to take you up on being a landlord in a future post. I had thought to do this, then I've known several friends do it, I know how it works but again, you really have to be ready for it.
OK Bernadetta / Meglet here comes a couple things I wrote down I forgot to post earlier, on how the transfers actually happen and what you pay for and so on:
Bernadetta,
That goal is commendable. Commendable enough that I will be honest, and try hard not to be a dick about things, I promise.
You pay rent now, to someone else. You don't worry about flood insurance, fire insurance, property taxes, and so on.
When you do as you say, work to own a place of your own, here's what is going to happen:
You will probably pay more than you are now for your mortgage payment, then you pay some more for fees and interest to the mortgage company. Remeber, the bank owns the property.
Except, you can't call the bank when something breaks, or when you now owe $5,000 for a roof job. The bank just might, however, be willing to let you take out a second mortgage. I don't beat chicks, so I can't threaten you as I would a young man, but I told a buddy once, don't you dare take that second mortgage or I'm coming over there with a stick! lol.
I can't justifiably give you the real figures for what you will pay, but I will tell you it far exceeds what you would pay to save money yourself and then buy later.
For interest alone, not counting escrow fees, count on paying at least twice your property's value if you make basic payments on a fifteen-year mortgage. Most people go for 30, but not this dog.
Anyway beyond that, the bank has to charge you to act as escrow for your property taxes, insurance, and all that.
Oh, and if the insurance carrier drops you mid hurricane season in Florida, as happened to me, the bank has no obligation to tell you. Their only obligation is to hold the money in the escrow account. It took a hell of a lot of work, and torturous run-aroundd, to get that one resolved.
Here's the scoop on property taxes: Your property has an assessed value and that is what you pay taxes on. Not the value you paid for it, not the value your realtor friend says it is, it's assessed by the county and you have absolutely no say in the matter.
And guess how your son's school is going to get paid for? That's your property taxes, and those get increased every year. All those news stories on TV about getting rich people to pay more for the schools. That's you. Real rich people get tax breaks by appealing to the county seat with promises, real and imagined, of economic development. Middle class, hard-working, business-owning, thriftys like, oh, let's see, like you, get stuck with this stuff. The people who don't default, who pay everything on time, and who are the ones carrying the load. It's something I will personally account for before I do this again. I'm just being honest. I have friends in the tax-break-collecting category and we've talked about this shit over beers. I've seen the paperwork, because it's on their computer and maybe they needed a little help with some things. So those increases that are necessary, all to pay for things we all see as necessary like schools and roads and fire departments. You Bernadetta are the main source once you buy a home.
Ah, but Leo, I'm already paying that through my rent, right? Marginally yes. Chances are depending on where you live, and how many properties the owner owns, you are paying a percentage of it. And if the owner defaults or can't pay, and the county puts a for sale sign on your apartment building, they can't kick you out. They can kick his or her can all over the town but they can't evict you because the owner wouldn't pay.
This is stuff you need to be aware of.
I think I can illustrate how you, or most people, really aren't working towards a place of their own.
First, the Magic Show they call the Closing. Three parties are involved, each party has an entourage.
There's Bernadetta the buyer, Cody the seller, and Leo the Mortgage company.
Each party has representation. If Bernadetta is smart, she has a Buyer's Broker, a realtor whose fiduciary responsibility is to the buyer, not the seller. If Bernadetta is not smart, then Bernadetta's and Cody's realtor are either one and the same, fiduciary responsibility to Cody and Bernadetta has protection in name only, or at minimum the two parties handshake each other.
Leo over there has checked out Bernadetta's credit and deemed her worthy, has watched Bernadetta's bank account for the past 21 days or so to see that she isn't blowing any big money. Bernadetta's predecessor did because the mom got cancer and had to pay $10,000 in fees which she covered, so Leo backed out on that loan. Fortunately, Bernadetta didn't have such a situation, or blow a grand on new furniture for the nice new place, not yet.
After that, Leo is checking out Cody's place, let's see, rats were here a while ago but Cody at least expelled them, meh a bit of dry rot but we'll increase the interest rate we're willing to charge Bernadetta for that one, oh and since we did a second inspection, the cost for that gets added to the loan.
Looks like the bell has rung, the Magic Show is about to start. Fancy pens are full of ink, paperwork neatly stacked by one of the realtor assistants who appears to be hopped up on some kind of uppers Bernadetta hasn't seen since college, all hoppity excited about you guys getting your nice new home. Under the jacket is a surprise, a bottle of champagne for the new homeowners.
So we start: Cody's realtor and realtor assistants sit by while Leo starts in with Bernadetta about fees and costs outside the actual property, associated with the sale itself, and the escrow. Since Bernadetta was smart and hired a Buyer's Broker instead of a realtor, that person is interjecting on Bernadetta's behalf. Cody's realtor's time to care less is just about over, except that Bernadetta follow through on the deal. Buyer's broker is the one with the fiduciary responsibility to the buyer. And buyer's broker *is* a real realtor, Bernadetta has done her research despite her hoppity associates at the office talking about by owner and a few other options they're looking into and trying out.
Ah that's done. Now it's time for Leo and Cody's realtor to put the ol' J.H. on some paperwork, and that starts the process of turning over the house to Leo. Not Bernadetta.
Leo is going to cut Cody a check, well, Leo has a stub since Cody wanted to sign to have the money directly deposited into a liquidatable money market account.
