Homeowners, enlighten someone who's never owned before

Hokay, so here's the deal: I pay $600 a month for my apartment, split with my girlfriend, $300 apiece, plus electric, cable, phone, all that crap. I always end up making money at the end of the month, and thus my savings account has been growing steadily. My girlfriend reports that her finances are the same, and actually has a lot more tucked away than I do.

I was recently promoted at work (although I have yet to begin training for said position), and have been told it comes with a fairly substantial raise in pay. So after I start getting on people's backs about beginning my new job (and getting the benefits on said new job), I think I'm going to be able to afford something greater than a 700 sq. ft. apartment. My lease is up in January.

After doing some very quick math, a $140,000 home (pretty average for small, 2 or 3 bedroom starter homes in the area), a 15 year, 6% mortgage ends up only costing about $100 more a month than my rent.

I have talked to my dad about this, he suggested checking with a local bank or credit union to find out the usual closing costs with local homes. Are there any other suggestions you guys have? Do it yourself? Find a broker? Am I crazy? Are there way more hidden costs than I'm expecting?

Maybe I just have dreams of my own garage dancing in my head

I happen to have a handy dandy "good faith estimate" for exactly that amount from my credit union.

140k 4.875% 30 year loan

If you are paying 600 dollars a month on your apartment, you're at more than "about 100 dollars" for your monthly payment. Here's my monthly breakdown (With a 3.5% down payment):

Principle & Interest: $728.00 Mortgage insurance: $61.92 (You'll probably need this unless your down payment is 20% or greater) Taxes: $150.00 (Mine, in NoVa. YTMV) So total, NOT counting HOA fees should you encounter them is: ~$950

I'm also going to need to bring around 7500 dollars to the table at closing for my down payment and closing costs (although the seller is paying some of that, really YOU are paying for it.)

In short, I think your math is off somewhere. Not saying it's not doable, just that you need to think very hard, take a good long look at your budget, overestimate everything, and get a good, trustworthy realtor. That will be the hardest part. Realtors are in the same category in my mind as lawyers and politicians.

Good luck. :)

What therex said. Also you better off with a 30-year fixed and paying extra on it. Interest rate is lower and you can apply all of the extra to principal, thus knocking off a ton and a half of interest. PMI will happen. Also, get married before buying a house with somebody. We aren't, and it's worked, but if anything ever happens neither of us could keep the house and the extra costs and paperwork suck.

although its tempting to just look at only the payment, there are a lot of other things like HOA fees and homeowners insurance, and also the fact that if you have a freestanding home, its going to cost more $ per sq. foot to heat and cool.

Don't forget, it's not just the mortgage.

You've got property tax yearly, abt 2000.00 where I live

There's your monthly upkeep, heat, light and water. It takes about $500.00 per month just to keep the house up and the services connected here.

Anything extra tha breaks costs money. $8000.00 for a new roof on my buddies house last year, hot water tanks, wahser, dryers, etc.

This is why I rent. It's far cheaper than owning in the short term and I have no kids to leave anything to so why bother buying a house.

I love being able to pick up the phone and say "I need a new stove" and one appears a few days later.

We looked at buying a few times and for us, it's just not worth it.

Shawn

therex covered it pretty well. At the risk of being a party pooper: there was a thread here recently about a guy who bought a house with his GF and now she's trying to clean his clock. I know it sounds evil to have to sit down and hammer out a written agreement with someone you care about but believe me, you'll both be better off for it.

Along those lines, you need to consider: can you keep up the payments etc on your own if something happens? Have you considered what might happen if you have a sudden large unexpected expense (need a car, medical bills, etc)? It's not the planned expenses that clobber you, it's the ones you never saw coming.

There are some benefits as well, you will have your tax write offs from owning a home, interest rates are really really low. But right now if I were buying I would plan for living in that same house for a minimum of 5-10 years, the recovery of the housing market is very slow, you will probably still lose money if you try to sell anytime under that.

