Buying vs. Renting

[EverClean]

I have recently been accepted to VCU and my wife and I are looking to buy. The problem is we're expecting our first in April so she'll be staying home with the baby and we'll have little to no income. We do have a nice little nest egg put aside but we're not sure if we should use that as a down payment, put it towards tuition, or use it to pay off monthly bills such as food and utilities- or just invest it and borrow more money from the government. Does anyone know if banks are willing to still loan us money for a mortgage and if so, how do we make the mortgage payments with no income? How would we make rent payments with no income? Can we just borrow from the government and use that money to pay off our loan? Or are we forced to rent if we have no income? Is anyone in a similar situation that could give me the low-down as what my options might be? We have A+ credit so we should be able to qualify for most programs. Thanks!

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[Hot pickle baby]

I have recently been accepted to VCU and my wife and I are looking to buy. The problem is we're expecting our first in April so she'll be staying home with the baby and we'll have little to no income. We do have a nice little nest egg put aside but we're not sure if we should use that as a down payment, put it towards tuition, or use it to pay off monthly bills such as food and utilities- or just invest it and borrow more money from the government. Does anyone know if banks are willing to still loan us money for a mortgage and if so, how do we make the mortgage payments with no income? How would we make rent payments with no income? Can we just borrow from the government and use that money to pay off our loan? Or are we forced to rent if we have no income? Is anyone in a similar situation that could give me the low-down as what my options might be? We have A+ credit so we should be able to qualify for most programs. Thanks!

youll have a hard time gettin a mortgage without income. Better buy the house as soon as possible.

 

[Dental Mom]

I'm a Mortgage Broker here in Florida. Yes, you can get a loan without working, but your interest is going to be a lot- a lot higher than if you can show that you work. So, you could end up paying a lot more for a mortgage than if you rent. Real state is slowing down nation wide. Home prices are very high and you will not make that much money when you sell because the country will stay on a down side for few yrs. This scenario is because you won't be working.

If I was you, I'd rent and buy later when things are more stable. Even if you buy a condo and something brakes you have to pay for it. Little things here and there add up and if you are living off loans it's hard.

Babies are expensive even buying the necessary. They do have little surprise expenses here and there. Plan on using that extra money for emergencies. Go to school with a peace of mind that if anything happens, you guys have savings to be covered.

Congratulations on the baby & getting accepted! What a great year for you both!

 

[Hot pickle baby]

I'm a Mortgage Broker here in Florida. Yes, you can get a loan without working, but your interest is going to be a lot- a lot higher than if you can show that you work. So, you could end up paying a lot more for a mortgage than if you rent. Real state is slowing down nation wide. Home prices are very high and you will not make that much money when you sell because the country will stay on a down side for few yrs. This scenario is because you won't be working.

If I was you, I'd rent and buy later when things are more stable. Even if you buy a condo and something brakes you have to pay for it. Little things here and there add up and if you are living off loans it's hard.

Babies are expensive even buying the necessary. They do have little surprise expenses here and there. Plan on using that extra money for emergencies. Go to school with a peace of mind that if anything happens, you guys have savings to be covered.

Congratulations on the baby & getting accepted! What a great year for you both!

I couldnt disagree more. Real estate is not slowing down in cities and in collegetowns and on the water. Thats just a ridiculous statement. If you look around a college you can hardly find a thing.

Dentalmom needs to realize that at most colleges a rent payment can be a minimum of $800.00 a month and it can be cheaper to buy a home.

IF your poor that doesnt matter, you still have to make SOME PAYMENT SOMEWHERE to live. WHY NOT OWN?

At the end of the four years, who cares whether you can sell it or not right off. Youll be making over $100,000 so its not like you will need to dump it right off.

Think dentalmom, your not being a financial advisor or realtor to dummies, these are going to be DOCTORS, in 4 years they are NOT going to care if they can sell a home or not. They will own several homes.

If your going to dental school someday you need to think above your status now.

 

[jpollei]

I couldnt disagree more. Real estate is not slowing down in cities and in collegetowns and on the water. Thats just a ridiculous statement. If you look around a college you can hardly find a thing.

Um, Richmond isn't really a beach town, you probably don't want to live on the James River (though boxes are cheap), and living in town isn't really the same as in Chicago or Seattle or NY. My money is on renting (which I would have done had I chosen to go to VCU instead of UNC).

