Buying a house????

[mickeyfan2]

i don't believe that everybody who has a interest only loan was uninformed. I worry about the number of these loan that could all come "due" and the cost to taxpayers and the economy.

 

[ead79]

I feel your pain! DH and I have been married for 2 years and are still in an apartment. Unless we’re willing to live so far out that we have 1.5 hour commutes (one way), we can’t afford a house. Though housing here in the Atlanta area isn’t as bad as the Northeast, it’s no picnic for newlyweds. There really aren’t even starter homes in our area, and the condos/townhomes cost over $150,000 and don’t tend to have the greatest resale value around here. We just focus on the fact that we are happy with our apartment and don’t feel short on space. When the time is right I figure everything will fall into place to own a home (with some hard work and frugal living of course).

 

[Chicago526]

It's not a huge risk to do a 0 down loan if you know the area you're buying in and you know something about home repairs and what will give you a return on your investment and what won't.
We got our house 3yrs ago with 0 down (VA loan) and it's increased in value between $60,000-93,000 in that time depending on who is doing the assessing and the improvements (kitchen, bathroom, wiring, yard) will further increase our value in a market that might be cooling but won't be cold for a long time due to several reasons.

Would I pay 0 down on a house that needed less work and has less of a chance to build equity quickly? not a chance, but it's not fair to say people putting $0 down don't know what they're doing.

My first mortgage was a 3% down payment (FHA). So for $3270 down, I bought a condo for $109,000 and sold it 4 years later for $156,000. I made $43,730 in 4 years on a $3270 investment.

So yeah, a low down payment loan worked for me!

Now, those interest only loan scare the jeepers out of me. I'm sure there are some cases where they aren't all that risky, but for the average person, I personally wouldn't take the chance!

 

[dvcgirl]

I am 22 and my SO is 21. We live in Northern California and can't afford to buy a house here. So we decided to purchase a house in Florida, we can get a nice house for $200,000 in Florida, so in April, we will purchase our very first home or townhouse and we will move in June.

I never imagined buying a house this young, I'll be 23 in May, but when we thought about what we've paid in rent for our small 500 square foot condo, it made is sick and we decided to buy a house. It's the best investment ever! We've paid $56,000 in rent in 36 months (3 years), that could've been towards a house.

Well, there are two sides to the the renting/buying thing. Keep in mind, I own my house in Florida. We have no mortgage. And it still costs me roughly $1800 a month to run and maintain it (not counting utilities). Between taxes, homeowners insurance (keeps going up up up here), association fees, pest control (a must here), termite control separate from pest control ( a must here), pool service/maintenance, lawn care (fertilizer/pest control and shrub care...we cut ourselves). $1800 a month.

And so owning a house costs money too. Even owning one outright costs. I'm not even mentioning the money you'll spend in decorating, gardening, unexpected maintenance and repairs....and trust me, they will happen.

My DH and I were lucky to have bought our first home before the insanity of this real estate bubble. I honestly don't know what we would have done if we had to buy now. Suffice it to say, we wouldn't be living in nearly as nice of a house as we do now. If I was looking to buy right now I would do one thing....I'd wait and watch.

Condos/townhomes....I would be very, very careful about buying a condo in any area that has had a real estate boom. I really do believe that we've set ourselves up for a big drop in that category specifically in this area (all of Florida really) And if you are looking to buy a house right now....especially in Florida, well, I wouldn't rush. I'd wait a bit. The market is cooling....rapidly cooling. And the market is quickly transitioning into a buyer's market. Even if you don't have quite enough now and would like to save some more. Save....take a few years. This market is going to be flat for at least a few years, and then we're likely to see normal appreicaition...in the 4-6% range.

 

[dvcgirl]

It's not a huge risk to do a 0 down loan if you know the area you're buying in and you know something about home repairs and what will give you a return on your investment and what won't.
We got our house 3yrs ago with 0 down (VA loan) and it's increased in value between $60,000-93,000 in that time depending on who is doing the assessing and the improvements (kitchen, bathroom, wiring, yard) will further increase our value in a market that might be cooling but won't be cold for a long time due to several reasons.

Would I pay 0 down on a house that needed less work and has less of a chance to build equity quickly? not a chance, but it's not fair to say people putting $0 down don't know what they're doing.

