Buying a Home--What's Smarter? (how much, cost, best, average)

[tiggywink]

Is it smarter to buy a house at the top of your price range if you know you're going to live there a while or at the bottom and trade up later on?
My husband and I are trying to decide.

At the moment I am staying at home with our toddler but will be working when he is in school (3-4 years from now unless we have another child, then it would be 5-6 years from now). My husband's salary is 100K. Mine would be around 70K. (in today's money) We are looking to buy something in the 500K-700K range with a very large down payment (350K).

Is there a rule of thumb?

Thanks in advancefor sharing any advice or experiences you might have.

[plaidmom]

You know what they say about real estate: location location location.

I'm wondering if you'd perhaps get more useful answers if you posted this in the "Real Estate Brokers" forum and stated your desired location? A competent realtor should be able to give you the lowdown on the market in a given area.

[tiggywink]

Oh thank you, I will do that. I didn't see that section!

[mainebrokerman]

Originally Posted by tiggywink

Is it smarter to buy a house at the top of your price range if you know you're going to live there a while or at the bottom and trade up later on?
My husband and I are trying to decide.

At the moment I am staying at home with our toddler but will be working when he is in school (3-4 years from now unless we have another child, then it would be 5-6 years from now). My husband's salary is 100K. Mine would be around 70K. (in today's money) We are looking to buy something in the 500K-700K range with a very large down payment (350K).

Is there a rule of thumb?

Thanks in advancefor sharing any advice or experiences you might have.

first of all, kudos to you for saving up such a large downpayment!

id suggest hitting middle ground, and ask a broker to search with your criteria for a house;

[SouthBayTodd]

i don't think you want such a large down payment...you might be better off putting less down and investing the rest. with that kind of money at stake, you should talk this over with a professional

[Need_affordable_home]

Originally Posted by tiggywink

Is it smarter to buy a house at the top of your price range if you know you're going to live there a while or at the bottom and trade up later on?
My husband and I are trying to decide.

At the moment I am staying at home with our toddler but will be working when he is in school (3-4 years from now unless we have another child, then it would be 5-6 years from now). My husband's salary is 100K. Mine would be around 70K. (in today's money) We are looking to buy something in the 500K-700K range with a very large down payment (350K).

Is there a rule of thumb?

Thanks in advancefor sharing any advice or experiences you might have.

I dont know where you live or where you plan to relocate to. In most locations, house prices are dropping so it would not be wise to buy anywhere near the top, probably you should rent till house prices stop dropping. I would keep investing that $350k you have, you should easily be getting 10% or more in funds. Are houses appreciating at least 10% a year? I am not gonna rent only because where im moving to, houses are way under 6 figures to buy and the mortgage costs half of what rent costs. If I were moving to an expensive location then yes id rent because rent would be half of the mortgage and all the extra money I save would be appreciating in funds far more than houses appreciate(if at all)

[Magnolia Bloom]

Originally Posted by Need_affordable_home

I dont know where you live or where you plan to relocate to. In most locations, house prices are dropping so it would not be wise to buy anywhere near the top, probably you should rent till house prices stop dropping. I would keep investing that $350k you have, you should easily be getting 10% or more in funds. Are houses appreciating at least 10% a year? I am not gonna rent only because where im moving to, houses are way under 6 figures to buy and the mortgage costs half of what rent costs. If I were moving to an expensive location then yes id rent because rent would be half of the mortgage and all the extra money I save would be appreciating in funds far more than houses appreciate(if at all)

Would you provide me with information on what funds are paying a 10% return?

[Need_affordable_home]

Originally Posted by hereinfla

Would you provide me with information on what funds are paying a 10% return?

Not sure if dad wants to share, but then it could be good because if people buy, buy, buy prices will go up, up, up! He has funds that have gone up as much as 50% in one year. He doesnt invest in single stocks because while there is more to gain, there is more to risk. Hes tried single stocks for many years and funds perform better in the long run and never go near zero. 10% gain a year is average, good funds easily go up 15-20%. Once I make money, its getting invested in funds, not real estate.

[SXMGirl]

Don't invest the $350K. At the most, put 20% down to avoid PMI. There are many types of mortgages out there, so find a good mortgage specialist. An experienced realtor can lead you in that direction. Don't purchase the best house in an area. Choose the middle ground. Negotiate well--it's fast becoming a buyer's market.

[MoMark]

Originally Posted by tiggywink

Is it smarter to buy a house at the top of your price range if you know you're going to live there a while or at the bottom and trade up later on?
My husband and I are trying to decide.

At the moment I am staying at home with our toddler but will be working when he is in school (3-4 years from now unless we have another child, then it would be 5-6 years from now). My husband's salary is 100K. Mine would be around 70K. (in today's money) We are looking to buy something in the 500K-700K range with a very large down payment (350K).

Is there a rule of thumb?

Thanks in advancefor sharing any advice or experiences you might have.

Most people will tell you to put 20% or less down and invest the rest, but look at today's stock market. I don't agree that advice is always good. There's more down coming. If you were going to invest it, then I'd pick a safe investment at this point like a U.S. treasury bond or higher return CD's. Housing isn't going up right now and the stock market is too dangerous.
It depends where you are, where the house is, etc. There are a few things I'd do before buying:
-Make sure it's a stable neighborhood. Look up the houses around the one you may want on Zillow.com, not necessarily to see what their current value is zestimated at, but to see the purchase histories of the homes around you. That will help give you an idea of the stability of the area. Purchases made 5 years ago or farther back most likely were not ARMs which means that it's less likely your neighbor's face foreclosure risk (though you can't know if they owe second mortgages, etc.)
-What are the property taxes for your area? In a house in the $700,000 range, you'll want to know how much the property taxes will be because not only is that going to be a hefty annual cost to you (though you'll pay it monthly in your mortgage payment), but it could be a deciding factor to anyone purchasing your home down the road.
-Are prices coming down in that area? Most of the U.S. is facing price declines and the latter part of 2007 will be the real test of how the markets will fair when over $1 Trillion of adjustable rate morgages reset to much higher interest rates. Foreclosures are affecting millions of subprime homeowners now and in Michigan already, they're walking away from their homes. A big wave of foreclosures is coming and no one knows how far it will drag house prices down.
It has now begun to affect middle-risk homeowners whose home loans aren't subprime, but they aren't prime borrowers either. If you see a lot of "For Sale" signs around the neighborhood you want to buy in, I'd be careful and really pay attention. High end borrowers can foreclose too and those foreclosures will pull down the values of all the homes around them.
-Large downpayment. I think it's a good idea because it guarantees you instant 50% or so equity in the house which will more than likely ride out the property downturn and keep you from going underwater in your mortgage.
If you ever go underwater (meaning you owe more on a mortgage than the house is valued at), you won't be able to sell the house without paying the lender the difference between selling price and the amount owed to the lender...meaning it would come out of your pocket.
-If you're going to stay longterm..then put the large downpayment down and try to find a good bargain anyway and get a sharp realtor.