(Closed) Advice on buying a home

posted 6 years ago in Home
Post # 3
1093 posts
Bumble bee
  • Wedding: September 2012

I’m no expert (hopefully some of the real estate-savvy bees will chime in) but, I definitely think buying a home would be worth it. Real estate prices are slowly going back up so even if you sold in 2 years, you’d probably still make some money on the house (or at least not lose any). 

I think making payments toward a mortgage (that you might get back when you sell) is much smarter than paying rent, if you can afford it.

I mean, you probably shouldn’t go nuts with renovating/upgrading the house if you’re only staying a few years (save that for your “forever” home), but I think it’s a good idea to get your real estate feet wet.

Good luck!

Post # 4
7311 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

In my market, which is pretty flat right now, I would not buy a home without a plan to keep it for 8-10 years. Remember, you’ll likely have to pay about 6% of your selling price for realtor fees. So your house would have to appreciate at least 6% in value in order for you to break even on your purchase price. It would have to appreciate even more in order for you to recover the costs of any closing costs that you pay on the deal to purchase the home and on the deal to sell the home. Plus you would need to factor in the necessary maintenance and any renovations that you would invest into the house during that time. Your break even point would probably end up at an appreciation of about 12-15%. Like I said, the market in my area is pretty flat. there is no way that a home purchased right now would appreciate by 12-15% in the next few years. So for us, we would end up losing money on the deal, and that is not something we would be willing to do.

That said, if you live in a hot market where that sort of appreciation is well within reason, it may be a sound financial decision.

Edit: Another thing to consider when analyzing the market is the flood of foreclosures that have yet to hit the market. According to our agent, about a year ago Fannie Mae and Freddie Mac told the industry that they had a very large number of foreclosures that they would begin to release in the next 12 months. That has not happened. These homes are being held back from the market, and I would bet it is for political reasons. After the next election, if the Pres gets re-elected and the Congress is set for a few years, there will be less motivation to hold these homes back. If FM x 2 releases these homes to the market in 2013 (after the election season is done), home values will take a big hit. This could be a negative for buyers looking to purchase and sell all within the upcoming 5-7 year timeframe.

Post # 5
3943 posts
Honey bee

@undercoverhomebuyer:  No, definetly not!

The first few years on a mortgage you are basically just paying interest and almost nothing towards the principle. Also, the real estate market is not picking up that fast like many people thought. We bought 2 years ago, when everyone was saying that prices are the lowest ever-buy, buy, buy! And now houses in the neighborhood are selling for even less (which tells me we are probably underwater).

It’s honestly not worth the headache to only buy for 2 years. We plan to stay in this home for 8-10 years, but realistically could stay here forever. Even if we sell, we would buy a house in the same area.

Edit: It also depends on your area. My experience is just in the Boston area, but Im sure other parts of the country are picking up quicker or weren’t hit as hard when the market crashed.

Post # 6
201 posts
Helper bee
  • Wedding: September 2012

It really depends on what you can swing financially. When the market was good (pre-2006ish) the general rule of thumb was you should only buy a house if you’re planning to say for a minimum of 5 years. That said, I bought my first place a year ago knowing I won’t be there for 5 years. I wasn’t with Fiance then, but I figured I’d either stay for 5+ yrs or, if I moved sooner, rent it out. I ran the numbers in advance and will almost break even renting it out. For me, it made financial sense and I am still happy with my decision.

The cost of buying and selling (closing costs, inspections, etc) is likely a lot more expensive than you realize. I would expect you to lose money if you try to sell in two years, regardless of what direction the market is going. I would not recommend buying if you may have to sell in 2 years. If renting the property is an option, that might be a different story. I’d recommend finding a real estate agent and broker to run some numbers for you. They’ll be able to give you the estimated closing costs and will know how much houses in your price range would rent for. Just keep in mind it’s a rough market and they’re trying to make money too. 

Good luck!

Post # 8
13099 posts
Honey Beekeeper
  • Wedding: July 2010

I’d say no.

Darling Husband and I just bought our first home and only felt comfortable getting a home that we could be in for at least the next 6-8 years (if not more).

lovekiss did a good job explaining above how realtor fees, closing costs, and maintenance will exceed any appreciation of your home if you are only there a short time.

Post # 9
2227 posts
Buzzing bee
  • Wedding: January 2012

@Bostongrl25: I agree.

When Mr Rugbee & I started looking to buy a house, we sat down with all the mortgage rates & amortization schedules. From our calculations, we’d gain 4-6k of principle every year. This was about equivalent to the money we’d save staying in our cheap apartment. Ultimately, we found a home we loved so we bought it & called it even.

 To find out if it’s a good idea for you, you need to know how much you’ll be taking out on a mortgage, what the amortization schedule is & then calculate how much you’ll pay on principle in those 2 years. If it’s less than the money you’d save by staying put, you have your answer.

Also keep in mind moving has sunk costs: -inspection, -closing fees, -cost of movers, -new paint, -little repairs. Those should go into your calculation aswell.

Post # 10
886 posts
Busy bee
  • Wedding: November 1999

Agreed on the “hold off” advice. You need to put at least 7 or so years of equity into your home for you to be able to sell it without a loss. Unless you know you’re going to stay there for that long, don’t do it yet. You might hear of mortgage schemes that let you bypass this, but it’s not reliable from what I’ve heard. And there’s also no guarantee that the market will shape that much up in the next 2 years to boot.

Post # 11
10453 posts
Sugar Beekeeper
  • Wedding: February 2014

I think it makes more sense to buy. If you didn’t, you’d just b throwing 2 years of rent money down the drain. Even if the market goes down and you lose some money on the house, you are 100% going to lose the money if you rent.

Post # 12
8394 posts
Bumble Beekeeper
  • Wedding: August 2012

I personally wouldn’t buy unless I was planning on staying at least 5 years. Fiance and I have been in our house for 2 years this month, and I cannot imagine packing everything back up and trying to sell it now. UGH! The market isn’t very good so there’s no guarantee you’d even sell it when you wanted to either. Carrying that mortgage + realtor fees, closing costs, inspections, renovations, etc and then possibly having to sell for a loss is just not a good idea IMO.

Post # 14
330 posts
Helper bee
  • Wedding: September 2011

One thing you could do is rent a house! For me, at least, part of the reason I want a house so bad is that I’m sick of apartment living. I grew up in a house & while I’ve done the apartment thing for a few years now, I’ll never get used to sharing walls with people I’m not living with (if that makes sense?).

Post # 15
720 posts
Busy bee
  • Wedding: August 2009

I think renting is the better idea if you’re looking at 2 years.  With all the fees associated with buying/selling, I doubt you’d break even during that time.  Renting a house is an great suggestion, though!  It may help you scratch that itch without the commitment. 🙂

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