No it's not fair to say that all people who put zero down don't know what they're doing....some do, most don't. Many got lucky here if they've played that game in the last five years. Going forward I think it's the equivalent to financial suicide. The big run-up is over. And people are scrambling to re-fi those zero percent interest only loans like crazy. Because the big balloon adjustments are coming in the next year or two. Foreclosures and Deliquencies on mortgages are forecast to head upward 15% higher by 2007. Lots more sellers will be coming to the closing table and writing fat checks instead of walking away with one.

People just got caught up in the frenzy. They listen to realtors and real estate investors who were shouting...."get in now....or it may be too late!!" And those who bought near the end of this run-up are in for a world of hurt. Same with the folks who pulled are paying on home equity loans/lines of credit. It's a shame really....

 

[JenDaveBrendan]

Seriously, how do young couples afford to buy a house these days? In order to make decent money, most people need to be near a big city (at least in my husbands field). I do not know how we will afford to buy a house. We make good money, above that 5% mark some one mentioned on another thread, and I can't figure out how we will be able to buy a house. Everything in our area under 300K is either a shack or in a track subdivision were you need to count down from the beginning of the street just to figure out which house is yours. You share your backyard with four other homes, no trees. We are looking into moving in the next year, hopefully NC, someplace more affordable. We are lucky that DH salary doesn't change no matter where he is. We are hoping to start our family this year and I have decided if we waited until we buy a house we will be starting our family in 2010....

Just a vent... it's really difficult for couples nowadays. We will probably buy a condo in this area if we stay, can't afford a house.....

I didn't read the rest of this thread yet, but we are in the same boat. We also live in MA and are trying to move to NC. Making a good income here and we still can't afford to buy a house. My husband has a 2nd interview in Charlotte next week, so fingers crossed he gets the job!! Like your husband, his salary won't change either, actually it will probably go up believe it or not. We can get a nice, 3br, built in the 2000's starter house for about $150,000.
I don't get how young couples afford it around here either. Some people we know have had their parents help out alot with money, so I guess that's how they do it. We don't have that as an option though, and see no other way to get a house besides moving south.
good luck!
Jen

 

[malibuconlee]

I must say I've been very lucky. DH has a good job. But I remember the first year DH was out of college. We weren't married yet and I was concerned about moving away from my small Iowa town mostly I guess because we weren't married. I remember those first few months before we had to buy a new car (he totalled mine) and before those student loans came due. It was fun. Then the bills started. I remember making a grocery list and figuring out how much it would cost before we even left. Trying to decide who was buying them that week.

DH had taken a lesser paying job to stay in Iowa. That lasted for not quite 2 years and we got married in that time. We somehow managed to get to Vegas for a wedding/honeymoon, but I still remember being very money conscious and having credit card bills.

DH took a job that was going to have us move around and after doing the math it made more sense for me to quit my retail job. He would make enough to cover that and more. Then he started paying extra on his student loans and started contributing to a mutual fund.

We've moved a lot and I worked for the company for over 5 years as well. We bought a house in Texas with very little down. Just a couple of thousand in the bank. We were able to get a VA loan because of DH's 7 years in the National Guard. We had to sell the house a little over a year later and didn't make any money on it, but work was then paying for our rent because we were "traveling". Stayed there for a year and a half and managed to live on what he made and save a ton of money for over a year saving the better part of my salary.

We were then able to put 20% down on an older home when we "settled down". That lasted for a little over a year and now we're back on the road again. I haven't worked full time in over a year. DH had quit the original company to go to another closer to family, which meant I had to quit as well, but after a year the original company called him and made an offer he couldn't refuse, so now we're moving again. Hopefully once we sell the house we'll be able to just start socking away again.

The two houses we've bought haven't been huge fancy new houses. The first was a ranch home from the 60's in a burb of Dallas. The second was a beautiful old Victorian.

I have to agree with what a lot of people say about our generation in that we want everything and right away. Our parents didn't have monthly internet charges, or cell phones we we were kids.

Neither of us grew up with money. We both grew up fairly poor. We've spent more money on our houses than anyone else in either of our families. But I've also had those "can you believe our utility bill this month was almost the same as our first monthly rent payment" conversations.

Like I said, I'm very lucky with a DH with a very good job. I've made good money in the past for someone without a degree.

