has market ever been hotter?

joey2665 · 10-07-2020, 09:45 AM

Quote:

Originally Posted by Biggd

I don't know about the lakes region but back in Ma many sales are cash sales, no mortgage.

Paying cash for a home right now with rates as low as they are is really financially foolish. If you have enough to pay cash, I’m not saying to get am 80% mortgage but consider 50-60% down and invest the rest. You will end up making money on the mortgage.

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Susie Cougar · 10-07-2020, 09:51 AM

Quote:

Originally Posted by joey2665

Paying cash for a home right now with rates as low as they are is really financially foolish. If you have enough to pay cash, I’m not saying to get am 80% mortgage but consider 50-60% down and invest the rest. You will end up making money on the mortgage.

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In my neighborhood, we have resales as well as new homes being built every day. The realtors say that over 70% of the new sales are paid in cash. They said that if you can pay in cash you have an advantage over those who are looking for a mortgage approval or any other contingencies. Buyers who are using cash are waiving everything else so they can have a fast sale.

dickiej · 10-07-2020, 10:03 AM

It's crazy everywhere....we are one hour east of Portland, OR.....everyone wants to get out of the city ( not to mention California ) the house we bought went on the market at 9:00 a.m....we got into a bidding war and got the sellers to accept our offer around 11:00.... Two hours on the market!

Susie Cougar · 10-07-2020, 10:25 AM

Quote:

Originally Posted by dickiej

It's crazy everywhere....we are one hour east of Portland, OR.....everyone wants to get out of the city ( not to mention California ) the house we bought went on the market at 9:00 a.m....we got into a bidding war and got the sellers to accept our offer around 11:00.... Two hours on the market!

Just curious. Did you pay cash or take out a mortgage?

joey2665 · 10-07-2020, 10:05 AM

Quote:

Originally Posted by Susie Cougar

In my neighborhood, we have resales as well as new homes being built every day. The realtors say that over 70% of the new sales are paid in cash. They said that if you can pay in cash you have an advantage over those who are looking for a mortgage approval or any other contingencies. Buyers who are using cash are waiving everything else so they can have a fast sale.

I understand the strategy but it is a financial error. It’s pretty easy to be approved for a mortgage when your putting 50-60% down.

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thinkxingu · 10-07-2020, 10:16 AM

Quote:

Originally Posted by joey2665

I understand the strategy but it is a financial error. It’s pretty easy to be approved for a mortgage when your putting 50-60% down.

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My parents raised us to always have our homes paid because "you'll always have a place to seek shelter." I get making money, but there's something...calming about not having a mortgage. In fact, I'm just starting to get that general feeling as, as a teacher, it takes years to make decent money.

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Susie Cougar · 10-07-2020, 10:23 AM

Quote:

Originally Posted by thinkxingu

My parents raised us to always have our homes paid because "you'll always have a place to seek shelter." I get making money, but there's something...calming about not having a mortgage. In fact, I'm just starting to get that general feeling as, as a teacher, it takes years to make decent money.

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I think as your age increases so does the calming effect of knowing that your mortgage is paid off.

joey2665 · 10-07-2020, 02:34 PM

Quote:

Originally Posted by thinkxingu

My parents raised us to always have our homes paid because "you'll always have a place to seek shelter." I get making money, but there's something...calming about not having a mortgage. In fact, I'm just starting to get that general feeling as, as a teacher, it takes years to make decent money.

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I understand the thought process but if you put the portion you are financing in a managed broker account and don’t touch it it is the same thing and your making money probably about 5% per year over and above the 3% mortgage and for 20-30 years you are talking about serious money. Plus your still getting the full appreciation value of the home.

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winterh · 10-07-2020, 04:43 PM

Quote:

Originally Posted by joey2665

I understand the thought process but if you put the portion you are financing in a managed broker account and don’t touch it it is the same thing and your making money probably about 5% per year over and above the 3% mortgage and for 20-30 years you are talking about serious money. Plus your still getting the full appreciation value of the home.

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Isn't there a saying about past performance not being a guarantee of future results.

joey2665 · 10-07-2020, 06:01 PM

Quote:

Originally Posted by winterh

Isn't there a saying about past performance not being a guarantee of future results.

Saying are just that there is no factual data behind it.

Look at the market over any 10 year period. I am being conservative with an 8% ROI. Then I netted it out to 5% after subtracting the 3% mortgage.

This is coming from some that is not an aggressive investor nor do I give aggressive adviser. IMO this is just a sound use of funds capitalizing on both the real estate and stock market.

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TiltonBB · 10-07-2020, 06:06 PM

Quote:

Originally Posted by joey2665

I understand the strategy but it is a financial error. It’s pretty easy to be approved for a mortgage when your putting 50-60% down.
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Not necessarily.

Mortgage approvals are based on the debt to income ratio of the applicant. Your credit score and cash flow are most important. That is how all of the loans sold in the secondary market to banks like Bank of America, GMAC, Etc work.

If you put 60% down but have a debt to income ratio in the 60% range there is no way you will get a mortgage.

