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View Full Version : With the Recession talk, would you buy a house???


Tink113
03-18-2008, 02:15 PM
We are looking to buy our first house. Prices in this area have been way out of reach for years & I grew up here!!! The Washington DC area is just crazy expensive. Anyway, prices have fallen and for the first time my hubby & I can buy a house. The only problem is I'm a bit worried about the recession talk.

WWYD???

We make about $100,000 a year & our payments would be about $2,800 per month. (We are currently paying $1,600 in rent...and I hate giving that money away every month!)

leahjade
03-18-2008, 02:20 PM
It is a buyer's market with some great prices to be had, however just make sure your monthly mortgage payment -- including principal, interest, real estate taxes and homeowners insurance -- should not be more than 28 percent of your gross monthly income (before taxes). This is where a lot of people are getting into trouble by buying more house than they can afford.

barbeml
03-18-2008, 02:24 PM
Is there room in your budget for another $1200 per month in housing costs?

Don't forget added costs for items that may be included in your rent, but will be in addition to your mortgage: homeowner's insurance, water & sewer, other utilities, exterior and interior maintenance (no manager to call when the heat doesn't work), landscaping, etc.

rockyroad
03-18-2008, 02:26 PM
If I felt that I had a job that would not be hurt by the recession, then I would buy one.

delmar411
03-18-2008, 02:29 PM
do you really have an extra $1200/mth just laying around to pay the difference between rent and the mortgage? Plus a large enough EF to protect the house in case of layoff or major issues w/ the house?

That seems so higher in comparison to your rent....

HeatherC
03-18-2008, 02:30 PM
What we did when we bought our first house and have never regretted was to buy a house based on only one salary. That way if something ever happened to your or your husbands income, you would still be able to afford to keep your home.

Going from $1600 a month to $2800 a month is a huge jump and not one that I would want to make. While $100,000 a year is a nice salary, that $2800 a month will take up a large part of it. If you think you can afford that big a jump, you could also start paying it NOW ...but to yourselves for another 6 months to a year. That would give you an even bigger downpayment and the prices will probably even come down further in that time. If you find it's too big a jump to do comfortably, you will then know.

Don't forget that along with a house comes repairs, maintenance costs, higher utility bills, homeowners insurance, along with any improvements you may want or need to make to a house you have just moved into. That will be in addition to the $2800 a month.

It is so exciting to buy your first house. But it is even more exciting to have a mortgage payment that is much less than the average person and which will still allow you to live your life and not become house poor.

Good luck to you!

Tink113
03-18-2008, 02:32 PM
The mortgage, P&I, Taxes, and Insurance is just under $2,800 a month. That is more like 50% of our budget...but trust me...that is normal for this area.

Karenj2
03-18-2008, 02:34 PM
If this is your first house, I'd try to get a place that would have your mortgage payments be as close to what your rent is now, 'cause there will be maintenance costs that you're not used to (i.e., repair, lawn stuff, HOA, etc.) Also, as a PP suggested, you don't want to stretch yourself too thin financially.

But, as it was said, since it's a buyers market, it could be a great way for you to get your foot in the door, so to speak... (My sister lived in NoVA, and couldn't afford a house - they're moving to TX.)

HeatherC
03-18-2008, 02:45 PM
Doesn't matter what is normal for your area. It is what YOU can afford comfortably. 50% of your income towards a house sounds like a dangerous situation to me. I honestly think that is what got alot of these people now in foreclosure into trouble.

A bank may tell you that you can "afford" it. But only you know what you really spend a month on things like food, clothing, health insurance, car payments, student loans, car payments, retirement savings, college savings if you have kids, vacations, holidays, etc..

If you have little money left each month for all these things, that mortgage payment is going to feel like an albatross around your neck.

I'm not trying to talk you out of it, but rather talk you into considering all the other factors. Life happens and peoples situations can change over night. Just make sure you are prepared and don't worry about what other people in your area are doing.

aka-mad4themouse
03-18-2008, 03:07 PM
I also think that spending 50% of your income on housing is pretty questionable. But if you're convinced that you want to try this, I would suggest putting $1800 into a savings account every month for the next 6 months. Believe me, you will spend at least $600 more on that house every month through the increased energy costs, maintenance and incidentals. Some months you'll spend more, some months you will spend less.

