It's not just about the money. When should we really buy a house?

January 7, 2007 3:00 PM

How do we figure out whether we're financially and emotionally ready to buy our first home? We have a really good handle on what we can afford, which neighborhoods we like best, what houses are going for. We've read "Home Buying for Dummies." We've saved up an OK chunk of cash. But my husband and I are both worried, and for different reasons.

When we buy a house, my husband and I daydream about living there for 40 years and becoming permanent parts of the community.

My reasons for wanting to buy now:
1. Irrational nesting urge.
2. I know we can afford it, even though it will be tight.
3. The market. Even though our savings will go up if we wait another year, I'm worried it will be harder to find houses we like and can afford in the future because of Portland's restrictive land use laws and continued population growth.
4. Desire for permanence. I've never lived in the same place for more than three years in my entire life, and I'm excited about investing in a house I'd like to make my own and live in until I'm old.

My reasons for not wanting to buy now:
1. Fear of permanence. I've never lived in the same place for more than three years in my entire life, and I don't know if I can handle it.
2. My career. If we buy a house, I have to give up some of my career ambitions, which would almost certainly require several moves to other cities in the next few years.
3. Money. We can afford a 10 percent down payment, we can afford the monthly payments and extra mortgage insurance that will bring. But everyone says 20 percent down payment is the way to go.

My husband's reasons for not wanting to buy now
1. Money. We can afford a 10 percent down payment, we can afford the monthly payments and extra mortgage insurance that will bring. But everyone says 20 percent down payment is the way to go.
2. The market. He hopes it will be easier for us to find a house in our price range if we wait another year, given trends in the national housing market.

My husband's reasons for wanting to buy now.
1. My career. He knew I was a career woman when he married me, and he'll follow me if need be. But he also likes the idea of getting me tied down here, so we can stay in the city we both love and want to grow old in.

Anecdotes, data and advice are all welcome.

posted by croutonsupafreak to home & garden (32 comments total)

Not having a 20% downpayment just means that you have to carry PMI (mortgage insurance). When you've built up enough equity or paid down the mortgage enough, you can call up the mortgage company and ask them to drop the PMI.
posted by Ostara at 3:25 PM on January 7, 2007

My wife and I bought our first house this past summer with a lot of the same fears and emotions involved. I'll just offer a few pieces of general advice since I don't think a whole lot of specific advice will be possible.

1.) you can always sell your house if you need to make a move. Of course it would be crazy to do that from a financial standpoint 9 months down the road, but after 3 to 5 years it may not be that big of a deal.

2.) trying to time the market to get the best possible price may not be the best use of your time. The short term housing market can be funny like that.

3.) Make sure you and your husband are on the same page in regard to what you want to do with the house (decorations, renovations, upkeep, furniture). This will cut down on a lot of potential for disagreements.

Good luck...
posted by mmascolino at 3:26 PM on January 7, 2007

Wait until you have the 20% for the downpayment. Otherwise you will have to pay PMI. And it is a dickens of an effort to get pmi dropped after you have 80% equity. The mortgage holder always find some way to delay giving that break.
posted by JayRwv at 3:32 PM on January 7, 2007

First thoughts:

In your math you should consider the price of life insurance for both of you. Because if, God forbid, either of you dies the other will probably not be able to afford the house payment themselves.

You will also need good health insurance because if you get caught without you could have a bill so high you would have to sell the house to pay it.

Buy a house that you are sure will re-sell easily. For example, I bought a house with a problem neighbor (junk cars) because it was cheap and I am never going to move. It would be hard to sell because of him. If you get a house that you are sure would be easy to sell, and you may have to pay a little extra for that, then there is no reason to think that buying a house will tie you down at all. Find out the history of a house and if it has every been "on the market" for a long time that should be a red flag.

I've also heard from industry folk that the market will be better for buyers in 1 to 2 years.
posted by cda at 3:33 PM on January 7, 2007

Buy it. It's worth it.
posted by Wayman Tisdale at 3:42 PM on January 7, 2007

Weigh the two alternate futures, all things equal, and try to consider which choices you'd feel more regret about.

Four or five of your questions mention investment potential, and no one will know that until the housing demand/supply and the economy plays itself out. The house will maintain its relative worth if it's in a good area, but as an investment, you probably aren't in a position to make assumptions. So I'd treat it as a neutral area and weigh the career/life path issues. This may boil down to whether you want more house later, or less house and more stability now.

