Let's discuss buying houses

[NerdGirl]

Just for you, wryness. Has anyone ever bought a house or a condo? This is something I am planning to do in the next few years. Tell me things.

[mic0]

Yeah, this is a great question! What things did you consider when looking at houses/condos? (After all this flooding, I think I'll consider "am I in a low part of town?")

[thatonemom]

We just bought a house, so here are *things*

I took a first-time homebuyers class (UVU offered one through their community ed) and it was so helpful. It talked a little about the housing market, different types of loans, picking an agent, picking a lender, etc. It also explained mortgage insurance, escrow, homeowners insurance, and everything that makes up a monthly payment. (NerdGirl, you are Canadian, right? I hear the loans and stuff are a little different there)

We asked around for referrals for agents. Our first agent was not a good fit so we switched to someone who specialized in first-time buyers. And she was great. No pressure or anything, even though it took us nearly two months of looking. We looked at so. many. houses. (mostly because we weren't sure what we wanted)

Once you've got an agent they can usually recommend a lender that they like working with. The lender will ask for your tax returns and pay stubs and then give you an idea of what kind of loan you're approved for. It helps to know if you want a conventional loan, or FHA, or whatever. A lot will depend on how much you have for a down payment and what your credit is like. (This was where that homebuying class was really helpful. I didn't know anything about loan options before that)

It helps to know what kind of property you want. Condos & townhomes are nice because there's less maintenance and utilities (and home owner's insurance). Sometimes they offer common areas/work out rooms/pools, too. But there's usually also an HOA. And sometimes those get expensive, or are a mess if they've been mismanaged. It helps to ask around about HOA's for any place you're thinking of buying.

And, that's the super long version. If I can think of anything else that helped get us started I'll add it on.

[Whistler]

I haven't gone through buying a house myself, since I moved in with Acius when we got married, but we're looking into building a home right now. We did look at some houses, and it was completely frustrating. I thought it was clear that I didn't want to look at any houses with a mother-in-law apartment or second kitchen (seriously), but I guess there just weren't any other kinds of houses in the areas we were looking in. Right now we're looking for an architect, so I'm reading up on house plans and stuff, but it seems like that comes with its own set of headaches too.

If you have a good agent they'll be able to guide you through the process... but you have to kind of trust that they're keeping your needs in mind.

[Giovanni Schwartz]

NerdGirl, you are Canadian, right?

I think you meant "NerdGirl, you are Canadian, eh?

[wryness]

I am posting solely to say that I approve of there being an ongoing conversation in this section that is NOT awkward for me to look at. (I get enough of that at lunch, where I am the only guy amongst my coworkers.) That is all I have to contribute.

[NerdGirl]

NerdGirl, you are Canadian, right?

I think you meant "NerdGirl, you are Canadian, eh?

That is exactly what she meant, and yes I am.

That's a really good idea to take a homebuyers class. I'm sure there are some around here. Basically this is the way it's going to go down as far as when I do it - I want to stay in Calgary long-term because I want to work here and I want to teach at the med school here. I would like to do my family medicine residency here, and if I get into the residency program here (which I probably will), then I will start looking for a house next summer. If I end up doing residency elsewhere, then I am going to move back here when I'm done (which will be in 2016) and buy a house then. But honestly, I am paying nearly $1400 in rent right now because rental prices in Calgary are ridiculous, and I have been looking into things a bit and I could get a really nice house with a mortgage payment that is around that same amount (maybe a little more, maybe even a little less depending on the house and the area of the city). It's time. I'm almost 31.

And I've thought about the condo vs not condo thing, and I hate the idea of a HOA telling me what to do. BUT a lot of the time there is better security in condos and townhouses. So I need to keep thinking about that one a bit.

[Dragon Lady]

I have bought a house (built it, actually. Not my self. Paid someone else to build it) and bought a condo. My number one advice is to just hire a realtor. Especially for your first one, don't try to do it yourself. Not unless you have excellent research skills and/or an inside source that can help you out. If you want to do it yourself later, get a good realtor and ask him/her LOTS of questions so you understand everything that's going on.

Other advice… save every penny you can now. The bigger the down payment, the more wonderful your life will be for the next long time. Plus, if your down payment is big enough, you won't have to have mortgage insurance. Which will save you about $50/month. Buy well within your means. Don't look at how much you qualify for; look at how much of a monthly payment you can afford. They generally recommend 1/3 of your income. Get a 15-year loan instead of a 30. Your payments will be higher, but you will save tens of thousands of dollars in the long run. And get out of debt sooner. I paid double on my 30-year condo mortgage for most of my time living there and still paid more in interest than principle. Now I just pay my 15-year mortgage without extra and pay more on principle than interest. It's awesome. Plus, you'll get a lower interest rate on a 15-year than a 30-year. But by all means, do not get an adjustable rate mortgage (ARM). You may get a lower rate, but if you end up staying there longer than your term, your interest rate is most likely going to start jumping like crazy. No good. No good at all.

Other than that, I'm not sure. Do you have specific questions?

