[Thinking about moving to Providence?]

How could real estate going up in value be immaterial to this discussion? And let's get it straight--the loan is not the reason people are going into foreclosure--it's their inability to pay for that loan, no? And since when does the buyer pay the realtor fee, which is more the norm at 5% than it is 6%. These are not leading or offensive questions. I simply want to learn and you seem to know something about financing real estate. Thanks.

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.

[Thinking about moving to Providence?]

i'm not ignorant enough (though i won't claim to be too bright either!!!) to believe that real estate does not go down, even though i personally feel this city has a bit of a bullet proof vest (or at least close to it) should some extreme downfall in the national market occur. but i'm so sick of people talking bubble this, bubble that. soon enough it becomes a self-fulfilling prophecy. i just truly feel, from doing research on the subject from every age bracket, most importantly old-timers who felt they bought at the top of the market when they could barely afford to, when everyone told them they were stupid, that real estate is a very safe and solid investment as long as you don't have to sell in the "down" market if and when it comes. it's the surest way to any sort of wealth for people that otherwise would not have it. but you have to get into the game to play it, otherwise you're being played by the throw-away society we live in.

BTW--transaction costs of 8%? Explain

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"

[Thinking about moving to Providence?]

lots away). i'm sure i know many more people who own homes that are just as "bad" for their communities as renters. i have no intentions of leaving. if i could afford to buy, it wouldn't be in providence, and i want to live in providence. i like the city. no, that's wrong. i love this city. i'll do what i can to stay int he city or as close to it as possible. right now that means renting. i've been in my apartment for over a year. i'll be here for at least another year (that's when my fiancee moves back from philly and we'll need a bigger place because this is just a small 1br). and then we'll stay in that apartment until we decide we have enough money to buy. until then, i'll be renting, and i'll be perfectly happy "throwing away" my money.

that being said... if you can find me a house that i can buy with no down payment and have my monthly payments be only $700 (including diving my property taxes by 12 months), by all means, let me know.

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/