Teach me about buying a house

[T_Yamamoto]

Hi ATOT, long time no see. It's me, the kid that virtually grew up on the internet here.

I am trying to decide if it's financially better to purchase a house or rent an apartment for the next 4-5 years. GF and I are moving since she is attending graduate school in (possibly) Philly area.

Rent for a 1BR 1Bath is around 1-1.2k, Zillow estimate (which seems to be pretty accurate from what I hear, minus the fact that I need to add PMI myself or assume I can pull 20+% out of my ass) for some okay places are about the same or less. Additionally my credit score is typically 750+.

In my mind, buying a house, even without putting 20% down seems to be the best option for me. Since Philly isn't going to be the place I'd like to call home, we will likely end up moving back to NC so if we get a house and sell it, it can be used as a downpayment towards a house in NC.

Thoughts?

Also please school me in loan terms and what kind of stuff I should look for in a house that is a deterrent (IE: flipper houses, nonlevel floors, areas with high crime rates).

Thanks in advance.

 

[sdifox]

Hi ATOT, long time no see. It's me, the kid that virtually grew up on the internet here.

I am trying to decide if it's financially better to purchase a house or rent an apartment for the next 4-5 years. GF and I are moving since she is attending graduate school in (possibly) Philly area.

Rent for a 1BR 1Bath is around 1-1.2k, Zillow estimate (which seems to be pretty accurate from what I hear, minus the fact that I need to add PMI myself or assume I can pull 20+% out of my ass) for some okay places are about the same or less. Additionally my credit score is typically 750+.

In my mind, buying a house, even without putting 20% down seems to be the best option for me. Since Philly isn't going to be the place I'd like to call home, we will likely end up moving back to NC so if we get a house and sell it, it can be used as a downpayment towards a house in NC.

Thoughts?

Also please school me in loan terms and what kind of stuff I should look for in a house that is a deterrent (IE: flipper houses, nonlevel floors, areas with high crime rates).

Thanks in advance.

lol why would you buy a house for 4-5 years?

also, pix of gf?

 

[Brainonska511]

If you're only looking to stay in a place for 4-5 years, it's probably easier to just rent.

Plus, you may want to rent for the first year anyway to get an idea of what areas of the city you really like, making your timeline of ownership even shorter.

 

[pete6032]

Buying on a 4-5 yr horizon can be risky because when you sell you will need to cover a) cost of the home, b) realtor fee, and c) other closing costs. If you home takes a hit in value you could be left underwater and paying off all of these things.

 

[kn51]

Yeah, that and amortization costs.

 

[s0me0nesmind1]

I wouldn't buy a house if you're ACTUALLY going to move in 5 years. If you're "thinking of moving in the next 5 years" which is code for "I dunno lol, might actually move in 15 years" then you might have something to work with.

I'm also just heavily risk adverse.... Lets just say you want to move but now can't sell the house. You're stuck with a mortgage + taxes, and likely can't afford a subsequent apartment + moving costs based on what you describe.


Maybe if you can pay most of the home off in 5-years?

 

[shortylickens]

Yeah, that and amortization costs.

You amortize a house?

Really?

REALLY?


REALLLYYY???????

 

[nakedfrog]

I tend to concur, if you have a solid plan to move in 4-5 years, I don't think I'd buy.

 

[Ken g6]

I'm sure I know less about this stuff than you, but I'll just throw this out there: What about a condo? Less expensive than a house, gathers more equity than a rental, right?

 

[Blackjack200]

Hi ATOT, long time no see. It's me, the kid that virtually grew up on the internet here.

I am trying to decide if it's financially better to purchase a house or rent an apartment for the next 4-5 years. GF and I are moving since she is attending graduate school in (possibly) Philly area.

Rent for a 1BR 1Bath is around 1-1.2k, Zillow estimate (which seems to be pretty accurate from what I hear, minus the fact that I need to add PMI myself or assume I can pull 20+% out of my ass) for some okay places are about the same or less. Additionally my credit score is typically 750+.

