housing market

[throwittoblythe]

My wife and I are in a very similar situation to some of the previous posters. We are 1 year out of school. Between us we have 3 student loan payments and 2 car payments. However, we are making good money and have some extra that could be thrown at buying a house. It would be a bit of a stretch for about 18 months (until we get her car paid off), but we could do it with a couple hundred left over each month.

So, what we're struggling with is, should we buy a house now even though it would be a little tight as opposed to waiting until next year when we could absolutely afford it? We don't want to have to live that close to the line, but we also don't want to miss out on the $8000 and low interest rates?

 

[MNCyGuy]

There is nothing wrong with that. The only time I've ever taken on debt is for real estate purchases and whenever I've bought, I've paid it off early. That philosophy has treated me very well over the years.

Buy wisely.

Even with the government tax credit, I'm not sure this housing correction is over. I wouldn't get too excited about buying something if it's just going to lose value. It may be a different story in Florida, California, and Nevada where there are a lot of distressed properties. There may be some "deals" there.

Believe me, I know there is nothing wrong with that approach. I look at my parent's financial situation knowing they were very conservative when they bought that house and compare it to others, and that is where I want us to land. Thus my wariness when approaching a home loan.

 

[Bobber]

My wife and I are in a very similar situation to some of the previous posters. We are 1 year out of school. Between us we have 3 student loan payments and 2 car payments. However, we are making good money and have some extra that could be thrown at buying a house. It would be a bit of a stretch for about 18 months (until we get her car paid off), but we could do it with a couple hundred left over each month.

So, what we're struggling with is, should we buy a house now even though it would be a little tight as opposed to waiting until next year when we could absolutely afford it? We don't want to have to live that close to the line, but we also don't want to miss out on the $8000 and low interest rates?

I'd pay off all the other loans off first...

Lot less debt and risk that way if one or both your jobs go south.

The $8,000 credit doesn't do you any good if housing values tank 20% when the government program ends(and that could happen....)

 

[throwittoblythe]

I'd pay off all the other loans off first...

Lot less debt and risk that way if one or both your jobs go south.

The $8,000 credit doesn't do you any good if housing values tank 20% when the government program ends(and that could happen....)

I don't see the housing market tanking 20% in Omaha seeing as how they haven't dropped all that much to begin with, but that's a whole other argument.

We won't be paying all the other loans off before we buy a house anyway because it will be a total of 7 years before we get them all paid off anyway(we're doing so at an accelerated rate).

Basically, I know we'll be able to buy next spring for sure, but we're toying with doing it now so we can get a lower interest rate and get the $8000.

 

[Bobber]

I don't see the housing market tanking 20% in Omaha seeing as how they haven't dropped all that much to begin with, but that's a whole other argument.

We won't be paying all the other loans off before we buy a house anyway because it will be a total of 7 years before we get them all paid off anyway(we're doing so at an accelerated rate).

Basically, I know we'll be able to buy next spring for sure, but we're toying with doing it now so we can get a lower interest rate and get the $8000.

Each to their own....

 

[alaskaguy]

First, mortgage interest deduction is not negligible, it does add up over time so that is not a line of BS - it does reduce the taxes you pay.

It is a line of BS for many borrowers. My standard deduction exceeds my itemized deductions so my mortgage interest provides me absolutely no benefit from a tax perspective.

 

[MNCyGuy]

I'd pay off all the other loans off first...

Lot less debt and risk that way if one or both your jobs go south.

The $8,000 credit doesn't do you any good if housing values tank 20% when the government program ends(and that could happen....)

Now this is something I've wondered about. Our current loan situation includes her car loan and our student loans. The car loan is not very big and I am on track to get my loans paid off in 5 years at the worst. Her loans are a little more hairy since she did not get very much help paying for school. Are we wiser to wait until I have my loans paid off at least? For the record I consider my job very stable, our company is not very big and has been hiring and talking of expansion since I was hired.

