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To House, or not to house


samurai nightling

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So in talking to some people tonight about me and the fiance looking for houses, i thought i would just get some points of view from home owners and non-home owners. What are the pros and cons? Should we or shouldn't we? We want a house eventually anyway, and plan on having a family within like 5 years.(Maybe?) Why waste money on rent when it could be towards a house anyway? So let's hear some discussion on this if you would like :P I know it's alot of work and upkeep, but isn't it worth it?

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Short answer, if you can, do it. Now is a good time simply because of all the repos up for auction. If you have bad - fair credit you might want to hold off simply because the banks are gun shy right now and will stick you with higher rates. If you have good credit and can afford it, go for it! Like I mentioned look for those deals at auctions, some of them are amazing.

 

 

 

 

Good luck!

 

 

 

Shaftiel

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There have been some interesting things written recently about how good an investment real estate (specifically primary residence) really is in both the short or long term.

 

The short version is, it really isn't a money maker.

 

There are good reasons to own, and equally good reasons to rent.

 

The discussion isn't really easily condensed into this forum, unfortunately.

 

One deciding factor is how long you intend to stay. A good guideline is 5 years. If you want to commit to a house for a minimum of five years, a house CAN be a good solution. Less than that, probably not.

 

My personal advice, unless you can afford a true 80/20 conventional mortgage, AND that 20% doesn't deplete ALL of your savings, then you should strongly consider continuing to rent.

 

YMMV.

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Good questions! I was in the same boat as you two years ago - engaged and looking for homes.

 

First off, please don't listen to anyone that just tells you to "go for it" or "don't do it". You need to evaluate your own situation, none of us can without more information. So:

 

1. Why are you considering buying a home? What are you not satisfied with in your current living situation? Keep in mind you'll have to live in a home for a minimum of 5 years to break even unless something amazing happens in the housing market.

 

2. Are you paying for your own wedding? That's common these days, and ends up being $15000-20000 for 150 people (even if you try to cheap out in certain areas). Planning a wedding is a ton of work, and shopping for a home is a ton of work. Are you sure you want to do both? Mrs Unclean and I tried that, but it was insane. We gave up on the house search and focused on the wedding first. And we're glad we did, we would have been stuck with something much less awesome that what we found now.

 

3. How much home can you afford? The 28/36 rule is a pretty good start. No more than 28% of your gross monthly income should go to your house payment, 36% to all debt payments. So let's say you make $60k a year - that's $5k/mo gross. Your mortgage shouldn't exceed $1400 (I'd personally include taxes/insurance/etc too in that). So you're looking at $175-200k for a pricerange. Now take that $1400 and set it aside for a few months. Is that cutting it too close? Maybe you have to change your numbers then. Also, what happens if one of you loses a job? Are you screwed right away?

 

3a. What kind of down payment do you have saved up? You need at least 3.5% of the home price now ($7000 on a $200k home), and closing costs will be another $2-3k. Will that wipe out your savings? You should ideally have 3-6 months of living expenses saved, so you'll need another $6000+ on top of your down payment. So have you saved at least $16000 for a $200k home yet?

 

I don't want to turn you off to the home buying process - it can be a good thing with a great result. Just don't expect for anyone to be able to tell you what to do, you need to do your own homework on it. Real estate agents can help you with the "homework", but it's you that ultimately needs to do it.

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Remember that there is a tax credit of $8,000 for first time home buyers. I believe that was extended out to June or so of this year.

And a $6500 credit for existing homeowners. :)

 

You have to have a signed contract by April 30 - that means you've found a house, got financing in place, put in an offer, went through the negotiations, and had the contract signed by the buyers and sellers. That process takes a month by itself, and it took us about 2 months (30 home viewings) before we even found a great house for us.

 

That means you pretty much have to start looking now if you want to make it in time for the credit. Just don't let that pressure you into buying a home prematurely. If you can't afford it, or make bad decisions, it's going to cost you a heck of a lot more than $8000.

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I know you guys have been dating for a very long time, but have you actually tried living together?

Have you guys thought about maybe renting for 6 months/a year before making a huge purchase on a house? See how it really is living together :)

 

You know that I don't really like houses since I've been in city apartments my entire life, but I'm not gonna be the one living in it soo :P

 

Whatever you chose, I'll be there for the housewarming ;D (If I can make that drive lol)

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Unclean has pretty good advice imo. Certainly don't plan on buying a house if you don't plan on living there at least 3 years, 5 years is better but still not ideal. Overall it is a buyers market, so you do have that going for you. I know when I bought my house there was a lot of expenses I didn't really consider (updating, fixing, furnishing, etc). Don't go for an adjustable rate loan, stay with conventional loans. The only place for interest rates to go is upwards. I hate to admit it :o ....but gl has a really good point too. It may make sense to rent awhile if you haven't lived together, but that is a something you are probably the best judge of. Just make sure you use a realtor you can trust. Overall though, it is an attractive time to buy with very low rates and depressed prices....just make sure you can afford it and that it is the right timing in your relationship.

