questionswhen is a good time to buy a house?

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I'm also open to more suggestions about the buying process, and also wouldn't mind hearing arguments for why renting is sometimes a better idea.

Final details to note: Colorado Springs is a military town in addition to a college town, so there really is a pretty constant stream of people moving in and out. Also, we'd looked at renting an apartment, but were able to find rental houses that were nicer and cheaper.

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@heyjoie: Well, it's pretty much a crapshoot to know whether the value of the house will be lower, higher or unchanged in five years. On the bright side you'll probably never be able to get a lower interest rate, and the itnerest you pay on a mortage is tax-deductible, plus the payments for the first half a mortgage's length is mostly interest and little principal.

I'd say to see what you can get while putting as little down as you possibly can, even if it means a slightly higher interest rate and monthly payment. Just bear in mind the other costs of home ownsership, like property taxes, insurance and the cost of home maintenance. Remember, if you're renting a house and the plumbing needs to be fixed, you're the one paying for it.

Make a chart with all of the associated costs of renting on one side and buying on the other. Then look at all of the intangibles, such as if you don't like the place you're renting, you can move when the lease is up. What if his job changes?

Good luck...

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My son and his girlfriend are looking in the same area for a house to buy. Colorado didn't get hit as hard with the housing bubble as some places and if you do your homework you should be able to find a nice house at a decent price. The biggest downside to buying vs renting is you're stuck. If you suddenly decide you want to leave the area or just the neighborhood you have to find a buyer first. Renting can be a problem if you have pets or a bad landlord. I would definitely take some time to look around and get to know the different neighborhoods before making a long term commitment to a piece of property.

Good luck!

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If you can afford it, now is an excellent time to buy. You're not going to see rates lower on loans than you see today, and the prices of homes are extremely low. Even if you can buy a home a few thousand cheaper in a few months, in the long run that few thousand won't make a difference when compared against not buying at all.

That said, I would caution against going into a huge financial commitment like this with a boyfriend/girlfriend. A breakup in a non-binding commitment with a huge financial responsibility like this can get very ugly. If you can afford to buy by yourself, do so and charge your boyfriend rent.

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@elforman: This was super helpful; thank you. I think a large problem is I just really have no idea about what the basic costs are, you know? And it's hard for me to wrap my head around the process, especially when I consider that we'd be buying a house knowing we'll most likely be selling it in a few years. That seems silly to me, until I think about how much money we lose by renting (we could buy almost half a house with that much!). I think you're right that the intangibles you describe are the real concerns. Although the job change thing has been a real issue for us even with renting—because of the move, he didn't have a job when we started looking for a rental, and consequently we had to pay a year's lease up front. Although of course, the situation would’ve been worse if we owned a home at that point...

One thing I wonder is, are mortgage payments generally cheaper than rent payments? That's what I've heard, but I just don't know enough about this stuff.

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@ohcheri: Thanks so much for your excellent suggestions. We’ve researched neighborhoods some for rentals, but I would hope that once we’ve lived there a few months we have a better idea of exactly where we would feel comfortable buying a house. The idea of being stuck with someplace that turns out to be not-so-great, especially such a financial commitment, definitely terrifies me. But I also can’t imagine a time in my life when I WON’T feel that terror, ha!! :) Good luck to your son and his girlfriend, as well.

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@drjing: Great advice, thank you. We wouldn’t be able to buy until a year from now since we just signed a lease, but it seems like I have been hearing things about how now’s a good time to buy. It’s just such a scary idea when I know so little about it---for example, I don’t even know what a “good” interest rate is, or how to know when the price of the house itself is good. I’ve looked some at services like Zillow, but they don’t always tell me much. And your advice about being cautious with buying a house with a non-spouse is good. We’ve made a more serious commitment to each other than just “Hey We’re Dating,” but I feel like there’s never a term that describes it properly. :)

I think the key phrase is "If you can afford it." How do you KNOW if you can afford a home? I have friends back home in Alabama (where granted, houses are MUCH cheaper) who buy houses and I know we're in better a financial situation than they, but I still feel uncomfortable with the prospect.

