Profile picture for laurelmd

FIRST TIME HOME BUYER: KEEP RENTING OR BUY?

I currently rent an apartment for about $1000 now, looking to move in the next 2 months and have been searching for a new location but the apartments I've been seeing are between $1100 and $1300 which I can afford. My question; does it make sense to keep renting and throwing money away an average of $1300 a month or invest in buying a house. I have good credit and income but not enough savings to put money down to purchase a house.

What are my options? Any advice will be appreciated.

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May 04 2011 - South Laurel
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Answers (35)

mj:

so you are as clueless about the internet as you are about real estate! right click and copy the link, to a new window, and you can see where it goes before activating it! it goes to a zillow post from 2 years ago, but since even this simple task may be too much, I'll simply reply on it right now, and push it to the top of the list... 
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October 11 2011
@Roberto I do not open strange links from hostile people.

Thanks but no thanks
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October 11 2011
Yes. I'm sure all those people who bought in 2006 and have now gone into foreclosure feel really good... because money isn't everything... and they had good schools and plenty of lviing space.

Miekeba, read the link I posted. But, based on your writing on here, it will probably go right over your head... 
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October 11 2011
I agree with you Cynthia.

Money isn't the only reason that people buy.

(1) place to raise/educate their children, (2) a place to feel safe, (3) plenty of living space, (4) control over the space.
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October 11 2011
Profile picture for SoCal Engr

@ Miekeba...

Wow, can I get you a bigger shovel?

Starting small-to-large...

You indicated you are advising the OP about the current market. They were asking about the market back in May. The way the market has been, "current" has a narrow application.

Um...Rob is in Arizona, not California. Not that it really matters.

Drum roll...

If you bothered to follow/read AzRob's link, you will see that it is a generalized approach - applicable to any locale/market.

p.s. How's that CDA-thing doing, generating commissions for you by shoehorning people into homes who have no business entering into the obligations/responsibilities of home ownership?

p.p.s. Ayup, Silver Springs, MD looks to be rocking the RE market.

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October 11 2011
this laurel mayland? link

The one that zillow shows dropping 6.5% over the last year? YES by all means, tell buyers "it is always better to buy" in a market that is actually dropping... DON'T give them a single market based fact, just tell them they should buy...

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October 11 2011
Hi Roberto,

I am responding to a Maryland question, where we are not experiencing the same problems as California.

I hope things improve for you, while Maryland's market is doing well.

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October 11 2011
Miekeba: you said it is ALWAYS better to buy. Even today, in many markets it makes no sense what so ever to buy. Half of california meets that requirement, because prices compared to rents are still ridiculously high.

SO for the original poster, since 99% of agents have NO CLUE when you should consider buying, I'll point you to  a post I made years ago on here, that helps: 

when to buy Linky

This advice worked through the bubble. I sold 4 investment properties in 2005 and 2006 on my own theory, and so far this year have purchased 7, and I still have more money to invest, all thanks to thinking about this market logically. Most of this will go right over the real estate sales agents heads...
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October 11 2011
I am under the impression that the potential buyer is inquiring about buying in today's current market which is a buyers market.

Prices are cheap and I would not recommend buying a property that is not affordable. 

Many of those foreclosed homes were sold to buyers using an ARM, because either their credit was not good or they were experiencing some sort of financial strain at the time of buying.  Which is never a good idea. 

There are people who are underwater, but would prefer to keep their homes and their promises to pay back the loan and remain in their homes.
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October 11 2011
If you are going to spend $1300 on an apt, and you can afford to buy, why wouldnt you? Check with your accountant, but I would say it is a better tax advantage. If you have good credit, good income but not enought savings, talk with your realtor about having the seller pay your closing costs, look into an RD loan (depending on your income).
Look at buying under your means - great advice I heard from Suzie Orman... good luck!
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October 11 2011
"I always believe it is more beneficial to buy then rent, because when you are renting your are paying for someone's property when you could be purchasing your own." - Miekeba.

Care to explain that belief to all those 2006 buyers? You know, your friends who owe twice as much as the home is worth, and pay more each month on their mortgage then rent would be? The ones getting foreclosed on and losing their downpayment money, and ruining their credit? remind them how it is ALWAYS better to buy... even when it isn't. 
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October 11 2011
It is possible to borrow the down payment using the CDA program.

I always believe it is more beneficial to buy then rent, because when you are renting your are paying for someone's property when you could be purchasing your own.

The first step to home buying is choosing a Realtor to walk you through the steps.

The second step would be to find a lender that has many lending programs to suit your needs.  Your Realtor can help you with this as well.

Next you want to get a pre-approval letter from the lender telling you how much you can purchase for.

Then your Realtor schedules a showing with you to find a home within your price range.

You decide how much you want to offer according to neighborhood prices.  The offer is made and you wait for acceptance.

Once accepted, a settlement date will be chosen.

Then the keys are yours.

