First time (town)home buyer looking for advice

[Adamski47]

Vitals
26 years old
Starting 2nd year at job I love
Salary just under $40k
Single but dating my future wife (or so we both say)
Pre-Approved for $150k
Putting $0 down
$483 monthly debt (not including house)
Planning on either a 30 year fixed (80/20) or an interest only (80/20)
McHenry county
Illinois
Rental lease ends August 31

I rented for a year to make sure I liked my new job and the area having relocated from MI originally. Now that I know I like it here I am going to be buying to build up some equity to eventually get into a house I want (using the built up equity for a down payment). This area is booming and I'd be a fool to not try and get in on the buyers market.

Option 1: Balls Out
Purchase a 3-bedroom townhome or home for more than I am prequalified for, probably around $200k putting my monthly payment, including taxes/insurance/association fees/etc., right around $1,800.
This is more than I can afford obviously and by going over what I am pre-approved for my interest rate has increased about 1/2 a pt (6.75 to 7.25) raising the total payment to the $1,800.
The plan, is to find two roommates (easier said than done...currently looking) to help pay off my mortgage. A rental contract would be drawn up by my lawyer at closing FYI. A few years down the road the roommates move out, and the girlfriend/fiance/wife moves in.

ADVANTAGES
Could end up being the best scenario...best home/townhome and paying the least amount ($600 if we split things evenly between roomates which is a good rate around here).

DISADVANTAGES
What if I cannot find 2 roommates? What if they drive their car through the kitchen wall? What if they move out? What if they do not shower...?
Can you really hold someone to a rental lease without a ton of hassle? I doubt the collectors will be sympathetic towards me!
Higher interest rate (could always refinance once the gf/fiance/wife moves in)

Option 2: Not too Shabby
Purchase a townhome for no more than I am prequalified for. I'd probably get something I could afford on my own and tough it out for a year. After a year it would become much easier (currently working on my masters...not a huge pay increase but eventually it will be). If I don't feel like living paycheck to paycheck I could get one roommate to help out and I'd be doing fine. Eventually the gf/fiance/wife moves in or we just sell the place.

ADVANTAGES
Safe route. Could essentially live alone.
Stay within my prequalified amount

DISADVANTAGES
Perhaps selling myself short (I should have bought the nicer place!)
Paying for bills alone sucks!
Probably wont get to live in Crystal Lake
Just wont be that nice of a place (a downgrade from where I am renting)

Option 3: Sounds crazy...worth the wait?

Wait a year and continue to rent. In April my girlfriend will be finished with school and looking for a job. Assuming she finds one we look for a place together (not until the next Sept mind you...another year lease), we get engaged, married and live happily ever after.

ADVANTAGES
Could get prequalified for more money with her on the mortgage (more house without taking a hit on the interest rate)

DISADVANTAGES
I'm renting still! AH!!!
I've lost an entire year of built up equity (might not be much...but could be!)
I'm relying on a girlfriend. Especially in regards to finances this could be a gamble.

Regardless of which option I choose, eventually I will be living with the girl, once she finishes school and finds a job, marriage etc. We would either stay in the place I buy now for a short time or get out right away and buy something else since we could be preapproved together for something better. Ultimately, I'm looking to make as much in equity as I can so when I do get married we can get a house with a nice down payment to help keep the interest rate low and mortgage payment low as well.

Lastly, I've always heard that it's a terrific investment to purchase real estate as long as you stay there for more than a year or two. What would happen if I bought something and a year later the gf/fiance/wife and I, after she finishes school and finds a job, decide we want something else?

Intangibles
-Don't ever trust a woman (especially one you are not married to)
-I really want to live in the city I am currently living in (Crystal Lake or surrounding), which is about 20 minutes away from work (Woodstock).
-Crystal Lake is more expensive but I love it (great area). The other choice would be to live in Woodstock, which sounds great for work etc, but isn't the most exciting place in the NW Chicago area.
-Woodstock is growing...probably faster than Crystal Lake which is already nearly fully developed. Eventually, Woodstock will be just like Crystal Lake with properties selling at a much higher price...but I doubt I'll still be in this home/townhome when the two are close to equal (probably 10 years off...I doubt I'll be in this place more than 3 or 4).

