First time buyers: Please help!?

Question

We'll be moving to the DC area (where the cost of living is SKY HIGH) We're in the military so BAH may cover some of our mortgage. We'll be stationed there for 3 years so I don't know if its worth it. I checked around for cheaper places but it seems to be cheaper going south which is 40 miles away from my husbands duty station and traffic is terrible.... please HELP! Pros and cons of purchasing a house... do you think we should wait??? DILEMMA...DILEMMA

Answer 1

My understanding is that DC is still near market top.

Since the math of homeownership takes about three years to show a profit in most cases (assuming 5% appreciation per year and taking into account taxes, insurance, inflation, alternative investments, etcetera), I would probably advise against buying unless you're going to stay at least five years.

Now if DC has fallen like San Diego, that advice turns around 180 degrees. When the bubble is gone, and there are 40 sellers per buyer, you're going to get a fantastic bargain if you've got the right buyer's agent, and the market will turn back up within three years.

There's no way of knowing for certain without being able to predict the future. But it never hurts to have the macroeconomic odds on your side.

Answer 2

Never never look at a house as an investment. It is a very good way to accumulate equity and a nest egg but not an investment and never speculate with it.

The market is at its very top now and in some areas, a correction is about to take place. If you are going to be in DC for a long haul, by all means, buy something because housing will appreciate over the long term. If prices goes down, you can wait it out and not lose money. However, if you are going to be short term, you can be trapped if the market goes down. All the people telling you to buy, buy, buy most likely are too young to remember the late 1970's that eventually drove the banking industry into a tail spin. With the military, your husband will have to go where ever he is needed and in short notice. That is stressful enough without having to deal with the house.

Answer 3

http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm?postversion=2006090814
http://money.cnn.com/2006/09/05/real_estate/Ofheo_home_prices/index.htm?postversion=2006090514

As housing market continues to slump, if you don't plan to delay your plan, please interview several and pick a good realtor or agent.

Bad ones will talk you into buying the largest property at your credit limit. Good ones will find you a good deal (Sellers are offering discount and incentives now).

Try to stay away from Adjustable Mortgage, because 30 year fix mortgage rate is very low right now. There is no reason to use Adjustable loans except fatter commission for loan agents.

Interests only loans are not good iether. Mortgage payment consists of two parts: interests and principal. Interests are like rent, which doesn't add to the equity to your house. It simply disappear as your pay it. If you want to use interests only loans, might as well rent, especially during market downturn, because housing price won't appreciate.

Finally, for tax benefits, talk to your CPA or tax accountant. Do not consult finance with realtors or agents. They get commissions when you sign the check!

Good luck!

Good article when you want to put in bid, negotiation.
http://biz.yahoo.com/brn/060909/19463.html

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Different perspective:

It is a myth that renting is always worst off than buying.

Rent vs. Buy as Housing Market Continues to Slump

As housing market slump, it is easier to calculate "Rent vs. Buy" scenario. Because "appreciation" is no longer a factor.

Mortgage payment consists of two parts: interests and principal. Interests are like rent, which doesn't add to the equity to your house. It simply disappear as your pay it.

If interests portion of the mortgage payment is roughly equal to rent of equivalent property, then it is a decent buy.

For example, let's buy a $500,000 condo with 0% down and apply interests only loan (just like renting a place). Mortgage payment would be $3250/month. It is a bad buy, because you can enjoy same property for $2000/month.

Please note that I assume the tax benefits from home cancel out fees from home association and property tax. For more accurate calculation, consult with your CPA or accountant. But NOT your realtor, whom will say anything to get the deal to go through.

And again, if you like a particular property, then paying more may be reasonable. You are the only person who can decide how much more premium you are willing to pay.

Answer 4

You should definitely purchase a house. It's a great investment and you'll make a nice profit when you sell it in a couple years. Try asking a realtor for help looking for a house in your price range and in your area.
http://www.realestateforsaleindc.com

This is a great site to check out local agents with links to their personal websites so you can do a little research and browse their listings before you contact them. Good luck!

