Ways to avoid debt?

God bless ya, Mikey, but you better pray to God Hondo doesn't see this post. Otherwise Mr. walked up hill both ways and liked it douchebag will be all over your ass.

 

This is some of the best advice my mother ever gave me: Find a mortgage agent you trust.

It does not cost much (nothing I think) for you to set up a sit down with a mortgage agent. If you get a good one who is not looking for a quick buck, but one who will be with you for an extended period of time, they will go over your credit history, tell you what to get rid of and what can wait. They will also go over with you what you can and cannot afford.

They will then give you a number. This number is what you shop with. Also, never buy the top limit of what you are approved. Think about it. If they approve you for $1,000 a month, if anything changes in your life, you will have a hard time making the $1,000 a month payment.


What mine told me:

1. Get rid of credit cards first. This is the worst type of debt.
2. The last debt to go should be a student loan because you get a tax deduction off of it, plus, it is a lower rate.
3. Get a mortgage agent before you even think about getting a real estate agent.
4. Sometimes you do not even need a real estate agent. A good mortgage agent can handle most of what a real estate agent does.

Also, what is so wrong about buying a place and renting a room to a coworker? Charge half of the mortgage to the renter.

Taxes...

If you have a $1,000 a month payment, about $200 will go back to the principal of the place (equity). So that money is not being thrown away. The other $800 will be interest and taxes. This $800 a month will add up to $9600 over the course of the year. This can be used against your taxable income which will give you about $1,800 in your pocket come tax time.

So instead of your landlord getting this $3,600 (1800 equity and 1800 taxes) in his or her pocket, it is in yours.

 

And I used to skateboard, too. I better start running now.

 

I bought my first house last year. Like others have said, there are plenty of reasons to owning sted of renting. Instead of throwing money away on rent every month, I'm investing - my house will almost certainly appreciate with time. Other than taxes, my monthly payment will be the same every month for 30 years. Rent is guaranteed to go up, especially with inflation. Not to mention the fact, I can park my car in a garage and don't have to worry about the party upstairs at 3 a.m.

With that said, I agree that if you're moving around a lot, you're probably better off renting. There was no way I was going to buy until I found a job where I thought I'd stick around awhile.

 

Just to repeat what I'm sure has been said 10 times so far: Credit cards are the devil to young adults.

Keep one, and use it only for those things which cannot be paid otherwise; i.e., Internet purchases. And pay it off THE NEXT MONTH.

The rest of those credit cards that come in the mail? Keep a good sharp pair of scissors handy, and cut them in two as soon as they arrive.

 

I paid cash for the engagement ring. Watching the guy swipe my debit card for that amount of cash was a little tough.

 

And those who think renting is preferable to buying ... read what 93Devil said. Every word is true.

 

Credit cards are the devil for anyone, young or old, who can't control their spending.

I love my credit card, but I treat it like cash. I don't use it if I don't have the money in the bank to cover it, and I've paid it off in full every month except two (moving expenses) in the last 10 years.

I have a Discover card, so I have the Cash Back reward. Last year I made $100. That's $100 in free money (card has no annual fee).

I also like my card better than cash because I have a handy, sortable record of things like gasoline and grocery purchases and travel expenses, which can be helpful at tax time.

 

I just had a talk with the ex today about that -- and then my grandma on the way to work. What I'm going to do, once mommy comes to the rescue to save her little boy, is cut all but two of them and make a neat, little collage in the garbage. My grandma suggested putting them in water and freezing them, but I don't even want to see them again. Yeah, credit cards saved my ass when I needed to pay off medical bills. But they're also -- with my help, mind you -- completely sinking me financially.

 

Owning a house sounds well and good, but how much money will you spend on repairs and improvements vs. how much money you're getting back? And how does getting jobbed in the current market (i.e. selling your house for $200,000 when you paid $250,000 for it) play into the whole financial incentive? Finally, are you OK with spending vacation days and days off "doing stuff around the house" instead of relaxing with a good book or maybe heading out of town?

 

You get insurance for major repairs when you buy your home.

Oh, never, ever buy a home without an inspection. If it does not pass inspection (I'm not talking piddilly shit) walk away.

Also, buy the worst home in the best neighborhood. You can always fix it up.

Never buy the best home in a shit neighborhood. If you have a rebel flag to the left and crackheads to your right, your property will sink in value.

About the market, you can buy now and then when you want to get a bigger place or move you can always rent your current place. My mortgage agent wrote in my application for my current house that I hade my old place rented so it did not count against my credit.

I am renting my pre-marriage townhome to three teachers at cost. I am getting about $4,000 in write offs on my taxes from it. Plus, I still have the equity.

 

Don't you make these choices in an apartment, too? Some off days we spend doing laundry, going grocery shopping and cleaning the bathroom. Some off days, we go to the library and read for 3 hours. I don't think this has anything to do with owning a home vs. renting. I digress.

I hear a lot of you saying this. And throughout most of the 20th century, I'd have no trouble believing it. But I wonder: Is this ever going to be untrue? Have we reached a point -- or will we? -- where house prices simply can't keep going up?

When my parents first bought a house, in 1984-85, they were making somewhere around $10,000 a year. Our house cost about three times' that. Regardless of their credit situation, that was very affordable for their means.

When we moved and they bought another house, in 1990, they were making somewhere around $25-30,000. Our house cost $81,000. Again, pretty affordable based on their salaries. About 3x.

I don't know when the situation changed, exactly. But if I'm making $30,000 now ... I don't know where the hell I might be able to find an affordable house -- in a decent neighborhood -- for less than $100K. It's not where I live now (which, granted, is one of the most expensive parts of the country.) But for a decent place now, I'd have to pay at least $300K, and that's if I'm lucky: the median home price in my county was $450K this January.

Not only is that not in line with any home-buying situation my parents ever had to deal with 15 years ago, it's not in line with any situation any generation of home buyers has ever had to deal with in the last century.

So I'm not sure how safe it is to say, "My home will almost certainly appreciate over time." It always has, of course. But even when they did, homes could still be bought for 3x your yearly salary. Now, that situation is all but impossible.

When do we get to the breaking point, where houses simply can't keep appreciating because people's salaries aren't keeping up? Or with the lending debacle, have we already?