Buying a House

[Shihtzuluv]

Hi,

I COMPLETELY understand where you're coming from. My parents have always told us to buy than rent. They actually begged us to go home after renting for 2 years so we can stop paying for other peoples mortgage. We decided to pool in money to get an investment property instead. While it took most of our savings, I know it will help us in the future. We probably won't buy a our OWN house that we'll live in until 3 years later. I am 25 and SO is 28.

forgot to mention. I live in Brooklyn, NY. We bought the investment property about 15 minutes drive from my parents house, in the next borough.

 

[royalstarrynight]

I bought my first house at 24.

The bay area is nuts. The targets keep moving. Unlike what DF says, I've lived here a good 28 years and it's never gone down. It just slows down growth esp in the penninsula. I would agree with some of the other ladies. Look into buying a condo/townhouse first so at least you gain on depreciation tax deductions and gain on property increases. It's pretty hard to make it off standard salary alone.

 

[Sagefemme]

I really think things are so much harder financially for young people today. My husband and I bought our first house in 1990 in Baltimore. We were both 29 years old and had just both finished graduate school. We did not have a RED CENT to our names, and I had student loans, although my husband owed nothing after finishing a PhD at MIT (smart ass, always getting full scholarships!). Anyway they must have let us finance the whole thing, since we had NO SAVINGS whatsoever for a down payment. We did both have jobs that we hadn't even started yet when we closed on that house. We moved to the West Coast five years later ( didn't make money on the first house) and the second house, which we still live in, is paid off via a 15 year mortgage. It's appraised at about 3 times what we paid for it 21 years ago. So our real estate life has been very simple. It doesn't seem so simple any more for the young ones. Although we of course were never trying to enter a very expensive market.

 

[ksinger]

I bought my 1100 sq foot house when I was 35 and single, almost dead on the age and status of a first time home buyer according to Zillow and another source my husband found, both of which had the age at 33. My house cost 59,500 and was paid off in 15 years, although I had a 30 year note which served me well when I experienced a layoff at one point. Anyway, I've been mortgage free now for several years.
And yes, I bought that house just before the overheating of the housing market that helped tank the economy, got going in earnest. I would not want to be trying to do what I did then, now. A single 35 year old of moderate income could not do it now, I know.

 

[rainydaze]

I was 25, DH was 26 or 27. We bought a very affordable, nice house in a rural area. The compromise was that I had an hour commute to work, and living there added on at least 20 minutes to wherever DH needed to go. We were happy to make that compromise - were young and didn't have kids yet, so we were still able to have a life. I look back on that time with a lot of nostalgia, it was such an exciting time in our lives, and that home was magical.

Two years later we moved to another town that is closer to conveniences and has a great school system. We made a good chunk off of the sale of our first house; we apparently bought at exactly the right time (low) and sold at the right time (as prices shot up). Our new house was on the lower end of the market in the new town. While friends referred to it as a starter home (it was small for this town), we thought it was our forever home (it was well built and had some nice features). However, we really outgrew it. We had made some expensive improvements, so we lost money when we sold that seven years later. But we had a lot of equity and more income, so we were able to afford something that suited us better.

I hope to instill in my kids the sense that having the goal of owning a property in their early 20s is something to really consider. That's generally the time when you can compromise most... and those first properties usually take some sort of big compromise! From my experience, that provides a good foundation for growing into a home that suits you as you get older and your needs become more defined.

All that said, it absolutely stinks that you live and work in a part of the country that is beyond expensive madelise! How utterly discouraging! Fingers crossed something comes along that you can work with.

 

[rubybeth]

House hunting sucks. I'm also stressed out and sad about it. You probably don't need more than 20% of selling price if you have good jobs/credit--but be prepared to pay for closing costs, which are a percentage of the price, unless you plan to offer more than asking price and roll the closing costs into the mortgage. We are also looking at houses (and have been for 6 months) but have heard from others that they looked at MANY more houses than we have, so that makes me feel better. We have taken it slow and only gone to view things that we actually think we would buy. We've made two offers and were outbid on both, but were okay with that as both sold for over our preferred budget. We have a saying: right house, right time. Edit: for reference, we are both mid-30s. My sister, OTOH, is 29 and bought her own condo a couple years ago--rent cost was outpacing mortgage cost, so she was able to buy and save money, plus her place will be paid off in 13 years. In our area, there aren't condos like that, unfortunately.