The argument can be made that "you're throwing money away on rent when you could be accruing equity"...however I'm in line with what Dental Mom posted. Sure you may outgrow an appartment in two or three years (we moved into a bigger place before our 4th year), but at least you'll have the freedom to move and not be worried about selling when you leave. And you can always sublet during summers off or rotations away from school. Buying might be better if you're planning on staying in the area beyond four years (a residency, practice, etc). But renting isn't nearly as bad as some make it out to be.

 

[ncalcate]

I couldnt disagree more. Real estate is not slowing down in cities and in collegetowns and on the water. Thats just a ridiculous statement. If you look around a college you can hardly find a thing.

Pickle Guy - next time you make a claim like this, make sure you back it up with facts.

http://www.boston.com/business/arti...rices_as_housing_market_slows/?p1=MEWell_Pos5

Last time I checked, Boston is a college town, it is on the water, and it is a city. So according to your logic, prices should be going up, right?!?

To the OP - your best bet is to acknowledge that real estate is not a sure thing... the property that you purchase is not necessarily going to go up over the 4 years... and it could even go down. Carefully consider this before making that purchase. In 4 years, you may be specializing and have matched into a program 3000 miles away, making it so you have to sell the property, potentially at a loss.

Having said that, I, along with a lot of my classmates at Buffalo, have purchased homes. So a lot of students do it. Just be aware of the risks.

 

[dentalman]

Good post. No one can predict the future. One news magazine says we are at the top of the market. Another says it is still going up.

Having said that there is a risk. i wish I would have owned something for four years. But I can't go back now. And it was nice when my water heater was leaking someone else took care of it.

 

[EverClean]

Thanks for all of your responses. I've been doing quite a bit of research, seeing what I qualify for- I currently have a pretty descent salary working for a publishing company part time (17 hours week making about 40K/year) while completing my undergrad education. I have excellent credit so I currently qualify for a good sized loan as well as awesome interest rates as long as I do it all before I start school in July because they base it off of the previous 24 months and not future potential salary necessarily.

I was offered a special program for Virginia first time home buyers by a local loan officer in Richmond (I have several connections out there even though I currently reside in Utah). It's called VHDA which entitles me to a 30 year fixed mortgage at 5.375% and little to no money down. That's a pretty sweet deal considering the rest of the country is looking at around 6% or so.

The other thing is that the area I'm looking at, Chesterfield county which is about a 20 minute drive away from campus is one of the fasted growing areas in the nation with an average appreciation of 15% per year. Now, I recognize that does not guarantee that it will continue to appreciate at that rate for the next 4 years, but there's a very slim chance that homes will decrease in value over the next four years. Therefore, it seems to me that buying in this area could be quite a nice investment. I spoke to a current VCU dental student who is graduating next year and he did the real estate route and made money off of his first house at the end of his second year, rolled that profit into his second home he has now and will be selling at a significant enough profit to "almost pay for all 4 years of school."

I don't expect to have the same outcome as he did, and I'm not sure what other risks he took, but even if I could break even after 4 years I still see it as a major benefit because I'd be building even better credit so when I graduate I can qualify for better interest rates etc. I just hate seeing $750/month in rent go to waste when I can get into a home for around $110,000 ($10,000 down payment) and pay 5.375% interest with payments $750/month including property taxes, mortgage insurance, etc.

The big question I have now is should I do an interest only loan instead so I can get into a better neighborhood and a nicer house? I know I will be moving after the 4 years and an interest only ARM could get me into a better place. I've tried doing some research of my own to see exactly what risks are involved, but does anybody know what would be the smartest thing to do in an appreciating area knowing I'll be moving after 4 years? If I do a 60 month interest only ARM and sell after 4 years, do I pay a penalty? What if I get into a house for $150,000 and sell if for $180,000 after the four years and I only have $10,000 in equity, does anyone know how the end numbers work out?

(Sorry this is so long, I've been thinking about this almost 24/7) Here's what it boils down to:
1) Do I do a 30 year fixed mortgage at 5.375% and get into a $110,000 home with $10,000 down? OR
2) Do I do a 60 month interest only ARM (I know a lender that can lock me into a 3% rate) and get into a $150,000 home with $10,000 down?

 

[Hot pickle baby]

Pickle Guy - next time you make a claim like this, make sure you back it up with facts.

http://www.boston.com/business/arti...rices_as_housing_market_slows/?p1=MEWell_Pos5

Last time I checked, Boston is a college town, it is on the water, and it is a city. So according to your logic, prices should be going up, right?!?