Edited by Jibbajabba
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1- rent is money for other people (landlords) to spend on their own house and build equity with.

2- spend the money on yourself and build your own.

3- good time to buy.

4- In many cases right now, mortgage (and taxes and ins) is cheaper than rent. Ex: looking to pay 425 on house vs current 750 rent.

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I've made money and lost money in real estate. The universal rule that real estate is a good investment doesn't always apply.

 

Check the home market values vs. median income to determine if the home you want to buy is priced right AND the area is trending neutral to upward. Ie: buying a $600,000 home in Detroit for $300,000 isn't necessarily a great deal.

 

You are on the right track. My strong (really strong) advice is to listen to Dave Ramsey (daveramsey.com) and learn his financial philosophy on home buying. Empirically:

1. Establish an emergency fund

2. Eliminate your revolving debt and car debt.

3. eat beans&rice and rice&beans

3. Save for a down payment

4. Buy a small home, build equity quick, buy a bigger home if needed.

 

It is more important to be in a good financial situation than to lock in a 5% rate instead of a 6+ % rate. If you compare the savings in that spread vs. what you save in debt payments from eliminating the above...you'll figure it out.

 

Good luck.

 

 

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I rented a house for eight years and I hated it.. The landlord was a Church and they would come in and inspect every 6 months, but would never fix a thing.. It was like your parents coming over just to see what your doing. When I told the church we bought a house and were moving they got nasty and told me I owed 2 months rent for damages. There was a mold problem that I had to clean every month, so I called the board of health. I didn't have to pay the money they demanded and they had to put some major money into the house to get it out of Condemed status.

 

You never know who your landlord is, and I was suprised that a church could be so "slum lordish".

 

Buy if you can..

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I rented a house for eight years and I hated it.. The landlord was a Church and they would come in and inspect every 6 months, but would never fix a thing.. It was like your parents coming over just to see what your doing. When I told the church we bought a house and were moving they got nasty and told me I owed 2 months rent for damages. There was a mold problem that I had to clean every month, so I called the board of health. I didn't have to pay the money they demanded and they had to put some major money into the house to get it out of Condemed status.

 

You never know who your landlord is, and I was suprised that a church could be so "slum lordish".

 

Buy if you can..

Reminds me of when my sister was trying to get a place to live with her first husband, they rented a house from a landlord (for 2 years) guy was a jerk and the home was in bad condition (the touch up was in poor quality, and the guy was rude over all), moved out and got another home, husband was jerk, so she filled for divorce ( he still loved his ex-wife, not my sister), she now has another home, with 2 kids and a husband in which they moved into 4 years ago, it's a pretty nice home for where they live (No place Minnesota). Personally I would try living together, and no going over to her place every few days doesnt count it, I plan to do that with my girlfriend when we make that leap, 500-800$ in rent isn't to bad (and thats for 2 bed 1 bath apartments, size does matter the price, but the biggest 2 bed 1 bath stop at around 700-800$, also might depend where you live.)

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Heh, rent here in SoCal (Orange County area) is 950 - 1350 1 bedroom, 1350 - 1700 2 bedroom. Very expensive here.

 

 

 

 

Shaftiel

 

One would be lucky to find a one bedroom for $1500 here in NYC shaft lol :P

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Thanks for all the replies guys. We're looking for a smaller house, just around the $130k range. We added everything up, and i mean everything, billwise that we would be paying while living in a house of our own to see what kind of payments we might be able to make for the house after everything else is paid for each month. And the whole living together thing is just, funny how many people make that the priority in a relationship. I won't go into that topic though, or how much time i spend with my fiance.

 

Right now i probably don't have quite as much money saved up as i should before buying a house, but it's something we just really want to do if we can afford it. I won't have a nice huge cushion of extra savings to sleep on at night, but I'll have a little something, plus each month we'll be putting some money in the bank still. I think we're going to try and buy if theres any way possible, but we speak to the mortgage broker on Tuesday. Depending what she tells us we may end up getting an apartment for a year before we buy or not, we'll see. But thanks for all the input so far! And really my big reason for wanting to buy was that any decent apartment we would want would be like $600 a month or more, and we figure why just throw that money into an apartment when just a little more per month can be going to our own house.

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For a 130k house, are you making at least $45k a year? No need to tell us the exact amount, but if it's less than that, you can't afford it.

 

Assuming you do, here's what your payment will look like:

 

700 mortgage

+ 300 taxes

+ 60 PMI

= $1060/mo

- $4550 down payment (minimum)

- $2000 closing costs

 

Will that leave you with $4000-$6000 in the bank for a safety cushion?

 

Also - and this is very important - are you and your wife-to-be paying for your own wedding? Part of it? How will that impact your ability to make $1000/mo house payments?

 

 

 

-------------------------------

If you want to hear about my situation (which is somewhat similar to what yours was), read on.

 

2 years ago, I was engaged and looking for a house. We had some money saved up, and a solid combined income. We found a real estate agent, looked at a ton of homes, and eventually found one at the top of our pricerange. We worked out the numbers, and could afford it - but we wouldn't be saving nearly enough for the wedding. So the wedding would put us in debt.