The guidelines don't care how much you put down or how much you have in the bank. If you put 50% down and have two million in the bank you would not qualify unless your $2 million was invested at a rate of return that would qualify you or you have other sources of income..

joey2665 · 10-07-2020, 06:43 PM

Quote:

Originally Posted by TiltonBB

Not necessarily.

Mortgage approvals are based on the debt to income ratio of the applicant. Your credit score and cash flow are most important. That is how all of the loans sold in the secondary market to banks like Bank of America, GMAC, Etc work.

If you put 60% down but have a debt to income ratio in the 60% range there is no way you will get a mortgage.

The guidelines don't care how much you put down or how much you have in the bank. If you put 50% down and have two million in the bank you would not qualify unless your $2 million was invested at a rate of return that would qualify you or you have other sources of income..

Your going down a completely different road. All the assumption in the above scenarios are strictly based on cash vs some % of mortgage and assuming approval isn’t an issue.

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TiltonBB · 10-07-2020, 07:02 PM

Quote:

Originally Posted by joey2665

Your going down a completely different road. All the assumption in the above scenarios are strictly based on cash vs some % of mortgage and assuming approval isn’t an issue.

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Actually no. Your post said: It’s pretty easy to be approved for a mortgage when your (sic) putting 50-60% down.

My point is that the down payment has nothing to do with the approval. Mortgage approvals are not based on how much you put down. Anything over 20% down payment is subject to the same approval process and that is primarily about credit, debt to income, security of that income, and the value of the subject property.

joey2665 · 10-07-2020, 07:12 PM

Quote:

Originally Posted by TiltonBB

Actually no. Your post said: It’s pretty easy to be approved for a mortgage when your (sic) putting 50-60% down.

My point is that the down payment has nothing to do with the approval. Mortgage approvals are not based on how much you put down. Anything over 20% down payment is subject to the same approval process and that is primarily about credit, debt to income, security of that income, and the value of the subject property.

Yes it does. Down payment has everything to do with approval. It’s usually the largest debt number in the debt to equity ratio and cash flow ratio

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Wentworth06 · 10-08-2020, 06:23 PM

Loan repayment ability is number one on any loan committee list.
Down payment is number 2
Where down payment came from number 3
What other collateral can we get from you as an abundance of caution
Credit score matters .but lots of wealthy people do not pay on time and have 650 credit.
FDIC.bank auditors are looking at a loan when they review the banks at audit time just like I described.
Homes that show pending and come back on are not always a issue with inspection. I suspect a lot are not qualifying
Like my friend mswego above said a cash offer close ASAP.has worked for me in the past.
If your able have a good line of credit for buying opportunities it really helps in getting a something locked up and closed

mswlogo · 10-07-2020, 07:10 PM

Quote:

Originally Posted by Susie Cougar

In my neighborhood, we have resales as well as new homes being built every day. The realtors say that over 70% of the new sales are paid in cash. They said that if you can pay in cash you have an advantage over those who are looking for a mortgage approval or any other contingencies. Buyers who are using cash are waiving everything else so they can have a fast sale.

As mentioned above. Just because you make a "Cash" offer doesn't mean you have to pay from a "cash" source. You're just removing the contingency of getting a loan. I've bought that way a couple times, knowing I'd have no issue getting a loan. But some sellers are smart and also want proof of funds. But it does not mean you need to use those funds you used for proof.

One thing people don't realize is almost all the water front property requires a septic site assessment by closing. If you made a cash offer and didn't get a loan you can just reject the site assessment (even if it's good).

We looked very carefully at actual prices being asked, what they actually sold for, and town appraised values. Of course market price is almost always above town appraisal value. But most of the high priced homes (in our range, under $2.0 million) didn't sell for more than around 60% over town appraisal. Anyone asking like 100% or more over town appraisal typically won't sell or actual price will be much lower.

Folks are crazy, but not quite insane. Normally Market is around 30-40% over appraisal. Right now it's around 60% (but not all that many houses sold that high). The data was lagging by a month because you have to wait until it's closed. I forget what we had up to. I think end of July (Closed in Sept). It may have got worse in August.

We also did a trend line (over 2-3 years of all sales) and it wasn't as steep as you might think and pretty linear. Just lots of transactions.

Asking price, as always, means nothing.

Biggd · 10-07-2020, 12:32 PM

The reason people are offering to pay cash is because most properties around my area are getting multiple offers. When the offers are fairly close you take the one that's most likely to close. Some people are offering way over asking price and the appraisal won't come in high enough so the buyers have to come up with more of a down payment which can kill a deal. A cash buyer gets the house then gets a mortgage later.

Quote:

Originally Posted by joey2665

Paying cash for a home right now with rates as low as they are is really financially foolish. If you have enough to pay cash, I’m not saying to get am 80% mortgage but consider 50-60% down and invest the rest. You will end up making money on the mortgage.

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Trail Goer · 10-07-2020, 03:19 PM

Quote:

Originally Posted by joey2665

Paying cash for a home right now with rates as low as they are is really financially foolish. If you have enough to pay cash, I’m not saying to get am 80% mortgage but consider 50-60% down and invest the rest. You will end up making money on the mortgage.