Now DH's sister managed to buy a house because it was a good offer that came to them and because they borrowed the money for the down payment from her grandparents. It was also a VERY cheap house. They've had it for about 8 years and it's a small 2 BR in a very small town in Iowa, but they only paid about $35000 for it.

Gosh that ended up long. Guess I'm putting off unpacking boxes today, huh?

 

[Disneyrsh]

Seriously, how do young couples afford to buy a house these days? In order to make decent money, most people need to be near a big city (at least in my husbands field). I do not know how we will afford to buy a house. We make good money, above that 5% mark some one mentioned on another thread, and I can't figure out how we will be able to buy a house. Everything in our area under 300K is either a shack or in a track subdivision were you need to count down from the beginning of the street just to figure out which house is yours. You share your backyard with four other homes, no trees. We are looking into moving in the next year, hopefully NC, someplace more affordable. We are lucky that DH salary doesn't change no matter where he is. We are hoping to start our family this year and I have decided if we waited until we buy a house we will be starting our family in 2010....

Just a vent... it's really difficult for couples nowadays. We will probably buy a condo in this area if we stay, can't afford a house.....

Move to McDonough, Georgia, about an hour south of atlanta. For 300k you get a freakin mansion in a subdivision on 2 acres of land, good weather, and southern hospitality.

 

[Crankyshank]

Oh I agree low and nothing down loans are risky but I get a little tired of being told how foolish we were when in fact we made a pretty good move.

As far as the bubble bursting and a lot of homes foreclosing - that's not just due to people taking advantage of 0 down. We're actually the only couple we know personally around here that did that with a VA loan or any loan for that matter. The foreclosing possibility is more to do with people deciding to become house poor. I know a lot of people who are in that boat if anything happens to either of their jobs. Again with the warped reality that they must have a huge house with all the trimmings for their first house.
**********************************************************

I didn't read the rest of this thread yet, but we are in the same boat. We also live in MA and are trying to move to NC. Making a good income here and we still can't afford to buy a house. My husband has a 2nd interview in Charlotte next week, so fingers crossed he gets the job!! Like your husband, his salary won't change either, actually it will probably go up believe it or not. We can get a nice, 3br, built in the 2000's starter house for about $150,000.

I am from MA. My entire family is in MA and it actually is possible to find a home for under $350,000 that doesn't require a lot of work. My uncle just bought a 3 BR Colonial in Norton just off 495 for under that. I do have to ask though, since when is a 3 BR house built in this decade a starter home?

 

[DisneyMommyMichelle]

Just have to chime in that we moved into the boonies (Rockford from the chicago suburbs) and my husband commutes 1 1/2 hours to work each way every day and is on call until 10pm m-sunday so it's hard, but it's something that had to be done if we wanted to afford a house and if i wanted to stay home with our two kids. we've come to LOVE it out here, it's quiet and calm and cheaper! we are renting right now to save for our down payment, but we have a HUUGE apartment. 3br/3ba attached garage, downstairs, laundry room, walk in closets, huge balcony, large kitchen...and it's only like 5 years old. we are also paying 3oo$ less than what we were paying for our old 2br/2ba apartment that was less than desireable in a great neighborhood. we've been house hunting and wouldlove to buy in April but just may wait another year to bulk up the down payment. you just have to do what you have to do. we are pretty young too (dh and i are 25).

 

[vetrik]

It's not a huge risk to do a 0 down loan if you know the area you're buying in and you know something about home repairs and what will give you a return on your investment and what won't.
We got our house 3yrs ago with 0 down (VA loan) and it's increased in value between $60,000-93,000 in that time depending on who is doing the assessing and the improvements (kitchen, bathroom, wiring, yard) will further increase our value in a market that might be cooling but won't be cold for a long time due to several reasons.

Would I pay 0 down on a house that needed less work and has less of a chance to build equity quickly? not a chance, but it's not fair to say people putting $0 down don't know what they're doing.

