STYLETHREAD -- LET'S TALK SHOP!

lynnie · Chanel

owning a home?

ILoveChoo · Hermes

If you can afford it comfortably, you should buy. IMO, rent is a waste of money. You can always take in a roommate or two if you own something big enough too so that you don't get lonely.

Aurora · Marc Jacobs

ILoveChoo wrote:

You can always take in a roommate or two if you own something big enough too so that you don't get lonely.

I was going to suggest this. I rent because I'm not really ready to buy yet plus I have no idea what 'burb I'd want to live in here since everything in the Inner Loop is really pricey and its still pretty ghetto in areas. But I would start researching now. Seeing what is out there. How much is required to be put down if anything. See if you qualify for any first time buyer programs. My cousin qualified for one since she makes under $50k where she received $4k for her downpayment without any strings attached. Doesn't have to repay it, etc.

lynnie · Chanel

ILoveChoo wrote:

If you can afford it comfortably, you should buy. IMO, rent is a waste of money. You can always take in a roommate or two if you own something big enough too so that you don't get lonely.

I'm just not sure what it means to afford it comfortably- and I'm pretty sure I don't qualify..yet. I've heard maintenance fees and taxes are ridiculous- i'd probably be spending $3000/mo for a one bedroom- plus having to furnish and supply things for an entire apt. but i don't know. If someone has specific numbers for me, that would be really helpful- i don't know where to even start! i understand the rent being a waste of money thing, for sure, but i also understand being chained to a mortgage. I'm not 100% positive i'd want to buy in this city yet (i'm 23) and I don't really want to rack on possessions (furniture, etc) quite yet since i still want to do some traveling and may move. I guess its more of a matter of some sort of timeline? How much should I save for a downpayment, etc? So that I'll know when I'm ready.

Aurora · Marc Jacobs

hmm elle might be a better source of info but I think in order to avoid default insurance you have to put down a downpayment of 20% when you are purchasing your place of residence. As far as property taxes goes your best be would be your city/county tax assessor. There you could see how much similar properties are being charged. I think you can pay it throughout the year not all at once so that would help the shock from having to pay it all at once.

As far as furnishing the place goes do it one piece at a time. I still haven't finished with my one bedroom apt. I started with a matress and a couch. From there I was able to salvage some bedroom furniture and 2 chairs from my grandmothers house after she passed away. Its not the best stuff and it doesn't exactly match or is my exact feeling for how I want my apt to be but heck its free and I can save/spend money on vacations/my new car instead of paying for furniture. I think that it took a few months before I got a dining room table. Before I got the current one from my cousin I used a folding table and 2 folding chairs.

Honestly at 23 I think renting is ok esp since you said your rent was really good and I know from other posts you are able to save quite a bit of your paychecks each time you are paid. I think as you live there more you will be able to figure out where you want to live and if you want to live there. I also haven't thought about buying yet because I'm waiting out the market. I think the prices are still inflated around here and I'm waiting to see when it drops and where it drops. Plus like you said a house is a huge thing to deal with. I'm not exactly ready to have to fix my own plumbing/problems

NCshopper · Hermes

Your post totally reminded me of an article I read in domino magazine a long time ago. They profiled a couple that rented in NYC and bought a second home as a vacation home upstate. That way they were able to live in NYC but still start building equity. I thought it was a neat idea. It's not for everyone, but it could work.

As far as taxes go, I think most of the time you pay the tax every month to the company that holds your mortgage and then they write the check to the city/county once a year. Generally, you want to be able to put down about 20% as a down payment. It won't kill you to do less or more, but there may be some penalties if you have less.

If you want to learn more, I highly recommend Suze Orman. Young, Fabulous, and Broke is a great book as are some of her "Ask Suze" series. Also, talk to your parents. They'll probably have some good advice.

