We moved into our home when it was framed, plumbed, wired, sheetrocked. I well remember the chaos that you now see all around you. We shovelled in dinner, and we worked until 9PM, after a full day for pay. Days off and "vacations" found us hard at work on our love nest... doing the projects that required more than a few hours each night. It was hard work. (still is!) I remember how excited I was when I FINALLY finished priming and sanding the walls and could finally put the color on them I wanted. Then, how exciting it was to see the plywood subfloor painted... and the window and door casing and the mopboards... (I painted all that, too). I don't have any financial advice to offer. When we needed more money we got another job or picked up another shift. Or we saved for what we wanted to do. Or we cut back somewhere else. Maybe you could find a way to save some dough with "sweat equity"... or maybe that's not your "cup of tea". People thought we were NUTS to live the way we did. But we now enjoy 100% equity and the inconvenience seems trivial in hindsight. Anyway, I understand how hard it is to live in a construction zone... I did it for 4-5 years and we still aren't done, although the major inconvenience is long since gone. Hang in there.

i agree with you conceptually about only investing in thing you believe in, or rather in things you can stomach as most investments and industries have a downside if you look hard enough. eventually you get to exploited workers and poisoned rivers and solid waste. i personally struggled with the payday investment i made. the return was high, but i did not want to be associated with it. i said no for about 6 months. over that six months i learned how they (where my money is now) did business. after i understood it i had a hard time thinking of it any differently than a bank. they both loan money based on ones ability to earn money and pay it back. the only difference is the duration and the size of the loan. a bank allows me to spend money i don't have on a credit card and then charges me 13-18% until i pay them back while they themselves are leveraged 10 to 1 on those dollars loaned. the payday place will only loan me money that will be covered in my NEXT paycheck and charge me a flat fee of $5 or $10 while they themselves have a dollar for every dollar they loan out. when i look at it like that i really had no problem with the payday place, but started to have them with the banks. the payday places are not dragging the economy down because of their recklessness. they are also not enslaving an entire generation by offering them credit they cannot pay back. there are people who use them recklessly, and it is real easy to point them out because they are the fringe. it is a little harder to point out the middle class suburbanite who is a slave to their credit card and bank because they get up and go to work each day and keep a nice yard but are living on credit. both industries lend money and both are technically guilty of charging people who don't have money. they are in business to make money, not give it away. in the end neither is good nor bad just as fire is neither good nor bad. the good or bad all depends on who uses it and how they use it. the payday places service a far less afluent and unsophisticated clientele and therefore gives them very little wiggle room to abuse the system. if they want to stay one paycheck behind for the rest of their lives, that is about all they can do. the bank will let me get decades behind because they assume i am responsible and won't let it come to that but do little to stop me and recently have even encouraged me to do so. in my mind it is a match compared to the bonfire. both can be abused, but the potential abuse of a credit card is far greater. but there may be other payday places that have different policies than where i invested. mind you i don't have equity in the payday place�"they borrowed money from me to lend. in short my money is on deposit to be lent out just as if i put it in a savings account for the bank to lend out on a credit card loan. the main difference is my rate of return is almost 10 times higher but not FDIC insured. the only thing i do struggle with is the 10% they charge for cashing checks. this is outrageous in my opinion. i can't understand why anybody would do that unless they were unable to cash it elsewhere and i won't speculate as to why. but in the end they have their reason and are paying a premium for it. and with that i leave it. cigarettes are another issue and i am totally with you. i feel the same way about other products as well most are not as overtly damaging, but their products do carry liability and they push them with abandon to those who are hurt by them. not just talking guns and alcohol. a few minutes watching saturday morning cartoons was an eyeopener to the type of products marketed to kids. slap a mcdonald's logo on a bucket of mud and i think my kids would want to eat it. a friend of mine who is militant about his hate for phillip-morris and smoking in general (i think he lost a parent to lung cancer) holds half his portfolio in tobacco stocks. he justification was that it "those people" are going to annoy him with their smoke