by Janelle Nanos, Brides
Before taking the plunge- into home ownership, that is- make sure now really is the right time.
We all know the dream: You become a "we," get married, buy a house, start thinking of yourselves as real adults-maybe even pop out a kid or two. Whether it's a Craftsman bungalow with built-in bookcases or an industrial loft with insane river views that you're pining for, this vision of home ownership as part of your new grown-up life has probably been looming a little larger in your head ever since you got engaged. But given today's sluggish real estate market, the foreclosure horror stories we've all heard about, the chunk of savings you most likely put toward your wedding, and all the inherent life adjustments (good and challenging) that come along with being a spouse-does it really make sense to buy right this second? For some, the answer is a resounding yes, but others may decide renting isn't so bad after all.
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Newly engaged, Sharon Kunz and her husband, Erik, thought they were ready to put down roots in Boston when they found a five-bedroom fixer-upper that they both loved last summer-one where they could easily envision raising a family. "It seemed like this amazing opportunity," Kunz says of the $369,000 1920s house. "It was so much space for the price." They decided to take the plunge.
However, in February, Erik was offered an enticing job opportunity in Connecticut (a two-and-a-half-hour commute), and the couple had to put the house back up for sale. Before the housing crisis, this would have been inconvenient, but Kunz and her husband could have flipped the property, perhaps for a tidy profit. However, the days of flipping are a thing of the past, says Rona Fischman, an agent with 4 Buyers Real Estate in Cambridge, Massachusetts. "We're in a flat market, so you stand to lose ten to fifteen percent of the value of your house the minute you buy it," she explains. "It's like buying a new car: You should only do it if you love it and are prepared to hold onto it for at least seven to ten years."
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As a rule of thumb, Fischman recommends: "Buy your second house first, and skip the starter home. Even when the market was going up, starter homes were dicey unless you had a crystal ball." Aviva Lomeli, a recently married agent with online real estate brokerage Redfin in Long Beach, California, seconds that: "A two-bedroom condo down the street from your favorite bar may seem ideal in the short term…until you're cramming two kids into bunk beds and pinching your pennies for private school because the public ones in your neighborhood are lousy."
To figure out what's best for you, CPA and marriage counselor Paula Levy suggests sitting down as a couple and creating a detailed "joint financial vision" of the things you're looking forward to in your life together-don't just assume you're on the same page. Discuss what you really dream about. "Is it a dog, a couch, a trip to Italy, a master's in nursing, a house of your own? Are you happy in your job? Are you ready to have kids?" Levy continues. "You want to make a list of these things and then start to talk about how to fulfill them."
For example, she says, if you're dreaming about a six-week trip for two to Costa Rica, you may want to rent for now and use your savings to travel. If, on the other hand, you know you want to have three kids in the next six years (and you can afford to), now may be the perfect time to become a homeowner.
"I'm definitely of the camp that if all your financial ducks are in a row, and you plan on staying in an area for at least five years, then buying a house is a great idea," says just-wed Yahoo! finance expert and author of Psych Yourself Rich Farnoosh Torabi, who recently purchased a two-bedroom apartment in Brooklyn with her fiancé. "But you really need to make sure the stars are aligned, both financially and psychologically."
For starters, Torabi says, do the math: "Ask yourselves: Do we have good credit? Do we have reliable incomes? Do we have enough savings?" ("Good credit" in the current market means a score of 760 or higher; "enough savings" means you can make a down payment of at least 20 percent on the house and still have a whopping nine months' worth of living expenses left in the bank.) Also: Have you worked out how you're going to share bank accounts, expenses, and finances going forward? Make sure you're comfortable with how you're paying the car note and cable bill before you add a mortgage to the mix.
Now let's say your financial ducks are in a row; the next step, Torabi says, is to make sure you're emotionally ready. Do you want to take on a fixer-upper, or is new construction more your style? Either way, "if the toilet breaks, you can't call the landlord anymore; you're on your own," she explains. "You have to mow the lawn and deal with the leaky roof." To some newlyweds, this might sound just dandy. Others may think: A weekend spent at Home Depot is not my idea of wedded bliss right now.
San Francisco resident Virginia Martin and her new husband assumed they were ready to buy in the suburbs-until they really thought about it. Although they'd like more space than they have in their 750-square-foot one-bedroom and are "sick of not having a washer-dryer," they realized they're not ready to give up urban life yet. "We love the convenience of living in the city," Martin explains. "We want to be able to take a cab to dinner. We want to be able to get that great cup of coffee." That said, Martin cheerfully acknowledges that buying that house in the burbs isn't too far off in their future. "A lot of our friends have already moved," she says. "They're having kids; they're moving to bigger places. I know at some point soon, we'll be ready for it."
Whether you decide to rent or buy, the key is to make an informed decision. And remember: It's not the house that will make you happy-it's the life you create inside it that will.
HOW TO KNOW WHEN YOU'RE READY TO BUY IN TODAY'S MARKET
1) You have a down payment of at least 20 percent saved, plus another 6 percent for closing costs, lawyers' fees, etc. Use a mortgage-qualifying calculator (hsh.com, mortgage-info.com) to see how much house you can afford.
2) You have a credit score of 760-the minimum you need for a mortgage with the best interest rate. For free credit scores, try quizzle.com or creditkarma.com; to see your credit report, go to annual creditreport.com.
3) You've got nine months of expenses in the bank to protect yourself in case of job loss or disability.
4) You won't need to move in the next five to seven years for work or any other reason.
5) You're up for the maintenance, in terms of time, labor, and expense. Depending on the age of your home, you'll want to set aside 1 to 2 percent of its value per year for upkeep, as well as emergency repairs-more during the early years, if you plan on making any upgrades.
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