7% interest rate?!

[DLgal]

China indeed. Moist people don't know what's gone on since 2008.

It has been RAMPANT in my city since about then. Close to half the homes in my neighborhood (built new in 2014-2016) were purchased by FCB (Foreign Cash Buyers, mainly China) initially. Several sold about 2-3 years ago, turning a nice profit. A bunch more were used for illegal birth tourism (again, China). We call our neighborhood "Little China" because of it, and also because Chinese residents are the majority here. I live in a cluster of 6 houses. When we moved in, only one other was occupied by actual humans. The rest sat empty for a couple years. They have slowly filled in with renters after being sold. Only one family actually purchased the home. The other 5 are rentals. The one next to us was one of the Chinese tourism birth houses. It was bizarre to witness a new pregnant Chinese woman move in every 3 months.

 

[elgerber]

OK, so educate me; what is the PMI for?

I'll tell you what happened to us - as the value of our house went up, we tried to get the house re-appraised to demonstrate we owned > 20% of the value of the mortgage. Problem was, we had to get the appraisal done through the lender. Well, guess who doesn't have much interest in you getting a better appraisal to get the PMI removed? Oh yeah, that's the lender. All PMI was doing for us was making our monthly payment more $$$. It's all behind us now but sure didn't seem fair at the time.

It is for anyone putting less than 20% down. You should be able to get it removed once you have 20% equity. The lender really has no interest in NOT helping you remove PMI. It's good customer service, and the PMI is not paid to the lender. There are insurance companies who issue the PMI, and they are the ones that the mortgage insurance is paid to.

 

[CaptainAmerica]

Many landlords use these homes as cash shelters, especially the foreign all cash buyers. You arent paying their mortgage, you are helping them avoid taxarion in China (usually). Other "investment" landlords put down a significant amount of cash down and then get interest only loans. The monthly cash flow pays the interest of the loan, they pocket the rest and rely on appreciation of the home over time. Then they sell the home for a profit.

Based.

 

[DCLMP]

What do most of you consider an acceptable percentage of your income towards your mortgage? Lenders will say 30%. I think that's too high in this economy. Despite the hikes inflation remains high.

 

[DCLMP]

It has been RAMPANT in my city since about then. Close to half the homes in my neighborhood (built new in 2014-2016) were purchased by FCB (Foreign Cash Buyers, mainly China) initially. Several sold about 2-3 years ago, turning a nice profit. A bunch more were used for illegal birth tourism (again, China). We call our neighborhood "Little China" because of it, and also because Chinese residents are the majority here. I live in a cluster of 6 houses. When we moved in, only one other was occupied by actual humans. The rest sat empty for a couple years. They have slowly filled in with renters after being sold. Only one family actually purchased the home. The other 5 are rentals. The one next to us was one of the Chinese tourism birth houses. It was bizarre to witness a new pregnant Chinese woman move in every 3 months.

You must live close to my in-laws.

 

[dvcgirl67]

There are foursquares all over the place in the greater northeast, ya' know. Pennsylvania, in particular, has loads of them, as does Vermont. Not all of them are pretty, but the best Craftsman-influenced versions tend to be really lovely.

They are especially ubiquitous in areas developed around the turn of the 20th century, because quite a few of the most popular Sears Kit homes were foursquares.

BTW, IME, traditional layout homes didn't get that "dark" reputation until people started building post-War homes that had far fewer windows than previously. In our home, the kitchen has 3 windows, the dining room has 4, the living room has 5, and the foyer has 2 if you count the light in the door. (Our LR, DR, and foyer are open to one another, connected by 5 foot wide archways.) Upstairs, the main bedrooms have 3 windows each, and the smallest one has a double-window on a southfacing wall. Plenty of light.

