Talk me out of buying a home.

In My Humble Opinion
1

I’ve always been very pro-rent until recently. I figured that buying a house is almost always a losing proposition. What if I lose my job and get foreclosed? What if I decide to sell and it appraises at way less than I bought it for? What if wind damage causes my garage to collapse onto my car? What if I’m having a bad month financially and don’t have five grand to spare when the water heater suddenly decides to take a crap? It’s been nice being able to call someone else to fix all problems for free when they arise. Besides, my credit isn’t stellar as I’ve paid cash for almost everything my whole life (I don’t trust myself with debt), so there’s no way I could convince a bank to give me a loan, right?

So about a month or two ago, I woke up one morning and realized that I’ve been throwing money out the window for years. If I’m going to be paying over a thousand a month for rent, I might as well be able to call what I’m paying for “mine.” The market has pretty much bottomed out and home prices will probably go back up in the next decade or so. Besides, I could lock in one of the lowest rates in history if I act right now. If that water heater does take a crap and I’m low on cash, I could take out a home equity loan in the short term to cover it.

So I’m pretty much convinced at this point and have started the process. I’ve been qualified for a much bigger loan than I anticipated. As it turns out, if you don’t have much debt, you can afford a bigger payment.

There’s only one thing stopping me: I’m 32 and only a couple of years off from getting my bachelor’s. It’s been a longtime goal of mine to move overseas after I graduate, and I feel like I’ll be tied down by the house, especially if I can’t find a renter or buyer immediately.

I could care less about the so-called American dream. I’d like to have a space that I can remodel as I see fit. I want a lawn with a shed on it. And the equity ain’t bad, either. Has anyone been in this situation? What have you done? I feel that if I really want to move away, I should really avoid purchases like this, right?

2

Handling the odd garage collapse or boiler explosion is what a good homeowner’s insurance policy is for. They’re actually pretty cheap; mine is just a couple hundred bucks a year, though that’s for an apartment. A detached house will cost more.

But a home really is a long term investment. If you’re planning on moving overseas in just two years, it may not be worth the hassle. Buying does take a lot of work - getting financing, dealing with the sellers, dealing with property tax, insurance, maintenance, HOA fees (if it’s in a HOA) and whatnot.

If you’re in it for the long haul, fine, but you’ll have to think a lot about whether you’re willing to do a mountain of paperwork twice (once to buy, once to sell) or to maintain all that stuff from afar if you rent the place.

3

Now is the time to buy. Make a low-ball offer; it will probably get accepted.

Do NOT over borrow! Even if you qualify for more, buy below your means. Get a mortgage that is several hundred per month less than you can afford, and put the extra into a maintenance fund.

Make sure you have enough cash in reserve for emergencies. Find a good handyman if you like calling people to fix things (Angie’s List or Yelp can help out here).

The whole “moving overseas” issue can be troubling. Research the rental market in your area. If you can easily find a renter, no problem. You might also look into property managers to handle issues while you are off the continent. Do not buy a house if you plan to turn around and sell it in less than five years; the transaction costs will more than cancel out any appreciation you might have earned.

Good luck!

4

This 100%. When we bought our first home I foolishly thought the bank knew what they were doing. We bought a brand new home and spent what they preapproved us for. Luckily it took a year til it was completed and in that time both of us changed jobs so our family income increased by almost 30k/yr. It was still tighter than I would have liked for the first couple years.

5

I’ll third this. Realtors (and others) are fond of saying you should buy as much house as you possibly can. That would seem to be a factor in the current mortagage disaster. You have to have monthly payments you can afford, and be able to put a couple of payments in the bank to account for temporary financial problems. I’d always recommend buying,* if you can afford it*.

6

Fourth not over-borrowing. Depending where you live, there’s probably a pretty good inventory of very cheap (compared to, say, 5 or ten years ago) homes. If you have the time and inclination, consider a house that is sound but could use some cosmetic work or upgrades, over a showroom-perfect house.

If you’re thrifty and purchase an easily-rentable, modest house, it can be rented out if you decide to leave the country.

Five grand is one expensive water heater! Get to know a good handyperson, it will save you a bundle over the years. My last H20 heater was under $300, and about $150 to replace. Insurance will pay for your garage roof, after a $500 or so deductible.

7

A better idea of what you can afford for a mortgage is one-third of your gross income (for payment and taxes).

I think the only real factor to keep you from a buying a house now is like others have said - if you’re going to leave soon, you’ll need to sell or rent it. I don’t know if you’re single or not, but if you had a roommate in your house that you could leave in charge of it while you’re gone, that could work out nicely. How long would you be gone for? If it’s longer than, say, six months, I’d say don’t buy.

