Dumb moves that sound smart: Buying a house

Updated at 3:46 p.m. ET (MoneyWatch) Buying a house isn't a bad thing to do with your money, if you're ready to be a homeowner and you understand what you're getting into. But if you're justifying the purchase with the well-worn: "I just want to stop throwing away rent money," you are about to engage in a dumb money move that only sounds smart because no one has worked out the math. How could I possibly question the clear logic of this age-old wisdom? After all, you build up equity in a house. You don't build equity by renting, right? Absolutely. But to inject a tiny bit of reality into this dubious wisdom, let's look at the numbers. To make the comparison simple, let's say you bought a $240,000 home, putting $40,000 into a down payment. That leaves you with a $200,000 loan at 4.5 percent (assuming you have great credit and interest rates don't rise). Your mortgage payment on that loan would be $1,014. Again, just to make this simple, we'll assume that's roughly the same amount you'd pay in rent. (Obviously adjust the numbers if your rent is lower or higher.) But to get the mortgage loan, you would need to pay "closing costs" -- these are a variety of fees that are paid for appraisals, title insurance, escrow services and to the lender to process your loan. Bankrate.com estimates that a homeowner who borrows $200,000 will pay an average of $3,754 in these costs. (You can get "no-fee" loans, but you usually pay a higher interest rate to get them, so you pay one way or another.) In other words, if your rent and mortgage were exactly the same, you'd start out $3,754 in the hole by buying. "Never fear," you say. "I'll get that back by building principal as I pay off my loan!" Reality check: At the end of the first year, your mortgage balance has declined to just $196,498, according to the amortization calculator at Bankrate.com. In other words, the total equity you've built up is $250 shy of paying the closing costs on your loan. The second year will be better, you Continue Reading

5 Reasons Why Buying a House Is a Way Bigger Commitment Than Marriage

Here are five reasons why buying a house together is way more of a commitment than walking down the aisle. Sasha Brown-Worsham, provided by Published 1:30 pm, Monday, February 12, 2018 Photo: Jeffrey Hamilton/Getty Images Image 1of/1 CaptionClose Image 1 of 1 Photo: Jeffrey Hamilton/Getty Images 5 Reasons Why Buying a House Is a Way Bigger Commitment Than Marriage 1 / 1 Back to Gallery A few weeks ago, my husband and I were having drinks with two friends who had just bought a house together—a fixer-upper they plan to tear down to the studs and rebuild in a labor of love. They are in their 30s and have been dating eight years. "So is the ring next?" My husband asked them, half-joking. "No way!" the woman said without even glancing at her significant other. "We aren't ready for that kind of commitment." They're not ready for the "commitment" of marriage, but happy to fling themselves into buying a house together? However strange this situation may sound, my friends have plenty of company. My husband and I have been married 15 years, and have three children. To most people, that sounds like a commitment. And yet, no decision in my life felt quite as serious and deep as buying a house. The fact I made this pivotal purchase with my husband certainly complicated matters further, but make no mistake, the "house" part of this threesome is what has weighed most heavily on me over the years. Here's why, at least to me, buying a house feels like way more of a commitment than walking down the aisle will ever be. 1. You can return a ring—but not a house Home & Real Estate Channel Now Playing: Now Playing REAL ESTATE CELEBRITY HOMES Taylor Swift Just Bought This $18 Million New Continue Reading

Bitcoin is booming in Miami. But can you buy a house with it?

