When's the right time to buy a house?

[Feops]

Here's something that's been at the back of my mind for a while.

When is a good time to buy a home? That big leap from renting to owning. Perhaps the largest purchase most people will ever make in their lives. An introduction to huge debt.

Common wisdom seems to be that one should purchase a home the moment they have sustainable employment to afford it. Though I'm not convinced this is the case anymore. Granted the rent money I pay is entirely lost. But I'm also not spending money on mortgage interest, property taxes, and maintaining my home.

Personally, I'm in Canada where the housing market has not collapsed, only plateaued at a high point, I have a single fairly average income, and I currently live in decent comfort in a single bedroom apartment. Talking to the bank, buying something at my current standard of living would be so tight on the budget that I'll live poor, so I'm leaning towards a joint income being a good idea before even thinking about this.

But I don't know. Anyone else done this dance recently?

 

[Nonsensical]

When you can no longer concider that last house you're living in home.

 

[BlueScreen]

I'm looking at this stuff too. I want to own something before I'm 30 as an asset. Just so I have some financial security, and money locked up somewhere. Also because rent is money spent without getting return.

They keep saying the housing prices are inflated here in Melbourne though, so it probably isn't the time yet in Australia. If Canada didn't crash, then there might be some room for price drops there also. Just depends if the prices are inflated in the first place. If Canada didn't do the nonsense Australia did, then they might not be.

 

[WoodsWoman]

Figure out what you'd have to live on if you were paying a mortgage by putting that amount (less your rent money) into a savings account. Do this for a year. It teaches you what to expect lifestyle-wise, and you build up a down payment. Gratification is sweetest when properly delayed.

 

[Feops]

Thinking about this some, I may seek out a condo. A condo has fees, but avoids some of the expenses, and more importantly allows the option to buy something small while still being nice. A nice house on the other hand pretty much always has a big expensive plot of land to maintain in addition to being moderate to large itself.

Noigmn, my hope a year or so ago was that the local housing market would plummet much like the american one. However we didn't experience the domino effect of mass defaulting and bank troubles, so things just hovered. If people can afford their mortgages I don't think it'll go down... which is frustrating as my wage doesn't nearly have the purchasing power (in terms of homeownership) that existed a generation ago. I'm still hoping that there will be a decline as the american troubles trickle into the local economy (canada exports to the states a lot) though this is something of a mixed hope as I'd rather our economy be strong, too.

Woods, I have a decent surplus in my budget right now and the down payment isn't a problem, though that's a good idea in any case. I know several people who have set up secondary accounts just to absorb budget surplus, or a set amount monthly, so as to distance that account from one's day to day finances.

 

[avolkiteshvara]

Let the market bottom out a little more.

Then:

Buying a Home - HUD

Local Homebuying Programs - HUD


There are some programs for first time buyers as well as others.

 

[chasingAJ]

It depends on the housing market where you live. Look for what economists are saying about it online (Realtors are in the business to sell houses, sales people typically lie...)

There are rent vs. buy calculators online. That's a good start. Could you transfer your job to an area with a lower cost of living (if you transfer, you typically keep your salary). If you factor in a commute, would moving further away from your job give you less expensive housing options? If you're a single person, would you be willing to live with roommates? I had a friend who did this, rented the rooms in his house out and it paid most of the mortgage payment while he paid for taxes, repairs, etc. His thought was that housing prices always go up (over the long haul) so he bought before he had a family because it would save him $ in the future. It worked out well for him and he had quite a bit of equity when he sold his house to move closer to his (new) wife's job.

You have to consider the costs of home owner's insurance, property taxes, association fees (if applicable), yard maintenance, appliances, closing costs, mortgage insurance (if applicable), higher utility bills (most houses are bigger than rentals), the cost of the move, potentially higher car insurance rates (these are based on zipcode in the US, not sure about Canada), etc.

