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home-buying aspirations

Most of you know that I've been proudly renting apartments for the past seven years. When I first got my job, the guys I worked with told me it was STUPID to rent because it's "throwing money away" and I needed to be saving money for a house now, get in with the smallest downpayment possible, just get in! Well I ignored them. At the time I was paying $400/mo for my apartment, and the kind of house I wanted was going to cost a great deal more than that. I could put the extra money into savings, and did. And I knew that your first few years in a house you only pay like $100/mo off the principal, so if I could put more than that into savings I was getting way more cash built up than equity. Sorry for the boring paragraph just explaining things, plus it sums up my general attitude about renting: It's a good thing. Am I paying a lot now? Sure. But I don't have any "surprise, you need $10,000 for a new sewer line!" sorts of issues that come up like homeowners do.

That all said, I really think I need to buy a house next year. The big thing is that I'm having a baby and there's no room for it here. Marc and I are in a split-level "one bedroom" that has no walls. I often feel like with just the two of us, we're outgrowing it. An office would be nice. A basement for storage would be nice. A second bathroom would br PRICELESS. And finally, a room for the baby, where we can close the door and watch TV someplace else while it snoozes away.

Last year we kinda looked at some places, but after about two days of cruising neighborhoods on Sunday afternoons for open houses we decided we weren't ready. We couldn't really afford anything we liked and didn't really like anything we could afford. Plus there was no hurry, not like we were having a baby or anything. So we signed another one-year lease on the apartment. I got pregnant right after we signed the lease. The timing was outright weird.

So here's the timeline we're considering:
  • April 1 - $8000 tax credit for first-time home buyers goes away. If we've "bought" the house by then we get the credit, if not too bad.
  • June 11 - have a baby. I should mention that I have a family history of late babies.
  • July 1 - Close on the house to get $8000 tax credit.
  • August 31 - lease is up. Getting out of the least before that costs about $2000
If it weren't for that damn tax credit timing, I'd just chill out and get a house when our lease is up in August, or even a little after, September could be "move/overlap" month. I don't worry much about bringing a newborn into the apartment, they don't need much stuff, kids don't even sleep in cribs until they're 3-4 months old. We just need diapers and a dresser drawer. And there are benefits to bringing a new baby home to this silly little apartment... we have fleets of neighbors here who love us, and would love to be part of all this. It'd be adorable to put an "it's a girl!" sign on our door. (if it's a girl. still hoping.)

But the tax credit drives all these other questions into my head, maybe we should try doing this earlier. Close by July 1? So in June, we'd have a baby and close on a house... does that sound too busy? Maybe we could close before that, and try to move out of the apartment while I'm eight months pregnant?

I read a real estate article once that said "First time buyers should know that the right time to buy a house is whenever YOU are ready to buy a house. Do not try to time the markets or take advantage of amazing offers, just buy when you're ready, this is your home you're talking about." And Rich Dad, Poor Dad also really stresses the fact that a house should not be your big investment asset... it's just where you live. So don't think too much about money. Just live there.

The other thought in my head is that the tax credit has already been extended once, and may very well be again. If we buy in August and they don't extend for us, well, it wasn't really our money to begin with was it? I don't feel so bad gambling with money that isn't mine.

It feels like such a maze.

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Comments

( 15 comments — Leave a comment )
astrogeek01
Dec. 21st, 2009 03:36 pm (UTC)
I would actually suggest that you start looking now, and if you find something bid on it, and if you get it break your lease. It's generally ok to break a lease for things like that (also for e.g. moving to another city). From what I've read you do NOT want to be moving 8mo pregnant, and from what I've experienced with post-pregnancy you're not going to want to gamble on doing it in August either. So in fact, I'd go with "when you find something you like" rather than worrying about the tax credit thing, but start looking now. You can always invite all your neighbors over to see the kidlet when it arrives. :)

It will help that you've already looked and have some idea of what you want in a house. It took us a long long time, we looked for months before we even found a realtor to work with, just so we'd know what we liked/hated in terms of houseness and neighborhood. But also don't rush it- if it gets too close and you need to/want to put it off, do that. You can (hopefully) go month-to-month on your lease afterwards (if you have a cool enough complex) so you're not rushed in August either.

Also the best house advice I got was: here will always be another house that's "perfect" but you don't want to get stuck paying too much for something you're not keen on. If the price is (or goes, in a bidding war) too high, let it go.
fugu13
Dec. 21st, 2009 03:44 pm (UTC)
I agree. Start looking now, and if you find something that works, break your lease.

If it isn't at a convenient time for you to help with moving, get friends or hire people to help you move (probably a good idea, anyways).

