Buying a house: tips, advice, etc

[drstrange]

grew up in Cape Town and have never seen any sharks outside the fish tank .... the ones swimming in the sea that is ....

[DigDug]

Mar 10, 2015 15:01:10 GMT -6 ickes said:

gaseousclay, bentin brings up a good point that I was going to bring up earlier but you seem intent on purchasing a house so I didn't bother. Now that bentin has brought it up I will chime in.

I own a home, purchased it ten years ago when I was 25, made all the right moves everyone says to do (a sizeable down payment, fixed mortgage, modest size, decent area, etc..) and I really have no regrets about. However, I have huge doubts as to whether I would ever purchase a home again....well at least not until I'm older and in my golden years. The "American Dream" of being a homeowner that is for whatever reason taught to us as being the right move is not always the right move, and is sprinkled with a bit of bull shit imo. As bentin mentioned, there are a certain amount of expenses and headaches that actually come with owning a home that some people aren't aware of or just don't really give much thought to. HOA expenses, maintenance expenses, property taxes, etc...it can get to the point where the home almost owns you and you base your life around that sole possession in some way. And for what?? Do the benefits really outweigh the costs?

I will keep my home, have it paid off when I am still relatively young, and maybe rent it out in the future for some supplemental income or something, not sure. Everybody's situation is different and I don't think being a homeowner is the right move for everyone.

I do agree with you, having a home is not for everyone. It's called "House Poor". But the American Dream of "Owning" your home is still there.
Many think that "owning" a home means having a house with a Morgage. That is not the dream. Back in the day you had to put 20% down (which kept people from buying to much home) and many would pay extra every month with the idea of Owning it.
Now there's no money down and get a home equity line of credit (so you can use it to go on vacation or buy a pool).
Owning your home - still the American Dream!
If you don't, you'll be renting from me (and the rent will go up over the years).

[brentkuz]

Live in a van down by the river.

[gaseousclay]

Mar 10, 2015 15:01:10 GMT -6 ickes said:

gaseousclay, bentin brings up a good point that I was going to bring up earlier but you seem intent on purchasing a house so I didn't bother. Now that bentin has brought it up I will chime in.

I own a home, purchased it ten years ago when I was 25, made all the right moves everyone says to do (a sizeable down payment, fixed mortgage, modest size, decent area, etc..) and I really have no regrets about. However, I have huge doubts as to whether I would ever purchase a home again....well at least not until I'm older and in my golden years. The "American Dream" of being a homeowner that is for whatever reason taught to us as being the right move is not always the right move, and is sprinkled with a bit of bull shit imo. As bentin mentioned, there are a certain amount of expenses and headaches that actually come with owning a home that some people aren't aware of or just don't really give much thought to. HOA expenses, maintenance expenses, property taxes, etc...it can get to the point where the home almost owns you and you base your life around that sole possession in some way. And for what?? Do the benefits really outweigh the costs?

I will keep my home, have it paid off when I am still relatively young, and maybe rent it out in the future for some supplemental income or something, not sure. Everybody's situation is different and I don't think being a homeowner is the right move for everyone.

you are of course correct. I'd like to buy a house but I already know from our current home (and from what you guys have already been saying) that there are many expenses with home ownership and at some point it does own you. when my wife and I bought our current house we got it from her brother in 2008. I didn't want to move because 1) it was small 2) he didn't do anything to fix the place and 3) I didn't think his value assessment was fair. my wife wouldn't budge and she said she was buying it with or without me. At that point we were only dating and living together, so I would've been out on my ass either way. After a couple of years I grew to like the home. It's in a nice neighborhood and it's quiet, however, we're paying $1500 per month for the mortgage plus bills.

I guess I feel trapped from renting. on the one hand, yes, there are many other things I don't have to worry about with renting. on the other hand, I really am throwing my money away. but I simply don't have the money to put down on a home at this point, so I likely won't do anything but continue to rent.

[bentin]

I disagree that renting is throwing money away. Factor in property tax, the additional cost of insuring your home, not just your possessions, yard work, a home warranty or unexpected repairs, upkeep and the absurd 6% you'd need to pay a realtor to eventually sell your house plus the interest you could make on a down payment and it's not hard to model a favorable situation for renting.

