Don't Want to Buy a House

[ThePennyHoarder]

My best friends in the world are seriously considering buying a house in the next few weeks, but not because they want to. My friends are 25 years old and are very good with saving their money. They have been renting a house the last couple of years while they build a nest egg. Their plan was to buy a house two years from now and continue renting until then.

Their plans were thrown a bit of a wrench this past week when their landlord informed them that they are planning to sell the house they are renting. My friends have to be out in 60 days. Rather then spend the money on moving twice, extra deposits, etc., my friends have come to the conclusion that they should just buy a house now.

Truth be told, they have enough money saved up, but they are feeling pressured to find a house in such a short amount of time. They have already looked at 20 or so, but haven't found "the one" They have found a few which would work, but that they aren't in love with. They are concerned that they might be settling and aren't sure what to do. What do you guys think?

[jIM_Ohio]

If they have the money to move, why were they waiting to buy?

Answer that question, and I think the solution lies in examining why they were renting, why they waited to buy to begin with, then seeing if any of those reasons have changed.

[jimmyrules712]

I think the inconvenience of moving twice is worth not spending 30 years feeling like you didn't get the house you wanted. Or buying a different house 5 years later (and thus moving twice anyway).

I'd say tell them to find something cheap and basic for now to rent, don't unpack most of the boxes, and buy a house as soon as they find the one they want.

[littleroc02us]

Why not just find a cheap apartment that allows you to rent monthly until you find just the right house?

[cypher1]

My friends (they're married), a few months ago were put in a similar issue with their apartment lease ending within 60 days and decided to buy a house since they didn't want to keep moving. As for the wife being laid off already, and they really didn't have much saved, is another topic. Took them over 30 houses to look at before finding the "one" in less than 2 months. If I was in that situation, I'd just bite the bullet, find another apartment and keep saving. On and off it took me a good 6-8 months to find something I really liked. Too much pressure, and I couldnt justify having a 30 yr mortgage to end up moving within a few years.

[ActYourWage]

If they have the money to move, why were they waiting to buy?

Answer that question, and I think the solution lies in examining why they were renting, why they waited to buy to begin with, then seeing if any of those reasons have changed.

Good question. If they were waiting to save up more money for a bigger down payment thus a bigger house ("right one"), this move may force their hand to get a smaller house with a smaller down payment, which in turn, could be better off in the long run.

However, if they are "pressured" to find the "right one", then I would hold off and rent a bit longer.

[Fizgig]

I agree with the others - Don't put yourself in the position of feeling you have to buy a house within a short time frame. Most everyone has to compromise on one thing or another when buying their first house, but they'll have to make far too many concessions if they have a MUST BUY date lurking over their heads.

They should rent cheap and keep looking until they find the right house, even when that means moving twice.

[littleroc02us]

Speaking from someone who has bought a house, if I could do it all over again I would save up a 50% down payment and have a very small mortgage. It's not fun watching so much money go towards interest when I could be using it for compound interest wealth building.

[Hector]

Speaking from someone who has bought a house, if I could do it all over again I would save up a 50% down payment and have a very small mortgage. It's not fun watching so much money go towards interest when I could be using it for compound interest wealth building.

I dont own house, but for the sake of argument, aren't these the few reasons why we buy houses?

A person making 100k/yr is not able to borrow 400k for the interest rate of 6% or so. The most common place a person would able to borrow this amount of money is by having mortgage. Then one would count mortgage deduction and would claim that he is actually paying less than 5% towards interest rate. Later in the life, amount of interest would go down and there wont be much tax benefits, but one would think that his income would go up and it wont be an issue. In a situation where a person is capable of making more than minimum payment towards mortgage, he wont do it because he is smart enough to make 8-10% by investing in stock market and who cares about paying tax on capital gain? So what a person pays around 800k over 30 years for the house whose buying price was 400k, person is making equity and not wasting all the money by renting and housing prices would appreciate that a person would able to sell the same house at least in 800k after 30 years if he needs to....

