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I was going over my finances (not always the best of things) and between me and my roommate, we have paid about $8,400 in rent this past year. It will be about 3 more years before we graduate, so that is a total of about $33,600. We are greatly considering a house, my roommate will be 21 in May, so hopefully we can find a place that will give us a morgage? My parents seem to dislike the idea, but her parents love it.

Any advice?


PS Decent houses in good neighborhoods (typically ranch-style) go for about $40,000- $60,000

Inky

I would say go for it. Once you're done you will be able to sell the house and get at least some of that back. Rent is like throwing money away...

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I agree. I think my parents would disagree with whereever I choose to live. They hate my apartment now and think I live in a ghetto

I live in a two floor, 1,000+ sq. ft. apartment in the outskirts of a large city. It is really, really, nice compared to the others I have seen in the area, or in their area for that matter.

Inky

You say you are a student in Southern Indiana? Where do you go? (I'm at Purdue...)

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really? in terra houte? Im @ USI. What year are you in?

Inky

Are you suggesting that between your room mate and yourself that you buy a house? If so I would be careful. You arent going to want to live together forever and things can go bad. I dont know your room mate but what happens if he/she stops paying their part of the mortgage? You'll get dragged down too if the house is taken back by the bank.
Buying a house is a great idea, just make sure you can afford the payments and that you really want the financial commitment with this person.

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Before you criticize someone walk a mile in their shoes. That way you're a mile away and you have their shoes.

West Lafayette, actually. I'm a junior.

True Lindy's points as well...

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Id only ever buy a house with a life partner or spouse, but if you can do it any other way buy a house , renting can be a suckers game. Its rather nice to wake up one day and realise that no-one can throw you out in the street in less than a month.

How long have you thought this through? really.

There's sooo much more to just going to a bank and applying for a mortgage.

You've got a deposit (although there are some places that won't take a deposit), you've also got interest, escrow, taxes, and all those other wonderful surprises that may happen (repairs, etc).

Think about this loooong and hard before even CONSIDERING going to a bank.

Say you're paying $700 a month on rent now. You get a loan for something like $60,000 for a house (yes, on the high side I know, but use it as an example). You've got the closing costs on a house also (about $3000 - $5000 - that you don't get back) due at signing.

Out of that, say, $700 a month (this is on a 30 YEAR loan, and I'm using the $700 a month as a figure as monthly payments could be less than that - IF you do decide to go ahead with this, or it could be more than that), you're not actually PAYING down at $700 a month on the loan. Which, IF you're lucky, maybe $100 is going toward principal (the amount you actually pay off on the house - the amount that you owe). The rest goes to taxes and interest.

But the taxes may vary wildly depending on the county the house is in. So you can pretty much flush the rest of the payment down the toilet.

Next. Insurance or Home Owners Association Fees.
If it is a single family residence you WILL have to buy homeowners insurance (this is what covers the structure). The bank WILL NOT give you a loan unless you have this. That cost will vary wildly depending on where you are. And it ain't cheap.

Home Owners Association Fees :
This is a monthly fee that you have to pay to a non-governmental agency which covers the structure (if it is a condo/townhouse situation) - but DOES NOT cover the internal wiring, plumbing etc - that is the owners responsibility.

Risks :
Something goes wrong - you're responsible. Could be minor, or it could be multiple thousands of dollars. And you gotta pay for it. You don't have maintenance to come out and fix it for you for nothing. You got to do it yourself. It can happen unexpectedly, and all at once. And YOU'RE responsible for it.

Do you REALLY want to face all this stuff with your roommate - is your friendship REALLY that strong? If you value your friendship - DO NOT DO IT. It is NOT worth it.

You live in an apartment - you're not responsible for plumbing, heating or any other problems that may arise (except maybe if you shoved a roll of toilet paper down the toilet or something - then you're at fault). So with renting you're responsible for the monthly rent, the security deposit, lease cancellation fees (if you decide to break your lease), you can wash your hands and walk away.

Buying a house on the other hand. The sky is the limit.

Another thing : Selling the house.
The big advantage of renting is you can get up and walk away. The mortgage is yours no matter what happens to the house. Even if the house burns down - you still gotta pay. The house drops in value - you could end up paying more than what it is worth.

When it comes to selling the house, you'll have to pay 6% to the real estate agent out of the gross sale, (eg, house sells for $50,000 - you'd have $3,000 to the agent). You better hope that it apreciates while you live there, and not depreciate, otherwise you could end up paying more than the sale of the house, and end up with nothing.

Speaking from experience here - owning a house comes with alot more added surprises that people tend to forget about.

Please take this into CAREFUL consideration before deciding. I'm siding with your parents on this one.

I own TWO houses, I'm speaking from experience.

I've thought about it quite a bit actually. Both the houses we are going to look at now are on the newer sides of town and should go up in value.

My roommate is really responcable, and so am I. With a roommate, they could easily walk away from an apartment too.


