How come everyone is telling me to buy?!?!?!?

[ScrimpAndSave]

I was talking to some friends and explaining that I am planning on saving $100,000 by December 2011 so I can buy a house with 20% down, 15 year mortgage and still have money to furnish it and money in my emergency fund.

They were saying that if I can save that much, with housing costs being so low and interest rates so low...i am stupid for not buying now.

I have $6,500 available in my checking account. Spending that all on a downpayment and leaving myself with nothing but a mortgage to pay is stupid - right?!?


People are WEIRD.

[DebbieL]

You seem to be all over the map. One day you're out looking at places to buy, then your friends are crazy to tell you to buy. Do you know what you want?

I don't necessarily think you should buy, but I do think it's time to move out on your own. I think your dad will only become more and more dependent on you for his social life the longer you stay.

[ScrimpAndSave]

I think it is within my best interest to save till 2011.

[ScrimpAndSave]

And I am all over the map. I'm bipolar. One of my most noted qualities...hahaha.

[DebbieL]

I hadn't realized you are bipolar. You sound like you are doing very well in life. I wish you continued success. My big brother is bipolar too. He is pretty bad off though, and not really capable of holding down a job anymore. He's spent so much of his life in psych wards - it's sad. Of course, there are many forms of bipolar and he's in the worst percentile.

[Gruntina]

Maybe keeps a journal on your home buying plans to keep all thoughts, plans in organized matter? I think it would help to see a visual graph or chart of how much money you saved so far for your deposit and write down thoughts of what you want in a home?

[ScrimpAndSave]

I'm so sorry to hear that about your brother...I was only diagnosed a few months ago...and it's a low end of the spectrum.

Gruntina...I think that is a great idea. I was actually thinking that today when I was looking through and interior decorating magazine. I was thinking of tearing our pictures of things that I love so I can figure out what my personal style is really like once I start to decorate my house.
And yes, I do keep vigilant watch of my savings and I have my savings planned up through 2011.

I did look at some houses with my realtor...and it did give me a much better idea of what I want in a house.

Open floor plan...large kitchen...hardwood floors..etc.

[gamecock43]

How come everyone is telling me to buy?!?!?!?

honestly i get that too. Iget it all the time and I can only think it is because
1. alot of people are really uneducatedabout the housing market and consider themselves 'informed' because they watched a commercial highlighting incentives to buy that was sponcered by ReMax realty co.

2. people dug themselves into a huge real estate hole and dont like the idea of admitting they were wrong. you jumping in to will prove to them that other people are doing it too.

3. people bought real estate and did good. So they attribute the ease and simplicity that they experienced to you and your situation. They think you will have the same experience even though your situation may be totally different than theirs.

4. Buying real estate is all kinds of fun and they have fun spending other peoples money.

5. They want to tell you why your wrong. they want to be right. they want to be smarter than you. If you told them you are buying a house they would turn around and tell you you are foolish.

Some people got away with making the largest purchase of their life with 0% down. Many didnt. Go with the historical data. put down 20% to be safe. Dont consider yourself 'smarter' than the masses by being able to buy with 0% down even though most couldnt. There is no data that shows they were more likely than you to foreclose.

[gamecock43]

They were saying that if I can save that much, with housing costs being so low and interest rates so low...i am stupid for not buying now.

So if you buy now, and pay 5k in maintance costs between now and 2011, and lose out on compounding interest- then you are really (I cant do the interest math) many thousands of dollars behind than if you saved and put the savings in the bank.

[ScrimpAndSave]

Game, that is exactly what I thought!

[disneysteve]

Originally Posted by ScrimpAndSave

I was talking to some friends and explaining that I am planning on saving $100,000 by December 2011 so I can buy a house with 20% down, 15 year mortgage and still have money to furnish it and money in my emergency fund.

They were saying that if I can save that much, with housing costs being so low and interest rates so low...i am stupid for not buying now.

I have $6,500 available in my checking account. Spending that all on a downpayment and leaving myself with nothing but a mortgage to pay is stupid - right?!?

You should know by now from hanging around this board for a while that doing what the average American would do with their money is generally NOT the way to go. How many of those friends own their homes? How many put down 20%? How many are consumer debt-free? How many are fully funding their retirement plans? I'll be the answer is not many, if any.

[terry1156]

Just to give you some extra thought, there are a couple of compelling reasons to buy now.

