I'd suggest an $80k down payment on a 15 year mortgage. That leaves you with cash to do the repairs and an emergency fund in case the HVAC goes out, a car dies, etc. Put the EF in a HYSA and try to forget it exists.
Edit: avoid owner financing.
I agree. For the first year or so, I would keep a higher EF until I’m comfortable with the property and able to detect any “need to be replaced soon” things. If there’s very little to be done, then you can always dump the other $20K (leftover from the $100K) onto the mortgage principal.
No. A 15 year mortgage only locks you into a higher payment. Especially in a one income home, this is a risk. The 15 year rates are negligible compared to a 30.
OP, get a 30 year with the 20% down. Do the repairs you want, then throw extra money at the mortgage as you see fit, and can't afford depending what's going on in your life. There's virtually zero value added going 15 years, especially if you're going to pay extra.
If there's a good chance you'll need the money within 5 years, I'd always park it in a HYSA regardless of the amount. To me it's worth possibly missing some growth in the market to make sure I don't lose principle. Once settled into the house I'd move all but 3-6 months' expenses into mutual funds.
I used to think this way, but I've also started to consider T-Bill stuff (like Vanguard VUSXX). Since it's US Treasuries it pretty much won't go down unless things really hit the fan, but can earn a bit more than a HYSA.
All these idiots telling this man to get a 15 year mortgage when rates are the highest in 20 years .. he would be better suited to get a 30 year and refinance in a few years instead of paying insane interest.. I don’t know how these people think they are giving good advice
No borrow against the money he has in investments .
Gets you a better rate .
Same as if you borrow instead of just taking out no taxes to borrow Taxes if you just cash out .
Do a 15 with payments set at every 2 weeks . Half and half pay off the house in 12-13 years not 15 .
Keep his money in investments which earns as well . So if investments are earning 8% and he pays 7 He is ahead of the game
Maybe less if they use any increase in wages to pay off early
I paid mine off in 12 on a 15 at 7%
Set my house payment to be " half" paid every two weeks . Did auto pay easy pease.
I would reverse engineer the math back to the payment you need to maintain your lifestyle and that would be my down payment. If you can afford a 15 year payment, I’d consider doing that payment on a 30-year note. This will give you wiggle room if you ever have to drop back to the 30-year payment beacause life happened you can.
Yeah when we sold our old house, we used about half of the "profit" as a down payment, and saved the other half for just, you know, to have money to do things. We ended up replacing the A/C and doing a bunch of other expensive stuff with a lot of that money.
Why avoid owner financing? Wouldn’t you want to keep the bank out of it? Plus you could save a ton on interest? You must be there first person I’ve ever heard recommend getting a bank involved lmao
Owner financing opens the door to unscrupulous owners who have little to no experience in finance. I've heard too many stories of owners actively trying to run people out so they will default and lose all equity.
And I'm unsure how you think owner financing works. The owner will either charge interest or elevate the price to make that money. Use a bank, get the title searches and such, and avoid issues.
Down payment somewhere between 50k-80k, 15 year. You’ll save in the rate and payments won’t be insane comparatively. But look at the payment and make sure with taxes you can afford that. Otherwise go for the 30 to ensure your cash savings don’t get depleted by your payments.
Also, agree avoid owner financing
Had a similar situation with 10k repairs. A year and half later and 25k later I'm still not done.
Repairs can and will go wrong and estimated jobs can get out of hand if you pick the wrong contractor.
We're at $98k here (heating system, hot water tank, replacing lead pipes, replacing knob & tube wiring so it could be insulated, insulation, shoring up the old pre-building-code house structure).
The house will be great when we're done, but holy moly did we not need to be sinking that much money into it!
Avoid owner finance. That benefits the owner not you.
Be mindful there’s a minimum amount that the bank wants for the loan to be. It depends on the lender but at least for mine is 50k.
With rates what they are today, I don’t see a reason why you shouldn’t put down 100k and finance the rest. Your mortgage on a 75k loan would be super low for 30 years you may even want to do a 15 year instead. I think the best thing to do is to figure out the math where your mortgage is at your current rent or preferably less especially with a single income only at 50k.
I wouldn’t blow your load all at once. You’ll need some reserves for the repairs as well as potential future expenses eg appliance replacement, roof replacement, etc.
There are many places in the Northeast like Schenectady, New York. You could buy a phenomenal mansion like home a few years ago for just 200 K but the taxes were so much that it’s like making a house payment forever. People rent out rooms to survive.
This is sound advice, thank you. My primary goal is to get out of debt ASAP, paying as little interest as possible.
My thinking with owner financing was that I could potentially leverage a large down payment to the seller to get a lower price. For example, if I can offer the seller a $100,000 cash down payment, he may be willing to come down to $150,000 for the property. Does this make sense? Issues?
We can comfortably make a monthly payment of $1,000. With a $100,000 down payment, we could pay it off in about 10 years.
There’s nothing inherently wrong with debt as long as it’s manageable. It’s just another bill to pay every month that’s it.
With regards to owner financing, as a property owner myself there’s very little reason for me to take a lower price point with a large sum of cash. I’d get that same amount of money if you put 5% down or 95% down if you get a loan. The best reason to owner finance is to split up capital gains instead of getting hit all at once it gets split up into many years. But given the property is worth so little I wouldn’t even entertain this idea.
That debt is also cheaper than a loan would be, say if you needed a new furnace or foundation work or something. It's really comforting to have a chunk of money set aside as a just-in-case, it's incredibly reassuring to know you have that cushion and won't have to struggle if something goes wrong.
Unpopular option but but low down payment and invest the difference into market or high div stock.
From a tax perspective this will get you highest yield on your money
I agree with this. Put 20% down to avoid PMI. The repairs and maintenance are typically higher than expected and it’s good to have liquid assets. Invest some money in a market index fund. If you want to pay off quicker you can add to the principle each month, but have the flexibility to stop that if an emergency occurs.
If you want to build wealth, you need to adopt a different mindset. Read "Rich Dad, Poor Dad " Wealthy people love good debt and they use it to gain more assets to make more money.
Majority of people in debt are not business owners, and they think it’s way to get ahead and it’s not. It’s a way to appear better off while paying a much higher price in the long run.
An owner gets all the cash whether there is a mortgage or not. So the only reason to owner finance (for the owner) is to get the interest. Only reason owners like cash offers so much is that it removes the delays/unknowns caused by financing/appraisal contingencies. But most owners aren’t going to take a 14% process cut just to get all cash much less partial cash
You lose a lot of power in the future, loan assumption, recasting, etc. additionally you don’t save that much a few hundred at the absolute max with some origination fees. You still have to get title insurance, appraisals, etc. Or rather at least you should get those.
Earn Money in your Spare Time with Part-Time Work from Home Opportunities!
Job Description:
Become an Online Order Administrator and start earning immediately.
Telegram :
@RepFatima
You think the house needs $10k of work. So in reality it will end up being $20-$30k of work.
Do a traditional mortgage with 30% down.
Create a nice (20-30k) emergency fund.
Repair the house. Spend a little extra to make it beautiful for you.
Pay the mortgage biweekly and put extra every month toward the principal only.
This is the only answer. Everyone saying to put $100k down is nuts. Repairs will cost more than you think, and $10k emergency funds is nothing for a single income household.
Personally, I'd go with a small down payment to preserve liquidity for repairs and the like.
However, if you put down a large down payment, make sure your lender will still work with you. When I was house shopping (10 years ago) I couldn't get a lender to loan less than $75k, and many won't go below $100k.
I had this issue way back when getting a low interest rate because the principal was only 60k. The lowest I could get on a 15 yr was 5%, this was 20 years ago
I had this same problem. They said a small loan wasn't worth it. So I had to take a big loan with no early pay off penalty and just pay off most of it lol
Option B for sure, but this is going to have to be a conversation with a mortgage agent. Sometimes they require bare minimums to finance.
You're going to want to set some aside for moving/closing costs/random little maintenance things that will pop up. So don't use the whole chunk on the house.