 

[SMC]

Madelise, you work in education, right? Do you qualify for this? http://www.mercurynews.com/2017/06/...-help-teachers-afford-bay-area-down-payments/

 

[anne_h]

I was ~22 when I bought my first place, a small 1-bedroom condo downtown. I was renting in the building, decided I liked it, so I put up a sign in the mail room asking if any owners would be interested in a private sale. Someone replied, and that is the unit I ended up buying. Although initially I planned to stay there a few years, shortly after that I was contacted by a realtor on behalf of his clients who wanted to buy a unit for their kids. They made a great offer so I accepted.

After that, I bought an income property, a triplex in a gentrifying area near downtown. I did a lot of work fixing up the bottom unit, which was in rough shape. My plan was to live in the top unit because it was the nicest. But shortly after that my partner and I decided to start a family, so I sold it. At that point I moved into my partner's home that he owned. Later he sold that and we bought a condo together in another area of the city where we wanted to live, which is a nice area near the downtown core.

Non-detached townhomes here now go for $1M+. At that price they will generally be in nice condition, probably with a small yard. People who live in this neighborhood seem to be professional couples with kids, or wealthy retirees.

We found out the hard way last year that nobody around here accepts offers that are conditional on the sale of a current property. So one either needs to sell first and rent / live elsewhere while shopping for a new home, or be an all-cash buyer.

Anne

 

[Dancing Fire]

DD#2 is looking to buy, but housing prices are getting to the point of ridiculous.... $650K + for a decent house (2400 sq. ft) in the Sacto area?... DD#1 was lucky enough to purchased a house in 2011 during the down cycle.

 

[mom2dolls]

We bought our first home two years ago in Southern California. My DH was 45 and I was 38. We never thought we could afford to buy in our area. We bought a home that is close to his work and our daughters schools. I commute a least an hour in and hour and a half home each day because we cannot afford to buy in Orange County.
We purchased our 3 bedroom 2.5 bath home for $345,000. We plan to rent the house out once the girls are gone and most likely move out of state. We are across the street from a University, so rentals are in high demand.

 

[cmd2014]

House prices/sizes are very different in the US compared to here. We live in smaller and much more expensive houses than the vast majority of the US, and there are no tax deductions for homeownership (only taxes). I'm always shocked watching HGTV seeing what huge houses you guys buy for so little where you live, and how much land you guys get with that (NYC and the Bay area being the exceptions).

We bought our first house when I was 35 (1573 sq feet, 3 bedrooms, 2 baths, unfinished landscaping and no appliances as it was a new build on the outskirts of town). It was a 45 - 60 minute commute from work if I took the highway; over an hour through the city in the winter. We got outbid on 11 houses before we got that one. We put in 3 years of sweat equity (including doing landscaping ourselves with nothing but shovels and a wheelbarrow). We sold it 5 years ago and we're now about 30 minutes of city driving from my work. Our current house is 1800 sq feet, 3 bedrooms, 2 baths, with an unfinished basement. We're putting extra funds onto the mortgage rather than finishing the basement. I doubt we'll move again until we retire.

I agree with Missy. First homes are exercises in compromise. But unless you get a foot in the market, you'll keep being left behind. My biggest financial regret is not buying something (anything) when I was younger. I wanted to wait until I was gone school, but we would have spent half as much if we had bought when we were first married using what we were qualified for at the time.

 

[whitewave]

When did you buy your first house? And how old were you? For those of you who have adult children, are you seeing a trend in a delay or nonexistance in home ownership?

Very few of my same-aged peers are home buying. I feel like I've been raised to buy a home instead of rent, but as I save every month, the cost of homes increase every month. It feels like I'm chasing a moving target.

My financial advisor 2 years ago told me to save as if I need $X as a down payment for "in 5 years". Now I'm told to save $2X as a down payment for "in 3 years".

Ya. Moving target. It's disheartening.

It was 1996 and we had been married 1 year. We were 26 years old and bought a 3 bedroom 1 bath 1150 sq ft house in Memphis for $92,000. It was an adorable house with a very nice lot with large yard.

This was the crazy 90s and since DH was in post graduate training, they had a zero dollar down payment program that we qualified for. So we literally walked into a house and the bank covered all of it. The interest rate was 8%. We moved 4 years later and made a $27,000 profit.