If you can live for 6 months without touching those savings, then maybe you can afford to buy the house. The added bonus will be that you will have almost $11K to be used for immediate improvements, new furniture, moving expenses, closing costs or to make your down payment more substantial.

If you find yourself dipping into those savings, even if you eventually "pay it back", you can't afford the house.

DMickey28
03-18-2008, 03:14 PM
We are also looking to buy a house in the next 6-8 months. The market down here is crazy and finally starting to be able to touch a house in this area.

We currently pay $2000/month in rent. We are looking at keeping our entire house payment (ins., tax, HOA,) under $2600 a month. I am a SAHM so this is based on DH's salary alone. The $2600 comes out to exactly 25% of our monthly income. However, on top of DH's salary he works in sales so we make an average of 50% of his salary on top of it with commissions and bonuses. This year we are hopefully on track to actually make 105% of his salary. That is all extra money that goes towards retirement, e-fund, savings, paying down debt and vacations.

I think that the market is PRIME for buying something but you need to make sure that it's a smart move. I personally could not squeeze another $1200 a month out of our budget without the dipping into the bonuses and commissions.

Good Luck in the decision.

wide awake
03-18-2008, 03:15 PM
As long as you don't have other bills it sounds okay to me. I am VERY conservative, and we are about 2 weeks from closing on a new house...our income is about $150,000/year, and the new payment will be $3050, includes everything. We only had to put about $5000 down on a $430,000 house...VA and excellent credit. We are keeping the house we've had for the past 8.5 years and renting it out...the payment on that one was $1840. DH and I are in stable jobs though...DH is in the AF, and I teach for a charter school that is doing well. It is a buyer's market, and if the price is right, and you feel safe w/ your jobs, go for it. You may never get another chance like this. Nothing like real estate...the house we'll be renting out still has about $200,000 equity in it, and that is taking into account the losses in the past couple years. I'm not expecting a boom again, but 5-10% appreciation/year will still net us $40-$50,000 equity increase on both properties.

Tink113
03-18-2008, 03:22 PM
Thanks for all the advise! The house is in Northern VA (McLean School District & if you know the area, that's one of the top area Schools). We have been putting about $2,800 a month into our savings for the past two months. We do not have school loans or any car payments. We do have about $14,000 in wedding debt that are on Credit Cards. --- CORRECTION: $12,000 in Wedding Debt, the other $2,000 is in deposits for a family Disney cruise --- Luckily, I have been able to move money around to keep the interest at 0%.

DH is due for a raise soon & I will start looking for another job if needed.

branv
03-18-2008, 03:45 PM
The mortgage, P&I, Taxes, and Insurance is just under $2,800 a month. That is more like 50% of our budget...but trust me...that is normal for this area.

Something doesn't add up. If your salaries before taxes are $100K, and your monthly housing expenditure would be $2800, then you would be spending 33% of your gross on housing, not 50%. By 50%, do you mean of your TAKE HOME salaries (after tax, medical, 401K deductions)?

At 33% of gross salary, I'd say...maybe. Even that is steep, but we do have to consider the area you live in. But do you have other required expenses that change this -- loans, high debt, medical bills, childcare (now or future), etc -- then regardless of how much "better" it is than it was before, it's probably not a good idea until your debt is lower. If you fudged a little on saying you have a $100K'ish salary and you really are spending 50% of your gross salary, then I'd say no way. I don't care how "common" it is for your area, stop and think that is is exactly why so many people are losing their homes right now -- because they decided they needed to be home owners, despite the writing on the wall. It may not be fair that other people can afford houses while other's can't, but that's life. Unfortunately for some, homeownership just means making hard choices -- we transfer to more affordable areas, live rural when we'd rather live urban, give up certain luxuries. And sometimes you just decide you'd rather rent than move out of the best parts of town/state/etc or give up a certain lifestyle.

