Buying a home or renting?

[McClinas]

So, I'll be attending a clinical PhD program this fall, and originally, I thought I would just rent for 4 or 5 years while I'm progressing though the program. A friend of mine suggested buying a house, and the more I've contemplated it, the more it makes sense:
1) The housing market is struggling right now (it's a good time to buy).
2) There is an $8,000 tax credit for first time home buyers
3) Rather than throw money away on rent for 4-5 years, I'm making an investment by buying a home and will have $ to show for it when I complete the program

It might be tough to finance this venture (down payment, mortgage, taxes, insurance, repairs, etc.) on my savings and stipend, but I think I might be able to squeak by. I'm also a little concerned that once I purchase a place, I'm basically committed to living there for the duration of my program, whereas if I rented, it's usually just a one year lease and I can change locations when the lease is up.

Have people been in the situation? What have you done/what have other people done in your program that you wish you would have done? I guess I'm looking for some advice/opinions on this matter. Thanks!

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[prettikittibaby]

1) The housing market is struggling right now (it's a good time to buy).
2) There is an $8,000 tax credit for first time home buyers
3) Rather than throw money away on rent for 4-5 years, I'm making an investment by buying a home and will have $ to show for it when I complete the program

It might be tough to finance this venture (down payment, mortgage, taxes, insurance, repairs, etc.)

Though I didn't get accepted anywhere, my plan was to buy. Since I didn't get in, I'm staying here, but still buying. When I was on interviews, I stayed with one person who owned, and one who rented. I heard that some people did buy. I was also told that one girl had rented her first year and bought the second and wished she'd bought from the beginning.

Here's my opinion from looking at houses right now (I'm supposed to submit an official offer on a house today). The house is a 3 bedroom 2 bath. $182,000. With a down payment of $7000 and a 30 yr mortgage at 5.3, my monthy payment is $1000. The general rule for where I am currently living is $400 per/bedroom. So, I'd be cheaper than renting for an equal size, and I'd be the owner, instead of paying someone else. (so far, I've not enjoyed my landladies. Though I do have a significant other, I qualified for this loan amount on my own, and the house will be solely mine. That's just my opinion. Never hurts to get prequalified to figure out what you can afford and then see what that equates to in the place where you're moving. Cuz that's a pretty important factor.

 

[prettikittibaby]

The girl with whom I stayed has a 2 bedroom townhouse and paid $550/month for her mortgage, but she said that that was also because of the sizeable downpayment they had, but it was a nice place.

 

[Therapist4Chnge]

The market was insane back when I had this decision, so it was rather easy, though now it is much more of an option for people. If I were moving to a decent town and could swing the finances, I'd probably buy. However, if you lived in a place like Flint, MI, where you can't give away a house, I wouldn't. Definitely check with a financial advisor who knows your local area, because there can be some very real factors that can impact long-term investment options.

I actually though about this for my fellowship....but the market is rather expensive where I am moving, so unless I can find a short-sale or find a good deal on a foreclosure, I'll be relegated to renting for two more years.

 

[Metta]

Another consideration, especially if you're looking at renting a house or condo, is the possibility of the property going into foreclosure while you're living there. If the owner is having financial difficulties, they'll let a rental property go into foreclosure before their own home. And in most places, there are few or no laws protecting renters when a property goes into foreclosure. A last-minute move, on top of one's usual grad school workload, would NOT be fun...

 

[McClinas]

Thanks for your responses! Another question: what do you think about buying a house vs. a condo?

A house could potentially be very expensive if a massive problem surfaces while your living there (i.e. you need a new roof). Also, a house requires a lot more of your time and effort (mowing the lawn, shoveling snow, fixing appliances around the house). I think typically, houses are tougher to sell, whereas you can get rid of a condo pretty easily when your moving away for internship. On the other hand, I like the idea of living my own independent house.

What do you all think?

 

[kbean]

Another consideration, especially if you're looking at renting a house or condo, is the possibility of the property going into foreclosure while you're living there. If the owner is having financial difficulties, they'll let a rental property go into foreclosure before their own home. And in most places, there are few or no laws protecting renters when a property goes into foreclosure. A last-minute move, on top of one's usual grad school workload, would NOT be fun...

I'll second this. This happened to me and we got evicted by the bank without even knowing that the house had gone into foreclosure. There were NO laws on our side, even though we were model renters, always paid our rent on time, etc...