Thanks for reading! A lot of information to digest. This is my summer project! Thanks for all of the help that I know will come from this community. Love it!

[Adamski47]

Dola,

I'm sort of thinking now, 5 mins after I've started the thread:

A hybrid of option 1 and 2. Buy the more expensive townhome and get ONE roommate at least and tough it out for a while in the townhome/home I REALLY want. If I find a 3 roommate, peachy. If not, not the end of the world...I'm probably building more equity faster in the more expensive home.

With the $1800 payment I'd probably do $1000 of it...roommate $800. If we get a third we'd all pay $600. The $1000 I would be paying would be the same as if I were living alone in the "lesser" place (option 2).

Man, this stuff hurts your brain!

[st.cronin]

I pick option 2. The biggest lesson I learned in buying my house is shop, shop, shop around for both a lender and a broker.

[Adamski47]

I've talked to two already plus a few more from online (mistake).

I did not know it affects your credit the more you have your credit score checked. I have terrific credit but apparently this affects it.

I did not plan on talking to anyone else because I am very happy with the realtor I am working with and the interest rate from the two brokers were identical (6.75 or 7.25 if I go over what I'm prequalified for).

[wade moore]

I think making a huge purchase such as a house knowing that you personally cannot afford it, is a big, BIG mistake. In addition, in the long run, 1/2 a percent makes a big difference, run some calculators if you haven't.

To me option 1, no offense, is a terrible idea. Option 2 all of the way. Worst case, if the g/f gets the big money, sell/rent out the house and buy the bigger one with your combined income.

I would strongly encourage you to not be in a situation where you cannot pay the monthly mortgage with 0 renters.

[Adamski47]

Wade,

Yeah, I've run the numbers and seen the difference in 1/2 a point. That's why I had it listed as a big disadvantage.

[Irrelevant Dude]

I'm in a similar situation to you, a would-be first time home owner who got prequalified a couple months ago and have been looking at houses. Personally I'm looking to err on the side of caution and am not even considering anything near the amount that I was pre-approved for. I look at it more as an investment and this won't be the house that I'm going to live in for the rest of my life. I want to make sure I still have plenty of disposable income to have fun, while at the same time not throwing money away as rent. Obviously I'm not an expert since I've never been through all this before, but that's just my opinion. Good luck!

[Eaglesfan27]

I erred on the side of caution if I erred at all with my new place. I think that is definitely the best option. It would be horrible to get a place you can't afford and lose it because of a roommate problem.

[TroyF]

You are insane to pick option one. And pretty close to insane to go with option 3.

So you don't live in as nice of a house as you hope? So what?

You still get a decent place, you aren't reliant on other people for money and you can afford to make it on your own. You also have money if the water heater breaks or if you have an unexpected expense some month.

My advice? Don't even take option 2. Look at your options and see if you can't find a place 15 to 20k lower than you pre qualified for.

I'm gong through a purchase now where I pre qualified for 180k. I purchased a place that's about 125k and it's perfect for me. It isn't a fix it upper at all. I won't have to do a thing but move in. Everything new, and the place is beautiful.

And I'm secure in knowing that not only do I have a nice place to live and that I'll be able to build up equity and continue to improve my credit score, I also know I have money to enjoy myself with and I'm not going to have to panic if something comes up.

[Adamski47]

All that worries me about going the side of caution is that I end up buying a sh*thole place that I cannot make any money on or sell down the road. Probably impossible but...

[Adamski47]

Dola,

Thanks for all the responses so far. Really puts things into perspective since I'm doing this all alone (for the most part).

Troy, where did you buy your home? Pics? I'd be interested in seeing!

[TroyF]

Originally Posted by Adamski47

Dola,

Thanks for all the responses so far. Really puts things into perspective since I'm doing this all alone (for the most part).

Troy, where did you buy your home? Pics? I'd be interested in seeing!

I'll post some pics when I get to the place in a couple of weeks. They took the ad down today, so I can't give the link.

It's a condo. Build in '99. All wood floors, mint condition. new appliances throughout. 923 sq. feet, 10ft. high ceilings, 2 bed, 1 bath. nice deck, gas fireplace.

Westminster, CO.