Yup, that's what we have here in NJ....a 1915 foursquare. Big wide front porch, center dormer and a beautiful layout/design. Previous owners blew out the wall between the "parlor" and the kitchen to make one big kitchen, which we love. We blew out a wall upstairs to make the primary bedroom much bigger (turning it from a 4 bed to a 3, but it'll pay off when we sell as larger primary bedrooms aren't the norm in these homes.. And we love the layout. Our first home was a center hall colonial...basically, a McMansion and I'd never live in that style of home again....so much wasted space for the way that we live. The front two rooms (living and dining) were rarely used. This old house has a zillion times more character than that house that we had built in the year 2000. And it always will....you couldn't pay me to live in a newer McMansion again.

 

[DLgal]

You must live close to my in-laws.

It's happening in a lot of places. I live in Irvine, CA.

 

[Lumpy1106]

It is for anyone putting less than 20% down. You should be able to get it removed once you have 20% equity. The lender really has no interest in NOT helping you remove PMI. It's good customer service, and the PMI is not paid to the lender. There are insurance companies who issue the PMI, and they are the ones that the mortgage insurance is paid to.

Oh boy, so much to unpack there and could be completely different now than it was in the early 90's. Grain of salt, not trying to argue, genuinely curious;

1. "It is for anyone putting less than 20% down" does not answer my question. Does it protect the lender in case of default? It certainly does not help the buyer. I know a lot of things changed following the crisis in 2008 (i.e. Big Short) but the lenders don't own the mortgages either.
2. "Good customer service" might be a thing now - it certainly wasn't with my lender in the early 90's. They did everything they could to keep me from getting the house re-appraised to get the PMI removed.
3. The insurance companies and the lenders are not entirely independent - at least they weren't in the early 90's. I'd be surprised if that has changed.

Like I said, truly curious and it is entirely behind me now.

 

[elgerber]

Oh boy, so much to unpack there and could be completely different now than it was in the early 90's. Grain of salt, not trying to argue, genuinely curious;

1. "It is for anyone putting less than 20% down" does not answer my question. Does it protect the lender in case of default? It certainly does not help the buyer. I know a lot of things changed following the crisis in 2008 (i.e. Big Short) but the lenders don't own the mortgages either.
2. "Good customer service" might be a thing now - it certainly wasn't with my lender in the early 90's. They did everything they could to keep me from getting the house re-appraised to get the PMI removed.
3. The insurance companies and the lenders are not entirely independent - at least they weren't in the early 90's. I'd be surprised if that has changed.

Like I said, truly curious and it is entirely behind me now.

You are correct, yes, it protects the lender in case of default, just like a car loan requires insurance.
#2, I have no reply for LOL, you must have had a crappy lender. I was in the business back then, and we always tried to get people out of MI if we could.
We are independent, there are several major PMI companies, and we use whichever one has the best rate for each particular loan. I do not know of any mortgage company that is affiliated with a PMI company.

 

[DCLMP]

It's happening in a lot of places. I live in Irvine, CA.

So do they.

 

[DLgal]

So do they.

Nice. So they get it.

 

[DLgal]

What do most of you consider an acceptable percentage of your income towards your mortgage? Lenders will say 30%. I think that's too high in this economy. Despite the hikes inflation remains high.

I think 30% is okay, as a portion of TAKE HOME pay. Our rent is 30% of our take home pay and we have more than enough extra every month. Lenders use gross pay, though, which makes NO sense. They base your affordability on money you never even see due to taxes.

 

[DCLMP]

Nice. So they get it.

Yes they do. You are right it’s not just there it’s other cities and states, but mainly California and Florida.

 

[DCLMP]

I think 30% is okay, as a portion of TAKE HOME pay. Our rent is 30% of our take home pay and we have more than enough extra every month. Lenders use gross pay, though, which makes NO sense. They base your affordability on money you never even see due to taxes.

Yes 30% of gross would be a bad idea. I think a lot of people would struggle with 30% of take home right now due to the rising cost of food. energy, healthcare and everything else. You rent so you don’t have maintenance and property taxes. 15 to 20% sounds better.

