To rent or own, that is the question

[ragani]

The last couple of weekends have been taken up with the great apartment search. I love where I live, but it really is not big enough for me, my lovely roomies and chaosloom. And really, in align with that "starting our new lives together" thing that we are embarking on, it seems like a good time to strike out on our own. Timing wise, we should probably move out by the start of September, because that is when one of the roomies returns from abroad, and things will get much tighter here.

We have looked at a range of places, some decent, some ridiculous. We even found a great one right across the street from where we are now and thought we had ended the search, only to be turned down because of chaosloom's credit. One friend, who just finished law school, pointed out that is was illegal for them to have turned us down when my credit and income is enough for me to take on the lease on my own, but we are not sure we want to pursue that "fight back" route at this time. Sigh...

Meanwhile, we have also talked about the possibility of owning. My step-mom thinks this is the perfect time for us to look for a place to buy because of the the current market conditions. There are any number of first-time home owner assistance programs in the towns where we are looking to live. There are even ones that are based on low-income, for which we might qualify for now (based on 2007 income), that we might not qualify for next year.

But really, is it a good time to buy? If so, why? And, what is the first step?

Comments

[whuffle.livejournal.com]

If you can look at your lives and expect to commit to owning whatever you buy now for 5-10 years, then yes, it is a good time to buy. The market runs in 7-15 year cycles. We're at the low end of a cycle right now so if you buy now, you should see an appreciation of what you buy in 5-10 years' time.

First step to take is to get your finances in order. Do credit checks for both of you with all 3 major credit trackers. Then go talk to friends and get a recommendation for a good home inspector and a good mortgage broker. Find someone who answers your questions and even offers information that a first-timer won't think to ask for; that's the mark of a good mortgage guy/gal. Once you've got your mortgage stuff lined up, then its time to go shopping. Start out by looking at the forclosures-held-by-banks market because those tend to be a good buy. If you know that you can put in a little DIY skillz, kitchen remodeling and bathroom renovations are the cheapest way to see a big bang for your buck when it comes to home value.

When we bought 1.5 years ago, the house value had to be reassessed for insurance purposes. Turned out the land itself was worth the most and that the replacement value of the house if it burned to the ground was undervalued. The value of the house was adjusted, then adjusted a second time based on our kitchen renovation. We put in about $5k and a bunch of sweat equity. The house is now worth 1/4 again what we paid for it. When I looked 6 months ago, it was work another $30k above that. Since we plan to stick it out where we are for a while and make more improvements, the house will likely end up being valued at twice what we paid in 10 years.

[furycom.livejournal.com]

I'm no good at going into the economics of whether it's a good idea, since so much depends on income levels, rental and housing markets in your area, the social dynamics of your roommates and how long-term your plans are, but the first step would be figuring out an ownership scenario with your roommates and then getting a loan pre-approval so you have some idea of which properties you should be looking at. Too many people househunt first, find something they love, and then either find they can't get the loan to swing it or take too long getting the approval and the house goes to someone else (though this may be less of a problem in today's slower market).

Good luck!

[japlady.livejournal.com]

do you ACTUALLY need a mortgage, and might it not be a better idea for you to buy it outright in your own name. You might want to talk to the family about that, maybe get a loan from a family member instead of the bank if your short for the down payment you would need to cover it alone. I hate to be cynical (just saying that to be polite, we both know I'm VERY cynical) but given the the divorce rate and the differences in your credit ratings, you might want to keep yours separate from his.

Honestly if it was me, I would want the property in one name or another clear, so that if there was a break up the breaking would be clearer.

[howlgirl.livejournal.com]

Have you been sharing finances for long?

I would strongly encourage you both to plot your spending habits over the course of a year before you jump into a major purchase. The market *may* start changing before then, but there is no way it will recover in a year.

[fresne.livejournal.com]

It is a good time to buy a first house. It is not a good time to get a loan as a first time home buyer. And I'll say, September is an extremely tight deadline for working out all the things that have to be lined up to start thinking about a home purchase.

You're going to have a much more difficult time qualifying for a no money to almost no money down loan, as restrictions have considerably tightened on who can qualify for what kind of loan.