[stevew]

How much rent do you pay a month now? I read something that suggested that you try to live on what your larger payment would be(bank the difference between rent and payment) for 6 months before you embark on a much larger expense. If its going to be drastically different.

[stevew]

dola,
I had a friend that sort of made option 1 work, but he also had friends that were willing to move in with him(who had good jobs also). But I'm pretty sure he could have made it work on his own if he had to. As the friends got different jobs, he then had time to get a new renter. Eventually he sold said condo, and since it was in a nice area of DC i think he made a six figure profit.

[Samdari]

Lenders generally will not give you a housing loan in which the payment is more than 37% of your gross income (or 28% of net minus other debt payments). This limits your payment to about $1200. Option 1 is probably not really an option.

[wade moore]

Originally Posted by Samdari

Lenders generally will not give you a housing loan in which the payment is more than 37% of your gross income (or 28% of net minus other debt payments). This limits your payment to about $1200. Option 1 is probably not really an option.

I wasn't even going to bring this up, but I was wondering the same thing.. you're talking about a significant increase over what you can qualify for, I would wonder about any lender that is willing to give you this loan and figure they are in the business of hoping you fault on it...

[Adamski47]

Originally Posted by Samdari

Lenders generally will not give you a housing loan in which the payment is more than 37% of your gross income (or 28% of net minus other debt payments). This limits your payment to about $1200. Option 1 is probably not really an option.

I believe this was what the 80/20 loan was for. They were letting me do it no doubt.

What do you guys think about these no interest loans?

BTW, I pay $500 for rent right now and I have a roommate who pays the same.

[TroyF]

Originally Posted by Adamski47

I believe this was what the 80/20 loan was for. They were letting me do it no doubt.

What do you guys think about these no interest loans?

BTW, I pay $500 for rent right now and I have a roommate who pays the same.

Even with an 80/20 loan, they shouldn't give you a large amount over what you pre qualified for. (if anything at all)

I'm assuming you've worked that out with your lender and agent already.

If you decide to go above what you pre qualified for (and in most cases hit the limit of what you pre qualified for), you are setting yourself up for disaster. This is the first time I've owned a home as well, but I studied the heck out of it and realized quickly that this was a new ballgame.

Look around your house and think of all the things that can go "boom" tomorrow. Computer, TV, stereo, washer, dryer, pipes, fridge, disposal, windows, flooring. . .

Can you afford to pay your rent AND any of those things in a month? If you said yes to that, could you then do anything else? (like maybe take your GF out to a nice dinner?)

Stretching yourself is good. Stretching yourself to the point you have no life outside of your house is bad. Stretching yourself to the point of relying on other people to make your mortgage payment and having to pray no unexpected expenses come up is disasterous.

If you have financial backing (rich parents) or another stash of hidden money I'm not aware of, do what you want. I'd be careful though. You can not only ruin a great investment, but destroy your credit if you bite off more than you can chew.

[Samdari]

Originally Posted by Adamski47

I believe this was what the 80/20 loan was for. They were letting me do it no doubt.

What do you guys think about these no interest loans?

BTW, I pay $500 for rent right now and I have a roommate who pays the same.

The 37% figure I mention applies to all kinds of mortgages, your total monthly payment for housing should not go above that. Most major lenders use that figure.

You can get smaller, less reputable lenders to give you loans for more, but you'd likely pay through the nose for it in interest rate.

Besides, an 80/20 loan means you have 20% of the purchase price to pay. Do you really have 40k to put down for a $200,000 purchase?

[Adamski47]

Originally Posted by TroyF

Even with an 80/20 loan, they shouldn't give you a large amount over what you pre qualified for. (if anything at all)

I'm assuming you've worked that out with your lender and agent already.

If you decide to go above what you pre qualified for (and in most cases hit the limit of what you pre qualified for), you are setting yourself up for disaster. This is the first time I've owned a home as well, but I studied the heck out of it and realized quickly that this was a new ballgame.

Look around your house and think of all the things that can go "boom" tomorrow. Computer, TV, stereo, washer, dryer, pipes, fridge, disposal, windows, flooring. . .

Can you afford to pay your rent AND any of those things in a month? If you said yes to that, could you then do anything else? (like maybe take your GF out to a nice dinner?)

