My wife and I currently reside in the town I will be attending dental school and we are considering if we should continue to rent or if it would be a good time to buy since we will be staying put for the next four years? It seems that renting for four years could add up to a substantial amount, almost half to a third of what an investment in a condo or starter home could be. Has anyone else looked into this option or made a similar decision?
Buying vs Renting
- Thread starter civy87
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The break even point is widely considered to be 4-5 years depending on where you get your information. I'm a gambler and I want a garage... so we're buying. Plus, there are so many distressed and near-distressed homes that it's a pretty sweet time to make lowball offers. Who knows, in 4.5 years the economy may pick up a little bit and we'll make some $$$ off the deal.
i am married and have some properties, though my situation isn't exactly the same as yours, here's my input:
assuming you have done the math and determined that you can actually afford the home with a single income (your wife's), also don't forget about the property tax -
best scenario i think is if your home goes up in value after dschool, you sell it and together with your new income you buy a bigger home for your family with kids.
worst scenario is the home drops in value and you decide to practice in a different town. if you sell you lose money, if you rent it out it can a big pain in butt landlording for house in a different town.
it's going to come down to lots of things - real estate outlook for your area, your future after school, is this house an investment or for the long term,...etc
you probably can't answer many of these questions now, whatever you're leaning towards, remember that the cold hard number$ will tell you much of the story, instincts will tell you the other half.
assuming you have done the math and determined that you can actually afford the home with a single income (your wife's), also don't forget about the property tax -
best scenario i think is if your home goes up in value after dschool, you sell it and together with your new income you buy a bigger home for your family with kids.
worst scenario is the home drops in value and you decide to practice in a different town. if you sell you lose money, if you rent it out it can a big pain in butt landlording for house in a different town.
it's going to come down to lots of things - real estate outlook for your area, your future after school, is this house an investment or for the long term,...etc
you probably can't answer many of these questions now, whatever you're leaning towards, remember that the cold hard number$ will tell you much of the story, instincts will tell you the other half.
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5 yrs x 12 months x $800 rent = close to $50k
With zero debt from my undergrad, the fact that we will be in this location for close to 5+ yrs, low interest rates, and a mildly depressed real estate market, my wife and i have decided to buy.
We both work full time and will be able to qualify for a loan on a house around $140k (probably a 3 bed/2 ba), and when we take out student loans for dental school here in august we should be able to use the money allotted to rent for our morgage (which should be close to $750, 1100 including tax/insurance). Once I enter school, our income will be cut in half but we will can maintain the mortgage with student loans and my wife working, and if she gets pregnant than we will just fall back on the loan.
We will probably do a 30yr note but try to pay more each month. Hopefully there will be some appreciation, but we are comfortable renting it out.
PS im pretty sick of house hunting. The realtor.com app is pretty awesome though
With zero debt from my undergrad, the fact that we will be in this location for close to 5+ yrs, low interest rates, and a mildly depressed real estate market, my wife and i have decided to buy.
We both work full time and will be able to qualify for a loan on a house around $140k (probably a 3 bed/2 ba), and when we take out student loans for dental school here in august we should be able to use the money allotted to rent for our morgage (which should be close to $750, 1100 including tax/insurance). Once I enter school, our income will be cut in half but we will can maintain the mortgage with student loans and my wife working, and if she gets pregnant than we will just fall back on the loan.
We will probably do a 30yr note but try to pay more each month. Hopefully there will be some appreciation, but we are comfortable renting it out.
PS im pretty sick of house hunting. The realtor.com app is pretty awesome though
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Don't buy too much home. You need to keep the total payment (principal, interest, taxes & insurance) at a reasonable level. You don't want half of your total income to be eaten up by your housing expense.
New home owners tend to go overboard and spend a ton of money on new furniture/appliances, painting, decorating the bathroom, new pictures for the living room, lawn mower, new grill, patio furniture, etc. Talk to your spouse and set a realistic budget...and stick to it.
Set aside a few thousand dollars in a maintenance fund. Something will go wrong in the next 4 years, and it may be expensive to repair.
When you're shopping for housing, shop for the general location and neighborhood first, then look for a house in that area. Don't fall in love with a house- you'll pay too much money and overlook some serious problems that will cost you in the end.
Get pre-approved for a mortgage before you start looking for a house. Even if you are approved for a $300K loan, you don't need that much house. Decide your personal upper limit and don't spend any more money than that. And DO NOT look at any houses above your personal limit, or you won't be happy with the less expensive houses.
Contact the administrative staff at the dental school and ask them if any graduating dental students are selling their homes. Also check with the administrative staff of the medical school and residency/fellowship programs.
Don't be afraid to offer less than the seller is asking. In most markets, sales are slow and there are plenty of other houses on the market.
New home owners tend to go overboard and spend a ton of money on new furniture/appliances, painting, decorating the bathroom, new pictures for the living room, lawn mower, new grill, patio furniture, etc. Talk to your spouse and set a realistic budget...and stick to it.
