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Buying Our First House: To Stretch or Not to Stretch?

 
 
sozobe
 
Reply Sun 14 Mar, 2004 03:26 pm
We've begun looking for our very first house (have thus far rented), and recently got our GFE (good faith estimate). This shows that we can qualify for a loan that is higher than we expected. (Just a standard loan, nothing fancy.)

Several people I have spoken to have advised that we buy a house for the maximum amount we can afford/ for which we can get financing. One thing they point out is the fact that we can reasonably expect that our income will go up from this point. I am currently not working, and plan to in the future, and my husband was just hired as a professor and can expect a few jumps in salary. Another aspect they cite is that housing prices nearly always appreciate; it's a good investment.

We have been living extremely frugally on one salary, the three years that I've been home -- I saved half of my salary for a year when I was working as a cushion, but we managed to go through this much time leaving that amount intact, to become our down payment. I never just buy something -- I think carefully about how necessary it is, whether there is some other way to get what I need that is cheaper or free, etc., etc. I just mentioned to a friend that I was going to buy a cheap towel at Ikea to make a bathrobe for my daughter (who has been asking for one for the last several weeks) -- she said, "but why don't you just buy a bathrobe??" I'm pretty far removed from that kind of thinking. (A bathrobe might cost, like $15 or even $25 dollars!! And the towel is only $3.)

So, while we could certainly afford to live on my husband's salary while making house payments at the highest level we would qualify for, this period of hyper-frugality would have to go on for a bit longer. Hubby drives some rustmobile he got for $1; he'd love to have a new car. (Wouldn't have to be NEW new, just not a rustmobile.) We need to start saving for retirement. We need to start saving for sozlet's college education. And it would be sooo nice to be able to plonk down (*gasp*) $25 for a new bathrobe. (Although sewing it is kind of fun, itself -- would be nice for that to be a recreational OPTION, though.)

The houses that have made us swoon thus far have definitely been at the very upper reaches of what we can afford. The houses at a more comfortable price have definite flaws, definite things that we would wish were different. (Of course, there's always the possibility that we will find something perfect AND cheap.)

Anyway, that's some of the background, would be interested in personal experiences and advice.

Thanks!
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Phoenix32890
 
  1  
Reply Sun 14 Mar, 2004 03:39 pm
Soz- I have always believed in living under my income. You never know when an unexpected expense will arise. I think that it is very short sighted for people to stretch themselves too far financially.

IMO you need to look for a modest house in a good neighborhood, with good schools, for the Sozlet. You mention that less expensive houses that you have seen have "flaws". What do you mean by "flaws"?If the plumbing or the roof or the heating system is ready to fall apart, it is no bargain. As a renter, you really have no idea as to how house expenses can mount up.

If it were me, I would take the middle ground, something between a fixer upper, and a dream house. Remember, you are still very young. The average person moves every seven years. When your circumstances allow, later on, you can still have your dream house. Right now you need a comfy place to live, not something that will turn into an albatross.
0 Replies
 
sozobe
 
  1  
Reply Sun 14 Mar, 2004 03:46 pm
Well, the good neighborhood, with good schools, is itself the kind of thing I meant by "flaws." There is an area I am interested in that seems to have an OK neighborhood and OK-to-really-bad schools, but great houses in our price range. The "good" neighborhood with definitely good schools has perfectly awful houses in our price range.

My "dream house" is pretty modest -- not very big, more about things like well-kept wood floors and built-in bookcases than, what, 2,500 sq feet and a pool. :-? I'm not talking about things that are a financial drain so much as not enough bedrooms (no guest room), no mature trees on the lot, that sort of thing.

Again, I am talking about the upper range of what a bank has decided we can afford. So it isn't living beyond our means, really, just upper or lower range.
0 Replies
 
msolga
 
  1  
Reply Sun 14 Mar, 2004 03:52 pm
Yes, Soz, personally I would tend to go for the middle, too. For many reasons, including the dreaded *unforeseen circumstances*, not being so impoverished for so long that it becomes a grind & also to give you a few choices (small luxuries, even! Very Happy ) in your day to day existence.
A lot depends on how important owning the best possible home is to you. If it's super important, then consider (carefully!) buying in this price range. There are obvious advantages in the future. But the PRESENT is important, also. Important things like, indulging in a bit of pleasure occasionally, not having to have your life dominated by watching where every cent goes, being able to buy a new pair of shoes when they're needed .... Having been frugal for a time already, you might consider how you would feel about extending this by a few years. That's important, too.
0 Replies
 
Phoenix32890
 
  1  
Reply Sun 14 Mar, 2004 03:57 pm
Soz- If it were me, I would look in the neighborhood with the good schools. It will not be very long before the Sozlet will be venturing out to school, and if you had to send her to private school, that would be very costly.