Some more paperwork circulates around the table, most of which many people glaze over but neither Bernadetta the buyer nor Cody the Seller are doing that this time. Forfeiture fees if someone backs out at this moment, and so on. Clearances that the bank accepts the property as is, acknowledgements that the pre-closing walk-through was completed, and that cody didn't do anything afterwards like leave a couple wild boar locked in the bathroom or anything.
Ah and Bernadetta got a glimpse of that deed, before Leo snagged it and put it in a folder to go into a safety deposit box assigned to her loan. She signs paperwork acknowledging that she understands the bank owns the deed, and she will have it after the loan is fully paid off, and the deed transfer fees paid.
Now for the detaila between Leo and Bernadetta again, Goofballs assistant is probably doing something that would drive Cody nuts by now, some kind of chattering about how wonderful this whole process is for new homeowners. And Bernadetta asks about the total amount to be paid, grand total, because well that isn't directly obvious. Goofballs makes some kind of sound that approximates a mourning dove with the misfortune of not having its neck wrung properly. Bernadetta gets a figure from Leo that is about two and a half times the sale price, she asks, "Is that for everything," and Goof balls just about drops it here. The conditioning doesn't really account for a new owner with quite that much research and eye for detail. She finally get the real scoop which is closer to three times the amount. After all, all these fees for closing costs, inspections, and one appraisal she did not pay for in cash, transfer fees which her buyer's broker couldn't haggle Cody into paying during the sale, and a few other midgets and mites.
A bit more magic and Bernadetta's realtor takes the keys from Cody's realtor, whose Goofballs assistant has somehow revived without a shot of liquor, and is again sooo excited for you guys.
And out of under the jacket and presented is the bottle of champagne for the new homeowners.
And six months later, Bernadetta is trying to be smart and get the dry rot issue addressed, within that two year window so she can get it written off on the Capital Gains Tax if that is still relevant after she's dead, since she plans to live and die on the place.
Only problem is, Cody had bought the home from someone else, who bought it from someone else ... who had covered up a crack in the foundation, not a big one, but nonetheless once discovered must be addressed. Not Cody's fault, not the inspector's fault really, though she's hearing rumblings she could take out that second mortgage and sue several someones to redeem the costs.
I'm only being honest about what actually goes into this. Of course it's allegorical but based on reality, and I'm positive there's parts I missed. At a closing you sign an average of fifty documents.
If you decide to go with a loan, there are a lot of costs you will incur just for the luxury of having that loan. And it's not all about the interest. That bank is having to ensure itself that the house is as fit as is described, that it is worth what you are willing to pay for it, and so on. Lots of people don't get the house because the realtors agree on a price, their assistant doves do their cooing action, and the bank says hell no I'm not financing a shack like that for 200 grand!
And the bit about the closing not happening because of spent money? I know a lot more people than I wish I did who went out and blew a grand here, a couple there, for the new furniture, 'for our new home with all the right colors,' and the bank saw that kind of money go out the door and said no way.
They require a balance of a few thousand, I don't remember how much then and it's surely more now, and you have to have had that in your checking account for a certain length of time. Above all the $75 here, $300 there, that you pay ahead of closing whether you actually close on the house or not.
Most people I knew did this on a credit card, again a bad idea for a multiplicity of reasons.
Oh, and I've known realtors try to talk people out of being that stupid. Because if that closing doesn't happen, you lose and so does the realtor.
If you Bernadetta or anyone else really want to do as you say, work towards owning your own place, and you don't mean put money away every year from tax refund and as much as you can spare every month, then the only way you will really do it is by agreeing to a payment plan with your own secret agenda of paying out way more than the payment plan.
Then, you make the payments exactly as you are instructed by their little booklet or probably now online, and in between payments, you make extra payments that are only principal, and you mark them as principal.
Did you know that if you make just the payments they tell you, all you pay is interest for the first two years? So the principal has not shrunk at all? This was at least true ten years ago. If compound interest, and interest vs. principal confuses you, get your kiddo's fifth-grade math book and bone up. At least I hope they still teach this. It confuses a lot of people, and my personal belief is, the reason for the confusion is that a fifth grader doing math, pulling a girl's hair, staring out the window dreaming of playing ball, has no idea what this even means. Then people become adults, have some kind of a vague memory of it, how to calculate percentages, there's something about interest and principal but I can't remember which is which, and there you go. Maybe I'm wrong, but that's my opinion on why people are confused by that.
Always remember, no matter how boring the details, it's detail about yours in a vice. It's up to you to make sure you get the best deal, and I don't mean bargain-hunting best deal. I mean best deal by having enough up front money to offset private mortgage insurance costs, having enough money in your bank account at all times to pay for the unforeseen expenses that will start to happen sometimes immediately after you get the keys, and the foresight to know what to do if your income disappears and you are now on the rocks and foreclosing.
I've not been foreclosed upon, but I've seen people who have, both homeowners and realty places, and they usually look like they wished you'd be nice and just shoot them. It's not just about losing your home, or having to couch surf, or losing your business if you're a realtor. You lose your credit, you lose everything you worked for. All those extra principal payments, irredeemably gone. All those nice new improvements you did, whose receipts you have tucked away like you're supposed to, are completely and utterly useless to you now. I've had people go on for hours as to the details and they weren't even talking about family and where they were going to live.