After DH and I in the last recession both lost our jobs within a week of each other 3 short months after buying our first house, we decided then and there that our next home would be purchased on the basis of only one salary. It's simply not worth the stress and heartache. That means we had to make a lot of compromises: we waited three more years before we bought another house, and this isn't what I'd call my dream house, let alone a city I really care for (ugh...my neighbors :rolleyes: ), the commute stinks, but it's WAY less likely to keep us awake at night whenever job security gets iffy, or real estate tanks.

I would just be very cautious right now -- what is your job security, what happens if just one of you can't work or find a job, how "flexible" is your budget..i.e. what can you give up and still pay mortgage, what is your savings safety net, and what is your debt: income ratio? Just think about it a little longer, and don't be tricked into buying b/c "everyone else does it". Don't forget, you'll probably see even more decreases in real estate costs over the next year (this real estate problem isn't going away anytime soon), so waiting a few months to figure this out won't kill you.

Best of luck to you.

Tink113
03-18-2008, 03:50 PM
Something doesn't add up. If your salaries before taxes are $100K, and your monthly housing expenditure would be $2800, then you would be spending 33% of your gross on housing, not 50%. By 50%, do you mean of your TAKE HOME salaries (after tax, medical, 401K deductions)?



Sorry, you are correct. I meant 50% of net & 33% of gross.

soccerchick
03-18-2008, 04:04 PM
The neighborhood you are talking about is a good investment; get into the Langley district and even better;) ). Now I'm curious about property values and prices there. We're in Loudoun County and prices have plunged. Inlaws are in closer to the city and their tax assessments actually went up again!

Have you run all the numbers? You need to sit down with a realtor or two and see what is what. Also sit down with a mortgage lender or two and/or your financial adviser.

We doubled our mortgage from house #1 to house #2 and were fine. We came close to doubling it again from house #2 to #3 and have still been fine. We vacation, eat out, have kids in lots of activities, fully fund retirements, put $ in savings etc.

If your jobs and salaries are recession-proof, go for it! If there's any chance of lost salary or pay freezes or reductions, furloughs, or RIF, I'd personally hold off and just keep saving/eliminating your debt.

PaulaSue
03-18-2008, 04:12 PM
OP, I hope people will still be buying, we have 2 houses (ILs) to sell so we can move to a multi-family friendly house.

Tink113
03-18-2008, 04:14 PM
The neighborhood you are talking about is a good investment; get into the Langley district and even better;) ). Now I'm curious about property values and prices there. We're in Loudoun County and prices have plunged. Inlaws are in closer to the city and their tax assessments actually went up again!

I know Langley would be even better, but OMG the prices there could kill a person out of shock. Also, my DH went to McLean High School and since Langley is their rival there is no way he'd allow that. LOL! The property value & prices have gone down. The same house sold in 2005 for $130K more then we are looking at buying it for. My in-laws & brother both live in McLean and they said that for property taxes this year, the amount was about the same... but something about the assessment for the houses went down & property went up. The whole county is up in arms because insurance companies don't want to give more coverage then the assessment. I hear Fairfax County is going to re-*****.

mickeyfan2
03-18-2008, 04:39 PM
We are looking to buy our first house. Prices in this area have been way out of reach for years & I grew up here!!! The Washington DC area is just crazy expensive. Anyway, prices have fallen and for the first time my hubby & I can buy a house. The only problem is I'm a bit worried about the recession talk.

WWYD???

We make about $100,000 a year & our payments would be about $2,800 per month. (We are currently paying $1,600 in rent...and I hate giving that money away every month!)
28% or 100K is $2333. Your payment is too high for your income. It is 33%.

I would buy a home but not that high of a home.

DH and I took the plunge during the early 90s housing slump. Our payments were lower and we still had a few touch and go months.

I suspect that housing will continue to fall for a while. Start saving $1200 each month and see if you can live like that. It will also give you a larger down payment.

mickeyfan2
03-18-2008, 04:41 PM
The mortgage, P&I, Taxes, and Insurance is just under $2,800 a month. That is more like 50% of our budget...but trust me...that is normal for this area.[

This is the kind of thinking that got many into the present housing trouble. Don't fall for that line.

