Post # 1
Ok, I know not everyone is buying a home, but sometimes it feels like it. This is just kind of venting, but I am also curious. Fiance and I make pretty decent money combined–$82,000 a year. The median household income for our city is $45k and the average home cost around $150k.
We recently were pre-approved for up to $325,000. We would not spend that much though. However, we only have about $18,000 saved up for a down payment. We are stuck in a hard spot because our rent lease is coming up and we would love to buy a home, but I am being a stickler for the 20% down payment. Why? Because I don’t want to pay PMI and I don’t want to pay the boat load of interest you pay (albeit over the long run) if you have a small down payment.
My Fiance feels we should buy because renting is “money wasted.” While I agree to some extent, I think there are clear benefits to renting….like not having to pay for costly repairs, not clearing out savings for the down payment, being able to move quickly if necessary, etc.
What is crazy is that we have friends buying homes (in the $120-$150k range) and they make quite a bit less than us. Now, I think it is great for them, but I don’t know if they did an FHA loan, got a nice “gift” to help with down payment or what.
I know the housing market is near an all time low (in my area), but I just feel like it is more responsible to wait and have the money saved up. Ugh, I am not 100% sure though. Realistically, it would take us another 1 1/2-2 years to save up the full 20% down payment.
What are you bees doing?
Post # 3
Sorry the formating is off….or maybe the bee is still messed up and it only looks that way to the originator of the post.
Post # 4
- Wedding: August 2013 - Rocky Mountains USA
I agree with your logic to some degree – BUT, it’s a great time to buy because interest rates are at an all time low, and may not stay that way for several more years. (Plus some of your mortgage payment is a tax write-off.)
We have a combined household income of 50,000 or so (but hopefully will jump up to 80,000 or so once my guy gets a new job). We bought a place for 130,000 and put 10% down, so a down payment of 13,000. We had most of that saved and borrowed 5,000 from my parents (paid back now).
Yeah, I would have preferred to have 20% down obviously, but with PMI only 0.5%, it’s about $55 a month. Not breaking the bank by any means. And while we’re spending most of our mortgage on interest, at least SOME of it is going to the principal versus wasting 100% of your rent money. We made sure to get a place where the plumbing, electrical, heating, and roof are all recently replaced and in good condition, so I hope the extra costs you talk about don’t come into play much.
For us, in the end, being able to buy a house for $700/month mortgage payment was totally worth it, even with PMI and a lot of that cost going to interest. We would spend at least that much renting a similar house, and this way we’re also building capital.
ETA: Poll option: NONE OF THE ABOVE. 10% down, standard mortgage with 0.5% PMI.
Post # 5
@lolot: That does make sense. Right now, we could realistically make a 10% down payment. My goal would be to make extra or larger payments to get to 20% equity faster. But I have also heard that FHA loans are due for some changes come April that might result in PMI being required for the life of the loan! So I am just not sure what to do….
Also, you are in the Rocky Mountains like me, which part?
Post # 6
For me (Toronto) house prices are through the roof!!! the average price is about $450000! I bought in 2006 with intentions to upgrade but I don’t see tha happening any time soon.
Post # 7
If I were in your positiion I would buy.. I wish my FH and I were in the position to buy but we have to keep renting and tossing away money.
Post # 8
My sister and her hubs really regret buying. They had two move, were unable to sell, own two homes and now rent a whole other place in their current location. I used to think I *had* to own, and now I am okay with renting.
Post # 9
Well we are lucky to live in a city/area that has been recently named one of the most affordable places in America to live. So that helps. lol
My fiance and I make average/slightly below average money. We are going FHA and have to put about $3500 down. We are getting the full 6% seller assist to help with closing costs.
The biggest thing for us was saving up for the down payment. And we’ve been doing it for FIVE YEARS.
We didn’t plan on waiting this long, but we had a rough road over the last few years (family death, family illness, job loss, etc). that prevented us from getting our own place beforehand. So in the long run, having that much time to save really helped.
As far as paying the monthly mortgage and utliites, we both have better paying jobs now than we did when we got engaged, so that is awesome. I also finished paying off my car in January and my fiance will finish paying his off about 2 months after we get married.
So although it SUCKED HORRIBLY to wait so long, looking back, it really did work out for the best, financially speaking.
Post # 10
We bought with the FHA loan, spent the extra money on remodeling, got the house reappraised (increased value by about 150k) and now have over 20% equity.
I wish we had houses going for $150k around here… you MIGHT be able to get a studio apartment in the ghetto for that much 🙁
Post # 11
FI’s parents loaned us the full down payment. He got really gung-ho about buying out of the blue, kept looking at houses, and suddenly things just fell into place. He talked to his parents and they actually volunteered to loan him the money. The bank didn’t know the “gift” from his parents was actually a loan, and his parents are charging us 4% interest…. so I would have never gone for it if it was up totally to me, but I knew we could afford it and he kinda took the reins. We’re paying about $200 per month less than we would if we were renting (not including the amount going to his parents every month, but including both mortgage and bills), and building our own equity instead of someone else’s, so it can work out really well in terms of money.
Post # 12
I would still urge you to go TALK to a mortgage counselor (or two.) There are a lot of first-time buyer options out there. Don’t let the PMI stuff scare you away from even thinking about it….
The brutal reality is interest rates are at historically low levels. I know that house prices are starting to creep back up– this is really a great time to buy a house!
Every person’s situation is different. Your savings, your credit rating and your desire to put down roots all will take a part in deciding if this is a good time for you to buy or not!
Post # 13
I was lucky in the fact that my father’s life insurance policy was substantial enough to cover a lot of things for me that otherwise I wouldn’t have been able to afford. When I moved to where I live now, I found out it was going to be cheaper to buy than to rent, so I used some of that money to put down 20% on the house and then my mom and stepdad offered to pay a little more so I would have 25% down.
My house payments are $300 less than we’d pay if we were renting.
Post # 14
I voted OTHER. We did not quite have the 20% to put down, but we were close. Our mortgage lender gave us the option of paying our PMI up front for a much lower rate. This ended up being a great deal for us. Therefore we decided to go ahead and buy since interest rates are so low.
Post # 15
Going to save for a few years before any loan plans!
Post # 16
The housing market is not down where we are, so we could not afford to buy. A one bedroom condo would be $250,000 and a semi-detached home $500,000 or more. I often wonder how other are affording to buy. I think here the issue is supply and demand. The median income is below ours but many people working here live in the suburbs or in shitty apartments. There are enough people able to afford expensive real estate for it to stay expensive even though these people are not the average.
Anyway, keep in mind that you will never really know the financial situations of others. One of the things that has been most helpful for me is to be honest with others. Our friends bought a townhouse condo for 400,000+ and hired an interior decorator to outfit it. I was very complimentary while the woman gave me a tour of their home. I said the third floor room with balcony could be used as a bedroom if they have 2 children. Her and her friend (who is a social worker) laughed so much and she said, “God we better not live here when we have kids!” as if it was a total dive. In this case I know they come from money and have husband’s with good jobs, but instead of being insecure or anything I just said, “oh for me this place would be a big step up, in my case I would be okay having two kids here”. When people ask why we still rent I say because that’s what we can afford to do right now. We could actually afford to buy but we aren’t certain about where we want to live long term and we would be pretty house poor. Anyway, everyone will have opinions on what is best for you to do but if you have some money saved and buy or rent within your means you can’t really go wrong even if renting versus buying is a bit different over time.