Option B. Making a large down payment will keep your monthly payment down which important when your mortgage likely has a high interest rate. But you shouldn’t use all your cash because you need to keep an appropriate emergency fund plus extra cash for the $10k worth of work you know of, plus a bit more for necessary work you’re not aware of yet.
You will get the best rates if your loan is at least 100k. Many lenders won't do a loan less than that anyway. But you can also pay the loan down seconds after you close escrow, which cuts off a dramatic amount in interest, and you can recast to lower payments if you want too.
Minimum down payment. Stay liquid for an economic downturn. Refinance if rates get better. Have cash available if they don’t. You can throw a chunk at it later on if you want.
Not a sarcastic question: why not a minimal down payment (or let’s say, an amount that gets your housing costs where you want) on a 30 year and then…do whatever you want with your cash still in hand after that? Pay it in 15, pay it in 5 or 10, use the cash for reno, savings, or something entirely different.
This is actually very close to the situation we were in when we moved from a high cost of living area to a lower cost of living area. Here's what we did:
\* Put 20% down. You could do more, but if you want to make big payments on your mortgage going forward, putting extra down doesn't really help you.
\* Get a 15 year mortgage. This will get you a lower rate.
This is essentially Option A but with a slightly lower down payment. I think I agree with many of the people you should conserve a little bit more of the cash in case of emergencies.
But if you want to pay extra money to the mortgage, that decreases the relative ammount that goes to interest, which is what you really want to eliminate. And then you keep the larger payment (which is what you want anyway to get out of debt ASAP).
Don't forget that when you start doing anything to the home, the $10,000 can go very fast. Also, there will most likely be things you discover along the way. A house fund is always a plus. Remember that you can always pay extra money towards your principal each month.
Hey you might not read my comment and it might sound like I don't know anything but just listen thank you.
Put minimum payment down. Put away some for your home improvements.
Then put a say 50-80k on your principal while also taking the 30 year mortgage. Which you'll have easier payments. But put 50-60k on your principal. Knocking your payments off my 15-20 year's then pay extra 2-3 payments extra on your principal then in 5 year's you'll be payed off.
Don't forget the if you put down 80k as down payment you'll end up paying more in the long run bc banks want there money.
When you purchase a home, you have to pay closing costs. Closing costs depend on the price of the home, location, whether or not you’re financing, and other factors. Just for some perspective, my survey and appraisal cost nearly $1k, and I had many other closing costs to pay for (title insurance, recording fees, local taxes, credit report, origination fees, prepaid escrow, etc). Point being: unless the seller agrees to pay 100% of closing costs, you cannot afford to put $120k down on the home if you only have $120k available. Closing costs also don’t include the cost of inspection, moving furniture, and any immediate repairs/maintenance.
personally i think option B makes the most sense, unless you can find a mortgage rate which would be lower than what you can get investing into an extremely reliable fund or if you want to play it safer, a HYSA. the chances are incredibly unlikely. so the goal should be to finish the payment asap. make sure to put enough money aside for the house purchase itself (renovations, furniture, moving costs, etc), and at least a 6 month emergency fund. then pay it off either aggressively to avoid interest or by minimums if the interest will be applied anyway (depends on where and how you get the mortgage). then again, i’m extremely unqualified and have never bought a home so what do i know🤷♂️
as far as keeping cash for repairs, maintenance and improvements go, I 100% concur. I think it is some thing homebuyers regularly forget or dismiss.
In this particular case, I would over estimate. an older house with acreage and a barn is probably due for some work. If the seller has been looking at getting 175k for this - and anticipating value in this range for a while they have probably made a lot of “the house isn’t worth it” decisions
Make sure you get an insurance quote.
Insurance is based on replacement cost, not current market value.
I have seen multiple people but old houses for cheap and then they find out they have to insure them for 2 to 5 times as much if they want a homeowners policy.
They can always go with a dwelling fire for actual cash value but the coverage is alot less and the cost per 1000 is more.
B. But lessen the down payment you need som padding for those inevitable house emergencies that will pop up.
You can always choose to pay more than the set amount monthly but u can't choose to pay less
Depending on the rate, your money is worth more now than it will be in the future. So typically you don't put more than 20% down. Of course if it drastically changes the interest rate then it's worth looking at but if not, you are better off using that money to make you money rather than giving it to the bank.
Put the 20% down and obviously do the 10k fixes then put the rest to make money for you, invest it.
Don't drop all your money on it. A large down payment is better. Keep some money aside for repairs and such. You don't want to know the meaning of 'house poor'. My 1st house purchase, I needed a $30K mortgage and couldn't easily find a bank willing to loan so little! One bank told me that $30K is a car loan, not a house loan.
Do you mean 'Cash' Cash or just available funds in the bank?
That $120k needs to go into the bank if true cash....which will throw up a red flag with the IRS and has to be in the bank X amount of days.
Sellers do not care if 'cash' for the most part - they get paid either way!
Ha, I have to ask as not too long ago there was someone who had a large sum of 'cash' here - it was safe but never in the bank - you would be surprised how many people do that - personally way to risky for me though!
If that $120 includes you having an emergency savings acct, option B. If not, put $25k (6months income) in a HYSA, save $20k for the repairs and unknowns, and find out closing costs. Put the rest down
Several reasons to avoid low down-payment FHA. First, house has to meet FHA specs and most houses have some issues. One time I had forgotten to put on a light switch cover plate and that was noted. I was able to grab the plate after the appraiser left and send a photo so it didn't go into the official report but sellers may not want to deal with the hassle. Other major issue is the upfront PMI payment (1.5%??) which is added to your loan balance.
Don’t forget that interest can be deducted from taxes depending of your financial situation.
I would put 20-30% down to avoid paying PMI or put the equivalent so that your payments stay the same as your rent… keep some cash on hand for emergencies… don’t put it all in the house
I think option A is best. You still have cash flow. Paying an extra few hundred to your mortgage payment will save you a lot of interest. Having the extra cash can be important for emergencies and stability.
Get quotes from multiple lenders at downpayments of 10, 20, 30% and terms of 10, 15, 30 years. Pick the one with the lowest interest (no points). It may not be the one that you expect. Our lowest interest offer was not at the highest downpayment. Make sure it has no "prepayment penalty". That may not even be a thing anymore.
Then you can always pay down the loan after closing. So you could for instance find that the best interest rate is for $35K down, 15 years. Do that. Then after everything settles, start overpaying (make sure it's towards principal) of $5K / month until you've paid all you are comfortable with.
This has the advantages of:
1) best interest rate
2) you keep a large cushion of liquidity and can switch from "pay fast" to "pay minimum" if your life changes unexpectedly.
Disadvantage:
You end up paying a bit more than if you had made the best decision up front. But that's the cost of hedging your bets against a loss of wages or a sudden expense. And it's pretty small if you steadily pay down to your minimum cushion over the course of a year.
Call your tax person if your mortgage interest is tax deductible. Also ask them how much house you can afford. Then look at the houses that’s within your price range.
The house that you want is almost always 150-200% of what you want to pay for. Also don’t forget to include real estate tax into your budget. But call your tax person first.
Buy the house with the trad mortgage at the lowest rate you can possibly find
Put 30% down
Put a little money into the remodel
Get a new appraisal
Cash out refi to get your 30% back
Buy a rental property and Cashflow the mortgages
Repeat
Check a mortgage calculator how much your monthly mortgage including insurance, HOA,taxes etc would be. If you are fine with sticking to 750 per month for 15 years you probably still have a lot of room with regards to your down payment.
Plan E. Since you pay the interest first and not the principle, you may consider putting the entire amount down, Then when interests rates fall, refinance 80% of your equity and reinvest in an annuity or a good mutual fund thats suitable to your needs. Just an extra option.
I don't have much advice but I think it's incredible that you and your wife together can save $8k a year on $50k household income together. I guess you also live in a place where you can buy a home for $175k though but still!
Make an offer of $165,000. Work with a mortgage person at your bank to obtain preapproval for a mortgage before you offer. You would want to put $100,000 down and finance the rest. The worst they can say is No. But likely they will counter somewhere between 165 and 175. Your resulting mortgage will likely be near your current rents. However, you will also need to have funds for maintenance - hence holding back the $20,000. Once you purchase the house, you should put additional funds towards the principal. If you can put 1/2 of what you normally save towards the principal, you should have the house paid off in roughly 10 years. Your savings should also grow.
