RE: Buying a house in this economy? (Full Version)

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GroupW -> RE: Buying a house in this economy? (3/24/2008 7:21:05 PM)

Relady -
Sent you that list via email. I think the format is pretty messed up though. Sorry about that.



relady -> RE: Buying a house in this economy? (3/24/2008 9:05:54 PM)

Thanks much! There are a lot of names on that imploded list that I am familiar with and more than a few that I ended up doing business with against my will over the past few years.



lexie -> RE: Buying a house in this economy? (3/28/2008 1:19:05 PM)

Dh and I are hoping to rent for just one more year and then we will go looking for a house. Our income is lower than yours but we also have less people so far. We're just waiting for an increase in Dh's salary before we go apply for a mortgage because we want to be a bit more secure.

Also, the way the housing market seems to be going (especially where we are) house prices should fall in about a year because of the economy as well as housing trends. We're hoping to get a house we can fix up at a cheaper price rather than all these new houses that are being built. It also means that we will be closer to the city than we had originally thought.



fist.sensei -> RE: Buying a house in this economy? (4/7/2008 9:19:50 AM)

To add the only things I didn't see already posted:

Another monthly expense to budget is home repair. Most finance gurus say the best way to budget for this is to estimate that you will have repairs in the amount of 1-2% of the value of the home.

So if you own a $100,000 home, budget $1000-2000 a year in repairs. From when I owned a home it was relatively accurate.

Also, do you really want the extra stress? Owning a home sucks in a lot of ways. Unless you are planning to stay very long term, or get very lucky in home value the 'investment' won't pay off very much... just stability in where you live.

Between repairs, yardcare, mortgage insurance, mortgage interest, being completely screwed if things go terribly wrong... add all that to what must be a hectic life with six little ones and it really probably isn't worth it.

I've owned a house, and until I am extremely financially stable, I intend to continue to rent. Renting is a better fit for me, especially with the area I like living in, where a house costs $250,000 - 300,000 but you can rent one for $1000 a month.



PrincessDonna -> RE: Buying a house in this economy? (4/7/2008 9:41:33 AM)

Eek! Apparently my brain never came back after the "ick" I had, because I forgot all about this thread.[8|]

More information...

The house we would like to buy is the one we are now renting. It's an old house, built in the 1800s, but the foundation is solid and still relatively level. The elderly landlord wants $45K for it, nonnegotiable because this is how much he owes on it and he needs to pay off the mortgage. We've lived here over three years now and know what repairs the house needs...new well and septic, new windows, new furnace, insulation, and siding. Inside has been kept up pretty well and a new roof was put on last summer (raising what the LL wants for the house by $5K). The work that needs to be done can mostly be done by my husband, dad, and people from church.

My husband drives a truck and has experience driving anything from a tow truck all the way up to a tractor trailer, so even if the particular job he is in were to disappear, he has lots of options. Part of what bothers me about buying right now is that I really cannot work right now if we need me to do that. We are expecting #5 in September, making us a family of 7. The younger three are not school age and daycare would negate any benefit my working would have. It'll be three years, at least, before I could feasibly work, and though we wouldn't count on that, I would like to have the option available, if that makes sense?

We do not have any savings or money for a down payment. We are caught up on bills, but just barely. The only debt is the van, which will be paid off in two years, and two small school loans we hope to pay off in two years also. We do know of two no/low down payment options here...one through HUD's first time homebuyer program and the other through the USDA rural housing program. The USDA program also offers grants for necessary house repairs, though I don't know how much we could get or for what.

Knowing that added information...now what do you think?



relady -> RE: Buying a house in this economy? (4/7/2008 10:15:05 AM)

quote:

the other through the USDA rural housing program. The USDA program also offers grants for necessary house repairs, though I don't know how much we could get or for what.
Check this out. I know that in rural areas around here, some people use it. I'm in the metro area so haven't had experience with it, but have heard that they are pretty strict on the house being in such and such condition prior to allowing the sale to close. Just be careful buying a really old home that needs as much as yours does - that's quite a list of repairs needed and several of repairs listed are quite high dollar.

What is HUD's first time buyer program? I have never heard of it. Do you have a link? I can't find one, but maybe I'm not searching correctly.



PrincessDonna -> RE: Buying a house in this economy? (4/7/2008 10:53:54 AM)

Hmmm...maybe it's not through HUD, but it's in the same building as the HUD office here. I don't have a link. They do not offer grants for repairs though, so the USDA one looks better for us from what we can tell.



GroupW -> RE: Buying a house in this economy? (4/9/2008 3:05:44 PM)

Mmmm. Based on the updated information you gave us, I can understand why at $45k you might want to buy it. You might be cutting things a bit close though given all the bad things that can happen - water heaters go out, furnaces can die, etc. Your overall cost of ownership will probably run about the same as your rental amount after repairs, incidentals, and taxes/insurance are figured in.