 

[Lisa Loves Shiny]

I bought my first house at 24. Downsized a few years ago to a smaller house, more land in a great neighborhood. My daughter bought her first house at age 24 but sold it within 5 years and now rents. She sold her home for 1/3 more than she paid for it. My son is in the process of buying his first house right now.

The difference I have observed with my children is they were not interested in a "starter" house. They both wanted big houses in very nice neighborhoods. My son, like my daughter chose to borrow as much as the bank would lend him. There is nothing wrong with that at all, but it is a different mind set than we have and it has it's risks. Most of my co-workers who are my children's age are still paying off student loans.

I know it's frustrating- and I wish you the best.

 

[NewEnglandLady]

My husband and I bought our home in 2010 when I was 28. We rented cheap apartments during our 20's while we saved up our downpayment and now that I've been on the other side for 7 years, I miss the days of renting. We are in a high COL area, so I absolutely understand why young people have a difficult time buying a home. The main reason we decided to buy was because we wanted to start a family and renting a 3/4 bedroom house in a good school district was not going to be cheap, so it made sense to buy. At that time it was a buyer's market, so house hunting was more relaxed than it is today an we had saved the downpayment, so we'd reached that goal.

 

[ringbling17]

Just wanted to add that when I purchased my first home I only had 10% down and did an 80/10/10 loan (I think that's what they called it). I refinanced a year later when the house value was worth more. When I sold the home close to five years later it sold for $140k more than what I purchased it for which allowed us to purchase a bigger home and put more than 20% down.
If I hadn't of purchased my first starter home I would never have been able to afford my subsequent home purchases.

 

[soxfan]

DH and I bought our first home in 2002/2003. He had bad credit from a divorce and student loans, but got his credit score up and had a very good income. We bought a beautiful 3000sqft cape on two acres for $165,000. We had to pay PMI, but the market shot up and we were reappraised in 6 months and PMI was gone.

When I was pregnant with my daughter (2005), we wanted to get out of the town we were in due to the schools not being very good. We went to look at a spec house a good friend of my dads was building. It was incredible. On the lake, brand new, huge, high end everything, wrap around farmers porch (you get my drift.) We were looking at it because we wanted him to build us something on another lake. As we were leaving, he said "I'd sell you this for what I was going to sell it to my attorney for- $375,000." We said we would put our house on the market and if it sold, we'd buy it. We didn't know how hot the market was.

We put it on at $299,000 and it sold in a WEEK for $295,000. We were able to move into the lake house with basically the same mortgage we had on the other place because we bought low and sold high.

Then we decided to move out of the state because the school system wasn't where we wanted our kids to go and private schools were insanely expensive. Took 2 years to sell the house and we took a $30,000 loss. BUT I was able to buy a house here before it went on the market through a friend of a friend. We paid $385,000 and it's currently worth about $475,000 as my town is booming because of low inventory, close proximity to the highway and our schools are ranked VERY high. I couldn't have picked a better town to move my family to- we are so happy here.

So 3 houses, first one bought when I was 27ish, the second one when I was 30, and the third when I was 40. We will be in this house until the kids go to college and maybe beyond. I love it.

 

[ringbling17]

DH and I bought our first home in 2002/2003. He had bad credit from a divorce and student loans, but got his credit score up and had a very good income. We bought a beautiful 3000sqft cape on two acres for $165,000. We had to pay PMI, but the market shot up and we were reappraised in 6 months and PMI was gone.

When I was pregnant with my daughter (2005), we wanted to get out of the town we were in due to the schools not being very good. We went to look at a spec house a good friend of my dads was building. It was incredible. On the lake, brand new, huge, high end everything, wrap around farmers porch (you get my drift.) We were looking at it because we wanted him to build us something on another lake. As we were leaving, he said "I'd sell you this for what I was going to sell it to my attorney for- $375,000." We said we would put our house on the market and if it sold, we'd buy it. We didn't know how hot the market was.

We put it on at $299,000 and it sold in a WEEK for $295,000. We were able to move into the lake house with basically the same mortgage we had on the other place because we bought low and sold high.

Then we decided to move out of the state because the school system wasn't where we wanted our kids to go and private schools were insanely expensive. Took 2 years to sell the house and we took a $30,000 loss. BUT I was able to buy a house here before it went on the market through a friend of a friend. We paid $385,000 and it's currently worth about $475,000 as my town is booming because of low inventory, close proximity to the highway and our schools are ranked VERY high. I couldn't have picked a better town to move my family to- we are so happy here.