In my mind, buying a house, even without putting 20% down seems to be the best option for me. Since Philly isn't going to be the place I'd like to call home, we will likely end up moving back to NC so if we get a house and sell it, it can be used as a downpayment towards a house in NC.

Thoughts?

Also please school me in loan terms and what kind of stuff I should look for in a house that is a deterrent (IE: flipper houses, nonlevel floors, areas with high crime rates).

Thanks in advance.

What neighborhood are you looking at? What school is your gf attending?

 

[T_Yamamoto]

What neighborhood are you looking at? What school is your gf attending?

Salus University for optometry school. Mostly looking at directly east of that area near the tracks even though that area is a little rough, but not as rough as the area south of the school.

 

[BurnItDwn]

Markets are likely going to collapse.
its not a good time to buy.
If you buy, you might lose a lot of money.
It might take decades for the housing market to recover, and some areas will never see recovery.

 

[snoopy7548]

You amortize a house?

Really?

REALLY?


REALLLYYY???????

Really.

 

[lxskllr]

I wouldn't want to do anything that made the Philly area feel like home to me. I'd buy an rv so I could get out of town as fast as possible.

 

[snoopy7548]

Hi ATOT, long time no see. It's me, the kid that virtually grew up on the internet here.

I am trying to decide if it's financially better to purchase a house or rent an apartment for the next 4-5 years. GF and I are moving since she is attending graduate school in (possibly) Philly area.

Rent for a 1BR 1Bath is around 1-1.2k, Zillow estimate (which seems to be pretty accurate from what I hear, minus the fact that I need to add PMI myself or assume I can pull 20+% out of my ass) for some okay places are about the same or less. Additionally my credit score is typically 750+.

In my mind, buying a house, even without putting 20% down seems to be the best option for me. Since Philly isn't going to be the place I'd like to call home, we will likely end up moving back to NC so if we get a house and sell it, it can be used as a downpayment towards a house in NC.

Thoughts?

Also please school me in loan terms and what kind of stuff I should look for in a house that is a deterrent (IE: flipper houses, nonlevel floors, areas with high crime rates).

Thanks in advance.

I don't know your financial situation, but rent is the maximum you will pay; your mortgage will be the minimum. Things will break and will need to be maintained, and you're fully responsible for it.

IMO with such a short horizon of five years, you will most likely come out ahead if you rent rather than buy. The extra money that would be going towards a mortgage, utilities, insurance, repairs/maintenance can be saved over those five years and give you a really nice down payment on a permanent home.

 

[zinfamous]

I don't know your financial situation, but rent is the maximum you will pay; your mortgage will be the minimum. Things will break and will need to be maintained, and you're fully responsible for it.

IMO with such a short horizon of five years, you will most likely come out ahead if you rent rather than buy. The extra money that would be going towards a mortgage, utilities, insurance, repairs/maintenance can be saved over those five years and give you a really nice down payment on a permanent home.

so much this. the expenses of owning, especially in short term, tend to outweigh the costs. Also the condo idea: HOA fees will likely murder any upside to that idea and make most houses more attractive.

The benefits of renting, aside from what your fixed cost will be, are that you will have a wider range of options of where you can likely afford to live--ideally closer to work and school over that 4-5 years, thus limiting your commute and general CoL. Plus, it's way easier to move if you need to escape shitty neighbors and/or shitty neighborhood, shitty landlord, whatever.

There are a lot of ways that owning can be a major trap that far outweigh the inherent "freedom." Storm damage, city damage, plumbing....all of these things? Not your problem. Landlord's problem. AND you generally have legal recourse if the landlord is a dick about it. If you own, just assume every headache (you bought a house with an old water heater, furnace, appliances, roof)? is going to be ~$1K minimum to fix each of them. Even if you are at least somewhat handy, there will be nightmare projects that will require experts.

So, rent and get serious with budget. Treat yourselves as if you are grad students (you are, right?): learn to cook and eat cheaply. Study and don't go out. Don't buy bullshit electronics that you don't need, etc, and maximize most of your savings into an account ear-marked for house down payment 5 years out.

