I've been thinking about buying a house by the end of the year. I live in the Midwest - KC, so we're not affected by the housing boom/bust that much. The question is: should I wait little longer (1-3 years) considering that Option ARMs, Alt-A's and other friends are going to reset soon, or should I take advantage of the 8K grant this year? There are two reasons why I think buying this year is a good idea: first the 8K grant and second, I have $110 cash saved up and don't want half of it to evaporate due to inflation or falling dollar (or other craziness). Houses I'm looking at are in the $160 range and I would put all $110 down. Thoughts?
why would you put 110 down with such low rates? Thats just plain stupid. I'd rather put 10 down and put 100K in GOOG on a pull back. Get in at around 335ish. But yeah, if you're ready to buy a house by all means do it!
Personally, I think it's a good time to buy if you're willing to hold it for 10 years or so... This is going to be your home, right? I'd be hesistant to "invest" in real estate but buying a home to live in is a good thing to do at the moment. Why put the entire 110k down? It is a waste to tie up that much cash with current financing options. Get a 20% down fixed at ~5%+ if you can and take the remaining 75k and invest it. You can always use that 75k to pay the mortgage if you need to and if you invest wisely you could probably do 6%-10% return per year with medium risk.
The answer to your question depends mostly on lifestyle questions, not financial ones. You should buy a house if you are confident you will spend at least the next 5 years in your current location, are willing to bear the responsibilities and restrictions of ownership, can afford it, and get pleasure out of being a homeowner. You can afford it easily so it's all down to personal preferences & lifestyle. If you plan to stay put, don't mind giving up mobility, and like the idea of a home, then go for it. Ignore the bad advice to invest the cash. Keep 2 years living expenses in cash (2 year TIPS if you are scared of inflation), and use the rest as a deposit. Mortgage interest not paid is a direct tax-free saving with zero risk, whereas investment returns are taxable and risky. E.g. 5.5% mortgage interest paid out of after-tax income costs about 9% in taxable returns. What risk-free investment pays 9%? None. Paying down a mortgage, or using a high deposit, is no-risk, risk-reducing, and tax-advantaged. Always minimize and pay off your mortgage asap, once you have 2 years living expenses saved up. It's the lowest risk investment you can make.
No. Buy a doublewide for cheap and trade the cash. Assuming you know how to trade. Why the heck would you plop down you life savings for a house? They re overrated.
Spoken like someone that actually lives in a double wide..... If you plan on being in the house for a few years, I would buy now, or in the next year or so (I don't think there is any hurry for you). Also, I actually like putting the entire $110 down because you could have that thing paid off in no time. Imagine how much money you can save (retirement or to trade) if you had no house payment/rent payment in 2 years.
You might want to consider getting a duplex to start, one unit for you, the other a rental for income. Finance it with the lowest fixed-rate, shortest term mortgage you can get and put just enough down so that you don't get stuck with PMI. Once you're in an have a rental income established you can sit and see where the market is headed so you can time the purchase a SFH for yourself, then find another renter for the other half of the duplex. Use the same financing strategy for the SFH and with any luck you can eventually get another duplex for additional rental income. Once inflation kicks in a few years from now the safest place you can have money will be in real estate, especially rentals. A lot of people are simply never going to be homeowners in the future.
you would also want to keep in mind that there is alot of exaggeration on this board I do agree that we will see double digit inflation rates in the next few years, but they will most likely be under 13%, and will average about 9% for the next 10 years, that means your $110K will be worth $46K after 10 years, and even at 5% inflation rate it will be worth $67K, and if you put that money in a savings account it will erode at a bit slower rate some of the inflation might even be hidden, like lower quality service and products, inadequate maintenance, smaller packaging and etc. all for the same price though not impossible it is highly unlikely (almost impossible) that we will see hyperinflation anyhow holding all your life savings in a savings account isn't the smart choice, and because there is no investment with a guaranteed return that beats inflation, after taxes, which is the whole idea behind inflation, I believe it makes sense to diversify across various industries and instruments. I don't want to make you feel bad, but since $110K isn't that much to consider diversifying it, unless you want to leverage on it, I think it sounds reasonable to put most of it as down payment, and save some of it in case you lose your source of income for some time or something unwanted happens
In CA, in addition to that federal 8,000, you can get 10,000 extra for buying a new home(and you dont have to be a first time homebuyer to get it) and they are talking about raising it soon to $30,000. But its limited funding on a first come first serve. They say all the money for that will be gone by summer