To the OP - your best bet is to acknowledge that real estate is not a sure thing... the property that you purchase is not necessarily going to go up over the 4 years... and it could even go down. Carefully consider this before making that purchase. In 4 years, you may be specializing and have matched into a program 3000 miles away, making it so you have to sell the property, potentially at a loss.

Having said that, I, along with a lot of my classmates at Buffalo, have purchased homes. So a lot of students do it. Just be aware of the risks.

man, that lady can write all she wants, I havnt seen a drop in prices. I have been looking for the last 6 months.

All I see is outrageous prices and then UNDER CONTRACT. I see new homes selling for over 110 a square foot when they used to be 90 and the homes are moving quite well.

You remind me of my grandmother. She is crazy. If the newspapers said that we were going to be invaded my aliens Saturday morning to protect ourselves then she would go to WALMART and buy a cart load of shotguns.

I bet you believe what you see on TV too? Figures.

 

[Hot pickle baby]

Thanks for all of your responses. I've been doing quite a bit of research, seeing what I qualify for- I currently have a pretty descent salary working for a publishing company part time (17 hours week making about 40K/year) while completing my undergrad education. I have excellent credit so I currently qualify for a good sized loan as well as awesome interest rates as long as I do it all before I start school in July because they base it off of the previous 24 months and not future potential salary necessarily.

I was offered a special program for Virginia first time home buyers by a local loan officer in Richmond (I have several connections out there even though I currently reside in Utah). It's called VHDA which entitles me to a 30 year fixed mortgage at 5.375% and little to no money down. That's a pretty sweet deal considering the rest of the country is looking at around 6% or so.

The other thing is that the area I'm looking at, Chesterfield county which is about a 20 minute drive away from campus is one of the fasted growing areas in the nation with an average appreciation of 15% per year. Now, I recognize that does not guarantee that it will continue to appreciate at that rate for the next 4 years, but there's a very slim chance that homes will decrease in value over the next four years. Therefore, it seems to me that buying in this area could be quite a nice investment. I spoke to a current VCU dental student who is graduating next year and he did the real estate route and made money off of his first house at the end of his second year, rolled that profit into his second home he has now and will be selling at a significant enough profit to "almost pay for all 4 years of school."

I don't expect to have the same outcome as he did, and I'm not sure what other risks he took, but even if I could break even after 4 years I still see it as a major benefit because I'd be building even better credit so when I graduate I can qualify for better interest rates etc. I just hate seeing $750/month in rent go to waste when I can get into a home for around $110,000 ($10,000 down payment) and pay 5.375% interest with payments $750/month including property taxes, mortgage insurance, etc.

The big question I have now is should I do an interest only loan instead so I can get into a better neighborhood and a nicer house? I know I will be moving after the 4 years and an interest only ARM could get me into a better place. I've tried doing some research of my own to see exactly what risks are involved, but does anybody know what would be the smartest thing to do in an appreciating area knowing I'll be moving after 4 years? If I do a 60 month interest only ARM and sell after 4 years, do I pay a penalty? What if I get into a house for $150,000 and sell if for $180,000 after the four years and I only have $10,000 in equity, does anyone know how the end numbers work out?

(Sorry this is so long, I've been thinking about this almost 24/7) Here's what it boils down to:
1) Do I do a 30 year fixed mortgage at 5.375% and get into a $110,000 home with $10,000 down? OR
2) Do I do a 60 month interest only ARM (I know a lender that can lock me into a 3% rate) and get into a $150,000 home with $10,000 down?

If it were me, I would do a 5-year arm and get my payment really low. Then I would pay what I could each month to gain some equity.

Thats still better than renting.

Plus, hell, if you come home and you want to paint a room then its yours to paint!

 

[SMC2UCLA2_]

If it were me, I would do a 5-year arm and get my payment really low. Then I would pay what I could each month to gain some equity.

Thats still better than renting.

Plus, hell, if you come home and you want to paint a room then its yours to paint!

Yea totally. And if the roofs leaky, you get to fix that too...AWESOME! Piping bursts in the wall and annihilates your dry wall and causes mold...yumm.

Seriously, rent...u are better off in this scenario. Do u want to stay there after you graduate? if the answer is a likely no, then you are really putting yourself in a tight bind. What if the housing market is down and you take a loss? dont forget that a house costs much much more than the monthly payments. Expect to pay another 10% a month or so for expenses and insurance. Expect more for maintenance fees, dont forget escrow fees, etc.