And always make sure to get an inspection before you buy.
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October 11 2011
It depends on the area you want to live in. You have a few questions to ask yourself to help you make a better decision:

1. What are you plans within the next 2-3 yrs? If you plan on switching locations or you don't like to live in one residence too long, you may need to stick with renting.

2. How much money do you have saved?  There are operating expenses involved when purchasing a home. Make sure you have a safety net incase the unexpected happens.

3. What would be the monthly mortgage with taxes & association fees for your desired relocation areas? Do the monthly expenses cost significantly more than rent?  If so, you may want to plan a bit more before purchasing.
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September 07 2011
Hi, There is more to it than just  low rates to consider when considering it to buy or keep renting. Take a realistic look at your job security, buying a home while there are definate advantages such as the interest deduction on your taxes also the intrinsic and mental advantages of owning your own phome. Also look at your timeline, do you plan on being in the home at leats 5-7 years? In days gone by many said 3-5 years but that was in the days of apprieaciating values at the historical 4% a year. House values may or may increase slightly in the next few years, but most can agree we will not see the historcial apprieaction of 4% for at least a few years and maybe more. All that said maryland has some great programs for first time home buyers.   In Maryland the USDA is available in all counties, the aresa avilable are as follows...
PG County, outside of Crain Hwy, south of RT 4.
Calvert County: all
Charles County: all, except the city of Waldorf and areas in close proximity
Anne Arundel: West of Rt 2 and south of rt 214
Montgomery: very little except in outlying areas
Howard: Very little.
Maryland has a program for first time home buyers where you can get $5,000 to be used towards your down payment or closing costs. It is in the form of a zero interest zero payment loan as long as you own the property or refinance into another loan. The interest rates on the program are different for foreclosed properties versus regular sales. At this writing the rates are 3.0% , apr 3.695% for foreclousures and 3.50% apr 4.236% for regular sales. These are 30 year fixed rates loans and can be USDA, FHA or VA. FHA & USDA allows seller concessions to help pay your closing costs of up to 6% of the sales price and the VA 4%,

Settlement costs can vary on our area buy quite a bit, this is due to property taxes in the different counties as well as cities like Bowie. Bowie residents get absolutly great services but their property taxes are higher than most. Consequently the settlement costs on a home in Bowie is higher than othe r parts of the county in general. Realisticly you can expect settlement costs, excluding any required down payment to be in the 4-5-1/2 % range in relation to the sales price. FHA loaans require a 3-1/2% down payment, on a home selling at $175,000 thats $6,125 with the state money of $5,000 you would then only need $1,125 to get into the home, provided th eseller was paying the balance of your settlement costs.

Regardless of what the loan program may allow, this is a negociable item that needs to be written into the overall contract offer, you need to work with a good real estate agent who will be your buyers agent.
let me know if you want to know more.
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September 07 2011
buy if your mortgage payment is LESS than the rent would be on a similar home. (with a standard 30 year fixed mortgage, no funny financing to make it happen). It really boils down to that, that one simple calculation convinced me to sell 4 of my homes in 2005. I have this year purchased 4 so far for less than one third of the price I sold them for, and plan on buying a few more. 
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June 25 2011
every day someone asks this same question on zillow.  Its a buyers market, there are tons of properties on the market, prices are very low, and interest rates are VERY low.  If you have a down payment, you should buy.  No reason to pay rent.  Except to keep your landlord happy. :)
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June 25 2011
Profile picture for SoCal Engr
"Four : Owning a home is a TAX write off.  You can write off the interest you pay on your taxes."

This is not exactly true. Mortgage interest is only deductable if you have enough deductions to make your Schedule A amount exceed your standard deduction.

So, the correct statement is that mortgage interest could be a tax write off, provided you have sufficient deductions to exceed the standard deduction that everyone is allowed to take.

Also, that statement is a bit deceptive, since it's not a dollar-for-dollar match. At best, you'd get back about 1/3 of the taxes, so you're still going "into the hole" for a minimum of 2/3 of the mortgage interest.
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June 25 2011
In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.   This is a perfect time to purchase a home-especially for first-time home buyers!  There are a lot of incentives available.  Recommend you contact a lender and get pre-qualified prior to searching for homes.  Your lender will provide you great information re: programs available.
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June 25 2011
Personally, I think that buying is the way to go. Then you have something that is all yours and financially you are paying towards something, you have equity in a house. Depending on the house/condo you choose you may be paying the same or a similar price per month for a mortgage as you are renting. Talk to a mortgage counselor, they will be able to tell you what you are eligible for and what the typical percent down sellers in your area are looking for. Just remember never get a negative amortization loan! They are bad!  
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June 02 2011
Speak with a lender and get find out exactly what you can afford.  Its a great time to buy, but always consider all your options, including costs, before you take the plunge!



Good Luck!
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June 02 2011

Number one : Talk with lender to find out your buying power.
Two : are there homes in the area where you want to live in your price range?   Are you willing to look outside of it to find more affordable homes? 
Three : Find agent to walk you though the process
Four : Owning a home is a TAX write off.  You can write off the interest you pay on your taxes. 