Don't forget all the damn trips to homedepot as well. Want to dig a hole? Time to buy a shovel. The amount you spend in miscellaneous crap is insane.

I notice you are in Pennsylvania. You also have probably noticed the tax structure attempts to balance the budget on the backs of property owners.

I'll bet you may find that you may add upwards of $300/mo in various taxes to that $700.00...

I just bought a house and it's awesome! I highly recommend it, we spend only a little over renting, our house is twice the size, I have a yard, it's awesome. We made it a point to find a home without HOA or fees, (due to my hobby of non-running lawn art) some of the neighbourhoods we looked in were run down because of this.

Also, if you buy before 1 Dec. there is a $8000 tax credit.

Thanks for the comments. I've considered most of this...owning a car has taught me have three times the amount of money you think you'll need to do something and you'll be ok.

As for the girlfriend, she and I agreed that if we end up owning a house together, we're going to have a lawyer draw up paperwork saying if things were to go south, this person gets this and this person is entitled to this etc etc. Believe me, I'm a realist when it comes to that. I love my girlfriend and probably won't ever be with anyone else, but E36 M3 happens.

My dad also implied that I would need way more money past the mortgage payment. Insurance, property tax, and all that fun stuff will be figured in.

These are pretty good numbers:

$150,000 purchase, 3.5% down payment, 30 year FHA at 5.5%

Principal & Interest - $825

Taxes, insurance and MIP - $350 - 400 or more depending on locality.

Figure $1200 is a good round number. You might shave a little from that, it is a bit conservative. That's double...not $100 more per month.

It is however, a really good time to buy. The market is basically bottomed-out, rates are low, first-timer tax credit, etc.

bludroptop wrote: first-timer tax credit, etc.

To get the $8,000 tax credit you MUST CLOSE on the house by December 1 - not December 31st as many believe.

Also consider what name to put the house in and what will you do should you separate with your GF, not to be a negative type but consider buying it then having her pay rent, so if she does go her own way the house remains yours, or vice versa.

That said, buy one now the timing is perfect and no feeling tops actually owning property

Listen to blu, unless you have a HUGE down payment, $700 a month isn't even close to a $700 a month payment.

Continue to do your research, remember heat/air will cost substantially more in a house than an apt, also water (watering the lawn for instance) and ANYTHING that goes wrong is now your responsibility.

I bought my house with no money down for a fixed rate 30 year mortgage, but I had credit rating over 750. I did some remodeling with the help of my dad and 3 years later I had the house re-assessed and re-financed and now I am 1 year away from owning 20% of my house. I did get a sweet deal from my family on the initial price though. My mortgage payment was only 2/3 or so of the total cost per month that got sent out as "mortgage" payment. Like others said, there's taxes, insurance, private mortgage insurance and possible other things that get tagged on to your payment. (Althought you dont need to escrow taxes and insurance in with your montly payments but you need to be saving that money anyways.)

Some "YMMV" things I've noticed...

I live in lower Bucks Co (Bristol Twp) and my taxes are roughly $3500/year, paid through the escrow account by the mortgage bank (typical). Oddly enough, the tax bill gets sent to us and we have to drive it over to the bank so they pay it.

My insurance is paid by me, generally split into two payments every 6 months (this is apparently less typical).

Budget at LEAST one w/e a month for house chores and repairs... lest you end up like me with a to-do list a mile freakin' long...

The comment about trips to the home center is very true.. although it does taper off after a couple of years...

Mowing grass is annoying... at least to me it is... that goes for yard-work in general, actually...

If you are planning to play with cars, pay close attention to the areas where you are looking. Where I live, "project" cars in various states of disuse are common (for the most part, a white, blue-collar neighborhood), so my crusty Volvo in my back yard under a tarp won't generate complaints... however, in a more "pricey" area, the locals may not be so lenient. Of course, this leniency tends to have an inverse effect on the quality of schools in the area... Whether or not this matters is up to you and your g/f (future wife?).