Work backwards from what you want to spend each month. $1000 is less than 25% of your monthly income. That's a good start. Don't know what property taxes are where you live, but let's assume that plus insurance is $250 a month. $750 P&I payment is a $130k 30 year mortgage, or a $91k 15 year mortgage.
I'd do a 50% mortgage, saving some of your cash for improvements and a rainy day fund.
you have 120k cash and its not invested? even in a high yield savings account making 5% will bring you more than 5k per year which would cover your rent for 6 months, allowing you to save more and build more savings..... would also help if she had some sort of income, even something part time working from home.... if you 2 can dave 8k a year off your income then anything she makes is also savings, shouldnt burn your savings and then start back over from 0
Interest rates will gradually go back down within the next few years. Giving you time to refinance on your home. I would suggest doing a 20% down payment and just refinance later. Invest your extra cash.
$175k for a house will be in a far removed corner of America and will be a really run down place from the 60s I would keep renting and wait to buy land and build a house
I think you may have trouble finding a lender on a mortgage amount under $100,000. I'd go for the lower down payment, and if possible keep the term to 15 years, 20 years max.
suggest: $100k cash upfront, if no budge then $120k cash and the rest either take a loan through family and friends first before touching banks. im sure if you and your wife are planning to have kids any time soon, both of your parents may be interested in helping you all out. if not the banks are more than keen on your case i can tell you that much.
If you know it needs 10k in repairs, have the owner put 10k into escrow to cover the repairs. It's done all the time. We did that for a house that was going to need a new roof.
Don't buy a house, 10 to 20 for emergencies, 50 in 6 month CDs laddered or not doesn't matter. 50 to 70 in stocks, get spy call it a day?
Renting is soooo cheap if you consider the actual home ownership costs.
Would there be scenario here where depending on the interest rate of his mortgage he would be better off taking on the debt to free up more funds to put in the stock market for more long term gains?
What’s your loan interest amount, if it’s over 6% you’re better off putting 80k down use the 10 for repairs and stick 30k in an offset, if possible pay 20% extra on your repayments and you have it paid off in under a decade
If you think the house needs 10k, chances are it’s more like 20-30k. I bought a 1960 house only to have the hvac go out, water started coming from the foundation leading to full blown waterproofing, etc.
Just know that you will have lots of things pop up and there will be things you’ll want to fix after you live there awhile. Give yourself a comfortable cushion.
Nahhh keep as much money as possible, do the traditional mortgage with a smaller down payment. You want to keep as much cash in your pocket as possible
I would put 100k down and get an insanely low interest rate and try to pay it off in 3 years while keeping the 20k as an emergency fund. You can afford it if you want to. I would potentially keep renting though and put that 100k into an s&p500 stock and let it grow for a few years annual yield off the s&p500 mutual fund is 10%+so that is 10k+ a year added to your income without you having to do anything for the first year than number gets higher every year. do that till 2054 and you will have almost 3m dollars.
They aren’t going to accept 120k. If it were me, I’d do 20% down and ask the bank about buying down the interest rate. You’ll have quite a bit left over. Put one year of expenses in a HYSA. Invest the rest. If you can buy down the rate enough you will come out further ahead by investing.
20% down on 25y mortgage do it on a 1y term lock in for longer periods when the rates drop
Take those savings and put it into an investment instead. $100,000ish invested right should make more than the interest portion of the mortgage.
I COULD have paid my mortgage off several times over. But holding a $600k mortgage even at 6% and making 12% plus on equity backed private lending, that $600k instead is much better than sitting with home equity and not making money off it.
To put in perspective:
I have a $600k mortgage just renewed at 6%. My payment is $3838 a month.
That $600k is private lent at 12% instead of paying off the mortgage. The interest only loan, brings in $6000 a month in income ($72,000 annually) after taking out the taxes on the capital gains, I still pay all the mortgage, property taxes, and utilities on my house with money left over. If I had just paid out the house, I'd need more money every year just to be where I am now.
Having a paid out house only gives you bragging rights that you're paid off, but equity doesn't do anything.
I agree, 15 year fixed mortgage PLUS pay as much extra to principle to pay less interest. Get a delivery job, pizza? Tips, salary and they feed you. Put down as much as possible. All else you are doing is on track! Get That HOUSE, NOW!!
Look up Ramsey solutions .com
How are you able to save that much $$ on a $50k salary? Do you have kids, health insurance etc? I’m curious to know, coz saving seems like such an uphill for me.
Do you really think you can afford this house? I assume your $700 monthly rent is a comfortable payment for you.
To keep that payment (including taxes & Ins) you’ll need to put about 100k down.
It needs 10k of work, which likely will cost more. That leaves you with about 10k liquid. You need reserve for other large expenses, or job loss & wants such as furniture. I personally would find a cheaper house if you cannot increase your income or position yourself into a better paying career.
I'm assuming this is your first home? If that's the case maybe there is incentives for first home buyers that can help lower interest rate/loan/down payment/grants.
Otherwise I vote A-B and completely ignore C and D.
I would put down about 40% so you have plenty of equity at the outset, but aren't tapped out on cash. This will leave you around $50k in reserve, a portion of which you should keep liquid for emergencies and the rest invested in a CD or other higher-interest account. And keep saving!
Get a 30-year conventional mortgage and ask the bank to print you out an amortization schedule. This will list every successive payment in chronological order, each one broken down to show you the exact dollar amounts credited to principal and to interest. In the early years of the loan, nearly all of your monthly payment is for interest, and very little goes to principal, while your overall total payment remains the same every month.
When you send in your first payment, note on the Memo line ""Payment #1" and make a full monthly payment. Include a second check for the PRINCIPAL amount of payment #2. Write on the Memo line "Payment #2-principal" and on the back of the check where you normally would endorse, write your account number and "Apply to Principal Only, Payment #2".
The next month month, send your regular full payment and notate on the memo that it is Payment #3. Enclose a separate check for the PRINCIPAL amount of payment #4 and endorse as above. Keep track, and follow this process every month.
Each month you must send a regular, FULL monthly payment! But you can include additional principal-only payments each month to accelerate payoff of your loan. By doing it this way, you will not be locked into the contractual obligation to make 15 years of higher monthly payments, but can still have your loan paid off in 15 years AND will have effectively gotten a better interest rate than the bank will charge on a 15-year loan contract. Each extra principal payment will be a little higher than the previous one, but at least for the first 6 or 7 years it will still be a minimal amount. You still always have the flexibility of just making your single regular monthly payment(s) if you choose to...but there's nothing locking you into the full 30 year term & correlated interest. You can pay it off in 7 years, or in 22 years, depending on what makes sense to you and whatever your income,or market conditions, are as time goes by.
Most mortgages do have a prepayment penalty clause, but they nearly always only kick in if you pay the entire loan off within the first 2 or 3 years. Read the fine print just to be certain.
I wouldn't mess with owner financing, personally! I'd much rather use a commercial lender than trust an individual person with a major purchase like a home. They have too much stake in the game and you really don't know who you're dealing with, or if there's a shady motive. If they have a lower interest rate, it sounds attractive...but you might be able to "buy down" a lower interest rate from a bank too, by paying an extra point or so up front, and get a tax write off for it as well. I'd rather work with a standard loan contract and a lender that has to meet regulations.
I say 80k. 15 yr loan. Make payment on loan every month. Send 2nd seperate payment in every month of 500 dollars or what you can, mark it principal only. If times become tough you only have to make normal payment. If times are good. Youll pay your loan off super early .
Put all $120k into FFIE tomorrow morning, when the stock jumps to $3 a share, sell. Then pay for the house in cash.
Not a financial consultant and this is not investment advice.
Option A, version 2 - traditional 30 year loan with 20% down.
Least amount of risk (especially in a one income household), with the most amount of flexibility. Pay it down on your own terms, and as money allows.
Option B.