 

[RileyG]

My dad bought the condo I am currently living in. From what we've been told (and from what I've observed from being here) condos in my town are pretty easy to sell...people are interested in having their own place to come to for football games. Some of my neighbors are only here during football season and their condos are either empty or rented when the season is over. It's nice and quiet here and people don't trash the place since we're mostly owners. I like not being responsible for mowing the lawn and doing other house maintenance. I got to paint whatever colors I wanted and I didn't worry when my dog decided to destroy my blinds (still not sure how that happened). That's another thing...depending where you move to, it may be hard to find housing that allows pets. So if you have a pet, owning may be a good idea.

 

[prettikittibaby]

Thanks for your responses! Another question: what do you think about buying a house vs. a condo?

A house could potentially be very expensive if a massive problem surfaces while your living there (i.e. you need a new roof). Also, a house requires a lot more of your time and effort (mowing the lawn, shoveling snow, fixing appliances around the house). I think typically, houses are tougher to sell, whereas you can get rid of a condo pretty easily when your moving away for internship. On the other hand, I like the idea of living my own independent house.

What do you all think?

That's a good question. I can tell you my impression, though it's solely MY opinion.

I am not looking at any condos/townhomes to buy because I HATE HOAs. I also don't want to have to share walls with other people. I like the privacy. The yards for townhomes/condos are typically really small too, and I like yards.

(I currently rent in a condo and I have had major issues with my HOA, my landlady threatened to sue them on my behalf, and on the behalf of one of her former tenants for a different/similar problem.) My parents own rental properties that are townhomes and they have had major problems with their HOA in one of the communities. (They didn't have separate water meters per unit, so everyone paid everyone's water bill, and half the ppl didn't pay the HOA fees, so it was a HUGE problem. That's the way it is at my current residence, so we're not allowed to wash our own cars at our houses since it's community water. Additionally, my landlady doesn't give a S*** about the fact that every toilet in our house runs, because she's not paying the extra water bill from it.

So I'm not really sure how much easier townhomes/condos sell. My parents ended up bailing out of that townhome and selling instead of renting and they lost money on it (they bought it because it went into foreclosure). When they were listing it, they were worried about people looking at their place, liking it, and then going and buying a different unit in the complex that was forsale for less money (this complex had many units for sale). But they actually ended up selling it within 1 week...

My family is very good at home repairs, so I don't have to worry about the expenses of that. Also, if you have a real estate agent whom you trust, s/he should point those things out to you that are faulty/in need of repair. I live in a city where everything is 50-100 years old, so we've got to check the plumbing and electricity, etc. Wouldn't you have some of these same issues with you a condo though? Cuz my "wonderful" neighbour had a water leak, and she had to solve it on her own, same with when the power went out to the east half of my unit (it's 3 floors, and half the power on each floor worked, and half didn't).

 

[phillydave]

Good to know there are others groaning over this decision too! My girlfriend and I are in the midst of deciding whether to rent or buy. We have very modest incomes right now, and probably will for the next 5 years, however, we are leaning towards buying.

 

[GreenPsych]

Well I'm on another side of the fence... need to sell before leaving for school. We purchased 4 years ago and the market is definitely against us so it's a very real possibility that we could have rent and a mortgage when we move. However, my significant other is not in school and pulls in a well above average salary.

I would think twice about buying unless you can be sure that the market will change drastically in the next 5 years.

 

[researchgirl]

2) There is an $8,000 tax credit for first time home buyers

Note: It is my understanding that you must close on your home by April 30th in order to qualify for this tax credit. So, unless you make some REALLY quick decisions, you are unlikely to get said tax break.

Two 1st years in my department are buying homes and one has already bought a home. One will have her mortgage payments be equivalent to what her rent currently is, though she had money for a down payment to help with that, which is awesome. So, it's definitely doable in some places.

 

[Psleepless]

Good to know there are others groaning over this decision too! My girlfriend and I are in the midst of deciding whether to rent or buy. We have very modest incomes right now, and probably will for the next 5 years, however, we are leaning towards buying.

phillydave brings up a good point about modest incomes, mcclinas. a modest income can sometimes work in your favor! see whether the area you're moving to has any housing available (mine does) specificially for low- or middle-income individuals or families. my area has this, and before purchasing my current home, i saw a number of low-priced places set aside legally for those making less than $Xk/yr for singles or less than 1.5($Xk)/yr for couples, etc up to families. also check the area (or your current area) for organizations for first-time homebuyers; they can direct you to lower-priced properties and even help you through the buying process.

i was barely able to buy but am very glad i did, since i have a number of tax deductions and am building up equity even in a down market. comparable homes in my area rent for more than i pay monthly to own.

another plus is that many people need to sell quickly (someone else mentioned short sales) in this unfortunate economy, and if there is going to be a lucky buyer who gets a place at a discount, why not you?

