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Buying a House

edro

edro

Lifer
I am currently paying ~$400 month in rent (my half) + half the bills...

My father is always pushing me to buy a house, and a coworker keeps telling me how easy it is and how beneficial and cheap it actually is.

Pros:
You get the tax money from your house payment back at tax time (~1/4 of your payment)
You gain equity in your house, so the amount going to principle is actually a savings account
You can rent a room out to a friend to help pay for it
You OWN A HOUSE!

Cons:
It costs a lot of money
It needs expensive repairs
You pay all bills and expenses on your own


The coworker says a house payment is generally ~$650 per $100,000. Since I am 22 and live in Ohio, houses are cheap in the burbs... for around ~$90,000-$125,000 or so.

I know I could afford it and all the bills, but I would be very very tight.

What are some other pros / cons I didn't list or might not be aware of?
How much money do you need a month to cover all expenses?

Thanks!
 
Obviously, it depends on what kind of rate you can get, but your payment estimates might be a bit low.
We have a 145k loan at 6.5% and with taxes and insurance, our payment is almost $1200 a month.
 
$2000 monthly mortgage on a (5.875%) $265k loan so you can adjust for your situation from that.

Then expenses include:
electric ($50-$100/mo.)
phone (not much these days with cells)
water (hardly anything)
food (depends if you eat out - we spend less than $200/mo. in groceries plus maybe $40 in takeout per week - 2 people)
gasoline for car ($150 per month these days)

I think $500-$600 is good for living expenses (less if you're alone) then you add your mortgage. Rest is your "play money" left over each month. It comes down to your monthly household income, of course.

I absolutely love having my own house. It's almost as nice as your first new car.
 
You pay all bills and expenses on your own

Welcome to the real world 🙂

Owning your own home is only worth it if you take care of it and keep it up. It is an investment (if purchased in the right area) and you can only make money off it in the end.
 
One con is
You can't get out of a House as easy as renting.

if you need to move/relocate you could be tired up with payments for Months
 
Originally posted by: spliffstar69
One con is
You can't get out of a House as easy as renting.

if you need to move/relocate you could be tired up with payments for Months
Click to expand...

1)start fires
2)collect insurance
3)....
4)profit!
 
The way I see it is, if the housing market in your area is doing okay and plan to stay the in the area for at least 5yr. then I would buy a house.
 
Payments might be cheaper these days. My mom recently started the second 5 year term and because of the low interest rates, the payments went down from $1000 to about $750 a month (this on around 140k).

So I say go for it. If money's tight just cut back on expenses (for example, flurecent bulbs, turn heater down a few °s and put on a sweater, etc) and learn how to do stuff around the house. Everything but the major renovations can be done by one knowledgeable person (ie unclogging, some basic electrical work etc)
 
I'd like to modify your first pro. You MIGHT get tax benefits. A large amount of deductions are already assumed. You only get tax benefits if your interest payments exceed that already large amount. On a ~$100,000 house with todays low interest rates you very well might get no tax benefit at all. Thus your ~1/4 number has no basis at all.

Additional Pros:
[*]Much less neighbor noise, and you can make a lot more noise without complaints.
[*]Housing prices usually go up. This is free money.
[*]Finally enough space to put all of your stuff. No more cramming until the closet doors almost burst. This is temporary though as you will always buy enough stuff to make any home full.

Additional Cons:
[*]It can be difficult and expensive to leave when you finally leave.
[*]It is expensive to get a mortage. A few thousand dollars for a ~$100,000 house is typical.
[*]Housing prices have gone down in many locations at different times in history. You may lose everything you put into it.
[*]Expensive insurance and expensive taxes.
[*]Utitlities may very well be 1x to 10x the amount you currently spend on your apartment. It all depends on the house.

I feel the pros outweigh the cons.
 
Generally speaking, try to keep the payment around .25 of your total net income per month. It might mean buying into a cheaper house on the first go-around, but given time (say about 10 years) for good, solid equity and living changes (better paying jobs and such) you will come out better in the end.
 
I have a $200k loan (started last July), my mortgage is just under $1600 (includes PMI).
After that, I have these expenses:
cell phone: $60
house phone: $20
gas: $170 (in winter, $50 in summer)
electric: $100
cable+internet: $115
garbage collection: $30
water: $10 (or less per mo.)

So that's about another $500/mo in utils.

Luckily, I have a fiance whos salary is close to mine, so my salary goes towards bills+mortgage and she furnishes the house. If you can get a roommate or two, they end up paying most of the mortgage. I have a friend who has 3 roommates and his mortgage is less than what they pay in rent each month. Granted, once he gets married, he probably won't have to have 3 roommates around anymore.
 
You need maybe about 5% down and 2.5% of selling cost for closing costs. so you need to have about that much liquid cash before you can buy anything.

after that, just figure out your monthly payment based on rates. Of course, if you don't put at least 20% down, you will need mortgage insurance or perhaps a second trust through mortgage company until you gain 20% equity in house and can re-finance.
 
Originally posted by: dullard
I'd like to modify your first pro. You MIGHT get tax benefits. A large amount of deductions are already assumed. You only get tax benefits if your interest payments exceed that already large amount. On a ~$100,000 house with todays low interest rates you very well might get no tax benefit at all. Thus your ~1/4 number has no basis at all.

Additional Pros:
[*]Much less neighbor noise, and you can make a lot more noise without complaints.
[*]Housing prices usually go up. This is free money.
[*]Finally enough space to put all of your stuff. No more cramming until the closet doors almost burst. This is temporary though as you will always buy enough stuff to make any home full.