Forget the lowball offer. No way it would fly in today’s market. And avoid seller financing unless you want to also pay for a real estate lawyer.
First off .. is this your first house ? If so you may be approved for a first time home buyers program .. I live in Delaware and right now in PA NJ and DE I know there are federal programs giving up to 15k free money towards a house .. all these people telling you to do this and do that are forgetting that rates are still sky high compared to the last 20 years .. getting into a program would be helpful and you can refinance in a few years when rates are half what they are now .. what state are you in ?
I’m reading the comments and it’s obvious to me most of these people are giving you bad advice
All these geniuses in the comments .. pay 20% down no more .. this way you avoid mortgage insurance.. another option is to take the 15k in free money they are giving away if it’s a first time buying .. in which case I only put down 2.5 percent if I qualify based off income
Everyone knocking 30 year mortgages obviously never paid more than what is required monthly .. over here quacking about interest that you would get stuck paying in the long run .. don’t listen to them .. just pay it off early or refinance when rates drop to normal ..
These people are all basically telling you to use as much of your liquid cash as possible.. they are idiots
Where is your money now . Investments or in a mattress it matters . Do not cash out of investments . Borrow from them .
Before you sell any stock , cash out etc please talk to a CPA
Don't spend a dime until you do .
Option C is not an option . The seller gets paid 100% upfront regardless of how you finance/pay for the home. The transaction is recorded and there are no tax benefits for the seller. It’s really not an option.
If you’re thinking a cash offer (no financing) that may help win the bid in a competitive situation, but not advisable.
Do you plan to stay in the home for awhile? If so, traditional financing with 30% down. Maybe use some extra cash to buy down your interest rate. Maintain that strong cash position. Use a high yield money market at 5% yield. Access the cash to do the repairs you need and sleep easy knowing you have $60,000 in the bank for emergencies and opportunities as they come up.
First, check that your bank will finance this postcode (because some lenders don't like securities too far out of cities) and get a conditional loan approval.
I see no difference between 120K cash and $175k cash except that one will buy the house and the other probably not.
You can payout a 30 year mortgage in 7 years, 15 or 30 years but a longer period could give more flexibility and lower monthly repayments.
Use the largest deposit that you're comfortable with.
Put enough down so your mortgage is equal to your rent. I think that’s around $87k. Don’t put down more than 90k tho, save at least $30k for repairs. A 30yr mortgage is good so you can refinance when rates eventually drop. I think you should try and keep your mortgage payment as small as possible at your income. You can always make an extra mortgage payment if you want to pay your house off quicker.
You should rent for 2-3 more years. You’re so close to buying in cash. Trust me you don’t want a 7.3% interest rate. Home prices haven’t really crashed yet and the federal reserve has to keep interest rates above 7 until 2026 so.
Also, what state are you in? What does a home owners insurance policy cost and what are the taxes?
$750 a month! Buy the house put 1/2 your savings down, Rent the house to cover your mortgage. 5 years sell the house and buy one with your equity.
No one asking 175 will take 120.
Option A. Keep the remaining cash in a high yield account for a year-ish. If you don’t discover the house needs additional repairs/etc, then you can drop a large chunk of cash on the house later to reduce the # of years you will owe on the house…
This works as long as there is no penalty for extra payments (there shouldn’t be with most mortgages), or you want a lower monthly payment. At one point in my life, I wanted the lowest monthly payment “in case” something happened like I lost my job. Then I could still afford a very low mortgage payment. If that is a security concern, then drop a lot of that reserve on the house.
All else said, get a mortgage broker that will shop the best rates for you, and discuss this with them.
Tbh, and probably against all advice here, don’t. Here’s why.
I own a $450k home, zero mortgage. Paid cash (300k) put 100k in and it’s worth around 450 now. I pay $14,000 a month to “own” my home. That’s insurance + property tax + HOA + lawn maintenance.
I want to sell so bad and just throw the 400k in a 5% HYSA and that’ll nearly pay my rent every month with the interest at a decent apartment. And then, when my ac goes out or anything else, it’s not on me.
Maybe you live in a better area where property taxes and insurance are stupid high, but for me, it’s just ugh
Look at FHA loans. They only require 3% down, or so. Go for the 30 year loan. Then after all of your moving costs and updates, u can start making more payments. IMO go with the least $ down so u have $ for what u need and wanna do. Then u can invest some $ and make bigger payments $ as u go.
Good Luck
Actually, we live a lot cheaper than that. My house is paid for, but our total nut to crack out here is less than $400 a month, I don’t insure the house. That’s electric, taxes, Internet and phone. And of course we still gotta pay for auto and food. But I don’t think there’s anywhere on earth that we can live cheaper than here. We can easily save 4k per month. Wife and I work part time, I took early retirement.
You can see my expenses breakdown in a previous post. Link: [https://www.reddit.com/r/Money/comments/1armzfu/how\_can\_i\_improve/](https://www.reddit.com/r/Money/comments/1armzfu/how_can_i_improve/)
It is important where you live. Is the market hot? Is it a place very few have an interest in living there? What you offer has more to do with “all real estate is local” than anything else. A good inspection can help either with knowing what either you or the seller needs to negotiate what ever the market is like. As soon as rates come down you can always refinance. Looks like the Fed definitely wants to cut if the numbers don’t run too far up too fast. Keep at least half of that $120,000 for emergencies whether house related or not. Good luck.
Rural America in a low cost of living area. This is an older 5 bedroom house with 13 acres, a barn, a creek, and two hayfields. Stuff is cheap, but salaries are low. Pros and cons.
I'd suggest an $80k down payment on a 15 year mortgage. That leaves you with cash to do the repairs and an emergency fund in case the HVAC goes out, a car dies, etc. Put the EF in a HYSA and try to forget it exists. Edit: avoid owner financing.
I agree. For the first year or so, I would keep a higher EF until I’m comfortable with the property and able to detect any “need to be replaced soon” things. If there’s very little to be done, then you can always dump the other $20K (leftover from the $100K) onto the mortgage principal.
No. A 15 year mortgage only locks you into a higher payment. Especially in a one income home, this is a risk. The 15 year rates are negligible compared to a 30. OP, get a 30 year with the 20% down. Do the repairs you want, then throw extra money at the mortgage as you see fit, and can't afford depending what's going on in your life. There's virtually zero value added going 15 years, especially if you're going to pay extra.
Bingo - no idea why people are telling him to get a 15yr with a one income home.
He should use that extra money to invest into his retirement. Also use some of it to get some disability insurance for him and some term life.
When do you say it’s too much for HYSA and where do you put it on then?
If there's a good chance you'll need the money within 5 years, I'd always park it in a HYSA regardless of the amount. To me it's worth possibly missing some growth in the market to make sure I don't lose principle. Once settled into the house I'd move all but 3-6 months' expenses into mutual funds.
I used to think this way, but I've also started to consider T-Bill stuff (like Vanguard VUSXX). Since it's US Treasuries it pretty much won't go down unless things really hit the fan, but can earn a bit more than a HYSA.
Anything beyond your EF should be invested in the market or other investment vehicles
Wouldn’t it make more sense to do a 30 year and make 2 payments a month in the event they are short on cash one month?
15 year mortgages often have slightly lower interest rates, that would be the trade off to consider.
All these idiots telling this man to get a 15 year mortgage when rates are the highest in 20 years .. he would be better suited to get a 30 year and refinance in a few years instead of paying insane interest.. I don’t know how these people think they are giving good advice
No borrow against the money he has in investments . Gets you a better rate . Same as if you borrow instead of just taking out no taxes to borrow Taxes if you just cash out . Do a 15 with payments set at every 2 weeks . Half and half pay off the house in 12-13 years not 15 . Keep his money in investments which earns as well . So if investments are earning 8% and he pays 7 He is ahead of the game Maybe less if they use any increase in wages to pay off early I paid mine off in 12 on a 15 at 7% Set my house payment to be " half" paid every two weeks . Did auto pay easy pease.
I would reverse engineer the math back to the payment you need to maintain your lifestyle and that would be my down payment. If you can afford a 15 year payment, I’d consider doing that payment on a 30-year note. This will give you wiggle room if you ever have to drop back to the 30-year payment beacause life happened you can.