I think this shows why it's so hard for younger people to buy in a lot of areas right now, as opposed to a few years ago. I live in RI also - my DH is 27 and I am 25. We were not able to buy 3-4 years ago because we were both in college and not working full time yet. I have several friends (a couple years older) who were able to buy then, and they got in at the right time. Their houses have appreciated $120,000 and up since they bought 3-4 years ago. DH and I did house hunt a little last summer, and we are definitely not looking for our "dream house", but to buy anything in almost any neighborhood except South Providence and Central Falls the mortgage, taxes, and insurance payment would be double what we pay in rent right now. We don't want to buy a condo or townhouse because I really worry about the resale value with the cooling real estate market, plus they are not that much cheaper in a lot of areas and the condo fees make the monthly living expenses even higher.

I don't know what to do. For now, we keep renting our comfortable 2 bed/2 full bath house and saving as much as we can. We are lucky enough to have family land available that we can build on, and I'm hoping we'll be able to afford to build in a few years.

 

[MrsNick]

I am in the funny position of being able to relate to both sides of this discussion.

I live in the NYC Metro area, and I don't care how frugal you are, starter houses (and I mean no frills, old homes with two bedrooms and one bathroom) are $350,000 and up.

Since rents are also very expensive here, it is really difficult to pay your monthly housing and save up a decent downpayment. Rent is expensive even in "starter apartments."

Try saving up for a downpayment in an expensive rental market when 17% of your DH's gross income (which as you know, would equal about 30% of his net income) is earmarked for child support.

DH and I cannot move to a cheaper market since in the industry we work in, you do need to be in a major metropolitan area, plus my DH's daughter lives near here, and we can't move until she graduates from high school.

So, we have a unique situation (and don't we all?).

I can relate to other posters who feel that many young people today have a sense of "entitlement" to a McMansion, a luxury car, gadgets and toys. I agree, because I observe that very behavior in many young people.

And yes, many people who don't make a 20% downpayment on their home are uneducated about lending, and adjustable rate mortgages and what can happen if there is a severe downturn in the real estate market (causing your home mortgage to be "under water" or "upside down" - that is you owe more than your home is worth). Or that if interest rates spike, when your adjustable rate mortgage does adjust after the initial five years, or whatever your term is, your mortgage payment could potentially double.

But since we are all in unique situations, I don't feel that it's right to make generalizations about everyone who is struggling to buy their first home, or that everyone who isn't able to come up with a 20% downpayment on their first home is going to file for bankruptcy.

I get the feeling that some of the posts on this board have a subtle tone of condescension, that may not have been intended, but it does come off that way to me. As in, we ate Ramen for five years and since you didn't, you aren't worthy of owning a home. Not that making that sacrifice is not admirable - it takes real gumption to do, but that type of sacrifice is a little easier to make in your early 20's than it is in your 30's (I know because that is how I ate in college when short on grocery money). Your body tolerates that kind of abuse better in your 20's, and so does your psyche. It is not particularly easy to accept that you aren't living any better after 10 - 15 years of working your butt off than you did as a student, or recent college grad.

A 20% downpayment on a starter house in the NYC metro area is going to be $70,000 or more. I don't know many "average" people who are able to sock away that kind of cash, no matter how frugal they are.

All that being said, we are homeowners. DH and I bought our first home in May 2004, less than one year after we were married. We made enormous sacrifices and compromises to buy our one bedroom / one bathroom condo in a safe neighborhood (believe me, not the trendiest neighborhood, but safe) within a reasonable commute of our jobs.

What that means is that we will have to put off having children until we build up enough equity to move into a home with more than one bedroom. We're not terribly young, so that is a compromise for us, but we could not have bought our first home any other way. Would we have preferred more bedrooms and bathrooms? Sure, who wouldn't? But we simply couldn't afford it, so we compromised.

We did make ourselves slightly house poor. We didn't want to be house poor, but honestly could not have bought our home otherwise. That was another sacrifice.

We were only able to come up with 5% of the purchase price + closing costs of our home, so we had to take out two mortgages. One for 15% of the purchase price of the home, to pool with our 5% cash to come up with a 20% downpayment. And another for the remaining 80% of the price of our home. The smaller mortgage wasn't all that much more than PMI payments would have been without our doctored 20% downpayment, and its interest is tax deductible, while PMI payments would not have been. Since it's a 15 year note, we will also build some equity on that small mortgage, which would not have been the case with PMI.