Set aside a few thousand dollars in a maintenance fund. Something will go wrong in the next 4 years, and it may be expensive to repair.
When you're shopping for housing, shop for the general location and neighborhood first, then look for a house in that area. Don't fall in love with a house- you'll pay too much money and overlook some serious problems that will cost you in the end.
Get pre-approved for a mortgage before you start looking for a house. Even if you are approved for a $300K loan, you don't need that much house. Decide your personal upper limit and don't spend any more money than that. And DO NOT look at any houses above your personal limit, or you won't be happy with the less expensive houses.
Contact the administrative staff at the dental school and ask them if any graduating dental students are selling their homes. Also check with the administrative staff of the medical school and residency/fellowship programs.
Don't be afraid to offer less than the seller is asking. In most markets, sales are slow and there are plenty of other houses on the market.
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Great advice, thanks.
We have been trying to decide on a neighborhood over the last few weeks until we get preapproved. Trying to decide if it's worth the commute to buy in a nicer suburb outside of Dallas ($130-140k), or just buy in a more ghetto neighborhood closer to the school (~$80-120k).
We have been trying to decide on a neighborhood over the last few weeks until we get preapproved. Trying to decide if it's worth the commute to buy in a nicer suburb outside of Dallas ($130-140k), or just buy in a more ghetto neighborhood closer to the school (~$80-120k).
I am currently in the same dilemma. I am leaning towards buying, mostly because i will be attending dental school within 45 minutes of where i grew up and about a half hour from where i currently work as an assistant. In the long run i see myself working there as a dentist when i am done with school. So for me to rent seems to be throwing money away. Whereas purchasing a smaller starter home could be an investment after 4-6 years of living there. Also my wife is expecting and a home would be much more comfortable. no worry about noisy neighbors waking up the baby.
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I'm going to be starting DPT school in the fall and the boyfriend/I decided we would like to buy. We both know we are going to be in the area for a few years (at least the next 3-5) due to his job/my schooling and it just seemed silly to waste all that money on rent with nothing to show for...
Also, we figured out our finances that it would be CONSIDERABLY cheaper to buy a house pay mortgage/insurance/etc than renting even a 2-bedroom apartment.
It'll be a great investment on a starter home for us and while I'm in school we are collecting equity and not completely losing all that money to "nothing".
So-- do your research, if it comes out that it would be less to buy than rent (and we considered ALL bills) then I'd say DO IT. We are closing on our first home May 1st (hopefully sooner!)
Also, we figured out our finances that it would be CONSIDERABLY cheaper to buy a house pay mortgage/insurance/etc than renting even a 2-bedroom apartment.
It'll be a great investment on a starter home for us and while I'm in school we are collecting equity and not completely losing all that money to "nothing".
So-- do your research, if it comes out that it would be less to buy than rent (and we considered ALL bills) then I'd say DO IT. We are closing on our first home May 1st (hopefully sooner!)
Just make sure you take into account all of the costs that go into buying a home.
-Down payment, generally 20%, if not will most likely be paying PMI
-Closing costs
-Calculate mortgage
-Taxes
-Insurance
-Maintenence
-If it's a condo or town home check monthly association fees
Markel- the problem is that when you buy a home a vast majority of what you are "putting into" your home is going elsewhere, it can take awhile to really start to pay off your principal. The taxes, association fees, closing costs are not going towards anything. Generally in the first five years 80% of your mortgage will go towards paying down the interest on the loan. Also, if your credit is not the best you will not get a great rate. All I am saying is make sure you do your homework, because you may be throwing away more money by buying a house.
-Down payment, generally 20%, if not will most likely be paying PMI
-Closing costs
-Calculate mortgage
-Taxes
-Insurance
-Maintenence
-If it's a condo or town home check monthly association fees
Markel- the problem is that when you buy a home a vast majority of what you are "putting into" your home is going elsewhere, it can take awhile to really start to pay off your principal. The taxes, association fees, closing costs are not going towards anything. Generally in the first five years 80% of your mortgage will go towards paying down the interest on the loan. Also, if your credit is not the best you will not get a great rate. All I am saying is make sure you do your homework, because you may be throwing away more money by buying a house.
Make sure if you are going to take on the debt of a mortgage that it doesn't impact your loan qualifications for school. In other words, if you put that mortgage in your name, you may qualify for less loans. Hopefully your spouse can qualify alone.
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All things we've considered and the house is in my boyfriend's name only (that way my loans for school are not skewed), the pre-approval was surprising- he was approved fairly easily and with decent rates, plus he has decided to go FHA and we are buying a 70-80k house, not a 100k+ -- living WITHIN your means... I can't believe people who have budgets of hundreds of thousands of dollars. Not what we are looking for in home #1. A small house, 2bed/1bath. That's it. Needs some work done, but not so much that we won't have the change of making anything off it when we go to resale. Our mortgage payment is looking to be about $500 (escrow-ing all other things in as well) + utilities. 2 bedroom apts? $700-900 + utilities. Closing costs-- we have asked the sellers to pay as much as they can (6%) and they agreed- the house has been sitting for awhile and they had an offer a few months ago that fell through, so they have been eager to sell.