If you don't find a place you want, don't buy one until you do, but the tax credit (even if you do have to pay the $2k to break your lease) is well worth setting you to looking in the near future -- over the course of a mortgage, that $8k is worth a lot more than $8k.
secretsoflife
Dec. 21st, 2009 04:53 pm (UTC)
i wonder if the expiring tax credit will cause a bit of artificial inflation in house prices.... $6k to me seems like it's not worth rushing into something imperfect for. but i'm also a renter :)
spacefem
Dec. 22nd, 2009 01:04 am (UTC)
eh, I kinda doubt it's doing things to the general prices because the majority of people don't qualify. If you've owned a house in the last three years or make more than $150K (married) you don't qualify. If you're buying a house less than $80,000 the credit goes down.
secretsoflife
Dec. 22nd, 2009 05:01 am (UTC)
oh wow, yeah, that is pretty narrow :)
smittenbyu
Dec. 21st, 2009 05:19 pm (UTC)
I agree with the ones above. Start looking for places now. The 8K credit will end up going to help with your costs of breaking lease and other hidden costs of buying a house that just crop up out of the blue.

We decided not to buy the house just because of the credit. Although it's the buyers' market, the sellers know of the the tax credit and somehow it all evens out. So, buy when you are ready.

The real estate market also was not so drastically affected where we are. So, it really was not a great time for us. In addition, we would have to give up a lot of lifestyle conveniences if we bought a house and moved. I am not sure how that is for you there. But then again it might be better use of money as the savings' rate is so low!

A move probably be good now till maybe when you are 7 months pregnant or after baby's born? I had a friend who moved when she was 8 months pregnant and it was a horrible time for her. Although, she didn't have to budge and her husband had to do everything (along with friends they recruited). But knowing you who would want to be involved and do stuff, it might not be so great an idea?

But yeah... moving to a new place is always fun! :) I wish we had a room to decorate for the child, more storage for things, etc. sigh....But I really do cherish the fact that hubby is/will be just 5 minute walk away from home!
olithered
Dec. 21st, 2009 10:08 pm (UTC)
Moving house is stressful; better not to be giving birth at the same time.

The numbers say you'll be $6k better off moving sooner so start looking in January!
fauxklore
Dec. 21st, 2009 11:41 pm (UTC)
My understanding is that the tax credit has to be paid back over time, too, though I admit to not having looked into it since I'd bought my place prior to it.

To me the key thing on timing is how long you plan to be in the place. Renting makes sense if there is a strong chance of moving to another area in the next 5 or so years. I'm also conservative enough to believe that if you can't afford it with a 30 year fixed rate mortgage and a significant down payment (ideally 20%), then you can't afford it.
spacefem
Dec. 22nd, 2009 01:01 am (UTC)
It has to be paid back if you don't live in the house for three years. Which is always a possibility. And that would suuuuuck! Otherwise though you don't have to pay it back.
mrs_dragon
Dec. 22nd, 2009 02:16 am (UTC)
I agree with everyone else. Start looking now, if you find what you like make an offer. : )
mappleleaf
Dec. 22nd, 2009 02:22 am (UTC)
We bought our house just under 2 years ago. My advice: start early.

As for the overlap between the time you get the house and the lease expiration... It's good to have it! In our case, the renovation works were delayed, furniture delivery was delayed and we were homeless for a couple of weeks. The overlap is expensive, but with a kid in your arms you do not want to sleep on friends' couches :)
aliki
Dec. 22nd, 2009 02:12 pm (UTC)
Depending on your requirements and personal style and how money-wise you want to be with the house-shopping, it may take you a while to find the right home. I know on TV shows it seems like they see 3 houses and settle on one, the bid goes out and the phone call comes back the next day, and everybody is moved in by the end of the week; but in reality, it hasn't happened like that for us. (On both our purchases. We have a home and a condo).

With the first-time buying home, we looked at over 40 homes (because we started with a conservative budget and soon realized that we would not be happy with any houses in that price range) and it took 4 different realtors and 3 months of weekend hunting.

With the second purchase, we were more experienced and I knew what to look for and what to expect, what I would compromise on and what structural defects to look for. It still took 2 different realtors and we actually found a condo in our complex in 2007 but after 2 months of negotiation, it fell through. We found another one in 2008 and closed on it, but the sellers weren't ready to move for 3 months!

So you can have lots of complications, negotatiations, bids; that is, if you want to get the most competitive deal. And none of this you want to do when you're pregnant or with a newborn, as it's fairly stressful!

Of course, I have close friends who bought a $800,000 home the day the house went on the market-- they took a weekend, drove around with their realtor, and paid asking price. They just aren't the type who care that much about finding the best house for the best price. So to each their own!
(Anonymous)
Dec. 23rd, 2009 09:06 pm (UTC)
nesting
There are all the money/finance issues mentioned above, but what really stands out to me is that when your last few months of pregnancy roll around, you'll start nesting like nobodies business. You may really feel like you want to be where you are bringing your baby home to and get great satisfaction from getting everything "ready".
(Anonymous)
Dec. 26th, 2009 03:57 pm (UTC)
When we were looking, probably 2/3 of the places we looked at were foreclosures or short sales (where the seller owes more on their mortgage than they're selling the house for), and it's not like we were looking at bargain-basement places either. Those slow things down a whole lot - like for months.

Don't know how the market is where you are, but you might not have much choice on whether or not to mess about with short sales and foreclosed properties.
(Deleted comment)
( 15 comments — Leave a comment )

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