Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and
2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Thanks!!!

Dave

In article om,
wrote:
Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and

Close to the edge if not over. If you have a major medical expense or
one of your cars die, you could end up in deep do-do.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

What is deductable is interest and taxes. Not sure about pmi, probably
not. If the $2500 base is principal and interest, the first few years
is mostly interest. Say $2250 as a WAG plus the taxes are deductable.

My top of the head feeling is don't do it. Your too close to the edge.
If you really want this house, see if you can swing a lease-purchase.
Else a cheaper rental, perhaps furthur out, and sock away every dollar
you can into savings so you can put a decent amount down.

And no more Starbucks coffee, brown bag your lunches and cut down on
eating out.
--
Rich Greenberg N Ft Myers, FL, USA richgr atsign panix.com + 1 239 543 1353
Eastern time. N6LRT I speak for myself & my dogs only. VM'er since CP-67
Canines:Val, Red, Shasta & Casey (RIP), Red & Zero, Siberians Owner:Chinook-L
Retired at the beach Asst Owner:Sibernet-L

In article om,
says...

Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.


Actually, for Fairfield Co. that probably is a very good deal, but watch out for
expensive repairs - this is an older house, isn't it? That could eat up the
rest of your income and dump you into deeper debt pronto. Does it at least have
a recent roof, recent furnace or boiler, updated electric, and good and dry
foundation? Just about anything else you can live with while you wait to update
if you have some patience and tolerance.

My advice - go further out, go for a condo, consider a different job if it's a
commute to NYC that's making you look in Fairfield.

At the least, take some time to fix up your credit and save more of a down
payment.

And, there's nothing wrong with a "starter ranch" if the location is good and
you take care of it. It might have fewer problems than what you're looking at,
and they get snatched right up on resale.

But, luck may be with you if you take the plunge, many people do.

Banty (13 years in a 3bdr. rancher in Dutchess Co., NY)

I say pass on the deal. You would be in far too over your head. If
some major emergency occurred, you'd be in very serious trouble.
Fairfield County is one of, if not the most, expensive places to live
in the country. Scale down, buy a smaller house or a condo. Or move
beyond Fairfield County.

On Feb 6, 4:12 pm, (Rich Greenberg) wrote:
In article om,





wrote:
Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and

Close to the edge if not over. If you have a major medical expense or
one of your cars die, you could end up in deep do-do.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

What is deductable is interest and taxes. Not sure about pmi, probably
not. If the $2500 base is principal and interest, the first few years
is mostly interest. Say $2250 as a WAG plus the taxes are deductable.

My top of the head feeling is don't do it. Your too close to the edge.
If you really want this house, see if you can swing a lease-purchase.
Else a cheaper rental, perhaps furthur out, and sock away every dollar
you can into savings so you can put a decent amount down.

And no more Starbucks coffee, brown bag your lunches and cut down on
eating out.
--



I agree with Rich. The interest and taxes are deductible. With that
income, you should be in the 25% bracket. So, if you have a $2500
payment, with about $2000 for mtg and $500 for taxes, that should
equate to about $1800 in interest, $500 taxes, or $2300 a month.
With that tax deductible, in 25% bracket, you'll be paying about $575
mth less in taxes, so it's more like a real pament of $1925.

Also consider you need money for maintenance, repairs, window
treatments, insurance, furniture, unforseen emergencies, etc. And
how long can you last if one of you loses a job for some reason?
The big run up in real estate prices is over for the time being. I
would expect more modest increases over the next few years, so I don't
think there is great harm in waiting a bit.

writes:

Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and

Probably. If you're opting for an interest only loan, and/or variable
rate then, it's "totally." Aside from the finances, that stress is
widely reported to be bad for marriage longevity as well.

And as for sweat equity and fixing up, keep in mind that you won't
have any money to do anything if so much of your salary is going to
housing.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Very little. Because whatever you are "saving" in deductions is going
out the window in interest payments and PMI.

I'd rent for a while. Save up a nest egg to put into a downpayment.
Get your retirement money seeded and get used to making 401k and roth
contributions. Heal your credit over that time. With better credit,
you'll pay less in interest. With a down payment, you'll avoid
wasting money on PMI, and depending on the market at the time, spend a
lot less in interest (assuming rates don't go up dramatically), and
you'll have the flexibility to take that next big job opportunity and
salary increase that may afford itself without being tied to a mammoth
house that needs work.