8

I missed that the moving overseas bit might be for long-term or forever. Renting can be iffy - especially since you’d probably want to use a property-management company to handle it, which will cut into any monthly income. And, you want to be able to rent it for enough to more than cover the mortgage, I would imagine. I own two houses now - live in one and rent the other out - but I live near my rental and have been very lucky to get a no-hassle long-term renter.

I’m a huge advocate of buying rather than renting, BUT if you think you might be leaving the continent for an unspecified period of time in two years, IMHO you want to be absoluely sure you can make the renting option work long-term.

9

And perhaps if you will not be around for a while, you’d prefer to invest in land that you could build a home on someday.

10

I, too, was a long time renter. Never, ever wanted my own house–the idea of being able to call a landlord when the water heater blew up, or the roof leaked, or an appliance needed to be replaced is what I wanted. I didn’t want to be “locked” into a place. What if I lost my job? What if the taxes increased? What if I decided I wanted to move to Texas or North Carolina? What if I met someone, fell madly in love and wanted to move in with him? I could think of 101 reason why I was going to rent and never buy a house.

Buying a house was not for me–no way, no how did I want that type of responsibility, until one day, I wanted my own space, my own yard, my own property to do with whatever I wanted. Chop down a tree? Remove a kitchen cabinet, paint a bedroom? I wanted to be able to do that and more if I wanted to do so, and without anyone throwing a fit.

I went through the process of looking for a house after I’d figured out what I wanted and what I didn’t want. Come to find out, that changed a bit when I actually tried to picture myself living in what I thought I wanted, and simply couldn’t do it. Right about the time I was going to give up, I found my house, and I knew it was mine the minute I saw it. I went through the whole loan process, the closing process, the moving process.

And what I learned through that process is I can always sell my house if I want. Or, I can live here for as long as I want. And, I can chop down a tree in my yard, remove a kitchen cabinet in my kitchen, or paint my bedroom (all of which I’ve done in the nearly two years I’ve been here).

Yeah, if you bought a house now, you could be faced with a “what do I do now” if you wanted to travel later or live abroad. But, a lot can change in a few years. You may decide that being a homeowner has taken you by surprise and you simply love having your own place to do with whatever you want to do. It took me by surprise, because even though I decided I wanted my own home, I didn’t realize how much I’d love it once I had it.

11

Why I Am Never Going to Own a Home Again
Why It’s A Terrible Time To Buy An Expensive House

I’m a bit younger than you and, though I could afford to buy a house, I have no desire to right now. Unless the Fed is lying, interest rates will remain low for years. I’m also not worried about housing prices going up any time soon. Hopefully, now that the bubble has burst, housing prices will go back to just keeping up with the rate of inflation like they have historically.

12

Yes, it’s a beautiful thing! I cannot fathom spending over $1,000 a month for nothing more than the right to live somewhere for another 30 days. That seems incomprehensible to me. Then again, I live in an area where real estate is ludicrously cheap - cheaper than renting (I know someone who just bought a house on three city lots for $10, yes, ten dollars) - and renting just seems like an insane waste of money.

13

This cannot be said too many times. I was appalled at how large a payment their software decided I could handle.

Note that little word AND.

How long are you planning to stay overseas? If it’s two years to graduation and a year overseas, I don’t think that the housing market will have started booming by then. You may have missed the very nadir of house values, but you’ll also have missed the hassle of renting or selling. Not to mention that when you return to Lost Jeruselem you may not find work there and have to move to Lost Cairo.

14

It makes no sense to buy a home now if you will need to sell it in two years. Homes are not easy to “flip” now.

15

You can either rent a house to live in, or rent the money to buy a house to live in. Sometimes one makes more financial sense, and sometimes the other does. But if you’re thinking of rent as “throwing money out the window” and you’re not thinking of mortgage interest in the same way, you’re thinking emotionally, not logically.

Sure about that? Robert Shiller doesn’t seem to think so. The Case-Shiller index is still around 150. Long run average is around 110 or 120, which suggests that we could see another 20+% drop in real terms.

You absolutely should not buy a house if you want to move overseas in a few years. If you really are convinced that housing is poised to boom (I’m not), and you want investment exposure to it, buy some REITs. The rule of thumb is don’t buy a house unless you’re planning to stay for at least five years. Personally, I’d plan for longer, but if you want to move in less than five years, don’t buy a house.

You can rent places with lawns and sheds. You can also find landlords who are willing to let you split the costs of some improvements.

Figure out how much 6% of your likely purchase price is. That’s what you’ll pay in commissions on one buy/sell cycle for a house and divide that by the number of months you expect to live in the house. Add that to how much more than your current rent your mortgage interest + property tax + PMI + whatever is. Those are the extra costs of buying a house. How much of a better place could you rent if you spent that much extra per month?

