$50k Saved, Can I Buy a House?

[Ameesh]

Originally posted by: AvesPKS

Originally posted by: Jgtdragon

Originally posted by: AvesPKS
My buddy bought a house for $27,000, so yes.

Did your buddy bought the house in the Bay Area?

What's the "Bay Area?" Chesapeake Bay?

No, he lives in Southern Illinois.

the Bay area genereally refers to San Fransisco and the outlying burbs which are very expensive.

 

[Kremlar]

I wouldn't say you're throwing away money if you rent. You're paying for a roof over your head. Do you throw away money when you buy food? Anyway, if he's paying significantly less renting - which he probably is - it's better for him to save up and have a lower mortgage.

Yes, I do consider renting, in many cases, to be throwing money away. When you can be putting your money towards YOUR mortgage and investing in YOUR equity, why would you choose to instead pay off your LANDLORD'S mortgage?

Good deals can be found as far as renting is concerned, no doubt. If you're paying rent that's 70% of what your mortgage could be, why not buy if it's within your means?

I never understood the 'wait and save more' mentality, unless you're close to 20% down. If you're paying rent 70% of what your mortgage could be, you're LOSING money every month that goes by - plus you're living in an apartment instead of your house! Unless you're close to 20% and ditching PMI, buy now and put as much money into your house as possible, then get rid of PMI as soon as you have 20% in equity.

I think it's difficult to understand what it's like to have a house unless you've actually been there.

I paid rent for probably 2 years longer than I should have. Sure, I had more for a down payment, but house prices went up and I paid thousands of dollars in rent that could have instead gone into my house.

 

[wyvrn]

Originally posted by: rgwalt

Originally posted by: wyvrn
Rent is not throwing your money away, though the current entitlement generation thinks it is. You have to pay for shelter, one of the most basic needs of being human. Apparently, video games and big screen TV's are more important these days

Seriously, if you look around you can find a good cheap apartment. Alternatively, look in the paper for people who have a separate apartment building on their property they want to rent out, usually these are cheaper than living in apartment complexes and you will have a bit more privacy. If you live below your means, you can continue to save money without the responsibility that comes with owning a home (if you are young as has been suggested). Most young people who get into houses too early have some regrets about it. There is nothing wrong with paying rent for a couple of years until you decide where you want to live: remember, once you buy a house it will become your permanent place of residence, and is much harder to move if your community needs or income changes suddenly.

However, if you feel comfortable with the idea of owning your own house, I suggest not maxing out your mortgage payment every month. Look for a place below your means but with plenty of room. You can live there for 5-10 years while the property appreciates, and when/if you start a family you can always sell and move into a nicer house.

Hope this helps your decision, and good luck!

It isn't a matter of entitlement. It is a matter of how you look at money. You can come out ahead when you own your home vs renting an apartment. There are factors you have to consider both ways, such as the cost of maintaining your home. The issue is that over the time he will live in a home, he can build up equity. You build up no equity living in an apartment. However, the value of living in a home over an apartment depends on many different factors. However, when someone says they are "Throwing away money on rent" I don't believe it has anything to do with feeling entitled to shelter. It has to do with the amount of money you are spending on a monthly basis that could be being put to better use building equity in a home.

Ryan

Yeah I know that. That's why I have rental properties, which is a step better than owning from a pure financial sense. My tenants are paying of the investment in the exchange for shelter services. However, equity is not some grand goal that dwarfs all other considerations. Sometimes NOT taking on excessive responsibility is worth more than money savings. I don't advocating renting long term, but certainly I can see that in some cases it would be favorable to do so. No doubt that's why I have renters in the first place

 

[rahvin]

Originally posted by: rgwalt

Originally posted by: wyvrn
Rent is not throwing your money away, though the current entitlement generation thinks it is. You have to pay for shelter, one of the most basic needs of being human. Apparently, video games and big screen TV's are more important these days

Seriously, if you look around you can find a good cheap apartment. Alternatively, look in the paper for people who have a separate apartment building on their property they want to rent out, usually these are cheaper than living in apartment complexes and you will have a bit more privacy. If you live below your means, you can continue to save money without the responsibility that comes with owning a home (if you are young as has been suggested). Most young people who get into houses too early have some regrets about it. There is nothing wrong with paying rent for a couple of years until you decide where you want to live: remember, once you buy a house it will become your permanent place of residence, and is much harder to move if your community needs or income changes suddenly.