Also, NerdGirl, HOAs aren't limited to condos. I'm in an HOA right now in my house. If you build in a neighborhood that shares anything (clubhouse, green space, snow removal, landscaping, etc.) you'll have an HOA. Personally, I dislike HOAs. But I do like the shared amenities. So… it's a toss up.

[Portia]

I'm a bohemian and refuse to get a mortgage. If I save up enough money to buy a house outright, or inherit one from my fairly rich grandma, so be it.

[Dragon Lady]

I considered that, but then I realized how much I'd pay in rent. And how Yellow and I are not handy. At all. So we wouldn't ever buy a cheap fixer-upper, just because we could afford it. So we decided to at least pay rent to ourselves (and a bank). Plus, it would be too hard to live in a tiny apartment with kids, just because we were too (sorry, I'm gonna say it. Don't hate me.) prideful to spend our money on a mortgage, despite having the money to do so.

[Portia]

I considered that, but then I realized how much I'd pay in rent. And how Yellow and I are not handy. At all. So we wouldn't ever buy a cheap fixer-upper, just because we could afford it. So we decided to at least pay rent to ourselves (and a bank). Plus, it would be too hard to live in a tiny apartment with kids, just because we were too (sorry, I'm gonna say it. Don't hate me.) prideful to spend our money on a mortgage, despite having the money to do so.

How is it a pride issue? I'm not offended, I hardly live the husband/kids/upper middle class Utah lifestyle, and in fact, probably try a little too hard to differentiate myself when I'm not that special, let's be honest, but still, my parents took on a mortgage, and my mother detested the house, they always stressed about bills, and then were hit with huge medical expenses. I think there are a lot of assumptions in this response about the value of homeownership and the American Dream ... I'm not trying to stop anyone from buying a house, but I don't think that it's reasonable to pressure others to do so, or question their motives. I simply don't want to be locked into that level of debt.

[Portia]

Utah is also very unusual in having higher rent values than it should, and lower housing prices. Where I live now, that's not necessarily the case. I pay $265 a month for rent. If you can show me a mortgage at that level, then I'll consider it.

[Dragon Lady]

I would consider it pride (and I ask that you not be offended, because that was my dream for awhile, too. I wanted to pay off my condo, save up money, then buy my next house in cash) because after many talks with my father-in-law, who is a financial something-something (is it bad that I don't actually know what my father-in-law does? I know the general idea, but not specifics. Or even a title) he has convinced me that, when done right, it is actually financially better to pay a mortgage than to save and pay in cash. Especially when we bought our house, mortgage rates were way down. (We got ours at 3.25%)

So, a simplified version. We bought at 3.25%. The market has since gone up (and will hopefully continue to do so). But we're locked in at 3.25%. However, now that the market is better, I can invest in safe investments for more than 3.25%. Which means that I can pay my minimum payment, invest any extra money, and come out better financially in the end.

We have some stock in Yellow's last company. At one point we had a pretty great hope of making it big when they went public. My first goal was to pay off my mortgage. Then we could re-invest (or not cash out) the rest to use as savings. Then use our mortgage payment we were no longer making to pay ourselves in more savings/investments and to be more charitable. In my head, that is by far the best investment. But after talking a lot with his father, I'm realizing that it really isn't the best financial option. We still might do it, but at this point it's now deciding which is more important, greater financial stability in the long run or greater peace of mind now.

So I guess I'm saying it's pride because you're putting the clout of saying, "I bought my house in cash" over a better financial option.

Now, I'm not saying you should buy a house right now. Not at all. There's a time and a season for everyone. It's just that you've completely dismissed the option.

Does that make sense? I'm trying to write this between making freezer meals, feeding Niffler Baby cereal and putting her down for a nap, and now needing to go get Dragon Baby from Joy School.

[Whistler]

Well, I think for Portia's situation, it makes a lot more sense to rent. But when your rent starts getting into the $1000 range, it makes a lot more sense to buy a house.

[Portia]

I would consider it pride (and I ask that you not be offended, because that was my dream for awhile, too. I wanted to pay off my condo, save up money, then buy my next house in cash) because after many talks with my father-in-law, who is a financial something-something (is it bad that I don't actually know what my father-in-law does? I know the general idea, but not specifics. Or even a title) he has convinced me that, when done right, it is actually financially better to pay a mortgage than to save and pay in cash. Especially when we bought our house, mortgage rates were way down. (We got ours at 3.25%)

So, a simplified version. We bought at 3.25%. The market has since gone up (and will hopefully continue to do so). But we're locked in at 3.25%. However, now that the market is better, I can invest in safe investments for more than 3.25%. Which means that I can pay my minimum payment, invest any extra money, and come out better financially in the end.

We have some stock in Yellow's last company. At one point we had a pretty great hope of making it big when they went public. My first goal was to pay off my mortgage. Then we could re-invest (or not cash out) the rest to use as savings. Then use our mortgage payment we were no longer making to pay ourselves in more savings/investments and to be more charitable. In my head, that is by far the best investment. But after talking a lot with his father, I'm realizing that it really isn't the best financial option. We still might do it, but at this point it's now deciding which is more important, greater financial stability in the long run or greater peace of mind now.