And here's another part of this foreclosure business: let's say you were smart, and didn't buy one of the idiot loans that many people did in the early 2000s. Well, all the idiot loan buyers defaulted, and now your bank has to raise your rates to compete. There are ways for this to happen, and it does happen. So you're on a tight budget with two kids and an income, and you can't afford the extra $200 a month now, or maybe even the extra $100 a month. And since the crisis is on, no bank wants to do refis, especially since now you are behind on payments. Not having missed whole payments, just either behind a couple hundred here or there, or behind on the phone bill while you made sure this month you made full house payment, etc. It happens. It's not just the stupid who get stuck in these situations.
Again, I know people who have gotten through this, and they did not, as some say, skate through it. They thought all this stuff through and had answers when the rest of us fools thought it would never happen to us because we were never behind. Fortunate me I sold before everything dropped, but I would not ever again buy a place I didn't intend to feel good about dropping dead in.
I will add, I truly believe Wayne is right. I did all the pool maintenance myself when most people thought I should hire a pool boy. That meant learning how to refit PVC and many other things.
I also grew up with parents who were constantly remodeling the house. If you want to live in that, fine. And you should be prepared to live in that should you own a home, because no matter who you are, once you get behind the plaster and drywall, you are going to find things that have gone wrong before a few people before you bought the place. You will either foolishly take out another mortgage, or you will finance it out of your Rainy day fund, or you will live with the open wall until you have the money to repair it peacemeal, provided such a repair can be made peacemeal.
And I grew up in houses where people had tried to do all the repairs themselves. Toilets flooded, electrical arcs, my oh my it was interesting but not for me. I did all the pool work myself, but I paid money to have the water and electricity put in for a washer and dryer, something nobody had done to that house before.
Again, I'm not arguing against home ownership, I'm just being honest about what can happen.
I do know how it feels, both good and bad, when it's your house. I don't know if it's the be all end all. Certinly for a few months it is, and on again off again later, but once the honeymoon period is over, it's a lot like paying rent only it's to the bank and you are responsible for everything.
Wayne, I agree with you about the taxes and putting the money into saving for next year's taxes, unless the kid needs braces or something lol.
Anyway, I'm not wanting to dissuade, just cause people to think. if you think as much as you do already, Meglet and Bernadetta, you are already way ahead of most your friends, I'm sorry to say. Because you'll likely end up okay with houses, and you'll have the misfortune of watching some of your colleagues and others completely flounder and do things you wouldn't.
But I'm always game for getting shot down on some points.
The landlord thing is an interesting topic, and if one is willing to be a small business, keep accounts properly, have the proper cushion of funds, and not slack when it comes to maintenance you should do okay. But as a friend of mine put it, if the mortgage is not paid off, then a few months with a tenant who lost their job and can't pay rent, and you lose it all. In some states it takes up to a year to enforce an eviction.
Hi Bernadetta,
I can certainly say that owning a home is infinitely preferable to being in the rented sector if you can do it. Obviously you shouldn't over extend yourself, or pay over the odds for a home, and you should have an eye on long term market trends particularly if you think you may need to move. But if you can do it, I'd heartily recommend it. It's yours, you can make the improvements that you want, change the layout/structure however you want, if something does go wrong you can get the repairs you want from the people you want them from, no-one can ask you to move at the end of your tenancy, no-one has the right to inspect your home, the list goes on. There are no downsides in my experience.
Well, leo, I cna't say I understood all that technical mathematical stuff--not entirely, but I get yrou point.
But here, the place I'm renting now, I pay 1300 a month for it. The landlord refuses to replace the hundred-year-old windows because they're grandfathered indue to the age of the building, so we have selaphane blanketing all of our windows, closing off any sun light and blocking my kid's view to the outside.
We have no yard for him to play in, and we live, at this price, in what could be termed as the ghetto. People with their ghetto blasters driving by with rap musi all hours of the day and night--and this is a good deal for a three-bedroom apartment here.
If we buy a house, we'll have all these fees, yes. But at the rate we calculated and with the price range we're looking at, we can work out a mortgage payment of 550 a month. I have a savings of eighty five thousand dollars for the rainy day, as you call it... So that's my justification for wanting to own, or to buy, as you call it.
What do you think? I'm asking honestly. I'm actually curious and I accept that you're a knowledgeable person regarding this, and I'll readily accept any guidance or advice you can offer up. lol
Oh. and by the way, in CT, blind citizens are exempt rom property tax. Same as in Massachusetts.
$85 grand?
Just by reading that I would say two things:
First, you're in the top percent of people who would succeed at this.
Second, find out how much replacing windows like that will cost you because when you do move you might have to do that.
I think you're one of the few who my posts don't really apply to: you have the rainy day fund, it sounds like. You've been doing the math, it sounds like.
As to the technical aspects when it comes down to it, that'll be a snap for you based on what you've said thus far. Just remember what they say: one way to eat an alligator, one bite at a time. You'll find yourself understanding this stuff the more you go along.
Just pay good money for several inspections on the place or places you are interested in. In this I disagree with Wayne. You can inspect by feel, and you probably should, but a good inspector is looking for things most sighted people would miss or tell you, Oh that doesn't look bad. They know building codes and permits, and you can ask the tough questions.