If you are working with a realtor and they're showing you stuff you
can't afford, find another realtor, or get real with them. If you're
looking at price tags that you don't think banks will lend to you
that's a huge warning sign. Personally, if I'm anywhere near what the
banks are willing to lend me, I know I need to chop the pricetag by
40%!


Best Regards,
--
Todd H.
http://toddh.net/

In article om,
says...
Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash.

How much do you make gross (before taxes)? I doubt that anyone
will go too much above 35% without some horrendous interest.

BTW, $500 taxes on a $400K house isn't at all high. Mine are $5500
on an assessed valuation of $183K.

We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

"Poor" isn't the word. As others have said, one glitch (and there
will be glitches) and you could be in a world of hurt.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

You've convinced me that it's a nice house, but It's still out of
your range, IMO.

I have two questions:
1) Are we jumping into financial suicide?, and

Quite possibly.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo?

Likely less than $500. BTW you can adjust your W4 so you don't
have that money withheld. You don't need to wait until the end of
the year to file for a refund.


How
heavily should we factor this into our overall financial picture?

Money is money. If you're not paying the tax it doesn't exist.

--
Keith

wrote:
Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.


Do you plan to have children? If so (within 5-7 years), don't count on
the normal salary increase because things may change, one of you may opt
out of the workforce or work part-time.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and

I think so. You will have very little left over each month for other
expenses. If a car breaks down or if you need to get some repair on the
house (and you will), you're pretty much screwed. Are you saving for
retirement? That should come first.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?


I wouldn't factor it in at all. You really need to work off your net
monthly income and not count on the tax return.

It's not necessary to own a house once you get married. I would rent
first until you 1) get a better FICO score; 2) save a large amount of
money for the down payment. Also, never buy at what the banks say you
can "afford" (never mind going over that amount by $50,000) - it's a
fictitious amount that the bank WANTS you to borrow.

Thanks!!!

Dave

Jeanne wrote:
It's not necessary to own a house once you get married. I would rent
first until you 1) get a better FICO score; 2) save a large amount of
money for the down payment. Also, never buy at what the banks say you
can "afford" (never mind going over that amount by $50,000) - it's a
fictitious amount that the bank WANTS you to borrow.



I will never forget what my mother said to me about 40 years ago about being
"house poor". She used it in reference to those who bought more house than they
could really afford. They ended up with a house but very little else. No
eating out, no movies, no entertainment at all really. Old cars, no vacations,
the list went on and on of their deprivations. But they had a house!

The point being that life is both short and unsure. You'd do better to buy or
rent what you can afford to keep while still allowing yourself the occasional
treat. The beginning of a marriage has enough stressors without being adding
being house poor to the list. You guys should be enjoying yourself a bit...
(but moderation in all things!).

Build up a down payment and correct your credit. Other deals will come to your
attention from time to time. They always do.



--
Mortimer Schnerd, RN
mschnerdatcarolina.rr.com

I'd guess you're over the edge but you can probably find someone to
give you the loan.

Couple things -

1) You do not make decent money for where you live. 100k gross
between two people does not go far in that area. Unless you want to
live in Bridgeport.

2) If you buy this house you could put a TON of pressure on your new
marriage. I speak from experience - your marriage may not survive
this.

3) Judging from your email address, you're only 24.

So I understand the rush to buy but do yourselves a favor and rent an
apartment for a year.

On Feb 6, 1:02 pm, wrote:

I have two questions:
1) Are we jumping into financial suicide?, and
2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Thanks!!!

Dave

It sounds like others have made good suggestions.
You are just starting out. Life gets tough; why saddle yourself with
problems from the get-go?
You don't need the perfect house right away. Dream about it for a
while.

Perhaps rent, or or get something that is not nearly perfect. (I
wouldn't want to move back into our first house. But I remember it
fondly for all the work, and raising a family in it.) Fix it up
together. Have some money left over for other things that you may
never get to do again.

Save some money; you should strive to have at least 3 months, maybe 6
months, liquid savings for emergencies such as layoffs, etc. You
would be surprised how much tension is reduced by having some
savings. This will also help your credit ratings. If you already
have some credit problems, why make things even worse?

Congrats and good luck.

"krw" wrote in message
t...
BTW, $500 taxes on a $400K house isn't at all high. Mine are $5500
on an assessed valuation of $183K.

That was $500 per month.

Tomes wrote:
"krw" wrote in message
t...
BTW, $500 taxes on a $400K house isn't at all high. Mine are $5500
on an assessed valuation of $183K.

That was $500 per month.


So? That comes to $6000 a year for a $400K house compared to $5500 a year for
the $183K house. It sounds like a bargain comparatively.