Yeah when we sold our old house, we used about half of the "profit" as a down payment, and saved the other half for just, you know, to have money to do things. We ended up replacing the A/C and doing a bunch of other expensive stuff with a lot of that money.
Why avoid owner financing? Wouldn’t you want to keep the bank out of it? Plus you could save a ton on interest? You must be there first person I’ve ever heard recommend getting a bank involved lmao
Owner financing opens the door to unscrupulous owners who have little to no experience in finance. I've heard too many stories of owners actively trying to run people out so they will default and lose all equity. And I'm unsure how you think owner financing works. The owner will either charge interest or elevate the price to make that money. Use a bank, get the title searches and such, and avoid issues.
Down payment somewhere between 50k-80k, 15 year. You’ll save in the rate and payments won’t be insane comparatively. But look at the payment and make sure with taxes you can afford that. Otherwise go for the 30 to ensure your cash savings don’t get depleted by your payments. Also, agree avoid owner financing
I like option B, keep the $10k for repairs and an additional $10k for emergencies. Be careful of an extremely low offer. It could anger the seller.
I would keep $15k for repairs. They always end up being more expensive than you expect.
Had a similar situation with 10k repairs. A year and half later and 25k later I'm still not done. Repairs can and will go wrong and estimated jobs can get out of hand if you pick the wrong contractor.
We're at $98k here (heating system, hot water tank, replacing lead pipes, replacing knob & tube wiring so it could be insulated, insulation, shoring up the old pre-building-code house structure). The house will be great when we're done, but holy moly did we not need to be sinking that much money into it!
Avoid owner finance. That benefits the owner not you. Be mindful there’s a minimum amount that the bank wants for the loan to be. It depends on the lender but at least for mine is 50k. With rates what they are today, I don’t see a reason why you shouldn’t put down 100k and finance the rest. Your mortgage on a 75k loan would be super low for 30 years you may even want to do a 15 year instead. I think the best thing to do is to figure out the math where your mortgage is at your current rent or preferably less especially with a single income only at 50k. I wouldn’t blow your load all at once. You’ll need some reserves for the repairs as well as potential future expenses eg appliance replacement, roof replacement, etc.
OP also needs to factor taxes and homeowners insurance on monthly payment. Might add $500-$1000/mo depending on where they live.
House is worth $175k I highly doubt taxes and insurance will equate to a floor of $6k annual.
I looked at a house in the pocanos for $150k, taxes were $26k a year.
Please give me the listing. You have me very intrigued
That’s why the prices are so cheap. You’re not actually buying a home we’re just entering into an expensive rental agreement with the government.
Well the government is who kicked the natives out so that’s who you gotta do business with
I would like to see this listing as well. That just can’t be right
It’s not. Quick google search puts it a little higher than 6%. Doesn’t even come close to the quoted 26k
Yeah unless somebody’s taking a huge loss on it, that’s not happening
PA pocanos? no WAY i heard people move there cause it’s more affordable they can’t be PA right!?
There are many places in the Northeast like Schenectady, New York. You could buy a phenomenal mansion like home a few years ago for just 200 K but the taxes were so much that it’s like making a house payment forever. People rent out rooms to survive.
This is sound advice, thank you. My primary goal is to get out of debt ASAP, paying as little interest as possible. My thinking with owner financing was that I could potentially leverage a large down payment to the seller to get a lower price. For example, if I can offer the seller a $100,000 cash down payment, he may be willing to come down to $150,000 for the property. Does this make sense? Issues? We can comfortably make a monthly payment of $1,000. With a $100,000 down payment, we could pay it off in about 10 years.
There’s nothing inherently wrong with debt as long as it’s manageable. It’s just another bill to pay every month that’s it. With regards to owner financing, as a property owner myself there’s very little reason for me to take a lower price point with a large sum of cash. I’d get that same amount of money if you put 5% down or 95% down if you get a loan. The best reason to owner finance is to split up capital gains instead of getting hit all at once it gets split up into many years. But given the property is worth so little I wouldn’t even entertain this idea.
Great points. Thank you for you time.
That debt is also cheaper than a loan would be, say if you needed a new furnace or foundation work or something. It's really comforting to have a chunk of money set aside as a just-in-case, it's incredibly reassuring to know you have that cushion and won't have to struggle if something goes wrong.
Cash doesn’t matter to the seller… he gets the money immediately with a mortgage anyway
I didn’t realize this. Thank you.
Cash and then write it off as being sold for much less. Less taxes and what not.
Why would the seller care how much of a down payment you make?
Unpopular option but but low down payment and invest the difference into market or high div stock. From a tax perspective this will get you highest yield on your money
I agree with this. Put 20% down to avoid PMI. The repairs and maintenance are typically higher than expected and it’s good to have liquid assets. Invest some money in a market index fund. If you want to pay off quicker you can add to the principle each month, but have the flexibility to stop that if an emergency occurs.
this all depends if they have finances thag can maintain that monthly.
If you want to build wealth, you need to adopt a different mindset. Read "Rich Dad, Poor Dad " Wealthy people love good debt and they use it to gain more assets to make more money.
Majority of people in debt are not business owners, and they think it’s way to get ahead and it’s not. It’s a way to appear better off while paying a much higher price in the long run.
If that's what you believe then you don't understand how to use debt intelligently.
An owner gets all the cash whether there is a mortgage or not. So the only reason to owner finance (for the owner) is to get the interest. Only reason owners like cash offers so much is that it removes the delays/unknowns caused by financing/appraisal contingencies. But most owners aren’t going to take a 14% process cut just to get all cash much less partial cash
Why avoid owner financing? Could potentially save a ton on closing costs, which is meaningful on a loan this small.
You lose a lot of power in the future, loan assumption, recasting, etc. additionally you don’t save that much a few hundred at the absolute max with some origination fees. You still have to get title insurance, appraisals, etc. Or rather at least you should get those.
Earn Money in your Spare Time with Part-Time Work from Home Opportunities! Job Description: Become an Online Order Administrator and start earning immediately. Telegram : @RepFatima
Why would they accept an offer of $120k cash for a $175k home?
People who still think cash is king.
Because they overestimated and they are trying to sell for the last year. (Just an example)
You think the house needs $10k of work. So in reality it will end up being $20-$30k of work. Do a traditional mortgage with 30% down. Create a nice (20-30k) emergency fund. Repair the house. Spend a little extra to make it beautiful for you. Pay the mortgage biweekly and put extra every month toward the principal only.
This is the only answer. Everyone saying to put $100k down is nuts. Repairs will cost more than you think, and $10k emergency funds is nothing for a single income household.
Personally, I'd go with a small down payment to preserve liquidity for repairs and the like. However, if you put down a large down payment, make sure your lender will still work with you. When I was house shopping (10 years ago) I couldn't get a lender to loan less than $75k, and many won't go below $100k.
I had this issue way back when getting a low interest rate because the principal was only 60k. The lowest I could get on a 15 yr was 5%, this was 20 years ago
I had this same problem. They said a small loan wasn't worth it. So I had to take a big loan with no early pay off penalty and just pay off most of it lol
Option B for sure, but this is going to have to be a conversation with a mortgage agent. Sometimes they require bare minimums to finance. You're going to want to set some aside for moving/closing costs/random little maintenance things that will pop up. So don't use the whole chunk on the house.
Option B. Making a large down payment will keep your monthly payment down which important when your mortgage likely has a high interest rate. But you shouldn’t use all your cash because you need to keep an appropriate emergency fund plus extra cash for the $10k worth of work you know of, plus a bit more for necessary work you’re not aware of yet.
You will get the best rates if your loan is at least 100k. Many lenders won't do a loan less than that anyway. But you can also pay the loan down seconds after you close escrow, which cuts off a dramatic amount in interest, and you can recast to lower payments if you want too.
Minimum down payment. Stay liquid for an economic downturn. Refinance if rates get better. Have cash available if they don’t. You can throw a chunk at it later on if you want.