I had a friend who lived in a modest cape. It happened that her neighborhood was adjacent a very upscale one, and the kids on her block went to the good schools in the fancy neighborhood. When she sold her house, I was absolutely shocked at the high price her small house commanded.

I, who had a nicer house, but in a so-so school district, got much less for my house, although they both sold at about the same time.

Why not keep looking in the better neighborhood? You might just "happen" on a gem!
0 Replies
 
sozobe
 
  1  
Reply Sun 14 Mar, 2004 03:57 pm
Yeah.

I'm tending towards the middle, myself, am hoping to get Slappy-types who have recently researched the current market and have suggestions.
0 Replies
 
SealPoet
 
  1  
Reply Sun 14 Mar, 2004 04:00 pm
Flaws within the property can be addressed as time and funds allow. Flaws outside of the property cannot.

Shop the town first.

And fercrissakes, don't let yourself become house-poor. If you both end up making lots more than you are now, you can move up, you can add, you can save...

And don't let the frugality go to waste either. You don't have to scrimp and save, but the habits you've developed should not be allowed to wither... you never know when the necessity may come up again...
0 Replies
 
sozobe
 
  1  
Reply Sun 14 Mar, 2004 04:00 pm
Oh, of course we'll keep looking, Phoenix, but the chances are vanishingly small that we'll find something both nice and affordable. Certainly nothing to plan on.

I'm doing a lot of research on school districts and individual schools, including making contact with one particular school in the "bad" neighborhood that seems promising. A lot of unknowns, though.

As a more general question, not sure if we want to live in a "nice" area -- too rich, too competitive, too suburban.

Anyone who has been through this recently?
0 Replies
 
msolga
 
  1  
Reply Sun 14 Mar, 2004 04:03 pm
And which ever price range you buy into, it's important that you feel comfortable & at home in the neighbourhood. Especially as you might be spending a lot of time at home during the day. I've bought into a very vibrant, "up & coming" neighbourhood, which has just about everything I need within easy walking distance. The house is one room short of what I'd prefer, but I got everything else I wanted within the limit of the price range I could afford. I could have gotten a larger house for the same price but wouldn't have felt nearly "at home" as I do here ....
0 Replies
 
sozobe
 
  1  
Reply Sun 14 Mar, 2004 04:06 pm
As a general concept, I really don't want to plan on moving. I want to exhaustively research (where I am now), get a good house, and stay in it a good long while.

It's something I've always wanted to provide to my child/ren... a solid home base.
0 Replies
 
sozobe
 
  1  
Reply Sun 14 Mar, 2004 04:08 pm
msolga, yes, that's really important to me. Exactly. I plan to be either a full-time or part-time stay-at-home mom for a while yet, with working from home a definite possibility. And with anoher kid a definite possibility, too.
0 Replies
 
Phoenix32890
 
  1  
Reply Sun 14 Mar, 2004 04:10 pm
Quote:
As a more general question, not sure if we want to live in a "nice" area -- too rich, too competitive, too suburban.


Not recently, but I once did an internship in a high school in a veddy veddy posh neighborhood. Half the kids wanted to be doctors, the other half lawyers. There was a scandal about cheating on SAT tests. The kids prsctically scratched each others' eyes out, in attempting to get what they wanted. Naturally, their parents were the same way.

No Soz, from what I know about you, I don't think that you would be happy in a place like that!
0 Replies
 
sozobe
 
  1  
Reply Sun 14 Mar, 2004 04:14 pm
Yeh... ;-)
0 Replies
 
Noddy24
 
  1  
Reply Sun 14 Mar, 2004 04:22 pm
Consider--if you buy a modest, "starter" home with easy-to-afford payments, you can always pay a few extra dollars every month, increasing your equity and decimating the interest. Then you'll have equity when you trade up.

Don't compromise on school districts though.
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sozobe
 
  1  
Reply Sun 14 Mar, 2004 04:27 pm
True about starter home.

The situation in the area I am most interested in is kinda complicated; basically, it's a quite nice area within a quite so-so larger school district. The area seems to be an "up and comer", as msolga described hers, and there is at least one public elementary school (right smack dab in that interesting area) that looks quite good. Does the school district need to be good if there is a good school?

