dzial67

We were planning to rent Stateside anyway but Chartreuses solution has some merit if you want to buy quickly if you have the kudos to get a mortgage - we would find that difficult - age etc. My concern was in trying to get some reassurance before you close on your sale in the UK?

Englishmum

It's traditionally been the norm in the States to put down a 20% deposit when purchasing a house. If you put less down, you usually have to pay for PMI - a kind of insurance which is of no benefit to you, it's for the benefit of the lender only in case you default.

Possibly the reason why the economy is such a mess right now is that people were getting mortgages over here despite putting little or no equity into the property and then were unable to repay their loans - (lenders traditionally took the view that someone putting 20% down is less likely to walk away from their mortgage).

TBH, I don't think it's going to be so easy to actually get a mortgage in the US right now, especially with only a 5% deposit....the banks don't seem to have any money to loan anyone and even the giant mortgage lender Washington Mutual may go belly up today....

PS: I've also heard a couple of commentaries in the media about the 'elephant in the room' that no-one really likes to talk about.....the gist of it being that apparently a few years ago, George Bush made a speech about minority groups (I assume he meant new immigrants/ethnic minority/black people, maybe even illegal Mexicans) being unable to secure mortgages and that the banking and lending institutions should make it easier for such people to have their American dream and buy their own home.

The commentators said that the lending institutions were terrified of being labelled as racist and perhaps getting lawsuits as well as bad publicity. They relaxed their criteria for lending funds to people (often in low paid and insecure jobs) who really should not have committed to paying regular mortgage payments each month and few of whom put down the usual 20% deposit. Few of them were given clear information when signing up for a mortgage with papers written in 'legalise' and they were unable to understand exactly what the terms and conditions of the mortgages were - as well as some of them being ARMs (adjustable rate mortgages) which meant that the repayments would go up and up. The result has been that oo many people have been or currently are unable to repay their mortgages and their homes have gone into foreclosure.

chartreuse

Yeah, that wouldn't really work for us as I'm planning on (sort of) telecommuting with my current UK employer, so would need a stable location which I'd put high bandwidth pipe into. Plus - we're moving to my wife's home town, so we know it pretty well already. Last (and probably least) there's the part of me that thinks that when everybody's being a bear, that's the time to be bullish

dzial67

I dont think its a bad time to buy in the States - we're only going to rent to give us some time to find the right place. We too know the area where we are going so thats not an issue. Didn't someone say he always buys when everyone else is selling - cant remember his name - rich american,

chartreuse

Yes, I found out about this. It's not really that different from the "Higher Lending Charge" that UK lenders impose in similar circumstances, which they use to buy a policy. I've factored it in to my calculations, don't worry.

I'm quietly confident. We're going through a local bank in the small town we're moving to, which helps. In truth, we have more than 5% (my plan B is a 70% LTV with another lender) but, for the reasons I mentioned earlier, we'd rather do it this way.

Oh yes, although I'm not sure it's fair to blame GWB for it. I've had brokers tell me that it would be easier to get a mortgage as an "undocumented alien" than as a law abiding Englishman! It's a bit shocking really, but apparently there are parallels with auto-finance, where lenders repo the car when the borrower gets deported and sell it on (with another loan) to the next illegal. Lather, rinse, repeat.

Giantaxe

I'm a contrarian too - and have made a nice profit off of shorting homebuilder and financial stocks the last couple of years - but I think you have to pick what to be contrarian about. With houses, I think a buyer right now has a far higher probability of being a knife-catcher than anything else. Houses are not like stocks whose prices can change direction quickly. Changes take place over a much longer timespan and spotting long term trends is a lot easier. Throw in the fact that prices are still largely out of whack with historic norms versus incomes/rents, and I think it's prudent even for a contrarian to take pause.

BritishGuy36

Interesting discussion developing.

Our plan is to stay with relatives for a while until the job situation is sorted, at which time we will pile the cash into the bank until we have topped up our moving fund enough to be able to buy a house for cash (and have some left over obviously). We were hoping to have enough from wheels down to buy a house but that's not feasible now due to the conditions discussed in this thread.

That plan allows us to determine whether we want to stay in the area we will be in, and if the work is elsewhere, well, we can just rent close to the job for a while and see what it's like.

Almost $1.82 now.

Cape Blue

I never understand the aversion to renting, I imagine brits have been so ingrained with the "must own property" mantra that even sitting a year or two out seems foreign to them. Perhaps its the experience of watching prices rise for so long and being scared they will not get on the ladder (now snake).

Renting for 12 months to experience the local area better and be able to take a view on the local property market seems a far more sensible option at the moment.

chartreuse

I don't think I said I was a contrarian (though you might be right), but I thought I'd explained that the old "be a bull in a land of bears" tactic was the least significant factor in our decision making. We have what I believe to be good reasons to buy and are just looking at the best way of doing so.

Which brings me to:

I'm not being funny, but we're two people, not all Brits. Also, we're in a specific, not a generic, situation. I've been through price inflation, price crashes, three day weeks, the winter of discontent, etc. I believe I have sound reasons for my strategy, and I'm old enough and ugly enough to not be too proud to admit when I'm wrong. Except I don't think I am.

Our choice is between buying a place, to enable me to earn a salary that is exceptionally high for the area we'll be moving to, or renting and getting a local job earning much less. I must confess, the latter had its attractions. As BG36 has pointed out, the decline in property prices in the UK has hurt people in our situation. This time last year, we'd have been looking at buying a place for cash and having the option of taking a part time job for beer money. Today, the mission is to earn sufficient to clear a decent profit.

chartreuse

Yes, and much more civilized than some fora I visit

You might want to think a bit about buying for cash. It was our plan, until the wheels came off, but with hindsight I realised that there can be benefits to having a small mortgage - tax relief, boosted credit rating etc. It might serve you better to invest a portion of your property pot and use a mortgage to make up the difference. With the right circumstances it can be possible to earn a better rate on the savings than the interest on the loan and still get the fringe benefits.

Giantaxe

Why not spring for high-bandwidth network access in a rental property? In relation to other costs, is it really a significant outlay?

chartreuse

It's the big picture. Putting in a T3 is part of it, which will have contractual terms attached. Having a stable address, controlled by us is another part. We probably *could* rent, if I went out and bought or leased a seperate commercial property, but that would kind of defeat the object, no?

Giantaxe

A lease gives you a "stable" address.

chartreuse

Perhaps. For some value of "stable". But by now we have drifted far from the point and would appear to be in some shadowland where no sacrifice is too great so long as one doesn't end up buying.

It's all getting a bit wierd, to be frank.

Giantaxe

I'm missing the "sacrifice".

The point I am making is that it's pretty unusual that someone has to buy. If that's weird, then so be it.