 

[Psleepless]

Note: It is my understanding that you must close on your home by April 30th in order to qualify for this tax credit. So, unless you make some REALLY quick decisions, you are unlikely to get said tax break.

Two 1st years in my department are buying homes and one has already bought a home. One will have her mortgage payments be equivalent to what her rent currently is, though she had money for a down payment to help with that, which is awesome. So, it's definitely doable in some places.

im pretty sure this tax credit has been extended for another year with some income limits.

 

[prettikittibaby]

Note: It is my understanding that you must close on your home by April 30th in order to qualify for this tax credit. So, unless you make some REALLY quick decisions, you are unlikely to get said tax break.

Two 1st years in my department are buying homes and one has already bought a home. One will have her mortgage payments be equivalent to what her rent currently is, though she had money for a down payment to help with that, which is awesome. So, it's definitely doable in some places.

You must be undercontract by the end of April and close by the end of June, but there are whispers that they're going to extend it again. It takes a LONG time to get the $8000 though. Also, $8000 isn't guaranteed, it's a MAX, the tax credit is a % of the value of the home/sale price.

 

[deleted176373]

If you can afford a house in this market, then yes, I would do it. Interest rates and prices will rise in the future... how far in the future is anyone's guess but the market has shed much of it's excess value. I doubt that you'll lose money 5 years from now, but no one can absolutely promise you the outcome.

Recently I purchased a foreclosed home in the DC metro area (in Maryland.) 5 bedrooms on a 1/4 acre. I paid $285k for it, local houses on my block on smaller lots are going for $325-350k, find a good investment property that needs a little love to turn the corner. Bargains are out there. I will come out ahead on this one. My interest rate is 4.75%, so I am not worried much about that, even though it's a variable rate loan... In the military with being less than 5 years in a location, variable rate loans make sense.

Mark

 

[ILGirl]

You must be undercontract by the end of April and close by the end of June, but there are whispers that they're going to extend it again. It takes a LONG time to get the $8000 though. Also, $8000 isn't guaranteed, it's a MAX, the tax credit is a % of the value of the home/sale price.

Seriously! You are impressive. I don't know any 20 year olds who are as together as you seemingly are. (Yes, I know others exist, but you are quite the rarity.)

 

[lamorena]

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[robinsena]

I would totally buy in this economy, if I can afford the down payment. As long as you make sure the place you're buying is in a competitive area, I think you should be good. You can always rent it out in the future once you're done with grad school and selling (still) isn't a good option.

 

[PsychPhDone]

I opted not to buy because:

- my apartment complex has many amenities I haven't seen offered in any developments/condo complexes
- the "good" houses and condos where I live are farther from campus than I'd like to be
- I'd have to handle my own maintenance/let people in, and since I'm single, the onus would be completely on me. I love our maintenance staff. If I had a sig. other I'd be more likely to buy.
- I'm stressed by not knowing what the market will be like in a few years and needing to sell then. Between getting stuff wrapped up for internship and moving for that, selling is another hassle I don't need

Some people in my program do buy, but I just can't do it right now. I haven't found a house or condo that beats my apartment.

 

[deleted176373]

Even if you can't do any work on your house while i grad school (face it, who will have the time?!)

You mean I wasn't supposed to have time to lay a complete new floor in the kitchen and do all the demo and electric to prepare for the new cabinets? I did the plumbing too. It came out killer, I let pro's do the cabinets and the granite, but did everything else. Even the contractor thought I did an amazing job on the floor (saved $2,000 there, $2,000 on the demo, and another $1,000 by doing the electrical and plumbing myself.)

Mark

 

[lamorena]

/

 

[mmbright]

As a new home owner I have a little insight to add to this discussion.

Recently I and my significant other made the decision to buy a home and invest in a duplex which makes paying the mortgage that much easier. We are able to rent out our lower 3 bedroom unit for $1,200 a month which pays for a significant portion of our mortgage. As a result my monthly contribution to the mortgage is CHEAPER than it was for me when I was renting.

Granted taking on tennants is work-but if you are handy around the house like I am (which is funny because I know my way around a tool box much better than my boy friend) or have a handy significant other this is definitely a nice way to afford not only a home but likely have a cheaper monthly commitment then renting.