 

[throwittoblythe]

Each to their own....

I agree. I don't think we'll end up doing it anyway because it's just too close to the line for me, but we'll see. Like someone else said, it's at least worth running the numbers to see if you can do it.

 

[MNCyGuy]

I'm gonna echo what I was initially saying. Is there a good website or source for some of the FAQ and loan calculating stuff when looking at home buying. I'd rather not just do a blind google search.

 

[throwittoblythe]

Now this is something I've wondered about. Our current loan situation includes her car loan and our student loans. The car loan is not very big and I am on track to get my loans paid off in 5 years at the worst. Her loans are a little more hairy since she did not get very much help paying for school. Are we wiser to wait until I have my loans paid off at least? For the record I consider my job very stable, our company is not very big and has been hiring and talking of expansion since I was hired.

We are literally in the EXACT same boat. My opinion has been that as long as you can keep paying off your loans at the accelerated rate and still have plenty of money left over each month (for unknowns) after paying your loans/mortgage, then it's worth doing it. For us, we know we won't be out of debt for another 7 years. We're not going to rent for that long, so we know we'll be getting a house much before that.

Also, if you're paying extra on your loans like we are, remember that that money is available in an emergency. Say your student loan is $200 each month, but you pay $400. Well, if you or your wife loses her job, you have $200 there each month that you don't HAVE to spend. So, keep that in mind. You shouldn't count that money as available, but know that in a crunch, it's there.

 

[dmclone]

I have a tendency to under-buy when it comes to a house. My wife and I have similar incomes and I like the ability to still be able to pay all the bills if one of us were not able to work. Helps me sleep at night.

 

[Bobber]

Now this is something I've wondered about. Our current loan situation includes her car loan and our student loans. The car loan is not very big and I am on track to get my loans paid off in 5 years at the worst. Her loans are a little more hairy since she did not get very much help paying for school. Are we wiser to wait until I have my loans paid off at least? For the record I consider my job very stable, our company is not very big and has been hiring and talking of expansion since I was hired.

My only advice is use a lot of caution when making your decision. You'll be commiting to a pretty large loan when you buy a house and that shouldn't be taken lightly. Houses are not problem free and they aren't as liquid an asset as you might think. You goal should be to build equity, but how fast will you be able to do that when you have so many loans? Throw in kids may come down the road as well as the other curves life can throw you and what may seem like a very manageble loan initially can change.

What harm is there waiting a few years, paying your current loans down aggessively and working at building a down payment nest egg?

 

[tejasclone]

My only advice is use a lot of caution when making your decision. You'll be commiting to a pretty large loan when you buy a house and that shouldn't be taken lightly. Houses are not problem free and they aren't as liquid an asset as you might think. You goal should be to build equity, but how fast will you be able to do that when you have so many loans? Throw in kids may come down the road as well as the other curves life can throw you and what may seem like a very manageble loan initially can change.

What harm is there waiting a few years, paying your current loans down aggessively and working at building a down payment nest egg?

The fear is that right now the tax credit and low interest rates are available, and who knows what the economy will look like in a few years.

Also, the prospect of renting from a landlord for another 2-3 years and watching that money disappear every month is nauseating. I understand that a mortgage payment still has a lot of interest and other fees that suck your money away, but at least a house will build equity, if only very slowly.

 

[GoCy]

I'm gonna echo what I was initially saying. Is there a good website or source for some of the FAQ and loan calculating stuff when looking at home buying. I'd rather not just do a blind google search.

DO NOT use the amount of money that someone will loan you as a gage of how much you can afford. It is typically in excess of what you should borrow. This maximum amount will stretch your budget very thin, and add alot of financial risk to your life. What happens if one of you loses your job, gets ill, etc? You need to take that into consideration.