--
Mortimer Schnerd, RN
mschnerdatcarolina.rr.com

On Feb 6, 5:25 pm, (Todd H.) wrote:
writes:
Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and

Probably. If you're opting for an interest only loan, and/or variable
rate then, it's "totally." Aside from the finances, that stress is
widely reported to be bad for marriage longevity as well.

And as for sweat equity and fixing up, keep in mind that you won't
have any money to do anything if so much of your salary is going to
housing.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Very little. Because whatever you are "saving" in deductions is going
out the window in interest payments and PMI.

It may be going out, but the fact that the govt is giving you a 25%
break is a factor in figuring out how much money you have left to live
on.



I'd rent for a while. Save up a nest egg to put into a downpayment.
Get your retirement money seeded and get used to making 401k and roth
contributions.

Why should they divert money into a 401K, when they already are short
money for a down payment on a house that they want? Houses have
proven to be excellent investments over time, you need a place to
live, and with rent, they are not getting any tax break, nor are they
building equity.

I'd focus on building up an emergency reserve and a down payment for a
reasonable home, and worry about the 401K after that.



Heal your credit over that time. With better credit,
you'll pay less in interest. With a down payment, you'll avoid
wasting money on PMI, and depending on the market at the time, spend a
lot less in interest (assuming rates don't go up dramatically), and
you'll have the flexibility to take that next big job opportunity and
salary increase that may afford itself without being tied to a mammoth
house that needs work.

If you are working with a realtor and they're showing you stuff you
can't afford, find another realtor, or get real with them. If you're
looking at price tags that you don't think banks will lend to you
that's a huge warning sign. Personally, if I'm anywhere near what the
banks are willing to lend me, I know I need to chop the pricetag by
40%!

Best Regards,
--
Todd H. http://toddh.net/- Hide quoted text -

- Show quoted text -

On Feb 7, 1:01 am, "Mortimer Schnerd, RN" mschnerdatcarolina.rr.com
wrote:
Tomes wrote:
"krw" wrote in message
et...
BTW, $500 taxes on a $400K house isn't at all high. Mine are $5500
on an assessed valuation of $183K.

That was $500 per month.

So? That comes to $6000 a year for a $400K house compared to $5500 a year for
the $183K house. It sounds like a bargain comparatively.

--
Mortimer Schnerd, RN
mschnerdatcarolina.rr.com



You're comparing apples and oranges. Municipalities raise taxes to
cover operating and capital expenditures for schools, roads, parks,
police, etc. Those costs don't have a direct association with what
a house costs. House prices are used to determine how the tax load
is spread out across the homes. So, you could double the price of
all the homes, the tax rate would be set to 1/2, and everyone's tax
bill would be the same as it was before. That is what happens during
a revaluation, when all the homes are set to current market value.

In article om,
wrote:

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

1) Are we jumping into financial suicide?, and

Yes. $400K is too much for a starter home. You either need to
rent until you can put 20% down (renting is a great deal right
now in most places), or rent a u-haul and move somewhere cheaper
to live. You could probably pick up that same house brand new
with all the upgrades near Bentonville, Arkansas, for just over
$100K due to the new construction housing bubble having burst
very badly in north-western Arkansas. That would give you a
payment of $600 a month or so, and some of the lowest taxes
in the nation overall.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Never make a deal based on tax considerations. Congress could
change the law at anytime, leaving your decision meaningless.
If you do get a bit of money back on your taxes, so much the
better, but don't bet the farm on it.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
================================================== ====================

In article . com,
says...



I'd rent for a while. Save up a nest egg to put into a downpayment.
Get your retirement money seeded and get used to making 401k and roth
contributions.

Why should they divert money into a 401K, when they already are short
money for a down payment on a house that they want? Houses have
proven to be excellent investments over time, you need a place to
live, and with rent, they are not getting any tax break, nor are they
building equity.

I'd focus on building up an emergency reserve and a down payment for a
reasonable home, and worry about the 401K after that.

Well, there's the aspect of possibly missing free $$$ their employer would be
putting in the 401K as a match. Depending on their particulars..

But I agree in general. If one tries to save for everything at that time of
life, that house downpayment is hard to build up. Which over the years adds up
to a huge opportunity cost.

The other reason partly counterbalancing the (good) advice to wait that people
here should consider - in some markets, people of normal means can't get into a
house without being house poor for awhile. NYC metro being one of them.