and take his taxes in healthcare, they are going to pay him for it. an interesting take on moral investing practices, but for him it makes sense. i respect your desire to not follow my practice of investing in payday lending. we not only have to undderstand our investments, but repect if not love them. i do not love payday lending, and to be honest would rather be elsewhere, but for the time being it is a good place and i am no so morally apposed to money lending as to not take the opportunity. i do however own no bank stocks for obvious reasons, i think their model is risky. i also think they are on the more unethical side of business. they have laws and loopholes that allow them to do things that are illegal to any other company. id it because we need their services and that is what it takes, or is it because they have power to influence if not make laws that favor them? i think recent events have shown us it is a little of both. before i sound too anti-establishment, let me say i think financial institutions are important and necessary�"ie. banks, insurance companies, the US government, the FED, and even payday lenders. BUT they are in busniness to make themselves rich, not us. if you do not understand what they are doing, how they make money, or worse, what you are doing, they will take advantage of you. thus education. it is through education that you can see the smoke and mirrors they use to make you feel good about making them rich at your expense. one of the most ubiquitous is the home mortgage. i am emphatic that the most expensive ways to buy a house are in this order; cash, paid off early mortgage, continually refinanced mortgage, a 15-year note, a 30-year note, ARM, variable rate, interest only, and deferred interest-AKA sub-prime being the cheapest. that said, i don't like differed interest as it assumes the risk in the real estate market and if used by the uneducated or irresponsible it can (and has) blown up in the borrowers face. what does the bank want you to do? they love you to take out a 30 year and refinance every few years or pay it off early. if you are going to take it to term, they prefer you take out a 15-year because it makes them more money and that is why they have a cheaper rate to take it�"they need to give you incentive to do what benefits them and think you are getting the better end of the deal�"if it makes them more money, how can it also save you money and show up in two places at once? this all sounds like hericy i know. but where do we get our financial education from? our bank? alan greenspan has a nice quote about the variable interest only mortgage being the best deal out there if people only knew how to use it and the 30 year not serving its customers as the think. i will see if i can find it. the mortgage subject was perhaps the most eye-opening and influential education i ever had in finance. it is the lesson that taught me to see the whole equation and not look at a financial strategy in a vacuum. it taught me to understand finance on a macro economic level to understand how to best use products on a micro economic level. it is painful and feels like you brain is removed and turned around and put back in. but i assure you it is all true and useful information, but it requires the user to be responsible for their financial life and some are not willing to do this and for them it is not wise to have control. just as fire in the hands a of one is destructive and to another the opposite. what i am talking about is basic business finance�"in short figuring out the lost opportunity cost and the taking the greatest margin. if done properly with understanding risk is minimized and growth is maximized. some will refuse to believe, but that does not prove those strategies wrong. i myself do not practice whole-heartedly all the strategies i know an believe because of issues regarding timing, my own laziness or whatever. this does not mean i don't acknowledge their strengths or potential. but it serves me to understand alternatives. there are many i have encountered on this forum and in other places who flat out throw up a wall and won't even try to understand that there are several strategies to use in every situation and they all have merits. my beef is with those who claim merits that are not truly there or ignore others. those who emotionally attach themselves to dogma that was sold to them without trying to understand. i have been guilty of this and still am at times and it only hurts myself. when i have a few hours to spend with a calculator, i will start a new thread and actually run the numbers on the most popular mortgage products side-by-side including paying cash. i will treat all as equals. it is amazing how different the outcome is from popular beliefs, but if you look at who is selling the mortgages and the information i guess it is not shocking. it won't prove anything other than which is the most expensive in terms of money and what risks are inherent in each scenario. the individual would have to choose which is best for them. the problem is that most choose the wrong thing for what they claim to want. if you know how they each work you can choose more appropriately for your goals whatever they may be.

