Buying vs. Renting for young professionals in DC area (Rockville: real estate, apartments)

[superseiyan]

Moderator, I don't know if this is on topic, but I'm relating it to the DC Area.

As someone in my late-20s I'm at the age where I get subtle and sometimes not so subtle pressure from many to "just get a mortgage". I'm at the "Stage where I should be buying a house for my future".

What I wonder is, that is always based on what I'm paying for rent at a 2BDR apartment (currently $1400, soon to be $1600). I'm told that's a mortgage.

However, i thought to get a mortgage you need:
1. A proper downpayment.*
2. There are annual property taxes.
3. Association fees
4. Utility bills are higher than for apartments.

*Even after the past two years I'm getting advice like, "oh, there's plenty of ways to buy without a downpayment" or "just get a foreclosure, you can get a huge place for really cheap".

Furthermore unlike renting, if you're buying in DC area you REALLY want as nice a place as you can get, so let's say one is planning for five years, for me Rockvill e is probably the sweetspot between quality and affordability, and even then I'm probably looking at a townhome, not a single family house. Can I get anything in DC area that works out to a $1200-$1600 monthly payment?

Now here's my question: Am I being negligent by continuing to rent? I'm getting enough shtick that I'm starting to wonder if I'm doing something weird.

Oh, also probably relevant, I'm about to go to Grad School and yes, part of the price will be getting some loans.

[PBSG]

No. I've bought a house, lived in it, fixed it up and sold it - now I moved to and rent in Rockville. The true cost of a house goes beyond the PITI, and those who say "Just buy" neglect many things. Sure, I'd love to own a bigger and better place but for now renting suits me fine. I don't have credit card debt, my modest car will be paid off this summer and my savings account is growing quite well. When we are ready we will buy, but not now. The "pride of ownership" fades away quickly.

Besides, IF you want to buy this is not the time. Prices will shrink in the DC Metro area.

[The Dissenter]

Originally Posted by superseiyan

Moderator, I don't know if this is on topic, but I'm relating it to the DC Area.

As someone in my late-20s I'm at the age where I get subtle and sometimes not so subtle pressure from many to "just get a mortgage". I'm at the "Stage where I should be buying a house for my future".

What I wonder is, that is always based on what I'm paying for rent at a 2BDR apartment (currently $1400, soon to be $1600). I'm told that's a mortgage.

However, i thought to get a mortgage you need:
1. A proper downpayment.*
2. There are annual property taxes.
3. Association fees
4. Utility bills are higher than for apartments.

*Even after the past two years I'm getting advice like, "oh, there's plenty of ways to buy without a downpayment" or "just get a foreclosure, you can get a huge place for really cheap".

Furthermore unlike renting, if you're buying in DC area you REALLY want as nice a place as you can get, so let's say one is planning for five years, for me Rockvill e is probably the sweetspot between quality and affordability, and even then I'm probably looking at a townhome, not a single family house. Can I get anything in DC area that works out to a $1200-$1600 monthly payment?

Now here's my question: Am I being negligent by continuing to rent? I'm getting enough shtick that I'm starting to wonder if I'm doing something weird.

Oh, also probably relevant, I'm about to go to Grad School and yes, part of the price will be getting some loans.

I (21 years old) would personally not buy unless I was staying put with a family. The main deterrent would be the costs beyond the mortgage. Property taxes are major also. $1600 would probably buy a home that's < $280k and that doesn't buy much there.

At least with renting, if the area goes downhill or property values decrease you can always move.

[Zippy7fo]

It just depends on your personal financial goals. DO NOT LET OTHERS INFLUENCE your decision.

-if you live on the coasts where the cost of living is significantly higher you are better off renting because you can take the excess income that you spend on a mortgage, utilities, insurance, upkeep costs and put it into investment vehicles and get a return much larger than if you owned.

-When you do the calculation for a mortgage and what you spend overtime it is damn near theft but so many people blindly follow it never challenging themselves as to why that is...

-The real key is that you set the plan and follow it...Maybe you move to the midwest or south down the road where housing costs are much lower and it makes more sense to own....

-Look out for cheap foreclosed real estate where you might be able to make a nice steal of a property at a much lower price. If your committed to the area then go for it..if not like most 20 sumthings I would just rent...

-Good read about this very topic on MSN
7 top homebuying myths debunked - MSN Real Estate

[knoxgarden]

Do you really want the responsibility of owning and maintaining a house? You give up a lot of freedom to do that, especially if you have to stretch to afford anything decent.
Do you want to spend your weekends making repairs and fixing stuff? If you buy a place to fix up, it will be years before you can take a vacation and not work on the house. How is your tolerance for clutter and using the bathtub as a kitchen sink?
It costs a lot more to heat/cool a house than an apartment. Budget for it. And for all the stuff you've got to buy like ladders and shovels and rakes and wrenches and such.
At your age, I was renting in DC and enjoyed it. If you want in investment, maybe look at condos or coops in an area you like.