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A few other things to consider, if you're not putting a lot down (20% I think is the tipping point) you may be required to either get a second mortgage or PMI (Private Mortgage Insurance), which will increase your costs.
Also, as others have mentioned, maintenance costs need to be factored in, particularly if you're buying a home more than a few years old. Climate control systems, water heaters, appliances and the like can be expensive and often can't wait to be replaced when they fail. You'll want to make sure you have a sizable emergency fund just in case.

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@heyjoie So I have been in my house 8 months now. I can tell you timing for sellers is different for everyone. People like to put houses on the market during a time frame where they can sell when schools are out. That means you have more options to choose from but that doesn't mean you will get the best price. I would advise giving yourself at least 6 months of searching and if you need to close while you are still renting use that as a negotiation tool with regards to price. Make sure you have money saved up and make sure you get a warranty.

Owning a house is awesome but have patience for the unexpected, be ready to do your homework and be prepared for things to break and make you cry. :)

@drjing Is correct about buying with a boyfriend/girlfriend. Consider your situation before doing something this big together. I have been with my boyfriend for over three years and still bought the house on my own. Our boys need to put a ring on it.

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@heyjoie: Overall, yes, mortgage payments are less than rent on a comparable home, plus the interest on the mortgage is tax deductible. The reason rent is higher is because the owner needs to cover his mortgage on the property plus the property taxes plus all of the repairs that you'd be paying for if you owned it.

So in the long run, the total expenditure is usually a wash. The difference is that as an owner you can build up equity, either by paying down the principal or by virtue of the property value going up. Your equity is what the home is currently worth minus what you still owe on it. Of course, if the property value goes down then it may end up being worth less that what you owe, so any equity you got from paying down the principal has essentially evaporated.

A good realtor in your area should be able to detail all of the tangenital costs of home ownership, such as what you can expect your water/power/sewage bills to be.

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Here's a good tool to determine how much mortgage you can afford:

http://www.mortgage-net.com/calculators/qualifynow.html

And don't think of rent as "throwing away your money". I have been paying a mortgage for almost 9 years now and, thanks to the housing bubble, I am still 100k upside down. You have to give someone money for housing no matter where you live. I always say I'm renting my house from the bank :-)

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@gt0163c: Good information, thank you. I think perhaps we’ll just have to wait and see what our finances are like in 6 months before making any decisions about what we’d like to do.

@prettywootprincess: This was all VERY useful, thank you. I’m hoping that given the military area we’re in, there might be a nice, constant flow of houses available… but who knows, and I suppose that (as you mentioned) could make it hard to find a “bargain” as well. I NEED DEALS.WOOT FOR HOUSES. As for the puttin’ a ring on it – I know, right?! On the bright side (for me), he’s the one with the income… so maybe HE should be the one getting this advice to be cautious, heh. :)

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@elforman: Thanks so much for clarifying all that, this was really helpful to me. If only I could predict the future… Fortunately, we’ve worked with a very nice, helpful realtor who helped us get our rental and I’m sure could offer insight into buying a house in the area as well.

@ohcheri: Lol @ paying rent to the bank…I like your way of looking at things. :D But geez, it’s just such a depressing thought to add up all those rent payments. That website looks SUPER helpful. I’ve bookmarked it for future reference if we start looking into this more seriously, so thank you!

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One reason it's cheaper for you to rent a house than an apartment right now is that a lot of homeowners are unable to sell their homes and any rental income they can get (even if it doesn't cover their full costs) is better than carrying a full mortgage payment or losing the house and their equity.

In days gone by, buying even for the short term was nearly always financially better than renting, since houses "always" appreciated. Today, not so much, if at all. You'll be on the hook not only for the mortgage but also for all related costs. It's really unlikely your new purchase will appreciate, and when you try to sell it, you'll have to put more money into updating and freshening it for the sale, covering part or all of the buyer's closing costs, and paying the agent's fee.

My advice is to avoid the unnecessary risk and just rent. It's simply not worth saddling yourselves with long-term debt in the hope of being able to break even in four short years.

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@ohcheri: Good link, but the calculator is for how much you qualify, not how much you can afford. Generally, one qualifies for a much lager loan than one can comfortably support. Almost half my income goes to my mortgage. As a result, I live very frugally and still am paycheck to paycheck.