Now, I'm not saying that's what these folks should do now. I think they should
wait, and consider if they really have to break into that particular market
after all. But those are things to think about which make some of the standard
advice less applicable.

Banty

Wow... a thread 16 messages long in a matter of hours! I really
appreciate everyone's input.

First of all, a few things have to happen before the house is even an
option. The seller has to come down and meet us in price. We are
optimistic that this may happen, but not positive. Second, the house
has to prove to have no underlying problems. I know the roof and
electrical are new, but I cannot say the same about septic,
foundation, etc. If any one of those things turn up as sub-par and
the seller has no interest in fixing it or give us cash back for the
issue, the house is also a no go.

In the event, however, that everything checks up OK, we have a tough
decision to make. The things working in our favor a
1) the tax benefits -- they are not guaranteed forever but we would be
looking at about $500-$600 per month more than we see in our current
paychecks
2) our salaries will go up nominally over the next few years -- I can
say this with a very high degree of (but not absolute) certainty. We
are at 100k combined right now, which is on the low end for the area
(so is a 400k home price). I am confident this number is closer to
110k or more within 18 months. The misses is just finishing up her
masters and will undoubtedly see a sizable increase (she's relatively
underpaid now), and I've gotten to the late stages of interviews where
they would have offered 10k more than I'm currently making. If I
pursued a job change more aggressively, we might not even be having
this conversation. With that being said, if the numbers "work" now,
they will certainly work with an extra $1000/month income
3) it is a house we know we can live in for 10+ years. If we weren't
in love with the place, we probably would go about $50-$75k cheaper
for a house we could live in comfortably and sell within five years.
This one is a keeper, and that's the only reason we'd be willing to
sacrifice.
4) value will only go up -- 2 acres, 2000 square feet in fairfield
county. If we take good care of it, and we found making payments to
be tough, we can sell the house for profit within a few years. I can
almost guarantee that we cannot lose money in this house.
5) the wedding will give us at least the 2 month cash cushion we'd
like to have. Obviously we'd feel more comfortable with six, but our
goal would be to work towards that while still paying the enormous
mortgage payment

I really do thank everyone for your feedback. As you know, we are
young (and probably naive). We've never owned a home & we've never
gone through the ups and downs of the real estate market, a furnace
breaking down, etc, etc. To me, the question isn't "can we afford
it". The question is "do we want to make this kind of lifestyle
change (no matter how temporary it is)".

Needless to say, I'll keep everyone posted. if one of the
dealbreakers mentioned above happens, its a non-issue.

Thanks again!
Dave

writes:

Wow... a thread 16 messages long in a matter of hours! I really
appreciate everyone's input.

First of all, a few things have to happen before the house is even an
option. The seller has to come down and meet us in price.

3) it is a house we know we can live in for 10+ years. If we weren't
in love with the place,


Clearly you've forged an attachment.


4) value will only go up -- 2 acres, 2000 square feet in fairfield
county.

That is pretty impressive -- the land itself sounds fairly
compelling.


If we take good care of it, and we found making payments to
be tough, we can sell the house for profit within a few years.

Assuming interest rates don't go up significantly, that's a fairly
safe bet.

5) the wedding will give us at least the 2 month cash cushion we'd
like to have. Obviously we'd feel more comfortable with six, but our
goal would be to work towards that while still paying the enormous
mortgage payment

I really do thank everyone for your feedback. As you know, we are
young (and probably naive). We've never owned a home & we've never
gone through the ups and downs of the real estate market, a furnace
breaking down, etc, etc. To me, the question isn't "can we afford
it". The question is "do we want to make this kind of lifestyle
change (no matter how temporary it is)".

It's extremely common to get attached to homes during the purchase
process, particularly the first one. Once you get mentally locked in,
it's hard to really consider advice. You're in a vulnerable
situation when you're attached to a place.

Just keep in mind that if the deal was that incredible why hasn't
someone else purchased the place? How long has it been on the market?
And why? Seeing the house through not only your own eyes but also
the next buyers' eyes will help keep a more realistic handle on how
easy the home will be to sell when/if you have to.

Having a home you love is swell, no doubt, but you don't want to have
to live for your house.

Best Regards,
--
Todd H.
http://toddh.net/

Why do you *have* to have this house *right now*, this second?

Why does the house need to be in *perfect* condition?

These days people have no patience and want instant gratification. This is
can be quite costly financially!

When I bought my house, I did the exact opposite of what you are wanting to
do. I was qualified by the lenders for a certain amount. Well I went and
found a house at half that price. This is what I purchased. I also got a
fixed rate mortgage. The house was not in perfect condition, but that is OK.

