Buying house - Very important decision

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TareNeko
Posts: 547
Joined: Wed Aug 14, 2013 1:27 pm

Re: Buying house - Very important decision

Post by TareNeko » Fri Jun 30, 2017 10:58 pm

@prettybogle:

Do you think that your mortgage stays fixed? As the property value goes up, so does the property tax. So does your insurance. Do you understand this concept?

It's a shame that you are still insisting on this massive house. Your realtor is taking advantage of you. Sure, it's only 80k more, but how much is that 80k will cost you for the life of the loan? How much more property tax you'll pay? How much more your bills will go up to heat/cool the extra space you don't need? How much more it will cost you to paint? Roof? Furniture? Cleaning?

It boggles my mind that you're worried about an extra $100/month rent increase but you're okay to waste 100s of dollar every month for a big house you don't need.

Good luck...

Gufomel
Posts: 208
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Re: Buying house - Very important decision

Post by Gufomel » Sat Jul 01, 2017 6:50 am

prettybogle wrote:After reading almost every response, I feel fortunate to get self-less guidance and elderly advise from such a wonderful people. I would like to sincerely thank each one of you. I used zillow's mortgage calculator and below are the numbers-

Home ownership expenses
--------------------------------
House cost $520k
30 year fixed rate 3.828%
If I pay 20% down payment ie $104k, then monthly expenses are:

Mortgage (principal + interest) $1945
Property tax $250
Home insurance $100
HOA $75
Gas $100
Water + Sewer $100
Electric bill $150
Maintenance/repairs $100

Total monthly expense = 2790

Apartment renting expenses
-----------------------------------
Rent $1300
Rental insurance $10
Water + Sewer $50
Gas + electric $120

Total monthly expense = $1480

From next month, our apartment rent may go up, I am guessing here, atleast $100 per month. Scared to death to even guess how much it will go up the year after etc.
Please correct if I missed anything or if I put in wrong numbers.
Your maintenance/repairs will be more than $100 per month on average over a 5-10 year period. Even if there's no issues with the house itself (which there will be), think kitchen and laundry appliance repairs on what will likely be fairly high end appliances. Lawn maintenance, pest control, etc.

As numerous people have asked, how are you going to furnish this freaking place? You're exhausting your emergency fund to put a down payment on this house (an issue in and of itself). Are you just going to live in 1500 sq ft of the house and leave the remainder abandoned and empty?

The level of your concern about rent increasing is completely irrational relative to your fear of the immense risk you're taking on with this house. I have no doubt that your rent will increase $100/month. I don't mistrust you on that. It may even increase thereafter (though no guarantee). What if it increases $100/month for the next 10 years? That would certainly be unfortunate because you'd then be paying $2300/month for an apartment in a relatively LCOL area. But this would be an increase that would be happening over an extended period of time. Let's make it even worst case scenario that it increases $200/month for 5 years. That's still an extended amount of time during which you have time to make a decision and you have flexibility because you're renting. Maybe you have to move to a less expensive suburb. That sucks, but this is worst case scenario. And it's nothing like the scenario described below.

Here's a scenario for buying this house. It's a realistic scenario. It could be worse. You buy the house for $535k. You put $100k in as a downpayment, which from my understanding is all of your liquid savings/emergency fund. Your monthly cash flow is also now tight because of your close to $3000/month housing expenses. You're building back up your emergency fund, but slowly, as you're also enjoying furnishing your new home. But guess what happens over the next 2-5 years? "Unexpectedly" the absurd recent development rate of apartments and house in reaction the rapid influx of people to the Nashville area begins to slow. There's quite a few vacancies. It seems that the industry/salaries being paid in the area cannot support all the middle class 25-40 somethings who want to live in the "hot spot". Rental and house prices begin to decline. You watch as your estimate house value on Zillow now drops to $435k. Your neighbor's house has been on the market for 60 days. You're paying $3000/month for a 3600 square foot house that's now only worth $435k, and you really only wanted it because you were fearful that your $1300/month rent was going to increase. You have no equity left in your home and you haven't really been able to build back up your emergency fund. I guess you could go try to find some lower cost of living like in the previous scenario, right? Wrong. You're stuck in a house you paid too much for, with more space than you want to take care of, with more debt than your budget allows for, and regret that you invested your financial future in the hot new home.

Why is that not the worst case scenario? Because life could also happen at the same time. The single income earner in your house could lose their job. You could have large medical emergencies while you're already living paycheck to paycheck. Name something else.

Oh yea, your realtor is a crook. $100k over 30 years isn't a big deal? People make me sick sometimes.

Just to be entirely clear, I have absolutely nothing against you buying a $535k house and/or a 3600 square foot house. I do have something against you mortgaging your financial future to get a house that's bigger than you need or even want and is FAR more expensive than your income allows for, just because you're afraid that your modest rent might increase.

finite_difference
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Re: Buying house - Very important decision

Post by finite_difference » Sat Jul 01, 2017 7:15 am

Your realtor, coworkers, society at large, etc. are peer pressuring you to buy a McMansion. I think you could afford to buy a $535k house with such low property taxes but you will be "house poor". Here are a few comments:

1. You are worried about rents rising, but what if property taxes go up?

2. 3600 sqft is a huge house. I grew up in a 3,000 sqft house and it was big for a family of 4. I think 500 sqft per person is pretty generous so unless you are planning on having 5 kids I would not go with 3600 sqft.

3. The bigger the house the more it costs to maintain, to cool and heat, and the more things that can break, etc. Are you going to do the gardening/yard work yourself? If not don't forget to factor that cost in.

