pete11

No, by all means. I'm not picking on you. Most people don't even know how an I/O loan amortizes, never mind an option arm. Suffice it to say, payments spike higher than they realize. Matt is right about home ownership, it does help a community, but when people are stretching to own, and the barrier (read down payments) is taken down people will spend what they've "qualified" for. Sorry for taking this thread off topic. As for the transaction costs you not only have realtor fees, but home inspection, closing costs on the loan, appraisals, attorney fees. Just because some of these are wrapped in the purchase price, doesn't mean you don't pay them. I only responded because I would hate a young man who is currently renting comfortably,to tie up his finances for 10-15 years without hearing both sides of the equation.

6% realtor fees, attorney, inspection ,other closing costs. -- Whether Real estate goes up or down is immaterial. The PITI quoted was a negative amortizing mortgage which puts you in a negative equity position. These loans are THE reason foreclosures are skyrocketing in RI. This is a used car trick of sell the payment, to the point where the shill (ahem) customer doesn't realize the debt they've taken on. P.S. what I said about traditional mortgages, is exactly what you said about "old-timers"

Jim you do what your doing. Save the money your saving by renting, for some sort of down payment. What these financial geniuses that are telling you to take out an exotic loan with no money down are saying is that real estate only goes up. The generations before us acquired wealth in their homes, because fully amortizing loans where a forced savings account while nominalizing debt (through inflation). I really don't understand how a resident (who might leave in 3 years) asks for a rental suggestion and is responded by buy. Even if prices remain flat transaction costs could run 8%. I didn't want to post on this thread, even though it made me ill, but knowing that Jim is getting married soon and makes no pretence of who he is, should not be made to feel guilty because he rents. Jim take a look at this site before you make a decision to buy. http://thehousingbubbleblog.com/