I have extra spending money each month. And when buying a house, you need
it! Don't forget about higher energy costs (you may have a $400.00 a month
electric bill!), trash collection, water, taxes, insurance, house repairs,
car repairs, new tires for cars, and on and on...

I've seen young married people overextend themselves on their house
purchase. It is not fun. They have no extra money to do ANYTHING! They can't
replace the tires on their cars when needed. Can't pay for repairs. They
fight about money constantly. Then they get divorced.

Buying a house when you have bad credit is NOT a good idea. You will pay a
ton of money in extra interest.

My suggestions:

-Wait to buy a house until you have good credit. Learn about credit and how
to get good credit.

-For now, find the least expensive apartment you can which is in a safe
area. You will then have plenty of extra money which you can save. Also you
can go out to restaurants, go to movies, buy flowers for the wife, and do a
bit of traveling. It is fun to do this stuff when you are young. When you
get older, then it is time to be a homebody.

-Buy all the "stuff" you want now. New cars, clothes, TV's, stereos, etc.
Get all this stuff now, because once you buy the house, money will be tight.

-Save as much money as possible for a down payment.

-Have fun and enjoy your youth! Have patience and buy the house later when
you have the income, down payment, and good credit. There will be nice homes
for sale later.

In article . com,
says...

Wow... a thread 16 messages long in a matter of hours! I really
appreciate everyone's input.

First of all, a few things have to happen before the house is even an
option. The seller has to come down and meet us in price. We are
optimistic that this may happen, but not positive. Second, the house
has to prove to have no underlying problems. I know the roof and
electrical are new, but I cannot say the same about septic,
foundation, etc. If any one of those things turn up as sub-par and
the seller has no interest in fixing it or give us cash back for the
issue, the house is also a no go.

In the event, however, that everything checks up OK, we have a tough
decision to make. The things working in our favor a
1) the tax benefits -- they are not guaranteed forever but we would be
looking at about $500-$600 per month more than we see in our current
paychecks
2) our salaries will go up nominally over the next few years -- I can
say this with a very high degree of (but not absolute) certainty. We
are at 100k combined right now, which is on the low end for the area
(so is a 400k home price). I am confident this number is closer to
110k or more within 18 months. The misses is just finishing up her
masters and will undoubtedly see a sizable increase (she's relatively
underpaid now), and I've gotten to the late stages of interviews where
they would have offered 10k more than I'm currently making. If I
pursued a job change more aggressively, we might not even be having
this conversation. With that being said, if the numbers "work" now,
they will certainly work with an extra $1000/month income
3) it is a house we know we can live in for 10+ years. If we weren't
in love with the place, we probably would go about $50-$75k cheaper
for a house we could live in comfortably and sell within five years.
This one is a keeper, and that's the only reason we'd be willing to
sacrifice.
4) value will only go up -- 2 acres, 2000 square feet in fairfield
county. If we take good care of it, and we found making payments to
be tough, we can sell the house for profit within a few years. I can
almost guarantee that we cannot lose money in this house.
5) the wedding will give us at least the 2 month cash cushion we'd
like to have. Obviously we'd feel more comfortable with six, but our
goal would be to work towards that while still paying the enormous
mortgage payment

I really do thank everyone for your feedback. As you know, we are
young (and probably naive). We've never owned a home & we've never
gone through the ups and downs of the real estate market, a furnace
breaking down, etc, etc. To me, the question isn't "can we afford
it". The question is "do we want to make this kind of lifestyle
change (no matter how temporary it is)".

Needless to say, I'll keep everyone posted. if one of the
dealbreakers mentioned above happens, its a non-issue.

Thanks again!
Dave


OK, it's a risk, but...

Two things:

1. Think carefully about whyever your credit rating is low at the moment, and
how it may relate to your situation. (

2. Make damn sure to have an *independant* inspector (not one connected to any
real estate agent, even yours) give the place a good look over. Make it a
condition of the sale. Pay particular attention to the money-sinkers like
foundation and drainage, septic, age and condition of plumbing and any damage
related to that. See if you can find out why this is such a deal. Be prepared
to walk away.

I have what we call our "ten thousand dollar sidewalk" which is the concrete
skirt which finishes off a foundation repair. There are some great vacations
buried down there. I could adsorb the cost fairly well as I went for a modest
house compared to my income, but that's the kind of thing that can sink you as a
first-time buyer.

