Renting vs. Buying

[StrangeSox]

My wife and I were pre-approved for $250,000 and we bought our house for about $170,000. It was tough going for a bit there, but we are now doing O.K.. My word of warning to you is to stay away from what you are pre-approved for.

 

Definitely. My parents could easily get a loan for twice as much home as they have now, but they'd be broke and living paycheck to paycheck.

 

Make a detailed budget and work backwards into what you can afford for a mortgage.

[StrangeSox]

I wouldn't plan on renting long-term, but if you expect a house you buy tomorrow to lose 10-20% of its value this year, then that's even more money being thrown away.

 

If you don't plan on selling for several years, it will almost certainly regain that value.

 

You'd really need to look at how long you're willing to sit on the market and let it bottom out and how much that'll save you in purchase price vs. how many months you'll be throwing rent money away.

[almagest]

Good advice here. I'm also in the market for a place -- I work downtown, so I'd like something in the city, or a nearby suburb, so I can utilize public transportation. You might want to check out Craigslist, as you can sometimes find nice by-owner deals on there.

[SoxFanForever]

A lot of good info here guys, really appreciate it.

 

The main reason i am considering schaumburg is because my job is located right near woodfield. I wouldnt mind living in the city if i could find a commute that isnt terrible.

 

Seems like most of you suggest buying which is what i am leaning towards.

 

Also, i wouldnt really consider getting the max loan as i know i would struggle with paying and affording everything else.

[SoxFanForever]

A lot of good info here guys, really appreciate it.

 

The main reason i am considering schaumburg is because my job is located right near woodfield. I wouldnt mind living in the city if i could find a commute that isnt terrible.

 

Seems like most of you suggest buying which is what i am leaning towards.

 

Also, i wouldnt really consider getting the max loan as i know i would struggle with paying and affording everything else.

[iamshack]

I bought my first place after being out of school for 2 years, and it couldnt have been a better decision. Of course the housing market was a bit different a few years ago than it is now. IM not too clear on how the appreciation is out in the burbs compared to where I live in the city, but buying could never be a bad idea over renting. Especially if you have several friends that would pay some of your mortgage. RIght now I would say its a buyers market and if you are planning on sitting on the property for several years, you should definitely buy. Ive never been a huge fan of staying in a house while helping pay your landlords mortgage, when I could just be paying my own off.

 

Also the good thing about the chicago area is that it is not quite bottoming out like alot of other markets, its quite insulated from that and only fluctuates a bit, and I would say if you are looking to buy, right now wouldnt be a bad time as houses are staying on the market longer and the winter is a very good time to find someone who is desperate.

 

Agreed, Rock- Chicago is doing fairly well right now compared to others because it is still the pre-eminent place to live if you're anywhere near the City, but eventually that market is going to bottom out a bit. The developers are starting to take the brunt of it now because of that over-saturation of the market by condos but I think the crap will really start to hit the fan in a few years when a lot of those who bought during the "boom" start looking to sell in order to hit the suburbs to raise their families and they realize there are 700 places on the market at their price-point with nearly the exact-same amenities package and so forth.

 

I'm going to be in the market in 8 months to a year but I am somewhat concerned at the thought of buying a condo in the City when they have become so cookie-cutter. I realize there will always be a demand for housing in Chicago but I really think they have passed the threshold a while back.

 

 

[almagest]

Agreed, Rock- Chicago is doing fairly well right now compared to others because it is still the pre-eminent place to live if you're anywhere near the City, but eventually that market is going to bottom out a bit. The developers are starting to take the brunt of it now because of that over-saturation of the market by condos but I think the crap will really start to hit the fan in a few years when a lot of those who bought during the "boom" start looking to sell in order to hit the suburbs to raise their families and they realize there are 700 places on the market at their price-point with nearly the exact-same amenities package and so forth.

 

I'm going to be in the market in 8 months to a year but I am somewhat concerned at the thought of buying a condo in the City when they have become so cookie-cutter. I realize there will always be a demand for housing in Chicago but I really think they have passed the threshold a while back.

