My house dilemma


#1

So here is my dilemma. My husband stays home with our two young children while he works on his dissertation for his Ph.D program. I work outside the home and my job is the only source of income. We are in an apartment right now and need to renew our lease within the next few weeks. We are wondering if it is best to keep throwing away $1000 a month on rent or if it would be a good idea to buy a house. We can afford to buy a house (I think- I don’t know much about the process), but am wondering if it is a good idea when we don’t know how long we will be living in this area. Once my husband finishes his dissertation, he will start looking for a teaching job and we could end of up anywhere in the country. The problem is we don’t know how long this will take. He could finish up in the next 3-4 years or it could be 10 years (he is progressing very slowly since he has to watch the children). I would like to have a house for the kids and our money in an investment like a house. I hate the idea of wasting money on rent for the next few years, but a few people have told me that buying a house would not be a good investment if you are going to turn around and sell within a few years. Is this correct? Money is very tight and we don’t want to get into a situation where we are going to be losing money. Would you buy a house knowing that you may have to move in a few years, or is it best to keep paying rent.


#2

Generally it would not be smart to buy a house if you are just going to turn around and sell it but from the sounds of it that is unlikely. 3-4 years is a good turn around period and if you end up staying there for 5+ years mortgage is a way better investment than rent. You are already shelling out $1,000. with the right downpayment and the right mortgage you could be paying less than that monthly. Talk to your bank or a financial consultant, take a good look at your finances. Also remember in home ownership all problems are your own, there is no building manager to fix plumbing etc. Also some areas have HMOs to pay, property taxes and the like. If it looks like it is really at least 3 years I say go for it, just do your research first.


#3

Don't forget that houses take more money than a mortgage payment to maintain. I'd do everything possible to support getting the dissertation done asap so that your family can move forward. If you buy a house, the entire process will slow you down, plus you might have to buy something that requires repair and whatever you buy will require upkeep. Not only is a house a money pit, but they require a tremendous amount of time as well. In your state in life, time is the most limited resource.

If you are happy in your current home, I would look for ways to push his schedule so that your husband can finish his dissertation sooner, spend money in that direction so that he can meet the more important goal of getting his PhD. If you need more space or you believe you can negotiate a better deal, then look to save money or spend it more wisely by finding a better lease/rental situation.

Grad school is huge and needs all of the attention your husband can give it. I know you and your husband are making great sacrifices to make this work. Get that PhD and move on. I would not add to the stress that you must already have by buying a home. The money you spend on rent is not wasted, you are "buying" the freedom to walk away from your home at the exact time you need to do so, rather than depend on the housing market. I think you would make a mistake to buy a home, it demands to much in the way of limited resources.


#4

I agree with the others - not a good time in your lives to be saddled with a house. And I do mean saddled. Houses require all sorts of maintenance that you are not doing in an apartment. Also, housing is not an investment that pays back, generally. In many areas of the country, people are completely upside-down in their mortgages - they owe more than the house is worth.

You DEFINITELY do NOT want to own a house in a location where you aren’t living. That is a nightmare.

You may think you are “throwing away” your money but you will tie up more of your money in a mortgage. Congress is trying hard to even eliminate that minimal tax deduction, so if they do that, there will be NO financial advantage to having a mortgage.

There is nothing wrong with apartment living - some immigrants in the 1900’s never owned a house and didn’t mind that much. Lower your expectations until later on.


#5

I would start with figuring out how much of a house you could affort (for example: saying you could afford a house that, including utilities, HOAs, etc cost as much as you're paying in rent right now) and then see what houses are available in your area that would fit yor budget. Definitely do NOT go by what banks say you can afford as they tend to believe you can afford more than less. Also, make sure you're looking at this based on your salary alone since you can't guarantee that your DH will be bringin in steady money any time soon.

If you find that there are a lot of houses in your area that would fit your budget, perhaps start looking. If you can't find anything in your budget then now is not the time for you to buy.


#6

I think trinichiqn and Cupofkindness offer excellent summations of the two points of view.