If you were my kid/brother/sister/friend, I would probably advise that you get the van & school loans paid off first and build up a bit of a rainy day fund first. To buy a house, I would think you should have enough savings to replace a water heater, repair a roof, fix a water leak, etc. Probably 2-5k depending on the house. The older the house, the more savings you'll need.

Now, if you were under the gun and being potentially forced to move due to the owner wanting to get rid of the property, then maybe it's a different story but I'd still think long and hard about it. Without a savings pool to fall back on, home ownership is a pretty risky proposition.

BT



PrincessDonna -> RE: Buying a house in this economy? (4/9/2008 3:13:05 PM)

quote:

If you were my kid/brother/sister/friend, I would probably advise that you get the van & school loans paid off first and build up a bit of a rainy day fund first.


That is my thought also, and that puts us closer to the date when I could work if we needed me to. We do have a credit card that we try to keep free for emergencies, and my husband can do most all needed repairs, so I am not AS worried about the upkeep cost as the mortgage, insurance, and tax costs.



GroupW -> RE: Buying a house in this economy? (4/9/2008 8:43:48 PM)

Sounds like you've got your wits about you on this one. Just one word of caution - it's not so much the upkeep that can bite you. It's having to buy a new water heater on a moment's notice or any other expensive little disaster that can happen. So far we've had a termite infestation, a hot water heater blowout, an A/C compressor, a recalcitrant clothes washer, broken windows, and water damage from an ice storm. It's the $400 bucks at a pop kind of things that can hurt you when you've got the budget stretched to the limit.

Just a good idea to have a couple of thousand extra dollars hanging around before you take on that extra burden.

Good luck!



fist.sensei -> RE: Buying a house in this economy? (4/9/2008 11:39:18 PM)

quote:

ORIGINAL: PrincessDonna
It'll be three years, at least, before I could feasibly work, and though we wouldn't count on that, I would like to have the option available, if that makes sense?


I'm not sure what your school level is, but there is tutor.com that you can work from home during your own hours.

Also, if you already have that many little'uns running around, have you thought of getting a daycare license?



fist.sensei -> RE: Buying a house in this economy? (4/9/2008 11:43:12 PM)

quote:

ORIGINAL: GroupW

Sounds like you've got your wits about you on this one. Just one word of caution - it's not so much the upkeep that can bite you. It's having to buy a new water heater on a moment's notice or any other expensive little disaster that can happen. So far we've had a termite infestation, a hot water heater blowout, an A/C compressor, a recalcitrant clothes washer, broken windows, and water damage from an ice storm. It's the $400 bucks at a pop kind of things that can hurt you when you've got the budget stretched to the limit.

Just a good idea to have a couple of thousand extra dollars hanging around before you take on that extra burden.

Good luck!


I'll second that... I had a 6 month stretch where there was a $1000+ emergency every single month.



crm4souls -> RE: Buying a house in this economy? (4/10/2008 2:17:29 AM)

Do you have a IRA and money for a down payment?
Have the prices appreciated greatly in your area? If they have, you need to wait additional time for example, AZ, CA, NV, FL to name a few states where investors pushed prices to the extreme.
Can you qualify for special programs to help you buy a home?
If you can buy a home and stay close to your rental payment monthly with a fixed interest rate and get into the home, then the answer would be buy a home. It is always better to own and there are tax advantages.



GroupW -> RE: Buying a house in this economy? (4/10/2008 9:59:22 AM)

quote:

ORIGINAL: crm4souls
It is always better to own and there are tax advantages. [/size]


This is probably a "mostly correct" statement. In part, a bit of a question between theory and practice. In theory, renting is probably a bit more lucrative. In practice, because we don't save like we should buying can be better.

The long term rate of return on single family housing according the Dr. Shiller (as in the Case-Shiller home price family of indices) is just a bit under the general inflation rate after insurance/taxes/maintenance/repair costs are figured in. There are tax deductions involved, but generally given the low return on housing, there's not that much advantage in it.

Now that said, because it's a forced savings vehicle it also happens to be a major avenue for creating wealth in this country. It comes down to this - if you're extrememly disciplined in your saving habits and can invest reasonably aggressively, you're probably better off in the long term to rent. If however you're like the rest of us and a bit less disciplined about saving or do not invest aggressively, then maybe you should consider buying.

In the end, buying a home is really more of a lifestyle decision. We buy homes because we want them, not necessarily because they're good investments.



beeper -> RE: Buying a house in this economy? (4/10/2008 10:45:40 AM)

First, you won't have any tax advantages to owning. You make 35, 000 with 4 kids. You don't pay federal income taxes. (General note, you must itemize to get tax advantages from your home mortage. And if your itemized expenses other than home mortage interest are less than the standard deduction, you don't really get much tax advantage from your mortage.)

Second, the most imporant issue you face is this: your landlord needs to sell. If he sells to someone other than you, where will you live?