Cheers,
Banty

On Feb 7, 8:37 am, "John A. Weeks III" wrote:
In article om,

wrote:
We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

1) Are we jumping into financial suicide?, and

Yes. $400K is too much for a starter home. You either need to
rent until you can put 20% down (renting is a great deal right
now in most places), or rent a u-haul and move somewhere cheaper
to live. You could probably pick up that same house brand new
with all the upgrades near Bentonville, Arkansas, for just over
$100K due to the new construction housing bubble having burst
very badly in north-western Arkansas. That would give you a
payment of $600 a month or so, and some of the lowest taxes
in the nation overall.


But did you factor in that their wages will very likely be a lot less
in AK, as well as opportunity for future career and income growth?
This is comparing apples and oranges.



2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Never make a deal based on tax considerations. Congress could
change the law at anytime, leaving your decision meaningless.
If you do get a bit of money back on your taxes, so much the
better, but don't bet the farm on it.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
================================================== ====================

Deals are made based on tax considerations of one kind or another all
the time, so I see nothing wrong with taking that into account. And
of all the tax deductions, one of the ones least likely to change is
the deductibility of home mortgage interest and taxes. Any attempt
to do that would be pure political suicide.

In article .com,
says...

Deals are made based on tax considerations of one kind or another all
the time, so I see nothing wrong with taking that into account. And
of all the tax deductions, one of the ones least likely to change is
the deductibility of home mortgage interest and taxes. Any attempt
to do that would be pure political suicide.


I think it's kinda dumb not to take the tax deductions into account, as the
market has pretty much long factored it in to housing prices. Not to factor it
in would be inordinately conservative.

Banty

wrote...

You're comparing apples and oranges. Municipalities raise taxes to
cover operating and capital expenditures for schools, roads, parks,
police, etc. Those costs don't have a direct association with what
a house costs. House prices are used to determine how the tax load
is spread out across the homes. So, you could double the price of
all the homes, the tax rate would be set to 1/2, and everyone's tax
bill would be the same as it was before. That is what happens during
a revaluation, when all the homes are set to current market value.

Not necessarily...

About 10 years ago Seattle/King county went from a "partial value
assessment" to "full value assessment" property tax basis. While they
capped the year-to-year increase in assessed value, they did NOT reduce the
mil rate or cap the total increase. Therefore, property taxes skyrocketed;
mine have almost tripled.

wrote...

Why should they divert money into a 401K, when they already are short
money for a down payment on a house that they want? Houses have
proven to be excellent investments over time, you need a place to
live, and with rent, they are not getting any tax break, nor are they
building equity.

I'd focus on building up an emergency reserve and a down payment for a
reasonable home, and worry about the 401K after that.

All 3 of those items are required, and they can fund them simultaneously.

Emergency reserves should be a minimum of 3 months take-home pay. When
they reach that level, they can shift more into the house down payment fund.
Some advisors suggest 6 months gross income, but I consider that the max
cash (savings + checking + short-term CDs + money market) an established
person/couple should have on hand.

These days it's not sane to get into the housing market unless you buy
well BELOW your means or have the 20% down payment needed for best interest
rate and no PMI. If the OP won't consider other than the high-priced area
mentioned, they need to wait and save.


The 401k is required because they need to learn to plan for the future as
well as take care of current needs. Especially where 401k contributions are
matched by the employer, they are an extremely good way to seed a retirement
fund AND reduce current tax burden. The 401k should be coming off the top
so they never see the cash, and therefore never miss it.

wrote:
First of all, a few things have to happen before the house is even an
option.

It would not be an option at all if I were you. You're counting it
as an investment, which you should not do, because in your situation
it is *not* a safe investment and you cannot afford a risky one.

In all this discussion of tax deductions, I have not seen mentioned
the standard deduction. Do you realize that to deduct your mortgage
interest and taxes you lose the standard deduction? Your mortgage
can cost you more in taxes than it saves, if you miss this trick.

Una

In article , says...
wrote:
First of all, a few things have to happen before the house is even an
option.

It would not be an option at all if I were you. You're counting it
as an investment, which you should not do, because in your situation
it is *not* a safe investment and you cannot afford a risky one.

In all this discussion of tax deductions, I have not seen mentioned
the standard deduction. Do you realize that to deduct your mortgage
interest and taxes you lose the standard deduction? Your mortgage
can cost you more in taxes than it saves, if you miss this trick.

The standard deduction is not $36,000/yr.

