Author Topic: Buying First Home  (Read 2424 times)

soccerchick

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Buying First Home
« on: May 24, 2015, 01:32:35 PM »
First time home buyer here. We are a young 4 person family looking to buy our first home. We have 40k saved/ gift from my parents to put down on a home but our income for the time being is quite low (35,000ish) while I am home with our young kids for a few years. We have 10k in a Vanguard VTSAX, 10k in a 401k, and 3k in an HSA. So not a huge stash. We have good credit--mine is 742, husband's is something similar. We have no debt of any kind.
We live in a small college town/rural pocket of the northeast. So taxes are bad but not as bad as urban areas in the region. Even with taxes, it seems to make sense to own. To give rough numbers, a $100k house might have a ~5ktax burden, but the same house would cost 1200--1400 to rent. The houses we are considering are in the 80k to 120k range. I guess I could go on with random details, but what I am seeking is general advice about how to go about purchasing a home, if it's a good idea to purchase one, what things to look out for, what I might have missed in my calculus, etc. 

forummm

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Re: Buying First Home
« Reply #1 on: May 24, 2015, 01:51:13 PM »
Are you buying a home for financial reasons? The taxes sound very high, but I guess that's what things cost there. It sounds like your total mortgage including taxes and insurance will be about the same as to rent. You'll have to be responsible for upkeep. And it will probably cost you 10% to sell the house. So make sure you're going to stay in that house for at least 5 years.

For a first time buyer, having a realtor seems like a good idea.

waltworks

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Re: Buying First Home
« Reply #2 on: May 24, 2015, 02:21:27 PM »
Go run the numbers on the NYT buy-vs-rent calculator: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

If property taxes are really ~$5k on a $100k house, you are probably better off renting even in the medium (5-10 years) term. But without a bunch of specific numbers it's hard to be sure.

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CashFlowDiaries

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Re: Buying First Home
« Reply #3 on: May 28, 2015, 12:32:44 PM »
It sounds like a good idea to buy a house especially if the rent costs the same.  Its better to have your "rent" money paying off an appreciating asset then to have that money paying off someone else's appreciating asset.


Fatmouse

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Re: Buying First Home
« Reply #4 on: June 06, 2015, 05:40:20 AM »
It sounds like a good idea to buy a house especially if the rent costs the same.  Its better to have your "rent" money paying off an appreciating asset then to have that money paying off someone else's appreciating asset.



The tricky thing there is that not all houses turn out to be appreciating assets.

+1 on the NYT rent versus buy calculator.  It is an amazing tool.  Run lots of different scenarios, and perhaps even run one with flat or negative appreciation on the home value.  I don't want to encourage zero tolerance for risk, but it is valid to ask what declining home value would mean for your family's liquidity and geographic mobility in the medium term, if those are important considerations for you.

Integrate

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Re: Buying First Home
« Reply #5 on: June 06, 2015, 06:43:48 AM »
It sounds like a good idea to buy a house especially if the rent costs the same.  Its better to have your "rent" money paying off an appreciating asset then to have that money paying off someone else's appreciating asset.



The tricky thing there is that not all houses turn out to be appreciating assets.


The thing is, even if they are appreciating assets, there's still a lot more you have to do to decide which is better. Most people forget about the opportunity cost of having that down payment money in the market instead. NYT does consider this, so it's a good place to look.

Even considering that, if Rent = mortgage payment, renting is better. The mortgage payment has to be lower than rent to break even when you consider insurance, property taxes and home maintenance.