When we bought our home, we ran a budget, built up an emergency savings account, and made sure that we could continue to afford the house if one of us lost our job. I'm not saying that you could, or even should be able to afford the house on one income, but I would recommend considering how long you could afford the house on one income, and what you feel comfortable with from a risk standpoint. Most people do not take "bumps in the road" into consideration when deciding how much house to buy.

The following is a link to an article by Dave Ramsey on this topic. He tends to take a conservative approach to personal finance, which is similar to my approach as well. FYI, he recommends a 20% down payment, with the payments less than 25% of your income.

How Much House Can You Afford? - Real Estate - daveramsey.com

 

[MNCyGuy]

DO NOT use the amount of money that someone will loan you as a gage of how much you can afford. It is typically in excess of what you should borrow. This maximum amount will stretch your budget very thin, and add alot of financial risk to your life. What happens if one of you loses your job, gets ill, etc? You need to take that into consideration.

When we bought our home, we ran a budget, built up an emergency savings account, and made sure that we could continue to afford the house if one of us lost our job. I'm not saying that you could, or even should be able to afford the house on one income, but I would recommend considering how long you could afford the house on one income, and what you feel comfortable with from a risk standpoint. Most people do not take "bumps in the road" into consideration when deciding how much house to buy.

The following is a link to an article by Dave Ramsey on this topic. He tends to take a conservative approach to personal finance, which is similar to my approach as well. FYI, he recommends a 20% down payment, with the payments less than 25% of your income.

How Much House Can You Afford? - Real Estate - daveramsey.com

Thanks, this is the kind of thing I was looking for. I'll hopefully get a chance to sit down and read this tonight.

 

[Bobber]

The fear is that right now the tax credit and low interest rates are available, and who knows what the economy will look like in a few years.

Also, the prospect of renting from a landlord for another 2-3 years and watching that money disappear every month is nauseating. I understand that a mortgage payment still has a lot of interest and other fees that suck your money away, but at least a house will build equity, if only very slowly.

Interest rates are often time over used when making decisions. It's been a long time since we've seen high interest rates, but when it occurs it tends to depress home values, so you can either go with a low interest rate and high house value or a high interest rate and a lower house value. True I like low interest rates too, but you should consider that houses values saw a temendous run up in the last 10 years(based on ever lower interest rates and creative financing). Have they settled to trend line values yet?

Rent is a relative thing. If you can rent cheap, you should do it. You have no property taxes or repairs and most importantly is it give you a lot of flexibility if you want to move.

Don't misunderstand me. I think in most cases, it makes more sense to buy than rent. I did. You need to be in good financial postion before you do so however or your're going to be like a hampster running in a wheel trying to pay all the bills.

 

[Bobber]

DO NOT use the amount of money that someone will loan you as a gage of how much you can afford. It is typically in excess of what you should borrow. This maximum amount will stretch your budget very thin, and add alot of financial risk to your life. What happens if one of you loses your job, gets ill, etc? You need to take that into consideration.

When we bought our home, we ran a budget, built up an emergency savings account, and made sure that we could continue to afford the house if one of us lost our job. I'm not saying that you could, or even should be able to afford the house on one income, but I would recommend considering how long you could afford the house on one income, and what you feel comfortable with from a risk standpoint. Most people do not take "bumps in the road" into consideration when deciding how much house to buy.

The following is a link to an article by Dave Ramsey on this topic. He tends to take a conservative approach to personal finance, which is similar to my approach as well. FYI, he recommends a 20% down payment, with the payments less than 25% of your income.

How Much House Can You Afford? - Real Estate - daveramsey.com

Ramsey's stuff is great. I agree almost every time with his advice to people...

 

[06_CY]

i did a loan calculation this weekend for a house i found and i have enough for a 10% downpayment and the monthly mortgage payment would be less than $200 more than i am paying now for rent. Problem is i can't get to my downpayment (without a penalty) for 6 months. Im not on the lease at the apartment, but my roomie would be ****** if i left this early (his lease is up in november).