They gathered in downtown Miami — an estimated 4,350 Bitcoin believers — to trade pitches for apps and start-ups. They discussed and debated trends in cryptocurrency. They speculated about the volatility of Bitcoin, which shot up in value from $900 to $19,000 over the course of 2017 and is currently hovering around the $10,000 mark. But despite the national stir created last fall when a $544,500 Edgewater condo was listed for sale in “Bitcoin only,” none of the panels or presentations at Miami’s sixth annual North American Bitcoin Conference focused on real estate. Although Bitcoin is the oldest and best-known of the nearly 1,500 kinds of cryptocurrencies currently available, real estate developers, brokers and analysts are cool on its use in an industry that is literally defined by physical assets. In other words, if you’re hunting for a home, don’t worry that you’ll get outbid by a buyer offering cryptocurrency. At least not yet. “I think it’s fine to buy Bitcoin, because high risks lead to high returns, and I believe in capitalism,” said Nela Richardson, chief economist for Redfin, a national real estate brokerage. “But when you come to buy my house, I’m going to need a currency that I can use to buy milk at the grocery store. I wouldn’t accept junk bonds or a lottery ticket as a payment. Any currency that drops 45 percent in value within three months, like Bitcoin has done, is not a currency that is stable enough for large transactions.” According to Redfin, only 134 out of the site’s total 568,000 listings in December 2017 — a miniscule .03 percent — included a Bitcoin mention. Created in 2009, Bitcoin is digital currency tracked on decentralized ledgers — called blockchains — that keep a real-time, immutable record of every transaction made around the world. Buyer and seller interact directly. Bitcoins can be purchased through a digital Continue Reading

Exploding Trees? 5 Shockers That Can Make a House Catch Fire

Is there any way to fireproof a house? Building experts say people can do plenty to mitigate the risks. Here's a rundown of what to watch out for. Judy Dutton, provided by Published 5:00 pm, Thursday, December 14, 2017 Photo: Skipro101/iStock Image 1of/1 CaptionClose Image 1 of 1 Photo: Skipro101/iStock Exploding Trees? 5 Shockers That Can Make a House Catch Fire 1 / 1 Back to Gallery The California wildfires are raging on—by last count, wiping out more than 1,000 buildings across 260,000 acres. And even now, these blazes are threatening 25,000 more homes. So the burning question in our minds is: Is there any way to fireproof a house? That might sound like a tall order, but building experts say that people can do plenty to put a damper on the risks from wildfire—through renovations, landscaping, and more. In fact, many homeowners might be missing out or making mistakes that could be putting their property and possessions in greater danger than they realize. Here's a rundown of what to watch out for. 1. Exploding trees If you have any eucalyptus trees on your property, watch out! "Many Southern California homes are adjacent to eucalyptus trees, which tend to explode during fire season," Los Angeles real estate developer Tyler Drew tells realtor.com®. Eucalyptus oil is highly flammable, so when brush fires bake these trees from underneath, they can burst, raining embers onto everything in the area. Home & Real Estate Channel Now Playing: Now Playing A British Doctor Is Selling Land on Mars for 10 Acres Per Penny Brandpoint Spring training real estate Sun-Sentinel Fredrik Eklund Felt ‘Helpless’ After Devastating Miscarriages: ‘I Was a Mess’ People Continue Reading

Swamped by Losses, U.S. Flood Insurance Program Faces a Deadline

The National Flood Insurance Program, the only flood insurance available for most American homeowners, is swamped with debt and set to expire on Friday. Kathleen Lynn, provided by Published 9:00 am, Wednesday, January 17, 2018 Photo: JodiJacobson/iStock Image 1of/1 CaptionClose Image 1 of 1 Photo: JodiJacobson/iStock Swamped by Losses, U.S. Flood Insurance Program Faces a Deadline 1 / 1 Back to Gallery The National Flood Insurance Program has been swamped by billions in claims, and Congress is looking for ways to bail it out. The federal program—the only flood insurance available for most American homeowners—is set to expire on Friday. Congress is expected to pass a short-term extension, as it has done several times since the fall. But if it fails to do so, the government would stop selling or renewing flood insurance, which would lead to the collapse of thousands of home deals, because mortgage lenders require the insurance for properties in flood zones. And the program has larger, long-term problems, which are only expected to worsen as climate change raises sea levels and increases the risk of catastrophic storms like last year’s Harvey, Irma, and Maria. “We know flooding is the most common and costly natural disaster in the United States, and it’s not getting better anytime soon,” says Laura Lightbody, who directs the Pew Charitable Trusts’ project on weather-related catastrophes. “We’ve got to face the problem head-on. These events are happening not only more frequently, but [also] in places that no one would have predicted.” The flood insurance program owes billions to the U.S. Treasury, as a result of losses racked up since Hurricane Katrina devastated Louisiana in 2005. Home & Real Continue Reading

