STYLETHREAD -- LET'S TALK SHOP!

lynnie · Chanel

people that own homes..

Elle · Hermes

Well, 20% down on a $250k house is $50k, and I think your payments after that would probably be in the $1,200-ish range. That would be a couple of years of pretty aggressive savings minimum. If you don't put 20% down, then you also have to pay mortgage insurance (~$100/month, give or take). And, many neighborhoods (condos, apts, housing communities, townhouses, etc) charge monthly HOA fees - those can range anywhere from $50 a month to $350+. Plus then you have to pay taxes on your house - low end is probably around $1k a year. Plus if anything goes wrong with it, you have to be prepared to fix it yourself or pay someone to fix it.

Sigh, it adds up so fast! IMO that's why so many people get in over their heads when buying - they figure their maximum monthly output on housing and then spend that entire amount on the mortgage payment itself, not taking into account all those other expenses that go along with it. Those extra expenses are probably tempered a bit if you're buying in a high-rise style building, as opposed to a freestanding place - less on utilities and then you don't have an outdoor space to maintain/water.

Anyway, since everything is so inflated, sometimes there just isn't anything acceptable in an affordable price range. Even around here, condos out in the suburbs are going for $200k and waaaaay up. You can get a freestanding house for about $200k, but it's not in a very nice neighborhood, needs work, and probably only has 2 bdr/1bth/<1000 sq ft. Decent 'starter' homes that are liveable and in okay neighborhoods are $275k - $450k here, if you want to be in city limits.

Bleh! Depressing ......

jacL · Coach

Elle is right, it is depressing (she is absolutely right about all the extra costs too). I pay more in rent than most people I know pay for their monthly mortgages, but I don't have anything for a down payment. I cannot wait til I can buy.

tri_sarah_tops · Marc Jacobs

Another thing to consider when buying a home is property tax. Where I live, the annual property tax is 2% of the home value, but I know in some places it's higher. Usually you can elect to pay it annually or monthly. We pay ours monthly and it adds about $500 on to our monthly housing payment. The tax rate can have a huge impact on what you can comfortably afford.

bumblebee · Coach

i am sure you already know this, but i just wanted to point out that it also is hugely dependent on the geographic area you are in. i think you are in NYC/brooklyn, right? i thought elle's post was really helpful in illustrating the types of costs you will have, but you'd have to do the math on what's available in your area to get more of a clear idea of the level of cost you are looking at.

there are some pretty good mortgage calculators available online that you could play around with to get more of an idea. just look at the listing prices of some places in neighborhoods you like in the saturday newspaper, and then price them out online.

cc · Marc Jacobs

Elle is right. In addition to the daunting nature of getting together a down payment there are so many other things to consider. I was doing pretty well with saving for a 20% downpayment and I started going to open houses for studio apartments in Manhattan. The monthly maintenance charges were really high (though it does include utilities and the property tax) but the thing that was the most off-putting was what the coop boards were expecting. I went to two places (one was a gorgeous old building with a doorman, the other was a crappy tenament building on a side street in a weird neighborhood) where the boards were demanding that any prospective tenants have X amount of money in their accounts after the cost of the downpayment. I think one building wasn't that insane - maybe 6-8 months worth of mortgage and maintenance fees - but the agent at the nicer building told me I'd basically have to have around 100k in my account after the sale went through in order to be approved by the board! So on top of the 20% I would have to have saved another 50% of the sale price. Not exactly encouraging, especially since coops far outnumber condos in this city.