--
Keith

On Feb 7, 7:59 am, wrote:
4) value will only go up -- 2 acres, 2000 square feet in fairfield
county. If we take good care of it, and we found making payments to
be tough, we can sell the house for profit within a few years. I can
almost guarantee that we cannot lose money in this house.

Any time anyone guarantees you a profit on something you know (or
SHOULD know) that it's a risky deal. Property values MAY continue to
rise but if the economy as a whole tanks your "almost guarantee" would
be worth the paper it's written on. Wait, it's not even written...

From your posting and responses I think you may have fallen for the
house and are not going to take cautionary advice with the seriousness
you should.

On Feb 7, 4:52 am, krw wrote:
In article om,
says...

Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash.

How much do you make gross (before taxes)? I doubt that anyone
will go too much above 35% without some horrendous interest.

BTW, $500 taxes on a $400K house isn't at all high. Mine are $5500
on an assessed valuation of $183K.

We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

"Poor" isn't the word. As others have said, one glitch (and there
will be glitches) and you could be in a world of hurt.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

You've convinced me that it's a nice house, but It's still out of
your range, IMO.

I have two questions:
1) Are we jumping into financial suicide?, and

Quite possibly.

2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo?

Likely less than $500. BTW you can adjust your W4 so you don't
have that money withheld. You don't need to wait until the end of
the year to file for a refund.

How
heavily should we factor this into our overall financial picture?

Money is money. If you're not paying the tax it doesn't exist.

--
Keith

how are you

On Feb 7, 2:02 am, wrote:
Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000
(about $50,000 more than we can 'comfortably' spend/most banks would
want to loan us). The mortgage payment would be $2500/mo (we don't
have perfect credit), PMI would be another $93/mo (we don't have any
equity) and real estate taxes another $500/mo (ouch). This would
bring our total payment to $3100/mo. Factor that in with the fact
that we pull in a combined $5500/mo after taxes and we have a
situation where we will be undoubtedly strapped for cash. We
understand we would be living "poor" for a while but we are optimistic
that our salaries will increase nominally over the next few years.

The plusses of the house are that it is the absolute BEST VALUE we've
seen in this price range, and we've been looking for several months.
It is also the type of place that with a little sweat equity, we could
really raise the value of the house (which isn't true with most
starter-ranch homes).

I have two questions:
1) Are we jumping into financial suicide?, and
2) How will tax benefits work? Assuming $2000/month of our mortgage
payment will go to insurance and another $500 to taxes, does that mean
we would have a VERY LARGE tax return to the tune of $600+/mo? How
heavily should we factor this into our overall financial picture?

Thanks!!!

Dave

Hi Dave,How are you? .

John Weiss wrote:
wrote...
Why should they divert money into a 401K, when they already are short
money for a down payment on a house that they want? Houses have
proven to be excellent investments over time, you need a place to
live, and with rent, they are not getting any tax break, nor are they
building equity.

I'd focus on building up an emergency reserve and a down payment for a
reasonable home, and worry about the 401K after that.

All 3 of those items are required, and they can fund them simultaneously.

Emergency reserves should be a minimum of 3 months take-home pay. When
they reach that level, they can shift more into the house down payment fund.
Some advisors suggest 6 months gross income, but I consider that the max
cash (savings + checking + short-term CDs + money market) an established
person/couple should have on hand.

These days it's not sane to get into the housing market unless you buy
well BELOW your means or have the 20% down payment needed for best interest
rate and no PMI. If the OP won't consider other than the high-priced area
mentioned, they need to wait and save.


The 401k is required because they need to learn to plan for the future as
well as take care of current needs. Especially where 401k contributions are
matched by the employer, they are an extremely good way to seed a retirement
fund AND reduce current tax burden. The 401k should be coming off the top
so they never see the cash, and therefore never miss it.



Not to mention, if the OP is really that young (say, mid 20s) the couple
should definitely start funding their 401k. A little bit a month will
go a long way for them.

krw wrote:
The standard deduction is not $36,000/yr.

The standard deduction for married filing jointly is $10,000/yr. So
by itemizing the OP would get to deduct 36k-10k or 26k more than
otherwise. The deduction is from income, not from taxes. So if the
OP is in the 25% tax bracket this is worth roughly 6k.

Una

On Feb 7, 3:14 pm, "John Weiss"
jrweiss98155nospamatnospamcomcastdotnospamnet wrote:
wrote...

