STYLETHREAD -- LET'S TALK SHOP!

Elle · Hermes

Big. Scary. Mortgages. and stuff ...

blink · Coach

Somehow, it just all balances out. We bought a new home when I was only 24 after we had been married for a little more than a year. Our mortgage payment is only about $500 more than what we were paying in monthly rent in our apartment, so the financial adjustment wasn't too bad.

We never regretted the act of buying a home and being responsible for the mortgage payment. We did build a new home, so repairs and such incidentals were never really a big issue. The only regret I have is that I wish we had just taken more time to pick the house and considered that we might live there longer. We bought the home in 2000 and totally expected to sell it for profit within a few years based on the market back then. Well, now that I have two babies and tons of other furniture and stuff filling the house, I am sick of the nice looking but small and impractical floor plan, the small (and on the plus side, low maintenance) yard, and there are other neighborhoods I would rather live in now that I am more familiar with my community as an adult. After six years, my house hasn't appreciated quite enough to make it worth it to upgrade just yet, so my husband and I feel like we need to stay a little longer.

It's been a learning experience, I will definitely know what to insist on in the features of my next home.

nunzi182 · Kate Spade

ITA with lorelei. We bought our first house after being married for only 5 months, me at 23, hubby at 27. We've been in the house now for 5 months and it's one of the best decisions we've ever made. We thought we were struggling in our apartment, but our mortgage payment more than doubled and we're making it just fine. Things are tight but management. It's all in what you are willing to sacrifice. I don't go shopping nearly as much as I used, if at all, but it's so rewarding that I wouldn't change a thing. We were going to wait until the market settled down a bit, but here in NJ things fluctuate with no rhyme or reason, so for us, it was silly to wait for something that might or might not happen.

The fact that you are freaking out about the payment means that you understand it's a big step. If you weren't worried, then I would say you weren't ready (if that makes sense.) Good luck and keep us posted!

ayo · Coach

I think it sort of depends on your market as well.

In this area, rent can be equally as expensive as a mortgage so it's worth it to save up the money for the down payment and buy.

We bought our first house in March 2004 right b4 we got married. Our house pratically doubled in valued in 2 years. We were able to sell that house this year (May 2006), cash out and buy a much bigger home in an area we definitely preferred to stay in long term. We are not moving for a while.

When we first bought our house we were also planning our wedding so money was TIGHT. We had to do some funky financing because we weren't able to come up with the complete 20% that was needed. Our main goal was to just not pay rent. Fortunately our income increased significantly and we were able to re-finance into something better prior to selling the house.

I won't lie, the day we closed on the house I was FREAKED, not only were we both entering into this huge financial responsibility but we were newlyweds still trying to figure out how to mesh our finances together. But it's worked out and I'd do it again if I had to.

I think the key is to first find out how much house you can afford. See how well the market is doing in your area. Determine what is most important to you when it comes to buying a home (the location, type of house, size of house etc) also are their any other long term factors that will play a role in your decision; like, kids, going to school, starting a new career...blah blah blah.

There are soo many ways to avoid paying silly things like PMI so I wouldn't worry about that too much..

jettie · Kate Spade

If you are thinking of staying in your area for at least 4-5 years, I would definitely buy a place. The tax benefits are great as well as appreciation.

Regarding PMI, I agree with Ayo in that there are multiple ways to avoid it. I only put 5% down when I purchased my condo (and even that was difficult at the time). I avoided PMI by doing to loans, one for 15% and one for 80%. There are other creative ways to avoid it as well.

nunzi182 · Kate Spade

ayo wrote:

There are soo many ways to avoid paying silly things like PMI so I wouldn't worry about that too much..

This is so true because we avoided it somehow. We put $0 down on our house and didn't pay a dime toward PMI.

Sunshinegirl · Kate Spade

I dont think that you can go wrong buying a house. It is much smarter to buy then to rent. For the most places, your investment (equity) will begin growing as soon as you sign those papers.

