Opinions on Northern Virginia and housing "rules" (Fredericksburg: apartment, for rent)

[jillabean]

I am buying a house here and putting 20% down--as we all know, no matter what the home, in NoVa that's a lot of money and it wasn't easy to gather it all.

Anyway, I was on financial forum and contemplated putting 15% down instead of 20% so as not to use up all my cash reserves and asked for opinions (mainly about the PMI I would have to pay since my interest rate would be the same).

There were exceptions, but I was pretty much chewed out for asking to have things "handed to me" and that I should put 20% or more down! That I was irresponsible, etc, etc, for even contemplating such a thing. That I (personally from the sound of it) was the cause of the whole housing collapse. And to top it off, they even scolded me for paying as much as I do in rent because it's more slightly more than 25% of my take home income (ironically, a mortgage payment with 20% down, for me, ends up being less than my current rent).

Anyway, it kind of bugged me. But then again, I wondered if the people "scolding me" had any appreciation for the fact that my down payment here is more than a lot of houses cost in other parts of the county. Are they even in the same reality as we are here in NoVa as it were? I just envision some guy in a $120k house in the Midwest (which would sell for $500k here) wagging his finger at me because I *only* saved $88k for a house when he probably only put up $24k for his.

What are your thought on "housing rules" and how they apply or don't apply to the NoVa housing market? Should I even bother asking for tips or advice from the rest of the county? I think, except for other markets like ours, that we are playing by a different set of rules here.

[saganista]

99% of people are lucky to have as much as a clueless notion of what happened to the housing market and who the players who brought all this about actually were. Don't pay the slightest bit of attention to their silly musings and rantings. There is absolutely nothing wrong with arranging the purchase of a home on terms that you find most favorable to you. It is often worthwhile to come in under a 20% down payment and pick up the PMI if that option is available to you, particularly if prepayment without penalty is allowed as it usually is. Don't let goofballs tell you differently.

As for the area, both the jobs and housing markets are different here from many other areas in the country, as of course is the overall cost of living. We play with different sets of numbers here but the principles of what one can afford and what sort of commitment to a mortgage one can sensibly make don't change much just because the numbers are larger or smaller.

[phrekyos]

Those people who scolded you must not live in NoVA or anywhere else expensive. Rent less than 25% of your take-home pay? If I had to find a place for that much, I'd either be living in a hole, living with a gaggle of roommates, living a gajillion miles from work with an excruciating commute, or some combination thereof.

[CaliTerp07]

Yeah, i've stopped looking at the "rules" I've found online. They just don't make sense for our budget, our income, our housing, etc. I think you just adjust your budget here. We pay more for housing, but we don't eat out as much or drive brand new cars, so it balances out.

DH and I make darn good money, but even so we barely come in under that 25% figure, and heaven knows we aren't living the high life with our housing situation! I guess we could down size to a 1 bedroom apartment to save a couple hundred a month, but when I look at the big picture, $2-3k/year isn't worth the headache of living in a tiny apartment.

[NOVA_almost_native]

jillabean, I would simply ignore those posters. I would guess that most people, even those living in inexpensive markets, do not put 20 percent down unless they have equity from a property they're selling. You should be very proud of yourself for saving 20 percent! We will be lucky to put down 15 percent when we buy. I'm not willing to wait several more years (I've already been waiting and saving for years) to save enough to meet some magic target.

And no, I do not think that those "rules" apply in an expensive market like this one, and I think many people, regardless of where they live, ignore them. If they were widely followed, wouldn't people have more cash savings? (According to an NYT series on debt, the average American household saved just $392/year in 2008!)

[bmwguydc]

If the advice is not coming from DC, NYC, San Francisco, LA, Orange County, or San Diego, then it is difficult for people to fathom housing expenses in this area. While other cities do have houses in the same price categories, it's not the same number of properties that represent that part of the market.

The 25% rule for rent of take home pay may work in other areas, but in this area it might not for many. If you have a hypothetical $100k in income, for example, using 25% of NET pay, the hypothetical tenant should pay around $1400-$1500/month, which doesn't get much in this area.

People are quick to judge you as wanting things handed to you when $500k is not going to put you in the lap of luxury. I think you are being reasonable and responsible, so if you can pay the PMI in your budget, and want to keep cash reserves, I would do so. You know your own comfort level; and, when you own a house there are emergencies where it is handy to have cash on hand.

[CAVA1990]

With mortgage interest rates so low and with the interest deduction I think it's crazy to put down more than you have to. Better to have that extra cash to pay off or prevent higher interest, non-deductible credit card balances.

[michgc]

I agree with everyone else. The realities in the market here are quite different than in say Wichita, Kansas. You are putting a lot down regardless. If you have saved up that much money, then I'd say you are pretty responsible with money and unlikely to default. The job market is strong here, so you'd likely find another job if you lost yours. If you only put down 15% then you still have the other 5%. It's not like you only scrounged up 15% and you would be barely scraping by with the mortgage payments.

One problem with getting financial advice online is that people only know one part of your story. Unless someone knows your whole financial picture, it's hard to give good advice. Having said all that, I'd evaluate carefully whether it's worth paying PMI and having that extra 5% in your pocket (for emergencies) or whether it's best to lower your payment and not have extra money available.

[djmont]

When you're getting free advice from random strangers, it's worth every penny you pay for it.

[roninsedge]

I totally agree with everyone else. Those people have no idea what it is like living around here, but can you imagine what it would be like if we did stick to those "rules"? I'd probably have to live past Fredericksburg or somewhere in secessionist West Virginia and still commute to DC.