How do you buy a house? Should I even buy a house?

Discussion in 'The Pub' started by jcmark611, Sep 20, 2018.

  1. ifallalot

    ifallalot Supporting Member

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    I live in a state that has extreme homeownership costs and high taxes. My wife's and my income together forces us into a situation where we have to own a house to save on taxes although the monthly mortgage cost makes us "house poor"

    I do it for stability for my kids and the tax break, but all in all, unless I lived in a different state, I'd rather rent. But then again, there's the hope that later in life it will be paid off so I can retire
     
  2. MrSteve

    MrSteve Member

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    At 40k a year, you won't be buying a house that will provide any tax advantage over an apartment. Like others have said, the cost of ownership is much more than your mortgage and escrow payments. You will have higher utilities and unpredictable maintenance costs. Without a 20 to 30k emergency fund, you're setting yourself up for an increasing debt load should you need a new roof, appliances, HVAC. Even if you go the condo route, could you come up with a 10K assessment to repair/replace common areas of the development? Would you want to have to turn down a dream job offer in another city because a market downturn has put you in a position where your home is worth $75k less than you owe on it? (that is what upside down means, a position you never want to be in, but may find yourself in). Owning a house can be great, but isn't necessarily the greatest investment.
     
    Last edited: Jun 1, 2019
  3. Anacharsis

    Anacharsis Supporting Member

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    I bought when I was 27. It worked out for me, and I sold 5 years later. I haven't bought since, because I have not lived in places in which it would have been wise to do so. I haven't regretted a rent check I've paid since, because I would have taken a beating (especially considering transaction fees) if I'd bought and sold in each location where I needed to be since.

    Property can indeed go down, just as it goes up. Mortgages are not cheap, and most of your house payment on a 30 year mortgage is interest for many years. Selling costs a ton of money. Think about the economic prospects where you live. Is there a boom under way? Is there a bust that seems to be pending? You can find yourself with more loan than home value very very easily, especially if your down payment is small. Finally, the notion that your housing costs are fixed to the amount of your principle and interest is completely false. All manner of expenses associated with ownership go up with (or faster than) inflation.

    I live in a state (Illinois) with a lot of problems and a 5 year decline in population. Net population growth over the past 20 years has been zero. You have to have people who want to live in the structures in order for the structures to maintain (never mind grow) value.

    There are lots of good reasons to buy, and by and large, those are the ones that people read and hear the most. I do not advocate against buying. I'm just stating the other side of things, so you understand that it's not all roses, and it quite frequently ends up being a bad financial decision. Most people I know who have financial holes out of which they are digging got there by buying too much house/condo, or buying the house/condo at the wrong time in the wrong place. If you want to save and invest, save and invest. You don't need to buy real estate in order to do that.
     
  4. MrSteve

    MrSteve Member

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    Really depends on where the OP is located. Certain towns in Western Pennsylvania have decent houses available for 80k, considerably less for fixer uppers.
     
    Last edited: Jun 1, 2019
  5. ChazMania

    ChazMania Silver Supporting Member

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    I'm 51 and have never owned. Imagine paying rent every month since you were 17 y.o. That is 34 years of rent, no equity. We are just now in a position to consider buying, yet it's challenging to make that step as I've crunch alot of numbers with my finance guy and we would likely pay $600-1000 a month more than current rent and have 500-800 square feet less. We have 1800 sq feet and pay about $400 below market value in rent at the moment. A 375-400k place around here is not nice nor spacious. I won't have a music room if we buy local.
    I have been in Boise ID and Atlanta GA in the last 3 weeks, and if I could land my current salary in either of those locations, we would have an utterly gorgeous large home for 250-275k and my wife would not need to work.
     
  6. carbonti

    carbonti Member

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    Yes you are correct that there are properties that are inexpensive to the extent where it can make for it to result in an inexpensive mortgage payment. Using your example of a $80k house: Zero down payment @ 4.50% for 30 years is “only” $405/month excluding escrow. But the trick here is not that it is cheap but in getting someone/something to loan money to buy a house with no money down. I don’t think banks do that anymore.

    I have a nephew that lives w/wife & kids in Hazelton Pennsylvania and their house cost in the ballpark of $50k. Mom helped. They live as best as they can which is what everybody tries to do in their own way.

    The OP buying a house is probably not a good idea and is probably not possible given what banks will see with a mortgage application. That’s the real world.
     
    MrSteve likes this.

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