So I guess I'm saying it's pride because you're putting the clout of saying, "I bought my house in cash" over a better financial option.

Now, I'm not saying you should buy a house right now. Not at all. There's a time and a season for everyone. It's just that you've completely dismissed the option.

Does that make sense? I'm trying to write this between making freezer meals, feeding Niffler Baby cereal and putting her down for a nap, and now needing to go get Dragon Baby from Joy School.

Yes, I think it makes sense. I don't doubt the credentials of Yellow, Sr. But for me, it is definitely not about bragging rights. I know myself, and not having received any kind of financial guidance from my own parents, I am fairly risk-averse when it comes to homeownership. It was similar with college. I could have gone to more exclusive schools, but BYU paid my full tuition, and I think that that was by far the better choice. I just have a hard time believing in "good debt" when the job market sucks this much.

I've done a little investing myself, and I enjoy math and finances, in the abstract. But the thought of chaining my future family to an overhyped job market makes me very, very scared. Look at what happened in the Phoenix area!

If I were a couple rungs higher on the economic ladder, I would probably be singing a different tune. But I feel very precarious. I have thought a lot, a lot, about whether it would be worth it to go into debt for an MBA. And I just don't think I could do it.

But I definitely think you have done the math, figuratively and literally. Both you and Yellow are smarter than the average homebuyer, in my humble opinion. You're better educated, and more mature.

I also would very much like the freedom to travel. I would like to pursue international opportunities. I will have to do more research into the best financial options for such a move.

It would probably not hurt for me to talk to a financial counselor after a year or two of working at this, my first career-level job.

My boyfriend is similarly debt-averse, and I think was freaked out by his own parents' precarious fortunes.

I've never had a credit card, either. I just don't really agree with a lot of our American consumerist values. I ultimately see a house as another purchase. I think the talk of an "investment," while nice in theory, is hard to swallow given the state of the economy. Unemployment for college grads is almost scandalously high. If your job is that precarious, buying a home, even ten years down the road, leads to scary thoughts of foreclosure. :-(

But your story was interesting, and the fact that you have had different housing situations helps. I also would never, ever, ever live on the West Side. So there's the real pridefulness. :P I will freely admit that!

[Dragon Lady]

Oh, absolutely. Like I said, a time and a season. When you're traveling, single, can't afford it, etc., renting is definitely a better option. I think more people should have to, I don't know, take a class or pass a financial maturity test in order to buy a house. It's by far the biggest and scariest thing I've ever done … and then it doesn't come with an owner's manual. Nothing to tell you how to keep your grass green or what to do when the weather changes. You're just expected to know everything. You're expected to have thought about costs of upkeep and decorating. Owning a house is EXPENSIVE. And terrifying, to be honest.

I guess my label of prideful was not on choosing to rent than to own, but rather to make the blanket statement that you would never take out a mortgage. You even said, "If I were a couple rungs higher on the economic ladder, I would probably be singing a different tune." Which makes me think that you don't actually fall under that label. Rather, you're saying, "In my current circumstances I would never…" which I think is actually really wise.

[Marduk]

I think it is important to realize that since the '50's in this country home ownership has been lauded. Because of this, the structures surrounding it, as well as the social status, have been built up. My predilection in general is against home ownership, (I find the model of nuclear families occupying partitioned off quadrants of land not only distasteful, but highly unsustainable) however, I will almost certainly become a home owner at some point. There are too many reasons (low interest rates and government assistance, as DL pointed out, among others. The mortgage interest deduction comes to mind) to choose it over other possible housing arrangements.

[Dragon Lady]

It may be unsustainable in general, but where there is space, I much, much, much prefer it. For many reasons, but these are the main ones: 1) I like to have a big garden. I'm a big proponent of self-sufficiency. I hope to someday have chickens, too. 2) I get claustrophobic when houses are too close together. I grew up on a 240-acre farm where the only fences were for the cows. I'm now on a 1/5 of an acre and so far two of my four yard-touching neighbors have put up a fence. The third (and smallest shared-property line) had a chain link fence up when we first built, so at least there is some breathing space. The fourth really wants to put up a fence. Probably next year. [sigh] It's just so … closed off. And I feel like my neighbors don't have being neighborly as a priority. (I requested we fence in all of our back yards together as one big backyard, but it was nixed. Seriously? Our kids play together All The Time. Now we're going to have to ask for play dates instead of just going out back to play. [sigh] 3) I don't like to share walls/floors/ceilings. Enough said.

[Marduk]

Did you suggest adding gates in those back fences?

[Dragon Lady]

Yup. That got shut down too. "It would only be a few steps more to walk out our gate and into your yard!" Yes… but suddenly it makes it so that we can't just walk into your yard. You have a fence and a gate, so we need permission. Our yard is currently unfenced (we would change that if they wanted a gate in between), so it's an open invitation for your kids to come play. [sigh]