-- Edited by cc at 20:42, 2006-08-20

honey · Gucci

if you're really curious most real estate websites have mortgage calculators which will let you figure out how much it will cost. i just used www.foxtons.com for the ny,nj, and ct area.

as bumblebee said it depends on where you want to live. in this area, the main killers are the downpayment and the property tax. the average price in my exact neighborhood is around $350K which doesn't include maintenance fees if it's a condo. additionally there is property tax though i will say i'm n/s if the figure they gave is monthly or yearly. i should add that that's the price for a 1 bedroom.

anyway, i just did a calculation for an apt. in my hood that was $375K with $75000 downpayment that mortgage would be around $1915. in theory this isn't bad, but i have no idea where i would get money for the downpayment. also this doesn't include the maintenance fee of $215 and the taxes of $1900, again i'm not sure if this is monthly but i'm assuming it's a monthly thing. so in reality i'd be paying around $4000 a month, which i definitely can't afford. any of you homeowners could probably enlighten me on that.

so in this area it can be really pricey. i would estimate it's probably at least $2000 per month in mortgage payments (excluding tax) and i think that would hold true for any area in/around a major city in the northeast/mid-atlantic area.

-- Edited by honey at 20:10, 2006-08-20

NCshopper · Hermes

Yup, Elle's right--there are a lot of costs associated with owning a home. Another thing to consider is Homeowner's Association dues. Ours are really cheap ($12 a month) but I think ours are the exception to the rule--most are much higher than that.

But to be honest, there's so much that goes into the home ownership and home buying experience that it's hard to say that there's a general rule as to how much a mortgage cost you every month. Geography, interest rates, down payments and the length of the mortgage vary so much that people could be living next door to each other and have vastly different payments.

For me, our mortgage payment (including taxes, HOA dues, insurance, etc) ends up being slightly less than renting a comparable place (sq. footage-wise) in our area. But that's definitely not the case for everyone. We live in an area that's very very affordable.

You might want to Google "mortgage calculator" and see what you can come up with after researching housing prices in your area. The "standard" down payment is 20% and I'm not completely sure, but I think interest rates are averaging about 6%. If you plug that into a mortgage calculator, you can come up with what your mortgage payment is likely to be. But that won't include tax, HOA dues, insurance and the cost of repairs for when things inevitably go wrong.

Hope that helps! Suze Orman's books have been really helpful to me in figuring out what to expect when buying a home if you need more professional advice.

jj · Kate Spade

I learned all about home buying when I was renting a condo and the owner decided to sell it. Even though I didn't know anything about buying property, I didn't want to move. So I asked my dad about how it worked and made an appointment with a mortgage broker at Bank of America.

Here's a bunch of stuff I learned about the process:

1. I was 24 and clueless, but I actually think it's easier to buy a home when you're younger. The place I bought was a studio - the perfect "starter" home in the city. Once you get older, your space wants/needs increase exponentially, and the cost of a place goes up considerably too. For example, I recently tried talking my friend into buying a one-bedroom, but she said she couldn't possibly consider it because she lived with her boyfriend, needed her space, blah blah blah. Now they're broken up and she's still renting. Or you are getting married and thinking about kids. It's nice to have that investment from 5 years ago that you can put towards a much bigger place. Plus, I knew I could rent out my studio until I decided to sell it.

2. There are ALL KINDS of first time homebuyer incentives. In DC, it mean't I didn't have to pay property taxes as long as I made under a certain salary level every year. Other people I know got a $5000 tax credit.

3. You can borrow money from your 401K for a first time purchase. Put a little extra into it every month to build up your savings.

4. You may not need a 20% downpayment. I only needed 3%, plus $500 closing costs. I bought my place for 50k, which meant I needed $2000 upfront, then paid $300 for the mortgage and $200 for the condo fee each month. Not bad

In today's inflated real estate market, a studio in that building goes for about $150,000, but that still only means a downpayment of around $5000 and monthly payments around $1200 with current interest rates.

5. PAY ALL YOUR BILLS ON TIME. With a great credit rating, you get lower interest rates, which means you can buy more house for your money. And basically all it means is not having any late payments.

Now, 7 years later, I am in the process of buying my 3rd place. After I sold the studio, my husband and I bought a 2-bedroom condo. We just sold that and are buying a 3-bedroom house. Eeeeee!

Elle · Hermes

jj wrote:

3. You can borrow money from your 401K for a first time purchase. Put a little extra into it every month to build up your savings.

