I know nothing about homeownership...Impart your knowledge, please.

One thing that also hasn't been brought up yet is that your monthy mortgage payment and can and will probably go up during it's life several times. Your escrow amount will eb and flow and any shortages will be reflected in your monthly payment. What makes that change you ask? Increases in property tax and insurance payments. Our insurance rates went up about 30% in the last couple of years, and property taxes also went up. What that amounts to is a $150 increase in the monthly payment, or you can pay it in a lump sum to keep it at the same rate. Just something else to keep in mind.

True. My payment has gone up about $150 over the past decade or so due to increases in taxes. Oddly enough, my home owner's insurance is billed directly to me rather than through my escrow account and like my car insurance (same company), I can pay it how I chose to: all at once, quarterly or monthly.

MitchellC wrote:

carguy123 wrote: Studies have shown that people who own homes have many times more personal wealth than people who don't. A lot of that is the equity build up, but here are a few other things as well. From NAR, WHY HOME OWNERSHIP MATTERS

I understand how these are all correlated to home ownership, but it's hard to believe the causation. Perhaps the National Association of Realtors has some sort of benefit from spreading this message; I can't imagine what, though. I would guess that individuals capable of buying a home have a much larger net worth than those who are not capable of purchasing a house.

I would say that the CAUSATION is the fact that homeowners have "bought into" the area and tend to be more stable. Kids do benefit from a more stable atmosphere which homeownership brings.

Of course there are exceptions to every rule. I've known homeowners who were the trashiest people you'd ever know and their kids were the worst in the school and I've seen people who have rented the same house for 20 years.

racerdave600 wrote: One thing that also hasn't been brought up yet is that your monthy mortgage payment and can and will probably go up during it's life several times. Your escrow amount will eb and flow and any shortages will be reflected in your monthly payment. What makes that change you ask? Increases in property tax and insurance payments. Our insurance rates went up about 30% in the last couple of years, and property taxes also went up. What that amounts to is a $150 increase in the monthly payment, or you can pay it in a lump sum to keep it at the same rate. Just something else to keep in mind.

Actually that has been brought up, it was in the NAR facts and figures. "Most home owners enjoy stable housing costs—a fixed-rate mortgage payment might not change for 15 to 30 years while rent typically increases 3 % a year" but obviously it got lost in the midst of a bunch of other stuff. But when you own a home the only thing that goes up on your payment, presuming that you went with a fixed rate mortgage, is the price of your taxes, insurance and HOA fees if you live in a neighborhood with an HOA.

Which brings up a point I haven't seen anyone mention, HOA dues or a tax rate that is higher than the norm reduces the amount of loan you can qualify for and therefore reduces the price of a home you can afford.

This isn't an exact number because rates vary, but $100 HOA dues or extra taxes or anything reduces the amount of home loan you can qualify for by about $11,000.

I must be unusual, but my house isn't a massive financial drain. Sure, we'll put money into it once in a while, but it's less trouble than any given car I own. We're more likely to improve the house than repair it. On the car analogy, there seem to be a lot of lemon homes in this thread :) I have learned that the typical $300 "inspection" is a crock though - they're either just boilerplate stuff or it's so slap-dash as to be useless.

One thing to remember is that eventually, you'll pay off that mortgage. And then you see the real benefit of owning versus renting. Think about it - if there wasn't money to be made in home ownership, nobody would want to be a landlord I had to rent a house for the first two years after I moved to the US because nobody wanted to check my Canadian credit rating, and every penny of that rent is gone.

Flynlow wrote: I'm going to be a voice of dissent here. You don't want to be a homeowner (YET). Buying a house to save $70 a month on a rent increase is a losing proposition. I GUARANTEE you will spend double that in small stuff on the house, EVERY month. New appliance or yard implement, painting walls, HVAC problems, etc.

This has been a very interesting thread, and I wasn't going to get on it, but I do want to disagree with the general statement above.

The gaurantee that you will spend a bunch is not true- sure it can be true, in major costs. But it also can be quite untrue- IF (and it's a big if) you know what you are getting.

There's a lot of good info out on the 'net- so before you go searching through a house, you should have a good idea what you personally are looking at. This is because not all inspectors know or will tell you everything.

For instance- a pipe leak is bad, very bad. But a faucet leak may not be- it could be as simple as taking the faucet module out, and either cleaning or replacing. KNOWING that will go a long way. You must know your leaks (drains are the worst, but that's because I think they are gross. they all are evil). Know your plumbing- if you see a bunch of copper pipe, but faucets give your rust- that's a bad thing (steel pipe over time are bad, especially mixed). Know that for ALL of the basics- wiring, HVAC, water, drainage, airflow. Flushing out what appears to be expensive to be cheap can save you tons of money, but missing obvious things that are insane to fix will cost you tons of money.

Same goes for outide. Can you get away with a reel mower? Do you NEED a snow blower? Must you have a weed trimmer? Sometimes, you can be in the same place, and all of that can be yes- you can mow with just a reel mower, but have to have a weed trimmer. And while the lawn is small, the shape of the driveway makes it impossible to shovel when you get more than 1" of snow.

Knowing and understanding those kinds of details will mean a lot to your purchase. If everything works, you'd be suprised how long they last, and work well. And knowing HOW things work- that will save a ton when they break (I just replaced my timer in the washer- cost $120, but saved me buying a new washer/dryer combo- first expense in either for 16 years now).

When looking at a house, especially on the thin, do know what you can compromise- a/c, garage, w/d, dishwasher, etc. Somethings you can't- fridge, oven/stovetop, sink, heater. Gotta have those.

Anyway- not every old house is a money pit. Yes, they can be, in a very, very expensive way. But if you are careful, they may not, too.

Keith wrote: I must be unusual, but my house isn't a massive financial drain. Sure, we'll put money into it once in a while, but it's less trouble than any given car I own. We're more likely to improve the house than repair it.

I agree with Keith. Our homeowner expenses have been more for improvments than anything else. We have spent twice as much as the original purchase price on improvements. Of course the house is twice the original size and appraised at 3 times the money we have put in it so far.

It helps that I do most of the repairs (plumbing, electrical, etc) including all the work to put a 1/2 bath in the basement.

I'll back those that say "rent a house." I did this when we were just SO's before marriage and getting started, too. More space, a garage, felt like grown-ups but fixed rent where someone else is responsible when something bad happens.

At this point of the real estate cycle, there are so many people that are caught with houses that can't sell. There are a lot of people out there that would kill for a reliable, handy renter who will pay the rent each month to help them cover the mortgage payment. You might even be able to negotiate a rent to own scenario - say add a clause that says that 10% of rent is transferable to potential future sale or something like that.

This is all good talk. My wife and I will be looking for a house later this year. We have very good credit, but have not been able to recover a good down payment since we lost so much selling our last home in 2009. We'll see how she goes.

I'm renting out the house I own in Ontario right now. It's more or less breaking even on month-to-month costs but that money is still paying down the mortgage. (It really, really helps that I have decent tenants!) I bought it for $76k in 2004, put somewhere around $10k into it (new furnace & siding were the big expenses, but I also repainted every room, fitted new doors, put up better-than-nothing insulation in the basement, and a bunch of other stuff.) if I were to put it on the market right now I'd ask $139 and maybe get $130. I don't think I've done too badly.

I'm living in a 56 m² apartment right now and the rent + utils are pretty much the SAME as paying for mortgage + utils in my house. Insurance was something like $360 a year and property tax is around $1200.

When I moved over to Germany I thought I was only going to be here for 8 months. If I'd known I'd be in for 3+ years I'd have bought something for sure. As long as you make a sound deal on the property, I would say buying ALWAYS makes financial sense.

Actually given how renter-friendly Germany is I'd think you're doing better renting than owning if you plan to live there for less than 10 years.

Flynlow wrote: I'm going to be a voice of dissent here. You don't want to be a homeowner (YET). Buying a house to save $70 a month on a rent increase is a losing proposition. I GUARANTEE you will spend double that in small stuff on the house, EVERY month. New appliance or yard implement, painting walls, HVAC problems, etc. I bought a foreclosure 3 years ago with 10% down and with what I thought was a reasonable money cushion (~$20K). I blew through that in the first 6 months without trying, and I'm pretty frugal (hell I didn't have furniture for almost the first year while I was painting, doing electrical work, etc.). I am now trying to get out of my house because I am exhausted, I pour all my time and spare $$ into improving it, and I realized that's not how I want to spend my 20s. I'm going back to a simple, small apartment and couldn't be happier. So, that being said, and with no offense intended, I would whole-heartedly recommend waiting. Pay off your CC debt and build up a solid cash savings ($10,000+). THEN go looking for a house. Maybe you'll have married the girl by then, which'll be one thing off the list. If you don't care for your current living situation, by all means, find another apartment or try and rent a house to see if its for you. Even if its more expensive than your current place it'll be cheaper than home ownership. Also, if you really want a garage, you can typically rent those too! I rented one for ~$200/month that was large enough for 2 cars with 6ft of work space around both, and had power, lights, my tool box, desk for laptop, etc. It was great, and I was far more productive on my cars when my free time didn't go to home maintenance. Your mileage may vary, and I am certainly biased, my basement's flooded twice this week and I had to shut the furnace down to protect it, so its been a cold, damp couple of days. But that's my $0.02.

Yes, like marriage, home ownership has its ups and downs as well, but atleast your allowed to paint your walls, and do things in your yard because you own them. You don't need to check in with someone else before doing such things.

glueguy wrote: You might even be able to negotiate a rent to own scenario - say add a clause that says that 10% of rent is transferable to potential future sale or something like that.

There is a time to rent and a time to buy. My daughter wants to buy and we have to keep counseling her to keep renting. Her job location and industry isn't that stable. She's here today but she just moved back from L.A. and she was in Houston before that.

By and large, costs to maintain a home have never been a big ticket item for me either, but I have replaced an HVAC system once which wasn't pocket change.

But on to the 10% of the rent transferable to a future sale issue, cause that is an issue - BIG ISSUE.