All that having been said... My personal "requirements" for buying a house are:
Prequalified through a lender so that I know my interest rate and can figure an accurate payment. This often means having a reasonable down payment.
Zero "small debt" (credit cards, medical bills, etc.) because these can be leveraged against your home in some places.
6 months of living expenses in savings (beyond the down payment) in case you lose your job. Eviction is not as harsh as foreclosure.
A house payment that is 20% less than the rent you are currently paying or could afford to pay.
Only buy a home that I have researched thoroughly to know that the price is not artificially inflated. (a 5% gain each year seems bad but consistent, a 30% gain last year in the home value is a red flag)
Only buy a home with a full sellers disclosure and a thorough inspection by someone _I_ hire.
Have visited the house/neighborhood (even to just drive by) at various times of day and days of the week. (We once had neighbors who got drunk and acted like idiots on Friday night... no thanks!)

This is sort of a tangent but I think you know when you're ready to buy when you feel confident that your "ducks are in a row."

 

[Darkéy]

When the prices are cheap, and when your wallet is full! :nod:

X.

 

[LilKimmie]

Make sure you have your money saved every month.Seperate the money you get from your work every month for the house rent and food , and maybe some other stuff that you need to pay and keep some money for yourself maybe when you want to go out probably. And the last part of the money save it . By the time you might have enough money to buy a house even if it takes a year but its a good way though .More important is that you also should save up your money for a future so you can have some spare money if you are in trouble or some other problems.Also about buying a house make sure its cheap and look good and ofcourse it should be the way you like it. I hope you understand what i mean, my grammar is not really that good but i'm trying to explain. And plus is good to use your money in a right way, most people these days use money to buy costly clothes,jewelleries,shoes and bags . Is better to buy a cheap stuff which looks pretty and good quality and it can save up your money more if you use it in that way , making it easier to get a house

 

[Lateralus]

I'm looking at this stuff too. I want to own something before I'm 30 as an asset. Just so I have some financial security, and money locked up somewhere. Also because rent is money spent without getting return.

A house is not an asset if you are living in it, it's a liability. It's only an asset if it is generating income. Owning is still much more expensive than renting in most of the US. Anyone who tells you that "renting is just throwing away your money" is full of shit (or trying to sell you something). If you own a home, you're often spending more on mortgage interest, taxes, insurance, and maintenance than you would on rent. Plus, if you have to move, it's much more of a hassle (and expensive) to own than rent.

Don't buy a home because of emotional reasons, like you "want to own something". Do it for more practical reasons.

 

[Geoff]

A house is not an asset if you are living in it, it's a liability. It's only an asset if it is generating income.

What about capital growth? Surely a non income generating, but rapidly rising capital base is an asset

Which is difficult to achieve right now, for sure, but still should be kept in mind when deciding if something is an asset or liability.

 

[WoodsWoman]

Building equity is an asset.

 

[Lateralus]

What about capital growth? Surely a non income generating, but rapidly rising capital base is an asset

Which is difficult to achieve right now, for sure, but still should be kept in mind when deciding if something is an asset or liability.

Owning real estate is not like owning stock. You have property taxes and maintenance even if you don't have a mortgage.

 

[Feops]

Anyone who tells you that "renting is just throwing away your money" is full of shit (or trying to sell you something). If you own a home, you're often spending more on mortgage interest, taxes, insurance, and maintenance than you would on rent. Plus, if you have to move, it's much more of a hassle (and expensive) to own than rent.

This is my concern. Some friends of mine have recently purchased homes, but they are in long mortgages of which I am certain they are being gouged in the long run. I'm very much aware of the penalty for compounding, so sitting in a 30 year mortgage looks terrible.

Rent is fairly simple to tabulate. I pay $x per month. I suppose the question would then become if those taxes, interest, and maintenance would exceed my current rent. If so, then I'm essentially paying money to build equity, when I could have put the money in the bank or invested it instead. Though property does tend to appreciate, so it's not a complete loss. I think this part of the equation was more simple some 20-30 years ago.. people just shifted their rent payments into mortgages and bam, profit.

The other factor would be lifestyle needs. Right now I'm single and don't even need the 1 bedroom I have really. If I hook up and have kids one day that means I'd have to dust my purchase for something bigger, or buy something bigger than what I currently need right now, but if it's bigger than what I need I'm eating a bigger mortgage that's less likely to be beneficial.

Time for math