Start shopping for a buyer's broker, someone who will represent *you*. This is the big mistake many people make, and an older gentleman gave me the word on before I made the mistake of just getting a realtor. You want your own realtor.
Hint: If the realtor has properties they are trying to sell, they have the fiduciary obligation to the seller.
What that gobbledeegook means is, if you were in court you would be asking them to help you while their primary responsibility is to your opponent.
More people than you care to know make that mistake, and you're likely to know people who get shafted because of it.
Hint: don't use a buyer's broker to sell the house, use a realtor, for the opposite reasons.
Oh, and a buyer's broker has a realty license, they are a realtor, they will collect a percentage and so will the seller's realtor. And they will pick at things the seller's realtor might slight over. It's like having your own attorney.
Start asking around about mortgage companies. Manage this yourself, because everyone on this site knows that you personally can. Sure there are bundles with a realty company having their own mortgage brokers they work with and yada yada yada. But, you want to select the mortgage company. Your buyer's broker only represents you between you and the seller. They really don't have any play in the mortgage situation.
Talk to your own bank.
Be reasonable and honest with yourself about your credit score, and what raises and lowers it. How many times has your credit been pulled in the past six months? How many denies? stuff like that. Any time you have someone pull your credit that is a pull on your credit. Not much, but mortgage financiers, good ones at least, are pretty sticklerish about this stuff.
Find out in your area average rate for electricians, plumbers and the like just so you know this information. Find out people who are reputable, sort of a word of mouth type situation if you can do it.
What you don't know, ask. Ask ask and ask some more. Take such copious notes you will have flashbacks of being in school.
And, I'm impressed at your age you are ready for this. You're way more ready for it than I was when I bought, and I was a number of years older than you are now, if I remember right.
For those saying age is just a number, sure, but it takes a certain time for most people to build this type of a savings up, a certain amount of time to actually acquire the type of knowledge and foresight Bernadetta clearly has.
I agree that all the things Leo says can and do happen to people, but most of them are because of bad management. Management is the key in your financial future period. House, car, furniture, you name it. What you buy and how you buy it matters.
Owning a home is like running a business to me. You want to keep checking on what is happening with it each quarter every 3 months.
Have interest rates gone down? Is the company that insures my home still healthy? Am I paying the best rates for the coverage I have? How much have I paid on my home, and what can I do to get it paid off quicker?
A good realtor, can make the difference, and if I knew nothing about houses I’d have mine inspected by a certified inspector, not the one the loan company bank nor the realtor offers.
You can find one by researching in your city where they are.
Getting in a hurry is the mistake. You’ve got time so shop well.
When you hear, well this house is going fast, let it go fast if you don’t have your facts.
Many cities, or banks will help you, and especially new home owners. They’ve got classes or avocets to get you through the closings and such.
Sure, property taxes can go up, but so can rent, and you have no say. Property taxes are not going up as much as rent, because rent goes up on what the owner decided they want. The taxes are as Leo says, and really easy to manage.
I personally would have my taxes rolled in to my payments, so you’re not trying to get the money for them at the end of the year.
When you do taxes and receive your rebate, put that money on your principal. You’d be surprised how quickly you can repay a loan by cutting your actual amount you owe this way.
Yes, credit matters, so the first thing to do is get your credit check, pay off all your large bills, or I should say pay them down. Do not close any accounts, leave them open. The better your credit score the better rates you’ll get offered.
Get your credit reports from all 3 agencies, don’t allow a bunch of people to pull them. Have them tell you what they’ll offer you on what you show them. If it is good, then allow them to pull your report. Too many pulls lowers your score.
Leo, that roof should have been backed by insurance, or a clause in the buying contract that gives you so many months on the house, like a warrantee sort of.
If I were paying 1300 and could cut that to 560 with my property taxes included, I’d do it.
Put some of that rainy day fund down on the house, but not much of it. How much you put down relates to how much your payments will be, so check on this. It is something like for every 10 thousand the payment lowers by 100 dollars.
If you are making good money on your rainy day fund where you are keeping it, you’d want to keep earning more than deplete it for the 100 per month. Hope that made sense.
You first home should be a budget home, one that suits, but doesn’t break the bank. Look at it as an investment, not a place you’ll live all your life.
Also again. If you or your mate are not handy people, you'll want to first keep up on what is going on in the house.
You'll want to fix and repair the major things first, and get to the minor later.
Don't buy a shack! If you can't fix it, buy something fixed as best it can be when you move in.
Don't buy a place that needs windows unless you can afford to replace them right away.
Can you handle yard work? No? Buy a place that doesn't have one.
Management again I say is the key.
I agree with much of what Wayne is saying, except:
I strongly disagree with trying to renegociate rates every few months, unless you are prepared to pay all associated costs involved and I mean in cash not having it added to the principal. I also couldn't disagree more about the starter homes anymore. I know as boys we were taught this, and in another time it really could work: namely between 1950 and the 90s.
Treating your home like a business requires you not get emotionally attached to the place, only make the remodelling changes that increase its value, and be prepared to move or hold on to it as the market demands. Most people cannot do this, and Bernadetta has been one to make very strong arguments for emotional attachments on other topics. Not saying she can't do this but just an observation.
Just like most animal lovers should not become breeders or livestock managers.
And most people are home lovers, the house and the home has a lot of meaning to them.
A well-loved home "with lots of character" is a very emotional thing, and the people living in it do love it, but that is not necessarily going to sell on the market.