In my opinion buy a nice sized house not a McMansion and you will be fine. It may be "only" $100k cheaper but $100k invested over 30 years at 5% real would leave you with $432k (2017 dollars) for your retirement. In my opinion it's risky to give up that much money for something you don't need, but if a big house will make you happy then that's worth it.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

Isabelle77
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Re: Buying house - Very important decision

Post by Isabelle77 » Sat Jul 01, 2017 12:15 pm

I'll try one more time. OP - some elderly advice from this 40yr old who has bought four houses.

I lived in Brentwood, my old house in an excellent neighborhood just sold this spring for 470k, it is 3100 sqft and in the Brentwood school district. Despite rising costs TN isn't expensive and housing costs are still reasonable. Find something a little smaller and cheaper.

Understanding finances is not a requirement to become a realtor. Neither is a college degree. I'm on my phone but someone else can tell you what 100k over 30yrs will actually cost you.

We now live in a more expensive housing market (Portland OR) and make a little more than double your HHI. Our house cost 395k. It's 2600sqft and because we live there our kids get to go to summer camp every July, we vacation every April somewhere tropical, and when it comes to college and retirement we will be great. We also are going to be able to pay it off before the kids are in college. I don't know how young your child is but you're going to have expenses that you're unaware of, competitive teams, trips, tutors, camps etc. They don't get cheaper as they get older.

Finally, my sister bought a reasonably priced house 2yrs ago in Ohio. Their HHI is 140k and the house was only a few years old and 375k, in a golf course community all very nice. Within six months the roof collapsed into one of the upstairs bedrooms. 12k fix. Then the entire AC/HVAC unit went out, 10k fix. My sister was angry but had the emergency fund to handle. How would you pay for it? New houses have emergencies too.

ETA: I also think your estimated costs are optimistic. We had months in TN where our electric bill alone was more than $300. In our smaller house.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sat Jul 01, 2017 12:28 pm

Isabelle77 wrote:I'll try one more time. OP - some elderly advice from this 40yr old who has bought four houses.

I lived in Brentwood, my old house in an excellent neighborhood just sold this spring for 470k, it is 3100 sqft and in the Brentwood school district. Despite rising costs TN isn't expensive and housing costs are still reasonable. Find something a little smaller and cheaper.

Understanding finances is not a requirement to become a realtor. Neither is a college degree. I'm on my phone but someone else can tell you what 100k over 30yrs will actually cost you.

We now live in a more expensive housing market (Portland OR) and make a little more than double your HHI. Our house cost 395k. It's 2600sqft and because we live there our kids get to go to summer camp every July, we vacation every April somewhere tropical, and when it comes to college and retirement we will be great. We also are going to be able to pay it off before the kids are in college. I don't know how young your child is but you're going to have expenses that you're unaware of, competitive teams, trips, tutors, camps etc. They don't get cheaper as they get older.

Finally, my sister bought a reasonably priced house 2yrs ago in Ohio. Their HHI is 140k and the house was only a few years old and 375k, in a golf course community all very nice. Within six months the roof collapsed into one of the upstairs bedrooms. 12k fix. Then the entire AC/HVAC unit went out, 10k fix. My sister was angry but had the emergency fund to handle. How would you pay for it? New houses have emergencies too.

ETA: I also think your estimated costs are optimistic. We had months in TN where our electric bill alone was more than $300. In our smaller house.
Thanks Isabelle77. Glad to read feedback from a recently relocated Tennessean :happy
Yes I do agree it is over my budget for our HHI. our worry is rent will go up to atleast 1400+ this year and even higher every year after that. Frankly, this is our top #1 biggest reason as we do not intend to have any additions to our family of 3. The house prices keep going up last few years here so our top #2 reason is they will go up even higher to the point that we will be priced out of the housing market :(

Isabelle77
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Re: Buying house - Very important decision

Post by Isabelle77 » Sat Jul 01, 2017 12:30 pm

You won't be priced out if you buy something reasonable. Stretch to 400k, put 20% down and save the rest for an efund. Problem solved.

msk
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Re: Buying house - Very important decision

Post by msk » Sat Jul 01, 2017 1:04 pm

I have built and owned numerous houses and apartments over the past 40 years and currently our two "homes" for our own use are 3500 sq ft and 14000 sq ft. So I am fully aware of the attractions (and shortfalls) of McMansions. Whatever happened to the old adage of never buying on mortgage a home costing more than 3x income? Frankly, just because interest rates are currently low should not tempt you into buying more home than you can afford. You believe the property market is about to shoot up? Go ahead and purchase a second property for whatever mortgage you can raise and then rent it out while waiting for the price rise. Would you, seriously, rent that $500+k house on your income if it were owned by somebody else? If the answer is No, too high a rent, then why are you even considering it? Living in a house is basically paying the rent to yourself and consuming the rent without having a landlord taking care of niggling headaches/repairs. Please steer clear. You want to play the Real Estate market? Do it with a second unit that brings in at least enough rent to cover the bulk of the monthly outgoings. This is basically speculating in RE. It can work out. For 3 decades I owned and looked after 30 rental units. Buy a McMansion only when you can pay cash. With a sober, frugal, BH life it can happen much sooner than you contemplate currently. Or not. Depends on how astute you are with your RE judgement.

Ninnie
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Re: Buying house - Very important decision

Post by Ninnie » Sat Jul 01, 2017 1:09 pm

Frankly, I wonder if OP is pulling our leg.

Unreasonably she keeps mentioning the $100 monthly rent increase, which is nothing compared to home ownership expenses. We spend $400-$500 per year on yard maintenance alone, and we do all the work ourselves ($300 mulch delivery, fertilizer, new plants, gas for lawnmower, etc.). Not including upfront cost to buy lawnmower/other tools and equipment, or the outside water bill. Just dropped $1500 to replace our dehumidifier. $8k a couple of years ago on replacement central AC system. Several thousand on repairs to heating system shortly after moving in 5 years ago. All that on a 15 year old home. And yes, property taxes go up every year.