Using TX property tax and a ten year model, I calculate a break even of $2,040/mo rent for a $420k home with 20% down on a 30 year, 3.5% note. It's about $1,980 over 5 years with no upkeep. This is assuming a $100/mo home warranty covers all repairs and 1.5% T Bills for 5 years or 2.2% for 10 years as return on the $84k down payment.

Of course removing property tax really wrecks my model, making break even about $1300/mo for ten years and $1225 for five.

Of course you can favorably change the ownership model by using a 10 or 15 year mortgage with a lower rate too. Home ownership is great, and I'm not trying to argue against it, I will own another home. But renting isn't the devil that the banking industry and grandma would have you believe.

[Deleted]

Mar 11, 2015 5:59:05 GMT -6 gaseousclay said:

Mar 10, 2015 15:01:10 GMT -6 ickes said:

gaseousclay, bentin brings up a good point that I was going to bring up earlier but you seem intent on purchasing a house so I didn't bother. Now that bentin has brought it up I will chime in.

I own a home, purchased it ten years ago when I was 25, made all the right moves everyone says to do (a sizeable down payment, fixed mortgage, modest size, decent area, etc..) and I really have no regrets about. However, I have huge doubts as to whether I would ever purchase a home again....well at least not until I'm older and in my golden years. The "American Dream" of being a homeowner that is for whatever reason taught to us as being the right move is not always the right move, and is sprinkled with a bit of bull shit imo. As bentin mentioned, there are a certain amount of expenses and headaches that actually come with owning a home that some people aren't aware of or just don't really give much thought to. HOA expenses, maintenance expenses, property taxes, etc...it can get to the point where the home almost owns you and you base your life around that sole possession in some way. And for what?? Do the benefits really outweigh the costs?

I will keep my home, have it paid off when I am still relatively young, and maybe rent it out in the future for some supplemental income or something, not sure. Everybody's situation is different and I don't think being a homeowner is the right move for everyone.

When my wife and I bought our current house we got it from her brother in 2008. I didn't want to move because 1) it was small 2) he didn't do anything to fix the place and 3) I didn't think his value assessment was fair.  My wife wouldn't budge and she said she was buying it with or without me. At that point we were only dating and living together, so I would've been out on my ass either way. After a couple of years I grew to like the home. It's in a nice neighborhood and it's quiet, however, we're paying $1500 per month for the mortgage plus bills

You didn't get an independent home value assessment?  That was incredibly shady on the part of your brother-in-law and wife.  And my eyes went big and wide when I read that she didn't care what you thought, and that she was willing to make a life altering decision without you.

[seth]

Mar 11, 2015 8:35:05 GMT -6 bentin said:

I disagree that renting is throwing money away. Factor in property tax, the additional cost of insuring your home, not just your possessions, yard work, a home warranty or unexpected repairs, upkeep and the absurd 6% you'd need to pay a realtor to eventually sell your house plus the interest you could make on a down payment and it's not hard to model a favorable situation for renting.

Using TX property tax and a ten year model, I calculate a break even of $2,040/mo rent for a $420k home with 20% down on a 30 year, 3.5% note. It's about $1,980 over 5 years with no upkeep. This is assuming a $100/mo home warranty covers all repairs and 1.5% T Bills for 5 years or 2.2% for 10 years as return on the $84k down payment.

Of course removing property tax really wrecks my model, making break even about $1300/mo for ten years and $1225 for five.

Of course you can favorably change the ownership model by using a 10 or 15 year mortgage with a lower rate too. Home ownership is great, and I'm not trying to argue against it, I will own another home. But renting isn't the devil that the banking industry and grandma would have you believe.

This is exactly right. Stated a little differently, renting is not the devil that marketing and sales propaganda would have you believe.

Real estate sales people have a strong vested interest in convincing you that renting is "throwing money away" and that buying is the American dream. If they can get you to believe that, they can get 6% of the price of a home every time it changes hands.