Try and look for up and coming areas in your town to invest in. If you have a friend who is a realtor, ask them if there are any areas in your city that are creating a "buzz" w/ investors/flippers that worth looking at. These are usually fantastic areas to buy into because they are reasonably priced (no inflated prices yet) and yet to be discovered. This is what i did 10 years ago and now i'm sitting on a small fortune w/ enough equity that allowed me to buy rental property last year.

Look for a fixer-upper. Try and buy below your means. Remember that you need to factor in taxes and insurance into your mortgage as well. Many people make this mistake. Before you buy a house find out what the taxes would be based on the selling price. Many times the current annual tax amount is listed but this is based on what the current seller bought the house for. It can thousands of dollars more a year. An accountant can help you out. There is a formula to help you calculate this. I think it is a percentage for every 100,000 you spend.

I hope this helps. Also, i think this is a really great time to buy because for the first time in a long time it is a buyers market. Sellers are wanting to make deals because there are so many houses on the market.

Also, look for first time homebuyers programs that may offer a better rate. Also, make it a fixed rate. Dont fool around w/balloon mortgages- IMO.

AllieGurl · Marc Jacobs

We bought our first home at 22. We had only been married 2 years and we realized that we needed to own a home to take advantage of all the tax breaks.

Buying our first home was EASY for some reason. We bought a brand new home, we were able to pick everything in it (wood floors , cabnit color , carpet etc) Our home doubled in value in a little over a year and a half.

Buying a home was the SMARTEST financial decision we ever made. We are only paying about $400 a month more than our rent was before owning, we get huge tax breaks every year (last year we got a 10k refund! ) and with all the equity our home earned we ended up refinancing takeing out 100k to reinvest in opening another location for my clothing stores AND the payment ended up being LOWER by a few dollars because rates had gone down.

Now my advice and what I have learned - Buy what you can afford. Dont overextend yourself. DONT buy a fixer uper. They cost ALOT when you wont have the $$. Buy 3 bedroom + if possible, they have the best resale value.

Also like a previous poster mentioned - we had no intention of staying here as long as we have so we bought the smaller model home. My house has 3 bedrooms, and we didnt buy the 5 bedroom model because it was an extra $30k. BIG MISTAKE. that house is worth a ton now and we could have used the room. So buy something you know you can grow into as well.

I know it is scary, but think of it this way- you are going to pay for living expenses either way. You can either pay rent which you will never see a dime of again, OR you can pay a mortgage and right off the interest payments every month off your taxes. Get your money to work for you.

As far as PMI goes , there is a TON of creative financing out there to avoid this. I believe all first time homebuyers can do a 80/20 loan and you will not have to inccur any down payment cost (other than closing cost).

HTH!

Elle · Hermes

Great advice ladies! And it makes me feel better hearing your stories, that it was scary and sometimes hard but it worked out. I'm super glad to hear that there are lots of ways around PMI!!

Our market here is somewhat unique, so unfortunately we won't be able to really make an ideal move. We have an urban growth boundary around the city that drives prices up because space is limited. Also means that there are condos going up everywhere that cost more than some freestanding homes. Also means that we are priced out of larger homes that are not 70's fixers, unfortunately. There's pretty slim pickins right now, but the tides are turning so we're hopeful.

But we are planning on getting something that would be acceptable to most first time buyers, that we would be willing to live in for at least 5 years, that's at a price point that wouldn't completely prevent us from saving.

Provided such a price point exists, of course . We'll know more tomorrow - we're meeting with a mortgage broker, meeting our real estate agent, and touring a house we found online. Talk about jumping in with both feet!

Cross your fingers for us!

valenciana · Dooney & Bourke

i'm not elle, but i have many of the same questions (although not nearly as much of the knowledge she already has, but we all know elle's a genius who knows stuff about *everything*)...and i would like to thank everyone for all the info, it's very helpful...

even if i am hyperventilating just a little here...$500 more a month than rent?!?! and that's not supposed to be "a lot"?!?!? ....breathe in...breathe out...breathe in...breathe out.... elle - we can freak out together...

