Hold off on buying. There are so many hidden costs that you don't factor in like lawn care equipment, landscaping, furniture. I had a budget going in and even factored most of that stuff in but all the little things I forgot about added up. The whole equity argument is overrated. You probably won't have appreciable equity in the house for at least 5 years (unless you get a super deal or home prices skyrocket) and even if you wanted to sell then that equity would more than likely go toward realtor fees and things like that. I think the worst thing someone can do is buy a house thinking about making money down the road (and I'm not talking about flipping houses). People forget too that things like broken air conditioners, trimming trees and storm damage that can come out of YOUR pocket to fix also. Just be patient. The tax credit is nice but it won't help you much if you get into a house you cannot afford or can afford but at the cost of losing all the things in life you enjoy like going out, buying new things or even buying the things you want at the grocery store. I will say the best part of home ownership is the pride and sense of freedom. You can (within reason) do what you want to your house and backyard when you feel like it.
Regardless of when anyone buys a house they generally won't have appreciable equity for X years. If folks are in the market to buy a house, chances are prices and loan deals will be better now than in the future.
Dude.... Buying a house is NOT a good idea for you right now. This is not an insult (nothing wrong with renting), just a fact. You really should save more money for a down payment and then buy something BELOW what you get approved for. If you have a kid on the way and need more room, why not RENT a house? You get all the pros of living in a house without any of the risk.
I concur with this. Can you earn equity by owning rather than renting? Of course, but as mentioned, it is a long process. Short of the type of quick appreciation in real estate seen in the late 90's and early 2000's, and even more in the California's, Florida's, etc. of the world, earning into equity will take a while. But the hidden costs are the big items. Fact is that your hot water heater will need to be replaced, eventually. Your A/C unit. Trees will need to be trimmed. Fences will rot. Garage doors will break. Don't forget homeowners insurance costs. Etc., Etc. The easy counter-argument is, THEORETICALLY, you are paying for all of these costs when you rent to...they are just rolled into your monthly rent. And that is, inherently, true. Though consider, especially in larger apartment complexes, there are significant economies of scale to the owner of those complexes that keep costs, to the individual renter, down. On an apples to apples basis, then, yes, how ownership makes sense. Just be sure you are comparing your current rent on an apples to apples basis to expected expenses with home ownership. You can not just say my rent is $Y, my mortgage will be $X...does the difference make sense.
Start listening to Dave Ramsey (950AM 1-4pm or podcasts on his website) and/or go buy his book "Total Money Makeover". You shouldn't buy a house unless you have all other debts paid off (including the car, preferably), and can sign a 15 year mortgage instead of 30 with it being less than a third of your take-home pay. I think he actually recommends 25% or less of take-home but I can't remember. If your apartment is half of your take-home you might seriously want to consider finding a cheaper place and not even think about buying a house.
Welcome to 2005, peak of the housing bubble thinking. Never buy anything for the purpose of tax writeoffs. Further renting is a savings of $8500 in the name of interest and taxes vs a cash value tax write off of maybe $2000. Housing prices are very localized. When it comes down to it, if you need to bail out on the house in a couple years, can you sell it w/out a loss. Houses are NOT an asset, regardless of who tries to push that thinking. If anything, the housing crisis has proved that. Assets put money in your pocket, liabilities take money out of your pocket.
Houses are certainly assets. Assets can make or lose money/value. You can't say renting is a savings in the name of interest and taxes because you are paying that when you rent, you just aren't getting the principal like you would with paying a mortgage.
I disagree with this to an extent. Houses CAN be an asset if you are smart about it, purchase in a good area, don't over-extend or buy something too expensive, etc. My wife and I purchased our first home in 2003 and have sold and purchased again in 2007. We have done extremely well on our homes, have added up tons of equity, etc. We were smart about it. We've got about $300K in equity in our house over the last 6-7 years, even in this market/recession. This is in Houston, where we didn't see huge jumps in prices, etc. If we had been renting during this period, we would have nothing to show for it. Of course, we could have overpaid in a "hot" area, and be stuck under-water, but we didn't. We purchased lower priced homes in more expesive neighborhoods that appreciated slightly over time, while at the same time, paying down lots of the debt.
This is the truth. I myself, before dave ramsey was taught this by my parents. 25% of take home is what he should look at when he is ready to buy and really it should be based on 1 income. That way if something does happen, you will be in great shape. I've been hading out the total money makeover as gifts and its surprising the feedback i get. Its really a life changer to people.
Most definitely, but as I mentioned above, the key is to make an apples to apples comparison. You can't just say: I'm paying rent of $1,500 a month I'd be paying mortgage of $1,500 a month Owning seems to make sense. There's a lot more math to it then that. Even if the mortgage includes your taxes and insurance, there are a lot of "hidden" costs with home ownership, or alternatively "hidden" benefits you get when renting, that need to be factored in. Just as deducting interest expense/property taxes from your taxes need to be considered as positives to home ownership. House are clearly assets, which could and should generate return. Nonetheless, I think it a stretch to say that the majority of homeowners are so because of the yield they could return on the investment. Rather, the decision process typically is, do I need to own a home rather than rent (be it for more space, land, independence, family needs, location, etc.), and then if so, how much to spend, in what location, on what type of property, etc., etc. in order to maximize return on the asset. Does the OP need to own a home? Perhaps...but it sounds like no. His wife is already against it. Moreover, he doesn't appear to be in the ideal financial position to do so anyway.
My house I bought in the 90's that I currently rent out is not an asset? Hmmmm, the house has over doubled in value and I currently get much more in rent than I pay in insurance, taxes and loan payment. I guess my definition of an asset is different than yours.
Hmmm. Every homeowner I know has HOA fees. Granted, they vary a LOT. Ours are less than $300/year, but I know some who are paying 4 figures, which is outrageous to me.
we're not talking about renting out property. We are talking about buying and living in a home. Your rental property is of course an asset. Keeping object ownership(cars, electronics, your homestead) and assets in separate categories keeps your net worth in check.
The apartment I had for the last three years, right across the street from work and near two fancy-pants shopping centers and a tennis club, was $850, then $825 plus gas and fees, then $969 with all those same fees. "That's market value," is all they have to tell you. This is a one-bedroom in Omaha, NE. The one bedroom condo I'm closing on in December, 4 miles away, will be cheaper than any thing I've lived in for the last seven years, ~$568 a month (after PMI, insurance and taxes) till 2039. No overhead or leasing reps, building supers or incompetent property managers' salaries to take care of. The only problem is about $6,000 or so in closing costs, although my broker was able to get the seller to pay $3700: 6% cap of purchase price with FHA financing. After not reading the fine print on a bad payday loan ($90 refinancing fee every pay period unless you request, in writing, to pay back the original $300 loan) and getting rental furniture for my first nine months on my own, renting an apartment; for the last three years, at least, seems to have been my worst financial decision.
I don't have HOA fees. They are common in new suburban communities, but plenty of people don't have them. I refuse to live where there is an HOA. Its nice that it helps keep the neighborhood at a higher standard, but often times it goes overboard in restrictions it places upon the homeowners. For example my mother can't put up a shed in her neighborhood. One neighbor built one back in the woods where it was almost impossible to notice, and the HOA made him take it down, and we are talking about a very nice wooden shed. My brother is only permitted a specific time he can have his trash can by the road. I thought they should at least give you 24hrs, but they don't. They also fined him for his kids drawing on the driveway with sidewalk chalk.
My house payment went up $50 due to an increase in property taxes, and obviously insurance would be the same way. So it still happens sometimes.