My wife and I are in our thirties and have done a mix of buying and renting over the past 10 years... I can say it's been really enlightening.
posted by rolypolyman at 3:45 PM on January 7, 2007

Everything I read lately says it's a buyer's market again. We bought a house the last time this was considered the case in the greater DC area (about 4 1/2 years ago) and have not regretted it one bit.

We did an 80-10-10 loan (so just 10% down, like you mentioned, and no PMI), and have since had a windfall that enabled us to pay off the other '10'. Obviously you should listen to your gut re: the finances - only the two of you together know what's realistic.
posted by ersatzkat at 3:55 PM on January 7, 2007

Yep, it's scary to buy. We bought for the first time 5 years ago with 5% deposit after moving nearly every year all of our lives. Our house value has doubled, and though we're tired of this town, we made a committment to the kids to stay until they finished high school. It's been good to be able to paint and put nails in when i feel like it, and never get inspected by a landlord. It's not been so wonderful having total responsibility for a house (the roofing iron was flapping in a storm, we had no spare cash for a plumber-roofer, and no landlord to ring up and harass).

But, financially, it's been one of the best decisions we've ever made. I have to say though, if you've moved a lot, staying in one place sounds wonderful until you actually do it. I'm aching to move again.

Buy. Commit to 5 years. Reconsider.
posted by b33j at 4:04 PM on January 7, 2007

If you are a first-time home buyer it is possible to get your PMI waived if your credit is good enough. I found a special program and pay no mortgage insurance even with no down payment. Ask around. There are all kinds of goodies for people buying houses for the first time.
posted by Alison at 4:47 PM on January 7, 2007

Not having a 20% downpayment just means that you have to carry PMI

Not if you have great credit, and are buying in the right market. My wife and I put no money down, and still had no PMI.
posted by MrMoonPie at 4:49 PM on January 7, 2007

Yes, buy it. Owning a home is often a great investment and the feeling of security from living in a place you own is very nice.

One thing that struck me, and I will always remember --- the wonderful feeling of walking into the house after the closing, and realizing, "I own this" ... it was a feeling like I have never had before.
posted by jayder at 4:49 PM on January 7, 2007

We bought our first house with $3,000 down when we were 23 years old. 3 years later we used the equity in that house to buy a second house which we used as a rental property. We made about $400/month on the rental after we paid expenses.

We ended up selling our second property 2 years later and made enough money from that sale to nearly pay off our first mortgage.

Personally, I've never regretted any of our real estate purchases. You learn a lot! There is a lot to be said for having a place that is totally yours.

I would suggest just putting 10% down and then sticking any money that you have left over into a repair fund ... because when stuff does break, it never seems to be cheap. Better to have some cash available for repairs instead of having to put them on a high-interest credit card.

Also, definitely get an agent. I would suggest that you talk to a couple to find someone that you trust.

Also, if you decide on a house, invest in a home inspector. Make your offer contingent on your satisfaction with the home inspector's report. The home inspector will almost always find something wrong, which you can use as a tool to negotiate the price down further. In most of the country it is definitely a buyer's market.

If you are uncertain about future moves relating to career plans, you could always keep your house and hire a property management company to rent it out for you.
posted by Ostara at 4:52 PM on January 7, 2007

Why not keep semi-casually looking at houses, and see if that won't decide it for you? It does leave you feeling a bit aimless, but you might hit on one that jumps out as a wonderful place for both of you. There'll be less regret over changes in career plans, the bullshit that is mortgage insurance, etc, if there're a couple of great features.

Make separate lists of your priorities and wants, not peeking at the other's, and see what matches on the two lists. If you're both going to be happy being in walking distance of a beach (say) -- you'll be happier in spite of being a wee bit house poor.

I don't know how important those housing market 'trends' are when you want a place to live a real life. I think there's something to be said for being less of a real estate speculator and more of a person deciding to do what they want with their life. Thinking here of a not-overpaid friend of mine who drives a somewhat impractical luxury car -- it's quite the expense, and makes no sense as economical transportation, but it's made him pretty happy.

How do you both feel about it when money's less of a consideration?

I can sympathise with the permanence thing, and the career considerations. But houses can always be sold or rented out if the perfect opportunity shows up; if moving is still too much of a hassle, I'd question how great the opportunity was in the first place. I suspect a lot of those two factors could be mitigated, if not entirely wiped out, by finding a genuinely appealing home.