My guess is that a family with your income and desire to buy such a cheap house could get some type of loan that would require no down payment. There are programs that vary greatly from state to state and even county to county. My guess is that you could get in the house for about 400/month, including taxes and insurance.

I think all the concen about savings your van, etc are smoke clouding what should be the real dimensions of your decsion.

Here is what you need to do:

Talk to a banker and get some real numbers on what it would cost you to buy (including taxes, insurance, and repairs, of course).

Then compare it to what you are paying in rent now.

Then compare it to what would happen if (or is going to happen if your landlord indeed needs to sell--he will eventually) you had to move. You might not be able to find anything to rent that would suit your large family.

My guess is that a house that has a good foundation and new roof for 45K is a major bargain, especially since you have been living in the house already (you are use to its faults and your stuff all fits)

The cournerstone of good decision making is to compare your relevant alternatives. You need to know 1) how much buying would really cost you and 2) what will happen if you have to move to another rental.

Then you can decide.



GroupW -> RE: Buying a house in this economy? (4/10/2008 1:20:29 PM)

Also good points. I alluded to it an earlier post but didn't explain it at all. Thanks for jumping in. These are legitimate concerns, although buying a house without a savings backstop is a very risky endeavor. If rentals aren't available at a reasonable cost compared to what you're spending today, it might be the best option available to you but to me would be a second choice if I had reasonable alternatives.

I might have missed something in the original post. I got the idea that the landlord is elderly and at some point in the near future might need to sell, but I didn't get the idea that this was something that was on the immediate horizon. Did I get that straight?

BT



PrincessDonna -> RE: Buying a house in this economy? (4/10/2008 1:32:36 PM)

The daycare license requirements here are nuts (hooray, state of NY...with a huge childcare shortage and tons of stupid rules[8|]). But I can have two full-time children, in addition to my own, without being licensed. I have done this in the past and could do it again.

We're aware that at our income, there is no tax benefit to owning.

Good points, beeper. Sounds like we need to start the legwork, look at the actual numbers, and then decide what to do.

Also a good point about it being hard to find another rental. If we needed to, I'm sure we could, but it would be nowhere near as big as this house (4 BR, 2 full bath).

It's not something in the immediate foreseen future, but yes, if the landlord were to get ill or die, we may need to move or buy very quickly.



GroupW -> RE: Buying a house in this economy? (4/10/2008 3:47:05 PM)

In that case, a big pat on the back for starting to think about these things before it's a crisis.

Applause coming your way from me on that one.

BT



relady -> RE: Buying a house in this economy? (4/10/2008 4:32:42 PM)

Another way to look at it is this....you are going to pay someone to live somewhere. Are you going to pay a landlord and let him earn the equity in the home or are you going to pay a house payment and get the equity for yourselves. Sometimes it's a tossup. Having done both, I would recommend being the homeowner rather than the tenant, hands down, unless it is absolutely impossible financially.



peace77 -> RE: Buying a house in this economy? (4/23/2008 9:36:11 AM)

Came across this program on the M & T Bank website that you should be able to use:
quote:


First-time homebuyers in New York State can take advantage of a range of SONYMA (State of New York Mortgage Agency) Mortgages from M&T and move into a home without a lot of cash savings.

* Up to 100% financing available on single family
* SONYMA Closing Cost Assistance loan available
* Security of a low fixed interest rate
* Long term financing options
* For existing and newly constructed homes
* Available for New York properties only
* Purchase price limits apply. Income limits may also apply

Must be a first time homebuyer (except in SONYMA defined target areas). SONYMA participating lender. Certain conditions and restrictions apply. Borrower contribution required. Amount varies by property type.


In many areas, a first time homebuyer means that you have not owned a home in the past 3 years.



Anne



topshot -> RE: Buying a house in this economy? (4/23/2008 1:27:26 PM)

If the owner has no intention of listing the house at this time, I'd stay put and rent. I'd rather you get the equity than him, but it does seem like you're pretty tight right now and it will get tighter with #5 coming. However, you should talk to some banks to see what the numbers come out to be.

One other avenue you may investigate is houses that have been foreclosed. Don't actually buy at the sheriff's sale, but contact the lender after they've bought it back. You can find some really good deals that way. Lenders don't like to keep properties on their books even in good markets.



relady -> RE: Buying a house in this economy? (4/24/2008 10:26:09 AM)

quote:

Don't actually buy at the sheriff's sale, but contact the lender after they've bought it back. You can find some really good deals that way. Lenders don't like to keep properties on their books even in good markets.
This is not a bad idea for someone who doesn't mind buying a home sight unseen, kinda like a grab bag. However, the lender doesn't always buy the home, often they will let the home go to an investor if they have recouped their money. Once a lender does get the home....it is very difficult to purchase it until they get it through their system, assigned to an asset manager and listed with a realtor. It is quite a lengthy and sometimes arcane process. If he doesn't buy it at the sale, it could be just a few days or weeks or it could be months before the property is actually available for sale, it depends on the bank.



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