[Mrs. 14th & You]

Before you consider buying, I highly recommend first going to a mortgage calculator such as this one: https://www.wellsfargo.com/mortgage/tools/. Then, go to this NY Times site, Is It Better to Buy or Rent? - Interactive Graphic - NYTimes.com, to see how many years it would take for buying to be better than renting in your circumstances. The results frequently flaunt conventional wisdom that buying is best.

You will be best off with a down payment. Having some money saved up makes it easier to get qualified in this tighter mortgage market. Also, that down payment becomes equity in your home. Should the market drop after you've purchased a home, the down payment is what keeps you from becoming "under water" on your mortgage.

As for "cheap" foreclosures, it's hard for the general public to gain advantage from those foreclosures. If you go to a public auction, where folks find "deals", you need to have your financing for the property already in order. A first-time buyer with little in the way of a down payment will likely have a tough time getting pre-approved for a mortgage on an auction property. If you buy a foreclosed property from a bank, the price will likely be high. Banks are trying to sell the property for the amount the previous owner had outstanding on the mortgage at the time of foreclosure. Since the market is down a lot from its peak, that amount owed on the house is often higher than comparably priced units.

As for price and value, a $1600/month payment will cover a total loan amount of about $200k. It depends on the interest rate you can get with your credit score, whether you want a 15 or 30 yr. loan, tax rates, and your cost of insurance. Your utilities costs will rise slightly if the total square footage of your home increases. You will also need to budget for repairs and damages. As well, you may have condo or homeowners association fees of a few hundred dollars per month. A $1600/month mortgage may mean total monthly housing-related expenditures that are close to $2000/month.

You don't want such a payment to leave you broke either. Once you own, you should have a savings cushion for repairs. If the hot water heater breaks in the middle of winter, you don't want that to be the difference between living comfortably and accruing credit card debt. Also, you want to have enough money in savings after your home purchase to cover 3-6 months of regular expenditures in case you should lose your job or fall ill.

The general rule of thumb is that the upward limit of affordability is spending no more than one third of your gross income minus debt on total housing costs (mortgage, taxes, utilities). However, you also need to consider your individual needs. Perhaps you have high healthcare costs or you need to play "catch up" on your retirement savings. Be realistic about what you need to spend on other things in your life (transportation, food, clothing, savings, etc.) before you commit to spending up to one third on your income on housing.

If it matters, I'm older than you and married, and I'm completely comfortable with continuing to rent for some time to come.

[jayman1981]

Well my friend it's a couple of things that you need to ask yourself. First do you plan on staying in this area for more than 5 years? Can you afford maintenance cost? 1600 around here is P.G. and Charles County prices in MD and possibly Prince William County, Va. The thing with that is often times those places will be far away from your job. So you have to ask yourself whether that's what you want. Another thing is that a house can tie you down. Say if you want to just up and relocate for your job, well you have to worry about the house, and spending money on improvement's in order to sell. Also it requires more money to own vs rent in this area.

Honestly I would continue to rent. Of course if you want a condo then maybe it is possible to have that 1600 figure, but even then that would be a stretch. I would buy when it's time to have a family or when you have at least 50,000 saved to put down. Don't let anyone tell you to become housepoor if your going to incur future debts (Grad School) on top of homeownership. Pay that off first and then look to homeownership in the near future. Your young so don't fret and live your life, but set it up in a way where you comfortable.

Originally Posted by superseiyan

Moderator, I don't know if this is on topic, but I'm relating it to the DC Area.

As someone in my late-20s I'm at the age where I get subtle and sometimes not so subtle pressure from many to "just get a mortgage". I'm at the "Stage where I should be buying a house for my future".

What I wonder is, that is always based on what I'm paying for rent at a 2BDR apartment (currently $1400, soon to be $1600). I'm told that's a mortgage.

However, i thought to get a mortgage you need:
1. A proper downpayment.*
2. There are annual property taxes.
3. Association fees
4. Utility bills are higher than for apartments.

*Even after the past two years I'm getting advice like, "oh, there's plenty of ways to buy without a downpayment" or "just get a foreclosure, you can get a huge place for really cheap".

Furthermore unlike renting, if you're buying in DC area you REALLY want as nice a place as you can get, so let's say one is planning for five years, for me Rockvill e is probably the sweetspot between quality and affordability, and even then I'm probably looking at a townhome, not a single family house. Can I get anything in DC area that works out to a $1200-$1600 monthly payment?

Now here's my question: Am I being negligent by continuing to rent? I'm getting enough shtick that I'm starting to wonder if I'm doing something weird.

Oh, also probably relevant, I'm about to go to Grad School and yes, part of the price will be getting some loans.