So 3 houses, first one bought when I was 27ish, the second one when I was 30, and the third when I was 40. We will be in this house until the kids go to college and maybe beyond. I love it.

Hi soxfan,
I'm just curious but did you downsize when you got your third home? I'm thinking about downsizing now but my husband thinks we should just stay where we are. The homes I've been looking at are smaller in sq feet and mostly on 1/2 acre or smaller lots. Our home is currently on over an acre so our biggest difference would be the property size but I honestly don't think we need all this land. We don't even use it! And we pay at least $250/mo for lawn services, if not more depending on when we need to fertilize it.
The other problem is that the house we are looking at is priced almost as much as what I paid for my home now although if we sell our house now I am pretty sure we can make some money from it. And we've already paid close to 6 years.
It almost seems like a waste of the past 6 years.
The plus is that the property taxes are so much less than what we pay now we would save at least $1k a month if not more, we can do 15 years easily with me just working part time and my husband not working, and the home is in the best school district in the state.

 

[soxfan]

Hi soxfan,
I'm just curious but did you downsize when you got your third home? I'm thinking about downsizing now but my husband thinks we should just stay where we are. The homes I've been looking at are smaller in sq feet and mostly on 1/2 acre or smaller lots. Our home is currently on over an acre so our biggest difference would be the property size but I honestly don't think we need all this land. We don't even use it! And we pay at least $250/mo for lawn services, if not more depending on when we need to fertilize it.
The other problem is that the house we are looking at is priced almost as much as what I paid for my home now although if we sell our house now I am pretty sure we can make some money from it. And we've already paid close to 6 years.
It almost seems like a waste of the past 6 years.
The plus is that the property taxes are so much less than what we pay now we would save at least $1k a month if not more, we can do 15 years easily with me just working part time and my husband not working, and the home is in the best school district in the state.

We did downsize as far as square footage goes, but we gained a fourth bedroom, a pool, more acreage, best neighborhood ever. It was VERY hard to adjust to the creature comforts we didn't have in the new house, but we've been renovating and making it our own. Our old house was just very posh. My master bath was the size of a bedroom! But it was a postage stamp lot with no privacy (.16 acres) Here we have 1.5 acres and I was able to get chickens! I couldn't have them in my old neighborhood We too pay less in property taxes.

One thing to consider- with 1/2 acre lots you will lose the privacy you have now. Are you ok with that?

 

[ringbling17]

The house we found is on a third of an acre but it has a tree lined fence and preserved woods in the back so it is very private. I was shocked when I went to see it bc I honestly didn't think it would be as nice as it was. The way the owner did the backyard makes it so private and the land appears to be bigger than it really is.
My home right now has a pool, finished basement with walkout and an extra bedroom in the basement with a full bath. Upstairs we have a jack and Jill and a princess suite- total four bedrooms. It also has front and back stairs and a sunroom addition.
This house I found has all of that except for the sunroom and a three car garage. It's basically a similar version of our house. It's also about the same sq footage. The basement is finished with a full bath also and has a walk out too. The owner owns a tile and flooring company so he did all the bathrooms and floors beautiful. Bettter than brand new actually.
I was just really so impressed when I found the house bc I've been looking and honestly didn't think I would find anything since I I'm so picky and only want something similar to what I have now. It's also at the lower end of our budget but I would need to sell my house first.

 

[soxfan]

The house we found is on a third of an acre but it has a tree lined fence and preserved woods in the back so it is very private. I was shocked when I went to see it bc I honestly didn't think it would be as nice as it was. The way the owner did the backyard makes it so private and the land appears to be bigger than it really is.
My home right now has a pool, finished basement with walkout and an extra bedroom in the basement with a full bath. Upstairs we have a jack and Jill and a princess suite- total four bedrooms. It also has front and back stairs and a sunroom addition.
This house I found has all of that except for the sunroom and a three car garage. It's basically a similar version of our house. It's also about the same sq footage. The basement is finished with a full bath also and has a walk out too. The owner owns a tile and flooring company so he did all the bathrooms and floors beautiful. Bettter than brand new actually.
I was just really so impressed when I found the house bc I've been looking and honestly didn't think I would find anything since I I'm so picky and only want something similar to what I have now. It's also at the lower end of our budget but I would need to sell my house first.