Unless you're supposed to remain unattached from your home, and make any and all hard business decisions, then buy the home as a home instead.
Not renegociate , just know the market and what is happening. If renegociate , is the best plan and will actually save you money, do it, but keeping up with what is happening will maybe save you some money say in 5 years.
Yes, emotional is the problem, I'll agree. That is why I say, the first home should be looked at as an investment. Get emotional about that home you can actually own, and not you and the bank.
You fix your place up with a green shag carpet you love and the pink sinks, and the two tone walls, somebody buys it, and changes it all!
Houses are like clothes, cars, and such. There is always a better, nicer, looking house then you've got. If you can get that better house and not suffer to keep it, you are smiling even wider, then if you struggle with that shack you live in, and you'd like to live across the street.
You treat it like a business, and run it well, you can get across the street and have your shacks supporting you and your emotional box.
I forgot to say, if your shack is all you can afford, treat it with respect, because you never know when or if you can afford another one. Anything kept well is worth something. Things that are misused are not.
Well, wayne, I hate moving from place to place. I'm not saying that the first home I buy will be my only one, but it sure will be lived in for some years, because, quite frankly, moving is a total pain in the ass especially when you have a kid. I'll write more on this topic later. lol. Just wanted to drop this note before I forgot about it.
I personally don't like moving either. I'm not talking moving every year or something, but I am talking about if you have a desire to live in a bbetter home your first is an investment.
Next, if you have the desire to remain in that home for lifel, it is still an investment.
Example, if you actually own that property say in 15 years, you have money sitting where you live even if it burns down.
If you own it, and need say 10.000 quickly, you can borrow that money on it if you must.
If you own it, and do decide to move, you and rent it out, and earn that 1300 you are paying as income.
Even if you are still paying on it, but are paying a low amount, because you have refinancied it and now pay around 200 per month, you have the extra rent in your pocket.
Sure, the person living might move and you've got to repair it some, but that is why you keep some of your gains for that purpose.
On the disable side, they've got special loans that can be had.
We are living in our 3rd home that we've owned. Everyone else has done a masterful job of laying out the pros and cons. The one thing I will say is that it is more difficult to move quickly when you own your home. For example, I knew by the end of my sons first week of first grade that he was attending the school from hell and I wanted him out of their ASAP. We had planned to stay in that house for many many years but the neighborhood deteriorated rapidly and school attendance zones were redrawn. By the time we took care of some repairs we needed to do and found a realtor with whom we could work, it was November before we got the house on the market. It didn't sell until June. Also, what I didn't know but soon discovered is that the seller pays most of the closing costs, in our financial bracket, anyway. Basically, unless you're going to sell at a higher price than you bought, plan to bring a good chunk of change to the table at closing.
If we had been renting, we could have just paid a reletting fee, found a new place, and moved within a month or two.
My husband lived in the same house from the time he was a baby until he moved out at age 18. I, on the other hand, have moved very frequently throughout my life. I think this is my 26th or 27th residence and I'm only 37. Perhaps the feeling of being tied down is more due to my nomadic nature but it is still something to consider.
I think if I were single, I would probably have never actually purchased a home. Being that I took the family path though, we've always owned our homes. I guess it's one of those things that it really depends on so many factors that you are all wise for looking at every angle and listening to people who know way more about the financial crap than I ever would even want to know. lol
I'd like to own a home one day. However, I don't want to do it before I'm ready. I don't intend to rush headlong into it, and I don't subscribe to the "you're throwing money away when you rent" argument. Even just roughly speaking, paying a thousand bucks a month for a two-bedroom apartment or even a very small house, you'd need to be living there for nearly thirty years before you paid what said house might be worth to buy. You don't own, and that can be a big deal, but financially you also don't have to worry about getting caught in a corner either. There's a lot to mull over here.
That's why you stay home until your 30. Smile. Momma doesn't charge. hahaha
Seriously, you have to pay to live someplace, so renting is not throwing money away unless you are paying to much for what you are renting.
that's my point. The prices over here are rediculous. I'm paying 1300 as I said, for a small place with three bedrooms, mostly outdated insolation so that causes my energy bills to be very high, no dish washer, no central AC or heating system, adn for someone who graduated only over a year ago and has a small kid, 1300 is a ton of money. And for what. So that I could line the pockets of a landlord, so he could pay his own mortgage off and own yet another home?
I've been looking around and I could get a 2 story four bedroom in very decent shape for 250000, and with central heating and air, brand new appliances--and I'd be paying, because I've already calculated this--approximately 550 to 700 a month in mortgage and all associated fees.
So now go ahead and tell me whether renting can be a waste of money or not. lol
I don't think anyone would disagree that in your very specific situation, you are correct.
People speaking in general terms stating that renting by definition is throwing money away, are wrong.
The way you apply general to specific is the expression at least my parents used on us: "If the shoe fits, put it on."
Sure seems a lot of kids don't know that one anymore. You've made a really coherent case for your situation. For the majority of people most of the time, costs go up and not down when they buy a home. So much of what I said may not apply to you, at least what I said in the beginning. You're in a good place to make some decisions. You're likely to get advice from people like Wayne who are upholding the traditional home ownership American dream view, which has its merits by the way, for those who do exactly like he's saying. Unfortunately, most do not. My viewpoint is largely for the most do not category of people, and it is shared now by quite a few people in my age range and younger.