All that said, the above-mentioned 80-10-10 loan is an interesting idea. And note that there's never enough money -- having a lot of savings sometimes means slightly unrealistic ideas about unnecessarily grand houses.
posted by kmennie at 5:00 PM on January 7, 2007

Don't buy! First off, the market is very high right now, so buying is unlikely to reap the benefits of years gone by. Second off, you can't afford it if you can only get 10%. When you owe so much on something (that may lose a huge amount of its value when the market crashes) it can become a psychological ball-and-chain. Especially when it is to blame for limiting your career.
Also, owing a house can be a real pain in the neck. When the roof caves in or the basement floods, its you who has to deal with it. There is no calling the landlord or manager. Its all you, and it can be very stressful.
Finally, houses are a huge responsibility and they tie you down bigtime. If you have never lived in a place for more than 3 years you may really get cabin fever.
posted by Osmanthus at 5:11 PM on January 7, 2007

If this is what you both want, dive in! From what I understand, the market today is favoring buyers over sellers and interest rates are still very low. The interest rate is what would spur me to make the move now. The rates WILL be going up.

You and your SO sound very savvy and just need a little nudge. Go for it and good luck!
posted by snsranch at 5:24 PM on January 7, 2007

1. My career. He knew I was a career woman when he married me, and he'll follow me if need be. But he also likes the idea of getting me tied down here, so we can stay in the city we both love and want to grow old in.

To me this sounds like kind of a big deal. It sounds like your husband is trying to trap you somewhere and keep you from following a dream. That's really really not cool. I don't know how it is with others, but if I allowed someone to prevent me from attaining my career goals, not only would I regret that forever, I would always resent that person. I'm assuming that you guys are fairly young since this is your first house. If that's the case, you've still got plenty of time to do your career and grow old in this city later.
posted by !Jim at 5:54 PM on January 7, 2007

As long as you are planning to hang on to it for the long term, it is always a good time to buy real estate. Over the long term, the chances of read estate not increasing in price are slim to none and, unless you are buying as an investment, what does it matter if the price is stagnant for a while?

As long as you buy right, you really can't go wrong. Get lots of advice, visit lots of houses (open houses are great for browsing the area with little pressure). Even if you decide to move to another city for a time for career reasons, you can always rent the house out and come back to it later.

There is a responsibility aspect to owning your own house, but nothing beats being able to do what you want to the house - paint the walls flouro link, rip up the carpet, whatever you want. Do it.
posted by dg at 7:12 PM on January 7, 2007

And it is a dickens of an effort to get pmi dropped after you have 80% equity.
Actually, we took out PMI with the plan of dumping a chunk of change into renovations which subtantially increased the value of the house. It took less a month to get it sorted out. We got the town to send out an assessor and then send the report to the bank: no more PMI - easy-peasy.

One of best reasons to buy a house is because you want to live there.
posted by plinth at 7:23 PM on January 7, 2007

We bought in 2003 with a low downpayment and a really nice rate, and while I think it's tied us here, I have to admit that with my parents ~45 minutes away and his within 2 hours, we're dreaming to think we would ever get out of here anyway. And we both love the larger metro area we live in, even with all of its stupid warts. There really is nothing like owning our own house, even when it's not the hottest funnest thing eaar, as it were. Repairing things when you don't necessarily have the money to is a pain in the ass. Parsing out projects over time (because I have a love/hate relationship with projects) is a pain in the ass. But this is our home, and we're here. Maybe we'll be here in another seven years, maybe we won't, but even when times was rough (and they were when we first bought the house) it's been worth it.

Besides the fact, paying rent is flushing money down the toilet. If you are reasonably sure that YOU want to stay in Portland, then there is no reason not to buy. You can't spend a lot of time on outlying possibilites. Either you are realistically going to stay in the place you are now, or you will have a realistic need to move relatively soon. If you are more likely to need to move soon for work, then put it off. If not, then buying should be fine.
posted by Medieval Maven at 7:25 PM on January 7, 2007

Thanks for the advice, everyone.

To clarify a few things: Although we want to the best deal we can with the information we have available, but we're not looking at a house as an investment. We're looking at is as a place to own and live in for many, many years.

!Jim: He's definitely not trying to trap me. We want a house, both want to live in it for a long time, and both want to settle down. I guess we're young-ish (late 20s/early 30s), but we're not fresh out of college or anything.

