My current problem (realtors and finance geeks welcomed)

  • Posted by a hidden member.
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    Dec 06, 2012 3:40 AM GMT
    I live in a nice apartment that is within walking distance to my work, grocery, and gym. It is cozy, with tall ceilings, hard wood floors, a gas fireplace, and french doors. I have worked out a situation with my landlord where I pay $300 a month in exchange for mowing the lawn. And, my gas/electric/heat is only about $75 a month. Those are my only housing expenses. HOWEVER, the apartment lacks some important things to me: It isn't practical for a dog (but I really want one), the kitchen is small (but I love cooking), and the yard is small and is in a semi-bad/unsafe neighborhood so I really can't hang out in the yard (but I looooove a good yard). I think about buying a house that has a good kitchen and yard and is in a safer neighborhood, but I know my cost of housing/living will go way up and I will be further from work (probably a 15 minute drive. Not bad.) . Remember, $300 in rent. But house costs and rates and very low right now. Should I stay in my apartment or buy a house? What should I do?

    Some important info: I'm a professor and my financial situation is good. I don't have any other expenses besides my cell phone. I do have a lot of student loans that I'm paying on. My credit score rocks (860+)


    Pictures of my pad (before a Christmas party)

    Yes, $300 a month.

    Living%2BRoom%2Bat%2BChristmas.JPG

    Dining+Room+at+Christmas.JPG
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    Dec 06, 2012 3:49 AM GMT
    If I was paying $300 a month for rent for an apartment that I didn't like so much, my immediate goal would be to save as much money as possible to buy a house that I liked in a great neighborhood.

    But I suppose it depends on your monthly income and how much you're willing to pay for the increased maintenance/utilities/costs/etc of owning a house.
  • AMoonHawk

    Posts: 11406

    Dec 06, 2012 3:57 AM GMT
    You already have student loans you need to pay off ... getting in deeper debt is not going to be good, even if you are making good money. Buying a house is going to take your every last spare dime. You would be better off putting the money toward paying off you loan, then save for at least half down on a house. Almost any loan you take out you are going to be paying double if you pay it off payment by payment.
  • AMoonHawk

    Posts: 11406

    Dec 06, 2012 3:58 AM GMT
    Okay ... now you are just bragging

    Nice place

    icon_biggrin.gif
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    Dec 06, 2012 3:59 AM GMT
    Yes, that is definitely what I'm struggling with. For my area, I think I could get something decent for about $900 a month, including mortgage, insurance, and property taxes. I'm guessing that heating/cooling/water, etc. would be about $250 a month.
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    Dec 06, 2012 4:01 AM GMT
    AMoonHawk saidYou already have student loans you need to pay off ... getting in deeper debt is not going to be good, even if you are making good money. Buying a house is going to take your every last spare dime. You would be better off putting the money toward paying off you loan, then save for at least half down on a house. Almost any loan you take out you are going to be paying double if you pay it off payment by payment.



    I think if I really focused hard, I could pay off my loans in 6 or 7 years (if I kept my apartment). I'm worried that house costs and loans will go up a lot in that time and I'll miss out. Possible?
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    Dec 06, 2012 4:25 AM GMT
    A lot of student loans?? I think you should stay put, depending on the amount of student loan debt you have.

    Personally, if I was in your situation, I would still save up for a huge down payment. Then buy a duplex or a house with a rental unit. The rental could cover half (or more) of your monthly mortgage. Which frees up your monthly expenses a little bit. You can use that extra disposable income to fix up your house/yard. Or you can use it to pay down your student loans. Or invest it somewhere.

    If your current student loans have a shitty interest rate, you can find a bank/lender that will approve you for a Home Equity Line Of Credit (HELOC), you can use that to pay off your student loans. This will just shift your debt from a shitty interest rate to a better one. And you can take advantage of the tax deduction from the mortgage interest.

    And not to scare you, but home prices are normalizing. Which means, they are going up. Inventory is shrinking. I suppose it depends on the city/state. That's what's going on here in the LA area at least. But the good news is that interest rates are still low. So you may still have the opportunity if you decide to wait. How long? Maybe another 1- 3 years. But I'm not so sure about 6 - 7 years.

    Please take my advice with a grain of salt. I'm not a realtor or finance geek. Just relaying some personal knowledge/experience. I sold my previous house and I'm in the market for a new one. So I suggest that you speak with your accountant or a financial planner, if you know of any. Because everyone's financial situation is different.
  • calibro

    Posts: 8888

    Dec 06, 2012 5:17 AM GMT
    i'm guessing you mean a vantage and not a fico credit score
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    Dec 06, 2012 5:25 AM GMT
    Rockbiter saidYes, that is definitely what I'm struggling with. For my area, I think I could get something decent for about $900 a month, including mortgage, insurance, and property taxes. I'm guessing that heating/cooling/water, etc. would be about $250 a month.