Renting can be an excellent option for people who want flexible lifestyle and those in larger cities where the rent-to-buy costs are much tighter. That's a lifestyle reason. There are metropolitan markets where you can rent Property A for significantly less money, including all tax breaks, than buying an exactly equivalent Property B. That's a financial reason.

Also, I watched a number of people buy into the greed of the most recent property boom, overbuy a property (expecting continued massive appreciation), watch it drop/correct, can't refinance, and get foreclosed on. Now these folks made poor decisions, no question about that, but the point is it can become the American Nightmare too. The math in the example above is a good analysis for typical purchase scenarios. It doesn't begin to get at the boom/bust cycles, or foreclosure/short sales, or what happens when you are forced to sell for divorce, job change, or other major life issue that some people can be unprepared for. 

To figure out your own situation, put aside the marketing slogans, and take a look at the New York Times buy or rent calculator. It's one of the least biased calculators on the Web. 

Don't get me wrong. Buying is great for most people - you get forced savings in the form of principal paydown. You get a tax deduction. You get price appreciation on the principal (in good times) based on 4-to-1 leverage of a typical loan (i.e. if you took an 80% mortgage with 20% down). It's great for most people. But it's not great for all. And it's terrible in some situations. 

Anyway, I have a lot of opinions about this. I could go on for a while....

[DigDug]

I love you renters!

[brentkuz]

I don't like 30 year mortgages and I don't think buying a house without 20% down is a smart idea. I rented an apt in providence ri and I will never rent again for my life.

Owning a house is awesome. Change things to my liking, really do whatever I want since I'm not worried about neighbors as much as in a complex or duplex. With a short term low rate mortgage I will see my money back or a profit to include the minimal interest for the loan. I bought in 2010.

Customizable is a huge draw and having bangers and my worrying about it.

[Old26]

The only advantage I see is the "not being tied down" bit.

No other investments would have turned my buy into 500%+ in the same period.
No repairs, etc. would come close to what I'd waste in renting a similarly sized place - looking at the kid's place @$3400 a month vs what I pay - I'd have to spend $20k a year in "oh no's" to even come close.

Only other investment I've made that's been as exciting on returns is AAPL. I've been in since $27.

But no way owning a home is heaven. It's a downright PITA at times. But to rent would be the big $ flush for me.

[ickes]

Well there is no return on your "investment" for a house unless you actually sell it for a decent profit and then downsize or find a home that is less than what you made on selling yours. I've heard from several financial advisors that a house is not considered an asset, it's a liability, and is only considered an asset if you sell it and actually pocket some profit. Not many people actually do that. Yeah you can sell your home after it's paid off and get more for it than what you paid but then what, you still have to find another place to live, and that costs money. You can't just sell your house and then live on the streets with a couple hundred thousand dollars in your pocket.

My grandparents house was purchased brand new for like 15,000 dollars or something ridiculous like that. Now it's maybe worth 100,000 about 50-60 years later. So yeah, 100,000 is 85,000 more than what they paid for it but if they sold it for 100,000 right now they then still have to find another place to live. So to get a comparable home in the same neighborhood it's going to cost them about 100,000. So yeah they have gained in the sense that they could buy another house outright and have no mortgage which is definitely a good thing, but imo owning a home is not necessarily this awesome investment that will make you huge gains.

Like I said, I'm glad I own my own but I am in no way expecting it to be a tool to make me wealthy.

[brentkuz]

Plus interest rates are historically low . Artificially low. They will be going up as the Feds have already expressed the will go up. It's nuts to see how low they are. Will never happen again in our life times.

[jjflash]

You gotta get out of this marriage before you do anything. Get your focus off your living situation and on finalizing this divorce and then start from ground zero.

(I'm going through a somewhat similar situation except that I'm the one who owns the home and was the one asking my wife to leave and I have to remind myself of this all the time. Eyes on the prize: If there is no hope of reconciliation, then you've gotta focus on business, and your son.)

Good luck, it ain't easy. If you want to buy a home, you'll get there. One step at a time.