Wow. I'd do it! Why is Dh against it?

 

[cmd2014]

Just wanted to add that when I purchased my first home I only had 10% down and did an 80/10/10 loan (I think that's what they called it). I refinanced a year later when the house value was worth more. When I sold the home close to five years later it sold for $140k more than what I purchased it for which allowed us to purchase a bigger home and put more than 20% down.
If I hadn't of purchased my first starter home I would never have been able to afford my subsequent home purchases.

That's what we did too. I worry about young people borrowing to the hilt, because if interest rates go up at all, they'll wind up in trouble. The whole subprime mortgage issue all over again.

 

[whitewave]

Madelise, have you gotten pre-approved for a home loan and spoken with your mortgage lender? That is step one. Call your banker/private banking and get pre-approved for an amount range, ask what the down payment is (I have never heard of a 40% down payment-- that is insane. I honestly don't believe it.)

 

[whitewave]

Add us to the people who have been paying extra each month and are within 5 years of no mortgage!

 

[ringbling17]

Wow. I'd do it! Why is Dh against it?

He's against it bc he hates moving and the land is smaller. I think he also likes the idea of having his dream home. With this home we are in now we are not settling for anything. But property taxes here are close to 15k and for the house I like they are only $3600. So to me it's a smart move to downsize.
The house I like actual is more sq feet. It's just the land that's smaller.

 

[cmd2014]

Add us to the people who have been paying extra each month and are within 5 years of no mortgage!

Us too, if we're aggressive. We'd have been paid off years ago, but we upgraded into a much more expensive house when we moved (our monthly payments and timelines are the same as interest rates dropped a lot between the first and second home, but the principal is more than double). It will be 8 years left if we do nothing more than what we've been doing. I keep trying to convince DH to downsize, but he loves where we are.

 

[Phoenix]

I bought my first house (a 6-bedroom, 3-storey Victorian semi-detached, 2 train stops from the financial district of London) when I was in my 20's. Bought several more properties in London, Australia and SG since then. This has been the largest contributor to my/ our wealth. The first time I bought and also the time I bought jointly with DH, I/ we put in every.single.penny/ cent of my/ our savings. It was very scary but totally worth it!!

 

[madelise]

I'll never afford a house because I'm a millennial and I buy avocado toast.

 

[SomethingNew]

Completely understand your frustration. $1M+ for a dump is not uncommon in the bay area, regardless for 1st time home buyer or not, just absolutely insane and nerve wracking to put your hard earned money (plus tremendous amount of stress) on some POS. Let alone you may probably be one out of the 10 or even 20+ offers, with folks offering all cash. I would encourage you to look in other nearby cities, such as SSF, Daly City, Bisbane, Cambpell, Union City and Fremont, etc. Don't just restrict yourself in the prime peninsula cities. I have friends who bought in SF, decked out a small but comfortable little unit downstairs to rent out for extra income. They made some equity, and eventually moved to San Mateo, bought an old house and remodeled into a 4 bedroom. Yes, a lot of hardwork/moving/dealing with contractors for the last 5 years for them, but it was completely worth it.

 

[minousbijoux]

I'll never afford a house because I'm a millennial and I buy avocado toast.

Love this! You'll do it, I know you will! Seems to me that EVERYTHING you set your mind to, comes to fruition. So I'm sending you dust - and hugs!

 

[jaysonsmom]

Dh and I bought our first 1800 sq ft townhome (290K) when we were 28. We paid for our own wedding the prior year, so my parents offered the 20% down payment as our wedding present. If it were not for my parent's gift, I don't think we would have been able to buy a home for another 5-6 years. We were very lucky, and bought our home in a newer up and coming neighborhood, and gained quite a bit of equity when we sold it 10 years later. We are now in our second home, a nice sized house in a small gated community, and we have been here almost 7 years, and prices have also gone up nicely since we purchased, so we have been fortunate with the timing of both our purchases. Both of our purchases were done right when housing prices started on an upswing. I do worry about my kids' ability to buy a house one day, so we don't know if we want to downsize when they head off to university, because chances are, they may have to move back in with us one day! I'm also thinking of doing the down payment gift instead of paying for their weddings since I personally think a 1 day event should not cost the same as a healthy down payment on a house!