1. Interest rates are at historic lows and inflation is rearing it's nastiness. Interest rates will likely have to go higher - maybe much higher - in the coming years.

2. It's currently a buyers market. That means that you can take your time and find a house you like and pay only what you think it's worth because there are plenty of alternatives to choose from

That is not to say that you should, just some things to consider and why your friends' advice may not be 100% wrong.

[ScrimpAndSave]

But Terry, in my circumstance...I do truly believe that my friend's advice is 100% wrong.

I cannot get a decent house under $250,000. This means that if I get an FHA loan and put very little down - then my monthly payments will be so high that I will wipe out my ENTIRE savings and have nothing left in my emergency fund. I will also not be able to put money toward retirement for another 3 or 4 years.

[disneysteve]

You should buy a home when you are financially, emotionally and situationally ready. From all you've posted, I'd say none of those apply quite yet. Besides, you still don't know where your husband-to-be will be working so how can you possibly buy a home now? Do your friends have a crystal ball that tells you what neighborhoods would be convenient to his future job?

[Like2Plan]

SnS,
It sounds to me that you should be the one giving advice to your friends instead of the other way around.

[MonkeyMama]

I am completely at a loss why people freak out when you say you are going to plan a couple of years to buy a house. (In your case more like 3).

A house is a big investment. Perfect example how most people want buy things now and figure out how to pay for them later.

I don't think it's unreasonable to save up 2-3 years for a house purchase. Heck, I don't think it's unreasonable if it took many more years.

Anyway, I already own a house and I got people left and right pressuring me to buy an investment property. I honestly think they are crazy. Their is a glut of housing and it has been hard to find renters ever since we have lived in this area. We considered buying a rental a few years ago and eventually decided against it. There are many, many, many reasons we decided not to go this route. But the most obvious are we couldn't float it on our assets and income alone (without a renter). This is what has screwed everyone over these last few years. But it seems to me everyone who is unscathed wants to jump in and succeed where everyone else has failed. It's a little scary. I am sure it is a great time to invest if it is right for you, but I see a lot of people jumping in head first with little thought, simply because there are deals to be had.

So anyway, I own a house and I am still getting it left and right - I need to buy another one. (Yeah, whatever).

{DebbieL - I understand. I have a sister who has spent a lot of time in the psych ward - bipolar. I feel extremely blessed to be about the only female in the family that did not get those genes. But I suffered a little PPD with my last child and I have to say I have a profound new respect what many in family go through}.

[Scanner]

I think there may be a compromise.

If you can get into a house for 250K, then 20% of that is 50K (almost had to get out a calculator, ha, ha).

You leave 10K for an emergency fund. . .not sure why you feel you need 100K, unless your future cash flow is so low that you need to keep the mortgage low.

That being said, I agree with Disneysteve. . .if you don't know where you all will be working and other "non-financial" factors. . .then don't buy and just keep making real estate agents and title companies money.

[ScrimpAndSave]

Thank you all for your support.

The big factor for me right now is:

Buy a $150,000 shack for little money down and stay in it for 5 years with a 30 year mortgage.

OR

Wait 3 years. Buy a beautiful $250,000-$300,000 house that can be my FOREVER home with 15 year mortgage and work on paying it off earlier.

No brainer for me!

But people insist that if I buy the $150,000 shack, I will gain all of this equity. But I'm sorry - with all of the maintanence and cost of upkeeping a house - don't they consider the amount that I would lose? Right now, I am saving $1500 a month toward the purchase of a home. Starting in Sept. I will be saving $2000 a month. Next Septemer...about $3000 a month and then the Sept. after that, $3500.

I don't think I could build equity that fast if I bought a crack house.

I have 3% interest (right now) on my earnings in my INGdirect account as well.

[Scanner]

Oh, to stay on topic, probably the reason why people think you are crazy to not buy is because they are only relating it to their situation.

They think, "Well golly gee George, if I had $50,000 sitting around, I'd buy me a house." Your friends are right. . .now IS the time to be "cash rich." But it just doesn't apply to your situation.

They are in their self-centered world. This is what makes financial planning so theorectically attractive to me. . .to actually consider where the client sitting in front of you is coming from and basing advice on that and perhaps sometimes why you should approach a board like this or a financial planner/accountant for advice.

[Scanner]

Oh, and stop cutting out pictures of decorating magazines. . .I hate when women do that as much as women hate when men don't put the toilet seat down.

You'll drive yourself crazy and be more likely to over-splurge after you get your house.