A lot of what I'm agonizing over now involves figuring out what my priorities are. I've fallen completely in love with Portland and could see myself here for the long run. But staying will likely involve professional sacrifices. I love my career, I'm passionate about it, it's a huge part of my identity. My husband loves Portland, he loves me, and he supports my career ambitions. I have to decide what my priorities are, with my husband as consultant and major contributor to the decisions that largely reside with me. I'm pretty torn.
posted by croutonsupafreak at 7:31 PM on January 7, 2007

I can't comment on the US market etc., but buy a house if you'd like to make it your home. Your very own place and a rented place are quite different propositions: even if there's no immediate financial advantage to owning, you may find (I have always found) there's an emotional advantage.
posted by londongeezer at 7:44 PM on January 7, 2007

croutonsupafreak, I don't know what your industry is or what kind of moving is involved. But if you wanted to move, you could sell your house. Or, if you could sublease your Portland house for the rent you'd have to pay in City #2, then you'd be breaking even (same monthly mortgage, still have the house to come back to). Or, if your salary has gone up some, you could leverage the equity in House #1 to buy House #2 in City #2, so you're not using the sublease money to pay rent buy to pay the mortgage on a second house that you could then sell when you leave City #2.

The time I took out a car loan, I had to repeat like a mantra, "I can always sell it." By buying a house, you won't be trapped at all, you'll just have a different set of options. You'll have more options, since you'll have built up some equity.

You want to grow old there. You can buy a place now. You can always sell it. Why not go for it?
posted by salvia at 7:54 PM on January 7, 2007

Don't buy! First off, the market is very high right now, so buying is unlikely to reap the benefits of years gone by.

So you think the prices are going to actually drop? That would be the only reason to hold off buying.
posted by smackfu at 8:48 PM on January 7, 2007

My understanding is that the US housing market is starting to turn and that, in some markets, houses are sitting for a long time before selling. From what I have read of Florida, San Diego and a few other markets, the housing bubble is bursting. Rents are currently much cheaper than housing costs, so it doesn't make sense for investors to keep buying properties and renters are better off renting. So I'd be cautious about buying right now, unless you're sure you can hang on for 5-10 years and stick it out through a downturn.
posted by acoutu at 8:54 PM on January 7, 2007

I'd like to Nth the caution about the market. Do you really want to be upside-down on your house in the near future? You'd be screwed if you do end up trying to sell for whatever reason. And that's TRYING to sell. The market is going to get ugly, and there will be hordes of people trying to sell at once.

There are plenty of people trapped because they bought house #2 thinking it would be easy peasy to sell house #1, and now they're on the hook for two mortgages. Yeah "you could always rent it out", but how badly do you want to be a landlord, with all the hassle that entails? And getting good renters can be a dicey process (if you can even find renters at all).

From what you've written, you're clearly not a real estate speculator or anything, but how would you feel if you had negative equity for years? If you can stomach this, then by all means buy now.

Watch out, you don't want to catch a falling knife, as they say.

By all means, discount my advice here if it doesn't sound right to you. But regardless, I strongly urge you to research the market - are pricess still falling where you want to buy? (In many many places there has been a receding from the peak). They will tell you "it's a buyer's market", but pay attention to *who* is saying this - is it someone who stands to make a buck selling you a mortgage or a house?

Also watch out for exotic loans, loans with "teaser" rates, and those with the potential for a nasty ARM reset.

(I am a doomsayer and an avid reader of The Housing Bubble Blog, so take that for what you will).

No matter what you do, I recommend a lot of research. This is probably the biggest purchase of your life, and you would do best to go in with as much information as possible.

Good luck. :)
posted by beth at 9:34 PM on January 7, 2007

Thanks, folks.

I really don't need advice on the market or on home loans. We'll be taking out a 30-year fixed rate mortgage if we buy. We both have stellar credit, and expect to qualify for good rates. We'll buy far below what we can afford. We already have adequate life insurance through our jobs, and have discussed getting additional insurance if/when we buy a house. I am very familiar with what's going on in the national real estate market, and I am familiar with how Portland -- with its population growth, land-use laws, and variously priced neighborhoods -- fits in to the big picture.

I think it's the emotional, relationship and professional stuff that has me stressed. I don't know how to balance all of my priorities.
posted by croutonsupafreak at 10:30 PM on January 7, 2007

I've gone through the same emotional issues when buying a house -- i got a heavy case of wanderlust, moved away from the USA, and bought a house in the UK. The only problem is, of course, that the same wanderlust now tells me to go somewhere else. I love my little house, though, and my partner and I plan to keep it as a rental property even if we did leave our current city in the future.