Stretching yourself is good. Stretching yourself to the point you have no life outside of your house is bad. Stretching yourself to the point of relying on other people to make your mortgage payment and having to pray no unexpected expenses come up is disasterous.

If you have financial backing (rich parents) or another stash of hidden money I'm not aware of, do what you want. I'd be careful though. You can not only ruin a great investment, but destroy your credit if you bite off more than you can chew.

Totally, I understand what you're saying.

The 80/20 loan was with zero down. Anyway, I've decided that I'm not going to be making a purchase over what I am prequalified for because I want to keep the interest rate at 6.75. Horray for me! Thanks for the advice up to that point.

For me, going close to what I am prequalified for is ok because I will be having a roommate. This should allow me to get into a townhome I really like and still have cash around. Worse case scenario, if I cannot find/keep a roommate I can make the payments until I find someone else.

I really appreciate all of the insight. I'm a big believer in listening to those who have been there before because I know they have the insight...I'm essentially living in their hindsight!

[flere-imsaho]

Option 2, for all the reasons others are posting about here.

My wife & I prequalified pretty high, based on terrific credit histories and high-paying jobs. However, we bought a perfectly good house for less than half of what we prequalified.

A few months later we both "downshifted" into lower-paying (but better work/life) jobs. If we had bought a house at our prequal limit, we would have had to move. Instead, we're still able to afford our mortgage payments comfortably, and we're still happy with our house.

[wade moore]

You asked about the "no interest" loans...

I'm assuming by that you mean the balloon loans which are actually "no interest" for the first few years, and then your payments balloon.

if so, imo, those are the biggest scam since pet rocks.

[Adamski47]

Originally Posted by wade moore

You asked about the "no interest" loans...

I'm assuming by that you mean the balloon loans which are actually "no interest" for the first few years, and then your payments balloon.

if so, imo, those are the biggest scam since pet rocks.

Wade,

Sorry, I meant interest ONLY loans in which you only pay off the interest for like 7 years (up to 10 I think) in which case you begin paying the principal once you are married and making more money. Sorry, my bad!

[flere-imsaho]

Originally Posted by Adamski47

Sorry, I meant interest ONLY loans in which you only pay off the interest for like 7 years (up to 10 I think) in which case you begin paying the principal once you are married and making more money. Sorry, my bad!

Those are just as bad. You're better off renting.

You think you're getting a good deal because you're only paying the interest, but in the interim, when the toilet blows, who pays to fix it? When the roof needs to be replaced, who pays for it?

So, 7-10 years down the road, you've put all of this money into the property and guess what? You still owe the bank 100% of the mortgage.

[Samdari]

Originally Posted by Adamski47

The 80/20 loan was with zero down.

The definition of an 80/20 loan is that you put up 20%. Methinks you need to talk to someone other than you have been to explain these things.

[stevew]

Originally Posted by Samdari

The definition of an 80/20 loan is that you put up 20%. Methinks you need to talk to someone other than you have been to explain these things.

I though that meant that you get a second mortgage to cover the 20?

[stevew]

dola

Originally Posted by some website

No Downpayment Loan -- 80/20 Option

The main advantage of this type of loan, also known as 100% Financing, is the ability to buy a home with almost no money down. If you have a strong credit profile but have limited funds to commit to a downpayment, then 80/20 mortgage is just right for you.
Lenders typically require a downpayment of at least 20 percent of the purchase price. If the loan amount is for more than 80 percent of the purchase price, private mortgage insurance (or PMI) is usually required. You can avoid paying PMI by getting a second mortgage ('piggyback loan') to back up your first mortgage.

The first mortgage is provided for 80 percent of the cost of the home and the 'piggyback' second mortgage is for the remaining 20 percent. The 80 percent first mortgage can be a fixed-rate (15-year or 30-year), adjustable-rate (usually 5/1, 7/1 or 10/1 fixed period ARM) or interest-only loan. The 20 percent second mortgage can be a home equity line of credit that changes with the prime rate.

Combined, the two loans allow you to purchase 100% of your home with no money down.

[Adamski47]

Originally Posted by stevew

I though that meant that you get a second mortgage to cover the 20?

Yep.

[RendeR]

Never ever NEVER NEVER EVER buy a house you can't pay for by yourself. EVER.

If you can't do it now on your own, don't do it.