 

[rh71]

So yeah, in summary, it's not worth the hassle especially if it's not your long-term location. If you rent for a few months, and decide you love it there, then you can always buy. Not easily done the other way around. That's what most people do going into a new area anyway.

 

[Svnla]

I wouldn't buy a house if the time horizon is 5 years or less because the first few years, your mortgage is mostly the interest. Rent and buy when you are ready to settle down.

 

[Scarpozzi]

Real estate is definitely a good place to invest, especially if you are handy and can do some upgrades while you're there. This little bubble the economy is facing should recover in 2 years or so, so the risk is low as long as you buy in the right neighborhood.

If you're brave, you could consider looking for a property that has rental potential too...look up that HGTV show, "Income Property". I rented out half of my house after college and it helped pay my wife's housing when she was in grad school (reduced our debt significantly).

I don't know what hope prices you're looking at, but use an amortization calculator to figure out what your cost of interest, calculate insurance, and taxes...consider your quality of life, location, etc... Then see if you're still interested. I bought a 4 bedroom home at 24 and made around $50k cash when I sold it, not counting the undisclosed rent I siphoned from people for 4.5 years.

You can consider 5/1 ARM loans if you KNOW you aren't going to be there more than 5 years. Closing costs are usually a minimum of $4-5k and learn what points are....you don't want to pay them if you don't have to. (it's basically pre-paid interest to get a lower APR)

 

[fralexandr]

Fyi ymmv, at least in California, commissions and closing costs (taxes, inspections, more taxes, etc) are ~10% of the sale price. Expect to pay a few thousand a year maintaining the property unless you diy (paint, pests, plumbing, saving for bigger repairs i.e. new roof, etc). Then you might want to get fire/flood/home owner insurance which might be 500-1k+/year. And property tax is ~1.25% of the sale price per year. It's generally not recommended to buy a house with the intention of selling in 5 years. As 3-5 years is generally the break even point of renting vs buying in California. Obviously things might be different in philly.

 

[dasherHampton]

Buying a house will cost a lot more than you think. Mortgage is just the beginning.

Also - make sure your potential neighbors aren't dicks.

 

[Red Squirrel]

Normally I would say buy, it's better long term and gives you more freedom as it's something you own, so you can make changes to it at will, and you don't have to deal with shared walls or any of that sort of BS. But if it's only for a few years you're probably better off renting. Once you find a permanent location, then buy. The market is a bit iffy right now too, it could crash, though people have been saying that for a long time so it's hard to tell.

If you do buy just be aware of all the bills that come with home ownership. Gas, hydro, insurance, water/sewer, property taxes, internet, phone (some of those you'd have anyway) etc... All of those are over $100 and go up every year. It really adds up fast. That's not even considering other costs like groceries, random car or house issues that need fixing etc... Home ownership is nice because it's something you own, you have a yard, etc . But there's also way more bills. Property taxes are another big one. It really depends where you live but expect to pay like $400/mo or so. So once you start to budget what you can afford, just consider that all those bills will probably be much higher in years from now so you will want some breathing room.

 

[T_Yamamoto]

I was on the fence but after reading all y'alls comments and learning that for her program, we could move back to NC as early as year 3 to do rotations.

And no, I'm not in grad school, working full time.

And yes, I could be saving more but I'm balls deep in keyboards right now but that hobby funds itself so no net loss, only gains (long story)

 

[allisolm]

If you buy, are you planning to have the house in both names? If so I would suggest reading https://www.bankrate.com/mortgages/questions-unmarried-couples-should-ask-before-buying-house/ or something similar. There are laws that decide the division of property for divorcing couples.These don't apply a lot of times to unmarried couples.

Experts seem to agree that 5 yrs is the staying time advisable now if you want to buy. It used to be 3 yrs.

 

[s0me0nesmind1]

"Balls deep in keyboards"?

Sounds like you have some problems there bud.