    It depends on the house and its insulation, windows, and attic blow-in insulation, which is what we found makes all the difference. Our bills combined for both electricity and gas are about 140.00 in winter and half that in summer (and this is nuts-expensive BC). Our house is a 1969er of 1850 square feet.
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    Dec 06, 2012 5:30 AM GMT
    You have a great looking apartment and the rental rate is incredible. The bottom line is you have some legitimate reasons to want to buy your own home and right now is a great time to purchase foreclosure homes. but the window is closing fast and the market values and interest rates are going to start rising again.

    Here's my gut feeling. The way you laid out the options seems evident to me that you are really wanting your own place that is more appropriate to the lifestyle you want to have. I think you've made your decision to buy a home and are just wanting someone to give you reassurance and/or permission.

    So, here's what I suggest you do.

    1) Sit down and make a wish list of the home features you are looking for. Be reasonable with the understanding that the bigger your wish list, the bigger the price tag.
    2) Do your budget and determine how much you are willing and able to comfortably pay each month in a mortgage payment including homeowners' insurance and taxes. When you talk to lenders they will almost always tell you how big of a loan you qualify for, but you don't want to take out the biggest mortgage they will give you. The lender/broker isn't going to be paying those high monthly payments, you will. So when you talk to a lender, tell him/her what your maximum monthly budget for a house payment is and stick to it.
    3) Contact your preferred lender to get pre-approved for a loan. It's best to have a pre-approval before you begin house shopping. Go with a direct lender like Bank of America, your credit union, or some other major lender. (I highly recommend avoiding Wells Fargo. I've had several buyers get screwed at the last minute by not being able to close on time with Wells Fargo.) Also stay away from most mortgage brokers. Brokers shop your loan around to "get you better rates", but many of them are simply middle men who end up costing you big fees in closing costs.
    4) Once you determine the maximum monthly payment you can afford, and you have gotten a pre-approval for a mortgage. Contact a real estate agent. (I have a couple good ones in your area I can recommend).
    5) Find a home that you like and make an offer on it. If you don't find something in your price range and that fits your wish list, then stay where you are. You haven't spent a penny up to this point and shopping for a home does not mean you a required to buy one. Until your have a binding purchase agreement, you can back out at anytime.

    Hope that helps. If you have any questions, message me directly and I will be happy to answer any of your questions and point you in the right directions. Good luck!
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    Dec 06, 2012 5:37 AM GMT
    First of all nice place man! icon_smile.gif.
    Second, given that you say that you're in a healthy financial situation, I don't see any problem on you getting a mortage loan for a place of your own, also your age helps to get a lower rate (if you wait longer, then you're more risky for credit so they'll charge you a bit more on the rate). However if you want an even lower rate, probably you could wait until you pay your student loans. Just make sure it's a fix rate and to check with several banks before you make your mind up. (Make sure to calculate the internal rate of return on the cash flows for your loan to see what's the real rate they're charging you tho).
    Remember that credit is always good and we should not be afraid of it. As long as we know that it is not our money and it is only a leverage.
    Good luck!!
    (yeah, I'm young but hope my financial background helps a bit icon_smile.gif)
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    Dec 06, 2012 5:53 AM GMT

    I'm an agent. Buy now. In this lifetime you will never see prices or rates this low in my opinion.

    I think in your age range you should be purchasing a home for the long term if you will be in the area for over 5 years. This is just security for your future.

    I'd buy something with a 15-20 year mortgage, not 30. On a 30 year mortgage you pay only 25% down in principle in the first 15 years.

    Run an amortization schedule on the loan a 30 vs a 15.

    Offer low on anything you buy. 10-15% under. Be ruthless....most sellers want to sell.

    I'd strongly suggest buying a duplex. Live in one side rent the other. Then move up in 5 years. This will be a great income resource for your retirement someday.


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    Dec 06, 2012 12:15 PM GMT
    Why not " play house" for 3 or 4 months to see what life would be like " with the extra debt"? Put aside the extra $$$$$ that it would realistically take for you to buy a house and upkeep of said house. Its not like the economy is going to have some magic rebound in the next 6-12 months, so I wouldn't worry about " missing out on low rates etc". Just an idea icon_smile.gif
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    Dec 06, 2012 12:33 PM GMT
    lookinforcars1 saidWhy not " play house" for 3 or 4 months to see what life would be like " with the extra debt"? Put aside the extra $$$$$ that it would realistically take for you to buy a house and upkeep of said house. Its not like the economy is going to have some magic rebound in the next 6-12 months, so I wouldn't worry about " missing out on low rates etc". Just an idea icon_smile.gif


    This.

    Then you have money for your closing costs.
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    Dec 06, 2012 1:33 PM GMT
    Trollileo saidI live in a house with three (sometimes four) other people for $280 ($325) per month respectively. Your apartment looks fucking amazing and I'd love to live in there even with my dog.

    Out of curiosity: what makes your apartment unconducive to raising a dog aside from the unsafe neighborhood and crappy yard?