I agree with trinichiqn's estimation of the timeline for home-ownership to be "worth it". And, right now, it certainly is a buyer's market when it comes to buying a house. But, as Cupofkindness said, with home-ownership comes many time-consuming tasks that you don't have to worry about as a renter: cutting the grass, shoveling snow, cleaning the gutters, figuring out how to stop the birds from nesting in your attic, wondering how the water is getting into your basement, etc., etc. It will inevitably lengthen the amount of time it takes for your husband to finish his dissertation. If that's okay with both of you, then you can consider it.

If you think about it long term, though, buying a house now could actually cost you money in the long run. For example, say your husband could make twice as much with his PhD as you are earning with your current job. If he can hit the job market a year or two earlier than he could if he didn't have to worry about home maintenance, then that extra income might more than make up for whatever extra principle you have accumulated on a house. You might try punching some numbers to see if that would be the case.


#7

I think the advice here is good - I have owned three different places in my life. My first sold for more than I bought it for. The second was foreclosed on thanks to my soon-to-be-ex (long story - I was working full time and he was supposed to be getting it listed and he just didn't at all and pocketed the money) - the third one is in short sale due to the divorce.

However I would do it again even single rather than rent if I knew I was going to be in an area for a long period. You can get a lot more house for a lower monthly payment than you can renting (usually). Also you don't have to ask anyone's permission if you want to paint something put a religious figurine in the garden, etc.

Good luck.


#8

My wife and I purchased our first home a few years ago as the housing bubble was beginning to deflate, but well before it fully burst. We now often ask ourselves what on earth we were thinking.

Here are a few pieces of advice I wish we had heard at the time. I can hear an echo of my own pre-purchase deliberations in your post, so I thought these might be worth considering.

[LIST]
] If you can't make a down-payment of at least 20% from your own savings, you probably aren't in a financial position to buy a home.
*] If you're buying with the expectation that you'll be able to sell your home within the next few years -- indeed if you're *depending
on that for your long-term family or career plans -- you probably aren't at the right point in your life to buy a home.
] If your combined annual payments for mortgage, property tax, mortgage-insurance (if applicable), homeowner's insurance, HOA dues, and home maintenance (if applicable) would exceed 1/3 of your gross annual income, you **certainly **can't afford the house.
*] If the combined costs of owning a home, plus your other *necessary
expenses (i.e., anything you couldn't do without for several months), exceed 50% of your after-tax income, you probably can't afford the house.
*] If you're using a temporary payment (e.g., for an adjustable-rate mortage, or a mortgage with an interest-only period upfront) to calculate the combined annual housing cost mentioned above: Don't. Consider the highest payment you can expect to pay down the road, even if, say, "5 years from now" sounds like forever.
*] If you're making any assumptions about your income other than that "it might go down, perhaps by more than you'd imagine possible": Discard those assumptions.
*] Ditto for assumptions about your non-housing expenses, other than "they will go up".
*] Be very wary of government assistance. Read all the fine print ahead of time and make sure you fully understand every string that will be attached to the mortgage loan. Also consider that these programs are generally designed to help people buy homes who, um, can't afford to buy a home. Which sounds nice but, oddly enough, doesn't magically change the buyers into people who can afford their homes.
*] Be wary of foreclosed properties. Often the negotiating leverage that a buyer's market can give you (in a conventional transaction) becomes irrelevant when you purchase a property 'as-is' from a bank. Or at least this was the case a few years ago, maybe things have changed now.
[/LIST]


#9

My wife also wanted me to point out that paying rent is not a waste of money. You're buying something (i.e., shelter for your family) that you absolutely need, presumably at a fairly reasonable price. That's exactly the opposite of wasting your money.

Speaking of which, It might be sobering to look at an illustration of a mortgage repayment -- i.e., the 360 payments you'll be making, assuming a 30-year mortgage, broken into an 'interest' and a 'principal' column, with sums at the bottom.

It will show you how long you'll be paying more interest than principal each month (23 years in our case). It will also show you that over the life of the mortgage you could easily spend twice as much as the sticker price of the home, just on the mortgage itself, not counting property tax etc. -- and perhaps much more, depending on the interest rate and other terms.


#10

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