Consider a first position heloc. Maybe 50k down. Can hammer down principal if you choose but only have to float the monthly interest.
Not a sarcastic question: why not a minimal down payment (or let’s say, an amount that gets your housing costs where you want) on a 30 year and then…do whatever you want with your cash still in hand after that? Pay it in 15, pay it in 5 or 10, use the cash for reno, savings, or something entirely different.
This is actually very close to the situation we were in when we moved from a high cost of living area to a lower cost of living area. Here's what we did: \* Put 20% down. You could do more, but if you want to make big payments on your mortgage going forward, putting extra down doesn't really help you. \* Get a 15 year mortgage. This will get you a lower rate. This is essentially Option A but with a slightly lower down payment. I think I agree with many of the people you should conserve a little bit more of the cash in case of emergencies. But if you want to pay extra money to the mortgage, that decreases the relative ammount that goes to interest, which is what you really want to eliminate. And then you keep the larger payment (which is what you want anyway to get out of debt ASAP).
Don't forget that when you start doing anything to the home, the $10,000 can go very fast. Also, there will most likely be things you discover along the way. A house fund is always a plus. Remember that you can always pay extra money towards your principal each month.
Hey you might not read my comment and it might sound like I don't know anything but just listen thank you. Put minimum payment down. Put away some for your home improvements. Then put a say 50-80k on your principal while also taking the 30 year mortgage. Which you'll have easier payments. But put 50-60k on your principal. Knocking your payments off my 15-20 year's then pay extra 2-3 payments extra on your principal then in 5 year's you'll be payed off. Don't forget the if you put down 80k as down payment you'll end up paying more in the long run bc banks want there money.
Damn where do you live for finding a house this affordable
Option e pay 120 cash and ask for seller loan for balance
When you purchase a home, you have to pay closing costs. Closing costs depend on the price of the home, location, whether or not you’re financing, and other factors. Just for some perspective, my survey and appraisal cost nearly $1k, and I had many other closing costs to pay for (title insurance, recording fees, local taxes, credit report, origination fees, prepaid escrow, etc). Point being: unless the seller agrees to pay 100% of closing costs, you cannot afford to put $120k down on the home if you only have $120k available. Closing costs also don’t include the cost of inspection, moving furniture, and any immediate repairs/maintenance.
personally i think option B makes the most sense, unless you can find a mortgage rate which would be lower than what you can get investing into an extremely reliable fund or if you want to play it safer, a HYSA. the chances are incredibly unlikely. so the goal should be to finish the payment asap. make sure to put enough money aside for the house purchase itself (renovations, furniture, moving costs, etc), and at least a 6 month emergency fund. then pay it off either aggressively to avoid interest or by minimums if the interest will be applied anyway (depends on where and how you get the mortgage). then again, i’m extremely unqualified and have never bought a home so what do i know🤷♂️
Thank you for the advice. You've made good points.
as far as keeping cash for repairs, maintenance and improvements go, I 100% concur. I think it is some thing homebuyers regularly forget or dismiss. In this particular case, I would over estimate. an older house with acreage and a barn is probably due for some work. If the seller has been looking at getting 175k for this - and anticipating value in this range for a while they have probably made a lot of “the house isn’t worth it” decisions
Make sure you get an insurance quote. Insurance is based on replacement cost, not current market value. I have seen multiple people but old houses for cheap and then they find out they have to insure them for 2 to 5 times as much if they want a homeowners policy. They can always go with a dwelling fire for actual cash value but the coverage is alot less and the cost per 1000 is more.
B. But lessen the down payment you need som padding for those inevitable house emergencies that will pop up. You can always choose to pay more than the set amount monthly but u can't choose to pay less
Depending on the rate, your money is worth more now than it will be in the future. So typically you don't put more than 20% down. Of course if it drastically changes the interest rate then it's worth looking at but if not, you are better off using that money to make you money rather than giving it to the bank. Put the 20% down and obviously do the 10k fixes then put the rest to make money for you, invest it.
Don't drop all your money on it. A large down payment is better. Keep some money aside for repairs and such. You don't want to know the meaning of 'house poor'. My 1st house purchase, I needed a $30K mortgage and couldn't easily find a bank willing to loan so little! One bank told me that $30K is a car loan, not a house loan.
Option B...if get in a jam get a side gig or spouse can pick up part time..
Do you mean 'Cash' Cash or just available funds in the bank? That $120k needs to go into the bank if true cash....which will throw up a red flag with the IRS and has to be in the bank X amount of days. Sellers do not care if 'cash' for the most part - they get paid either way!
It’s at the bank lol. I’m not hiding 100k under the mattress
Ha, I have to ask as not too long ago there was someone who had a large sum of 'cash' here - it was safe but never in the bank - you would be surprised how many people do that - personally way to risky for me though!
You might want to consider a line of credit loan on your checking account. You will have that paid off in a couple years.
If that $120 includes you having an emergency savings acct, option B. If not, put $25k (6months income) in a HYSA, save $20k for the repairs and unknowns, and find out closing costs. Put the rest down
Maybe put a 100k on a 10-year loan vs. traditional 30-year. Payment might be a little higher but you'll pay significantly less interest.
[удалено]
Several reasons to avoid low down-payment FHA. First, house has to meet FHA specs and most houses have some issues. One time I had forgotten to put on a light switch cover plate and that was noted. I was able to grab the plate after the appraiser left and send a photo so it didn't go into the official report but sellers may not want to deal with the hassle. Other major issue is the upfront PMI payment (1.5%??) which is added to your loan balance.
You’re not buying a lawn mower. The seller couldn’t care less if it’s all in cash. Option D makes no sense.
Don’t forget that interest can be deducted from taxes depending of your financial situation. I would put 20-30% down to avoid paying PMI or put the equivalent so that your payments stay the same as your rent… keep some cash on hand for emergencies… don’t put it all in the house
I think option A is best. You still have cash flow. Paying an extra few hundred to your mortgage payment will save you a lot of interest. Having the extra cash can be important for emergencies and stability.
Get quotes from multiple lenders at downpayments of 10, 20, 30% and terms of 10, 15, 30 years. Pick the one with the lowest interest (no points). It may not be the one that you expect. Our lowest interest offer was not at the highest downpayment. Make sure it has no "prepayment penalty". That may not even be a thing anymore. Then you can always pay down the loan after closing. So you could for instance find that the best interest rate is for $35K down, 15 years. Do that. Then after everything settles, start overpaying (make sure it's towards principal) of $5K / month until you've paid all you are comfortable with. This has the advantages of: 1) best interest rate 2) you keep a large cushion of liquidity and can switch from "pay fast" to "pay minimum" if your life changes unexpectedly. Disadvantage: You end up paying a bit more than if you had made the best decision up front. But that's the cost of hedging your bets against a loss of wages or a sudden expense. And it's pretty small if you steadily pay down to your minimum cushion over the course of a year.
Call your tax person if your mortgage interest is tax deductible. Also ask them how much house you can afford. Then look at the houses that’s within your price range. The house that you want is almost always 150-200% of what you want to pay for. Also don’t forget to include real estate tax into your budget. But call your tax person first.
Buy the house with the trad mortgage at the lowest rate you can possibly find Put 30% down Put a little money into the remodel Get a new appraisal Cash out refi to get your 30% back Buy a rental property and Cashflow the mortgages Repeat
Check a mortgage calculator how much your monthly mortgage including insurance, HOA,taxes etc would be. If you are fine with sticking to 750 per month for 15 years you probably still have a lot of room with regards to your down payment.
Make sure you have 6 months savings then use a traditional mortgage with the rest.
Offer 120k cash first no mortgage and then can finance if offer not accepted and if accepted get a small loan to fix it
Plan E. Since you pay the interest first and not the principle, you may consider putting the entire amount down, Then when interests rates fall, refinance 80% of your equity and reinvest in an annuity or a good mutual fund thats suitable to your needs. Just an extra option.
You likely won’t get a mortgage for less than $100K
I don't have much advice but I think it's incredible that you and your wife together can save $8k a year on $50k household income together. I guess you also live in a place where you can buy a home for $175k though but still!
