Considering Buying a house; The Eaglestrike-FREE edition

[Trinsie]

Well, looks like there are 6 3+bd/2+ba homes under $240,000 (between $199k-$240k) for sale right now in Doylestown, PA, so you have some options.

Not sure if Doylestown is located in the middle of a cornfield or if my sense of home prices is just warped from living in NYC, but a 3 BR for 240k sounds insane to me.

[archibaldcrane]

Warped from living in NYC, basically (and also remember home prices nationally are back down to like 2002 levels, they were really inflated for a while there). Plenty of places have very, very nice 3/4 bedroom homes for 200k. That looks to be the low-end of home prices in his hometown, but some do exist there too. My hometown of Madison, WI has over 150 3/2 homes for under 240k, some of which are in nice neighborhoods too.

[Amelya]

^ I live in about an hour north of Madison, and my house is 3 bedrooms, 2.5 bath, ~2100 sq.ft, nice neighborhood etc and it was 218k.

Unless you have some ridiculous savings put away I wouldn't buy a $225k house on that salary. I'm in a very similar situation money wise, and I really don't have much left over once the bills are all paid (and my mortgage is only 2.8% so I'm probably paying less than you would be monthly). Don't forget you have taxes, insurance, and much higher utility bills than an apartment, and there are always going to be unexpected expenses like if the AC or furnace craps out, or the roof leaks, or you need work on your car, or whatever. Then there's the typical house stuff you need to buy, which really adds up. If you actually like to go out and have a good time, or have any hobbies, etc, don't over-extend yourself.

[Brill Weave]

Ganon the big thing to remember is the market is going to remain the same for the next few years. The wife and I have been seriously looking for the last year or so to upgrade but after talking to our realtor(who is a family friend) and my brother in law(who is a financial adviser) we decided to hold off for now.

[archibaldcrane]

Yeah, I expect little fluctuation in the national housing market, nor in mortgage interest rates, over the next 24 months or so.

Although that expectation made me buy now since I didn't see things getting much better.

[Necronus]

Not sure if Doylestown is located in the middle of a cornfield or if my sense of home prices is just warped from living in NYC, but a 3 BR for 240k sounds insane to me.

Insane high or insane low? Since ur from NYC, I assume you meant insane low.

I'm originally from Pennsylvania, and aside from the largest cities like Philly, Pittsburgh, Harrisburg ... its a really cheap market in many places (and thats before the economy collapse), not just the "cornfields". Moving from a place like the Wyoming Valley in PA to Baltimore MD was one of the largest shell shocks in my life financially. So much so that on my job interview, the interviewer didn't believe my rent costs and I didn't believe what she said it cost to live here. Most awkward moment in my life was when they offered me the job and asked how much I wanted ... I put my head down in defeat and said "Sir, after today, I literally have no idea ... I was looking for a $30k job, but the lady downstairs implied that in this area I'd be broke and homeless in a month ... so offer me what you will".

For a current example, my mother has her house up for sale. Has standard living/dining/kitchen first floor, non-furnished basement, a second floor with 3 bed/1 bath, and a furnished attic with 1 bed. 1,900 sq. ft total. She paid 36k ... was appraised currently for 60k ... she's selling for 49k. People I work with here in Columbia/Baltimore often make fun of me and her house often citing how their kitchen renovation, or back yard renovation, or new car cost more than what my mom paid for an entire house back home.

Oh how I wish I could tele-commute to work. I'd live like a king.

[Weltall]

I just bought my first place last week, so you can PM me with questions if you have them.

Part of my benefits at work is investment and housing consultation (they will advise based on salary, promotion outlook, age, mortgage cost, down payment %, etc) and I gave them about 18 places I visited over the last month with my real estate agent. Finally decided on a townhouse.

Here is what I discovered is most important:

*Obviously interest rate - none of the advisers I had meetings with expected the market to drastically change over the next year. They suggested I buy within the next 24 months. 1% on rates is a drastic difference.

*Equity opportunity - Biggest mistake I have made is not buying sooner. The townhouse I bought was selling for $152,000 base in 2010. They have already gone up in value to $168,000 base. I would have gained $16,000 in equity very quickly.

*Location / Community - You want to buy in an area that is growing heavily and doesn't have many unsold properties (unless its a building condo, then you can get great deals if you don't plan to resale). At my location, they built 52 lots from mid 2010 - 2011. 51/52 are sold with only 1 left on market. They are currently building 6 to be complete by May 31st; of those 6, 4 are already sold, including mine. This is why the base price keeps increasing. If you ever do want to resale, you don't want to have to compete with a builder, so look out for this.

*Mortgage:Rent - I currently have 2 other roommates, and our rent is very cheap. I hate my current place. One of my roommates (Serif from BG) is moving in with his girlfriend when our lease is up, and the other brings nothing to the table (hasn't bought shit in 3 years / cleans nothing). My monthly bills would at LEAST* be doubling if I had to get a new place and split the bills with just 1 other person. After putting a down payment on my place, I am actually going to be saving money owning a place vs. renting with 1 roommate AND it is an investment that can return the money. I believe I read you would be spending $1,000 in rent; if this is the case, you absolutely can afford a mortgage instead of throwing that money away. My mortgage is barely that much including insurance and HOA fees.

I've always been against buying in the past. I figured I would when I eventually get married and plan to stay somewhere. After several meetings, it is hard to argue against the math and it is just flat out the better decision to make.

Type: Townhouse
Bedroom: 3
Bath: 2.5
SqFt: Base 1,673 Custom 1756

[Drex]

Some other things to keep in mind:

1) A mortgage is leverage. It can hurt as much as it helps. It's hard to imagine housing prices much lower, but that's been the sentiment for a long time now. The size of your down payment matters a lot here: if you can only afford something like a 5% down payment (and if the bank will give you that loan), then you are levered 20-1 and can lose all of your equity from a move as small as 5%. Of course, if it goes up 5% you double your equity for free, but that's how leverage works so you need to be careful.