As for your age, try not to let that be a factor. It's perfectly normal to be renting at 23 and it's probably more of the exception than the rule to have already purchased at that age. So, don't feel rushed into buying--you're in no hurry. It's far better for you to buy when you're ready than to be stuck with a mortgage you can't afford or to be locked into a lifestyle that doesn't allow you the mobility to travel if you want.

Elle · Hermes

We just bought with only about a 5% down payment and we do not pay mortgage insurance! It can be done! The price of our house was split 3 ways - an 80% mortgage, a 15% mortgage, and our 5% down payment. As long as no one mortgage holds more than 80% of the value of the property, no mortgage insurance . Second mortgages usually come at a higher interest rate, but can be refinanced with a bank (who always offer lower rates than brokers can get for original financing) with no fees after 6 months or so to get lower rates.

It's really hard to know where you stand without speaking with a mortgage broker, which you can do for free. They'll run your credit report, help you figure out how much you can afford now, how much you could afford if you saved $XYZ more, what your options would be on mortgages and how they would affect payments, etc. They'll also let you know what kind of closing fees you'd be looking at for the amount you'd be borrowing, etc. The closing fees caught us by suprise a bit because they ended up being almost 3% of the house price. A mortgage broker is also probably one of the best people to help estimate homeowners insurance costs, taxes, average HOA fees, etc. You'll definitely walk away with a much better feeling of where you stand now, and how/what you need to be able to buy in the future.

We decided to buy when we did even though we're young and even though we probably could have saved more for a few reasons. We hated the apartments we lived in and were spending a ridiculous amount on rent (Relatively speaking. We spend 50% more on our mortgage than we did on rent), we knew we weren't moving away from the area again, homes in our area appreciate very consistently and we didn't want homeownership to move any farther out of our grasp than it already was. Also, DH's job is very stable, and his salary will go up yearly while our mortgage payment will stay the same, so eventually it will be less and less of a stretch. Also, the interest you pay on a mortgage and your property taxes are deductible on your federal taxes, so we'll be getting the rockingest refund evah next year!

Anyway, lots of pluses and minuses to weigh. If it was me, I'd probably meet with a broker just to get an idea of what I needed to aim for, and then work toward that for a couple years. In that time you can also decide if you want to stay in the city and maybe negotiate some benefits for yourself at your current job or a new one. At the end of that time you'll only have more money to work with and will have had some more time to get used to the idea of owning.

ETA again: You can also pay half your payment every 2 weeks on any mortgage - it greatly reduces the amount of interest you pay over the life of the loan, and can pay off a 30 year mortgage 7 years early!

-- Edited by Elle at 13:34, 2006-12-29

erin · Chanel

i was 23 when we bought our house. i regret not having 20%, and we seriously got screwed over on the mortgage. but then i wisened up, and we refinanced to a 15 year mortgage instead of 30 years, and with a great rate. i am really happy in our home, and i'm glad we bought...but i wouldn't have minded renting for a few more years. property taxes here are a bitch (we pay about $3000 a year) and it sucks if something breaks and it's basically "all you."

i would say wait until you have 20% saved up (if you already do, great!). it takes a lot of years and interest off the mortgage.

greendiamond · Marc Jacobs

I was 24 when hubby and I bought our home. We had only saved $12,000, but bought anyway (it was not 20%)!

My advice if you are still in the "should I/shouldn't I" stage is this:

1. Find a mortgage calculator online and see what you can afford. Don't forget to adjust for taxes, PMI if applicable, and insurance.

2. Look around and see if you can come remotly close to buying anything in a neighborhood that you'd like to live in with that kind of money.

3. Take the difference between what you pay now in rent, and what the calculator says you can afford and put it in a seperate savings account every month, on the first of the month or whenever you pay rent, until you can buy. That way you test yourself if you can afford the new payment while saving money for a downpayment. It's real easy to say, that you can afford it if you skinp on this or don't buy that, but until you do actually make those sacrifices, you'll never know.

So, even if you aren't ready to buy right this minute, these things will help you to better understand what it would be like financially, and you'd take a look at the kind of places you could afford to live.

HTH

-gd