We also seriously considered buying a condo but it is important to consider what the resale market is in the city where you are looking. We found the market in our area to be flooded with new condo projects, many of which were not even able to sell all units when the market tanked. Some are now empty or are converting to apartments. Given the low likelihood of being able to sell in the future we decided against this route.

Selling our house on the other hand will be much easier as we chose an area a 20 minute busride away from the campus I attend that has a phenomenal school district and therefore houses in this area hold their value well, sell easily and it was very easy to find tennants who want to live close to a good school program.

If you are thinking of buying I would suggest checking out www.zillow.com which does a pretty good job of tracking the housing market and will allow you to see the fluctuation in home prices over a significant period of time.

Hope this helps!

 

[UnLurked]

You must be undercontract by the end of April and close by the end of June, but there are whispers that they're going to extend it again. It takes a LONG time to get the $8000 though. Also, $8000 isn't guaranteed, it's a MAX, the tax credit is a % of the value of the home/sale price.

For those interested it's $8,000 or 10% of the value of the house, whichever is lower. At least that's what our realtor told us. My wife and I are on our way out to look at houses right now, with two of us it just makes sense to buy.

 

[deleted176373]

wow, while in grad school? props to you! my husband and his dad did all the work in our house themselves. except for adding a new roof and some plumbing. you do save a ton if you do it yourself.

Yes, I am in my 3rd year... took longer than it should of because of school. The wife was very patient. We had to put a roof on here, and no, I didn't do that either... That really does take a good work crew.

Mark

 

[psychgrad10]

My fiance and I were thinking about buying because a payment would be much less than what we are paying in rent for our house now, but I was worried about where we would be in the next 5 years, our income, etc and I was too worried to be stuck with a mortgage and the cost of upkeep on a house and an impending wedding, student loans


For those of you who are buying, what do you plan to do when it comes to having to leave for internship, if you leave the area you're living in? Will you sell, or will your spouses stay in the house?

 

[phillydave]

If you are thinking of buying I would suggest checking out www.zillow.com which does a pretty good job of tracking the housing market and will allow you to see the fluctuation in home prices over a significant period of time.

Hope this helps!

Great website, thanks!

 

[mmbright]

Great website, thanks!

Glad you find it useful. Hopefully it helps in your deciding whether or not to buy.

 

[hamsterpants]

Seriously! You are impressive. I don't know any 20 year olds who are as together as you seemingly are. (Yes, I know others exist, but you are quite the rarity.)

I know. Damn. She is probably really 40 IRL

 

[deleted176373]

My fiance and I were thinking about buying because a payment would be much less than what we are paying in rent for our house now, but I was worried about where we would be in the next 5 years, our income, etc and I was too worried to be stuck with a mortgage and the cost of upkeep on a house and an impending wedding, student loans


For those of you who are buying, what do you plan to do when it comes to having to leave for internship, if you leave the area you're living in? Will you sell, or will your spouses stay in the house?

My spouse will be staying during the internship year because she is working on her law degree. She'll follow after that.

Mark

 

[prettikittibaby]

I know. Damn. She is probably really 40 IRL

har har. That thought scares me. Not the age per se, but I'm not quite ready to be 40. haha. Like, really scary. People say that I act like I'm 26... But in my head people who are over 35 should have good careers and children. I'll pass on the children, thanks. Shudder

 

[VeggieDelight]

Just signed my lease for next year (starting in August)! Wahoo! Let's hope I made the right choice . My mom, being in real estate, is dead set on me buying next year or later, but I just couldn't deal with that on top of everything else right now. For the time being, I'm happy being across the street from the bus stop, with parking and a DISHWASHER. I count my blessings...

And the icing: my balcony will allow me to yell audibly at the bus, something I feel like I'll be doing quite often.

 

[katciao]

My husband and I are trying to decide what to do in terms of housing, also. My school is in a city that is a couple of miles from the beach in Southern California. Thus, off-campus housing is very expensive. Houses within a few miles of beaches, for the most part, seem to hold their value. My husband, a musician, is on the road sporadically and approximately half the year, usually while grad school is in session. That means I am completely responsible for a couple of dependents for most of the time I'm in school. I'm inclined to stay on campus as on-campus apartments are large, attractive, cheap, a 10-minute walk to class, next door to dependent care facilities, and in a safe environment. The only con I can see of living on campus in my situation is lack of covered parking in the residential area. My husband really wants to buy a house off campus. Don't know what we'll do.

Good luck in your decision!