    I'm on the third floor. Up and down steps constantly, especially in the "potty training early months" would be nutty. And, I want a big dog and I know he wouldn't be happy in an apartment.
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    Dec 06, 2012 1:40 PM GMT
    Pay off the debt before you assume more.
  • HottJoe

    Posts: 21366

    Dec 06, 2012 2:45 PM GMT
    First of all, keep the beard!!! icon_razz.gif

    Secondly, I love your xmas decor!!! I'll bet you could do a lot with a large older home. Good luck.
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    Dec 06, 2012 3:35 PM GMT
    Always buy . I bought my first house when I was 26. Remember
    that the mortgage interest is deductable. Look for a neighborhood that gay couples and architects are moving into; historically they are the urban pioneers. More gay guys should get together to buy places together when they can't afford it alone ..Another option is to find a place the has potential for an In-law unit and rent to students or professors etc. to cover monthly costs. Its cool if your area still has reasonable property values. We arecfully recovered here and it's getting crazy again with multiply offers on anything that goes for sale .
  • Posted by a hidden member.
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    Dec 06, 2012 3:43 PM GMT
    Your apartment looks beautiful to me. If you don't have financial problems then you can think of moving out and I am sure you will find good option to choose from. icon_cool.gif
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    Dec 06, 2012 3:46 PM GMT
    Well, $300 is a steal I'd say. I live in the most expensive area and I pay $1550 for an apartment in the suburbs and it's a good deal considering the size.

    I just purchased a condo in SF (yay, closing at the end of the month) and I paid a fortune for it. That's SF, but I still feel I got a great deal (fixer upper). The big thing that convinced me to buy instead of rent was comparing my monthly costs. I had the funds to get into the place but when comparing the monthly costs, they were almost identical. In your case, that probably won't be the case. Interest rates are unbelievably low so that's to your advantage today but could change tomorrow. The market is picking back up so prices are on the rise and demand has been pent up so a lot of people are looking.

    If you stay put, then you should budget for what you might pay with a mortgage and bank all but the $300 you're paying for rent. Utilities will increase a little but probably not that much. Don't forget the tax benefits of having a mortgage and the freedom to make it yours. There's something to be said about fixing it up the way you want and knowing the return on investment is yours and not the landlords.
  • HndsmKansan

    Posts: 16311

    Dec 06, 2012 4:05 PM GMT
    First, let me say, your home looks very nice, your dining area looks awesome... really like the french doors and your floral work above.

    That said, you've been getting some good input so far. Great that your credit score is so good .... a little surprised about that considering no mortgage or extensive credit history (maybe you've been there and done that...well). A couple of sugguestions:

    1. You need to decide what is most important to you long term.. a house or a condo or apartment based on your lifestyle. Do you want to ultimately want to retire with a house or live in an apartment. Houses do have responsibilities with them (which I love), but some people don't.

    2. Nice that you make a reasonable income. Evaluate your liquid savings,
    you need to put down at least 10% on a house loan (and 20% is certainly better). I lived at home (where I grew up) with my Dad (who was gone most of the time) and managed the property and built savings.. enough to put down 50% when I had my home built 8 years ago. Don't put yourself in a financial bind with a home purchase... make sure it is well thought and carefully considered.

    3. How important are dogs to you and your social situation (meaning what about your future wants and desires?

    4. Evaluate other expenses.. sounds like you have. The need for a vehicle and expenses like house insurance, property taxes (which is a nice write off). If you are a professor and you have no home mortgage deduction (I hope you contribute to your 403(b) retirement plan to the max).. you are paying income taxes out the nose. A house can help that!

    Lots to consider.. the bottom line is, what do you want and how do you want to live your life. If you want a house, save, save SAVE and make it happen now.

    Congrats on the credit rating!
  • FitGwynedd

    Posts: 1468

    Dec 06, 2012 4:13 PM GMT
    Council housing is the solution to all housing questions or problems
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    Dec 06, 2012 4:14 PM GMT
    What I picked up on is that you think your neighborhood is bad/unsafe. That for me, would be the most compelling reason to move, whether you found a house to buy or another place to rent. Life is too short to put up with the vibes of a bad neighborhood. So I would not buy a house in a poor neighborhood, are there, unless it was changing very rapidly already. If you can afford it financially, this is a good time to buy a house, because interest rates have NEVER been this low. Rates will rise, but no one can say with certainty, when they will start to rise. If you buy, get a fixed rate mortgage, unless you plan to move again in a few years.
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    Dec 06, 2012 4:16 PM GMT
    All I can say is that I bought my first place about ten years ago and have bought and sold a few places to get into a house that I can see living in the rest of my life. I was lucky to start buying and selling before the market really took off. It seems we're in a similar situation now where you could conceivably flip up a few houses to really get into one that you won't want to leave.

    All that being said, you should definitely be responsible with your finances and even conservative. It's a big decision but I'm very, very glad that I made the plunge and know a lot of people who didn't who are now a little sorry...
  • metta

    Posts: 39144

    Dec 06, 2012 6:25 PM GMT
    Another thought:

    If you have enough cash for the down payment as well as additional money for savings, emergencies, etc., have you considered buying a small home and renting it out the new home. If you can get enough rent to cover most of the expenses of it and stay where you are, you can eventually move into that home after you pay off your school loans. That way you wont need to worry about prices or interest rates getting too high.