Until she addresses the cheaper home option and her unwillingness to budge from an over $500k house, rather than a general wish to buy in general, not sure she can be taken too seriously.
Last edited by Ninnie on Sat Jul 01, 2017 1:25 pm, edited 1 time in total.

Gufomel
Posts: 208
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Re: Buying house - Very important decision

Post by Gufomel » Sat Jul 01, 2017 1:18 pm

prettybogle wrote:
Isabelle77 wrote:I'll try one more time. OP - some elderly advice from this 40yr old who has bought four houses.

I lived in Brentwood, my old house in an excellent neighborhood just sold this spring for 470k, it is 3100 sqft and in the Brentwood school district. Despite rising costs TN isn't expensive and housing costs are still reasonable. Find something a little smaller and cheaper.

Understanding finances is not a requirement to become a realtor. Neither is a college degree. I'm on my phone but someone else can tell you what 100k over 30yrs will actually cost you.

We now live in a more expensive housing market (Portland OR) and make a little more than double your HHI. Our house cost 395k. It's 2600sqft and because we live there our kids get to go to summer camp every July, we vacation every April somewhere tropical, and when it comes to college and retirement we will be great. We also are going to be able to pay it off before the kids are in college. I don't know how young your child is but you're going to have expenses that you're unaware of, competitive teams, trips, tutors, camps etc. They don't get cheaper as they get older.

Finally, my sister bought a reasonably priced house 2yrs ago in Ohio. Their HHI is 140k and the house was only a few years old and 375k, in a golf course community all very nice. Within six months the roof collapsed into one of the upstairs bedrooms. 12k fix. Then the entire AC/HVAC unit went out, 10k fix. My sister was angry but had the emergency fund to handle. How would you pay for it? New houses have emergencies too.

ETA: I also think your estimated costs are optimistic. We had months in TN where our electric bill alone was more than $300. In our smaller house.
Thanks Isabelle77. Glad to read feedback from a recently relocated Tennessean :happy
Yes I do agree it is over my budget for our HHI. our worry is rent will go up to atleast 1400+ this year and even higher every year after that. Frankly, this is our top #1 biggest reason as we do not intend to have any additions to our family of 3. The house prices keep going up last few years here so our top #2 reason is they will go up even higher to the point that we will be priced out of the housing market :(
Ok, let me spell this out for you. If your only option is a $535k home, you are already priced out of the market!

You have repeated the exact same response for days now. I no longer believe this is a genuine post. This must be a troll.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sat Jul 01, 2017 2:22 pm

Ninnie wrote:Frankly, I wonder if OP is pulling our leg.

Unreasonably she keeps mentioning the $100 monthly rent increase, which is nothing compared to home ownership expenses. We spend $400-$500 per year on yard maintenance alone, and we do all the work ourselves ($300 mulch delivery, fertilizer, new plants, gas for lawnmower, etc.). Not including upfront cost to buy lawnmower/other tools and equipment, or the outside water bill. Just dropped $1500 to replace our dehumidifier. $8k a couple of years ago on replacement central AC system. Several thousand on repairs to heating system shortly after moving in 5 years ago. All that on a 15 year old home. And yes, property taxes go up every year.

Until she addresses the cheaper home option and her unwillingness to budge from an over $500k house, rather than a general wish to buy in general, not sure she can be taken too seriously.
Please, I am serious and I am not joking around in this respectable forum. As a first time home buyer and as I am, mistakenly, comparing with my friends around here, and my inexperience may come out as too dumb to believe for y'all experienced ones.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sat Jul 01, 2017 2:25 pm

Gufomel wrote:
prettybogle wrote:
Isabelle77 wrote:I'll try one more time. OP - some elderly advice from this 40yr old who has bought four houses.

I lived in Brentwood, my old house in an excellent neighborhood just sold this spring for 470k, it is 3100 sqft and in the Brentwood school district. Despite rising costs TN isn't expensive and housing costs are still reasonable. Find something a little smaller and cheaper.

Understanding finances is not a requirement to become a realtor. Neither is a college degree. I'm on my phone but someone else can tell you what 100k over 30yrs will actually cost you.

We now live in a more expensive housing market (Portland OR) and make a little more than double your HHI. Our house cost 395k. It's 2600sqft and because we live there our kids get to go to summer camp every July, we vacation every April somewhere tropical, and when it comes to college and retirement we will be great. We also are going to be able to pay it off before the kids are in college. I don't know how young your child is but you're going to have expenses that you're unaware of, competitive teams, trips, tutors, camps etc. They don't get cheaper as they get older.

Finally, my sister bought a reasonably priced house 2yrs ago in Ohio. Their HHI is 140k and the house was only a few years old and 375k, in a golf course community all very nice. Within six months the roof collapsed into one of the upstairs bedrooms. 12k fix. Then the entire AC/HVAC unit went out, 10k fix. My sister was angry but had the emergency fund to handle. How would you pay for it? New houses have emergencies too.

ETA: I also think your estimated costs are optimistic. We had months in TN where our electric bill alone was more than $300. In our smaller house.
Thanks Isabelle77. Glad to read feedback from a recently relocated Tennessean :happy
Yes I do agree it is over my budget for our HHI. our worry is rent will go up to atleast 1400+ this year and even higher every year after that. Frankly, this is our top #1 biggest reason as we do not intend to have any additions to our family of 3. The house prices keep going up last few years here so our top #2 reason is they will go up even higher to the point that we will be priced out of the housing market :(
Ok, let me spell this out for you. If your only option is a $535k home, you are already priced out of the market!

You have repeated the exact same response for days now. I no longer believe this is a genuine post. This must be a troll.


