Yep, found those already, thanks. :-)
I have prolly 100 links already in my "Columbus" folder.
Online take-home pay calculator would rock, though...
Here we go:
http://wwwdev.hr.duke.edu:8080/CGI/takehome.showform
(Took me writing that to figure out how to search Google for it...)
Well, maybe not that one (seems NC-centered, doesn't mention homeownership) but I found several.
Re: Buying Our First House: To Stretch or Not to Stretch?
sozobe wrote: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.
Sounds like the job I'm looking for. Um, what is the pay scale for cushions, by the way?
I am still recommending "Home Buying for Dummies" especially for dragging up things you might not have considered - like the time involved in commuting. Given the right opportunities, I would pick the lesser home in the better neighborhood, but that's just me. In any case, watch that financing. Less than 20% down usually equates to Private Mortgage Insurance, which is a monthly add on to the payment, and believe me, it insures exactly nothing.
I knew someone would jump on that!! (The cushion thing...)
Oh wait I'm gonna regret "jump on" now too, aren't I?
The lesser houses are really, really lesser. I mean, they make me SAD.
Tell me more about the Private Mortgage Insurance thing.
Thanks, Phoenix, but that was pretty pro (sweet young couple can afford a house!! yay!!) while roger seems to be saying it's rather con.
PMI is not insurance. It an addition to the mortgage, like interest, but it's not quoted as part of the interest rate. Unlike interest, it is not deductable for taxes. It's somewhat like a charge for being a shakey borrower, in spite of your long and spotless credit record.
Sometimes, it can be avoided, but watch how the loan points an/or interest rise accordingly. Actually, my feeling is that I could handle the payments on anything that I could come up with a 20% down on, which ain't much.
Phoenix, that was my point too -- wanted to see what roger had to say about it rather than seeing what THEY have to say about it.
Thanks, roger.
Sozobe, I'm not sure I understand the school thing. Is bussing not an option or do you want your daughter to go to a neighbourhood school?
More than a third of the kids in this city are bused to school, mabey more.
Make a list of priorities and stick to them. A house is an investment. I was lucky, I bought my house just before the boom. It was dirt cheap in a great neighbourhood. It's a fixer upper,to be sure, but it was in my budget and has more than doubled in vaIue in the five years I've owned it. It's in a little pocket, almost forgotten, close to downtown but still far enough away from everything to be safe and quiet.
A good rule of thumb when buying a house is to budget about 3 - 6% of the price of the house for improvements and repair per annum.
A water heater could burst or you may decide to put in new windows, regardless don't forget to save for it.
Make sure, get someone you trust to inspect the property first. Don't be turned off by superficial problems, look for structural integrity, a good roof ect.
Oh yea, and make sure the house has a secret tunnel that transforms you into the night as a superhero, saving mankind from evil.
That's a must when I buy a house.
Yeah, that's been a big downside. Only two of the houses we looked at had 'em, and they were like, all moldy and musty. Bats kind of go with the territory, fine, but mold? Yecch. One had a really cool secret door, you had to pull out Penn and Teller's "Cruel Tricks for Dear Friends" from a bookcase, and then...
Ceili, the school thing is that where you live has a whole lot to do with what schools you can attend. I am looking at one area within Columbus, and a few areas that are actually considered outside of Columbus even though they are geographically right there. The non-Columbus areas have their own school districts.
There are some magnet schools, which have different rules. And private schools are a whole 'nother matter, not my preference at all. But generally speaking, for public schools, you have to live within a school district for sure (if I live in the Columbus school district, I can't sent sozlet to one of the schools in the non-Columbus school districts we're looking at), and then it goes by neighborhood.
So for example, if I live in a specific area -- about 1 mile square -- around the apparently good school in the Columbus neighborhood, I can definitely send sozlet to that school. But if I want to send her to a Columbus public school in another neighborhood, I have to take part in a lottery. Conversely, if I live outside of that 1-sq.-mile area, I'd have to rely on the lottery to get sozlet into that school.
Does that make it more clear?
Not just a matter of getting to the school (in terms of distance/ busing), at all.
A few things to keep in mind:
* I love the idea of living below your means, but interest rates are really good right now. They won't be forever. but what that can mean for you is, you might want to buy a better house and pay the money in a cheap(er) mortgage, spread out over 30 years, rather than buying a cheaper house and purchasing repairs in a few years, when yeah, you might have more income but interest rates are also higher. Get into credit card payments for major repairs, and it will cost far more than just buying the better house and making a bigger mortgage payment. Plus, you'd have to pay for repairs and improvements a lot more quickly. Unless you go for a home equity loan, you'll be hurt financially.
