1st Time Home Buyer: Advice?

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Phinance
Posts: 43
Joined: Fri Apr 12, 2019 3:33 pm

1st Time Home Buyer: Advice?

Post by Phinance » Tue Jun 11, 2019 1:40 pm

Looking to purchase 1st time home. My current assumption is that a home is not an investment (does not produce cash flow) but rather a shelter whose price “may” rise in the future, is this correct? How much home can I purchase safety with below assumptions? I think home prices are ridiculous in Portland, OR (but they seem to keep rising). I keep wanting to wait to see some drop, but if Fed decreases rates that doesn’t look like it’s going to happen (market timing? :oops: ) Any other advice on how to obtain a competitive mortgage rate? My plan is to apply for a 15yr fixed mortgage (I hate the idea of a mortgage but can stomach 15yrs I think).

36yo male, engaged, no children (but plan to)
Location: Portland, OR (expensive homes, not SF but still high)
Income: ~400K/yr
Saved Deposit: 200K
Home price: ~600K
"Our life is frittered away by detail. Simplify, simplify." -Thoreau

jharkin
Posts: 2225
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: 1st Time Home Buyer: Advice?

Post by jharkin » Tue Jun 11, 2019 1:50 pm

You are talking about a home with a mortgage of just 1 year income - Whats the question? You can easily afford this.

JoeRetire
Posts: 2422
Joined: Tue Jan 16, 2018 2:44 pm

Re: 1st Time Home Buyer: Advice?

Post by JoeRetire » Tue Jun 11, 2019 1:56 pm

Phinance wrote:
Tue Jun 11, 2019 1:40 pm
Looking to purchase 1st time home. My current assumption is that a home is not an investment (does not produce cash flow) but rather a shelter whose price “may” rise in the future, is this correct?
That is correct.
How much home can I purchase safety with below assumptions?
Wrong question. Ask yourself "Given my financial situation and my financial goals, how much house do I need?"
I think home prices are ridiculous in Portland, OR (but they seem to keep rising).
For now.
I keep wanting to wait to see some drop, but if Fed decreases rates that doesn’t look like it’s going to happen (market timing? :oops: )
No guarantee that the Fed will decrease rates. And home prices are hyper-local anyway and not tied to Fed rates.
Any other advice on how to obtain a competitive mortgage rate?
Whenever you want to get the best prices for anything, the tactic is the same - shop around.
My plan is to apply for a 15yr fixed mortgage (I hate the idea of a mortgage but can stomach 15yrs I think).
If you hate it that much, then just save your money and pay cash.

Otherwise, consider a 30 year mortgage that you can choose to pay off aggressively if your financial goals dictate doing so, yet hold on to more liquidity if they don't.
Income: ~400K/yr
Saved Deposit: 200K
Home price: ~600K
Seems perfectly reasonable.

Rus In Urbe
Posts: 374
Joined: Sat Dec 09, 2017 2:12 pm

Re: 1st Time Home Buyer: Advice?

Post by Rus In Urbe » Tue Jun 11, 2019 2:17 pm

Good advice above.

There is a reason why "Location, location, location" is the mantra in real estate. It is the one thing about a property you can't change. So think very carefully about the neighborhood, air and water quality locally (it varies!), and most especially the commutes to work (read Mr. Money Mustache's rants on the wasted time and money that a longer commute can entail---it really adds up, which is why I bought a fixer-upper within walking distance to my office and have been so very glad I did----the savings have been enormous).

Also, you mention you may start a family.....you will have to consider the school district. That is (usually) COMPLICATED! You and your partner will want to collaborate on analyzing what location is really going to work for you and your kid's education. I have seen a lot of young couples get a starter home and then need to move when their child reaches school-age. That can work, or not. Just factor it into your thinking.

Your outlook on housing is rational. Yes, indeed, a house is not an investment. Home Ownership costs more money than you can imagine until you have one (google "money pit"); there are closing costs, agents fees, mortgage points, the mortgage interest itself, and then always something that needs fixing or upgrading. And when you own a house, you probably want to improve it constantly.

Be prepared: Every first time home buyer seems to go through "buyer's remorse" afterward.
("Agh, we felt so rich and now we feel so poor!")

But I love my home and we never regret one dollar of the sunk costs (that will never be recouped).
If you like nesting and putting down roots (we do), the pleasures of a home are worth the costs . . .

Good luck to you! :beer
I'd like to live as a poor man with lots of money. ~Pablo Picasso

welsie
Posts: 82
Joined: Tue Feb 12, 2019 6:11 pm

Re: 1st Time Home Buyer: Advice?

Post by welsie » Tue Jun 11, 2019 2:38 pm

Phinance wrote:
Tue Jun 11, 2019 1:40 pm
Looking to purchase 1st time home. My current assumption is that a home is not an investment (does not produce cash flow) but rather a shelter whose price “may” rise in the future, is this correct? How much home can I purchase safety with below assumptions? I think home prices are ridiculous in Portland, OR (but they seem to keep rising). I keep wanting to wait to see some drop, but if Fed decreases rates that doesn’t look like it’s going to happen (market timing? :oops: ) Any other advice on how to obtain a competitive mortgage rate? My plan is to apply for a 15yr fixed mortgage (I hate the idea of a mortgage but can stomach 15yrs I think).

36yo male, engaged, no children (but plan to)
Location: Portland, OR (expensive homes, not SF but still high)
Income: ~400K/yr
Saved Deposit: 200K
Home price: ~600K
Just to quibble, it does produce cash flow in the sense that it can reduce your housing costs. The real question is, what is your opportunity cost? That will determine the value of your "investment" in owning housing instead of renting it. It may be the case that it is not an investment, but it can be.

rascott
Posts: 106
Joined: Wed Apr 15, 2015 10:53 am

Re: 1st Time Home Buyer: Advice?

Post by rascott » Tue Jun 11, 2019 2:41 pm

Phinance wrote:
Tue Jun 11, 2019 1:40 pm
Looking to purchase 1st time home. My current assumption is that a home is not an investment (does not produce cash flow) but rather a shelter whose price “may” rise in the future, is this correct? How much home can I purchase safety with below assumptions? I think home prices are ridiculous in Portland, OR (but they seem to keep rising). I keep wanting to wait to see some drop, but if Fed decreases rates that doesn’t look like it’s going to happen (market timing? :oops: ) Any other advice on how to obtain a competitive mortgage rate? My plan is to apply for a 15yr fixed mortgage (I hate the idea of a mortgage but can stomach 15yrs I think).

36yo male, engaged, no children (but plan to)
Location: Portland, OR (expensive homes, not SF but still high)
Income: ~400K/yr
Saved Deposit: 200K
Home price: ~600K

Why do you think home prices are ridiculous? It's just a nominal number. Housing is an expense that will never go away (unless you are homeless or someone else is paying)..... it's just figuring out the best way to cover it in your specific situation, long-term.

Golf maniac
Posts: 251
Joined: Wed Dec 27, 2017 2:02 pm
Location: Florida

Re: 1st Time Home Buyer: Advice?

Post by Golf maniac » Tue Jun 11, 2019 3:06 pm

Don’t forget about the furniture, paint, changes (floors, countertops, etc), yard maintenance equipment, moving costs,etc. Make a budget for all the things you want to do to the house and have that money earmarked. Houses are expensive.

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