I think of a house as a flexible asset, a home if you need a home, a moneymaker if you need to be somewhere else. Of course, I'm lucky that in our city there's a huge rental property market that I can rely on (which may or may not be the case for you). I did fear feeling "tied down" by a house but so far the challenge of making it my own is far outweighing any worries of being trapped.

In short - i would buy a house, and depending on how you feel in a year or two, keep an open mind about how it can work for you and your husband.
posted by ukdanae at 12:17 AM on January 8, 2007

There's something so incredibly wonderful about having a house that is your own. It sounds to me like you're ready. There's no perfect time, just like there's no peefect time for having a baby! Don't stress about the PMI thing, there are a lot of options.

My one piece of advice is to have savings just in case a large cost comes up. No matter how good your inspection is, these things sometimes happen. That said, don't be scared off by "maintenance" costs. As long as the home has been well cared for it's not going to be that expensive.
posted by miss tea at 4:44 AM on January 8, 2007

croutonsupafreak, as someone in a somewhat similar situation, I can throw in a bit of my own experience. While a large part of me would like to settle down here, doing so would involve currently unknown (and perhaps total) career sacrifices. I've decided to wait before buying because I want to make sure that those sacrifices are knowable and acceptable before I make them.

Can you wait a few years and find out if your sacrifices are just fine in light of living in Portland? Because if you suddenly find that you cannot live with the choice, moving can be very difficult once you own a house (and I say this as the daughter of someone who once had to accept a final price $30 000 less than the appraised value *and* buy the house of the buyers in order to leave a place that was no longer viable for our family). But if you waited for a few years, you might have a better idea of what this sacrifice would entail, and be in a better position to judge whether it's one you are willing to make. Plus, you'll have more of a down payment, which is always good.

Can you break down the career compromises you'll have to make? Is it money, prestige, advancement, variety of responsibility, amount of responsibility, proportion of satisfying duties to unsatisfying duties? Once you've done that, you might have a better idea of what it is exactly the trade-offs are. You can arrange them by importance + degree to which they are changed by staying (ie. if you loose a little prestige but that's a high priority, it'll be higher up than if you loose a lot of variety but that's a low priority). If you take a critical look and most of what you're giving up is in the low priority range, then it might be fairly safe to buy a house and see. On the other hand, if most of it is high priority, then you should probably wait and see while renting and maintaining a high degree of mobility.
posted by carmen at 7:48 AM on January 8, 2007

Wait. Take a little bit of time. It sounds like your husband is okay with waiting too. You won't lose the chance to settle down and build some roots.

From what I'm hearing -- You're not just making a decision to purchase a piece of property. To you, it's a lot more than that, and I don't think you would want to rush the process.

Are there any creative ways that you could stay on your career track without moving? A combination of limited travel plus telecommuting, or working from an office nearer to home? What is it that you really love about this specific career - what drives you, what makes you love to go to work, and once you identify that, is there a way to replicate that in a position that won't require you to move? Is there a known point where you wouldn't have to move any longer, and how do you feel about the cities where you would forseeably be living at that point?

To the extent that you feel you can, let your husband help you work through these felings.
posted by KAS at 8:11 AM on January 8, 2007

I should have previewed. I like carmen's advice.
posted by KAS at 8:12 AM on January 8, 2007

Croutonsuperfreak,

Don't worry about the state of the US housing market or the West Coast market at this point. Everyone I have talked to (I'm in PDX too) sees the Portland market as slowing down but certainly not "bursting" or in decline. So now is still a good time to buy here, especially if you think of owning a home in terms of an investment (your monthly rent isn't an investment but a mortgage is).

The good news is that, even is the two of you feel the need for a change (career or otherwise) the rental market in Portland is pretty good (all those condo conversions downtown are decreasing the number of available rentals and increasing the rents). So the two of you could decide to up and move and would likely be able to rent your house for near if not more than your mortgage while retaining the property as an investment (vs. selling in under three years and getting hit with capital gains).

However I completely agree with you that buying a house is a heck of an emotional roller coaster. Even though we were totally agreed on wanting to and being capable of buying a house I still was reduced to tears when we put in our bid And the shock of see the end date of a 30 year mortgage actually in print was also less than pleasant. But we've been in our place now for 4 years and it has nearly doubled in value and we've even decided to brave owning rental property in town...

My best advice --- find a realtor you really like, one who won't pressure you into a sale ever and one who understands that, when you said you wanted a bungalow near Alberta, he/she doesn't send you listings of post-war ranchers in SW.
posted by rosebengal at 1:05 PM on January 8, 2007