The Dream Home
Alright, so you got that great job right out of college and your college sweetheart fortunately said yes to you even though you don’t understand the toilet seat down deal and still would rather have keg and eggs instead of mimosas and brunch. Whats next? Well you need a roof to keep the both of you safe and comfortable (and dinner parties for her).
I hope through a series of posts to take you with me through the adventure of purchasing a home. Currently my fiance and I are beginning to look and get everything in order. First a few things I have already learned or heard.
1) Through my own experience, if your not ready, don’t go into something you aren’t 100% sure about. Yes, renting is like “throwing away” your money, however, we are young, and the same reason we can take risks in our 401(k) we can wait until we are completely ready to make an enormous investment. I looked at condos this past spring, looked at a lot even got close to offering. However, my fiance was not working yet, we have a wedding to pay for, and I just was not 100% there. I told our mortgage guy and realtor this, they understand, and now that I am going back to look and homes and they still want to do business with me.
2) Work with people you can trust and like. If you can “shoot the *&@$” with your realtor or he does not laugh at your very funny joke about regulated investment companies, move on. Same with your mortgage broker.
3) Budget to know what you can afford. I covered this a few weeks ago. In this new housing market you don’t want to get in over your head.
4) Ask for advice from people. Ask co-workers, managers, and family members. These people have gone through it and can give you a lot of insight and referrals.
5) Research! You have to know your stuff. Know what an ARM is, know how property taxes work, know language, etc… There is some great material to read through and get you started on researching. Our readers should already know how much I like about.com. Its just a great starting point for any online research. Here is their article on first time home buying. In addition, major lenders have tons of resources like mortgage calculators, payment calcs, etc.. Here are a few I have used: Wells Fargo, Chase, Accunet.
6) Enjoy the hunt!
If any of our readers have a question on homebuying or my experience, leave a comment.
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Tags: Finance, Home, Investing, The Dream Home
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October 12th, 2007 at 11:10 am
2 Suggestions:
1. Checkout Redfin it’s a pretty awesome way to save 10,000 buying a house if you are willing to try it and are in their coverage area.
2. Try the Rent vs Buy calculator from the New York Times, it’s a great graphical tool to help you make the decision on whether to rent or buy.
October 12th, 2007 at 2:07 pm
I’m a firm believer that renting is not “throwing your money away” but more importantly, it’s a better long term investment than purchasing real estate.
Consider: by purchasing a house/condo, you are locking a significant amount of your assets in one extremely illiquid investment. While real estate prices have seen phenomenal gains in the 1990’s, historically they do not out-perform the market. More so, home ownership carries additional burdens of taxes, insurance, and maintenance that further discount any investment gain.
Instead, I plan to continue renting and investing the bulk of my assets in the stock market that has historically returned upwards of 10% per year.
Of course, home ownership carries with it psychological value and obviously many people value this very highly. Just wanted to throw in my $0.02 regarding the question of economic gains and the rent = “throw your money away” myth.
October 12th, 2007 at 3:02 pm
Tad, you raise some valid points, and working the market may lead to much greater gains. However, the market is much more risky while homeo wnership is quite safe. According the the Census Bureau the median home value has increased 90,000 dollars over the last 60 years. That is a very low ROI of course, but an ROI nontheless.
http://www.census.gov/hhes/www/housing/census/historic/values.html
My second point would be that your paying rent anyway, why not have some of that money be equity. A nice two bedroom apartment in Milwaukee may go for 1,300 a month in rent. However, you can purchase a home in the city with a 180,000 mortgage to purchase the home which carries a payment of 1,500 (including taxes) of which a portion is equity. Your already spending the money for a place to live, why not have a portion go to equity. Either way it comes down to prefrence. Thanks for your contribution.
October 12th, 2007 at 4:50 pm
1. http://www.zillow.com/ is a great place to find home values. This is especially useful if want to get an idea for what your current home or condo (if you own one) is worth.
2. The most important thing I learned in my real estate class (at the #1 real estate program in the country) is that ALL real estate markets are LOCAL. Even during a national down turn in real estate, some markets are booming. So make sure you get informed from local sources, not the USA today or WSJ. http://www.realestatejournal.com/buysell/openhouse/20070725-kim.html
3. I bought a condo in May and while I’m confident that its value will rise, this guy’s digg post shook me to the bones. http://efinancedirectory.com/articles/This_is_Why_I_Rent:_Median_Incomes_Do_Not_Support_Median_Home_Prices.html
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