MrGarrison
03-18-2008, 04:45 PM
The mortgage, P&I, Taxes, and Insurance is just under $2,800 a month. That is more like 50% of our budget...but trust me...that is normal for this area.

This is the kind of thinking that got many into the present housing trouble. Don't fall for that line.

Yep, that and some of the crazy mortgages that were taken out. Those ARM's are killing people now. It stinks.

Starburst
03-18-2008, 05:02 PM
My DH works in the banking business in NY (great times, I know) and we're in contract to buy an apartment in the city. We signed the contract in late Dec (co-op board approval also takes forever - thankfully!) and before most of the financial firms starting layoffs, and certainly before Bear went under.

We bought a place we could afford based only on my DH's base salary, completely ignored his bonus (which is typically 50% of his total income) and ignored my salary (which is 50% of his base). Our total monthly expenditure on housing, including utilities is 35% of his gross income. After 20% down we still have 1.5 years worth of mortgage payments in savings.

Would we sign a contract now on the same apartment? No.

If you think your jobs could be impacted AT ALL by a recession, and you really want a house now, then I would buy something that you could afford assuming your salaries are 60-75% of your current salaries. If the recession continues/deepens odds are housing prices will continue to fall. If income levels fall, there is no way housing prices could recover/rise, the two should be/are related. It was the break in the relationship (when housing prices skyrocketed and incomes did not keep up) that has been a major cause of the entire mess, which means you probably aren't going to get priced out of a market.

If it were me, I would wait a few months, bolster up your savings until you have at least 6 months worth of payments saved up and by then you'll have a better idea of how this whole thing is going to shake out. The only reason I'm not having major anxiety attacks right now is 1. we haven't closed yet, which means our mortgage is still theoretical and 2. for us to make ends meet my DH has to have a job that pays 1/3 of his current job. I have a three year contract and it would take a lot of effort to lose my job (medical resident).

Good luck with whatever you decide! My DH is from Virginia - and misses it terribly.

Lucky4me
03-18-2008, 05:02 PM
I'd continue to sock away the money for a year. You'll probably be able to get that house knocked down another $100,000 then.

Kay1
03-18-2008, 05:07 PM
I would continue to rent and save. You say it's throwing money away but what about all the interest you'd be throwing the way of your lender? Also, since all those mortgages are still resetting what if prices continue to plunge and in a year you owe more than your house is worth?

delmar411
03-18-2008, 05:36 PM
The DC area market is still in a decline. I'd wait it out at least another 6mths. Esp if you are in a great position to buy. You can watch the market very closely and at first sign of the prices going up, jump in and buy. It's just best to buy at the bottom of this slump then somewhere in the middle. You never know what is going to pop onto the market esp during the late spring/summer when a lot of families move.

PatriciaH
03-18-2008, 07:48 PM
I would pay off your debt first and sock away savings. Houses will keep dropping for a while.

dvcgirl
03-18-2008, 08:52 PM
The mortgage, P&I, Taxes, and Insurance is just under $2,800 a month. That is more like 50% of our budget...but trust me...that is normal for this area.

50% for Mortgage, taxes and insurance is cutting it too much. I would keep saving or buy much less of a house.

You didn't mention how much you were planning on putting down, or did I miss that? In an area like No Va. where housing values are still in decline you may need to put down at least 20% to get a loan....even with very good credit scores.

A book I would highly recommend to you is called "All Your Worth: The Ultimate Lifetime Money Plan", offers a really good and simple breakdown of where your money should be going.

50% of your net pay should go to "Must Haves". Your must haves include all housing expenses, utilities, transportation, insurance and groceries.

30% to "wants".....fairly self-explanatory.

20% to savings.

If a full 50% of your budget is just going to mortgage/taxes/insurance then you're either going to end up spending most of what is left and saving very little, or continuing to save and feeling very house poor. Either way, you'll feel squeezed.

You said that spending 50% of your budget on housing is "normal" for your area.....well, I look around at what "normal" is these days with regard to fiscal responsibility and do everything within my power to do the exact opposite.