@heyjoie, as a guide I'd recommend not going over 40% of your take-home pay if you want to be able to do anything beyond the basics in life (no more than 30% would be much better). But it all really depends on how much money you make (can you afford the home by yourself if your sig other bails on you?) and your career path (if you're at the financial lower end of a career that has a solid income increase year over year, then you can and should stretch a little today because it will get easier for you to make your payment, over time... But if your career path is going to provide only small incremental increases in pay, or none at all, stick with the conservative/cautious figures).

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I don't believe I saw in any of your posts what your plans are after grad school. Are you moving somewhere else? Then rent. It doesn't look good in the housing market for a while for sellers. Are you getting a job there? Then buy. Rates and prices are as low as they have been in years. JM2C.

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@magic cave: Thanks for your input and advice. So you think that even by 2017, things will not have started getting better? I suppose I hoped that now might be an ideal time because maybe things were on the mend... meaning we could get something for a good price now (er, next year) with a low interest rate, and be able to sell more easily in several years. But I of course don't want to make a major gamble if the odds don't look good.

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@drjing: Thanks for the guidelines. It seems to me that affording it in the short term is unlikely to be a problem for us (although I pause when I think about some of the potentially expensive costs of unexpected repairs), but I just worry about what happens when it's time to sell. Which brings us to...

@jsimsace: Our plans at this point are not entirely known... I'll have to do a one-year internship beginning fall 2017, and it's unlikely (but perhaps not impossible?) that it would be in the same area. There's still the possibility that we could return to the area to live afterward, but I just don't know at this point.

I suppose this all comes down to what we'd be able to do with the house assuming we leave. Renting it out is always an option (I know now from experience that rentals get snatched up QUICK in the area), but it does seem risky to buy if we don't know we'd be there long-term.

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@heyjoie: There are approximately 11 million existing homes nationwide that are considered "shadow inventory," houses that are currently in foreclosure, should be in foreclosure, or are likely to be foreclosure in the next nine months or so. In an average year, approximately 3 million houses are bought. Banks are holding huge numbers of houses off the market and out of listing because if they try to sell them the market will take a humongous hit and the banks' financial reports will reflect equally humongous drops.

If you found the right house at a truly good price ($6,000 for a house valued three years ago at $75k?) it would probably be a good opportunity. I suppose the market could improve enough in five years to make buying a home for short-term usage a wise decision, but I'm fairly conservative financially and personally wouldn't give it a single thought.

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7:31 PM is the best time, according to a scientific research paper I authored in May of 1948.

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I'd be cautious. You signed a 12 month lease, so you will only have 48 months to own a property. That is very near the minimum recommended time to own a house. Expect that you will have to put down 20% of the purchase price, plus whatever closing costs are (add several thousand).

When you sell, you will have to pay the agent's commissions (6% of the sales price), plus whatever it takes to get the house ready to sell. Unless the market goes up 2-3% per year you will probably lose money on the deal. If the market goes down again you could lose some or all of your downpayment. If it really drops you could be upside down and unable to sell. Yes, it blows paying rent. Getting stuck in a property is worse.

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the 20% down is just a suggestion. If you have excellent credit, you will be better off putting only 5% down and paying the PMI. If you don't have excellent credit, then yes 20% down is the best option. Contact a mortgage specialist. You likely qualify for a few different mortgage programs (first time, rural development, ect...) As mentioned earlier, what you qualify for is not the amount you should get a loan for. For example, I was qualified for 380000, I'm looking for about half that. 8 years ago, I was qualified for 190000, and bought for 95000.

One final piece of advice/knowledge to consider: For loan purposes, if you purchase a house, live in it for 4 years, then move away and set it as a rental, that income can not be considered income until you have 2 years landloard experiance. In other words, if using as a rental, you will have a tough time getting a new mortgage in the area you move to. (and yes, this is fairly new)

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@magic cave: Thank you for more excellent info. I think I’m with you in that I’d rather play it safe… as much as that can sometimes be a bummer, heh. :)

@wilfbrim: Yikes… wow, you really presented this in a way that puts it in perspective. I think I don’t have the energy or the nerves to take that kind of risk, at least not at this point in my life.

@jkaleda: Wow, I definitely did NOT know that about renting a place out, but that’s great to know in advance, haha. Thank you!!

TO EVERYBODY: Thanks so much for all of your FANTASTIC information and advice. I suspect buying a house just isn't a great idea for us right now given the circumstances. RENTING 4 LYFE... or at least, another five or six years. :)