Additional Cons:
[*]It can be difficult and expensive to leave when you finally leave.
[*]It is expensive to get a mortage. A few thousand dollars for a ~$100,000 house is typical. (this varies greatly depending on your broker, there are hundreds of different lenders with many programs that can save you money)
[*]Housing prices have gone down in many locations at different times in history. You may lose everything you put into it.(very rare, but a good way to tell if an area is a stable one is to look at the businesses there. Generally businesses don't build in areas that might decline in value)
[*]Expensive insurance and expensive taxes. (depends on the area)
[*]Utitlities may very well be 1x to 10x the amount you currently spend on your apartment. It all depends on the house.

I feel the pros outweigh the cons.(I agree)
Click to expand...

Try looking for hud homes if you can. My first house was a hud in good condition and hud actually paid about 70-80% of my closing costs. In fact all my wife and I had to bring to closing was roughly around 2200 bucks
Just thought I would chime in on this
 
Originally posted by: sohcrates
You need maybe about 5% down and 2.5% of selling cost for closing costs. so you need to have about that much liquid cash before you can buy anything.

after that, just figure out your monthly payment based on rates. Of course, if you don't put at least 20% down, you will need mortgage insurance or perhaps a second trust through mortgage company until you gain 20% equity in house and can re-finance.
Click to expand...


I think its a little easier these days to buy a home without large downpayments. There are so many lenders these days competing with each other that a good broker can likely get you a loan without a large downpayment. It takes a little work but its well worth the effort.
 
Originally posted by: spliffstar69
One con is
You can't get out of a House as easy as renting.

if you need to move/relocate you could be tired up with payments for Months
Click to expand...

You can get out of house almost if not faster than renting. You can't break a lease very easy. But you can sell your house anytime you get ready. There are a lot of factors that go into a house payment. You have your mortage which is based on your interest rate, but then you have taxes, utilities, and insurance. The big thing with a house is the enormous tax savings. You could realistically recoupe 50% or more back in tax savings vs what you pay during the year.
 
also, you have a house built, its alot easier to get approved.

i have terrible credit

but i was approved for a 145K new house, low interest (i forgot the number but i believe it is below 6%) and no money down.

my house payment is like 930 a month including insurance.
 
You can always try to borrow from friends for the downpayment. I just put down a 5% deposit on a house at 2.5% this week and 2.5% on Monday. The total is $12,370. The house is a new construction which will be finished in July. At that point all I need is the closing costs, but I requested that they raise the price of the house $5k so I get that back at closing (which will be applied to closing costs.) I'll use the money I saved to pay off my car loan and any other loans floating around that aren't tax deductible.

The builder wouldn't consider an FHA loan on the house, so I had to do a conventional loan, which meant coming up with a downpayment. If you qualify for FHA or a state program you can usually get by with 2-3% down (or even 0% down.) It is nerve racking at times but it's worth it in the end. July can't get here fast enough!!
 
That mortgage will probably have to include property taxes, unless you can find a company that won't require you to escrow it, plus homeowners insurance. The offer we put on the house we want was $159,000, making payments just under $1200 a month, including taxes and such, at 5.75%.
 
My wife and I bought a $90k townhouse in MD in June 2000. In April 2004 we sold it for $190k. One sold in January 2005 (last month) for $253k. So it just depends on where you buy.

When we sold our house we did FSBO and sold it in 8 hours. No realtors involved at all.

I love this country!
 
Originally posted by: edro13
I am currently paying ~$400 month in rent (my half) + half the bills...

If you get an interest only mortgage, you can get a $100K home for about $400/month

Pros:
You get the tax money from your house payment back at tax time (~1/4 of your payment)

True, great benefit too

You gain equity in your house, so the amount going to principle is actually a savings account
Equity will gain or lose whether you pay principle or not, some people don't seem to understand this

You can rent a room out to a friend to help pay for it
You OWN A HOUSE!
Definitely will lower your expenses and if you do it right, you'd end up paying almost nothing

Cons:
It costs a lot of money
False assumption, most of the time you can do two loans 80%, 20% so you don't need anything except some closing costs.

It needs expensive repairs
expensive repairs if you break things, otherwise, repairs aren't that much. Especially if you buy a newer home

You pay all bills and expenses on your own
Okay, but if you pay rent, isn't part of that money going towards expenses too? And rent always goes up as expenses goes up.


The coworker says a house payment is generally ~$650 per $100,000. Since I am 22 and live in Ohio, houses are cheap in the burbs... for around ~$90,000-$125,000 or so.
Ohio boasts the most affordable housing of all the states.

I know I could afford it and all the bills, but I would be very very tight.

What are some other pros / cons I didn't list or might not be aware of?
How much money do you need a month to cover all expenses?

Thanks!
Click to expand...
yw
 
Originally posted by: classy
Originally posted by: spliffstar69
One con is
You can't get out of a House as easy as renting.

if you need to move/relocate you could be tired up with payments for Months
Click to expand...

You can get out of house almost if not faster than renting. You can't break a lease very easy. But you can sell your house anytime you get ready. There are a lot of factors that go into a house payment. You have your mortage which is based on your interest rate, but then you have taxes, utilities, and insurance. The big thing with a house is the enormous tax savings. You could realistically recoupe 50% or more back in tax savings vs what you pay during the year.
Click to expand...

that they key words right there becuase I have seen homes that just stay on the market for months even years so it all depends but you this maybe the case with more expensive homes im not to sure.
 
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