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You are absolutely right. According to Dave Ramsey, paying off all your mortgage before you start investing is a bad idea.
http://https://www.daveramsey.com/bl...ave-retirement

dickiej · 10-07-2020, 03:51 PM

Unless you're in your sixties....my wife and I are 67 and have no mortgage, no car payments and no credit card debt...we can live on $2500.00/ month for food, utilities, taxes and insurance....we sleep like babies.

joey2665 · 10-07-2020, 04:05 PM

Quote:

Originally Posted by dickiej

Unless you're in your sixties....my wife and I are 67 and have no mortgage, no car payments and no credit card debt...we can live on $2500.00/ month for food, utilities, taxes and insurance....we sleep like babies.

Understood. Remember though my point being the cash not used to purchase the home is still there just in an account appreciating at a faster rate than your mortgage rate. I am definitely not saying to spend the cash not used to purchase the house. Put it in an account that is NOT to be touched. You have to be very disciplined but even at 67 your life expectancy is a minimum of 10 plus years which for 100,000 at 5% would have a value of 162,000.00 and extra 62k is nothing to sneeze e

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thinkxingu · 10-07-2020, 03:59 PM

Quote:

Originally Posted by Trail Goer

You are absolutely right. According to Dave Ramsey, paying off all your mortgage before you start investing is a bad idea.
http://https://www.daveramsey.com/bl...ave-retirement

According to Dave Ramsey, I shouldn't have taken school loans to become a teacher. Life is pretty damn good for us. Though I like some of his ideas, I think he often overlooks life in favor of avoiding debt.

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Trail Goer · 10-08-2020, 06:23 PM

Quote:

Originally Posted by thinkxingu

According to Dave Ramsey, I shouldn't have taken school loans to become a teacher. Life is pretty damn good for us. Though I like some of his ideas, I think he often overlooks life in favor of avoiding debt.

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If you have taken his Financial Peace University course, you would understand that getting out of debt is only part of the battle. He teaches you how to stay out of debt and build wealth, while also teaching you how to give. I've taken that course, then took it again a few years later as a refresher. My wife and I haven't used a credit card in over 4 years.

thinkxingu · 10-08-2020, 06:41 PM

Quote:

Originally Posted by Trail Goer

If you have taken his Financial Peace University course, you would understand that getting out of debt is only part of the battle. He teaches you how to stay out of debt and build wealth, while also teaching you how to give. I've taken that course, then took it again a few years later as a refresher. My wife and I haven't used a credit card in over 4 years.

I use my Discover card for every large purchase and use the cashback to fund my BBQ habit. Who's the genius now?!

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8gv · 10-08-2020, 07:07 PM

I am thankful that Dave Ramsey does his thing.

While I realize there are other ways of conducting one's finances in a responsible way, his teaching and preaching has been great for my three adult kids.

They each have budgets and stick to them.

It is not unusual for them to tell me about a friend who has bought a vehicle or house that they cannot afford.

They brag about their thriftiness and savings!

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mswlogo (10-07-2020)

10-07-2020, 10:03 AM	#3
dickiej Senior Member Join Date: Oct 2013 Location: White Salmon, WA Posts: 301 Thanks: 21 Thanked 171 Times in 93 Posts	It's crazy everywhere....we are one hour east of Portland, OR.....everyone wants to get out of the city ( not to mention California ) the house we bought went on the market at 9:00 a.m....we got into a bidding war and got the sellers to accept our offer around 11:00.... Two hours on the market!

10-08-2020, 06:23 PM	#15
Wentworth06 Member Join Date: May 2020 Posts: 30 Thanks: 37 Thanked 11 Times in 7 Posts	Loan repayment ability is number one on any loan committee list. Down payment is number 2 Where down payment came from number 3 What other collateral can we get from you as an abundance of caution Credit score matters .but lots of wealthy people do not pay on time and have 650 credit. FDIC.bank auditors are looking at a loan when they review the banks at audit time just like I described. Homes that show pending and come back on are not always a issue with inspection. I suspect a lot are not qualifying Like my friend mswego above said a cash offer close ASAP.has worked for me in the past. If your able have a good line of credit for buying opportunities it really helps in getting a something locked up and closed

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Wentworth06 (10-08-2020)

10-07-2020, 03:51 PM	#19
dickiej Senior Member Join Date: Oct 2013 Location: White Salmon, WA Posts: 301 Thanks: 21 Thanked 171 Times in 93 Posts	Unless you're in your sixties....my wife and I are 67 and have no mortgage, no car payments and no credit card debt...we can live on $2500.00/ month for food, utilities, taxes and insurance....we sleep like babies.

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bigdog (10-07-2020)

10-08-2020, 07:07 PM	#24
8gv Senior Member Join Date: Jan 2012 Posts: 2,117 Thanks: 64 Thanked 749 Times in 483 Posts	I am thankful that Dave Ramsey does his thing. While I realize there are other ways of conducting one's finances in a responsible way, his teaching and preaching has been great for my three adult kids. They each have budgets and stick to them. It is not unusual for them to tell me about a friend who has bought a vehicle or house that they cannot afford. They brag about their thriftiness and savings!