 

Sadly, we had to walk away from the house. My fiance was living at her parents' house, I stayed in my apartment for another year. So we paid off the wedding before "the big day", saved more money, and had enough saved to buy 25% more house. We went from a 3BR 2BA with an unfinished basement in an OK area to a 4BR 2.5BA with finished basement in an awesome area with killer schools.

 

"Why pay a landlord when you can own your property" - we heard the question before, and now know the answer. We couldn't afford to own our own property when we were engaged, but we can now that we waited and saved diligently.

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As far as the wedding is concerned, the reception hall, photographer, and DJ are all payed for between our parents. (Thats the biggest chunk of the wedding right there) All we're paying for is flowers (which will only be 1 bouquet and the flowers for the bridal party), the dresses and tux's, and the church fee. Therefore we wont be spending thousands upon thousands of our own money on the wedding.

 

Do i make $45k a year? Before or after taxes? Before i meet it, after I don't. I have nearly $10k in the bank, do i feel thats going to be enough? Well not really, it will be tight for a while, but this is all just on me so far without adding in my fiances income at all. And we aren't for sure getting a $130k house, thats the cap of our price range, we have been looking at quite a few online in the $100k-$115k range too. The beauty of living in the midwest suburbs is that houses aren't godawfully expensive, though some can be i guess.

 

I know i don't need to explain myself here, but you seem like you are definitely looking out for my best interests so I just want to try and assure you I'm not getting entirely over my head here by giving details about the wedding etc. :) I appreciate the posts so far, keep em coming because I'm for sure gonna be needing all the help i can get lol

 

Oh and as far as furnishing the house, well we both get to take the stuff we have from our parents/her apartment. My sister jsut got new furniture and is giving us her couch and loveseat for free, only a few years old still. I just figure we'll need to maybe buy a fridge, washer, dryer, lawnmower? And the rest of the house can be a little bare for the time being as we slowly buy more things to go into it.

Edited by samurai nightling
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You got it - I'm not trying to pry into your personal situation, but making a home purchase is a huge decision that does require a lot of research.

 

Will your wife-to-be be providing an income in your household too? If so, then you'll be living more comfortably, financially speaking, if/until she stops working. The fridge/washer/dryer usually come with the home. Common expenses include a snowblower, lawnmower, and paint. You may have other things to fix based off what the home inspector finds and the sellers do not fix.

 

In my opinion, now would be a great time for you to buy. You're in a strong buyer position in a buyer's market - you don't have any home to sell, so you can offer a quick closing on a house. You don't have a ton of cash for a down payment, but as YoMamma mentioned, you can get that $8000 new home buyer credit. You get that credit as a tax refund a few months from now, but that could be your financial safety cushion. So you have the means to purchase one now.

 

If you do want to start looking, start now. Get pre-approved from a reputable lender, and find a good real estate agent with lots of positive reviews. You'll need a signed contract by April 30 if you want that $8000 credit, and interest rates are rising. Don't let that force you into getting into a place that doesn't "feel like home" though. If you find one, great! If not, don't go buy a home you're not happy with - that could end up costing you a lot more than $8000.

 

It's an exciting time though, so good luck with whatever route you go!

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If he goes FHA, then no down payment.. When I bought my house FHA I had the sellers agree to pay 7%. The house was $168k and at signing I got $1800 in cash back, and I had zero down..

 

Samurai you need to speak to the girl I used Amy Wolfram, she's on the east side of Cincy. She is a FHA expert/specialist. Her number is 513-317-5484, give her a call and she will go over everything in less than 15 mins..

Edited by Batman
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Thanks a lot Unclean and Batman, we currently started speaking with a mortgage broker today over the phone and are meeting with her on Saturday before we go out to look at houses with the realtor that my sister suggested to us. Though if i don't like her maybe I'll give this Amy a call. And yes my fiance will be contributing an income also, she currently is working only part time but is almost guaranteed a full time job at her same place in April, so we'll see if she gets it. Either way she finishes up school this summer and will be looking for a full time job anywhere she can if she doesn't already have the one in April.

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$600 for a decent apartment!?!?!?! You would be lucky to find a room with a toilet here for that price lol :o

Same here - and equivalent houses to the one that Sam is looking at in Cinn run about 250-300k in a good area here, or 200k in bad areas (where you'll hear gunshots once or twice a week). It's crazy how different home prices are in different areas, isn't it?

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and do some research on all the different government housing programs.

 

i know the community center i work for has a "down payment assistance" program class. basically, if you qualify, the gov't will pay 5-8k of your down payment, and if you live in your house for long enough, it gets forgiven.

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$600 for a decent apartment!?!?!?! You would be lucky to find a room with a toilet here for that price lol :o

Same here - and equivalent houses to the one that Sam is looking at in Cinn run about 250-300k in a good area here, or 200k in bad areas (where you'll hear gunshots once or twice a week). It's crazy how different home prices are in different areas, isn't it?

 

It's pretty crazy indeed! It's all about location

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