Closing costs come along with a mortgage or more accurately I suppose a loan? There are basically two types of closing costs. Those related to the purchase (aka transaction) and those related to borrowing any money to facilitate the transaction. Those related to the transaction are charged whether you are taking out a loan or not. Examples include title insurance, property taxes, transfer taxes, attorneys' fees, agents'commissions, certain other types of insurance. Some of these charges will be a fixed fee, others based on a percentage of the sales price. Some of these fees are charged by the title company and some by the state/local authority. The second set of closing costs are those related to taking out a loan. The appraisal fee (which is usually a fixed charge - say $350)and the origination fees (aka points - which is based on the amount of the loan. Each point is 1% of the loan amount). Seems like a lot of the closing costs come from the title company - and you have to do that anyway? I.e. why are loan closing costs a big deal? Most people finance their home purchases by borrowing the money. It costs money to borrow money. The largest cost of borrowing money is, of course, interest determined by the interest rate. The other big cost of borrowing is the origination fee, aka points. It's a big deal because it is a one-time charge based on the amount borrowed. So, it's variable. A point is 1% of the loan amount. If I'm buying a $500,000 house, borrowing 100%, and paying 1 point, it's going to cost me $5000 (just drop the last two zeroes on the loan amount.)If I put down 50% and finance $250,000, the point will cost me $2500. Some borrowers find it advantageous to "buy down" their interest rate. They might pay 2 points or more to purchase a lower interest rate over the life of the loan. Other borrowers might pay zero points and buy a slightly higher interest rate. Lenders will often tie interest rates and points together as a marketing tool to stand out against their competition. So, depending on the amount financed and the number of points charged, this particular cost of borrowing money can make or break the loan for a potential buyer. And do mortgage related closing costs go up with the amount of the loan? How why? Some do, some don't - see above. Why? 'Cuz. (LOL) Then depending on the last, only buying a house full price/cash is an advantage? A hefty downpayment and smaller loan gets you (no)where? Not necessarily. Sadly, Mary, this is where the math becomes really important. But a good mortgage calculator with a full amortization schedule can be a big help. It will calculate not only the monthly payment but the total interest cost of the loan (prepare for heart failure) and enable you to model different interest rate, loan amount, and payment scenarios. Stop thinking of it as math and start thinking of it as money...playing with money. So when people talk closing costs - are we talking two types? The type you pay no matter what - say you bought full purchase price - or even inherited a house. And the ones that come along with a loan? Which are loan ones and which are not? Yup...see above. Mary, the best way to understand the total transaction costs of a real estate purchase is to take out your settlement statement from you recent home sale. This is called the HUD-1. Then go to HUD's website and follow the line-by-line explanation of what each settlement line means. You'll see right away that the form is divided into loan costs and other costs. Doing this is akin to doing your taxes by hand. Despite the miracle of tax software, you will never understand our tax system better (and how it applies to you) than after you've done your taxes with paper, pencil, and a good tax manual. Something, each taxpayer should do at least ONCE in their lifetime. Same goes for the HUD-1. It's work but it's good work. Hope that helps. The concepts, guidelines, and rules-of-thumb are important but no piece of generic advice will ever replace working the numbers specific to YOUR situation, your financial needs, your psychology, and your future situation. Mary, I know how much you want to buy a home versus renting. You love "home" - it's a passion, a hobby, and a lifestyle for you. You also want a secure financial future and you have doubts about how these two fit together right now. I think it's great that you keep asking questions and seeking answers. I read that you had engaged a financial planner. As you review your decisions, you might want to start a new hobby - getting past math anxiety by learning more about consumer finances and financial planning. The math is such a small part of it. It's much more a process of thinking and mindset. You might want to see if your local county or community college offers financial education classes. It's a great way to meet people who have similar interests and it can become downright addictive. Fifteen years ago, I didn't know there was such a thing as a financial calculator...now, I carry one with me all the time. Playing with mortgage scenarios, calculating investment earnings, etc. is a great way to pass time while waiting in lines...sort of like having your own financial game-boy. Good luck!

You've asked the great question: Does it make financial sense? Only you and your advisors can know for sure. For example, what is your current family income? Does it put you at a level where mortgage deductions will begin to phase out? What does your "rainy day" fund look like? You're young, and can probably weather any economic storm to come, but what do you need to protect you and your family in the event of something like the Great Recession of 2007? So- stay liquid with that portion. Sure, it doesn't earn a ton (if any) interest, but trust me on this- when you need it, and it's there, you don't care. Nothing erases the idea of "no earnings" faster than knowing that if push came to shove, you can pay your bills for a certain amount of time. Conventional wisdom says leave a 6 month cash "cushion" to live on. So- if you have a very big mortgage, you'll have to put that much more aside, to protect both your family and your asset. And be aware that that asset, itself, could be a money loser for years, in the worst of "dips". It's happened before, it will happen again. Are you and/or your wife employed in any industry vulnerable to economic downturns? If you lost your job due to huge swings in your industry/consumer demand etc- would you rather have a big mortgage OR a big reserve fund? I'm a big believer in liquidity for a year, and one of the ways we do it is to keep our "monthly nut" small. No debt, save for a small mortgage against big equity. Great credit lines. We can weather any financial storm, with this approach. Finally, do make sure you're diversified. This is one place that some of the cash from your build could help. Just be smart, judicious and stay true to your own goals.