I understand everyone, including myself, here are internet strangers. But FWIW, I am dead serious and am asking these questions very honestly. My inexperience may come out as too dumb to believe for y'all experienced ones.

Gufomel
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Re: Buying house - Very important decision

Post by Gufomel » Sat Jul 01, 2017 3:04 pm

prettybogle wrote:
Gufomel wrote:
prettybogle wrote:
Isabelle77 wrote:I'll try one more time. OP - some elderly advice from this 40yr old who has bought four houses.

I lived in Brentwood, my old house in an excellent neighborhood just sold this spring for 470k, it is 3100 sqft and in the Brentwood school district. Despite rising costs TN isn't expensive and housing costs are still reasonable. Find something a little smaller and cheaper.

Understanding finances is not a requirement to become a realtor. Neither is a college degree. I'm on my phone but someone else can tell you what 100k over 30yrs will actually cost you.

We now live in a more expensive housing market (Portland OR) and make a little more than double your HHI. Our house cost 395k. It's 2600sqft and because we live there our kids get to go to summer camp every July, we vacation every April somewhere tropical, and when it comes to college and retirement we will be great. We also are going to be able to pay it off before the kids are in college. I don't know how young your child is but you're going to have expenses that you're unaware of, competitive teams, trips, tutors, camps etc. They don't get cheaper as they get older.

Finally, my sister bought a reasonably priced house 2yrs ago in Ohio. Their HHI is 140k and the house was only a few years old and 375k, in a golf course community all very nice. Within six months the roof collapsed into one of the upstairs bedrooms. 12k fix. Then the entire AC/HVAC unit went out, 10k fix. My sister was angry but had the emergency fund to handle. How would you pay for it? New houses have emergencies too.

ETA: I also think your estimated costs are optimistic. We had months in TN where our electric bill alone was more than $300. In our smaller house.
Thanks Isabelle77. Glad to read feedback from a recently relocated Tennessean :happy
Yes I do agree it is over my budget for our HHI. our worry is rent will go up to atleast 1400+ this year and even higher every year after that. Frankly, this is our top #1 biggest reason as we do not intend to have any additions to our family of 3. The house prices keep going up last few years here so our top #2 reason is they will go up even higher to the point that we will be priced out of the housing market :(
Ok, let me spell this out for you. If your only option is a $535k home, you are already priced out of the market!

You have repeated the exact same response for days now. I no longer believe this is a genuine post. This must be a troll.


I understand everyone, including myself, here are internet strangers. But FWIW, I am dead serious and am asking these questions very honestly. My inexperience may come out as too dumb to believe for y'all experienced ones.
Ok, I apologize for saying that I thought you were a troll. It was not because you're inexperienced. There's lots of inexperienced posts on this forum, including from me. The reason that I, and many others, were starting to wonder if this was a fake is because you've posted the exact same response to the many helpful replies you've received.

At this point, do you have any questions/concerns that we can help you with (other than what you have clearly stated as your concern that your rent is likely going to increase)? What are your thoughts now on the comparative risk between your rent increasing vs. the financial burden you would be taking on with this large house?

MoonOrb
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Re: Buying house - Very important decision

Post by MoonOrb » Sat Jul 01, 2017 3:14 pm

It's really uncharitable to interpret this as a troll. People come to this forum in all sorts of places in their respective financial maturities. As I see it, OP's major issue here is a belief that is not rational: that the most important consideration is avoiding future rent increases. Until this is resolved I think she'll be stuck (at best) stressing out about this or (at worst) making a pretty serious error in judgment.

But you can see the factors that are contributing to this fear: rent has just increased, housing prices are going up, friends and coworkers are encouraging home purchase, the realtor is complicit in this by suggesting that another $100k is nothing to be concerned about, etc.

OP, take a few steps back. Owning a home is just one possible part of a financially secure life. Don't panic when rent increases; this is normal. Look at your overall financial picture and figure out what plan makes sense for you. Don't let people like coworkers and your realtor push you into stupid financial decisions.

Ask yourself why you haven't yet said, "wow, ok, maybe there is some reasonable path forward here that doesn't involve a home 2-3 bigger and 1.5x more expensive than I need?"

squirm
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Re: Buying house - Very important decision

Post by squirm » Sat Jul 01, 2017 4:38 pm

That's why I usually keep my responses short, so I don't feel like I'm wasting my time of they're just trolling.

newbie_Mo
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Re: Buying house - Very important decision

Post by newbie_Mo » Sat Jul 01, 2017 4:46 pm

Another 100k in housing price means $3000 into the realtor's pocket. They wouldn't care less you couldn't afford the house.

hightower
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Re: Buying house - Very important decision

Post by hightower » Sat Jul 01, 2017 4:51 pm

Some things to consider...
Probably already been stated, but $535k is way too much house for someone making 130k. I like the recommendation of no more than 2x your salary when deciding the size of a mortgage. So for you, after down payment, your mortgage should be no bigger than 260k.
Second, the nice thing about renting is that you know exactly what the max you're spending on housing each month. With a house, the mortgage payment is the minimum you'll be spending each month. With all of the other costs involved in home ownership, your actual costs could be much higher.
Also you should be fairly certain you want to stay put in same place if you're going to buy. Moving often costs money in lot's of different ways. With renting you can pick up and go just about any time you want. You're less tied down.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sat Jul 01, 2017 4:57 pm

As this thread is starting to look like troll post for some members, I will just pause posting in this thread until we make up our minds. At this point, we are leaning more towards upper 300s and lower 400s. I will be sure to update in this thread if and when we have any new thoughts or we find a more suitable house for our family. Thanks everyone and again I am not troll

jumppilot
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Re: Buying house - Very important decision

Post by jumppilot » Sat Jul 01, 2017 5:06 pm

I thought she was a troll too. She never has answered the question of why they can't live in a less expensive house.