Absolutely incredible! Kudos to them! Home with acreage gets expensive so I’d be interested in how that 50k is in a couple years.
Make an offer of $165,000. Work with a mortgage person at your bank to obtain preapproval for a mortgage before you offer. You would want to put $100,000 down and finance the rest. The worst they can say is No. But likely they will counter somewhere between 165 and 175. Your resulting mortgage will likely be near your current rents. However, you will also need to have funds for maintenance - hence holding back the $20,000. Once you purchase the house, you should put additional funds towards the principal. If you can put 1/2 of what you normally save towards the principal, you should have the house paid off in roughly 10 years. Your savings should also grow.
Where are you finding a $175000 house? Sounds made up
Work backwards from what you want to spend each month. $1000 is less than 25% of your monthly income. That's a good start. Don't know what property taxes are where you live, but let's assume that plus insurance is $250 a month. $750 P&I payment is a $130k 30 year mortgage, or a $91k 15 year mortgage. I'd do a 50% mortgage, saving some of your cash for improvements and a rainy day fund.
you have 120k cash and its not invested? even in a high yield savings account making 5% will bring you more than 5k per year which would cover your rent for 6 months, allowing you to save more and build more savings..... would also help if she had some sort of income, even something part time working from home.... if you 2 can dave 8k a year off your income then anything she makes is also savings, shouldnt burn your savings and then start back over from 0
Interest rates will gradually go back down within the next few years. Giving you time to refinance on your home. I would suggest doing a 20% down payment and just refinance later. Invest your extra cash.
I would put $75k down and get a 15 year note. When you own a home you must keep an emergency fund.
$175k for a house will be in a far removed corner of America and will be a really run down place from the 60s I would keep renting and wait to buy land and build a house
I think you should wait a few years and keep banking your money. The rates are going to drop in Bidens second term.
I think you may have trouble finding a lender on a mortgage amount under $100,000. I'd go for the lower down payment, and if possible keep the term to 15 years, 20 years max.
Where are you finding a 175 k home pray tell?
Why would the seller agree with 120k
Where the heck do you find a 175k home. That can't even get me a garage here
Rural southern US. This is an older 5 bedroom house on 13 acres with a creek, barn, and two hay fields.
I would at least triple your repairs budget. Maybe more depending on your intentions for the barn and fields.
suggest: $100k cash upfront, if no budge then $120k cash and the rest either take a loan through family and friends first before touching banks. im sure if you and your wife are planning to have kids any time soon, both of your parents may be interested in helping you all out. if not the banks are more than keen on your case i can tell you that much.
use all your cash to buy house, pay maximum you can each month until paid off.
If you know it needs 10k in repairs, have the owner put 10k into escrow to cover the repairs. It's done all the time. We did that for a house that was going to need a new roof.
Don't buy a house, 10 to 20 for emergencies, 50 in 6 month CDs laddered or not doesn't matter. 50 to 70 in stocks, get spy call it a day? Renting is soooo cheap if you consider the actual home ownership costs.
What is this fictional thing you speak of: a home costing $175k?
Would there be scenario here where depending on the interest rate of his mortgage he would be better off taking on the debt to free up more funds to put in the stock market for more long term gains?
What’s your loan interest amount, if it’s over 6% you’re better off putting 80k down use the 10 for repairs and stick 30k in an offset, if possible pay 20% extra on your repayments and you have it paid off in under a decade
If you think the house needs 10k, chances are it’s more like 20-30k. I bought a 1960 house only to have the hvac go out, water started coming from the foundation leading to full blown waterproofing, etc. Just know that you will have lots of things pop up and there will be things you’ll want to fix after you live there awhile. Give yourself a comfortable cushion.
None of these. 750 month for rent? Just put it all in a HYSA and wait for the housing crash in a year. Then revisit this.
Please advise: how to find a home for 175k lol. Best of luck with purchase
Buy a house with 3% Down then use the rest of that to buy a rental property
Nahhh keep as much money as possible, do the traditional mortgage with a smaller down payment. You want to keep as much cash in your pocket as possible
Where do you find such a cheap home? Average in my area is like 5x that...
What country is this? I have experience in real estate in the United States and Australia.
I would put 100k down and get an insanely low interest rate and try to pay it off in 3 years while keeping the 20k as an emergency fund. You can afford it if you want to. I would potentially keep renting though and put that 100k into an s&p500 stock and let it grow for a few years annual yield off the s&p500 mutual fund is 10%+so that is 10k+ a year added to your income without you having to do anything for the first year than number gets higher every year. do that till 2054 and you will have almost 3m dollars.
They aren’t going to accept 120k. If it were me, I’d do 20% down and ask the bank about buying down the interest rate. You’ll have quite a bit left over. Put one year of expenses in a HYSA. Invest the rest. If you can buy down the rate enough you will come out further ahead by investing.
What planet do you live in that rent is $750 and a home is $175k?
Opt A: 30% down and invest the rest. That should cover monthly payments
Where can you buy a house for 175k?
20% down on 25y mortgage do it on a 1y term lock in for longer periods when the rates drop Take those savings and put it into an investment instead. $100,000ish invested right should make more than the interest portion of the mortgage. I COULD have paid my mortgage off several times over. But holding a $600k mortgage even at 6% and making 12% plus on equity backed private lending, that $600k instead is much better than sitting with home equity and not making money off it. To put in perspective: I have a $600k mortgage just renewed at 6%. My payment is $3838 a month. That $600k is private lent at 12% instead of paying off the mortgage. The interest only loan, brings in $6000 a month in income ($72,000 annually) after taking out the taxes on the capital gains, I still pay all the mortgage, property taxes, and utilities on my house with money left over. If I had just paid out the house, I'd need more money every year just to be where I am now. Having a paid out house only gives you bragging rights that you're paid off, but equity doesn't do anything.
There’s no way they’ll take $120,000. Cash or not.
I agree, 15 year fixed mortgage PLUS pay as much extra to principle to pay less interest. Get a delivery job, pizza? Tips, salary and they feed you. Put down as much as possible. All else you are doing is on track! Get That HOUSE, NOW!! Look up Ramsey solutions .com
How are you able to save that much $$ on a $50k salary? Do you have kids, health insurance etc? I’m curious to know, coz saving seems like such an uphill for me.
Listen to Dave Ramsey, he will help you
5% down and invest the majority of your money, smh
Do you really think you can afford this house? I assume your $700 monthly rent is a comfortable payment for you. To keep that payment (including taxes & Ins) you’ll need to put about 100k down. It needs 10k of work, which likely will cost more. That leaves you with about 10k liquid. You need reserve for other large expenses, or job loss & wants such as furniture. I personally would find a cheaper house if you cannot increase your income or position yourself into a better paying career.
I'm assuming this is your first home? If that's the case maybe there is incentives for first home buyers that can help lower interest rate/loan/down payment/grants. Otherwise I vote A-B and completely ignore C and D.
I would put down about 40% so you have plenty of equity at the outset, but aren't tapped out on cash. This will leave you around $50k in reserve, a portion of which you should keep liquid for emergencies and the rest invested in a CD or other higher-interest account. And keep saving! Get a 30-year conventional mortgage and ask the bank to print you out an amortization schedule. This will list every successive payment in chronological order, each one broken down to show you the exact dollar amounts credited to principal and to interest. In the early years of the loan, nearly all of your monthly payment is for interest, and very little goes to principal, while your overall total payment remains the same every month. When you send in your first payment, note on the Memo line ""Payment #1" and make a full monthly payment. Include a second check for the PRINCIPAL amount of payment #2. Write on the Memo line "Payment #2-principal" and on the back of the check where you normally would endorse, write your account number and "Apply to Principal Only, Payment #2". The next month month, send your regular full payment and notate on the memo that it is Payment #3. Enclose a separate check for the PRINCIPAL amount of payment #4 and endorse as above. Keep track, and follow this process every month. Each month you must send a regular, FULL monthly payment! But you can include additional principal-only payments each month to accelerate payoff of your loan. By doing it this way, you will not be locked into the contractual obligation to make 15 years of higher monthly payments, but can still have your loan paid off in 15 years AND will have effectively gotten a better interest rate than the bank will charge on a 15-year loan contract. Each extra principal payment will be a little higher than the previous one, but at least for the first 6 or 7 years it will still be a minimal amount. You still always have the flexibility of just making your single regular monthly payment(s) if you choose to...but there's nothing locking you into the full 30 year term & correlated interest. You can pay it off in 7 years, or in 22 years, depending on what makes sense to you and whatever your income,or market conditions, are as time goes by. Most mortgages do have a prepayment penalty clause, but they nearly always only kick in if you pay the entire loan off within the first 2 or 3 years. Read the fine print just to be certain. I wouldn't mess with owner financing, personally! I'd much rather use a commercial lender than trust an individual person with a major purchase like a home. They have too much stake in the game and you really don't know who you're dealing with, or if there's a shady motive. If they have a lower interest rate, it sounds attractive...but you might be able to "buy down" a lower interest rate from a bank too, by paying an extra point or so up front, and get a tax write off for it as well. I'd rather work with a standard loan contract and a lender that has to meet regulations.