Elle · Hermes

valenciana wrote:

i'm not elle, but i have many of the same questions (although not nearly as much of the knowledge she already has, but we all know elle's a genius who knows stuff about *everything*)...and i would like to thank everyone for all the info, it's very helpful...

even if i am hyperventilating just a little here...$500 more a month than rent?!?! and that's not supposed to be "a lot"?!?!? ....breathe in...breathe out...breathe in...breathe out.... elle - we can freak out together...

Crap, I sure don't feel like I know much when we get into stuff like this. I feel like the kid trying to play with the adults !

Anyway, staring down the barrel at nearly $2k a month in house expenses and the resulting hyperventilation is what started this thread in the first place Valenciana ...... . I wonder how many people just like us real estate agents and mortgage brokers the nation over have had to pick up off the floor over their careers?

In our research V, (may I call you V?), someone pointed something out which has been very helpful in the keeping of the peace of mind. It is this: Yes, a house might be expensive. And the payments are painful at first. However, once you buy the house, the payments don't go up (provided you get a fixed loan), but your income will. Through raises or new jobs or whatever. I have a friend who bought a house 10 years ago for, wait for it, $96,000 and they just about died at the thought of that! Now, their payments are the same, but they make twice as much an hour as they did then . They do quite well for themselves now, as you might imagine.

And once you're in the game, property values may make the next house you want more expensive by $10k, but it also makes the house you have worth another $10k. Not always nice and neat like that, but you get my drift. Much less painful after you get in initially ...

ayo · Coach

valenciana wrote:

even if i am hyperventilating just a little here...$500 more a month than rent?!?! and that's not supposed to be "a lot"?!?!? ....breathe in...breathe out...breathe in...breathe out.... elle - we can freak out together...

Awwh well don't let that scare you. Think of it this way...you get a lot of tax benefits from owning the home. So you can do two things 1) increase your exceptions which should give you a little more cash to play around with each month (you will need to work with your accountant to see what makes sense) or 2) keep your exceptions the same and get a large sum back at the beginning of the year.

So while it may be about $300-$500 more a month for the mortgage payments. By the time you calculate what you'll be getting back for taxes it will be a little less than that.

Like someone here said, they got about 10k back one year in taxes. Spread that across 12 months

NCshopper · Hermes

Buying a house is pretty scary, but IMO, it's a good investment.

My piece of advice is to buy what you can afford. A bigger house and a bigger kitchen and hardwood floors and all that stuff definitely looks nice, but if it's going to cause you to lose sleep figuring out how to make ends meet, then it's not worth it at all.

Think of it this way: if you buy a house with a lot of amenities (let's say, stainless steel appliances or hardwood floors), you really end up paying for it: the sellers will want more because they figured they put the money into the house and they want to get something out of it. Then you end up not only paying more, but you have to finance it because it's included in the cost of your mortgage, so you end up paying what, 6% on it?

If you buy a house with fewer amenities (say, non-stainless steel appliances or carpeted floors), you can upgrade later when you're making more money, and then sell the house for a greater profit. Then you'd have the cash to pay for it outright instead of financing it. Make sense?

Our house is a starter house, and we went into this process realizing that. We're not going to live here forever. It's a 3 bedroom, 2 bath, 1,200 sf place on 1/3 acre. It's cute and we've done a lot to fix it up. It hasn't been expensive at all. We figure by the time we've outgrown this place in a few years, we'll have enough saved up to buy a second home and rent this one out, so we can use it to make money.

You really don't want to have all your money tied up each month in your mortgage--you want to diversify and invest in other things, right? So I'd suggest starting with a smaller place and working your way up as you start to make more money.

Elle · Hermes

NCshopper wrote:

Our house is a starter house, and we went into this process realizing that. We're not going to live here forever. It's a 3 bedroom, 2 bath, 1,200 sf place on 1/3 acre. It's cute and we've done a lot to fix it up. It hasn't been expensive at all. We figure by the time we've outgrown this place in a few years, we'll have enough saved up to buy a second home and rent this one out, so we can use it to make money.

Can I move to your town? A 'starter home' here (aka something we -and other first time buyers- can reasonably afford) is 2 bdr, 1 bth, 900-ish sq feet, with no garage or a 1 car detached if we're lucky, on .1 acres, in an older 50's/70's/80's neighborhood .