But both Wayne and I have clearly stated that you in your specific case should go out there and buy a home. You're the exception: in a majority of cases once you add up maintenance and everything else people pay for with a new home, for a majority of people most of the time, it's more expensive. More expensive is not wrong, it simply means get a calculator, which you already did.
I'd say that shoe doesn't fit in your case though.
Ah and how did we end up with a whole generation of kids now, who don't understand "when the shoe fits, wear it." That's not just you, Bernadetta, I see it all the time. We clearly blew it somewhere if a whole generation doesn't know how to take only what applies to them.
You if you were honest would have to admit you're way ahead of most of your friends, and your peers in this regard. Unless the housing market in your particular area is really obtuse this way. Even so, with the dollar amount you quoted, you obviously possess a sense of financial discipline many 3 times your age have yet to attain, just sayin'. When you're playing in the big league, you can't really complain about what people say for Little Leaguers, cause you ain't in the Little League. lol
You're figuring in mortgage, interest, taxes, and insurance, right??? That just seems crazy low. I've always been told, and have experienced this as well, when figuring out your monthly payment, basically take roughly 1 percent of your loan. This has proven to be fairly accurate with the 3 houses I've owned.
The loan on this house was $137'ish and our payment, which includes insurance and taxes sent to our escro account and paid yearly, is $1340'ish. The interest rate on our loan was 4.875. Anyway, all that to say, that $550 amount just sounds super low. Again, I'm not trying to burst your bubble or infer that you are wrong in some way; I just want to make sure that you've accounted for all of that other stuff. Perhaps the taxes are different where you live. It seems like almost half of our payment goes into the escro account for taxes and insurance. Again, our previous two houses were pretty much the same.
Also, based on the description of your current situation, if you can financially swing it, I'd say "go for it."
Wow, speaking of financially speaking, I'm impressed with your savings account. Having that much of a down payment will help for sure.
I agree domestic that 5 to 700 is too low for a two hundred and fifty thousand dollar loan even over 30 years.
You are correct that 1% is the factor, but that depends on the taxes and insurance rates in the location.
As you note the taxes and insurance are the lion’s share of the payment in many cases, plus your interest.
In my location a one hundred and fifty thousand dollar home cost around 900 to 1,000 per month.
I like the taxes and insurance rolled in to the payments, because you aren't struggling to make the taxes up at the end of the year
Smart banks require insurance, so that you’ll have to pay.
Two hundred and fifty thousand here would cost around 2,000 per month or better depending on interest and location, because tax rates change much here depending on where your house sits.
I am impressed with a savings of 85 grand, and I am not, because it depends on what that money is doing.
I know a few people that have had as much as 500 thousand, plus an annuity, and they are stone broke at this date, accept for the annuity so many is only as good as it is managed again.
If all I had was 85 grand saved, and had to use that as my down payment, I’d not spend two hundred and fifty thousand on a house.
Smart banks require 20% down, plus fees, so you are spending half or better to get the house. I’d not want to use half my savings on such a venture.
You give up 40 to 45 grand, grab a payment for around 2 grand per month, so what has your 40 gran done for you?
Next to own a home for that kind of money smart banks require your payments not exceed more than 1 third of your income. That is a smart rule, because you are going to want to do more with your paycheck than pay mortgage.
The smart situation on a house that cost that amount is 20% down, and monthly income of around 6,000 or better.
Now if I had just one rental shack bringing me 1,300 per month, that make that house easier to own. Smile.
I'd forgotten about the 1% rule.
Yup, we bought an older home at $75,000 in Florida in the late 90s. We added some things to it and so were able to sell it for over 12 grand more. But nonetheless minimum mortgage payment was $750 a month because of mortgage insurance, taxes and the requisite property insurances.
And I meant to type a 5 not a 4 on my 20% down payment. Over half of the savings is gone, plus fees, so it could get as high as 53 to 55 grand on the move in cost.
You'll want a title search, title insurance, first years owners insurance, and some other fees that add up to closing cost.
Inspection will be one of them even if the home is bran new, you still want it inspected.
I haven’t been checking, but here is something that might help.
You’ll be a new home owner, so look for a bank that is offering you some breaks due to this.
Next, your disability is worth some fee money as well.
Via F H A Federal Housing Administration, you could get your closing cost fees waved except for the inspections and title search and your agent’s cost.
Don’t use an agent, but go around to these open houses, the seller pays the person that sold the property, so that saves you some cash as well, or ask your agent to ask the seller to pay them.
You may even be eligible for a lower interest rate aside from your credit ratings point.
Example, maybe you’ve got a 700 750 credit score, and that gives you a run at loans at 4% interest. Due to being a new home owner, or disabled, that interest rate could drop to 3.5 or 3%.
A point can save you lots of money as much as 100 dollars per month again.
Okay, so here we are.
We got 20% down, a payment of 2,000 per month, and we got some blind on that figure.
We drop another 10,000, and our sleep shade on the table, and we’ve got our 3,000 to 5,000 dollars back in our pocket, and a payment of 1800 per month.
Give me the keys baby!
Oh, and buy plenty beer for your family movers.
Well, as I said before, there's no property tax in CT for blind home owners. Just like in Massachusetts. I believe those are the only two states with this law on the books.
I didnt' factor in the insurance fees, etc., into the estimate I wrote here, but even with that, I think this move would be more worth than the rent I'm paying right now.