[wade moore]

Originally Posted by Adamski47

Wade,

Sorry, I meant interest ONLY loans in which you only pay off the interest for like 7 years (up to 10 I think) in which case you begin paying the principal once you are married and making more money. Sorry, my bad!

Yeah, that's what I thought you meant....

These loans specifically are contributing to a large increase (sorry, I have no factual numbers ) in the number of foreclosures in the US. It all sounds peachy until, like someone else said, 5-10 years down the road you still owe 100% of your loan and you haven't gotten the increases in income that you were expecting...

[Adamski47]

Originally Posted by wade moore

Yeah, that's what I thought you meant....

These loans specifically are contributing to a large increase (sorry, I have no factual numbers ) in the number of foreclosures in the US. It all sounds peachy until, like someone else said, 5-10 years down the road you still owe 100% of your loan and you haven't gotten the increases in income that you were expecting...

Totally. I was just putting it on the table for discussion. As of now I am going for a fixed 30 year loan at 6.75%.

[Adamski47]

Dola,

Again, thanks to everyone for their input so far it has been a tremendous help!

[wade moore]

BTW - I did a 103% loan about two years ago...

I'm not sure how strapped you are for money down, but just make sure you're aware that you will still need a few thousand dollars for closing costs, etc. even if you put no money down.

[Adamski47]

Originally Posted by wade moore

BTW - I did a 103% loan about two years ago...

I'm not sure how strapped you are for money down, but just make sure you're aware that you will still need a few thousand dollars for closing costs, etc. even if you put no money down.

Yep. I just do not have enough right now to put something substantial (less than 5%).

[rewissick]

Since the wife and I closed on our place about 10 months ago, I've got a few ideas for you...

First, check out any state or local programs for 1st time buyers. In NYS, for example, we have a program that allows you to finance 97% at a really low rate (like 5.85% with no points) for 30 years, and they even have closing cost assitance available. There were even some local towns/cities here that offered grants for closing costs or improvements if you purchased in certain areas. We were not able to take advantage of these programs (just missed the income cut-off) but it's worth checking out.

Second, check out www.hud.gov to see if you can get into any special programs. Based on info on this site, we were able to get a FHA loan that required only 2.75% down with a LOW interest rate since we were first time buyers. (we also got the closing costs paid by the seller, so things worked out real well for us there).

Third...be careful/wary of the prequal stuff. I might be off here, but I believe prequal is based solely on income level, and NOT your ability to actually afford the place. For example, we prequal'd for a 200K mortgage last spring based on our income, but only ended up getting a house for 105K. I don't think we could of afforded much more than that based on monthly payments (our taxes are crazy high!)

And finally....don't forget to take local taxes into account on your monthly payment. Those helpful mortgage brokers won't remind you about that until it's too late. You might be able to pay the premium on your high end prequal amount, but the taxes could sink you.

Hope this helps a bit.

[TroyF]

rewissick,

Yeah, that's why above I warned about even getting up to the pre qual limit. There isn't anyway I could have afforded going up to my pre qual limit. Sure, I'd own my home. I'd also have no electricity, internet, gas, or food after paying the bill.

It would have been suicide. I hope you have some good friends adamski. I'd make darned sure you can handle the full payment and still live your life if you go right up to your pre qual level.

You are playing with fire if you don't.

[Adamski47]

The places that I can afford I simply have no interest in. They are essentially dumps. There are nicer townhomes in a city over but everyone keeps telling me to stay away because it is sort of desolate/farm land.

Check out this link:
http://www.ginniemae.gov/rent_vs_buy...p?section=YPTH

This is an interesting form but when it gives you a verdict at the bottom, which for me usually says renting is best, does it take into account the equity you've made into the house? I mean 15-20k is something I will never gain by renting. Right?

I guess what I am saying, should I stay put and rent again? It sounds so stupid but I love the place I am renting. I would MUCH rather buy but the places I am seeing, I can't imagine I'd make much on it (obviously some) but some of these places may take a long time to sell.

Decisions decisions decisions! Thanks for all the help so far.

rewissick,
I did know about all of the extra charges. This is what I've been basing payments on. Mortgage payment is just part of the pie! Thanks for the link...Briefly browsing I did not see anything in my area.