5 tips for buying a home in 2018

As 2017 came to a close, many area residents are starting to think about their plans and goals for 2018. For many, becoming a homeowner is at the top of their list. Whether you are a first-time homebuyer or a five-time owner, here are five things you should do when entering the real estate market this coming year: 1. Find out your credit score: This is an important first step if you want to qualify for and secure a mortgage in 2018. Knowing what kind of shape your credit score is in will help you know whether you will qualify for a loan and what interest rate you can expect to pay. A higher score will net you a lower interest rate. Checking your credit score is easy nowadays with the plethora of websites offering free credit score checks. If you find that your score is not optimal (below 620), you can start correcting it by fixing any errors on the report, paying your bills on time, closing credit cards you do not use and getting your credit limits raised. 2. Understand what you can afford: While looking at homes online is exciting, prospective homebuyers time is best spent searching after they know what they can afford. Online mortgage calculators are a great tool, but it is important to have a wholistic and realistic understanding of your monthly expenses. Buyers should sit down and look at all their monthly expenses from fixed costs, such as car payments and student loan bills, to fluctuating expenses such as groceries and discretionary spending. An industry rule of thumb is that housing costs, including property taxes, utilities and insurance, should only take up 30-33 percent of your total gross monthly income. 3. Find a mortgage lender and get preapproved: A critical step in purchasing a home is finding a mortgage lender. They can help you understand what you can afford, what you will be approved for and offer guidance throughout your search. Every lender and bank has different products and programs tailored to individual homebuyer needs. For example, at Continue Reading

8 questions to ask yourself when deciding to rent or buy a house

If you’re at the age when your peers are making major life moves — getting married, having kids and buying homes – you might be feeling it’s time to join them. Or you may simply just be at that stage all on your own.Either way, plenty of young adults are starting to get the home-buying itch. While there are a lot of appealing benefits to homeownership, taking on that kind of debt is not without risk. The decision to rent vs. buy is one you should make carefully.If you’re trying to figure out your next move, consider asking yourself these eight questions. The answers should steer you in the right direction. 1. What Is my top financial priority?Buying a home will slow down your ability to make progress on other financial goals. You’ll need to focus on lowering expenses or increasing your income so you can afford a down payment and monthly mortgage payments. (This guide can help you understand more about how to determine your down payment on a home.)That extra cash will be funneled toward your mortgage rather than paying off credit cards or student loans if you have them. Other financial goals, such as saving for retirement and building an emergency fund, may also have to take a back seat.Assess your competing financial goals and decide which ones take priority. Buying a house might come first in your book, or perhaps you’ll decide to work toward other money goals before committing to a mortgage. 2. Do I have savings for a down payment & closing costs?Renting requires some savings – you’ll need enough cash to cover the first month’s rent and the deposit.To buy a home, however, the minimum you’ll need to have saved is usually 6% or more of the home’s value. Even FHA loans require a minimum down payment of 3.5%, and closing costs add another 2-3% to the costs.But that’s the minimum; a 20% down payment is better to give you a decent amount of equity and avoid private mortgage Continue Reading

