Save cash for a house or get a mortgage?

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gloriousfifty
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Save cash for a house or get a mortgage?

Postby gloriousfifty » Thu Apr 04, 2013 8:09 am

Hello,
My family is moving in a year. Our current house is paid off, and we should have no trouble selling it when we move. A similar house at the new place costs more. Should we stop our retirement and college investing for a year to save cash for the new house,
or get a small mortgage and pay it off quickly? Thanks for your input.

stannius
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Re: Save cash for a house or get a mortgage?

Postby stannius » Thu Apr 04, 2013 9:19 am

I certainly would keep contributing enough to get any employer match. Other than that, it depends.

How is your credit? Do you know your credit scores?

How are your retirement and college savings balances?

Do you have an extremely strong aversion towards debt?

Mario
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Re: Save cash for a house or get a mortgage?

Postby Mario » Thu Apr 04, 2013 9:39 am

stannius wrote:I certainly would keep contributing enough to get any employer match. Other than that, it depends.

How is your credit? Do you know your credit scores?

How are your retirement and college savings balances?

Do you have an extremely strong aversion towards debt?


All those things too.

One thing I'd be very concerned with is PMI.

Besides losing company match, if you haven't already maxed out your 2012 Roth, that's something else you should look at. You can pay more to your mortgage later on, but you'll never again be able to stick money into your 2012 Roth
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frugalcoconut
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Re: Save cash for a house or get a mortgage?

Postby frugalcoconut » Sat Apr 06, 2013 7:59 pm

For me, the mortgage question falls into whether it makes sense to pay closing costs. If you can get the seller to pay for them, that would be ideal. Otherwise, is it worth shelling out X thousand dollars to get a temporary mortgage? I would definitely continue putting money towards retirement but would consider a reduction in college investing for the short-term to save up for the home purchase.

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Re: Save cash for a house or get a mortgage?

Postby Bichon Frise » Sun Apr 07, 2013 8:00 am

frugalcoconut wrote:For me, the mortgage question falls into whether it makes sense to pay closing costs. If you can get the seller to pay for them, that would be ideal. Otherwise, is it worth shelling out X thousand dollars to get a temporary mortgage? I would definitely continue putting money towards retirement but would consider a reduction in college investing for the short-term to save up for the home purchase.


One thing is for sure, if you don't ask you'll won't get it. But, I don't think the market is in a place for buyers to be asking for things like this. I guess with "starter" homes it is common to ask for a couple thousand in closing, but if I was to sell my house and the buyer asked for closing costs, I would look at them like they were a weak buyer. The last home we sold (in 2011), we got multiple offers. One party bowed out, one party's initial offer they were trying to dicker with us on a house that was already priced a little below market (plus asked for things like closing costs, fridge etc), but came up to our asking price and the other was just at asking price, but they never dickered with us. Guess who got the house?
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Re: Save cash for a house or get a mortgage?

Postby TCstr8 » Sun Apr 07, 2013 6:35 pm

In my experience, a buyer asking the seller to pay for closing costs has absolutely nothing to do with their "strength" as a buyer. Like you said, you won't get it if you don't ask.

Recently closed a loan for a couple, purchased the house for $510,000 with over $200,000 down payment, less than 20% debt ratios and 780 scores. They asked the seller to pay $2500 in closing costs. Not what I would call "weak" borrowers.

Also, there are plenty of rate options that involve no closing costs. The higher the rate, the lower the costs (even to the point of being negative), and vice versa.
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Re: Save cash for a house or get a mortgage?

Postby Jerry » Mon Apr 08, 2013 12:10 am

You won't face any issues in getting a mortgage if you meet all the required criteria of the lender. So, rather than jeopardizing your retirement savings and the golden years of your life by stopping payments to the retirement funds, it will be better to take out a mortgage.
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Re: Save cash for a house or get a mortgage?

Postby DoingHomework » Thu Apr 18, 2013 2:59 pm

Bichon Frise wrote:One thing is for sure, if you don't ask you'll won't get it. But, I don't think the market is in a place for buyers to be asking for things like this.


Are you kidding? I don't care what the NAR says, it is still a buyer's market in many areas. We are looking right now and see a great many houses that have been on the market for over a year. The trouble might be that many of those people are asking too much and don't have cash for closing costs. But I think asking and then offering a good price could make it work.

Interest rates are so cheap right now that a mortgage is attractive even if you have cash. But if you intend to pay it back quickly then the point about closing costs is a good one. You will want to keep them low.


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