I had no idea they even made houses that small and that expensive until we started looking.

We'd need to go between $50k and $75k higher in price to get something like you have, which I think we'd be happier in for longer. We're going to keep looking in our current price range just in case the 'right' thing happens to pop up. Hopefully by the time it either 1. Does, or 2. We get tired of looking, we'll have saved up enough extra to bump us up in price range.

This is going to be a looooong process for us, methinks ....

I couldn't agree more about not wanting all our money tied up in mortgage, which is exactly what we're trying to avoid. That might require taking more time to save first than we'd like though, unfortunately.

NCshopper · Hermes

Yeah, Raleigh is an extremely affordable place to live, which I feel really grateful for, since I've gotten priced out of my hometown (San Diego).

Anyway, definitely take your time during this process. Rates are still pretty good right now and it doesn't seem as if they're going up exponentially or anything, so I think you'd be better off if you took your time to really figure out what you want and get a good price than you would be if you were to rush into the process.

Also, and I'm sure you're doing this, talk to friends, family, parents, your friends' parents and see if they have any good insight. A good realtor is a good thing to have too. If you don't have one, see if any of your acquaintences can recommend one. We found ours through my freind's mom, who is a realtor in Phoenix and recommended the lady we ended up working with. Having someone on your side throughout the process is immensely valuable.

kittenheels · Coach

I just bought a condo/townhouse with my husband this past spring. We had a little remodeling to do, but it was totally worth it. Our mortgage is a lot more expensive than our rent (we live on the westside of LA), but it's still doable. We made sure that any payment would be no more than 30% of our monthly takehome...and with readusting my priorities (shopping a little less), it's been totally worth it. I think buying a place is scary, but it's so rewarding. I suppose it's kind of like marriage?

scarlett · Marc Jacobs

This thread has been really helpful for me too! With the market turning more in the buyer's favor now, I've been thinking a lot about buying an apartment. (Since I live in NYC, it would not be a house.)

lynnie · Chanel

scarlett wrote:

This thread has been really helpful for me too! With the market turning more in the buyer's favor now, I've been thinking a lot about buying an apartment. (Since I live in NYC, it would not be a house.)

let me know about the process if you start looking- i'm still a few years away- but i have no idea what to look for in nyc. Can you even find something for less than $500,000?

scarlett · Marc Jacobs

Lynnie, I have seen some listings for apartments that are less than $500,00. I don't know if you can get anything in Manhattan for that much, but for example, this morning I was looking at listings on the NY Times site real estate section, and saw a three bedroom in Long Island City, Queens, for $425,000 (I think). It was between 400K and 500K at least.

If I start really going into this process I will let you know!

greendiamond · Marc Jacobs

Don't be afraid of starter homes built in the 70's. I'm living in a 1965 starter home and it has been wonderful. The place was sound, however was a 1965 relic. We've been updating things and will turn a pretty good profit when we leave in about 3 years (we've been here 2).

Here are 3 pieces of advice for you:

1. Pick up "house buying for dummies" it will answer all the questions you are too afraid to ask (heaven forbit you don't look like a grown up and ask a dumb question. It was a life saver"

2. Be picky about you real estate agent. Don't work with a friend or family member. But, meet with someone a friend or family member recommends. Our was SO helpful. He could immediately tell us if the place was going to be too much work, never made up feel bad about not having much money to spend, and took us to a LOT of homes. We even spent one weekend looking at homes in our price range in surrounding cities so we could see what our money would buy there.

3. Chose a qualified home inspector and attend the inspection. Let the person do their work, but ask to be called to be shown unusual things. It was really helpful to hear what he had to say. They also are good at leting you know what needs immediate attention and what should be done when you have the time. Avoid inspectors who are also contractors, as they will want to do the work for you, and as I see it, that's a conflict of interst.

It is scary buying a home, but it is so nice and worth every worry. But, do remember that the amount you are pre-approved for on a loan doesn't mean you can afford to pay the mortgage on that priced house.

Go for it, and enjoy!

-gd