Foreclosed house question


#1

I don’t have the money to buy a house right now, but sometimes I look at the prices.

I love a good deal and the foreclosure sales are a really good deal. It just feels a little creepy to think about buying one.

Can a Catholic trying to lead a moral life buy a foreclosure home in good conscience?


#2

Some things to consider.

  1. Broke people shouldn’t buy houses. Houses are expensive, especially the maintenance and upkeep. Plus one hiccup and you are in serious trouble. You need to have a sizable downpayment, and your mortgage payment (including taxes & insurance) should be no more than 25% of your take home pay.

  2. Buying a foreclosed home is not immoral. You are not forcing them to sell, and they are not forcing you to buy. While they may be in financial trouble, that is not your fault or responsibility.

  3. Don’t think of it as getting away with something or taking advantage of someone, buying a foreclosed home in most instances will allow them to move forward with getting their financial lives put back together and be out from under debt that is crushing them. I’m quite certain they would rather you buy their home than another one down the street.

  4. Re-read point #1.

  5. Don’t worry about prices going up much for the next 5 years, easy. Pay off your debts, save up a down payment, and then you will be ready to buy a home. (check out www.daveramsey.com)

  6. Re-read point #1.


#3
  1. I’m not broke! :slight_smile: Thanks for the percent figure, it is helpful.

2.& 3. This is what I was wondering, thank you for taking the time to answer.

4&6. Duly noted.

  1. I am fortunate to be in no debt right now. Good to know about the next 5 years thing.

#4

I would caution, though, to be charitable when viewing foreclosed porperties. Work with an agent and ask them which houses are vacant to look at. In my neighborhood, we have what I glumly refer to as the “funeral procession”…prospective home buyers driving sloooowly past the houses that are in the foreclosure process, but still have families living in them, who are trying very hard to save their homes. :frowning:

I live in a small timber town; there were no irresponsible or broke people…just those who lost their jobs when the mill closed. They earned a fair family wage at those jobs, but barely qualify to flip burgers for minimum wage now. they can not and should not be faulted for their circumstance. I pray for them all.


#5

Be careful, some foreclosures have maintenance issues and the outgoing owners have been known to gut or even damage the place when they leave. If they owners have vacated by the time you have the house inspected, you should be okay, just have a good inspector.


#6

[quote="SpaceNeedle, post:4, topic:185514"]
I would caution, though, to be charitable when viewing foreclosed porperties. Work with an agent and ask them which houses are vacant to look at. In my neighborhood, we have what I glumly refer to as the "funeral procession"...prospective home buyers driving sloooowly past the houses that are in the foreclosure process, but still have families living in them, who are trying very hard to save their homes. :(

I live in a small timber town; there were no irresponsible or broke people...just those who lost their jobs when the mill closed. They earned a fair family wage at those jobs, but barely qualify to flip burgers for minimum wage now. they can not and should not be faulted for their circumstance. I pray for them all.

[/quote]

I feel heartbroken when I hear of these situations. I don't know why banks won't try to work with people who are wishing to pay 1/2 or something of their mortgage...they'd rather it go through foreclosure, and not get any money until it sells again? And the new loan might not even have anything to do with the old bank who owned the house to begin with? Mind boggling. I will never get that. :(


#7

I second this, get a though inspection done.

We looked at a foreclosure one time where the previous owners, gone by then, had ripped up all the flooring and taken it with them. There was no hardwood, carpet, or tile in this house. The house was also fairly new.


#8

That’s nothing. I’ve seen entire cabinets taken out, appliances taken or destroyed, light fixtures taken. The worst I saw was photos of one condo. The owners had painted EVERYTHING black. The wall, the ceiling, even the carpet.


#9

That’s sad. They must have been very angry. :frowning:


#10

25% of net is brutally overconservative. It might be a nice goal for those move-up shoppers well into the 6 figure income range, but it is crazy talk when directed at entry level folks. A modification to make it better would be to allow up to 25% of GROSS income for mortgage, taxes and insurance) for entry level buyers and at least 10% down payment and a couple month rainy day/emergency fund too. With rental rates being what they are, no family would ever be able to save up enough to buy a home at 25% net. Most folks are paying more than that for their apartments.


#11

[quote="zz912, post:2, topic:185514"]
Some things to consider.

  1. Broke people shouldn't buy houses. Houses are expensive, especially the maintenance and upkeep. Plus one hiccup and you are in serious trouble. You need to have a sizable downpayment, and your mortgage payment (including taxes & insurance) should be no more than 25% of your take home pay.

  2. Buying a foreclosed home is not immoral. You are not forcing them to sell, and they are not forcing you to buy. While they may be in financial trouble, that is not your fault or responsibility.

  3. Don't think of it as getting away with something or taking advantage of someone, buying a foreclosed home in most instances will allow them to move forward with getting their financial lives put back together and be out from under debt that is crushing them. I'm quite certain they would rather you buy their home than another one down the street.

  4. Re-read point #1.

  5. Don't worry about prices going up much for the next 5 years, easy. Pay off your debts, save up a down payment, and then you will be ready to buy a home. (check out www.daveramsey.com)

  6. Re-read point #1.

[/quote]

I'm sorry-um...should a broke person buy a home? What are you trying to say? Come on-I think your being obtuse on this one...:thumbsup:

A Catholic can buy a foreclosed home in good conscience. It's not pretty, and I'd feel bad as well, but the benefit is simple-if you buy a home, when your ready, you can turn it into a loving Christ centered home.