My parents always told me to buy a house not a payment, and not to buy a house more than three times your income. That’s why we left Dana Point when we very young. We didn’t make a lot of money back then, but we were able to buy a nice house for 170k. We are still in the same house. I’d like a new house, but I like my Disney cruises Can’t have everything. If I win the lottery I’d move back to So Cal in a heartbeat probably San Diego.

 

[dvcgirl67]

Here's a chart of price drops for the months of August/September/October around the nation. I keep reading that this isn't 2007-08......but these numbers are pretty big.

https://twitter.com/x/status/1588547994592301056

 

[CaptainAmerica]

"Good customer service" might be a thing now - it certainly wasn't with my lender in the early 90's. They did everything they could to keep me from getting the house re-appraised to get the PMI removed.

I think you're talking about two different things.

When your LTV drops to 78%, PMI must be removed automatically. So if your house is $300,000, the second the mortgage balance drops below $234,000, PMI goes away, by law. It doesn't matter whether this is through your normal payments and amortization schedule or if you come up with some extra cash to apply towards principal for what effectively amounts to an after-the-fact down payment.

That's different than an appraisal wherein you try to convince them that your $300,000 is now a $400,000 house.

 

[CaptainAmerica]

Here's a chart of price drops for the months of August/September/October around the nation. I keep reading that this isn't 2007-08......but these numbers are pretty big.

https://twitter.com/x/status/1588547994592301056

Yeah but mortgage rates have tripled so this isn't actually saving anyone any money, they're just paying it to the banks now instead of the sellers.

 

[RamblingMad]

Will be interesting to see how this plays out. Auto sale prices should also start falling.

 

[dvcgirl67]

Yeah but mortgage rates have tripled so this isn't actually saving anyone any money, they're just paying it to the banks now instead of the sellers.

Well, back to the OP who is debating about whether to buy early next year or wait. Buying a house right now is like catching a falling knife. If we do get a price drop of say...30%+ in some markets, she gets the same house a year or more from now for much less. So say the house she wants is 600k....and 12-18 months from now she gets it for 420K, even if rates are slightly higher, she can always refinance when rates come down. The Fed is frog marching us into what increasingly looks like a nasty recession next year. As economic conditions worsen, they will eventually pause, then pivot...and likely begin to lower rates again.....and mortgage rates will fall. I would not buy a house in the next 6 months for sure, probably more like a year.

We did really well on the sale of our first two houses thanks to the crazy run-up in real estate from 2004-2007. We sold two homes during that period and netted over 500K in profit. However, the house we live in now....we purchased in 2007, and it took over 11 years for us to get back to what we paid for it. The OP would be saving herself a lot of pain by waiting in my opinion. Anyone who put less than 20% down on homes in the last couple of years may find themselves underwater in short order.

 

[RamblingMad]

Well, back to the OP who is debating about whether to buy early next year or wait. Buying a house right now is like catching a falling knife. If we do get a price drop of say...30%+ in some markets, she gets the same house a year or more from now for much less. So say the house she wants is 600k....and 12-18 months from now she gets it for 420K, even if rates are slightly higher, she can always refinance when rates come down. The Fed is frog marching us into what increasingly looks like a nasty recession next year. As economic conditions worsen, they will eventually pause, then pivot...and likely begin to lower rates again.....and mortgage rates will fall. I would not buy a house in the next 6 months for sure, probably more like a year.

We did really well on the sale of our first two houses thanks to the crazy run-up in real estate from 2004-2007. We sold two homes during that period and netted over 500K in profit. However, the house we live in now....we purchased in 2007, and it took over 11 years for us to get back to what we paid for it. The OP would be saving herself a lot of pain by waiting in my opinion. Anyone who put less than 20% down on homes in the last couple of years may find themselves underwater in short order.

It's reasonable to expect home prices to keep up with inflation in the long run.

Rates should continue to go up. Prices will come down a bit. But we still have a huge supply issue.