Answer 5

Hello -

Let me be the first to congratulate you on considering buying your fist home. That is a great decision. Here is a link to a FREE report which will teach you all of the secrets for First Time Home Buyers :

http://www.freerealestatesecretssoutherncalifornia.com/buyer_secrets.aspx

Nearly a full third of households are still renting...but if you are one of them, you could be paying a hefty price. Additionally, the children of the baby boomer generation are close to or at the home buying age, but these "echo boomers" could mistakenly decide to put off the purchase of a home because of all the noise about a "bubble" in home prices.

Is there a "bubble"? The simple answer is "no". Even if interest rates move a bit higher, it won't be enough to cause a nationwide slide in home prices. The key to a healthy housing market is the job market. If the payment on a new home might be slightly higher due to increased interest rates, it generally won't stop someone from purchasing the home of their dreams...but if they feel their job is in jeopardy, it might be enough to stop them from making a move. So with the currently low levels of unemployment and the beefy gains in job creations, it looks like the housing market will remain vibrant. Although it will be difficult to sustain the double-digit gains that much of the country has seen, price declines are highly unlikely. Expect a more moderate rate of appreciation, perhaps closer to the historical 6-7% range, which is still very good.

It is important to note that housing tends to be localized. So if the job market in your area is weak, housing prices could under perform the rest of the country.

But this talk of a housing bubble has been going on for a few years now, and those who were unfortunately victimized by continuing to rent instead of purchasing a home are painfully mulling over their missed opportunity. But is it too late? Even with the more moderate levels of appreciation expected…procrastinating on that home purchase could cost you a bundle.

Let's look at an example. If you are paying rent at $1,500 per month and your landlord increases your payment by a modest 5% each year, you would wind up paying just about $100,000 over a 5-year period! Worse yet, after forking over $100,000, you still would have nothing to show for it.

And speaking of having nothing to show for it - how about any improvements you might make to a rental property? It's not uncommon for renters to freshen up the paint, install new light fixtures or plant some nice flowers outside. But guess what…all your efforts, labor and the benefit of that improvement belong to the landlord, not to you.

With the extensive variety of programs to help buyers obtain a mortgage with little to even zero down payment, the very same money could have been used towards home ownership. Even using a standard 30-year fixed program, a mortgage of $300,000 could be obtained with a total monthly mortgage payment - including property taxes and insurance - of around $2,200. Assuming a 25% tax bracket, this would be equivalent to the average amount spent on rent during the same period after your tax benefit.

And the benefits of home ownership are quite considerable. Because the mortgage is being paid down each month, equity is being built. After 5-years, the $300,000 mortgage would be reduced to $279,000, adding $21,000 to your net worth. Home appreciation can add an even bigger chunk. If your home appreciates at a modest 5% per year, the value of a $300,000 home would increase to $383,000 after 5-years. Subtract the remaining mortgage of $279,000 and you have a whopping $104,000 of additional net worth! Even if the appreciation level were at 3.5% or half the historical norm, the result would be $77,000 of additional net worth.

But if laying out the initial increase in monthly payment and having to wait for your tax benefit to show up next April is a tough nut to crack, the IRS wants to help. Instead of waiting to file for the tax benefits derived from your new home purchase, you can simply adjust the amount of your withholding. This allows you to have less tax withheld from each paycheck so you can handle the new mortgage payment more comfortably throughout the year. In essence, you are taking your tax refund as you go instead of letting Uncle Sam hold it all year, interest free.

Visit http://www.irs.gov and use the IRS withholding calculator. This very handy tool can quickly show you the effect a change in withholding will do to your net paycheck. Remember to balance this with the expected refund and it is always a good idea to check with your tax advisor.

Don't be victimized by the bubble hype. Buying a home is a big step, but it is almost always one in the right direction.

Answer 6

Rent for now.

http://www.breakingbubble.com/index.htm

And I thank your husband for serving are country, and you having the hardest job in the military that is a supporting spouse.

God bless are troops

Answer 7

you can always look for unclaimed houses. there are loads in the DC area.

Answer 8

Try this site for a realtor

http://realestateagentlive.com/index.php