Tuesday, January 19, 2010

Need the Housing Memo

Dear Homeowners,

I think we missed a memo or something.  How is it possible to afford a house?  The Boy and I are looking at a move to the Boston area (which might be our first problem), and we'd like to buy a house.  A single-family house.  However, even with a decent down payment (~10%), once you tack on insurance and taxes, it really looks like even a small house in a nice town on a commuter rail (which is what I'd really like) is out of our reach.  Or, maybe it isn't, if we were more comfortable with having housing take up pretty much half of our monthly budget.

Are we crazy?  Did we miss a memo?  Or would it just be wiser to spend another year in a rental rather than live with the stress of high monthly costs?

Let me know.  I've been watching way too much HGTV lately and feeling like I'm just clueless about the process.  How can all these 20-somethings be able to plunk down a ton of money for a house, while I don't feel like I can?  Is there some financing thing I'm missing, or am I just not comfortable enough with massive amounts of debt?

Your advice would be appreciated.  Thanks!
Your pal,


  1. What you need is an aggressive broker who looks at all your options--we got a rural development loan with 0 down. She had never heard of them before, but found out about them for us. Waiting is always a good option-- that way you can get to know the area and know where you really want to be. BTw, Frau's college roommate and her husband live in that part of Mass and would be great guides.

  2. Jill, I put $200 down on our house. That's two hundred. I spend a whole paycheck (and then some) on the current payment, bills, etc., We used an FHA program that's no longer in existence, though to get into our house. But we also bought a foreclosure that was in surprisingly good shape.

    Home ownership is simply overrated, though. We did this as an investment, and I think it's going to work out. Our condo in Pittsburgh should work out, too. But now we're tied to this house (wouldn't be able to rent it out). I kinda wish I was renting so we could be free.

    Remember who is pushing home ownership -- banks (profit) realtors (profit). And remember that when our parents were owning homes for 20+ years and taking pride in it, their jobs allowed them to stay in one place and do so. At least for me, I've moved about 8 times in 9 years after graduation.

    But remember also you're searching in Boston. There's no new housing there, so they can charge what they want. We live in the burbs in the midwest, so it's new houses for miles and miles ...


  3. Jill, it is tough. No one tells you about all the costs...Boston is a tough area. When I lived out there I had NO hope of owning. The folks I knew that owned often didn't have enough money to buy until they were A LOT older than I expected (& inherited money from a dead relative!)

    I'd go with the renting for a while...get settled and find out where you'd really like to live out there. Take your time to find the right place, I'm sure it will pay off in the end!

    The comment about Frau's old roommate from Dordt being out there and a helpful person to know is true...Her name is Dorothy VandenBerg. I used to teach with her and her husband Dick. They live in Douglas, MA.

  4. Boston, yeah, that's your first problem. Just remember how much better off you are than NYC or SF.

    It is a big payment each month, even when you can afford it. Just like kids. After a year or so, you adjust, and it's just another bill. But that's only if you could afford it in the first place.

    Turn off HGTV, or at least take it for what it is - entertainment. It is as useful as learning poker from ESPN or the markets from CNBC.

    Investment? That's the code for 'I getting killed on this so please God, get me out of this somehow and I promise never to do it again'. It's a place to live in and enjoy, that's your value (and a tax break on your interest payment). Historical average return on residential real estate is <2% after expenses. HGTV forgot to mention that. But every 20 years there is a bubble that makes you think otherwise, and you can slap in granite counter tops on some dump and feel like a real estate baron.

    Waiting is probably the best option now, and it will probably happen anyway as it will probably take you a 6 months to figure out where you want to live, and then longer to find a house.

    -The Migster

  5. You should look into HUD home, they have a website, google it and FHA or foreclosures. Shop around for a real estate agent that specializes in selling foreclosures. If you are willing to put in a little elbow grease, you can usually get a really good deal. Although, I am speaking of my experience here in Illinois and know very little about the Boston area. Cant someone for Ben's work help you get in touch with the right people? tom Toolis

  6. Dear Jill--

    The previous commenters are right about HGTV--pure fantasy. I watched a ton of "Property Virgins" and "My First Place" while house hunting, and, well...no.

    As far as being comfortable with large amounts of debt, yes, that's something to get used to. Of course the amount and type of debt differs depending on how much you spend and how you finance, but no matter how you do it you're going to have those huge numbers staring you in the face. The only thing to do, I think, is to take a deep breath and dive in.

    And investment? Bullshit. You buy a house because you want a place to live that's yours. You don't buy a house because it's an "investment". Unless you're an extremely good renovator and got an extremely good deal in a seller's market, or you're just seriously deluded.

    Also, it depends on what you're used to. You paid a reasonable amount of rent in Chicago, so monthly mortgage payments aren't going to be much of a downward change for you. We paid ridiculous rent for our LSD high-rise apartment, so our mortgage is now half of that here in Madison. We basically couldn't go anywhere but down on our housing costs based on what we had been paying and our move to a much smaller market, whereas you guys are moving to another big market with similarly high rates.

    Best of luck to you in your decision...it is a tough one!

    Your pal,

  7. Hi Jill,

    The best advice I have is my own experience. Even after living in Chicago my whole life and working in the real estate industry Tim and I took about a year and a half to find our condo. We viewed it both as an investment and a home.

    We started our search by moving into the city, to a neighborhood we were interested in. We then went to open houses and sometimes had a Realtor friend show us a few places of interest.

    When we first started we weren't ready to buy. We didn't have our down payment and we made an educated guess as to how much we could afford. The exercise was at first in learning the neighborhoods and learning the value of homes.

    About a year after that we were ready to buy. At that point we had a good idea of what we could expect from the neighborhoods we liked. We got preapproved from a lender and decided, from that number, how much we were really comfortable with spending (it was a lot less than they suggested). We continued to look in the neighborhoods we liked, but then started to whittle it down as we could see which neighborhoods offered the best value for their inventory.

    We found a place, lost it, then the next weekend found another during an open house. At first we thought the one we chose was out of our price range, but it was too good to simply pass up. We adjusted our budget and decided we could get it. I don't think either of us would ever look back.

    What I learned was, get preapproved, but write your own budget. You may not agree with how much they say you can afford. Know your neighborhoods! Learn the history of them and feel like you can see where the future is taking them. Visit lots and lots of open houses. Take your time. Find a compasionate Realtor. Don't let the loss of a property discourage you, a better one is probably right around the corner. View the purchase as both and investment and a home. RENT FIRST!!

    I have a friend who owns near Boston, he might be able to recomend a Realtor. Shall I ask for you?


    P.S. I love this subject, so let me know if you would like to talk more.