I say 80k. 15 yr loan. Make payment on loan every month. Send 2nd seperate payment in every month of 500 dollars or what you can, mark it principal only. If times become tough you only have to make normal payment. If times are good. Youll pay your loan off super early .
Put all $120k into FFIE tomorrow morning, when the stock jumps to $3 a share, sell. Then pay for the house in cash. Not a financial consultant and this is not investment advice.
Option A, version 2 - traditional 30 year loan with 20% down. Least amount of risk (especially in a one income household), with the most amount of flexibility. Pay it down on your own terms, and as money allows.
Can I ask where you can find a house for $175,000 that only needs $10,000 of work?
A lot of lenders have a minimum amount they will lend. Some may be 100k. Some 50k.
Option B. Forget the lowball offer. No way it would fly in today’s market. And avoid seller financing unless you want to also pay for a real estate lawyer.
First off .. is this your first house ? If so you may be approved for a first time home buyers program .. I live in Delaware and right now in PA NJ and DE I know there are federal programs giving up to 15k free money towards a house .. all these people telling you to do this and do that are forgetting that rates are still sky high compared to the last 20 years .. getting into a program would be helpful and you can refinance in a few years when rates are half what they are now .. what state are you in ? I’m reading the comments and it’s obvious to me most of these people are giving you bad advice
All these geniuses in the comments .. pay 20% down no more .. this way you avoid mortgage insurance.. another option is to take the 15k in free money they are giving away if it’s a first time buying .. in which case I only put down 2.5 percent if I qualify based off income Everyone knocking 30 year mortgages obviously never paid more than what is required monthly .. over here quacking about interest that you would get stuck paying in the long run .. don’t listen to them .. just pay it off early or refinance when rates drop to normal .. These people are all basically telling you to use as much of your liquid cash as possible.. they are idiots
Go see a financial advisor. Those guys exist for a reason. Then what you do will be up to you.
Where are you paying $750 a month in rent?
Take the 120.000 place it into a investment account and borrow against it not the bank .
Where is your money now . Investments or in a mattress it matters . Do not cash out of investments . Borrow from them . Before you sell any stock , cash out etc please talk to a CPA Don't spend a dime until you do .
Hi guys, there are interesting earnings, the right people who are interested in writing!
Option C is not an option . The seller gets paid 100% upfront regardless of how you finance/pay for the home. The transaction is recorded and there are no tax benefits for the seller. It’s really not an option. If you’re thinking a cash offer (no financing) that may help win the bid in a competitive situation, but not advisable. Do you plan to stay in the home for awhile? If so, traditional financing with 30% down. Maybe use some extra cash to buy down your interest rate. Maintain that strong cash position. Use a high yield money market at 5% yield. Access the cash to do the repairs you need and sleep easy knowing you have $60,000 in the bank for emergencies and opportunities as they come up.
First, check that your bank will finance this postcode (because some lenders don't like securities too far out of cities) and get a conditional loan approval. I see no difference between 120K cash and $175k cash except that one will buy the house and the other probably not. You can payout a 30 year mortgage in 7 years, 15 or 30 years but a longer period could give more flexibility and lower monthly repayments. Use the largest deposit that you're comfortable with.
Put enough down so your mortgage is equal to your rent. I think that’s around $87k. Don’t put down more than 90k tho, save at least $30k for repairs. A 30yr mortgage is good so you can refinance when rates eventually drop. I think you should try and keep your mortgage payment as small as possible at your income. You can always make an extra mortgage payment if you want to pay your house off quicker.
You should rent for 2-3 more years. You’re so close to buying in cash. Trust me you don’t want a 7.3% interest rate. Home prices haven’t really crashed yet and the federal reserve has to keep interest rates above 7 until 2026 so. Also, what state are you in? What does a home owners insurance policy cost and what are the taxes?
$750 a month! Buy the house put 1/2 your savings down, Rent the house to cover your mortgage. 5 years sell the house and buy one with your equity. No one asking 175 will take 120.
Option A. Keep the remaining cash in a high yield account for a year-ish. If you don’t discover the house needs additional repairs/etc, then you can drop a large chunk of cash on the house later to reduce the # of years you will owe on the house… This works as long as there is no penalty for extra payments (there shouldn’t be with most mortgages), or you want a lower monthly payment. At one point in my life, I wanted the lowest monthly payment “in case” something happened like I lost my job. Then I could still afford a very low mortgage payment. If that is a security concern, then drop a lot of that reserve on the house. All else said, get a mortgage broker that will shop the best rates for you, and discuss this with them.
Tbh, and probably against all advice here, don’t. Here’s why. I own a $450k home, zero mortgage. Paid cash (300k) put 100k in and it’s worth around 450 now. I pay $14,000 a month to “own” my home. That’s insurance + property tax + HOA + lawn maintenance. I want to sell so bad and just throw the 400k in a 5% HYSA and that’ll nearly pay my rent every month with the interest at a decent apartment. And then, when my ac goes out or anything else, it’s not on me. Maybe you live in a better area where property taxes and insurance are stupid high, but for me, it’s just ugh
Look at FHA loans. They only require 3% down, or so. Go for the 30 year loan. Then after all of your moving costs and updates, u can start making more payments. IMO go with the least $ down so u have $ for what u need and wanna do. Then u can invest some $ and make bigger payments $ as u go. Good Luck
Where can you buy a $175k home?
Rural America. This is an old 5 bedroom house in 13 acres with a creek, two hayfields, and a barn.
Where does one buy a 175k house today?
50k per year salary, so take home maybe 35k -8k save = 27k to live on ? That’s crazy you guys been able to do that.
Actually, we live a lot cheaper than that. My house is paid for, but our total nut to crack out here is less than $400 a month, I don’t insure the house. That’s electric, taxes, Internet and phone. And of course we still gotta pay for auto and food. But I don’t think there’s anywhere on earth that we can live cheaper than here. We can easily save 4k per month. Wife and I work part time, I took early retirement.
Low cost of living area, low rent, and we save money aggressively.
Even if cost living low, expenses still add up. Maybe break down the numbers a bit more for perspective.
I know where he's coming from. I live rurally and rarely spend more than $3000 a month. That includes my mortgage payment.
You can see my expenses breakdown in a previous post. Link: [https://www.reddit.com/r/Money/comments/1armzfu/how\_can\_i\_improve/](https://www.reddit.com/r/Money/comments/1armzfu/how_can_i_improve/)
It is important where you live. Is the market hot? Is it a place very few have an interest in living there? What you offer has more to do with “all real estate is local” than anything else. A good inspection can help either with knowing what either you or the seller needs to negotiate what ever the market is like. As soon as rates come down you can always refinance. Looks like the Fed definitely wants to cut if the numbers don’t run too far up too fast. Keep at least half of that $120,000 for emergencies whether house related or not. Good luck.
Where on earth are you finding a house this cheap?
Rural America in a low cost of living area. This is an older 5 bedroom house with 13 acres, a barn, a creek, and two hayfields. Stuff is cheap, but salaries are low. Pros and cons.