Good luck when it's your time!


#12

Not really. Most banks put a limit at 35%. But more than 25% is going to make things very tight for most families. It will force them to live paycheck to paycheck for a long time, and their lifestyle will be very spartan. Plus they won’t be saving enough for rainy days.

Most people if they budgeted and got themselves out of debt could be ready to buy a home in under 5-7 years. We’ve just become a microwave culture that thinks 6 months is too long to wait.


#13

I live in a CHEAP apt and earn a decent wage for a single person. I pay nearly 29% of what I make in rent.

In some respects it’d be better to be paying more towards a house and building equidy because I’m already paying more than 25% in rent, and I rent a VERY simple place. And at the end of the month I have nothing to show for it.


#14

On the other hand, people whose mortgage balances exceed the value of their home having nothing to show for it either; they have negative equity.


#15

Housing costs vary greatly by State and towns within the State. I live in NY and what a house and apt cost me in Upstate NY would be considered free compared to those living in and around New York City.

Some people have no choice in the matter of how much % it consumes - assuming they want some sort of roof over their heads. These folks make adjustments in other aspects of their daily lives.

That being said - only you know what is appropriate within your budget and what your risk tolerance is.

The banks with their supposed revised and more “conservative” lending practices should also give you an indication on what they are willing to allow in credit.

Is 25% or 35% of net or gross prudent? I think you need to look at your financial picture as a whole.

Do you have other debt? Do you have a high standard of living where you need the latest gadgets and other things? How’s the retirement account and savings account?

Just be sure to do a well thought out budget ahead of time factoring in maintenance, and your other daily required expenses - food, utilities, transportation, clothing, etc…

If it’s an honest and accurate assessment you may have a clearer answer.


#16

[quote="Chiltepin, post:1, topic:185514"]
I don't have the money to buy a house right now, but sometimes I look at the prices.

I love a good deal and the foreclosure sales are a really good deal. It just feels a little creepy to think about buying one.

Can a Catholic trying to lead a moral life buy a foreclosure home in good conscience?

[/quote]

my nephew actually asked his priest about this because the only job he could find (in Detroit) was collections and foreclosures. Yes it is moral as long as the business practices followed by the institution and all involved are legal and ethical. For one thing it helps the debtor get out of that situation and can (not always but usually) get them out from under that burden. It also makes lower cost housing available to more people, and makes local S&Ls and lenders more stable which helps everyone.


#17

Alot of over-inflation happened, yes, but some of that could be forseen and people were foolish. Like buying townhomes…younger folks, metro familes or older folks tend to like townhomes…especally moving into a brand new one. Ten years later there’s new town homes with new features and the price of the original town homes plummet. Same with houses in “developments” with “associations”. After the initial sell they become far less appealing to people.

However, the “value” of a home that is being paid off isn’t really about an apprasied value. So much of that is SO subjective. If a company moves into the town the value of that home will shoot up WAY past any “value”. If a large company moves away home values plummet. If you look at inflation and current value vs. presant value you can also get a picture of if you’re really upside down on your mortgage. So much of the dollar value of a home is about the local economy…and even town lines or school boards. If a school is highly rated it can drive up property values by STREET and one house can be valued MUCH higher than its twin next door. But if you’re 50 years old having a school available adds no value to the house. Its about resale.


#18

[quote="Chiltepin, post:1, topic:185514"]

I love a good deal and the foreclosure sales are a really good deal. It just feels a little creepy to think about buying one.

[/quote]

Be aware that it is often impossible to get the house for the advertised foreclosure price. Even after you put in an offer, the bank is going to look around for someone who is willing to pay more, and then at the end, the owner might declare bankruptcy which delays everything for a year. I have several friends who fell for one of these "good deals", but none of them actually got the house in the end.


#19

[quote="purplesunshine, post:17, topic:185514"]
Alot of over-inflation happened, yes, but some of that could be forseen and people were foolish. Like buying townhomes...younger folks, metro familes or older folks tend to like townhomes...especally moving into a brand new one. Ten years later there's new town homes with new features and the price of the original town homes plummet. Same with houses in "developments" with "associations". After the initial sell they become far less appealing to people.

However, the "value" of a home that is being paid off isn't really about an apprasied value. So much of that is SO subjective. If a company moves into the town the value of that home will shoot up WAY past any "value". If a large company moves away home values plummet. If you look at inflation and current value vs. presant value you can also get a picture of if you're really upside down on your mortgage. So much of the dollar value of a home is about the local economy....and even town lines or school boards. If a school is highly rated it can drive up property values by STREET and one house can be valued MUCH higher than its twin next door. But if you're 50 years old having a school available adds no value to the house. Its about resale.

[/quote]

All this is true. One's home has intrinsic value to an individual as a place to live, but that's a personal value. Market value is what somebody else will pay for the property today. And like stocks, bonds, oil, copper, the dollar, the Euro, and farmland, home values can rise and fall. The housing markets are influenced by all the factors you mentioned. For years--decades--homebuyers were always assured that values could only go up. But that's not the case. The housing market can go both ways.


#20

When we were looking to buy our first home, my wife and I figured what the monthly mortgage payment would be on each home we looked at. We thought, OK, how does that compare with what we are now paying for rent? Can we comfortably afford that payment?

I thought everyone did that. Much later, I was having a discussion with a mortgage broker, and I said to him, “when people come to see you, don’t they really already know how much of a monthly payment they can afford?” “Jim,” he replied, “people think that they can afford whatever I tell them they can afford!”


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