Author Topic: To Buy or Not to Buy - a house in this case  (Read 2887 times)

mustacheme

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To Buy or Not to Buy - a house in this case
« on: May 22, 2013, 04:37:59 PM »
Here's the dilemma. My boyfriend and I are considering purchasing a house. We currently live in a condo that I purchased prior to us meeting (about 7 years ago). We have been discussing the idea of buying a house, preferably a short-sale or foreclosure, that needs work. Our thought is that since interest rates and housing prices are low, we could buy a house and fix it up while living in the condo and then sell the condo and move into the house once it was finished.

We could buy the house under just his name or jointly, and would buy in a price range that we could afford to make payment on both the condo and the house. However, the big catch is that I owe more than the condo is currently worth. The market has come back up some in our area, but I'm still about $15k away from being even.

On one hand we don't want to miss out on the chance to get low interest rates and a good price on a house. On the other hand, we are sort of assuming that by the time we're ready to move into the new house (we figure a 9-12 mo time frame for searching and fixing) we would be at a point (due to principal payments and a hopefully rising housing market) to sell the condo for at least even.

Is buying a house a good idea, or do we need to just cool our jets and be patient?

chucklesmcgee

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Re: To Buy or Not to Buy - a house in this case
« Reply #1 on: May 22, 2013, 05:33:29 PM »
If you could provide some more financial background that would be helpful. Income, location, assets, current payments, etc.

My initial hypothesis is no. The only factors you mention in moving now are low interest rates and a good price on the house.  Is this it? Because that means we're jut considering whether or not this will save you money long term. The Federal Reserve has continued to indicate that it will keep interest rates as low as possible for the near future, probably for at least 2 years or so.

Getting a good price of the house, what rate do you expect housing prices to increase in your area? Because while prices are rebounding, there's not much evidence it's really skyrocketing. Historically investing your money in stocks should outperform the housing market. Do you think you'll generate greater returns by buying a house now or putting your downpayment money and a year's worth of mortgage payments into the stock markets and then wait a year or two to buy?

As far as you owing more than the condo is worth, I think it's irrelevant if you can continue making payments. You need to avoid the sunk-cost fallacy here.

If you flush out your motivations and situations a little more I think others will better be able to give input.

jamccain

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Re: To Buy or Not to Buy - a house in this case
« Reply #2 on: May 22, 2013, 05:53:14 PM »
The numbers don't matter in this situation...it's a bad idea. 

IT'S A BAD IDEA.

If your BF buys in his name only you are helping him build his wealth, while potentially hurting yours.  If you buy jointly you've just bought a major future headache if the relationship goes south.

Doesn't matter how much you love one another or any of that stuff...just don't do it.  Once you are legally married...maybe. 

Frankies Girl

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Re: To Buy or Not to Buy - a house in this case
« Reply #3 on: May 22, 2013, 06:02:09 PM »
My 2...

If your only real reason to purchase a new house is to get a bargain, then I'd hold off.

I agree without further information, it's really difficult to say it's a good idea.

Is there a problem with the condo? Too crowded, bad location, etc... that makes you want to move? If it's working fine for you, then I don't see jumping into another mortgage solely based off of home sales/mortgage rates. Even doing lots of the fixing up on a fixer-upper, you'll be paying two mortgages, two insurance policies/taxes, materials and time to make repairs.... for something like a year by your estimation.

Something else to throw in the mix: You're not married, so purchasing a property together could be a mess if something happens down the road. Definitely you'd not want it in his name only, if you both would be putting money into the mortgage, then you both should be on the title. If you're not contributing equal portions, then a contract should be drawn up to make sure you both are protected for the share you would each contribute, and plans for selling or who buys who out in the event of a break up.


mustacheme

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Re: To Buy or Not to Buy - a house in this case
« Reply #4 on: May 23, 2013, 09:59:50 AM »
Thank you all for your feedback.
There is no major reason we would have to leave my condo. It is in an ok location and there are no real issues with it. I think our only real motivation is the ones I listed, and that we just want to have a house with a yard and to move to a quieter area of town. From what I've been able to find online, housing prices in the area are expected to go up 3-6% over the next year depending on neighborhood.

I think I just needed confirmation really, that I am probably chasing a want rather than an actual smart financial decision.
In other words, I need to get some patience.

SunshineGirl

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Re: To Buy or Not to Buy - a house in this case
« Reply #5 on: May 23, 2013, 10:06:09 AM »
Yes, patience!