I also neglected to mention that there's a program for disabled, lower-income people who are interested in buying their first home here in CT. My savings is mostly do to a couple really good freelance breaks and what gifts I've received from family over the years for birthdays, christmases, my high school and college graduations, and my First holy communion and confirmation (as a kid raised in a Catholic family, I had to go through that but it paid off--literally--for my communion I recieved a huge party and ten thousand dollars worth of monitary gifts and for my confirmation, a fancy dinner and twelve thousand dollars worth of monitary gifts. that's twelve thousand right there. Anyone wanna join my family and be catholic? lol.
Anyway, so I'm still considered low-income. For this program, everyone who makes less than fifty grand a year is low income. I'd have to review the exact details here, but with this program, you have to pay 12 percent down payment at minimum, your closing costs and some other fees are waved (including the title fee), andd you pay 2.5 percent interest on your mortgage. The catch is that you have to agree to own the home for at least nine years, and you cant' flip it like some people do.
So that's in my corner too, isnt' it?
Sure, but your payments will still be more.
God is good Smile. Just had too. hahaha
Where do I sign up? You got some sexy cousins, aunts, or something I can marry?
Wow, that having to be there for 9 years would kill the deal for me. I'm sure there's some crazy ass penalty for breaking that contract.
I don't know. I'm just of the mind that if it sounds too good to be true, it probably is.
How in the world can you be considered low income with that savings account? Even if you do make less than 50 gran per year, don't they look at your assets?
I dont' have that in a savings account. lol. That's all I'll say about that.
And wayne, I have two single cousins, but one's a skinny bitch who yells a lot, and the other is a fat weirdo who couldnt' keep up with your attempts at conversation half the time and her laughs sound like: "teeHeeHeeHeeHeeTeeHeehee.". lolYou wouldnt' like either one.
And my aunts are either dead or loud and fat--but they cook well--except for one--her food is always stale and her house is never clean. lol.
So I'm the only reasonable one who is technically still single--but I'm taken as you know. Sorry.
hahahahaha
No. Savings is only looked at to learn if you have enough money in your bank to cover the closing cost. Smile.
How much money you have, and how much you earn are different.
Only earning money, stocks, mutual funds, and such are income, not savings.
You'd not submit that account, only the account that shows the closing cost and down payment.
She's got a perfect reason why she has the 50 angels. Smile.
Yes!
I did some research, and that tax exemptions is called.
Homestead tax exemptions.
Many states have it I’ve read, so that was wonderful information.
Here is what I wonder.
If a couple or person that purchased the home in their name is under a certainty income, disabled or disabled veterans, no sweat.
Now what if the couple is mixed and one is abled, and they both have their names on the deed, can they take advantage of the exemptions?
Internal revenue in your state could answer that question.
Domestic Goddess, better check.
Leo, this is what I mean by keeping current with the rules.
Some states I’ve read only give you some much discount, but in other circumstances, you get 100% property taxes free, and other, only for 1 year.
I’d think that needed checking on, because maybe this year it was given, and you thought it went away, but all it required was you filling out another application for the next year, and you were saving some cash.
No moving required.
Yes lord!
What else you got writer to add to this fire!
Did you say her name was Janet?
Wow, I was posting when I was getting information on my cash cows, oops, I meant, prosepcts.
The skinny one I'll hook her up with the choir, and the fat one, we'll not need to talk to much, because I'll be managing the wedding gift.
You get that much cash to say amen, and graduate, just wait until you get married actually? Lol
You don't want to hook the skinny one up with the choir. She sure as hell can't sing. lol. and the fat one's really looking to get married--She's 26 years old and never had a real boyfriend--I have sources telling me she's still a virgin?
What, a, prize!!! Have fun with your bride, wayne. more cushion for the pushin'. lol.
ok. but seriously.
Yes. that's it. homestead tax exemption. I believe you still get the exemption if you're part of a disabled/nondisabled couple.
And you're right about the wedding gifts--When Polish people attend weddings, they tend to gift gifts of two hundred fifty dollars and up, depending on how close the relative and how much they like you or feel obligated to pay. lol.
And thats' 250 per person, mind you.
Sometimes I love that I'm a Pollock. lol.
I'll send her to the fat farm with some of that $250 per person.
When she gets back, I'll have to beat the boys off.
We'll ask for cash. I'm a great shopper, so we'll have some money and the satin sheets to take care of that virginity.
Now, business.
A bit about qualifying as low income.
Low income doesn’t mean poor, it depends on your situation.
An example I read was a disabled veteran, who was single, could earn up to 75,000 per year and qualify.
That isn’t low income to me, but by the rules in this state, I think it was Washington, it was.
I believe me and the cousin could even get a tax exemption for the *phat* farm. Still business right?
Ewwwww, wayne, ok, the satin sheets--the virginity--Thanks but T M I. Thats' a disturbing image to wake up to. I'm sure you'd agree if you actually met my cousin. hahahahahaha
Yep, low income can mean various things--it doesn't strictly apply to being poor. I work freelance and sometimes, I do make decent money. But that's only sometimes. i'm still learning teh business and sometimes I either dont' have the right client or no client at all, and I'm forced to work in the equivalent of a labor factory for writers: doing mindless work like writing web content articles for pennies. I'm not proud of it but you do what you have to in order to get by.