Great time to buy with low interest rates translating to more buying power than had before. 
If you are a first time home buyer and live in an area where Compass Bank is they currently have a no mortgage insurance loan program.  This program will save you over $100 a month.  Meaning you can have more money to buy  better home.   Good luck@



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June 02 2011
The rental market in Central Maryland is hot. Supply and demand have shifted to a very low inventory due to many homeowners being displaced and the increase of people moving to Maryland for work.
With the interest rates so low and a great deal of homes available to purchase, for just a little bit more than first and last on an apartment you can buy a home. An FHA loan requires that you have a 3.5% down payment. Take a home that is listed for $150,000. Your down payment would be $5250. Find[deleted by Zillow moderator as hotlink to website] can negotiate the seller paying all the closing costs and that is all you would need. At the current interest rates your principle and interest payment a month would be $756. Add taxes, (Average of $200 to $300 per month) Home owners insurance (Generally $50 per month) Mortgage insurance (Est $120). Around the same as renting, but you get the deduction on your taxes and as the property adds value, you will build equity. Ask the seller to provide a home warranty too.
With the growth in Maryland, statistically there will be a housing shortage in the next 10 years so this is the PERFECT time to purchase. 
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June 02 2011
In my opinion, today's market offers a generational opportunity to all buyers.  $1,300 a month gets you a lot of house at today's rates.  Given that you don't need to sell another home, you are attractive to sellers and have the ablity to take your time and be selective.  I would speak with a mortgage broker as soon as possible.  I can provide you with some names.
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May 04 2011
Profile picture for SteadyState
Jeffrey Messick, "jeffmessick"  says:
 "I feel that it is still a buyers market and to continue to pay someone else's mortgage is not in your best intrest. "

How original!  Should he pay the bank's mortgage instead?
Meanwhile in Mr. Messick's area:
Y-t-Y: down 9.6%
Q-t-Q: down 0.9%
M-t-M: down 0.4%

% of people who sold for a loss in Mr. Messick's Berlin, MA:
2009: 15%
2010: 30%
2011: 50%

Does laurelmd (first-time home buyer) want to be included in these numbers?

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May 04 2011
Profile picture for SteadyState
Although REAs will encourage you to buy, after all it's in their interest, there is no hurry and housing prices are not going anywhere soon.
Today on Yahoo:

"The biggest overhang for the economy remains a sluggish housing market, Ritholtz contends. "It's not going to be a bright spot in the economy and probably not for five to 10 years," he tells Aaron Task and Daniel Gross in the accompanying video.

Why? We still have millions of Americans who remain in homes they couldn't afford to buy. Ritholtz suggests half of the lot has already defaulted, but there's still a long way to go. Plus, housing prices are still too high."

No need to rush. Save plenty for down payment - if possible have enough saved to pay for the home in cash and then get a loan.




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May 04 2011
I feel that it is still a buyers market and to continue to pay someone else's mortgage is not in your best intrest. There are lending programs out there that will help you with your down payment or even qualify you for 100% financing, you should first talk with a lender and find out what you are qualified for as far as purchasing your new home. Second, if you can find something that is similar to what you are renting now and plan on being in the area for at least 5 years or more then I would suggest buying it. Good Luck.
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May 04 2011
Profile picture for the_country_hick
Wait until you have a solid down payment and some extra money in the bank. You could buy a house and find $5,000 in repairs happen in the first couple of years.

Perhaps the links below can be of help.
"Do low interest rates really make it a good time to buy a house?"

"How do I get a down payment to buy a house? The ideas below worked well for me. They could help you also."

"What should I watch out for when choosing a home to buy so that I don't jump into a money pit?"
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May 04 2011
Profile picture for sunnyview
Honestly, there are few agents that will tell you that now is not a good time to buy. The question you should be asking is why should I buy now? Ask your local agents about the average days on market, the listing price trend up or down, the median price rising or falling the fair market rents here for units that you are considering vs the costs of PITI.

Agents have the information, but it is up to you to weigh the factors that will influence whether you lose money, stay even or pick up money over the next 5 years. If you are making an investment and not primarily a lifestyle choice, you should have reasonable answers to those questions before you put your money on the table. You can't make a smart decision without information.

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May 04 2011
It depend on the price of a similar home. For example, if a similar home would cost half a million dollars, you obviously shouldn't buy if a similar home costs 100k then you definitely should. Even if you needed to move, you could rent it for a good monthly profit. To answer the bad advice and ideas from agents on here: 1. Buy cause rates are low. Stupid. If and when rates go up, that will pressure prices downward. 2. Buy if you are staying more than 5 years. Really? How did that work out for the 2006 buyers? They are going into foreclosure in droves, so I'd say not so well!
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May 04 2011
Hi, if you think you'll stay in a home you buy for at least 5 years, I think buying is a no brainer. There are low downpayment options as well as govt programs that cover your downpayment. Everyone's situation is different so if you want to discuss yours or just need to be pointed in the right direction, I'm happy to help.
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May 04 2011
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