Im a skeptic and I wouldn't buy right now when I know my money can earn around 12% a year safely. If a home can't clearly beat this then ill steer away.

Either way, good luck. I doubt you will seriously seriously regret either decision you make.

 

[ncalcate]

man, that lady can write all she wants, I havnt seen a drop in prices. I have been looking for the last 6 months.

All I see is outrageous prices and then UNDER CONTRACT. I see new homes selling for over 110 a square foot when they used to be 90 and the homes are moving quite well.

You remind me of my grandmother. She is crazy. If the newspapers said that we were going to be invaded my aliens Saturday morning to protect ourselves then she would go to WALMART and buy a cart load of shotguns.

I bet you believe what you see on TV too? Figures.

Let me make sure I understand this correctly. You attack Dental Mom, calling her statement "ridiculous." You insist, presumably based upon what you believe is your vast knowledge of the real estate market, that property values are going up around the country, especially in "cities and in collegetowns and on the water." I then provide you with a link to a leading newspaper that quotes several experts who attest that real estate in Boston (which is on the water, is a college town, and is a city) is going down. You ignore that completely, continue to insist that real estate is going up (but provide nothing beyond anecdotal personal experiences to substantiate your assertion) and then compare me to your grandmother??? That's the only response you can come up with???

Well pickle guy, I would recommend that you apologize to Dental Mom for calling her well-reasoned post "ridiculous." It was a completely inappropriate, rude, and obviously ignorant comment. I can only hope that at some point in the future you'll respect people a bit more. The sooner you post your apology, the better.

Based upon the facts, I think we all know who the ridiculous one is here.

 

[SMC2UCLA2_]

Let me make sure I understand this correctly. You attack Dental Mom, calling her statement "ridiculous." You insist, presumably based upon what you believe is your vast knowledge of the real estate market, that property values are going up around the country, especially in "cities and in collegetowns and on the water." I then provide you with a link to a leading newspaper that quotes several experts who attest that real estate in Boston (which is on the water, is a college town, and is a city) is going down. You ignore that completely, continue to insist that real estate is going up (but provide nothing beyond anecdotal personal experiences to substantiate your assertion) and then compare me to your grandmother??? That's the only response you can come up with???

Well pickle guy, I would recommend that you apologize to Dental Mom for calling her well-reasoned post "ridiculous." It was a completely inappropriate, rude, and obviously ignorant comment. I can only hope that at some point in the future you'll respect people a bit more. The sooner you post your apology, the better.

Based upon the facts, I think we all know who the ridiculous one is here.

right on. couldn't have said it better myself.

 

[Hot pickle baby]

Let me make sure I understand this correctly. You attack Dental Mom, calling her statement "ridiculous." You insist, presumably based upon what you believe is your vast knowledge of the real estate market, that property values are going up around the country, especially in "cities and in collegetowns and on the water." I then provide you with a link to a leading newspaper that quotes several experts who attest that real estate in Boston (which is on the water, is a college town, and is a city) is going down. You ignore that completely, continue to insist that real estate is going up (but provide nothing beyond anecdotal personal experiences to substantiate your assertion) and then compare me to your grandmother??? That's the only response you can come up with???

 

[Hot pickle baby]

Let me make sure I understand this correctly. You attack Dental Mom, calling her statement "ridiculous." You insist, presumably based upon what you believe is your vast knowledge of the real estate market, that property values are going up around the country, especially in "cities and in collegetowns and on the water." I then provide you with a link to a leading newspaper that quotes several experts who attest that real estate in Boston (which is on the water, is a college town, and is a city) is going down. You ignore that completely, continue to insist that real estate is going up (but provide nothing beyond anecdotal personal experiences to substantiate your assertion) and then compare me to your grandmother??? That's the only response you can come up with???

Well pickle guy, I would recommend that you apologize to Dental Mom for calling her well-reasoned post "ridiculous." It was a completely inappropriate, rude, and obviously ignorant comment. I can only hope that at some point in the future you'll respect people a bit more. The sooner you post your apology, the better.

Based upon the facts, I think we all know who the ridiculous one is here.

Real Estate is still booming and going up. Appologize to me sucker!

Your like an old man who reads the paper and is scared of his shadow.

I read a newspaper last winter that said the swine flu was going to wipe us out. hahahahaha

I bet that scared you to death!

guess what, it didnt happen. I guess the same writers are writing about real estate now. Also, please in the future, refrain from using big words that you do not understand. They do not make you look smarter!