Inky

Yes but the difference in the amount you would owe between an apartment and a mortgage is huge! If you end up in a situation that you have to sell the place and you cant get the place to sell for atleast what you bought it for then you'll end up with a huge debt that you will be paying for a good part of your life.
Ideally you would have a personal income that would be able to cover the bank loan if the other does decide to walk away and leave you with all the finance.

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Before you criticize someone walk a mile in their shoes. That way you're a mile away and you have their shoes.

Before you even think about this, get GOOD solid legal advice so that you know ALL of your liabilities beforehand. Of which there are many, several already cited above, and several others probably lurking in local bye-laws that you're advised to find out about NOW while you're not committed to a long term payment.

Rent seems like a pain. But what are you paying that rent for? Simple. Major structural matters, repairs etc., are your landlord's responsibility. You're paying for someone else to shoulder that burden.

Take my example. I had a kitchen floor collapse on me last year. The landlord stepped in and rebuilt the whole kitchen. He also rewired the entire house from scratch, AND let me specify where I wanted all the sockets so I could have several fish tanks dotted around the place. That little lot set him back around £5,000 (getting on for $9,000 in US money). Which he paid up front to the contractors. Are you in a position to do likewise if disaster strikes, and a flood hits and destroys your kitchen? If not, think LONG AND HARD before jumping in.


Panda Catfish fan and keeper/breeder since Christmas 2002

Buying property with someone you are not married/committed to is a precarious thing. I do, however, admire your thinking.

I belong to a property investment forum here in Australia so this is a topic close to my heart. http://www.somersoft.com/forums/

There is more than one way to skin a cat... some people buy and rent out their property while they live elsewhere
eg someone pays you $200 p/w to live in your place
you rent somewhere else that costs $185
You still have an asset of worth in your name that will appreciate.

However, I made the decision that unless I could do it on my own I wouldn't do it at all. But that is your call.

A book on property that changed my life
More Wealth from Residential Property by Jan Somers
(is Australian but principles are relevant to other countries irrespective of market and mortgage types)

Your parents are motivated by fear and concern.
Fear - they have baggage about money due to life experience, those attitudes came from somewhere. As such have to be respected, not necessarly adhered to by you forever, but respected.
Concern - they want the best for you, this means sometimes they forget that at that same age they didn't live in the penthouse at the Ritz either, you are a student!
Do all the research and make your own decisions.

A bit more of my story...
I bought my first property in 2004. I purchased it and then told my family. This is because they had been tying themselves in knots on my behalf in case I made a boo-boo and they hadn't stopped me. I decided to take the burden from their shoulders. I told them once it was a done deal and we could just celebrate. Worked for me but I did a few years of research and savings and I am not a full time student.

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~~~ My fish blow kisses at me all day long ~~~

All in all though theres nothing like the feeling of paying out £650 a month for a house that the mortgage cost the owner about £200 a month.

Taken for a huge ride is the phrase. There are times to buy and times not to. The market for buyers in the uk is terrible at the moment , people are asking 3-4 times what they paid for a house, but the uk will hit a depression in about a year, so save your money till then...

think again...

example.
our townhouse in denver rents for about $850 a month. Our property manager takes out his share (10% of the monthly rent), and the rest goes to us.

Whereas our mortgage payment/HOA fees amount to around $900per month.

It all depends on where you live, and what the current rental rates are in the area. For a while we were renting at $1000 a month (and were making a profit since we were paying less in mortgage/HOA fees).

But since there's more rental properties than there are renters in denver right now, we have to rent cheaply in order to keep it occupied - thus paying more than we get in from the income.

thankfully - some of the expenses are tax deductible.

Not all landlords are rich - trust me on that one.

We did the math and it is going to be about $700/mo with morgage, utilities, ect. Its about what we are paying now, accept we will own it. Also, we are looking at constantly growing areas for our home, and the value is likely to go up ^_^ We arn't looking at townhomes/condos either.

Also, many of you said you wouldnt buy a house with someone other than a spoce or loved one. I am far from home, and have very few friends here, and it is the same with my roommate. She is not a university-assighned roommate and was my closest friend down here and simply moved in with me almost 2 yrs ago. She is my best friend, and I like to think we have more then an "oh, yeah, you live here too" relationship.

Inky

Have you included maintenance, repair, things that you don't need right now like lawn mowers and tools? Higher electrical bills, heating? taxes?

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If at first you DO succeed, try not to look astonished.

Uhh, is that your math, or the bank's math?

I'd be going to the bank to even see if you could get approved for a loan before househunting - to see how much they'd even give you.

just remember mortgages are in upwards of 30 years! plus, what if one of you meets a spouse or has children? just be sure to THINK it out...

and... those are some CHEAP houses up there.... im in oklahoma and the property taxes are through the roof!

*Chelle*
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I love the fishes cuz they're SOOO delicious...

dallas they ain't much better... no state income tax, so in order to make up for it the property taxes are higher.