OP, why not buy a $250,000 house and trade up in a few years?

katnok
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Re: Buying house - Very important decision

Post by katnok » Sat Jul 01, 2017 5:15 pm

Given the size of the house, it's nearly certain that you will be spending at least 20k, if not more on furniture and related items.

We bought a new house last year that has 24 windows altogether. We furnished all except 6 with Levlor blinds, which cost us 2k, and my wife wants the furnish the rest with drapes, which are going to cost us 1k each.

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jharkin
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Re: Buying house - Very important decision

Post by jharkin » Sat Jul 01, 2017 7:48 pm

prettybogle wrote:
Ninnie wrote:Frankly, I wonder if OP is pulling our leg.

Unreasonably she keeps mentioning the $100 monthly rent increase, which is nothing compared to home ownership expenses. We spend $400-$500 per year on yard maintenance alone, and we do all the work ourselves ($300 mulch delivery, fertilizer, new plants, gas for lawnmower, etc.). Not including upfront cost to buy lawnmower/other tools and equipment, or the outside water bill. Just dropped $1500 to replace our dehumidifier. $8k a couple of years ago on replacement central AC system. Several thousand on repairs to heating system shortly after moving in 5 years ago. All that on a 15 year old home. And yes, property taxes go up every year.

Until she addresses the cheaper home option and her unwillingness to budge from an over $500k house, rather than a general wish to buy in general, not sure she can be taken too seriously.
Please, I am serious and I am not joking around in this respectable forum. As a first time home buyer and as I am, mistakenly, comparing with my friends around here, and my inexperience may come out as too dumb to believe for y'all experienced ones.
We get that, but what we are telling you in no uncertain terms is that your logic for buying this house is the thinking that caused the mortgage crisis and 2007 crash. Many many families lost everythingdue to those decisions.

Don't make the same mistake. Please.

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watchnerd
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Re: Buying house - Very important decision

Post by watchnerd » Tue Jul 04, 2017 7:47 pm

prettybogle wrote:
I understand everyone, including myself, here are internet strangers. But FWIW, I am dead serious and am asking these questions very honestly. My inexperience may come out as too dumb to believe for y'all experienced ones.
It's real simple. Regardless of what rent increases may lie ahead:

You can't afford a $500k house.

You need to shop cheaper.

It will likely ruin your quality of life and potentially lead to you being foreclosed on and/or bankruptcy.
Tweaked 3-Fund: 35% US Equities | 35% Total International | 30% Intermediate Treasuries

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sun Jul 09, 2017 9:03 am

In my continued search for cheaper house, I see some houses with brick and some with vinyl siding. What is the difference ? What is the better choice for resale ?

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sun Jul 09, 2017 9:05 am

watchnerd wrote:
prettybogle wrote:
I understand everyone, including myself, here are internet strangers. But FWIW, I am dead serious and am asking these questions very honestly. My inexperience may come out as too dumb to believe for y'all experienced ones.
It's real simple. Regardless of what rent increases may lie ahead:

You can't afford a $500k house.

You need to shop cheaper.

It will likely ruin your quality of life and potentially lead to you being foreclosed on and/or bankruptcy.
Thanks @watchnerd, you are a straight shooter :beer .

am
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Re: Buying house - Very important decision

Post by am » Sun Jul 09, 2017 9:28 am

prettybogle wrote:
watchnerd wrote:
prettybogle wrote:
I understand everyone, including myself, here are internet strangers. But FWIW, I am dead serious and am asking these questions very honestly. My inexperience may come out as too dumb to believe for y'all experienced ones.
It's real simple. Regardless of what rent increases may lie ahead:

You can't afford a $500k house.

You need to shop cheaper.

It will likely ruin your quality of life and potentially lead to you being foreclosed on and/or bankruptcy.
Thanks @watchnerd, you are a straight shooter :beer .


What I find interesting around my suburban area is that the median income is around 120k for a household and the median price of single family homes is around 500-600k. Are all these people in way over their heads? I also see many McMansions and other huge houses which are between 1-2 million? Could the majority of people outside of bogleheads be house poor?
Last edited by am on Sun Jul 09, 2017 9:30 am, edited 1 time in total.

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HueyLD
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Re: Buying house - Very important decision

Post by HueyLD » Sun Jul 09, 2017 9:29 am

prettybogle wrote:In my continued search for cheaper house, I see some houses with brick and some with vinyl siding. What is the difference ? What is the better choice for resale ?
A brick house lasts longer and has less maintenance to deal with.

Vinyl siding can be a pain to maintain, especially in the high humidity area like yours. You may have to power wash all the molds that may grow on vinyl. In addition, vinyl siding may not survive a major hail storm. Of course, you will need to replace the siding every so many years and the cost will be thousands.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sun Jul 09, 2017 9:56 am

am wrote:
prettybogle wrote:
watchnerd wrote:
prettybogle wrote:
I understand everyone, including myself, here are internet strangers. But FWIW, I am dead serious and am asking these questions very honestly. My inexperience may come out as too dumb to believe for y'all experienced ones.
It's real simple. Regardless of what rent increases may lie ahead:

You can't afford a $500k house.

You need to shop cheaper.

It will likely ruin your quality of life and potentially lead to you being foreclosed on and/or bankruptcy.
Thanks @watchnerd, you are a straight shooter :beer .


What I find interesting around my suburban area is that the median income is around 120k for a household and the median price of single family homes is around 500-600k. Are all these people in way over their heads? I also see many McMansions and other huge houses which are between 1-2 million? Could the majority of people outside of bogleheads be house poor?
Yes that is exactly what is happenning here too. Not sure if non-bogleheads are house ppor or if they are thinking future and living 'happily' in their McMansions.