A good site for information about the market and the current loan rates is Bankrate.com.

Terrible site design, and a lot of their tables are actually ads, but they are literally the only game in town in terms of almost all Banks going to a single source on a weekly basis to post their rates. There are a lot of articles there about things you should do to shine up your credit.

When you do buy a home, write out who will own what % of the property and who put what in for the down payment in a Home Owner's agreement. That way there's no question who owns how much of the property. Get it notarized and registered with the title. Then when you do your taxes, whatever % you own, is what you'll itemize for your deduction. Keeping in mind if finances change, the agreement can be amended at any time. Just renotarize and register with the Title company.

[xthread.livejournal.com]

This is not yet a good time to buy.
The market probably has another year of shaking out coming, and if you buy now, you will have to watch as the value of your property falls, which is ... not pleasant, for most people, before it starts to recover.

As another poster has pointed out, getting a loan right now is also... exciting.

[japlady.livejournal.com]

yah what he said. The market especially around you is still shaking itself out, in part because your bubble was so big.

Here in chicago, not so much.

[xthread.livejournal.com]

Actually, here in NorCal, we're down much less than people from outside the area expect - the Bay Area hasn't fallen much, though it's fallen some. Stockton and parts of Southern California have fallen off a cliff, however.

But there's still more down coming.

[rhuurrr.livejournal.com]

long time no see!

dazzlynn and I are in a similar boat, and are also looking to possibly buy a home, and have been doing some research on the various first-time buyers programs. I was referred to http://www.naca.com by a friend and attended their intro workshop just this weekend. It seems to good to be true but after attending and reading up I feel like it is legit and worth looking into for anyone embarking on a home buying journy. Of course their time-line might be a bit longer than you're looking to decide by, but if you do decide to buy I definitely think they're worth investigating.

Trust your feelings...Luke.

[philosophertone.livejournal.com]

On Buying:
I tend to think the market has more down before up.
You've got to do some reasoning, then take your best guess as to when the "bottom" is, and how you feel about what you can find and afford at that time.

If you're investing for the long haul, what matters to you is getting a place you would want to stay in for the long haul, and buying value (a property that will appreciate relatively more than others).

In the South Bay, schools are really important to property value. Sometimes it's smart to get a smallish home on a big lot in a good location, on the theory that you can expand it later, and the added square feet will be at a high value because of the good location.

I'm big on quality of life...so I don't like long commutes. Your time and energy are precious.

Is there a chance you will want kids someday? Schools matter more, then.

I think what may be a challenge for the two of you is that your income history doesn't look great, and his credit history doesn't look great. Do everything you can to repair his credit. Live frugally, and sock away as much seed money as you can. More than you think you need is usually almost enough.

All of that said, if you get prequalified and know what you can afford, in this market you may be able to negotiate an awfully good deal. In some more downtrodden parts of the Bay Area, the default rates are high and you may find your unreasonable offer accepted. These are not the best investment properties...just less expensive.

Stay away from condominiums.
Stay away from condominiums.
Stay away from condominiums.

Finally, try to be really clear with yourself about what is most important to you, and that it's a wise thing, and stick to it. These are very big complex decisions, so you really need to know what your top ranked criteria are, so you can boil it down to the essence.

[mercator-7.livejournal.com]

The market will be down for a long while and it's more important to get your finances together than trying to time the market for the absolute bottom. Make an VERY honest assessment of your finances. Pay off all your debts and clean up any of the outstanding issues you can with Chaosloom's credit history. Even if this takes a year it will be a year well spent because by just diligently paying off all you owe, you will be improving your credit scores.

The Down Payment is harder to save for, but the next best thing you can do to get a good loan. Loan officers feel much more comfortable when you start with equity in the house. It gives them hope of breaking even if you default. Also, if you can manage 20% somehow, the broker won't require that you buy mortgage insurance thus lowering you monthly obligation.

You probably won't be using any of the "First time buyers" programs unless you are buying a house that is very cheap (as in "run down")or in a bad neighborhood. These programs are more geared toward urban renewal than fulfilling the dream of house ownership.