So the reality of my situation is, I can make as much at two or three thousand one month and only eight hundred the next
It's a good thing I can budget well, because otherwise my little family and I would be in deep doodoo a lot of the time, actually.
It's a good thing I got about a gazillion of my Polish uncles to hook me up during special occasions, huh? lol
(I say uncles because my mom has nine brothers--she's the only girl). lol
So yeah, wayne, maybe the fat wouldnt' deter you so much if you could get all that cash... But you kwo what? Now that i think of it, the skinny one, she's only 19 and also still a virgin because she's deathly afraid of getting pregnant before she's married...or ever for that matter... so you could take that one as well and save all the money you'd spend on that fat farm. I think boot camp for divas with attitudes cost less than fat farms. lol.
it must be a state by state thing on the low income situation.
When I lost my consulting business and was trying to get into the Vending program, the Vending program had no issues, and they understood my background. Not so a lot of other places, who saw tax returns from 1099 forms from the past couple years which put me at a modest living. Because my previous year, or in some cases two years', income was what it was, many got quite upset at me attempting to claim low income status on some things.
Fortunately for me, I breathed a sigh of relief regarding the Blind Commission and the Blind Vendors' program. If they asked for tax returns at all, which I don't remember if they did, they didn't give me that run-around about last year.
Just saying low income means different things to different organizations.
And an organization is slated to assist with one very narrow set of customers or as the Chick refers to them 'clients'.
Anyway this is how working people like us, like Bernadetta, get screwed. People at the perpetual tail end of the line will always get help though. It's middle and working class America, the backbone of American society, business owners like Bernadetta that can often get screwed if not careful.
Gotchya.
Yeah, homestead exemptions are awesome. They do vary from state to state. Fore example, when hubby and I both worked, we did not qualify even though we were both blind. In Texas, you're only taxed on a percentage of your home's value if you get the homestead but you still pay quite a bit in property tax.
Most homestead exemptions, no matter how they are marketed, are there for one reason: stability in the area. You now have a homeowner who is sitting on this land tight enough to lay an egg, for a certain length of time. Long enough, usually, to surpass the revolving homeowner / flip trends.
They are largely an American idea, one I believe as Americans we can be quite proud of.
The reason for this nowadays is, if DomesticGoddess or Bernadetta move into a neighborhood instead of a home flipper, you have a family which in Western capitalist society equals stability. You have an investment not only in the home but in the local community. Any of us who have seen the devastation wreaked by land developers who move in, build, sell, and turn the place into some kind of a strip mall know how problematic this stuff can be. Or if you have neighbors who are flippers who move in, up the value of their home significantly so Granny down the street on a fixed income gets assessed for property taxes way beyond her means. It's happened out here at least.
Homestead exemptions are a great way to obvuscate this. And yeah I know a lot of Libertarians who use them too, even though they are a government program often called redistribution of wealth.
No matter how technological we get, land is still important. She who owns the dirt ultimately owns what's on it, through leases or anything else.
The tax exemptions, is still great and sound information, and something I’d check in to as a home buyer.
I read some states gave 100% no matter what your income status was, you just needed to be disable. Others gave a percentage.
At any rate, these could save you lots of money, and with your savings, you could reduce your principal.
If you were used to paying 1,000 per month, and learned you didn’t need to pay property taxes, so dropped 200 off your total, plus received a rebate for the taxes you’d paid in that year, that money could be put on the house, because you were spending it anyway.
Smart money to me.
Yep, all good info.
I really wish I had known about some of that stuff yall mentioned earlier about getting points off of closing costs because of blindness. Oh well, such is life.
I will say though that I definitely agree that it is much easier to afford something nice by buying it than renting it. The cost to rent my house would be over $2000 per month.
I think the craziest thing of all though is the difference in cost of living and property values throughout the nation. I remember when I was in Oregon getting one of my dogs and I described my house. One of the trainers was like, "Wow, you must be ritch then because that house would go for over half a million out here." I was almost embarrassed to tell her what we actually paid. I love Texas, well, the far southwest Dallas/Fort Worth area anyway.
Yes, home values are extremely different depending on where you live.
Even in a city, a homes value can be different from neighborhood to neighborhood.
That is why some folks talk about location, in terms of the future resale.
Smart shopping can get you a home worth more then you pay, if you are patient, and shop.
I want a town house, for one simple reason. No lawns to maintain.
this topic has been really informative, and many points leo has brought up, are the very reason why, if I ever buy a home, it'll be years and years down the road.
I have to say, though, that I wholeheartedly disagree with those who don't think people are throwing money away, when they're renting.
most of my income goes to rent alone, rent, mind you, that went up significantly, last month.
My husband and I own a home. We have lived here for 3.5 years now, and have had to fix it piecemeal. We've filed one insurance claim because we had water coming in through 3 windows, causing mould to grow on our walls. We've had a flooded basement due to crappy drainage in our back yard, which we had to fix this summer (thankfully my parents helped us out). Two years ago, we had a mama and baby squirrels take over our attic, which we got rid of due to mama kicking the babies out and us chasing mama through the gutters with a water hose. That all being said, I love the house, love living here, and am thrilled that we are homeowners. It is expensive and stressful, and perhaps the timing was wrong, but we lucked out getting a fixer-upper in a nice friendly neighborhood... and in Canada the property values are astronomical!
Kate