[TroyF]

Originally Posted by Adamski47

The places that I can afford I simply have no interest in. They are essentially dumps. There are nicer townhomes in a city over but everyone keeps telling me to stay away because it is sort of desolate/farm land.

Check out this link:
http://www.ginniemae.gov/rent_vs_buy...p?section=YPTH

This is an interesting form but when it gives you a verdict at the bottom, which for me usually says renting is best, does it take into account the equity you've made into the house? I mean 15-20k is something I will never gain by renting. Right?

I guess what I am saying, should I stay put and rent again? It sounds so stupid but I love the place I am renting. I would MUCH rather buy but the places I am seeing, I can't imagine I'd make much on it (obviously some) but some of these places may take a long time to sell.

Decisions decisions decisions! Thanks for all the help so far.

rewissick,
I did know about all of the extra charges. This is what I've been basing payments on. Mortgage payment is just part of the pie! Thanks for the link...Briefly browsing I did not see anything in my area.

The equity is something that is nice and as a rule you should buy if you can afford it for that reason.

But. . . the worst mistake you can make is to buy a house and end up losing it. It'll damage your credit like there is no tomorrow. You'll be worse off in three years than you'd have been if you'd just kept renting.

Reiterating what I've stated before. . . if you can't afford it buy yourself, I think you are playing with fire. Things happen. Roommates leave, water heaters break, televisions die, computer hard drives fry.

If you are tightroping it with the rent, what type of quality of life are you going to have if one of those other things goes out? Even if it doesn't put you under, it'll cause you a ridiculous amount of stress.

If you can't find anything you like that you can afford, rent another year or two. Having said that, I wouldn't give up either. You can get good deals by accident sometimes. Look really hard in the price range you can afford and see if something stands out. You may be surprised.

[digamma]

Originally Posted by Samdari

Lenders generally will not give you a housing loan in which the payment is more than 37% of your gross income (or 28% of net minus other debt payments). This limits your payment to about $1200. Option 1 is probably not really an option.

With the increase in home prices, the 37% number has not been as closely followed in the last several years (for example, the number of Americans spending more than 1/2 of their income on their mortgages increased by about 7 times over between 2001 and 2004--from about 2 million to almost 16 million). It will be interesting to see if lenders revert to that number as the market softens and interest rates push upward.

[rewissick]

Rereading this a bit, and I noticed you mention you are working on your masters. Given that fact, along with some others you've mentioned, I'd go with renting until the masters is done.

Of course, I'm just some dude on a message board. My wife doesn't listen to me, so maybe you shouldn't either.

[Eaglesfan27]

Originally Posted by digamma

With the increase in home prices, the 37% number has not been as closely followed in the last several years (for example, the number of Americans spending more than 1/2 of their income on their mortgages increased by about 7 times over between 2001 and 2004--from about 2 million to almost 16 million). It will be interesting to see if lenders revert to that number as the market softens and interest rates push upward.

Even though lenders will allow it, the thought of going over the 37% as a consumer is a very scary idea to me. I didn't even want to go over 30% and risk having a major disaster if many unexpected expenses occur.

[digamma]

Originally Posted by Eaglesfan27

Even though lenders will allow it, the thought of going over the 37% as a consumer is a very scary idea to me. I didn't even want to go over 30% and risk having a major disaster if many unexpected expenses occur.

I think that's a very fair point and sound decision making. I was just pointing out that the old 37% rule isn't necessarily the way lenders are behaving these days--whether that's a good thing is up for debate.

[Flasch186]

FWIW, many homeowners who sold last year and are renting are planning on renting into next year under the hopes that a price drop should be coming 4qtr '06 and 1qtr '07 in many of the cities and towns that had booms in prices the last few years. I have no idea if the drop is coming but just a nugget I thought I'd toss out there.

[Adamski47]

Originally Posted by Flasch186

FWIW, many homeowners who sold last year and are renting are planning on renting into next year under the hopes that a price drop should be coming 4qtr '06 and 1qtr '07 in many of the cities and towns that had booms in prices the last few years. I have no idea if the drop is coming but just a nugget I thought I'd toss out there.

Interesting. Care to elaborate?