However, if you feel comfortable with the idea of owning your own house, I suggest not maxing out your mortgage payment every month. Look for a place below your means but with plenty of room. You can live there for 5-10 years while the property appreciates, and when/if you start a family you can always sell and move into a nicer house.

Hope this helps your decision, and good luck!

It isn't a matter of entitlement. It is a matter of how you look at money. You can come out ahead when you own your home vs renting an apartment. There are factors you have to consider both ways, such as the cost of maintaining your home. The issue is that over the time he will live in a home, he can build up equity. You build up no equity living in an apartment. However, the value of living in a home over an apartment depends on many different factors. However, when someone says they are "Throwing away money on rent" I don't believe it has anything to do with feeling entitled to shelter. It has to do with the amount of money you are spending on a monthly basis that could be being put to better use building equity in a home.

Ryan

Equity in the home, points, loan cost and PMI are not the only factors to consider. Total lifetime costs of the home should also be factored in, including the real estate commision on the sale of the property. A typical real estate commision is 6%. 400,000 X 6% is $24,000. This means the condo would have to appreciate in value $24,000 in the time he owns it just to break even. Buying will often cost you more than renting if you don't stay in the property you purchased for over 5 years (unless you are in a very hot real estate market, then sometimes all you need is 3 years to break even).

Condo's also don't appreciate in value like homes, they burst increase (in my area at least). Whereas homes appreciate a fairly consistent percentage every year, the condos will often sit at the same price for 10 years then go up 50% in 2 years. Condo's are much more affected by the cost of rentals in your area. If for example apartments in your area are overbuilt and rents begin decling condo prices will often either stagnate or trend downward.

You can lose a LOT of money in real estate if you make the wrong decisions so be sure of what you are doing and figure out the maximum lifetime costs you will experience for your timeframe of ownership.

 

[Kenji4861]

Originally posted by: PHiuR

Originally posted by: cpals
Dang... 50 grand. I want whatever job you have.

its not that hard....he prob been saving up for a couple of years?

Thanks for all the tips guys. Yea.. I don't have a "kicking" job. I just saved up for a while. It looks like I'll be targetting a condo in the lower range ($200-$300). I live in the Silicon Valley area.. and the cost of living is still quite expensive in this area.

 

[allisolm]

Total lifetime costs of the home should also be factored in, including the real estate commision on the sale of the property. A typical real estate commision is 6%. 400,000 X 6% is $24,000. This means the condo would have to appreciate in value $24,000 in the time he owns it just to break even.

Real estate commissions are normally paid by the seller, not the buyer.
Factoring in lifetime costs of the home would be a formidable, if not impossible task. How on earth would anyone know what you might have to shell out for something 20 years down the road?

 

[CChaos]

allisolm--He was talking about the commission he would have to pay if he wanted to sell it and get his money back out.

Personally, I don't see interest rates and housing costs going down anytime soon. So, I don't see much point in spending a couple of years trying to save another $30k to hit that magic 20% only to find that both rates went up and $400k buys less than it does now. I'd suggest finding something in the $300k range, and putting 10 or 15% on a combo loan. You'll keep quite a bit of cash in the bank, start building equity and you get the benefit of appreciation. Plus you don't pay PMI.

A 20% down payment is nice and all, but I can't help but think of it as a throwback to a time before housing prices got completely out of control. I live in Southwestern Connecticut and yes they are out of control. When a 3 bedroom 1 bath cape built 70 years ago demands $350k despite looking like it hasn't been updated in 30 years, then that's out of control. Sure the guy who paid $200k or less 5-10 years ago can put $150k in his next house even though he built maybe $25k of that through equity. The rest is the result of the market. So get into a house and hope to get swept away like he did.

EDIT: As for what the monthly payment will be, well get in touch with a mortgage broker. People speculating on what the taxes or condo fees will be or what kind of deal you can realisitically get won't be nearly as helpful. Go now!

 

[WolverineGator]

Totally unrelated, but the GF's uncle has $7 monthly payments on a mobile home he bought for about $5k. He financed it just so he could say his utility bill was more than his mortgage payment! He's now selling it for $15k.

When you get your condo be sure to host a ATOT Lan party