But thank you! 😉
These are all really good things one needs to (MUST, in my opinion) consider when buying (at any time).
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We signed papers on a 3bd/2ba house today. Conventional loan for 95% with 5% down @ 4.875%. We got a great deal and got instant $15k equity. Monthly payment (mortgage, mortgage insurance, taxes, home insurance) of $1175 (31% of monthly income). When I start school my wife will continue to work and my student loans will help with the mortgage.
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See! It can be done and you definitely made out and got a wonderful deal. Congratulations! 🙂
I don't believe there is a difference. If you are on the loan or co-signed, either way you are on the loan. They will run a credit check and approve you for the mortgage and it will show up on your credit report as a mortgage loan account. If you do go that route, be sure to never make late payments (>15 days I believe, maybe 30), late mortgage payments destroy your credit score fast.
I'm no expert though. Probably the best places to ask these questions is those whom issue the loans, and maybe an accountant and/or the financial aid department.
My personal take is that buying a house is not worth it unless the house appreciates a good amount. I bought a house in 2000 for $200k, sold it in 2005 for $225k and I would have been better off paying rent. I wouldn't expect any house bought now to appreciate even that much in the next four years, unless you get a great location/deal. Rates are lower now though so it would help a bit.
People say, well you can use the mortgage interest as a tax write-off. But how does that help you when you have zero net income during school? Deductions mean nothing when you have no income being taxed. Just some random thoughts on it... Myself I'll never buy another house until I have the cash to buy it outright. I paid over $50k in mortgage payments for over 5 years and I think maybe $3-4k went to principle, yuck.
I wasn't looking to close on a house until July, how will this directly or indirectly affect my student loans? Amount, timing, interest rate? Once in dental school do you have to reapply for the loans every year?
I'm not advocating either side right now, but just wanted to add some food for thought:
At least you sold your home prior to 2006 when real estate tanked, so your home did appreciate somewhat. A primary residence should no longer be seen as a short term investment as people in the U.S. have done for the past decade. The market was grossly inflated. This is why so many people are still going into foreclosure--they bought more home than they could afford, hoping to turn around and sell for a quick profit. The glory days of making lots of money off of flipping a house are over. However, there are other great benefits to owning your own home... freedom to remodel, or paint a room, building equity, etc.
My view is: Debt is a part of life. Unless you save a big portion of your paycheck every month or receive a large inheritance, you will not own a home for a very long time if you are afraid to obtain a mortgage loan. True, the first 5-10 years of a 30-year-fixed loan, you're paying mostly interest which sucks.
At least you sold your home prior to 2006 when real estate tanked, so your home did appreciate somewhat. A primary residence should no longer be seen as a short term investment as people in the U.S. have done for the past decade. The market was grossly inflated. This is why so many people are still going into foreclosure--they bought more home than they could afford, hoping to turn around and sell for a quick profit. The glory days of making lots of money off of flipping a house are over. However, there are other great benefits to owning your own home... freedom to remodel, or paint a room, building equity, etc.
My view is: Debt is a part of life. Unless you save a big portion of your paycheck every month or receive a large inheritance, you will not own a home for a very long time if you are afraid to obtain a mortgage loan. True, the first 5-10 years of a 30-year-fixed loan, you're paying mostly interest which sucks.
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It is MUCH easier to get a home loan before you have student loans. Student loans do not count as income. Lenders are not worried about you paying off dental school loans and will readily loan you money even if you have a mortgage.
We did a 30 yr fixed and will try to make 1 extra mortage payment each year to cut 30 yr down to 17 yr.
Yesterday we had the home inspection which went great, but was really eye opening to see how many aspects of the home must be upkept.
Yes a good deal of that 50k goes to interest, but its better than paying 50k in rent over 5 yrs. Sooner than later we're going to buy a home, and now is the time to grab up a foreclosure. Foreclosures are driving down neighborhood prices.
I'm from the Dallas area so I can see ourselves staying in the house beyond dental school, and if not it's very rentable in a great neighborhood and should generate good cashflow. My parents' rent houses paid for my undergrad (along with grants/scholarships).
We did a 30 yr fixed and will try to make 1 extra mortage payment each year to cut 30 yr down to 17 yr.
Yesterday we had the home inspection which went great, but was really eye opening to see how many aspects of the home must be upkept.
Yes a good deal of that 50k goes to interest, but its better than paying 50k in rent over 5 yrs. Sooner than later we're going to buy a home, and now is the time to grab up a foreclosure. Foreclosures are driving down neighborhood prices.
I'm from the Dallas area so I can see ourselves staying in the house beyond dental school, and if not it's very rentable in a great neighborhood and should generate good cashflow. My parents' rent houses paid for my undergrad (along with grants/scholarships).