To buy a house, millennials digging deep into family’s pockets

DETROIT — As home prices rise and competition for a limited supply of homes increases, young buyers are increasingly using a special financing to win in bidding wars: The Bank of Mom and Dad."It’s definitely becoming much more common, not that parents didn’t help their children in the past," said Jeanette Schneider, vice president of RE/MAX of Southeastern Michigan in Troy. "But, it really has become a trend."Several factors, she said, are driving it: Millennials — the generation of young homebuyers ages 18-35 — are facing more competition and costs for homes, they are saddled with more student debt than previous generations, and simply put, their parents seem to be more willing to lend them money. Based on anecdotal reports from agents, Schneider estimated that nearly 10% of home sales use some kind of family financing or gifts and that could grow if the housing market stays hot. That percentage, she said, is far more prevalent than what she would have estimated when she started in the industry nearly 30 years ago.An analysis of mortgages serviced by Shore United Bank in Troy, suggests the percentage of home sales using gifts might be even higher. It found that 42% of young homeowners used money that was given to them toward down payments and closing costs.The trend, however, requires that families be clear on whether the money being given is a loan or a gift. Not only are there relationship concerns to consider, there are legal and tax considerations. Taking out a family loan, even if it is a relatively small one, adds to a homebuyer's debt, can jeopardize eligibility for mortgage programs and could reduce the attractiveness of an offer to the seller.A gift means that the homebuyer has no obligation to pay it back — but can if he or she wishes.Take 24-year-old Amber Hauer, who just bought her first home in July.For about $145,000, she purchased a Continue Reading

5 things every service member needs to consider before buying a house

Buying a house is a serious commitment of not only your time and energy but also your money.For each person considering buying a home, there are different pros and cons. When you’re in the military, there is an extra degree of difficulty: you don’t always have a lot of time to make that choice. Oftentimes, service members decide to buy a house in a rush and forget to consider some important factors that should go into such a large purchase.Here are five things to think over before you commit to buy a house at your next duty station. 1. Time on stationConsider how long you could potentially be at your duty station. Is it going to be less than two years? Buying a home is a long-term commitment, and you’ll want to be able to keep the house for at least as long as it will take you to recoup your investment before you try to sell it again. If you know you’ll be at your duty station for only a year, this may not be the time to buy a house unless you know you’ll be back. 2. PCS ordersIt’s probably just a matter of time before you get orders again. Before you buy a home, you should have a plan for what happens to the house when you receive new orders. Will you sell it or rent it out? Know what your goals are for buying and selling the house before you make the commitment to purchase one. More: Buying a home? Ask your partner these 4 questions first More: These are the best cities for women to buy a home More: U.S. homebuilder sentiment falls in September 3. LocationSome people like to live close to base so they can go home after physical training or to avoid traffic. Others want to live far away from base to get away from work.Visit the house you’re interested in purchasing when your family and neighbors would be at home and at the times you’ll be commuting to work. During those times, you’ll have a more realistic picture of what day-to-day living will be like if you get the Continue Reading

Buying a home? Ask your partner these 4 questions first

Buying your first home is incredibly exciting, but there’s also more than a little bit of stress that comes with it. A house is a big purchase, and it brings a whole host of new hurdles beyond the initial price tag.If you’ll be purchasing your first house with your significant other, one way to avoid some of that stress is to have a few important conversations before you even start your house search. Based on my experience buying a house with my husband, these are a few of the questions I’d suggest chatting about before you set out to find your perfect pad.How long do we plan to live there?You don’t have to set an exact time frame on your house purchase, but it’s a good idea to see if you’re both on the same page before you find a place to live. You should try to stay in the home at least until you hit your break-even year to recoup the purchasing costs. And depending on where the house is located, that could be several years down the road.To determine whether you’ll be able to make that much of a commitment, have a frank conversation with your partner about your plans in the coming years. Do you see yourself building a family in this house? Are you both happy in your current jobs, or do you foresee a job search in the future that could make for a long commute? Life throws curveballs, of course, but talking about these things ahead of time will help you narrow down the type of house you both want based on your future goals. More: Here’s how much you should have saved by 45 More: U.S. pending home sales fell in July, 4th decline in 5 months More: Buying a home? Strategies for lowering your closing costs How much house can we afford?This is one of the most important questions you should discuss with your significant other before buying a house. It’s not uncommon for people to get approved for mortgages with monthly payments that would, in actuality, be very hard for them to afford. Continue Reading