Another reason for renting is being highly mobile; yet, another, being Swiss (and it’s not like the Swiss don’t know anything about money). Considering how many people downsize an empty nest or move to sunnier lands upon retirement, “by the time retirement comes, I want to own the house where I live” isn’t necessarily the best motive. My own “retirement home” (which I do own) wasn’t a bad purchase but it’s not going to appreciate by much unless the market changes a lot, because it’s in a tiny village that people simply don’t think of; my “investment purchase” (which has already appreciated by 30% in two years) is the one in Barcelona.
To consider: what exactly do you want from buying? And what exactly do you need, want, absolutely not want, can live with, in your new home? For example, many people think that they would love a garden; I know I like mine cared-for by the city’s government. Schools aren’t important for you now, but access to decent schools might be important in the future. And so forth.
One thing I have not seen mentioned in the thread yet (though it is chock full of good advice) is to ask yourself, how am I going to be able to sell this proposed property in the future? I.e., how are the schools, is the neighborhood on the rise or declining, is this a type of property that is easy to sell (SFA vs Condo vs Time-share). You want something that you’re going to be able to resell in the future, assuming you don’t think you’re going to die owning this property.
Another thing is that, while there are such things as buyer’s agents, the realtor is only going to get paid on a sale. Consequently, you might find yourself feeling pushed into a property by someone you may have thought you were paying to give unbiased advice.
Stuff already mentioned, but worth reiterating: Shop around for financing. Your credit union is a great place to start, and interest rates are quite low. Figure out how much you realistically can spend. Include a budget for maintenance. Being house-poor sucks. Consider potential disasters in choosing your property. Perhaps I’m sensitive, living in seemingly the flood capital of the US, but flood plain maps aren’t definitive, and often should’ve been expanded.
I live in a townhouse and my HOA is just fine. Monthly assessment is low ($128) and has only gone up about $10 in the 15 years I’ve lived here. The HOA has over $200K in reserves. All roofs were replaced without an additional assessment. The landscaping and snow removal are good. We don’t have fancy stuff like a pool or a clubhouse. If you go the condo/townhouse route, be sure to check out the rules and regs before you buy.
You can start looking at what’s available in your area by going on any of the real estate websites that show homes for sale. Zillow.com is a popular one. Homes typically have lots of pictures and you can get a very good feel of what kind of house is available for your price range. Drive by houses you like to see what they look like in person. Look for open houses, which is where the house is open for browsing during certain hours.
A simple way to figure your price range is that every $100,000 of loan value will be about $1000 in total mortgage payment. The mortgage payment is more than just the loan repayment. In addition to the loan itself, it also includes escrow (payments for home insurance/taxes) and possibly loan insurance. You should plan on having about 10-20% of the home price to pay for the down payment. That will vary depending on your mortgage requirements.
But I’d also point out… you made a profit of US $110,000 in 20 years. In my area, I’d pay that much in property tax in 20 years. I would pay that much in upkeep and renovations over 20 years.
It’s a good point that you’ll eventually own the home outright, but a home mortgage is really just an enforced savings vehicle.
Just want to add in here re realtors: most realtors are working for the seller, not for the buyer. If you want the realtor to be working primarily for you, make sure that it’s clear you’re looking for a buyer’s agent – and note that you’ll in that case be the one paying the realtor.
Lighten up, it’s hyperbole informed by the lived experience of myself and people I know. Which is - HOA are often underfunded and mismanaged. They often don’t perform agreed-upon maintenance, but are fairly controlling on what they expect homeowners to do.
HOA should be scrutinized carefully in any buying situation, understanding that many of them do not perform to expectations.
Start by asking yourself: where do I want to live, how do I want to live, how much can I afford, and how much do I want to spend?
Where: Close to work? Near recreation? Near relatives? City? Country? Suburbs?
How: Do you want a perfect house that you just move into and enjoy? A house you can renovate to your tastes? Can you do renovation work yourself? Can you afford to pay contractors to do it all for you? Do you want a single family with a big yard for gardening? Do you want a condo so you have less to worry about when you travel? Or one that’s close to urban amenities? Maybe a townhouse so you don’t have to take care of the yard? A place where you can entertain friends? A place big enough for relatives to stay in? An exercise room?
Afford: Your credit union can help with this. It’s a good idea to prequalify for a mortgage before you start making offers.
Want to spend: Obviously, this should be lower than the number above. If it isn’t, save more, earn more, and try again later.
I agree with those suggesting that you go to open houses and check listings online. Once you have some idea what you’re interested in and what the market is like, find a good real estate agent. Ask people you know who recently bought for recommendations.
With interest rates where they are today, every $100,000 of loan value adds only about $550 to a loan payment, assuming a 30-year fixed rate mortgage at 3.875% and property taxes at about 1% of the purchase cost. Your mileage may vary, particularly if property taxes are higher in your area. There are calculators online that will give exact calculations to the penny, and the OP can check those out. Bankrate.com is a good source for current mortgage interest rates.