We put a lot of thought into buying our home, and will not lose the shirts off of our backs because we didn't have 20% downpayment. Trying to save that up would've been like waiting for Godot, because the rate of savings would have been grossly outpaced by the rate of housing appreciation here. In other words, today's 20% downpayment would be equivalent to 10% tomorrow, meaning we would never have 20% no matter how long we saved.

So, everyone's circumstance is different, and I feel genuine sympathy for newlyweds who struggle with buying a first home. It isn't easy, period. That said, yes, most people buying a first home need to accept that they will make large compromises.

You won't end up in your desired neighborhood, your first home will not be as large as you'd like and you will not be able to vacation, unless you invest in DVC - about 10 months after we bought our home, I managed to purchase a small SSR contract (lots of scrimping), which was my big splurge. I think that it was important for us to feel like we had a "carrot" attached to the stick: that although we can't buy a lot of new clothes or new gadgets, we can look forward to one nice week once a year without being worried about paying hotel bills - we'd gone years without vacations, and with DH's daughter, well, we wanted to be able to do something. And now that we own our home, our monthly housing costs should not go up as much, so if DH or I gets a small increase in salary, our financial situation will start to ease up a bit.

Okay, off my soapbox!

 

[The Mystery Machine]

But I've also had those "can you believe our utility bill this month was almost the same as our first monthly rent payment" conversations.

OK...so what was your first real rent you had to pay??? Hmmmm?

Ours was $240.00 (in 1986). That included ALL utilites (everything!) and it was furnished (bed & 1 dresser). You got burned in the shower from the 14 people that lived about us, when they flushed the toliet.
We had a tiny stove & oven, a small old refridge. You could go to the bathroom, take a shower and brush your teeth at the same time our bathroom was so small.


We love to tell our dd's our stories, we also have pictures! We had raccoons living in the old chimney walls!

We tell them that we hope they have some good stories to tell when then venture out on their own.

 

[DMickey28]

I haven't read all the posts yet, but i will. I just had to post this, and change my profile. We don't live in Barrington anymore. We have moved down to Aurora because I work in Naperville and it's a lot closer to work. Now I do not want to buy in Aurora but I do like this area.

Currently I am looking at suburbs like Elburn, Geneva and St. Charles. Still very ex*****ive and maybe the "ultimate" town we don't need right now. I have a friend that just bought a house in Plano in a new development and it really has peaked my interest. While I am not a fan of the tract housing that was placed in a field, maybe it is what we need to be looking at right now. A town farther west that is still growing and new house that will hopefully still gain equity. That type of enviroment will probably be good for a young family with young kids anyway... What do you think of Plano and Plainfield? Or up in Round Lake? What other towns should we look at? Decent schools and safe areas, DH travels a lot.

I am worried that the housing market will level out or even go down and then we will be stuck with a house that we owe on if we need/want to move. I am a planner and like to know what will happen so it makes this process very difficult.

ETA: What about buying a house with average credit? We do not have great credit but is it is getting better. I do believe our score is just under getting a loan with a A lender but is this something we should wait to buy. We have been building it up over the last two years, but there are a few big things on there that are going to take a time to really make it a lot better.

 

[Toby'sFriend]

I paid $180 for a two room apartment in 1986. After we got married in 1987 we combined our "considerable" wealth and rented 3 rooms in an old house for $230. It felt like the lap of luxury -- Other than the fact that the house was 120 years old and totally unheatable in the winter and uncoolable in the summer due to the gaps between the windowsills and windows. The glass was so old that you could see where it had actually flowed down from the top to the bottom of the panes. There was a really old guy living above us. You never heard a peep from him and we were always worried that he had died up there.

The first house that we bought was 1185 square feet. We were so proud of that baby. I was devastated a couple of years ago to hear that the County had bought out the subdivision and razed all the houses for Parkland.

And I honestly don't mean to sound condescending, but most up and coming twenty-somes I know today just wouldn't consider living in a 2 bedroom/1 small bath 1185 sq foot home. I loved that house though.

 

[CheshireVal]

We can't afford a house right now, either. DH is still in school and, while he is working part-time at a fairly decent hourly wage, I'm still the major bread winner and I just have a modest/average salary.

Even when DH does get a full time, salaried, job, I'm afraid we're still going to have a hard time. We could move way out in the suburbs where stuff is more affordable (my best friend bought a beautiful new townhome in McDonough, Ga for $97,000 2 years ago!) but I work in the city so I can't go too far out or the commute will be hell. It's kind of disheartening because I'd really like to start trying for kids within the next year and I don't want to be in an apartment anymore.