Keep renting....you're not throwing your money away. That rent is providing shelter for your family. I own a home and have no mortgage, and yet I still get the privilege of paying property taxes and insurance and maintenance on any number of systems that decide to stop working. I bought here in NJ a year ago and have likely lost 5% of my money in that time and don't expect much appreciation at all over the next few years at a minimum.

If you bought something within the next year, you'll be lucky if it doesn't lose value. And if you are lucky enough to time the bottom, it won't be appreciating very much in the next several years anyway....the years of double digit appreciation are over for quite awhile.

juliana_sd
03-18-2008, 09:04 PM
I have been struggling with this too. My "stats" (income, current rent, proposed PITI) are very similar to the OP. I am leaning toward continuing to rent for a couple reasons:

-I'm single. I don't have anyone to help with house maintenance (and while I am perfectly capable of doing those things, it's a lot for one person!)

-The economy is soooo unstable. There's nothing to lose by waiting. I can invest the difference in the meantime. And build up my downpayment.

-To rent the "perfect" house at this point will cost me ~$2100 per month. To own that same house would be about $1000 more in PITI alone (which I cannot afford). SO to buy, I'd have to make some big compromises... a bedroom, a bathroom, a yard, school district, etc. If we stay in this downturn, I'd be stuck and quite possibly unable to upgrade in 3-4 years.

I have to move this summer either way. I've been wavering for months, but I'm pretty firmly on the renting side of the fence now.

IDoDis
03-18-2008, 09:06 PM
If you can afford the extra $1200 per month, I suggest you save it for a year. You'd save up almost $15K for a down payment. The market may continue to drop -- I don't think it's going to rebound in a year. If you buy now and the market drops more and then you have to move and sell your home, you are going to owe more than the house is worth and be in a heap of a mess.

I say to wait. DH and I make $100K per year and our mortgage is $800 per month (we've been in the house for 9 years). We want to upgrade and decided we would be willing to pay another $300 per month. With lower rates and prices, we could get a bigger home, but we are holding out until the market bottoms out. There's no way in my life I'd consider a $2800 per month mortgage on our $100k income (gross -- not net).

iwannago!!
03-18-2008, 09:09 PM
I agree that it is a buyers market - and with the Fed rate cuts, great rates can be had with great credit (which I will presume that you and DH both have if you are able to move 14k$ around on credit cards for 0%). However, IMO, shop for a house that you truly can afford & in the best area that you can afford to buy in, as the home is more likely to hold & increase its value. Seriously evaluate how secure both of your jobs & income REALLY are, as well as your future plans (children, plans to work or stay at home, daycare costs). Get a fixed rate mortgage & don't lock in your rate until your lender has changed their rates post fed rate cut(s).

DH & I made $160k+ last year, but our mtg/tax/ins is only $1500k/mo. I would hate to spend twice that on housing & we can theoretically afford it. We also have 2 car payments that we would prefer to do without, daycare expenses that we could do without, & are closing in on paying private high school tuition in >2yrs. Really consider all expenses & future plans when determining how much of your net income you can channel to housing costs.

barkley
03-19-2008, 03:06 AM
I know Langley would be even better, but OMG the prices there could kill a person out of shock. Also, my DH went to McLean High School and since Langley is their rival there is no way he'd allow that. LOL! The property value & prices have gone down. The same house sold in 2005 for $130K more then we are looking at buying it for. My in-laws & brother both live in McLean and they said that for property taxes this year, the amount was about the same... but something about the assessment for the houses went down & property went up. The whole county is up in arms because insurance companies don't want to give more coverage then the assessment. I hear Fairfax County is going to re-*****.


realy research and see what is going on in your marketplace. see if the prices are continuing to drop-and if so, wait it out awhile. reason being is you're entering the time of year when more homes are traditionaly listed and with more competition comes lower prices in a buyer's market. also if your area is still declining you may find that prices drop a whole lot more in a shorter period of time than you would imagine. the market we were in crashed big time in the spring of 2006 and people have been speculating it could'nt get any worse and it had to start leveling off. well, apparantly not-the identical comps to the home we sold in 5/06, up until a few months ago were being listed for as much as $150,000 less-today i looked at the mls and there are allot of new listings-starting about $200,000 less (thats a $50,000 initial pricing drop in just a few months-think how much that can save you in a payment:thumbsup2 ).

