Menu

Need a strategy for buying house #2

Home Mortgages and Home Buying Need a strategy for buying house #2

  • Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1807
    Joined: 02/11/2019
    Splash Refinancing Bonus

    I’m always curious how I would handle a move as well.  I would want to use funds from the sale of my current home for a large downpayment on a new home.  I wouldn’t want to start shopping for a house until I knew my current house would sell though. SO, I don’t know what I’d do.  Maybe sell my home and look for a rental while we shop for the new place.  I do not want to have 2 mortgages.  I’ve seen many docs get stuck with 2 mortgages because they have trouble selling their old house.  Doesn’t seem smart.  But, I also don’t feel like moving twice, so I’m just not sure what I’d do.

    Click to expand…

    Moving twice is darn near impossible with kids.  I would gladly take a few K hit of having 2 mortgages for a few months to ease the process.  You never want to feel rushed in this process.

    “Never let your sense of morals prevent you from doing what is right.”

    #192939 Reply
    Molar Mechanic Molar Mechanic 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 394
    Joined: 10/29/2017

    I’ve never understood the love for the 20% down that I find so common.  That guideline is to protect the bank, not you.  I’ve owned 3 houses, and the next one I put more than 10% down will be the first one.  PMI is easily avoidable for a professional with strong credit and income.

    Look into a split mortgage loan.  You may need to talk to a broker rather than a bank.  These deals are 80/15/5 or 80/10/10.  80/20/0 used to be a think, but I don’t know if it is.  (80% mortgage 1; 10-15% mortgage 2 @ slightly higher rate; 5-10% down).  Physician loans lock in the high rate for the life of the loan.  Eff that.  Some banks will make you pay an appraisal to drop PMI.  Eff that too.

    PS:  Some of my houses were good buys, one was a terrible buy, and one was too close to tell.  Never did my choice of mortgage significantly change the outcome.  Even the house I had to sell at a loss and write a check to close; I didn’t lose more money, I just lost it later.

     

    #192943 Reply
    Liked by Zaphod
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3030
    Joined: 09/18/2018

    @lordosis,
    1) Sell house
    2) Rent apt or house in new schools.
    3) Rent two or three storage rooms
    4) Purchase land and contract with builder
    5) Watch delays and enjoy bonding time.
    6) Extend lease 3-6 months
    7) Note kids are embarrassed
    8) Move to new house.
    Pretty simple. That was an all cash deal. Memories!
    The apartment tour is my daughter’s favorite way to shame me. “On the left is my brother and my bedroom, right is Mom and Dad’s, this is the dining room and the TV is the living room, the desk here is our study room and the counter, sink, stove and refrigerator is the kitchen .”
    To this day, Dad, why did you do that? It worked but was a mess. Just couldn’t figure out a better way. They still can’t either.

    #192951 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1484
    Joined: 12/07/2016

    I’ve never understood the love for the 20% down that I find so common.  That guideline is to protect the bank, not you.

     

    Click to expand…

    This is not true.  A down payment protects you in the event that the housing market drops.  The banks demand it because it shows you’re willing to be responsible and put some skin in the game.  They offer better terms as a result.  If you have virtually no equity in your home (which would be the case with a small or non-existent down payment) and the market drops like it did in 2008, you’re stuck in your mortgage until you either pay down the balance or do a short sale, which wrecks your credit for at least 7 years.  Maybe that won’t be a problem if you’re staying in your home for the long haul, but what if you need to move for job reasons or something else?  You are either forced to give up thousands of dollars to pay down the balance (if you have it) or you wreck your credit in a short sale, which then makes it impossible to get a new loan when you move.  Not a good situation to be in.  That’s precisely what happened to millions of people during the last recession.

    Additionally, having 20% down saves you money in interest. Why pay interest to borrow extra money that you don’t need to borrow?  Being in debt sucks and borrowing 90-100% of the value of your home just insures that you stay in debt longer. Would you borrow money at 5% interest just to invest it in the stock market?  I wouldn’t.  That’s what you’re doing when you sign up for more debt than you need in order to hold on to your own cash.

    #192956 Reply
    Molar Mechanic Molar Mechanic 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 394
    Joined: 10/29/2017

    A down payment protects you in the event that the housing market drops.

    Only if you don’t have the cash to cover it when you sell, which shouldn’t be an issue for the cohort on this website.  Otherwise, appreciation is yours, and so is the depreciation.  It all nets out the same, it just changes when you write the check.

    market drops like it did in 2008, you’re stuck in your mortgage until you either pay down the balance or do a short sale,

    Or you write a check and move.  Ask me how I know.  I did it in exactly 2008.  That is the benefit of having a high income and savings.  You don’t lose or gain money differently, you just choose when to lose it.  We expected to be at a duty station for 5 years, and I got picked up for residency after 2.  If I’d known there was a chance of that happening, I’d have rented.  However, with a wife and young kids and an impending Iraq deployment, I didn’t want to risk her having to move while I was gone for a year, so we bought.  Neither way changes my loan decision.

     That’s precisely what happened to millions of people during the last recession.

    How many of them were doctors making $300k?  Some, I’m sure, but not many.

    Being in debt sucks and borrowing 90-100% of the value of your home just insures that you stay in debt longer. Would you borrow money at 5% interest just to invest it in the stock market?  I wouldn’t.  That’s what you’re doing when you sign up for more debt than you need in order to hold on to your own cash.

    That is honestly an opinion, not a statement of fact.  I mostly agree with it though.  More specifically, “Being broke sucks” and debt is a tool to be wielded carefully.  I have in fact borrowed money to invest.  Most of us have, and that is the conventional wisdom of this site.  “Maximize tax advantaged accounts” before paying off reasonable student loan rates and rasonable mortgages.  Beyond that, it is shades of gray.  I have significant debt as well as significant assets and a significant net worth.  I’ve only started paying down debt at an accelerated level as I became closer to FI, simply because I can afford to.  I still don’t “put it all to the debt” though.

    My favorite quote on the subject come from an acquaintance with a net worth between 500 million and a billion, all self made in the truest sense of the word.  When asked about his concerns using debt to finance investments, his response was to “Quit thinking like a hillbilly.”  He’s also among the nuttiest SOBs I’ve ever known, but that’s probably why he’s had the guts to be as successful as he is.

    #192966 Reply
    Liked by Zaphod
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1807
    Joined: 02/11/2019

    @lordosis,
    1) Sell house
    2) Rent apt or house in new schools.
    3) Rent two or three storage rooms
    4) Purchase land and contract with builder
    5) Watch delays and enjoy bonding time.
    6) Extend lease 3-6 months
    7) Note kids are embarrassed
    8) Move to new house.
    Pretty simple. That was an all cash deal. Memories!
    The apartment tour is my daughter’s favorite way to shame me. “On the left is my brother and my bedroom, right is Mom and Dad’s, this is the dining room and the TV is the living room, the desk here is our study room and the counter, sink, stove and refrigerator is the kitchen .”
    To this day, Dad, why did you do that? It worked but was a mess. Just couldn’t figure out a better way. They still can’t either.

    Click to expand…

    Easy peasy!

    Next time I move it will hopefully be to a retirement home.  I have plenty of time to save up for that to do it the easy way!  😛

    “Never let your sense of morals prevent you from doing what is right.”

    #192968 Reply

Reply To: Need a strategy for buying house #2

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear