Is a house a possibility for us?

[FireWithin]

There are so many factors that can go into this, including very emotional ones. I'm not sure if I can cover it all here.

DH and I have been renting for almost 15 years. I put myself through college, and he through his masters. (We had $40,000 in student loans, which are now down to $9,000

For emotional and financial reasons I just so badly want a house.

We have been digging ourselves out of cc debt and student loan debt for so long. Three months ago we got an inheritance of $15,000. We immediately used $3000 to pay off cc. The rest is in a cd for a future house. DH also got an off cycle raise.

Now with so little debt to pay off ($200 a month, as opposed to $550), we started to look for a house. We don't intend to buy for a year; we think the market will only continue to benefit us, we want a more sizeable down payment, and I want to test to make sure we can afford a house. We think we can save $800-900 a month for more of a down payment. This will test how much we can afford for housing expenses. This would put our housing expenses (mortgage, taxes, insurance) to $2000 a month (factoring in our $1150 month rent now.) Our gross monthly income will be $5000 a month.

Mortgage calculators say we can only afford a $200,000 house, with a down payment of $16,000. The problem is you can't find a house here for so little. I am sooooooo sad. The lowest we have seen for a 3 bedroom is $275,000. I don't know if we can afford that, but one of my questions is will a mortgage lender lend us that much?? DH has a very stable university job. I do not work, but I intend to tutor this school year, hoping to bring in $3000-4000 this year, but we can't trust it as stable income. We are homeschooling, so I don't wish to go back to teaching FT.

[velochic]

Originally Posted by Mammo2Sammo

The lowest we have seen for a 3 bedroom is $275,000. I don't know if we can afford that, but one of my questions is will a mortgage lender lend us that much??

This is exactly the type of lending that resulted in the current housing crisis. Banks *did* let people overextend themselves. I believe that we will see some major lending regulations put into place over the next several months and years. In the meantime, please don't make the same mistakes millions of others made and buy more house than you can afford because emotionally you feel like you need a home.

At 5K gross, you dh probably brings home about 3500. A mortgage of $250K (that's assuming a down payment of $25K on a $275K loan) is going to be about $1500 before PMI (or second mortgage), insurance and taxes. Your monthly payment is probably going to be $2000. That means that your house payment would be nearly 60% of your take-home pay. In all honesty, I don't think any lender would give you a loan knowing that your payments would be more than half of your take-home pay.

[FireWithin]

Originally Posted by velochic

This is exactly the type of lending that resulted in the current housing crisis. Banks *did* let people overextend themselves. I believe that we will see some major lending regulations put into place over the next several months and years. In the meantime, please don't make the same mistakes millions of others made and buy more house than you can afford because emotionally you feel like you need a home.

At 5K gross, you dh probably brings home about 3500. A mortgage of $250K (that's assuming a down payment of $25K on a $275K loan) is going to be about $1500 before PMI (or second mortgage), insurance and taxes. Your monthly payment is probably going to be $2000. That means that your house payment would be nearly 60% of your take-home pay. In all honesty, I don't think any lender would give you a loan knowing that your payments would be more than half of your take-home pay.

I don't want to make the same mistake that so many made. I want to feel safe and secure, not scared by our bills.
We will see at the end of this month how much he brings home a month post tax, 403b, etc.



We moved a lot as a child, always renting. I just want a place where I can plant a rose bush and see it grow, year after year.

I am feeling so stuck where we are living. DH has a great rewarding job, we live in an area we love. We really want to stay.

We would need a very sizable downpayment to make the prices here doable. Maybe the prices will go down some more.

[D_McG]

I would consider buying an apartment or townhouse in your situation.

[UUMom]

South of Boston, or South Boston? Does your dh work in Boston? If so, you absolutely don't want to deal with a commute.

What are the various communites, say, in a 30 mile radius of dh's work?

[FireWithin]

Originally Posted by UUMom

South of Boston, or South Boston? Does your dh work in Boston? If so, you absolutely don't want to deal with a commute.

What are the various communites, say, in a 30 mile radius of dh's work?

He works at BU. We are in Quincy. We want to stay within public transit. His commute right now, via red line, is 1 hr 20 min, more than I feel good about. We don't want to go further away. DS is going to an "unschooling school" in Waltham this year two days a week. This year is a test to see if our school commute is reasonable for living in Quincy, the city we love. We are considering Cambridge, because DH could bike, and they have a good first time buyers program that will reduce our mortgage up to $130,000. We are considering a row house in Cambridge, but we might be priced out fo those also.

[TiredX2]

I don't fully understand your financial situation (is the $3500/month net accurate? why are you paying your student loans off early? are you saving for retirement? can you live comfortably off of $1500/month? etc...?).

In you situation, my first stop would be a mortgage broker. Lay everything out that you laid out for us and see what is available in your situation.

I *know* that you should keep your housing expenses below 28%, or whatever, but that just wasn't going to happen for us. So I also understand others making the same choice. BUT, we also had a 20% down payment and were saving (though not, at that point fully funding) for retirement.

[PenelopeJune]

As someone who's mortgage is just under 50% of our take-home income, I would advise you to wait. It's really, really hard to make ends meet right now for us. (I have a post on this board about it, so I won't repeat it.)

[UUMom]

Yk, In your situation, I would not have any moral issues with buying a house in the 275k range. If you could find something like in Cambridge, I would grab it. That seems nearly impossible, imo. But if there was a ever a market to find a bargain, this could be it. The market is down, and you are also young , plus your dh has a stable university job in a universty city. I have never in my adult life seen housing prices so low. They may even go lower, too. But tradtioanlly, Boston is a hot market. Unless the end of the world as we know it is coming, I would buy in the next year or so. Real Estate is always a good investment -- you can't make more Earth, kwim?

[Lit Chick]

Ah, Boston. Housing was the #1 reason we left MetroWest and moved to Arizona (I also have family here).

DH and I bought a house we could afford. However, it's a long commute. 2 years ago, that wasn't an issue. Now it is. Our mortgage is only 1K, but the cost of food and transportation is getting close to being as much as having another house. Scary.

And while we bought a house we could afford, many of our neighbors did not. That's double scary, wathcing blocks crumble. It's not dire yet, but it's not confidence inspiring either.

The desire to have your own place is big, I know. But when you have a house and stuff goes in the crapper, you can't just pick up and move... that's been a hard adjustment. Be cautious. Do NOT overextend yourself financially. Better to wait and have something stable than rush in and be ruined later.
That said, the Boston housing market is a lot better than many places. Not much land, not many houses, and always a big demand. If you *can* get something in Cambridge, wow. And if you can eliminate a car commute... good for you.
It really could go either way. Here's hoping things work out.

[FireWithin]

Originally Posted by UUMom

Yk, In your situation, I would not have any moral issues with buying a house in the 275k range. If you could find something like in Cambridge, I would grab it. That seems nearly impossible, imo. But if there was a ever a market to find a bargain, this could be it. The market is down, and you are also young , plus your dh has a stable university job in a universty city. I have never in my adult life seen housing prices so low. They may even go lower, too. But tradtioanlly, Boston is a hot market. Unless the end of the world as we know it is coming, I would buy in the next year or so. Real Estate is always a good investment -- you can't make more Earth, kwim?

Well. . . we haven't found anything in Cambridge in the 275 range, but with the first time homebuyers program, we might be able to bring it down that low. So really, we are seeing high 300s, low 400s. The one problem is that we just signed a year lease in Quincy. We need to live in Cambridge for a year to qualify for the program. I will spend time there this winter to see if renting and then owning there will feel right for us. so, we won't be able to buy for 2 years, unless we leave this lease early. I am thinking if Cambridge feels right to us, we will leave end of winter, early spring.

[FireWithin]

Originally Posted by TiredX2

I don't fully understand your financial situation (is the $3500/month net accurate? why are you paying your student loans off early? are you saving for retirement? can you live comfortably off of $1500/month? etc...?).

In you situation, my first stop would be a mortgage broker. Lay everything out that you laid out for us and see what is available in your situation.

I *know* that you should keep your housing expenses below 28%, or whatever, but that just wasn't going to happen for us. So I also understand others making the same choice. BUT, we also had a 20% down payment and were saving (though not, at that point fully funding) for retirement.

Starting this month we will see an increase because of a raise. $3500 is an estimate. We are not paying out student loans off early. I have been away from some of these loans for 10 years, which is often the payoff time for loans. We have been considering using our extra funds to pay off the loans, so that it will free up our last $200 a month in debt - but it does feel counterintuitive to pay off, in order to save. The thing is $8000 of the loan is at 6.75%, unchangeable, and we are still paying off interest. Our possible cd rate for the $12000 we have is 4%. If we pay 10,000 off this month, we will be able to save another $2000 in a year.

We are saving for retirement. We put in 3%, the university puts in 5%. we could be doing more.

We are trying to figure otu if we can live comfortably on $1500 a month. That is what we are testing now. Up until now, all extra money was going to debt repayment (cc), or we were at times putting ourselves back into debt. Which is not going to happen again. Which is what we are testing this year.

DH and I agreed that we should go to a broker and set up a plan.

I am getting great feedback, lots of different ideas. thankyou

[MamaMonica]

You're being very thoughtful to plan and consider all the options. Seeing a mortgage broker is a great idea, and should be the first step. Then you'll know what's needed financially and can make plans. You don't have to ever use that broker, but you'll have information.

[Malva]

The US real estate downslide is not over, not by a long shot. I'd wait for the market to weaken further, maybe a couple years down the road and buy then.

[Alare]

Originally Posted by UUMom

Real Estate is always a good investment -- you can't make more Earth, kwim?

No, it is NOT always a good investment. Especially when a mortgage payment is over half the net income.

OP, you have to factor in costs of maintaining a house into your calculations, too. Lawn maintenance, HOA fees, the other miscellaneous things that come up like having to replace the roof/water heater/air conditioning. By living on only 1500 dollars after mortgage in an expensive place like Boston, how will you save money to pay for these things?

[holidaymama]

I am not trying to shoot down your dreams as I know how you feel with needing your OWN house...to plant a rose bush: I felt the same way before we bought our house.

But, the poster that mentioned all of the maintanance is right. Our mort. is less than 20% of our income, but there is a lot of maint. you have lawn care, much higher electric bills, unplanned things like the air going out or painting, the list goes on and on!

Maybe you could rent a house where you want to live for a year with the payment you would be making and see how it goes for a year...if it's too much, at least you can get out before you are in over your head.

Good luck! It's so hard when emotions play such a big part!

[AnalogWife]

We went thru our state housing authority (also in New England) and they made sure we weren't getting in over our heads, I definitely recommend them (our downpayment loan doesn't have to be paid until we move, we didn't have to pay closing costs, our interest rate is looooooooooow, as is our monthly payment.) The lending bank will tell you what price range you're in, have you visited the bank? What is the Cambridge deal again?

We bought in 2004 when the market was still high, but I believed in buying a centrally located house close to town, near both our jobs---and boy am I pleased with that decision now with gas and all. What is the Cambridge deal again? They give you $130k??? Can you explain?

[UUMom]

Originally Posted by Alare

No, it is NOT always a good investment. Especially when a mortgage payment is over half the net income.

?

Ack--stop yelling.

*Often* a good investment. Esp when one does the sort of work in the sort of town we're talking about.

There ya go. I realized I used the verboten SAT 'always* word. lol

[Bird Girl]

One thing that you may wish to do is compare the kind of place you could rent for your target housing payment and the kind of place you could buy. Leaving aside the question of the down payment, you should be able to rent OR buy a comparable place. Where we are, in the SF Bay Area, one can rent a substantially nicer house than one could purchase for the same outlay. That generally means that the market has further to fall.

I would check out thehousingbubbleblog.com to get a very realistic view of the national housing market. Plenty of people there will understand your true desire to put down roots, but will caution you about the complex international credit situation that has put housing so far out of reach for so many middle-class people.

You are smart to wait. Be careful, and don't think of buying for at least 18 months. This housing market will not be V-shaped--we will bounce along the bottom for many, many months, like an L or a wide U.

[p.s]

I think that no more than 2.5 times income is a good marker. That and at least 20% to avoid PMI. And save money until then.

can you plant a rose bush in a container?

of the financial/ money forums I frequent, it sounds like the people who invest in the Boston area real estate (like landlording) are still waiting for bargains. Prices have fallen, but still "overpriced" for an investor. Have you looked into foreclosures?