A Close Call
Posted on July 30, 2006 16 Comments
This afternoon, following a late breakfast in La Grange (another near Western suburb), Brian and I noticed an open house sign on a condo in the downtown area, within walking distance from the train. Intrigued, we decided to visit.
After a quick tour, I realized why browsing open houses is so dangerous – like shoe shopping or trying on the perfect pair of jeans, the excitement that comes with seeing an ideal property is feverish. We left the two bedroom, vintage condo with a host of questions. Most importantly, could we possibly afford this? The price is right ($207,900), the location is ideal (walk to the train, downtown), the floors are hardwood, laundry and air conditioning are inlcluded. The timing is absolutely horrible, but still… maybe we could make it work. I started having visions about my new life in La Grange. “After all,” I thought, “we still haven’t signed our apartment lease yet.”
I came home and ran the numbers. I kept thinking to myself, “This is crazy.” I know that I’ll be in much better financial shape 12 mos. from now, that we might need to move to Naperville next year and that I had only started to research buying a home. And yet, I wanted it. So I ran the numbers.
Thanks to a simple exercise on Coldwell Banker’s Web site, I learned that despite the great price, because my downpayment would be so little, my monthly payments (including taxes, assessments and insurance would be more than DOUBLE what I pay for my apartment. And at this time, I just can’t afford that.
So I think I’ll sign that lease. At the rate of my rent, I’m able to save a lot each month and finally feel like my savings account is really starting to grow. I’ll keep researching other investment vehicles to help it grow faster, too.
And for my finances’ sake, I’ll stay away from open houses for at least another year.
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16 Responses to “A Close Call”
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July 30th, 2006 @ 10:35 pm
$207,900?! *drool* I’m trying to find a condo in southern california and all of them start at $400,000
July 31st, 2006 @ 12:36 pm
Isn’t it funny how your opinion on what a house is worth depends on where you live. Here in Indiana, I’m refusing to even look at HOUSES (with yards, basements, and garages) that go over $200,000. But, like you Nicole, we (smartly) re-signed our lease and are trying to save for 1 more year to have a better downpayment.
August 1st, 2006 @ 4:44 pm
Having just bought our first house last month, I would like to add this advice, the down payment and closing cost are where it just begins…
Day one new rug for the living room $180, new closet organizers $200, new door locks $125 and on and on and on….
And that is not including any new furniture that you want/need… It all adds up. But it was well worth the wait… And in the end I am glad that we saved as much money as we did becuase all the stuff that we have bought for the house has not seemed too bad… Hey it came out of the “House” fund…
Good luck, when you do it do not settle!! There is a huge cost in moving….
August 1st, 2006 @ 7:56 pm
I hear you tim. Under 400k condo is either in a bad neighborhood or 700 sq feet. The market is softening. The condos will drop the most.
August 2nd, 2006 @ 2:46 am
Not sure what your areas are like, but have you considered trying to find something well below market, so you can walk in with equity, and do a quick heloc to pull out money to hold the property for a year or two years? Then, you save money on rent, which means more money towards debt, and all the while you are building equity. My two cents – from a crew of REI in Phoenix!
August 2nd, 2006 @ 4:14 am
I was looking at townhomes in my area recently. The one I fell in love with was 2,200 sq ft for $160K. It had a two-car garage and a master bedroom on the first floor. It had a living area on the second floor. Three bedrooms, three baths.
I fell in love.
My sister bought a house bigger than that, also new, three years ago for @ $120K. She’s scandalized that I would even look at a townhouse for “that much money.” (We live out in the suburbs) My friends (who live in Houston) are all shocked that I found something that big for that cheap.
Perspective is critical when it comes to money.
August 2nd, 2006 @ 7:31 pm
I wish we had started reading this colum before we brought this house. We just spent 185,000 for a four bed, two and a half bath in CT. It is a great price but we didnt save anything and we didnt try to pay down our debt first.
Trust me you are doing the right thing. Stay strong it will all pay off in the end
August 2nd, 2006 @ 10:59 pm
I was floored by the price as well. My wife and I are looking at houses in Southern CA for $250k-$350k but you have to live out in the boonies. Is that how you spell boonies? Anyway purchasing a home in S. CA requires a lot of money or the willingness to live 30 to 40 miles from LA.
August 3rd, 2006 @ 10:27 pm
Where in CT can you get 4 beds for $185k?
Here (Albany NY) it is feasible. I pay $600 in rent.
Average US house price is about $215k
August 4th, 2006 @ 4:16 am
Thank god you had the sense to do the math and to realize that it is not a smart move to pay 2X on a mortgage what it costs you to rent.
OMG are you going to be feeling proud after saving for another year and going out to buy “discounted” RE.
Bet on it. RE’s already coming down, not only MOM, but also YOY.
This is the biggest credit bubble the world’s ever seen and when the party’s over you’ll get MUCH more for your money (and have a larger downpayment to boot!).
Kudos to you for having financial sense.
August 4th, 2006 @ 5:17 am
Sure you can afford it, like millions of others who bought homes in last 3-4 years on option interest only neg am ARMs with 105% financing
Do you know when the current owners bought that condo and how much they paid for it? That’s the first thing I look at.
Also did you see this story in Chicago Tribune about slow real estate market in Chicago?
http://www.chicagotribune.com/business/chi-0608020170aug02,1,1574841.story?coll=chi-business-hed&ctrack=1&cset=true
August 4th, 2006 @ 3:07 pm
“Having just bought our first house last month, I would like to add this advice, the down payment and closing cost are where it just begins…”
Good point Brian. 20% for DP, 3% for closing costs. Figure you need to furnish it (depends for each situation) and then you still need to have 6 months worth if living expenses put aside. Add that up and to buy a $200,000 house you would need $60,000 or more in savings before you buy.
August 4th, 2006 @ 3:15 pm
“I was looking at townhomes in my area recently. The one I fell in love with was 2,200 sq ft for $160K. It had a two-car garage and a master bedroom on the first floor. It had a living area on the second floor. Three bedrooms, three baths.”
If I could find that in my area (Chicago burbs) I’d buy it right now sight unseen.
August 6th, 2006 @ 12:27 am
Thanks for sharing. This is a great piece that is so eye opening. There are alot of banks and other businesses touting the little or no downpayment way to go.
I for one think you are doing the right thing. I am definitely heading your advice.
September 15th, 2006 @ 4:41 pm
And after you get the new house you’ll ofcourse be craving the nice new furniture, wood blinds, rugs, etc, etc. Also don’t forget the maintenance if something breaks or needs updating. Those costs can creep up into your housing costs too.
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