bdcp
03-19-2008, 05:17 AM
We live in No. VA and have for 13 years and we're on our second home here. Our first home (VA Beach) we spent 50% of our net income on our mortgage and that was in 1982 when interest rates were 15%. We more than doubled our mortgage 4 years ago on our fourth home and so did a lot of people I know and we put 20% down on it. The home we bought in 1995 sold for double what we paid for it in 2003 when we sold and moved into our dream home. You can afford what you think you can afford. Don't let people tell you x amount or x percent is TOO MUCH FOR YOU! It is your choice to spend what you feel you can afford on a house. The reality is, if you're going to be in a house for several years, it will go up in value and you will pay down equity (unless you have an interest only loan-which make no sense). On average, homes double in value every 10 years. You might have a couple of years where values drop or stabilize (like now). Our home went up almost 30% in value in the first three years we were in it. It has since dropped back by 10%. I knew that home values were over inflated in 05/06 and the fact values dropped didn't mean anything. We were overdue for an adjustment after that rapid rise in values. Anyone who thought those increases in values were normal or permanent didnt' do their research or understand real estate. Just know what your budget will allow. If your credit scores are good, they are likely to remain so, and you know what you can handle.

TenThousandVolts
03-19-2008, 06:08 AM
YES! I think it a good time to buy right now. I am hoping to buy some property this year- the timing feels right. But then again, I am not rich, so I might not be the best person to take advice from.

SandraVB79
03-19-2008, 06:43 AM
I have only read the first page, not the others.
I know situations in different countries are different, but one of the rules of thumb here is that you don't spend more than one third of your nett income for your housing cost/ mortgage.
And we live in a stuation where we don't have to think about money to go to college, no worries about health care and we know that when we loose our job, we get a "decent" replacement income by the government.

Good luck on whatever your decision is, but make sure you can still LIVE after you decided what to do, and not only pay bills and have nightmares/ sleepless nights because of bills!

Miz Diz
03-19-2008, 07:04 AM
When you make your decision, do consider that you will have additional expenses that you do not have now. Your utility bills will be higher - heating and cooling a home is much more than an apartment. You may have additional bills, like water. We have to pay for trash pick up. Lawn maintenance - we spend several hundred dollars each year just on our lawn - mulch, pinestraw, flowers, fertilizer, bug treatments (this is us doing it ourselves - no lawn service). You'll need to keep a termite bond on your house - another yearly fee. Probably will have HOA fees. House maintenance items come up, so make sure you can still afford to put money in savings. Our house is only 7 years old and in the last 2 years we've had to have it painted ($3000), replace 2 garage door openers ($300), replace a dishwasher ($450), get our A/C unit repaired ($500 dollars).

Personally, making more than you (but with 2 kids), my family could not afford that house payment. Even if we cut out vacations, I don't think we could do it, nor do I think it would be worth it.

You have to do what is right for you, but keep in mind that when owning a house, the mortgage is not your only expense.

ekmom
03-19-2008, 07:05 AM
When DH and I bought our 1st home back in the dark ages (1983 :) ), we bought a house that we could afford on his income only because I wanted the option to stay home with the kids if I wanted to once we started our family. Well, I decided to continue to work part time after our kids were born in 1986 and 1989 so when we bought a larger home in 1991 we were a little less conservative, but we still took on substantially less of a mortgage than the banks said that we could afford. We were really tempted to buy this beautiful home that would have required the maximum mortgage, but I'm SO glad that we didn't. Our mortgage was paid off last year and over the years we've been able to afford to fully fund retirement, save substantially for college, travel, and live comfortably without counting every penny.

Only you know what is right for you, but we prefer not to live too close to the edge of our income.