2) Mortgage interest deduction only counts if you itemize. I don't know how much work you do on your taxes, but if you take the standard deduction then you will not benefit from the interest tax deduction at all. Something to consider when weighing the cost-benefits. If you take the standard deduction, then the interest payments are as much "wasted money" as rent.

[archibaldcrane]

2) Mortgage interest deduction only counts if you itemize. I don't know how much work you do on your taxes, but if you take the standard deduction then you will not benefit from the interest tax deduction at all. Something to consider when weighing the cost-benefits. If you take the standard deduction, then the interest payments are as much "wasted money" as rent.

When looking at a 200k loan at 3.75% (likely rate for a mortgage today), you're starting off with roughly $7500 in mortgage interest per year to start - that already eclipses the $5800 standard deduction for his situation. You're correct for much cheaper loans that if you have no other deductions it may not make sense, but someone in this position would be stupid and lazy to not itemize.

[Fhqwghads]

TurboTax ftw. Takes a little longer to not do something silly like a 1040ez, but you're throwing your money away as a homeowner if you don't put a bit of effort into your returns.

[Brill Weave]

I'm originally from Pennsylvania, and aside from the largest cities like Philly, Pittsburgh, Harrisburg ... its a really cheap market in many places (and thats before the economy collapse), not just the "cornfields".

Can't speak for Philly or Harrisburg, but housing costs in the suburbs outside of Pittsburgh are very reasonable.

[greenhills]

All I can say is don't settle for something you don't really like.
After getting our dream house outbid and signed into contract right out from under us, we were two seconds away from being talked into a house that was similar but in a crap area. To hell with being stuck somewhere two to five years at the minimum that isn't a perfect match, and it is only that short a period if you can sell.

[fengzi597]

I am 25,too.It is so pathetic that i have no money to buy a house.FML

[Fievel]

I am 25,too.It is so pathetic that i have no money to buy a house.FML

At least you have 10 posts now so you can stop with all the random bullshit

[Furionstormrage]

1.) If the majority of homes in the area are 2bed/2bath, getting a 3bed/2bath or something similar is a good idea, if you can easily afford it. It will be a great selling point when you decide to sell the home, and you'll always find a use for another room. I say that very hesitantly though, and I'll explain why at the end of my post.

2.) I wouldn't get a total fixer-upper as a first home, especially if you have an interest in home repair but no experience. I would recommend getting a home that might need new paint or could stand for a light remodel to update it, as you can save a ton of money now, do those basic things as budget allows, and gain a lot of equity.

3.) Do not buy a modular home. They do not hold their value nearly as well as a regular home.

4.) I don't know if it's a loss or not, so I can't speak on that, but if you can afford a home (and associated expenses), avoid condos/townhomes. However, if it's much more financially sound, investing in one now will provide you with lower upkeep costs and less time spent maintaining the property, so it's not completely out the window, I'm just personally against them. (Too many friends have gone this route and been unhappy with noisy neighbors and cramped spaces, or had to wait extremely long to sell and dropped their initial asking price considerably to move the property, though your area might be very different)

5.) I'm against renting, the market to purchase is good right now, so I can't get past feeling like renting is throwing money away if you have a solid plan for your life. (Stable job/family/friends/whatever) If you should bother, I'd ask you how solid your savings are (I don't want to know, just something to consider). Regardless of your living situation, having a good amount of money saved up should be a huge priority for anyone. If you don't have a comfortable amount of savings, I'd recommend at least waiting until you have enough for a good down payment, a large amount to spend on initial expenses (furniture, appliances, etc), and six months of living expenses including a mortgage and associated costs of living on your own. None of my friends ever follow my advice on saving, but I'm not the one asking them for money when bills are due, so really consider that.

What you really need to consider, is your quality of life. Too many people overbuy on a home, don't take into account the very real expenses of heating and ac, power, trash pickup, cable, internet, phone, lawn maintenance, home maintenance, paying for stuff when it breaks, and then expanding into car payments, car repair bills, insurance, medical insurance, cell phones, retirement plans, etc etc.....

Basically, make your life easy (financially speaking). If you'd rather have lots of disposable income to go out and have fun, take a vacation, buy an awesome flat screen, buy less home and use the space you have wisely. I have far too many friends that bought a nice huge house and new cars, but can't afford to go on a cruise, take a trip to Vegas, or even have a nice dinner out when they want to, because they didn't budget properly.

When I bought my house, I had my sticking points (3 bedrooms, garage, decent but small yard because I hate lawn care), and I was flexible on everything else. I purchased a smaller home but it has a nice open layout and vaulted ceilings, so it feels much larger than it is.

What I also did, and you're in a similar situation because you don't have to move the day you buy, is buy mine with three months left on my apartment lease, as the house I bought needed new paint and the bathrooms and kitchen were a little dated. I saved a TON of money versus a modern home of the same size, and spent those three months repainting the house inside and out, and remodeling the kitchen and bathrooms. I spent a fraction (doing the remodel) of what I would have spent on a new home of the same size and quality, did the work after work and on the weekends, and increased the equity of the home. (My last appraisal, done 1.5 years ago, was 43,000 over what I paid, and I spent FAR less than that on paint and materials). I'm no DIY-er, but paint and tile and simple things like that are easy to learn, though I wouldn't want to gut a house and rebuild it.

At any rate, I've rambled for far too long. I'll just emphasize, don't overspend. The feeling of financial security and being able to splurge regularly far outweighs having a nice house with a crippling mortgage. Hope you come to a decision that works for your situation!

[Ksandra]

locking this as people don't notice the necro.