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WHY DID I DECIDE TO BUY

  • why am I paying such a high rent for such a sh*tty kitchen?
  • I can invest in a property
  • living @ home isn't an option
  • prices are low right now, but they're going up
  • My credit is excellent, I have no debt
  • You can pull $$ out of your retirement for 1st time home purchase
  • Tax advantage
  • Rent goes up, your mortgage doesn't

RISK FACTORS

  • Going back to school?
  • Is this a wise decision long term?

STEPS

  • Find a real estate agent that you like - make phone calls, really do the research
  • Meet with lender for crunching numbers
  • Get pre approved
  • Start looking

BUILDINGS

  • 5750 Bou Ave, ROCKVILLE, MD 20852
  • 4801 Fairmont Ave, BETHESDA MD 20814
  • 2501 Calvert St NW, WASHINGTON, DC 20008 (Adams Morgan) - right by Open City and in front of Omni Shore Hotel
  • 1869 Mintwood Pl NW, WASHINGTON, DC 20009 (Adams Morgan) - housing across Mama Ayesha
  • 1200 23rd St NW, WASHINGTON DC 20037 (West End)

ACTUALLY DOING IT

  • FINRA Incentive Compensation helped out a lot!
  • Taking out a loan from my 401K
    • Can't change the loan amount, once it is set, that is what you have to pay all the way through
    • Currently I contribute 19% and my employer matches 6%. Now I'm going to be changing my contribution to 6% - to take advantage of the employer match, otherwise I lose out on money. The rest of the money will be paid to the loan over the coarse of 3 years.
    • I am allowed to pay the loan off early by putting in more
    • The loan you get is pre-tax money. When you contributed it into your 401k, it was pre-tax. When you take out a loan, it is pre-tax. When you pay it back into the account it is after-tax.
    • You pay interest, but you pay it back to yourself.

PROS & CONS OF BORROWING FROM 401K

  • CON: The money you contribute into 401K is pre-tax and the money you take out to borrow is pre-tax but the money you put back as repayment is taxed on and will be taxed on again when you withdraw
  • CON: Mortgage interest is tax deductible (not to be confused with Mortgage Insurance (PMI) which is not) Interest on the loan from 401K is not tax-deductible.
  • CON: Taking a large-sum loan and paying it back over time means that money won't be able to grow and compound. The larger your account balance is, the more it has the potential to take advantage of long-term market growth.
  • CON: the amount you lose on that seconding taxing of your interest that you pay back into your 401k from a loan, is nothing compared to the loss you accumulate by not having the money in the 401k plan to grow as the market grows. Article - 401(k) loans: Are you really taxed twice
  • CON: The risk is whether you pay yourself as much in interest as you can earn if you didn’t take the loan out to start with and didn't allow your balance to grow and compound with market growth.
  • CON: I have to hold on to my job until I pay off the loan. Otherwise, I have to repay the entire loan amount due within 60 days.
  • PRO: Pay increases every year - your mortgage cost stays the same (not the case when you rent, since rent goes up)
  • PRO: Bonus helps
  • PRO: My car payments are going to go away in October 2017
  • PRO: I pay the interest back to myself

ALL THE THINGS I'VE LEARNED & NEW INFORMATION I'VE GAINED

  • Mortgage payment is the sum of monthly principal, interest, taxes and insurance (PITI). Your monthly mortgage payment is calculated using these four factors.
    • Principal: the original amount you borrowed from the lender
    • Interest: what the lender charges for lending you the money to buy your home
    • Taxes: 1/12th of the yearly property taxes on your home
    • Insurance: includes homeowners insurance and, if required by the lender, Private Mortgage Insurance (PMI)
  • PMI is 1% of loan amount. Divide by 12 for monthly payments. So a 300K loan would have a PMI of $3000 annually, which is $250 monthly. You can cancel PMI once you've paid at least 22% of the original loan amount, or if an appraisal shows that your home has appreciated and your equity is more than 20%.
  • Closing costs are administrative fees and other charges related to the home purchase that are paid at closing. They're normally 3-6% of the loan amount. Don't believe ads promising "no closing costs." There are always closing costs. What that really means is that the lender will let you finance the closing costs (which means you'll be paying interest in the sum).
  • It’s common for lenders to transfer servicing of loans. You might have several servicers over the life of your loan.
  • The mortgage note is what commits you to paying the actual loan. The mortgage provides security for the loan.
  • IMPORTANT WEBSITES

QUESTIONS

  • FOR VANGUARD
    • How much can I take out? 50% or $50,000
    • What are the fees associated? $35 origination fee and $25 annual maintenance fee
    • Is there a penalty for withdrawal?
    • Interest? 4.75% paid back to yourself
    • Does the loan that I'm paying back per month just go back to the same account and invested? Yes
    • What's the finance charge? The finance charge is a combination of the interest rate and the annual maintenance fee. Interest is compounded
    • Is the loan repayment from paycheck pre tax or after tax? I hear only the interest is after tax? The whole repayment amount deducted from paycheck is after tax.
  • Did my credit card get charged for the appraisal ($475)and then will I have that charge again on the closing costs?
  • ✔ Did I get $300 back for the dryer issue from the home inspection?
  • Did I get my security deposit back?
  • Did I get my Redfin refund?
  • ✔ Did I get my refundable $250 check for moving in to Condo building?
  • Did I apply for Homestead after closing? - (http://dat.maryland.gov/realproperty/Pages/Maryland-Homestead-Tax-Credit.aspx)
aug 6 2014 ∞
apr 18 2017 +
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