SandraVB79
03-19-2008, 07:10 AM
We live in No. VA and have for 13 years and we're on our second home here. Our first home (VA Beach) we spent 50% of our net income on our mortgage and that was in 1982 when interest rates were 15%. We more than doubled our mortgage 4 years ago on our fourth home and so did a lot of people I know and we put 20% down on it. The home we bought in 1995 sold for double what we paid for it in 2003 when we sold and moved into our dream home. You can afford what you think you can afford. Don't let people tell you x amount or x percent is TOO MUCH FOR YOU! It is your choice to spend what you feel you can afford on a house. The reality is, if you're going to be in a house for several years, it will go up in value and you will pay down equity (unless you have an interest only loan-which make no sense). On average, homes double in value every 10 years. You might have a couple of years where values drop or stabilize (like now). Our home went up almost 30% in value in the first three years we were in it. It has since dropped back by 10%. I knew that home values were over inflated in 05/06 and the fact values dropped didn't mean anything. We were overdue for an adjustment after that rapid rise in values. Anyone who thought those increases in values were normal or permanent didnt' do their research or understand real estate. Just know what your budget will allow. If your credit scores are good, they are likely to remain so, and you know what you can handle.

Don't want to attack this, but I'm not so sure it's the best advice of this thread...
It's not because you THINK that you can afford something, that you really CAN.

Todd&Copper
03-19-2008, 08:11 AM
Living in the D.C. metro area suburbs, I am not as concerned about some folks from the midwest or TX who think your mortgage would be too high. It actually sounds about right for the area and I don't think you will necessarily be getting in over your head. DH and I were in a similar situation three years ago when we bought our house and we are doing just fine. We still contribute to retirement funds, have a large emergency fund and can afford our basic needs. But I am also not obsessed with designer clothes or purses, and prefer to spend my weekends puttering around in the garden to dropping cash at the mall.

If you have nothing saved for a down payment, I wouldn't buy right now. I'd take the money and pay off the cc debt and start a down payment account. We had a substantial amount saved for our down payment when we bought our home b/c we had saved a lot by renting for 6 years.

SandraVB79
03-19-2008, 08:17 AM
Something may be priced "right according to the area", but therefore, it doesn't guarantee you can afford it.

I saw a designer purse some time ago, great price for it (only half the regular price), but it was still way too expensive.

Todd&Copper
03-19-2008, 09:53 AM
Something may be priced "right according to the area", but therefore, it doesn't guarantee you can afford it.

I saw a designer purse some time ago, great price for it (only half the regular price), but it was still way too expensive.

OK, but if you had saved up for it and made allowances in your budget for it, who am I to tell you not to buy it, YKWIM? :)

Chicago526
03-19-2008, 10:12 AM
I just read the OP's original post, so my post is based on that.

DH and I make what you make and our mortgage is $1400 a month, and we find that comfortable. However, we do have other debt (CC's and a truck). Even if those went away tomorrow, though, I still don't think we'd be able to swing $2800 a month and still be able to save for our other goals, like fully funded emergency savings, retirement, college for our (future) kid(s), as well as more short term goals like vacations, gifts at Christmas and birthdays, car repairs and maintenence, home repairs/maintenance/remodels, etc.

If you haven't already, draw up a VERY detailed buget, right down to oil changes and magaizine subscriptions, and figure out if you can swing the higher payment (and higher utilities and home maintenence) and still a) afford to pay your other bills and b) save for your short term, mid term, and long term goals.

leahjade
03-19-2008, 11:34 AM
My best friend who's a realtor tries to give young couples guidance about not spending too much on their mortgages, but they don't listen. So after spending 50% of their income (or more) on housing, they get sick or lose a job then end up foreclosing on their home, often owing much more than the house is worth. Err on the side of caution and chose a less expensive home or wait until you can afford it!

Plantlady
03-19-2008, 11:54 AM
We are planning on building a house.

I'm a bit concerned about how well our current house will sell, but, we'll just deal with that when the time comes. We are in a position that the extra mortgage won't really be *that* hard, because we live WELL below our means when it comes to mortgage payments.

We've always told the kids, we'd rather have a smaller house, and go on great vacations.

But, alas, still planning on building. We're ready to go back home to family, have the land, just need the home. Recession or not.