[AlexB]

Originally Posted by rewissick

Rereading this a bit, and I noticed you mention you are working on your masters. Given that fact, along with some others you've mentioned, I'd go with renting until the masters is done.

Of course, I'm just some dude on a message board. My wife doesn't listen to me, so maybe you shouldn't either.

Herein lies the key - this is an internet message board, not a financial advice clinic. Speak to a professional - I'm guessing there are mortgage advisors in the US the same as over here (they make their money from the commission on the deal that they offer a IFA for introductions to their schemes - you should not pay over the odds for engaging one).

FWIW I bought a property 7 years ago which was right at the edge of what I could afford. As things turned out this was a great decision - the place is worth 250% of whatpaid for it. If it had gone wrong I would have been screwed. I made the decision in the dark and got lucky - if you are in a similar position, take advice from a professional, and don't rely on luck.

[Flasch186]

Originally Posted by Adamski47

Interesting. Care to elaborate?

some are gambling that in a few quarters, those investors who bought homes intending to flip them than found out they couldn't do it easily will grow tired of carrying a home that cannot be rented or sold at their original intended price thus eventually lowering it to "dump it". If this bears fruit you may see some excellent opportunities to cherry pick somewhere down the line. This, however, as I see it would definitely be contingent on what area we're talking about. Some did not overinflate, some grew moderately, and some not at all, so it is not this simple across the board PLUS if the prices do not adjust downward those renting will have wasted time.

[Adamski47]

Originally Posted by Flasch186

some are gambling that in a few quarters, those investors who bought homes intending to flip them than found out they couldn't do it easily will grow tired of carrying a home that cannot be rented or sold at their original intended price thus eventually lowering it to "dump it". If this bears fruit you may see some excellent opportunities to cherry pick somewhere down the line. This, however, as I see it would definitely be contingent on what area we're talking about. Some did not overinflate, some grew moderately, and some not at all, so it is not this simple across the board PLUS if the prices do not adjust downward those renting will have wasted time.

I am talking to two different realtors but getting their full-attention and effort as much as I would like (which is A LOT) is next to impossible. I've asked to see these comparison numbers to see which areas are growing and which are not but each realtor seems fit to wait until I narrow it down to a few or whatever. I guess they don't understand the fact (my fault for not reiterating) that this has a lot to do with which ones make it to the final round.

Do you have some sort of history of particular areas in the US? Would you need zip codes, street names? Actual addresses?

Off for a night of fun!

[Flasch186]

zillow.com can be a starting point but the prices can be WAY off in "boom" towns. Drive around the area and look for flyers for stuff for sale, make calls on "for sale" signs and ask the list price (this is usually NOT the price the seller expects to get). See how many for sale signs and for rent signs are up in an area. etc.

[flere-imsaho]

Originally Posted by Flasch186

FWIW, many homeowners who sold last year and are renting are planning on renting into next year under the hopes that a price drop should be coming 4qtr '06 and 1qtr '07 in many of the cities and towns that had booms in prices the last few years. I have no idea if the drop is coming but just a nugget I thought I'd toss out there.

Poor sods. The fact is that the financial press has been pushing the "housing bubble" story since about 2002. Every year is going to be the year it happens.

Now, there may be a housing bubble. In fact, i'm sure there are sectors of the housing market that are overpriced. That's not my point, though.

My point is that if you've randomly gone to WSJ.com, money.com or whatever else over the past 4 years, you've seen over and over again what's amounted to a meme on this topic. It almost makes me think that the financial press is trying to will it to happen, so they can all look smart for predicting it (even if they predicted it each year, every year, for four+ years).

So yeah, if you think a particular sector is overpriced (condos in Chicago, for instance), don't buy. But to say the entire housing market is headed for a dotcom-style bust, specifically in the next few quarters, is just guesswork.

Sorry, a bit of a rant there. Not directed at Flasch personally, btw.

[Buccaneer]

For what it's worth, I gladly rented for 18 years (which included the college years). Even though I knew once I arrived in Colorado I would be here for the long term, I rented for 7 years. I waited until I got married and two months later, we bought our house. Equity and interest deductions are great stuff but I don't think they would have outweighed the advantages of not having mortgage payments and substantial maintenance costs while I was single. Live cheaply while you can and when the time is right, do it. With that, I echo getting something cheaper if you want to go that right now.