I remember as a kid my Dad telling me that you NEED 20% of the purchase price of a home to put down if you are going to buy a house.

Although it isn't technically true and he was wrong in practice, it was sound financial advice that has never left me.

Don't you need 20% down to avoid some sort of insurance?

PMI insurance. I believe with creative financing you can get around it..

Using your equity line of credit to take vacations...that's a great idea!!

If you using the equity in your house for anything other than home improvements/repairs....perhaps education, you probably need to rethink your finances.

My dad also said to never ever take a penny out of your home.

I opened a line when I started my firm as a back-up.....thankfully, never had to touch it.

You would not believe how many closings I've done lately where I have to call the seller and tell them to bring like $25,000 to closing...and they're shocked by it.

It's no wonder we're in the situation we're in.

I have some questions about the $25M at closing. Is it something that their RE agent did not cover with them? What does that money cover? Did they assume it would be deducted from their gains? Just curious because we are thinking about downsizing.

They took all their money out of their house and leveraged the hell out of it.

1. Say if you buy for $500M.
2. Back then you could get away with putting $25M down.
3. Then, two years later you want to go on a nice vacation and buy a car, so what do you do?
4. Take out a HELOC for $60M.
5. You blow through that completely.
6. Then, two more years later, you want to buy a new house.
7. You take a little hit on it becuase you want to buy something right away so sell yours for what you perceive to be "too low."
8. Selling price is $515M
9. You pay realtor commissions of approximately $27M.
10. State, County and City transfer stamps (Chicago is where I do most my work).
11. Got to pay title.
12. Got to escrow taxes.
13. Got to usually in this market pay some type of credit.
14. Got to play lawyers' fees.

Next thing you know, you owe $15M....in many cases, more.

Mortgage brokers are the used car salesmen of home financing. They are just looking to get a pay day, and when the broker and RE agent are in bed together, it spells danger to any new home buyer.

When we were searching for our first home, we chose elmhurst as our destination. Expensive of course, so the agent thought up some creative financing options. First he thought we could get a 50 year mortgage. (clue #1 that this guy was out of his mind) Then we found a house we really liked, but it was out of our range. But he says, listen, I talked to the other agent and we have this figured out. You buy it for x amount of dollars, but then we sign a promissory note with the sellers that we promise to pay them 10k per year for the next 5 years. (clue #2) What made him think we could come up with 10k every year for 5 years, I have no clue.

quote:

Originally posted by GE Fan:

You would not believe how many closings I've done lately where I have to call the seller and tell them to bring like $25,000 to closing...and they're shocked by it.

It's no wonder we're in the situation we're in.

My dad was in banking and never even had a credit card until one was required for hotel and travel reservations. He still walks around with a pocket full of cash.

Fan - It seems lack of understanding the paperwork/contract but signing anyway has come up in nearly every story I read about "we are losing our home in this terrible economy." People can ignore what they don't want to hear very effectively.

Americans like to hate on lawyers, but if you don't know what you are doing in a transaction - you had better pay someone who can tell you!

Just reading the local newspapers makes one realize that the philosophy of buy now, regret later is often used locally. There are so many foreclosures!

GE that was well said and well figured! Easy to understand. I see it at closings here too sometimes. Then I of course go home and panic-look at my own mortgage statment, make sure I'm going in the right direction and vow not to move right now.

quote:

Originally posted by GE Fan:
They took all their money out of their house and leveraged the hell out of it.

1. Say if you buy for $500M.
..... with putting $25M down.
.... HELOC for $60M.
.... Selling price is $515M
..... approximately $27M.
.... you owe $15M....in many cases, more.

I assume you meant K, not M in all of these numbers?

Which reminds me, it always made no sense to me why you sometimes see Million abbreviated as MM. Where's the other M come from, I wonder?

Thanks, Fan. That's what I hope you were referring to. The agent covered #9,10,11,12 and 14. We know those will come out off before we see any money. We have no credit to pay off other than the mortgage balance.

As for the M instead of the K, I worked in the print industry for years. We always quoted prices per thousand or M. That's been over 30 years. I think it comes from the Roman numeral M for 1000. I might just think that because I'm Italian.

This message has been edited. Last edited by: M,

M = 1,000 in Roman numes

K is probably more accepted. In the high-flying financial industry that I am the Captain of, we use M to = 1,000,000.

Funny, I work in trailing edge technology and we just say per 1,000 or x/1,000 (industry wide I might add).

I remember M for 1000 too and I'm not that old.

quote:

Originally posted by lupechennel:
I remember M for 1000 too and I'm not that old.

If you are who I think you are then, yes, you are old.

Interesting. It explains using M instead of K (or perhaps, more appropriately, k, for kilo-). Still don't get the MM, as that would be just 2,000 in roman usage. Per wikipedia, the proper thing to do would be to put a bar over the M.

Maybe it's three zeroes for each M

quote:

Originally posted by middlein87:
Still don't get the MM, as that would be just 2,000 in roman usage.

And you're the engineer? The math guy?

Stay with me here.
M = 1,000
1,000 times 1,000 = 1,000,000
MM = M times M
MM = 1,000 times 1,000
MM = 1,000,000

Thank god you went to Notre Dame and not Illinois. I would be mortified if you went to Illinois.