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Old 04-16-2015, 08:02 AM
 
Location: North Carolina
5 posts, read 3,768 times
Reputation: 10

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If you buy. Buy below your means. Don't buy what the banks tell you your qualified for.
Get a few mentors and rely on their wisdom.
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Old 04-16-2015, 09:07 PM
 
Location: Austin, TX
16,722 posts, read 40,829,423 times
Reputation: 9197
Quote:
Originally Posted by Flux-Capacitor View Post

2. @Austin-Steve At a house of 200K value or higher, I absolutely don't have the funds to fully cover a down payment plus 6 months living expenses.
Again, you should focus on saving and building up a down payment fund and an emergency fund adequate for you to get by for 6 months of living expenses. Until you have that, it would be foolish to borrow money for a downpayment and get yourself into debt up to your eye balls at this stage in your life. Slow down and save, you will be better off in the long run.

Get in debt now as you are considering, and you could easily end up having to default if life dealt you a bad hand, and you would be struggling the rest of your life to overcome the bankruptcy and bad credit ratings that could result.

You have time to do this in a responsible manner, do it. Take your time.
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Old 04-17-2015, 05:44 AM
JH6
 
1,333 posts, read 2,605,069 times
Reputation: 996
Depends what you want.

Two years ago I bought a 2 bedroom 1100 foot house in Round Rock for $122k.

It is like a two bedroom country cottage, about 10 years old.

Taxes are about 2400 per year, insurance is like 650 per year.

All in with insurance and taxes escrowed into the payment, I am at $1019 per month.

We came out of pocket with about $8000 to close on the house.

As rents increase in Austin, my payment will stay fixed (except for rising taxes).

When I get rid of the $130 per month PMI payment as I reach 80% LTV, I will be under $1000 per month for a house on a double lot in round rock.

If I choose to refinance the loan, I could drop it another $100 per month.

Where is the apartment market going to be after all those years? Not sure, but I will have a stable payment.

As for the USDA loans, we looked at that, but the area seems to be shrinking that that is available for, as the area populates.

So the zero down loan can be had in Hutto and parts north of cedar park, if you want to drive that far. The area I own in, we had to pay 3% down on a FHA loan.
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Old 04-17-2015, 07:25 AM
 
Location: Downtown Austin
6,084 posts, read 15,344,202 times
Reputation: 5048
I think the main thing whether renting or buying is to know your exit strategy going in, and what it will cost. Else you get "trapped" in a place, either as renter or owner, which limits your life options.

For renters, the breakout fee is typically going to be 1 to 3 month's rent when all said and done. different leases have different terms, but if you mentally set those funds aside beforehand, you are free to consider opportunities that require relocation and the early termination of a lease agreement.

Likewise, a home can always be sold within 30-90 days, at the right price, but selling typically costs about 10% of the gross sales price in fees, title cost and commission. So it costs $20K to bust out of a $200K house, plus the additional time frame, prep work, etc.

For those who saved and put down 20%, the equity is there to get out from under an owned property, even if it dipped 10% in value after purchase. You're still not trapped. For those who made a low downpayment purchase, then the market flattened or went into a trough, they have to wait until the home appreciates 10% or more before they are at the breakout point. Lately, 10% appreciation might have happened first year, but it typically takes 3-5 years in normal markets.

But renting a home vs apartment can be costly as well if you draw the unlucky card of renting homes that the owner keeps deciding to sell. I rent to people all the time who want a 2 year lease, which I can normally do, because they've had to move 4 years in a row because the owners keep wanting to sell, or move back in. One move can eat a lot into that year's savings because it's expensive to move. That leaves people wanting to avoid that scenario living in apartments where they won't make you move but has other drawbacks.

Frankly, I can see many logistical advantages to kids just living at home and saving until late 20s/early 30s (just DON'T tell my kids or my wife I said that. She would love it. I want them out on their own)

Steve

Last edited by austin-steve; 04-17-2015 at 07:28 AM.. Reason: typo
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Old 04-17-2015, 08:30 AM
 
Location: Round Rock, Texas
10,719 posts, read 10,108,292 times
Reputation: 14181
FWIW, OP, I knew from an early age that I wanted to own my own home. At 21, I bought my first condo in NYC at an unheard of price of $85k. Yes, I had to put down some money and go through the rigorous qualification process, but I honestly think buying the place was one of my better financial decisions. It was a fixer, but it was located in a desirable area. I knew that whenever it was time to sell, I wouldn't have a problem because it was close to parks, the subway, shopping, plus it was large (for NYC standards) at 2 beds/2 baths + den. Yeah, ownership can be tough, especially by yourself. But I haven't looked back. I rented for one year when I moved down here and after that, I've owned. Pride in ownership goes beyond just the ability to choose your own paint colors and "do what you want". I feel a strong connection with the places that I own, vs. rentals.

So, cliff notes version, as a formerly young owner, I encourage young people to own. But be smart about it. No money down new construction homes (unless you really like the area and want to live there) aren't the way to go. Put down something. Also, make sure you choose wisely when it comes to area. It doesn't matter where you'll buy - try to find the place that has some type of desirability. When I lived in Pflugerville, I moved to an area that I knew would experience growth (and thereby increasing value). The toll road had just been built when we moved in, and sure enough, years down the road it ushered in a lot of development. What used to be a neighborhood in the boonies was now in the middle of a thicket of retail, transportation, and other amenities. They just can't build enough in the area now. I now live a little farther north in Round Rock E, and we chose the area because it had things that people do find desirable -- large, wooded lots and non-cookie cutter homes. You have to do your homework because selecting the wrong area can be disastrous if you decide to change your mind. Personally, I never considered buying in an area if I didn't see myself living there for at least five years. I tend to live in my homes for many years so I never really had to worry about exit strategies or hasty selling. Good luck.
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