Keep in mind that in addition to the mortgage you'll have to pay for homeowners insurance and property taxes plus utilities. And once you're in the house you'll quickly discover all the things you need and that adds up quickly.
so, a little while ago me and my girlfriend broke up and so i moved out of the apartment we shared. now im staying with my parents while i look for a new place.
im doing a lot of research online and i really like the idea of getting a mortgage and buying my first house.
mortgage payments seem to be pretty comparable or cheaper than the average apartment rent in my area. and then when i would eventually sell the place, i will essentially get alot of that money back, whereas with an apartment i would get my small security deposit and nothing else. is that essentially correct?
fact is though, im in the first half of my twenties and not that knowledgeable about this kind of stuff. would anyone want to offer their advice? maybe help me out with the pro's and con's of rent versus lease versus mortgage?
We just closed on our house at the end of May and moved in about a month ago. We spent a lot of time budgeting things out.
A lot of things depend on where you live. For what we paid for our house in the Chicago suburbs we could have bought 2 or 3 in my girlfriend's hometown in Ohio.
Are you sure? This is a MASSIVE misconception that a lot of people have that leads to HUGE, unrealistic expectations. Part of this is of course, the fault of the Real Estate business itself as it constantly bombards people with advertisements that they can own a home at the same price they rent for.mortgage payments seem to be pretty comparable or cheaper than the average apartment rent in my area. and then when i would eventually sell the place, i will essentially get alot of that money back, whereas with an apartment i would get my small security deposit and nothing else. is that essentially correct?
Can you own a home at the same price you rent for. Sure.
Is it going to be a home you want in an area you want? Unlikely. Granted, every market is a bit different, but here in Indianapolis, we have a a very,very strong buyers market and everytime I hear someone tell me "Oh, I pay $700 a month in rent, I don't want to go over that on my mortgage payment" I grit my teeth and want to shake them.
It defies logic, what would possess a person who pays $700 a month in rent per month, for a two bedroom, 900 square foot apartment to think they would be able to get a 3 bedroom, 2000 sq foot house for the same price?
Does that make any kind of sense whatsoever?
Your mortgage payment breaks down into several different componets.fact is though, im in the first half of my twenties and not that knowledgeable about this kind of stuff. would anyone want to offer their advice? maybe help me out with the pro's and con's of rent versus lease versus mortgage?
1)The principal of your loan.
3)Your homeowners insurance.
4)Your property taxes.
5)Private Mortgage Insurance. (this does not apply to every loan, some people based on their credit, the type of program, size of downpayment, etc, do not have to pay PMI.)
You also get for file a homeowners deduction on your taxes that will net you back some extra cash at the end of the year.
Also, in many states, if you are buying your first home, you may be eligible for a Mortgage Credit Certificate, or MCC, what this does, is increase your take home pay, as less money is witheld from your taxes each month.
Check at your local bookstore on books for first time buyers. They can be handy references to get an idea of what to look out for and how the whole buying process works. You also want to check to see if your state has a first-time buyers program. Depending on your income, you may be able to get a pretty good deal on a mortgage rate if you are a first time buyer.
I also agree with Keith, a lot goes into your monthly payments and you're going to have to be realistic about what you will have available to you. On the bright side, your first home isn't necessarily your last home. Eventually you can sell and trade up when the means become available. Oh, having a healthy down payment can help a lot too.
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watch out for the arm loans and other weird ones.
I close on my first home on Aug. 1st. I don't know about the housing market up where you are, but here in Seattle, the prices of homes are really off the chart. The 3bd 3.5ba townhome I bought cost well over $500,000. Keep in mind, it was my choice to stay in the city, which is why it cost so much. Really take the time to research how much you can actually afford. Many lenders will lend you money even if you can't really afford it.
I was basically in the same boat as you. I just graduated from college last June, and decided for myself that I didn't really want to rent anymore. My job as a software developer means I can actually make the monthly mortgage payments on my own, but since I'm single, I'm renting out the other rooms to offset the cost.
BTW, the types of loans you can get will really depend on your finances, and your credit history. I was fortunate that my parents co-signed my mortgage loan, otherwise, the fact that I had only been in the professional work force for a year would have prevented me from actually being able to qualify for anything.
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Also, another huge misconception is resale value.
You can turn a profit...eventually. But its going to be dependant on so many different factors. The market, demand, how much equity you have in your home, appreciation, etc.
People are completely taken aback when we do a market analysis on there homes and give them a projected sale price. Without going into a bunch of lingo that you won't understand, I wil put it into laymans terms.
If you don't have a nice chunk of equity, and you try to sell, your fucked. People CONSTANTLY buy houses, and then turn around and expect to sell them a year or two later and turn a profit in a buyers market. Its hilarious.
I piss people off all the time by telling them our team has no interest in listing their home. Most Real Estate agents are basically whores, who will take any potential business that comes there way, so the average seller simply cannot comprehend an agent telling them they don't want to work with them.
Perfect example. I had a guy last week who bought a house about a year and a half ago for around $175,000. He bought it new, and then did about $20,000 in upgrades, customizations, etc. Of course the builder is still building these houses in his neighborhood, at the same price and he wanted to know who much his house would sell for.
Why would someone buy your home when BRAND NEW ONES JUST LIKE IT are still being built AT THE SAME PRICE! Idiot.
The he wanted to go on an on about all the things he had done to the house, yeah, you put $20,000 of crap in it. Guess what, the typical buyer does not give a shit. All the things that people spend money on to "improve" there home does not increase its value or chance of selling unless you have niche buyer.
No one cares about your customizations, your "man room, or home gym, your pool, your deck, your patio, your boat dock." The cost of those things FAR. FAR, FAR, FAR exceed the market value.
People want a blank slate, something they can put their own personal touch on. Update your shit, put new paint, carpet, modern kitchen and bathroom stuff.