KlangFool
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Re: Buying house - Very important decision

Post by KlangFool » Sun Jul 09, 2017 10:03 am

prettybogle wrote:
am wrote:


What I find interesting around my suburban area is that the median income is around 120k for a household and the median price of single family homes is around 500-600k. Are all these people in way over their heads? I also see many McMansions and other huge houses which are between 1-2 million? Could the majority of people outside of bogleheads be house poor?
Yes that is exactly what is happenning here too. Not sure if non-bogleheads are house ppor or if they are thinking future and living 'happily' in their McMansions.
prettybogle

In my neighborhood, median household income = 150K.

<<the median price of single family homes is around 500-600k. >>

This is about the same.

<< Not sure if non-bogleheads are house ppor or if they are thinking future and living 'happily' in their McMansions.>>

They are my co-workers and peers. How could they live "happily" when they are stressed financially? They packed their lunches and cut spending on all other stuff in order to feed the house. Meanwhile, I eat out regularly and still save a lot more than they do.

KlangFool

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sun Jul 09, 2017 10:09 am

HueyLD wrote:
prettybogle wrote:In my continued search for cheaper house, I see some houses with brick and some with vinyl siding. What is the difference ? What is the better choice for resale ?
A brick house lasts longer and has less maintenance to deal with.

Vinyl siding can be a pain to maintain, especially in the high humidity area like yours. You may have to power wash all the molds that may grow on vinyl. In addition, vinyl siding may not survive a major hail storm. Of course, you will need to replace the siding every so many years and the cost will be thousands.
If a house was already built with vinyl siding, can it be replaced by brick ?

am
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Re: Buying house - Very important decision

Post by am » Sun Jul 09, 2017 10:12 am

KlangFool wrote:
prettybogle wrote:
am wrote:


What I find interesting around my suburban area is that the median income is around 120k for a household and the median price of single family homes is around 500-600k. Are all these people in way over their heads? I also see many McMansions and other huge houses which are between 1-2 million? Could the majority of people outside of bogleheads be house poor?
Yes that is exactly what is happenning here too. Not sure if non-bogleheads are house ppor or if they are thinking future and living 'happily' in their McMansions.
prettybogle

In my neighborhood, median household income = 150K.

<<the median price of single family homes is around 500-600k. >>

This is about the same.

<< Not sure if non-bogleheads are house ppor or if they are thinking future and living 'happily' in their McMansions.>>

They are my co-workers and peers. How could they live "happily" when they are stressed financially? They packed their lunches and cut spending on all other stuff in order to feed the house. Meanwhile, I eat out regularly and still save a lot more than they do.

KlangFool

Hedonistic adaptation. The big house won't make you happy or impress anyone. All it will do is stress you out and limit your options later if you want to sell (upper tier houses in my metro suburb area outside California sit for much longer unsold and sell below asking).

wrongfunds
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Re: Buying house - Very important decision

Post by wrongfunds » Sun Jul 09, 2017 10:33 am

How are you guessing the median household income? If you have actual data from census, that is going be quite old. For real estate transaction prices, it is all public records, so that data can be current and accurate. Household income data will be hard to ascertain. Of course unless IRS publishes or makes it available such data on yearly basis. Those are the only people who have access to such information.

My point is my neighbor might be earning lot more than I do or I think she does.
Last edited by wrongfunds on Sun Jul 09, 2017 10:53 am, edited 1 time in total.

KlangFool
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Re: Buying house - Very important decision

Post by KlangFool » Sun Jul 09, 2017 10:42 am

wrongfunds wrote:How you guessing the median household income? If you have actual data from census, that is going be quite old. for real estate transaction prices, it is all public records, so the data can be current and accurate. Household income data will be hard to ascertain. Of course unless IRS publishes or makes it available such data on yearly basis. Those are the only people who have access to such information.

My point is my neighbor might be earning lot more than I do or I think she does.
wrongfunds,

Not if most of your neighbors worked in the same industry.

There are only 3 levels of salary for most people live in my area

1) 60K to 80K

2) 80K to 120K

3) 120K to 150K

The range of household income is a combination of 2 or 1 income from that 3 levels.

KlangFool

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HueyLD
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Re: Buying house - Very important decision

Post by HueyLD » Sun Jul 09, 2017 10:53 am

prettybogle wrote:
HueyLD wrote:
prettybogle wrote:In my continued search for cheaper house, I see some houses with brick and some with vinyl siding. What is the difference ? What is the better choice for resale ?
A brick house lasts longer and has less maintenance to deal with.

Vinyl siding can be a pain to maintain, especially in the high humidity area like yours. You may have to power wash all the molds that may grow on vinyl. In addition, vinyl siding may not survive a major hail storm. Of course, you will need to replace the siding every so many years and the cost will be thousands.
If a house was already built with vinyl siding, can it be replaced by brick ?
Depending on how big the area is, the project you ask may cost about as much as your annual HHI, if not more.

It is very expensive to be a proud homeowner. I have owned my own home for many years and home maintenance cost has always been more than expected. However, living in an apartment is not what I desire and I am willing to pay for home ownership.

The key to being a satisfied home owner is to buy only what you need and certainly less than what you want. I set aside more than enough money for repairs and maintenance but unexpected issues still pop up periodically and that's what emergency funds are for.

And don't think for a moment that a newer house will be maintenance free or low maintenance. For a brand new construction, you will incur a lot of "new house" cost because someone has to install window treatment, landscaping, water conditioner, etc. and again those things cost thousands. Unless you are willing to live in a house with no window treatment, no yard cover (grass, rocks, etc.), you have to spend a lot of money on the brand new house right after you move in.

In other words, allow yourself plenty of room for the "money pit" without causing too much stress in your life.