I just read something in the liberal/ conservative thread about property taxes/ quality of the school, and for example one thing the teacher from that school who I contacted mentioned is that there is a new playground thanks to their "very active" PTA. So that's an extra-district thing; if there are people with a fair amount of money living in one corner of a generally more poor district, they contribute money where they can. :-?

The whole school situation in America is whacked, ain't it? That's a whole 'nother thread, though.
0 Replies
 
Slappy Doo Hoo
 
  1  
Reply Sun 14 Mar, 2004 05:30 pm
Hi Soz...recently, I was casually researching purchasing a condo or house for myself. One main reason was because one of my roomates was moving out, and I wasn't sure if I'd find a replacement. Luckily, one of my best friends is moving in. I'm psyched, I live in a big place, in a high-income area which I could never afford to buy in right now.

However, I'm in a completely different situation than you. I was looking at "up and coming" neighborhoods with no regards to the school system. I'm single, and kids aren't in the near future for me. I was also considering a condo...basically, something I knew I'd probably sell in the next few years. And I decided not to go into buying a multi-family with my friend. That's something I'd rather do solo.

Another difference between you and I, is your spending habits. I'm the opposite! I'm starting to discipline myself though.

So...that being said. You obviously don't want to lock yourself in a mortgage if it's going to strain you. Don't do it in the hopes of more income, because you never know what's going to happen. At the same time, invest in a house you TRULY like. You don't want to look back in 10 years saying, "man, I wish we got that bigger house...bigger yard for the kids, ect." One thing my friend told me when I first moved out of my hosue into an apartment was "everything just falls into place." I was nervous about being able to afford it, but he was right. I knew I had the income, but I had to learn to spend less on other things.

Remember what Phoenix said, too. The "nicer" neighborhoods are well established, and housing prices seem like they do appreciate very well. The "up and coming" neighborhoods? They could be gems, or they could stay up and coming for years and years. I can't really advise you what kind of neighborhoods to look at, I don't even know where you live, and it's something you have to be comfortable with.

As far as buying it, you might have to turn it into your job for a little while to find the right house. First, try to narrow it down to the town you want to live in. That will make finding your house that much easier. If you're looking at 5 different towns, you'll be all over the place, and will probably confuse yourself into making the wrong desicion. I think this is really important.

Once you do that, research, research, research...read the paper every day, look at houses, and really learn the market. Then you'll know what's a deal. If you can talk to the seller, ask questions to find out how motivated they are! Why are they selling? If it's a seller's market, and they're willing to sit on the house to get all the money, you might overpay. If you find someone that HAS to sell, hopefully you can negotiate and get the house under market value.

Good luck with everything!
0 Replies
 
sozobe
 
  1  
Reply Sun 14 Mar, 2004 05:38 pm
Thanks, Slappy!

I have the town -- Columbus, OH -- but am looking at various areas within it. Don't live there yet, so that's an added complication. Definitely on the "making it my job" part.

In terms of income, though, it actually is something we can count on. I mean, there are always possible disasters, but the reason we're moving is that E.G. has been hired as a professor with an expectation of getting tenure -- that means his salary will go way up in a few years. And all of the calculations so far are based on me making NO money, which will change in the future.

One thing I really have to figure out is how much of a stretch it would be. We know what his income would be, but we don't know how that would translate to take-home pay in terms of different tax bracket, different state, home owner credits, etc. Typically, though, if a bank says we can afford it, we feel like we're rolling in dough. (We're just cheap cheap cheap.)

So what I am calling a stretch may not be, really. Gotta find that part out, for sure. (Anyone know of any online tools for that?)
0 Replies
 
Phoenix32890
 
  1  
Reply Sun 14 Mar, 2004 05:42 pm
Soz- I am assuming that you plan to live in Columbus. If not, there are stats for outlying school districts. On the bottom right are the proficency scores
and the graduation rates. Check those out:


http://www.columbus.k12.oh.us/website.nsf/webpage/parents?opendocument
0 Replies
 
Phoenix32890
 
  1  
Reply Sun 14 Mar, 2004 05:45 pm
Hmmm...This may be even better:

http://ilrc.ode.state.oh.us/Districts/Default.asp
0 Replies
 
Slappy Doo Hoo
 
  1  
Reply Sun 14 Mar, 2004 05:48 pm
Gotcha...then I'd loosen up my belt...don't be too cheap when investing in a house. And I do believe it's an investment, not just a purchase. You'll be fine....now I have to go learn to save $$.
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