[gaseousclay]

Mar 11, 2015 9:15:51 GMT -6 devastitis said:

You didn't get an independent home value assessment?  That was incredibly shady on the part of your brother-in-law and wife.  And my eyes went big and wide when I read that she didn't care what you thought, and that she was willing to make a life altering decision without you.

to my knowledge she didn't do an independent value assessment. my wife hired her friend's cousin to do the home inspection but that was it. he was a complete sleazeball too and tried hitting on my wife.

what it boiled down to was this, my wife's brother basically took an arbitrary value of the house, probably from trulia.com/zillow.com, deducted the cost of repairs needed on the home and came up with a final estimate on the value. I don't know how he figured what the cost of repairs would be or where he got his numbers from, but he apparently 'did the math' to arrive at his estimate. This was in 2008 when the bottom dropped out of the economy. To this day I view him as a shady SOB who screwed us both so he could live in his suburban McMansion. Had we waited until '09 or '10 we could've purchased more house with less money because it was a buyer's market.

[Deleted]

Mar 12, 2015 7:19:18 GMT -6 gaseousclay said:

Mar 11, 2015 9:15:51 GMT -6 devastitis said:

You didn't get an independent home value assessment?  That was incredibly shady on the part of your brother-in-law and wife.  And my eyes went big and wide when I read that she didn't care what you thought, and that she was willing to make a life altering decision without you.

to my knowledge she didn't do an independent value assessment. my wife hired her friend's cousin to do the home inspection but that was it. he was a complete sleazeball too and tried hitting on my wife.

what it boiled down to was this, my wife's brother basically took an arbitrary value of the house, probably from trulia.com/zillow.com, deducted the cost of repairs needed on the home and came up with a final estimate on the value. I don't know how he figured what the cost of repairs would be or where he got his numbers from, but he apparently 'did the math' to arrive at his estimate. This was in 2008 when the bottom dropped out of the economy. To this day I view him as a shady SOB who screwed us both so he could live in his suburban McMansion. Had we waited until '09 or '10 we could've purchased more house with less money because it was a buyer's market.

What a disaster from the getgo..A lot of sleazeballs and shadiness surrounding your wife. Hope it works out on your end.

[benjaminpersitz]

Mar 11, 2015 8:35:05 GMT -6 bentin said:

I disagree that renting is throwing money away. Factor in property tax, the additional cost of insuring your home, not just your possessions, yard work, a home warranty or unexpected repairs, upkeep and the absurd 6% you'd need to pay a realtor to eventually sell your house plus the interest you could make on a down payment and it's not hard to model a favorable situation for renting.

I think everything boils down to timing and your financial security/life plans. On the whole, I would argue that buying is better than renting for most. If you are buying in an inflated market where rent is cheaper than a mortgage, you're at risk for a major loss in the event of a downtick in the market, or you are financially unstable, then renting looks much better because you're minimizing your risk. That said, if you're financially stable and plan to stay in your house long term, even buying in an inflated market can be better than renting (assuming you keep your debt to income ratio low enough). In an inflated market, you can't look at your house as a short term monetary investment, but a long term investment in your future stability.

I bought my house right when the market began to recover in 2012. My total mortgage including property taxes and insurance is under $1,000 a month for a 1500 square foot 3 bedroom home with a yard. My interest rate is in the low 3s. My house's value has increased 20% since I bought it. I pay less for my mortgage than it would cost me to rent a shity, delapidated, 950 square foot apartment.

I absolutely look at this as an investment. I will always need a place to live, and even if I don't turn a profit when I sell because I need to buy another home, I will be in a better financial position because of the equity I've built. When I pay this house off, it will free up nearly $800 (property taxes are 200 a month) of my monthly budget, giving me more security and freedom.

The other side of the coin is what happened to my brother. He paid about 50k too much for his condo in an inflated market and his debt to income ratio was too high. When shit hit the fan, he was unable to pay and was very far underwater in his mortgage. Like I said, timing and stability.

Tldr; buying isn't usually a smart profit producing, cash, investment. It is however a wise investment in your stability and future. Don't overbuy, keep your payment low, and plan to stay awhile. Renting builds zero equity and gives yóu nothing except minimized risk. At the end of a mortgage, you have a rent free place to live until you die.

[ickes]

very good points benjaminpersitz