No withstanding the above comments, I am still willing to pay for the privilege of home ownership. You just have to be realistic and give yourself plenty of room for "unexpected" maintenance issues.

Good luck to your continued search for a house.

am
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Re: Buying house - Very important decision

Post by am » Sun Jul 09, 2017 11:11 am

wrongfunds wrote:How are you guessing the median household income? If you have actual data from census, that is going be quite old. For real estate transaction prices, it is all public records, so that data can be current and accurate. Household income data will be hard to ascertain. Of course unless IRS publishes or makes it available such data on yearly basis. Those are the only people who have access to such information.

My point is my neighbor might be earning lot more than I do or I think she does.
This site has more data than I could handle including specific parts of my suburb. Some places near me have median values of 1 mil+ and median incomes around 200-250k. How do you explain? Old money, family help, stretched to the max?


http://statisticalatlas.com/United-States/Overview

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HueyLD
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Re: Buying house - Very important decision

Post by HueyLD » Sun Jul 09, 2017 11:19 am

In areas with high housing prices (coastal California, NYC, etc.), I read that many buyers have help from "mom and dad banks," old money and/or personal assets (e.g. retirees who are asset rich but income poor).

Traveler
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Re: Buying house - Very important decision

Post by Traveler » Sun Jul 09, 2017 12:44 pm

No, you can't afford a $500K+ house. Why do you need that? You live in TN, a relatively LCOL place. Surely you can find something in the $250-350 range. No, it won't look like the $500K+ place. You don't need more than 2000 for three people. But you want more. Figure out the difference between wants and needs before you break the bank on this house.

What I'm more shocked about is that you're concerned about your rent going up to $1400 but you're happy to plop out $3500+ each month for an overpriced, oversized house for the next 30 years. How do you rationalize this?

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Sun Jul 09, 2017 1:36 pm

Traveler wrote:No, you can't afford a $500K+ house. Why do you need that? You live in TN, a relatively LCOL place. Surely you can find something in the $250-350 range. No, it won't look like the $500K+ place. You don't need more than 2000 for three people. But you want more. Figure out the difference between wants and needs before you break the bank on this house.

What I'm more shocked about is that you're concerned about your rent going up to $1400 but you're happy to plop out $3500+ each month for an overpriced, oversized house for the next 30 years. How do you rationalize this?
Yes I totally see the math. But seeing at the kind of houses folks are buying around here and their family sizes, boy, it surely looks like this area is the next silicon valley. Or may be we are in the bottom income earners in this area :(

am
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Re: Buying house - Very important decision

Post by am » Sun Jul 09, 2017 3:04 pm

prettybogle wrote:
Traveler wrote:No, you can't afford a $500K+ house. Why do you need that? You live in TN, a relatively LCOL place. Surely you can find something in the $250-350 range. No, it won't look like the $500K+ place. You don't need more than 2000 for three people. But you want more. Figure out the difference between wants and needs before you break the bank on this house.

What I'm more shocked about is that you're concerned about your rent going up to $1400 but you're happy to plop out $3500+ each month for an overpriced, oversized house for the next 30 years. How do you rationalize this?
Yes I totally see the math. But seeing at the kind of houses folks are buying around here and their family sizes, boy, it surely looks like this area is the next silicon valley. Or may be we are in the bottom income earners in this area :(
No, it's just that people are stretching themselves really thin. Look at average consumer debt and retirement savings in this country. Real pathetic.

MoonOrb
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Re: Buying house - Very important decision

Post by MoonOrb » Sun Jul 09, 2017 3:12 pm

Some people with similar incomes bought before you did and paid less. Some people have higher incomes and can afford bigger houses. Some people are willing to have roommates and use that as additional income. Some people have bigger families and are in a risky financial position by purchasing houses that large, but they have more of a need to take on greater risk.

And then there is a whole set of people who can't really afford the large and expensive houses but buy them anyway, even though it's a significant financial mistake to do so, because they face peer pressure from coworkers or friends, their realtors assure them it's okay, or they irrationally take on a huge amount of risk because they fear being priced out of the home owner market more than almost anything else.

bluebolt
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Re: Buying house - Very important decision

Post by bluebolt » Sun Jul 09, 2017 4:55 pm

MoonOrb wrote:Some people with similar incomes bought before you did and paid less. Some people have higher incomes and can afford bigger houses. Some people are willing to have roommates and use that as additional income. Some people have bigger families and are in a risky financial position by purchasing houses that large, but they have more of a need to take on greater risk.

And then there is a whole set of people who can't really afford the large and expensive houses but buy them anyway, even though it's a significant financial mistake to do so, because they face peer pressure from coworkers or friends, their realtors assure them it's okay, or they irrationally take on a huge amount of risk because they fear being priced out of the home owner market more than almost anything else.
And some people lived so far below their means for many years that they could afford to pay cash or put a large down payment on a house they seemingly could not afford based on salary alone. :sharebeer

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watchnerd
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Re: Buying house - Very important decision

Post by watchnerd » Sun Jul 09, 2017 5:14 pm

bluebolt wrote: And some people lived so far below their means for many years that they could afford to pay cash or put a large down payment on a house they seemingly could not afford based on salary alone. :sharebeer
That is what we did.

We lived in an apartment, saving money, until age 40. Then in 2010, after the real estate crash, we bought aggressively with a 40% down payment, which resulted in a mortgage about the same price as our rent was then.

In 2012, we refinanced, and paid another $35k to reduce the principal even more.

Fast forward to 2017 and we're selling to relocate to another city due to a new job. The proceeds from the sale will be enough for us to buy a new house using all cash at the new location.

The CAGR for the house value over the last 7 years has been >9% (I'm not sure how to calculate the CAGR on the leverage).