It must be done right or it can't be done at all.

If you are talking a credit towards a future sales price that's one thing, but if you're talking a credit towards down payment that's another issue altogether.

1) credit towards a future sales price? - What price? Today's price or tomorrow's price? Since appraisals are no longer done to determine a real value how do you even determine real value tomorrow? It's much better to come to terms on a price when the lease is done, but know full well the Seller's going to think he's getting screwed if the guy rents for a couple of years and then wants a 2 year old price.

2) credit towards downpayment? - Can't be done. In a regular transaction the seller can't pay any part of a buyer's closing costs, but he can pay closing &/or prepaid costs which really accomplishes the same thing unless we're talking large sums of credit here.

Actually there is a way for the seller to contribute towards the buyer's closing costs, but the buyer's not going to like it. If you get a rent & market study done by an appraiser to determine a fair rent for the property then the buyer can get a credit towards his downpayment for any amount he pays that is IN EXCESS OF the fair rent.

You'd like the rent & market study to be done at the time of the lease not at the time of the sale because a) the buyer and seller both know what they are getting into and b) it's very hard to determine what fair rent would have been in the past. There's no MLS for rent pricing.

Something that hasn't come up in this thread is owning vs renting come retirement time. If you own your home, sure you have to maintain it but you don't have to pay rent. The idea: buy a house, maybe move up two or three times through the neighborhoods etc but never take your eye off the long term goal of 'paid for by retirement time'. You probably won't need all that much house by then, so maybe you sell the big 'un and buy something smaller for cash. Now you are in good shape: paid for house and a cash cushion. THAT's what all that worry and aggravation was all about.

OTOH come retirement time the lifetime renter still has to pay rent till the day they finally shuffle off this mortal coil. They have ~zip~ to show for all their cash outlay. Their rent has provided someone else's retirement cash cushion.

I am currently working with a customer who worked their way up the housing ladder with retirement in mind. They just sold their large house and along with a not so great retirement plan with them depending mostly upon SS they actually have enough to live quite comfortably.

They are getting a long term loan to keep the new house payments low, rather than paying cash for the new house like I would have. They felt more comfortable leaving the cash in the bank but keeping their monthly payments low so that they could live within their SS means.

If I were to do it again, I'd look for a house with a rental built into the basement or one that I could add a rental in the basement. The added income would be worth it in my eyes to deal with having a tenant on the property.

I wouldn't think of hitting retirement without a paid off house. In reality, @35, I have passed the 6-digit threshold. I only owe 5 digits on my house now. Normal payments would have me owning outright @ 46 IIRC, but we are paying more aggressively. I'd love to own it outright before I'm 40. Whether we stay here or use the equity as a BIG down payment on the mountain compound, having a "free" place to live is a strategic move on my part. Yeah, money could grow faster in the market, but when the E36 M3 hits the fan, a paid for home = freedom.

digdug18 wrote: If I were to do it again, I'd look for a house with a rental built into the basement or one that I could add a rental in the basement. The added income would be worth it in my eyes to deal with having a tenant on the property.

Just keep in mind that not every area will allow you to have a rental unit such as a basement or detached garage, but in almost all cases you can have a roommate.

carguy123 wrote:

digdug18 wrote: If I were to do it again, I'd look for a house with a rental built into the basement or one that I could add a rental in the basement. The added income would be worth it in my eyes to deal with having a tenant on the property.

Just keep in mind that not every area will allow you to have a rental unit such as a basement or detached garage, but in almost all cases you can have a roommate.

Funny, most parts of the country I have looked at to live do let you. Roomate just sounds bad, why don't you just call them your life partner and get it over with...

digdug18 wrote: Funny, most parts of the country I have looked at to live do let you. Roomate just sounds bad, why don't you just call them your life partner and get it over with...

IDK, are you boning him?

Funny, most parts of the country I have looked at to live do let you. Roomate just sounds bad, why don't you just call them your life partner and get it over with...

It has to do more with the separate unit and 2 families in a space zoned for one.

In L.A. it's quite common to have room mates as the cost of living is so high, but in reasonable cost areas roomies aren't so common since almost everyone can afford their own place.

Yeah, in an actual apartment that is in a family home, it needs to be rezoned for a multi family dwelling. Most people don't go to the trouble and end up paying for it in the long run. Multi family dwelling meaning separate heating for each unit and fire walls between units.

In reply to digdug18:

Multi-family duplex or apartments are a PITA if YOU live on site. Hearing the exploits of the upstairs tenant at 3 a.m. when you gotta be up at 5 a.m. for work isn't worth any amount of rent. Otherwise, duplex or apartments are good investments... if you live elsewhere.

I am currently house shopping and only have 1 thing to contribute: a Realtor listing a house and not mentioning that it is a short sale in the listing should be clubbed.

MrJoshua wrote: I am currently house shopping and only have 1 thing to contribute: a Realtor listing a house and not mentioning that it is a short sale in the listing should be clubbed.

Yes, because that could change someone's mind about if they even want to look at it. But that's probably why some don't.