Author Topic: Home purchase, good deal?  (Read 819 times)

Invester17

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Home purchase, good deal?
« on: July 03, 2018, 08:00:01 AM »
Hi all,

Quick opinions needed for home purchase (new construction).

Asking price: $535,000
Seller is providing $16,500 towards closing + blinds (wood) and washer/dryer (additional $2,000).
Loan would be a 30 year fixed, 4.75% interest, no PMI, 10% down + purchase of 2 discount points. Total closing cost comes in around $21,000.
* The 2 additional discount points allow me to remove PMI / reduce the rate.

Down payment of $53,500 + $4,500 closing = $58,000.

Does this seem like a decent deal?
« Last Edit: July 03, 2018, 08:01:50 AM by Invester17 »

Cwadda

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Re: Home purchase, good deal?
« Reply #1 on: July 03, 2018, 08:15:19 AM »
Are you asking if this is a good investment property or a primary residence?

We'd need more information.

Invester17

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Re: Home purchase, good deal?
« Reply #2 on: July 03, 2018, 08:23:45 AM »
Does the overall deal sound good (in terms what is being offered by the seller, loan etc.)

Primary residence.
« Last Edit: July 03, 2018, 08:27:45 AM by Invester17 »

Cwadda

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Re: Home purchase, good deal?
« Reply #3 on: July 03, 2018, 10:05:36 AM »
Does the overall deal sound good (in terms what is being offered by the seller, loan etc.)

Primary residence.

I think the better question to ask is whether the house suits your needs. Also, whether it makes sense to purchase a new construction (could you buy another home not new for significantly less?)

Invester17

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Re: Home purchase, good deal?
« Reply #4 on: July 03, 2018, 11:50:58 AM »
Definitely suits my needs. Good location in the right neighborhood / schools for kids in the future. Big backyard (rare), extra parking (rare). 3 bedrooms, master, office, and a spare bedroom for guests. I could pay less for an older home, but I hate updating stuff and it would likely cost more to do it myself.

I suppose my only real worry is that I already have one rental in the same neighborhood. The loan is pretty big and while I get tax benefits, I could downsize the house and invest the difference.

Cwadda

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Re: Home purchase, good deal?
« Reply #5 on: July 04, 2018, 10:08:56 AM »
Definitely suits my needs. Good location in the right neighborhood / schools for kids in the future. Big backyard (rare), extra parking (rare). 3 bedrooms, master, office, and a spare bedroom for guests. I could pay less for an older home, but I hate updating stuff and it would likely cost more to do it myself.

I suppose my only real worry is that I already have one rental in the same neighborhood. The loan is pretty big and while I get tax benefits, I could downsize the house and invest the difference.

I think you might be exaggerating to rationalize a new purchase, since older homes and DIY are undoubtedly cheaper. But if it's right for you, go for it. As long as you understand that a more expensive house will push your FIRE date back, if that's important to you.

Hopefully this post doesn't come across as judgmental, but you asked for other angles so this is my thinking.

Greenstache

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Re: Home purchase, good deal?
« Reply #6 on: July 04, 2018, 10:16:46 AM »
Interest rate doesn't sound great, and it doesn't make sense to be paying two points to get to that rate (which isn't low) - without the points, you'd be at 5.25%?  Have you gotten any other loan quotes to see if this is really the most competitive rate available?

Also surprising that you are being told purchasing points will remove PMI - that's not how PMI typically works.  Is this a situation where they are charging you PMI and then saying you can purchase points to lower the interest rate you pay (which is essentially just prepaying it)?

Invester17

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Re: Home purchase, good deal?
« Reply #7 on: July 05, 2018, 08:23:01 PM »
Fair points and I welcome the feedback. Yes - I could probably buy something for cheaper, yes it might be cheaper to upgrade. However, I really just dont like any other properties in the area (backyard size, parking etc). The work on both inside & outside of them would definitely end up costing more than just buying one thats move in ready (because of how picky I am).

Im 27 and plan to work for another 20 years at least so im trying to use leverage now. The mortage rate is higher because its a jumb loan. Yep, exactly its a lender paid MI payoff, but then using discount points to bring it down. The plus side here is that I can write the discount points off of my taxes. The closing is $21,000 and Im paying $4000 of it - seller is paying the rest.
« Last Edit: July 05, 2018, 08:25:48 PM by Invester17 »

wbranch

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Re: Home purchase, good deal?
« Reply #8 on: July 06, 2018, 10:59:19 AM »
This primary residence has the same numbers as the investment/second home listed in your other thread? $500K for a house just doesn't make sense in my mind, way too much of a house everywhere I have lived. I know it is different in higher cost of living places, but based on comments about being picky and also being 27 years old expecting to own it for 20 years does not sound realistic to me.

https://forum.mrmoneymustache.com/real-estate-and-landlording/need-help-investment-property-w-home-equity-loan/

Invester17

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Re: Home purchase, good deal?
« Reply #9 on: July 07, 2018, 08:11:16 AM »
Sorry for the confusion. That thread was specifically around equity loans and understanding the pros/cons. I changed it from a second home to a primaru as I intend to move back in a year. My parents are renting it until they buy a house (cash) and Im going to rent it for one summer before moving in. The high cost is mostly the land as its near the oceanfront.

Cwadda

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Re: Home purchase, good deal?
« Reply #10 on: July 08, 2018, 10:09:55 PM »
Sorry for the confusion. That thread was specifically around equity loans and understanding the pros/cons. I changed it from a second home to a primaru as I intend to move back in a year. My parents are renting it until they buy a house (cash) and Im going to rent it for one summer before moving in. The high cost is mostly the land as its near the oceanfront.

Another thing to consider: would you be able to potentially AirBnb a room out or rent it for a few weeks of the year? I'm not trying to rationalize a purchase for you, it's just another angle.

Invester17

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Re: Home purchase, good deal?
« Reply #11 on: July 10, 2018, 07:00:23 PM »
Yes, absolutely. My plan is to do a monthly rental until June. It would then rent weekly (like Airbnb) for the summer. The plan (as of now) would be to then live in it as my primary residence for a few years. After that, switch it back over to a summer/winter rental. My other property did about $3700 ($308 per month) profits (after PM fees, maintenance, utilities, etc). That was also my start up year so I had to buy a bunch of furniture which cut into my profits greatly - it probably would have been double that.

The risk here is that if the economy tanks, people might not go on vacation as much and the monthly income would not be higher than the mortgage. I'd have to supplement it with my income. The positive news is I have an emergency fund and I have a very stable career (IT/networking with expert level certifications).