* Rank your priorities and be ruthless. I assume a good school district is #1 for you, so ignore areas that don't fit that requirement, or whatever your primary requirement is. This will help to keep you focused.But also keep your "it would be nice if ..."s in mind, too, as they will help you decide among several possibilities.
* Future money shouldn't be spent now. Yes, you'll probably earn more money. That's likely to be true of most of us. But the economy is still unkind to job seekers and anything can happen. Therefore, look for today's affordability. If you end up with better incomes, you can use the $$ for repairs or to pay down your mortgage.
* Speaking of paying down your mortgage, roger's right on target when he talks about PMI. It's extra $$ and doesn't do anything for you. If you can afford 20% down, do it. And once you get to 20% equity, if you were unable to initially put 20% down, start insisting that PMI be dropped. The bank will not do this on its own as they will gladly take more of your money. You have to make this happen.
When RP and I bought, we had different priorities as we have no kids, none planned. Hence our main priorities were things like affordability and parking (it's very hard to find parking around here), and public transportation accessibility. Our "it would be nice ..."s included white pillars in front and a garage (as opposed to just a parking spot or driveway), plus we wanted an older home. We were able to get all of that and the house was not costly. We just so happened to luck into an up and coming area which is now a lot, uh, upper, than it was when we bought. But no one could have known that when we bought, back in '95. Currently, our house has trebled in value, and it's not all from improvements we've made.
But we've also had to make a lot of improvements - back porch, all new appliances, and now we need some major plumbing work. Each of these repairs or improvements is in the thousands range. And, I'm not working, and I haven't been since '01 (except for A2K, where I'm a volunteer). When we bought, we assumed we'd both make more money and there would likely not be long-term unemployment in our future. But that turned out to be wrong, wrong, wrong.
I don't mean to scare you, but I'm not personally a fan of projections. Here and now is real and can be determined. "Later on" is fuzzy and may never happen.
Good luck and there are always some finds out there!
Always live under your means. I can't tell you how many homes in my neighborhood have been forclosed!
A friend of mine bought the nicest house he could afford, then his reserve unit got called up and he was sent to Iraq... and couldn't afford to keep the house.
Houses aren't everything
Even if your kids don't go the the 'best schools', if you are involved in their education, instead of working to pay for the house, they will be just fine.
I agree with many. Especially since you feel a smaller more modest home would fit your needs, why extend your debt more than you have to? Also, if you ever have an emergency, you would not have any cushion. Many people find themselves house poor. In addition, if you are looking at this also as an investment, never put all your eggs in one basket. Always diversify. If you have extra money, it is better to have it in various investments than one. What if the housing market dropped? It has been increasing, it is not inconceivable for it to start reversing.
Another big thing many people do not think of, the more house and land you own, the more house to clean and yard to work on. Also, as some have mentioned, the better investment would be one with a good location. These tend to keep their value better. It would be better to buy a small home near good schools and good neighborhoods. Have you ever heard the comment location, location, location - there is a reason for it. If you buy a smaller home in one of these neighborhoods, and you have enough land, you could always expand
Thanks for your thoughtful responses, everyone. very useful.
I crunched some numbers, and found out that at the highest level we qualify for, after the monthly house payments we would have twice as much money as we do now after house payments.
In other words:
Now: Monthly take-home minus rent = X
Columbus: Monthly take-home minus house payment = 2X
That's not so stretched as all that, then, and that's going by the immediate numbers; starting salary for E.G., no money from me.
Thanks for the interest rate points, Jes, part of what I was going for.
Sozobe wrote:Another aspect they cite is that housing prices nearly always appreciate; it's a good investment.
For what it's worth, our common guru Paul Krugman thinks that housing prices are experiencing the moral equivalent of a bubble, and that this bubble will burst like the Internet bubble at some unpredictable time in the future. He also thinks that long-term interest rates are about to rise and recommends fixed-interest mortages even though the current interest rate on flexible-interest mortages is lower. You might want to account for that in your calculations.
Personally, I am conservative with money, and the thought of moving into a bigger house in 10 years because I'd been too conservative feels much less uncomfortable than the thought of having to move into a smaller one because I'd been too aggressive. Most of the discomfort arizes from the "having to" part, not the moving part. But this is really a question about personal risk preference, and I can't really answer it for you.