 

[Christine]

I've seen this comment a few times when people are talking about not being able to afford a house: About the commute.

Unfortunately, sometimes this is one of those sacrifices. It doesn't have to be forever, but sometimes you have to move out and commute just to get your foot in the door, so to speak. And, yes, it's painful.

When I bought my very first home, it was in a not-so-great area, but I was 14 miles from work (D.C.). For my second and current home, I was absolutely determined to be in a safer neighborhood with a better school system (I had kids at this point). So, I had to move 30 miles outside of D.C. I searched and searched for a home in the county that would put me closer to D.C. with a good school system, but, financially, it was really out of my reach. I have been in my current home for 11 years and have built up some sizeable equity. My goal is still to move one county north (Fairfax, VA) to make my commute a bit easier. It will have taken me 15 years to get exactly where I wanted to be, but sometimes you just gotta do it.

I think if I had not been willing to make the commute sacrifice, I don't think I would have ever been able to own a home. Even though I was trying to purchase when it was *supposedly* easier.

 

[katerkat]

See, in my area, I don't see how people can't afford to buy. A brand-spanking-new house in a nice development, probably 1200-1500 square feet with an unfinished second level (usually a daylight basement or the bottom half of a spilt level) is still pretty affordable to us. And I'm a SAHM and DH is a military LT - not the most high-paying careers.

And we have one nicer car, a huge TV, two computers, a money-sucking machine (er, I mean a baby).

 

[DMickey28]

Val ~ I feel you. We are working on starting a family and even though I woudl PREFER to own a house first, I do not have a problem with not owning one with a baby. We rent a nice house now and have room for a baby in this house.

I have to agree that some of the posts have sounded condesending, but I doubt they were meant that way. While I do not feel that we need to be in the "dream house" at this point, I do not think that living in a 70 year old house that has not had any updates smart either. With the prices of gas, oil and electricity rising like they are we will be paying out the money we would be saving in by buying an older home in utilities. DH makes good money, however he travels. He travels on average two weeks a month. He works an average of 60-70 hours when he is home during the week. HE does not have the time to remodel or update an older home. His "off" time is time that he wishes to spend with the family and doing things we enjoy. Remodeling is not something he enjoy's doing. He works too hard and provides to much for me to demand that he do that.

Our major problem in facing this home situation is two fold. I am very much a planner, I look for perfection on what ever level. We have moved a bit and being in our late 20's our lives are changing rapidly. That means our idea of perfection changes rapidly. We have moved a lot and we aren't even sure if we are settling here yet (though we are trying to plan as though we will be). Also, we were stupid college students and have a few credit problems that we are recovering from. We have very little to get paid down/off and will do so with in the next four months. After that we just need to wait out time to build that credit score back up. We are building a decent down payment during this time.

My honest idea of the perfect house for us right now? I would prefer not living in a tract house, however I see the positives of that type of community for a young family to met other young families. So a smallish three bedroom or three beds and den home (1. b/c higher resale with 3 bedrooms 2. DH needs an office 3. Hopefully a new baby 4. We are from MA, our family and friends some to visit) Something a bit newer, again see the utilites reference above. Would prefer a single family house, mostly for resale, but not opposed to a condo. I would say about 1500 square feet. Two baths.... I don't think that is a dream house, I think of that as a starter home.

 

[Crankyshank]

Now don't discount older homes because they need repairs or they cost more to heat.
Just because you live in an older house doesn't mean it hasn't been updated or you're throwing money away on utilities. My house is 66yrs old. My DH also works 60-70hrs a week and I also work full time and go to school so it's not like your situation is unique. We also had credit issues at the time of purchase.

our house needed nothing done to it except for repairs to our detached garage roof (a weekend project). My utilities are quite low considering where we live. The upgrades we are doing is because we want to do them, not because they are needed. I also do quite a bit of the house puttering myself. There's nothing written that says a man is the only person who can do DIY repairs. Most of my friends were in the same position when they purchased their first home (most built post WWII but prior to 1980).
Also a 3 BR house is not a starter home. A starter home is an older home, usually 2 Bedrooms 1500sq ft or under and needs updating.