16

I’m 33. The Mrs. and I bought a three bedroom in May after 15+ years of renting.

It’s not just the mortgage you have to worry about. We pay $825 a month total, which is exactly what we used to pay in rent. About $375 goes to the principal, and $150 to interest. $50 for hazard insurance and $150 in property taxes. Another $100 in mortgage insurance.

So, less than half of what we pay is actually building any equity. Sure, that’ll change when we start moving toward the other end of the amortization table, but from a financial stability perspective, we’d be better off renting a cheaper place and socking $375 in a savings account. We don’t currently “own” our house in any meaningful sense.

On that mortgage insurance: unless you have a big pile of cash sitting around for a down payment, you’re going to have to get an FHA loan, and you’ll be required to pay about 0.1% of the principal every month in insurance until you have 20% equity built up.

If you do have a couple ten grand on hand, well, that’s an extremely liquid asset, which would be helpful for things like moving overseas.

While we’re on the topic of money, don’t forget inspection and closing costs, which will probably be in the neighborhood of about three grand for a $100k house.

There’s also all the other shit you’re going to have to buy: a lawnmower, ladders, furniture to fill up all the empty space you suddenly have. Our house was in pristine condition when we moved in, but we spent a good $2k buying all of the tools and crap to do things that the landlord used to take care of. Thanks to the mild winter, I still haven’t gotten around to buying a snow shovel.

Got help you if you want to do any substantial remodeling.

The buying, selling, and borrowing process is a huge fucking hassle, too, and we actually had a great real estate agent who smoothed things over immensely. Still, beginning to end, the process took about four months. Be sure to factor that in on both ends of your expatriation plans.

Don’t forget the psychological component. Those little things that you never pay attention to because they’re the landlord’s problem and you’ll be moving away in a year or two, anyway? The wobbly toilet. The moss growing in that one section of gutter. Raking leaves. The dryer vent that leaks a little bit when it rains. They. Will. Eat. Away. At. You.

Oh, and the neighbors. Renters seem to have an understanding with each other - they all maintain the fiction that they can’t hear the intimate details of eachother’s lives through the paper-thin walls, and maybe give each other a polite nod or “howdy” when they pass in the halls or run in to eachother getting mail, but everybody pretty much minds their own business and respects everyone’s boundaries.

Homeowners are different. They have expectations. The day we moved in, the neighbor on the left asked me when I was going to cut down the (perfectly healthy) maple in the back yard. Day two, the neighbor on the right informed me that our back yard is considered the neighborhood wiffle ball field. He didn’t ask me. He told me. I replied “Well, guess the kids are going to have to go play in the park from now on,” and he got offended.

I don’t regret buying, but it’s been an adjustment, and I’m in a totally different phase of my life than you are. Think long and hard before you do anything.

17

The money I saved by buying a home more than made up for the expenses involved. Now, I own the house free and clear, and only put about $200 a month aside to pay taxes. I also had a ridiculously cheap mortgage that never went above $350 a month (including escrow). That amount made it much easier for me to find jobs I wanted to do without worrying so much about the money.

I got in at a good time with an assumable mortgage. It was 8.5%, but by the time refinancing seemed an option, I was paying off equity and not interest, so I paid less in actual interest than if I refinanced.

18

An excellent reason not to buy. The transaction costs of buying and selling a home are immense. If you buy a $200,000 home, expect to pay between $3000-$6000 in costs (getting your loan, getting inspections, etc.). If you then decide to sell your home 3 years down the line, expect to pay $12,000 in realtor’s commissions. If you wind up selling, those $17,000 in wasted costs won’t even come close to the tiny amount of principal you’ll have paid on your loans.

Bottom line: do not even consider buying a home unless there is a STRONG likelihood that you’ll be in the house for 5 or more years, or you’ll simply be eaten alive by the transaction costs.

19

Jeeze, I would have wanted to know about neighbours like that before I bought - it would have been a deal-breaker. I do expect my neighbours to clean their sidewalks, mow their grass, deal with weeds, keep their houses in proper order, etc. (and I do the same), but I’d never tell them what to do with their own trees or expect access to their yards.

Another thing about buying a house; you don’t have to pay an outrageous amount of interest if you pay your mortgage off early. The way our mortgage is set up, if we went crazy and made all the extra, penalty-free payments we’re allowed, we could have our mortgage paid off in five years.

20

True. Now is a good time to buy- IF you can see yourself living there for 10 years. Op, if you’re moving on in a couple of years, do not buy now.