Major motive: my rent keeps going up, and I’ve been told that a mortgage might be financially better in the medium to long term. I remember all the radio ads for mortgage companies before 2008, so I know renting isn’t necessarily “a waste of money,” but if I can eventually get some kind of “savings,” it’d be worth it to me. I know I may end up spending it on other things like maintenance, so even roughly equal would help; at least then I’d have something to show for it.
I don’t care about yards, I’m not handy (right now), and as I said in my OP, I like the area I’m in right now. I’d love to live closer to work, but the closer you get to it, the more expensive things get, since it’s a hot high-money employment area, and I’m a little afraid that waiting will either boost my rent a lot, boost prices a lot, or both, even in my neck of the woods. If I do this, I’d prefer not having to move further away.
One aspect I found to be true in the past with buying a home is that once you set up a flat rate mortgage, your monthly cost is essentially fixed. So, even though rents might seem comparable today, down the road you will be paying the same and rents will have risen. Yes, taxes and insurance costs will tick up over time, but I haven’t found them to go up like rents do. So, ten years from now you may/will feel like your monthly is a bargain.
I’ve twice used a buyer’s agent in buying a home and they’ve been paid the standard 3% commission by the seller. Other than a thank you gift I haven’t paid anything directly.
We tried to buy in Oregon. We were preapproved for the mortgage, but couldn’t get a realtor that would work with us on a house that was less than $300,000 since the market was one fire then. I had to update my preapproval each 90 days, and did this throughout the two years we were looking for a realtor. We almost bought a place by owner during the time, but a guy swooped in with a cash offer and we lost out.
When we finally got a realtor, our preapproval was revoked a couple of weeks later because I turned 35 at the time, and they didn’t want to lend to me when they thought I would be retired and still making the payment. We were then on the hunt for another lender, which the realtor promised wouldn’t be a big deal because our debt to income was fine and our credit was fine.
We never found a lender. The purchase price of the homes we were looking at were all sub $300k, and the lenders would either slow roll our application or flat out tell us and the realtor that they weren’t currently doing loans below $290 or $300k. After 6 months, we gave up. Each one of these bastards ran our credit each time, and by the time we quit looking, our score had dropped 150 points. We were still approvable through the credit score hits for the inquiries, but we gave up when we couldn’t find a lender. Even our bank and credit union (we had both at the time) weren’t a lot of help.
I hope the market is better where you are. We gave up on the state once our landlord sold the house to the SAME fucking broker our realtor was working with, making us homeless.
Mortgages come in different lengths. The standard is 30, but there are also 20, 15, and 10 year mortgages. Keep in mind that the shorter the mortgage, the higher the payment. But overall, the shorter the mortgage, the less you’ll spend in total for the house.
It depends. Notice the slow roll I went through… On paper, they never told me ,“You are now 35 with no prior equity therefore you don’t qualify anymore” but they did over the phone. They suggested trying with another lender, and so did the next one, and the next one… Your application might be in “processing hell” never to come out. I don’t think this happens in Oregon as much today, that sweet teat of California cash is fading from what I hear from friends still there.
If it was Splendora, Texas where I was trying to buy the lender would have driven out to my house with a bottle of wine and a massage table to get the deal to go through. Beaverton, Oregon? Oh hell no.
Maintenance on a fairly new townhouse shouldn’t be much of a problem. And remember, renters pay maintenance and property taxes too - this is just hidden in the rent.
I’m not sure this is a good time to buy, but if you hold onto your job and hold onto the house you’ll be fine. The value of my house has fallen about $200k from its high, but it is still worth 4x what we bought it for 23 years ago. We paid off the mortgage since we lost the tax break with the new tax law, but our mortgage at the end was like 1/3 of what the rental price would be. You’re right - rents rise over time, while mortgages don’t.
Rent increases year over year, whereas your mortgage probably will not. So that’s a good reason to get a house.
Mortgage prices tend to be higher per month than rent, with the benefit that you will have much lower prices after you have finished (hopefully by the time you retire!) You have to do an analysis on that, and it probably depends on the local area, and on what interest rates will be like twenty years from now.
Some people love equity. I see little point to this. The house is not an income-producing asset (unless you rent part of it out). I rent and invest the (extra) money that I could have spent on a mortgage. Of course, only some renters do this, so people will often say renters can’t or won’t do this.
Are you married, with children? I see little point of buying a house if you’re single, with no children. Furthermore a married couple (where both are working) has a far more stable income stream, which is a big deal when your monthly expenses would be higher. Despite being full-time and permanent, your organization might go out of business (unless it’s the government or something really big and stable) and there’s a slight risk of getting fired. This is not a reason not to buy a house, but a reason to note that one income is less stable than two incomes.
I think the townhouse is a better idea than a condo. Condos come with condo fees that can suddenly rise (where I live, condo fees are higher than my cheap rent, before you even touch a mortgage, and there’s no “rent control” on condo fees). I hear horror stories of condo associations, and (if you care about equity) most of the equity is really in the land, not the house (or sky box) itself. Of course, condos are popular where I live, a big city, because land is in short supply.