4. You may not need a 20% downpayment. I only needed 3%, plus $500 closing costs. I bought my place for 50k, which meant I needed $2000 upfront, then paid $300 for the mortgage and $200 for the condo fee each month. Not bad

I actually wouldn't recommend borrowing against a 401k - what little you'd get from a liquidation would only lower your monthly payments by a couple bucks, and you'd end up paying out your ears come tax time. All the taxes and fees they hit you with make it really not worth it.

Holy freaking crap where do you live that you got a place for $50k!!! I want! What was your mortgage insurance like on that? Or did you not have to pay it because the loan was so low anyway?

jj · Kate Spade

Actually, the $$$ you borrow from your 401K for a first-time home purchase is NOT subject to taxes/penalties. That's the beauty of it. You do have to repay it, but you're just paying it back to yourself, and borrowing $1500 came out to be $10/month.

It's crazy, but I bought my studio in one of the trendiest, nicest neighborhoods in DC, Cleveland Park. It was 1/2 block to the metro and cute as a button. When I was renting, I never thought I could afford to buy in that neighborhood, but boy was I wrong!

ETA: Oops, forgot to answer the mortgage insurance question. To be honest, I have no idea how much it was! Told you I was clueless! All I knew was that I had to send $306 to BOA each month.

-- Edited by jj at 20:55, 2006-08-20

halleybird · Hermes

the other girls gave great advice, but I wanted to add my 2c, which is a little less depressing.

I bought my first house at age 22, and qualified all by myself on my crappy teacher's salary. I did an FHA loan, which meant I only needed to put 5% down, which was about $6,000. I saved the down payment during the 6 months the house took to build. Even with the mortgage insurance and the HOA fee, the monthly payment was about $100 less than what I was paying in rent for a similarly sized house further in town.

The catch, of course, was that I was in a relatively new area that was about 15-20 minutes from the area that I really wanted to live in. But it was safe and clean, so I put up with a really annoying 40-min drive to work for 2 years. After 2 years, we were able to sell the house for nearly $100k in profit, which enabled us to buy our current house, which would have been way out of our price range otherwise. We were able to put down 20% on this house and thus avoid mortgage insurance. This house is big enough for at least 2 kids if we had them, as well as our dogs. It has a good school system and is in a great location.

You really have to know the area you live in (here, home values almost always go up), and what your long-term goal is. Some of my friends held off on buying until they could afford a house or condo in a specific area or trendy neighborhood. Their houses are so small that they won't be able to stay there when they have families, etc., and they're stuck because their payment is already high. So I just wanted to put my story out there, because it isn't always an awful process. I am glad I had that first house, and I put up with the less-desirable neighborhood and the longer commute, because it would have been years before I was able to afford a house like ours. But it all depends on your lifestyle.

-- Edited by halleybird at 21:42, 2006-08-20

Elle · Hermes

jj wrote:

Actually, the $$$ you borrow from your 401K for a first-time home purchase is NOT subject to taxes/penalties. That's the beauty of it. You do have to repay it, but you're just paying it back to yourself, and borrowing $1500 came out to be $10/month. It's crazy, but I bought my studio in one of the trendiest, nicest neighborhoods in DC, Cleveland Park. It was 1/2 block to the metro and cute as a button. When I was renting, I never thought I could afford to buy in that neighborhood, but boy was I wrong! ETA: Oops, forgot to answer the mortgage insurance question. To be honest, I have no idea how much it was! Told you I was clueless! All I knew was that I had to send $306 to BOA each month.

Wow! That's an awesome, awesome deal!

Hmmm, my friends liquidated the wifes 401k last year to buy a house - they didn't take out penalties off the top as they usually would (that the one-time home buying thing), but they taxed it like a bat out of hell. It lowered their mortgage payments by about $50 a month, but they had to come up with almost $5k at tax time (aka almost half the liquidation!). I think they could have elected that to be done when they liquidated, but then they would have had $5k less to put into the house - it's still considered income (and I believe they consider it at 'bonus' type level for tax purposes), and since it's contributed pre-tax and they still want their cut.

-- Edited by Elle at 12:14, 2006-08-21