The economy will come back. We are in the education industry, our jobs are safe.

rt2dz
03-19-2008, 12:00 PM
I have not read all the replies, but, YES!, I would consider buying a house. A recession is an overall economic issue, not a run-n-hide issue for all. If you can afford the mortgage, it's a great time to buy.

IMHO, I think the foreclosures/drop in housing market isn't because of the recession, but is because people bought more house than they can afford, which is what actually caused the recession.

I would evaluate what you can comfortably pay (not what the bank says they'll finance--not that you can go over that) and how much you have for a down payment. One thing I have never done is pay P&I--I put down 30%; 20% keeps away the P&I. Don't forget to factor in to your monthly payment things like taxes, upkeep, homeowner fees (if any), emergency funds for a blown hot water heat, homeowners insurance, etc. And certainly do not forget about any other payments you have--including retirement & college funds--not just car payments and cc payments.

Since the market is so soft there are great deals out there. We're really considering one right now. I'm also not going to sell my house now; it's over 50% paid for and I have such a low mortgage payment I can rent it for 3X what I'm paying.

rdevine10
03-19-2008, 12:15 PM
We have been wanting to upgrade to a larger house for a while, but Im very leary to still in this market. IMO, the realestate market is still to unstable, and Im not certain prices will not drop further.

If I were the OP, Id pay a small wait and see game... like at least 6 more months to see how the market is in your area (if you see its going up alot, then buy).

It depends on how many foreclosures are in your area. There are some here, and they of course affect the rest of the real estate values.

barkley
03-19-2008, 12:43 PM
We have been wanting to upgrade to a larger house for a while, but Im very leary to still in this market. IMO, the realestate market is still to unstable, and Im not certain prices will not drop further.

If I were the OP, Id pay a small wait and see game... like at least 6 more months to see how the market is in your area (if you see its going up alot, then buy).

It depends on how many foreclosures are in your area. There are some here, and they of course affect the rest of the real estate values.


the figures that just came out for first quarter 2008 show decreases in value on average across the u.s. at 8.9%-that's just how much prices have dropped in 3 months:scared1: i like you suspect it's going to get worse before it gets better:sad2:

one of the issues i see impacting decisions to sell houses right now among friends, family and former neighbors in a variety of states is the impact the economy and rising costs for consumables is having on their finances. increased gasoline costs have made a major impact on the cost of commuting from more favorable communties to the locations of their jobs, increased utility costs have impacted on their budgets, escalting costs of groceries have made a huge impact as well-while they were 'comfortable' making their mortgage payments in past years those other rising costs have realy eaten into their incomes.

i know when dh and i bought our first home we purposely purchased much less than we felt we could afford-reason being is we were newly married and anticipated having children. we did'nt want to be in the position where i HAD to work to cover the mortgage, and we knew that with daycare rates in our area even if i was looking at going back to work there was going to be a considerable hit to our expendable income. it worked well for us. in comparison we had friends who bought to the absolute max they were comfortable paying and then as costs for other things went up (utilities, commute, etc.) they were stretched way too thin.

Tink113
03-19-2008, 06:36 PM
Bumping :rolleyes1

leight
03-20-2008, 08:18 AM
dh & I made an offer a few weeks ago on a short sale in our favorite neighborhood- it's perfect for our family and we wouldn't have been able to afford it 2 yrs ago when we first looked. We held off on buying but are ready to do so today. Although we could put more down we will be using an FHA loan with only 3% down and that way we will have a big emergency fund should anything happen to either of our jobs (although I'm pretty sure we're secure) We won't know about this house for another few weeks but it's actually well below market and will give us a buffer for continued depreciation. We are renting and pay $1600 a month but we will probably be paying approx $1700 monthly including mortgage, pmi, insurance, taxes etc , so it is the right time for us.

To the OP - only you know what you will be comfortable with. We hated paying someone else's mortgage again for the last year but by waiting we are able to get into a home that we will stay in for the long term rather than something we'd settle on until we could afford more.

Tink113
03-20-2008, 08:21 AM
Thanks for all the advise...