[jIM_Ohio]

I dont own house, but for the shake of argument, aren't these the few reasons why we buy houses?

A person making 100k/yr is not able to borrow 400k for the interest rate of 6% or so. The most common place a person would able to borrow this amount of money is by having mortgage. Then one would count mortgage deduction and would claim that he is actually paying less than 5% towards interest rate. Later in the life, amount of interest would go down and there wont be much tax benefits, but one would think that his income would go up and it wont be an issue. In a situation where a person is capable of making more than minimum payment towards mortgage, he wont do it because he is smart enough to make 8-10% by investing in stock market and who cares about paying tax on capital gain? So what a person pays around 800k over 30 years for the house whose buying price was 400k, person is making equity and not wasting all the money by renting and housing prices would appreciate that a person would able to sell the same house at least in 800k after 30 years if he needs to....

Two additional points

1) don't get a house for the tax deduction.
2) paying mortgage off in 15 years is close to a 100% return on money...

compare interest paid on a 15 year and 30 year mortgage (over life of mortgage)- the 30 year is usually 2X the total interest paid relative to 15 year (which is 1X interest paid).

YMMV.

[Seeker]

Settling?

Both these people need to draw up a list of what they want in a house; room-by-room. They need to do this separately. Externals are also important. Natural light in a room (windows and direction they're facing). Noise from outside. If they have or plan for kids in the future, schools may be important. The proximity to gorcery stores, etc.

Kitchen -- generally the wife is more interested in this room of a house. What does she hate about kitchens? What does she love about kitchens? Have a pro and con list for each and every external/internal thing that is important to each of them.

Then together they need to compare their lists and draw up a combined listing taking both their considerations into it. "He" might not care as much as "she" in some aspects of the combined list; that's natural. But they need to be flexible in drawing up a "combined" pro/con listing.

They need to take a combined listing to each house they "sorta feel like they might be settling."

I'll tell you, I was not certain that I had found the right place for me when I purchased my first condo (and I still live in the same place almost 20 years now), it's natural to "feel" ambivilant or uncertain. It's a major expense that you cannot just easily back out of.

The listing will help though.

[rj.phila]

i would suggest they do both! seriously-keep looking for a house, and in the meantime, devote a few hours here and there to finding a place to crash for a few months if they dont find a house. pick a cutoff date, and if they find one by then, great-if not, rent for a few months, chuck the stuff in a storage unit, and that's that.

fyi, if they have seen 20 houses or so, statistically, they are approaching the time when they should be finding "the one".

a helpful tool one of my RE agents gave me once about how to know when you find "the one" is this: imagine you woke up tomorrow, and you found out that the house was sold. would you be disappointed? if so, it might be the one".

[Slug]

Let's see:

rushing into biggest purchase ever made + no experience homebuying = recipe for disaster

Just rent for now. Move twice now or move twice later when you figure out the house that was close to the "one" wasn't quite close enough.

[snafu]

There is no justification for rushing into a really big purchase like a house. Have they sought out the new purchaser of their rental to see if they want to extend the rental? Have they already done the paperwork for mortgage approval? Buying your 1st home should be an enjoyable experience not a pressure filled mission.

Larger isn't necessary better but it sure is a lot of work!

[littleroc02us]

I dont own house, but for the sake of argument, aren't these the few reasons why we buy houses?

#1 Never buy a house for the tax deduction. Ex. If you had a mortgage on a 400k house, you pay the bank in interest 25k a year to only get back $7000 from the IRS if you were in the 28% tax bracket. Hmmm, sounds like simple math would show that. Bad idea to carry a mortgage for the tax deduction.

#2 A home is a place to live. If I didn't love my home so much and the people who live in my neigborhood we would have sold to break even, rented for 2 years and saved up a huge down payment.

#3 A home is like an investment, some years it goes up and some years it goes down.


Good luck! Save, Save, Save....