As others have mentioned, either marry the girl or have a long, hard discussion about the legal issues of buying a house together. Hell, I'm regretting buying a car w/ my g/f...

ignorant wrote: Don't forget all the damn trips to homedepot as well. Want to dig a hole? Time to buy a shovel. The amount you spend in miscellaneous crap is insane.

Amen. For the first 6 months I owned my first house I was going to the Depot at least once a week, and occasionally 5 times a weekend. I also discovered during that time that it was impossible for me to walk out of there without spending at least $100. I'd walk in for a tape measure and somehow $100 worth of crap piled itself into my cart.

My mortgage on an 85k house is 540. Plus escrows for taxes and insurance, that comes to about 750. It's not bad, but in the last two years I have spent 2200 on windows, 2400 on a furnace, 2100 on insulating the whole place with blown celulose, and 15k building my own garage. (the garage was rolled into my 85k refi). The house still needs lots of landscaping work, and paint, and some roofing, and carpet...and on and on. Not to discourage, but it adds up!

Joey

In 2000, I bought a fixer-upper for $77,000. In 2005, I sold it for $93,000. After paying realtor fees and the cost of the stuff to fix it up, I came out pretty even. My house payment was around $600 per month (maybe $700?), but a 1300 sq/ft apartment with a garage would have been at least that much.

I had a place to park my trailer; I started my woodworking hobby; I could weld and paint in my garage; I could have a pet without asking permission; I was able to do repairs/upgrades as I wanted (such as adding a 20 amp circuit to the garage); I never heard noises from a tenent living a few feet away from me.

When I moved for a job relo, I rented for almost a year. All my tools were in storage, where they began to rust. I had to pay someone too much money to replace the fuel pump in my truck (I had nowhere to do it). We weren't allowed to use a charcoal grill on our tiny balcony. We couldn't get dish TV--we were forced to suffer with Comcast and their piss-poor customer service. We had to walk up three flights of stairs so we didn't have to live below horny tenents.

My current house is worth about $25,000 less than what I paid for it (but I'm still in better shape than many neighbors). I'll still never rent again.

When I looked into buying this house 7 years ago, I asked my father for advice. His reply was "....it's the best thing that you can do".

I cursed him for a year or so afterward ...seemed like I was spending money left and right....appliances/paint/carpet/roof/furniture/lawn mower/tools, freakin' venetian blinds !!!....and on and on.Everything that it takes to make something your own.

Still, it was the best thing that I have done thus far.I still need windows and a furnace, but overall I'm happy.

Your utilities will probably be more, your payment will be more and you have to budget for taxes and insurance, plus maintenance.

joey48442 wrote: My mortgage on an 85k house is 540. Plus escrows for taxes and insurance, that comes to about 750. It's not bad, but in the last two years I have spent 2200 on windows, 2400 on a furnace, 2100 on insulating the whole place with blown celulose, and 15k building my own garage. (the garage was rolled into my 85k refi). The house still needs lots of landscaping work, and paint, and some roofing, and carpet...and on and on. Not to discourage, but it adds up! Joey

Ironically, the pile in front of his fireplace has been there for just over a year!

My mother always told me a house is a "full-time" hobby.

She was right. But I enjoy the household projects.

z31maniac wrote: Listen to blu, unless you have a HUGE down payment, $700 a month isn't even close to a $700 a month payment. Continue to do your research, remember heat/air will cost substantially more in a house than an apt, also water (watering the lawn for instance) and ANYTHING that goes wrong is now your responsibility.

But your forgetting the fact that in the beginning of a 30 year most of what you pay is interest. Take 33% (in my bracket) of that back with the taxes and deductibles included. Add in the closing costs. In My case we were renting at about 2000 a month and our mortgage ~2800$ with tax reductions came out about he same monthly.

Are you entering this venture with your girlfriend? You need to read the thread about the guy who bought a house with his GF and then they split...