You're comparing apples and oranges. Municipalities raise taxes to
cover operating and capital expenditures for schools, roads, parks,
police, etc. Those costs don't have a direct association with what
a house costs. House prices are used to determine how the tax load
is spread out across the homes. So, you could double the price of
all the homes, the tax rate would be set to 1/2, and everyone's tax
bill would be the same as it was before. That is what happens during
a revaluation, when all the homes are set to current market value.

Not necessarily...

About 10 years ago Seattle/King county went from a "partial value
assessment" to "full value assessment" property tax basis. While they
capped the year-to-year increase in assessed value, they did NOT reduce the
mil rate or cap the total increase. Therefore, property taxes skyrocketed;
mine have almost tripled.


If that's true, and most peoples actual taxes skyrocketed to the point
of almost tripling, then the municipal revenue also skyrocketed. So,
what did they do with all the extra revenue?

In article , says...
krw wrote:
The standard deduction is not $36,000/yr.

The standard deduction for married filing jointly is $10,000/yr. So
by itemizing the OP would get to deduct 36k-10k or 26k more than
otherwise. The deduction is from income, not from taxes. So if the
OP is in the 25% tax bracket this is worth roughly 6k.


In my world $6K is more than $0. My objection was to your
statement: "Your mortgage can cost you more in taxes than it saves,
if you miss this trick." That $6K can be used to directly offset
the monthly mortgage payment.

--
Keith

wrote in message
ps.com...
Hi all -

We are a soon to be married couple looking for our first house.
Though we make decent money, its still hard to find anything we'd want
to live in as we're looking in an expensive area, Fairfield county,
CT.

We think we've found our "perfect home" selling for about $400,000

What town? Have you considered Bridgeport? West Haven, Danbury, Milford?
Sure, your commute will be a little longer, but prices will be (somewhat)
lower, probably $50K lower.

Personally, I would *NOT* commit to a $3100 mortgage payment on a $5500
after tax monthly income. And I doubt anyone would approve you for that
much. I wouldn't count the tax benefits when consdering this.

"Bill" wrote in message
...
When I bought my house, I did the exact opposite of what you are wanting
to
do. I was qualified by the lenders for a certain amount. Well I went and
found a house at half that price. This is what I purchased. I also got a
fixed rate mortgage. The house was not in perfect condition, but that is
OK.


We did the same thing. Eight years ago, we bought a house that was half the
price we were approved for, got a 15 year fixed rate loan, and are more than
half way to paying it off. It has allowed us to feel confident and secure,
with no worries about paying the mortgage. It was definitely a smart move.

On Feb 6, 3:02 pm, wrote:
Hi all -

We are a soon to be married couple looking for our first house.

Have you and your fiancee discussed this with either
set of parents? They know you quite well; what do they
think?

Cindy Hamilton

wrote...

If that's true, and most peoples actual taxes skyrocketed to the point
of almost tripling, then the municipal revenue also skyrocketed. So,
what did they do with all the extra revenue?

Damn good question!

Allegedly, road repair, baseball and football stadiums, schools, Medicaid,
light rail, busses...

Where it REALLY goes, probably only the lawyers know...

In article , "Bill" writes:
Why do you *have* to have this house *right now*, this second?

Why does the house need to be in *perfect* condition?

These days people have no patience and want instant gratification. This is
can be quite costly financially!

When I bought my house, I did the exact opposite of what you are wanting to
do. I was qualified by the lenders for a certain amount. Well I went and
found a house at half that price. This is what I purchased. I also got a
fixed rate mortgage. The house was not in perfect condition, but that is OK.

That's what I do also. Two years ago when I got prequalified for a
mortgage, the bank said I could afford almost a million because my credit
rating is so prime. I enjoyed the head rush for a minute and then reminded
myself that if I did that, the payments would probably be extremely painful.
I found my perfect house for a quarter of that (which in the northern VA area
is a a 35-year old house in the outer burbs).
Young people need to be reminded that the banks are NOT their friends.
It seems like in the 'olden days' banks wouldn't lend you any more than they
felt you could responsibly pay off. These days they love the late fees, and
practically throw money at you knowing you're likely to default.

- Sharon
"Gravity... is a harsh mistress!"

You really need to get some good financial planning advice. My favorite is Dave Ramsey on radio...

The link to his site is:

www.DaveRamsey.com


You really need to do some serious contemplation about finances. Do not purchase something you can't afford. Anytime you do, then "Murphy" moves into the spare bedroom. { You know, Murphy' Law: If anything can go wrong, it will }

If both of you are not on the same page on finances, the your marriage is doomed. Most of the divorces come from problems with finances...

Good Luck

Sandra Beall
Huntsville, AL