Buying a house beneath our means, with low APR and low payments, in a growing market has been one of the best investments we've ever made and allowed us to continue to aggressively maximize our pre- and post-tax savings in parallel.
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Devil's Advocate
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Re: Buying house - Very important decision

Post by Devil's Advocate » Sun Jul 09, 2017 5:35 pm

And then there is a whole set of people who can't really afford the large and expensive houses but buy them anyway, even though it's a significant financial mistake to do so, because they face peer pressure from coworkers or friends, their realtors assure them it's okay, or they irrationally take on a huge amount of risk because they fear being priced out of the home owner market more than almost anything
Brilliant...simply brilliant

DA

jeffh19
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Re: Buying house - Very important decision

Post by jeffh19 » Sun Jul 09, 2017 7:11 pm

I got absolutely killed for asking if I should buy a 260k home with a 150k income with 160k in cash with zero debt of any kind....so don't be surprised if everyone gives you a hard no here

from what I can see people are being a lot nicer to you than me too lol

wilked
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Re: Buying house - Very important decision

Post by wilked » Sun Jul 09, 2017 7:22 pm

jeffh19 wrote:I got absolutely killed for asking if I should buy a 260k home with a 150k income with 160k in cash with zero debt of any kind....so don't be surprised if everyone gives you a hard no here

from what I can see people are being a lot nicer to you than me too lol
not accurate

you got feedback that working 80-90 hours per week is not sustainable, and that buying anything based on income which required 80-90 hours per week is inadvisable

It was good advice

Frank Grimes
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Re: Buying house - Very important decision

Post by Frank Grimes » Sun Jul 09, 2017 9:21 pm

prettybogle wrote:
Yes I totally see the math. But seeing at the kind of houses folks are buying around here and their family sizes, boy, it surely looks like this area is the next silicon valley. Or may be we are in the bottom income earners in this area :(
Maybe you are. Or maybe those folks are in debt up to their eyeballs. Either way it's not a good idea for you to buy that high.

scorcher31
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Re: Buying house - Very important decision

Post by scorcher31 » Sun Jul 09, 2017 9:39 pm

If you really feel you have to get into the market now before rent or home prices rise than pick a home that costs significantly less. If the market continues to go up, than the home may appreciate just as well as your more expensive one. With that said I doubt even your realtors know what is going to happen in the market in the future.

If you really want a home then try to find a new/newer home with very little work that needs to be done for 300,000-350,000 between 2000-3000 square feet instead. By giving up the space you should definitely be able to find a better price on a home. Do not go over 3x annual salary for any reasons unless you are in a very high cost of living area.

wrongfunds
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Re: Buying house - Very important decision

Post by wrongfunds » Mon Jul 10, 2017 7:23 am

am wrote:
wrongfunds wrote:How are you guessing the median household income? If you have actual data from census, that is going be quite old. For real estate transaction prices, it is all public records, so that data can be current and accurate. Household income data will be hard to ascertain. Of course unless IRS publishes or makes it available such data on yearly basis. Those are the only people who have access to such information.

My point is my neighbor might be earning lot more than I do or I think she does.
This site has more data than I could handle including specific parts of my suburb. Some places near me have median values of 1 mil+ and median incomes around 200-250k. How do you explain? Old money, family help, stretched to the max?


http://statisticalatlas.com/United-States/Overview
Looking deeper in to that site, the data is from US Census. That means it must be current as of 2010. And that was my point before.

KlangFool
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Re: Buying house - Very important decision

Post by KlangFool » Mon Jul 10, 2017 7:28 am

wrongfunds wrote:
am wrote:
wrongfunds wrote:How are you guessing the median household income? If you have actual data from census, that is going be quite old. For real estate transaction prices, it is all public records, so that data can be current and accurate. Household income data will be hard to ascertain. Of course unless IRS publishes or makes it available such data on yearly basis. Those are the only people who have access to such information.

My point is my neighbor might be earning lot more than I do or I think she does.
This site has more data than I could handle including specific parts of my suburb. Some places near me have median values of 1 mil+ and median incomes around 200-250k. How do you explain? Old money, family help, stretched to the max?


http://statisticalatlas.com/United-States/Overview
Looking deeper in to that site, the data is from US Census. That means it must be current as of 2010. And that was my point before.
wrongfunds,

1) Yes, but that information was reverified by our actual knowledge of our peers' earnings.

2) Wages/income had been stagnant for the most part of the country over the last several years.

KlangFool

Jeff Albertson
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Re: Buying house - Very important decision

Post by Jeff Albertson » Mon Jul 10, 2017 7:45 am

According to this survey in Business Insider, '10 US cities where it's becoming more expensive to live comfortably', Nashville topped the list by a wide margin. (#2-Seattle, #3-Louisville, #4-Austin)
http://www.businessinsider.com/us-citie ... shville-10

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watchnerd
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Re: Buying house - Very important decision

Post by watchnerd » Mon Jul 10, 2017 10:04 am

Jeff Albertson wrote:According to this survey in Business Insider, '10 US cities where it's becoming more expensive to live comfortably', Nashville topped the list by a wide margin. (#2-Seattle, #3-Louisville, #4-Austin)
http://www.businessinsider.com/us-citie ... shville-10
I'm moving to the #2, Seattle...
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FoolMeOnce
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Re: Buying house - Very important decision

Post by FoolMeOnce » Mon Jul 10, 2017 1:06 pm

prettybogle wrote:Our thinking behind 535k is it is "only" 80k higher than that and we get brand new house.
I'd prefer ten-year-old to brand new. That allows time to get the kinks and defects worked out. Brand new will cost more up front, and could likely cost more dealing with problems that take some time to discover (even considering a builders warranty). You are looking to spend $80k more, which you might not be able to afford, to acquire extra headaches.

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