 

I think this has started already. A guy I work with is having a heck of a time selling the condo he bought two years ago. He's even lowered the price to below what he bought it for, and still no offers. This is in Logan Square, which is considered one of the up-and-coming areas in the city. It's things like this that are making me consider suburbs that are an hour or less away from downtown by Metra more and more.

[RockRaines]

Agreed, Rock- Chicago is doing fairly well right now compared to others because it is still the pre-eminent place to live if you're anywhere near the City, but eventually that market is going to bottom out a bit. The developers are starting to take the brunt of it now because of that over-saturation of the market by condos but I think the crap will really start to hit the fan in a few years when a lot of those who bought during the "boom" start looking to sell in order to hit the suburbs to raise their families and they realize there are 700 places on the market at their price-point with nearly the exact-same amenities package and so forth.

 

I'm going to be in the market in 8 months to a year but I am somewhat concerned at the thought of buying a condo in the City when they have become so cookie-cutter. I realize there will always be a demand for housing in Chicago but I really think they have passed the threshold a while back.

Its really based on neighborhoods in the city right now. The south loop has recently been extremely over developed and has lost some of its noteworthy value growth. Other areas are still continuing to appreciate as well. You have to pick the neighborhood as wisely as your actual unit.

 

Also as far as cookie-cutter, there are alot of very interesting units around the city for different tastes. I live in a condo in a neighborhood of lofts, high rises vs rehabs on the northside. There is still plenty of variance.

[iamshack]

I think this has started already. A guy I work with is having a heck of a time selling the condo he bought two years ago. He's even lowered the price to below what he bought it for, and still no offers. This is in Logan Square, which is considered one of the up-and-coming areas in the city. It's things like this that are making me consider suburbs that are an hour or less away from downtown by Metra more and more.

 

Yeah, I would think that the key might be to make sure you buy something that isn't the exact same thing as the other 10,000 units in that price-point on the market, but even still, you're playing with fire still. It's going to be really, really interesting to see what happens to the market over the next several years because of the oversaturation...

[iamshack]

Its really based on neighborhoods in the city right now. The south loop has recently been extremely over developed and has lost some of its noteworthy value growth. Other areas are still continuing to appreciate as well. You have to pick the neighborhood as wisely as your actual unit.

 

Also as far as cookie-cutter, there are alot of very interesting units around the city for different tastes. I live in a condo in a neighborhood of lofts, high rises vs rehabs on the northside. There is still plenty of variance.

 

Well, there certainly are units for differing tastes, such as lofts, high rises, rehabs, etc. But no one can deny the proliferation of cookie-cutter, "luxury" condos. They're absolutely EVERYWHERE.

[GoodAsGould]

Heres a question: Why Schaumburg?

 

Well Schaumburg is almost like a mini city in itself. Has the mall close by, a pretty big theater and a bunch of different restaurants of all sorts. Not 2 mention has some of the best public schools in the area.

[CanOfCorn]

While we were in town with our realtors, they were saying that there's a 3 year surplus of condos in the city. Meaning, if they stopped right now building and rehabbing, it would take 3 years to sell them all. That's what worries me about the city. AND, in Oak Park, they have the largest amount of houses on the market in 15 years, BUT, Oak Park holds it value well. Just a little info.

[Steve9347]

OK, so I am at that point. I have been out of college for over 2 years and I have been working full time for the majority of it. I'm currently at home with the parents and have the desire to move out in the near future. I did a pre-approval at a bank a few weeks back and I was approved for a $200,000 loan if I do 20%. I don't have anything near $40,000 for a down payment right. Probably somewhere in the neighborhood of $15.000. Also, I have one or two friends lined up that would be in on renting a place with me or paying me rent if I buy a place.

 

Now, from everyones experience, would it be wisest at this time to rent or to buy? I'd probably be looking at something in the $175k-180 range if I were to buy and most likely in the burbs around Schaumburg or the surrounding area.

 

Any feedback is appreciated.

If you want to go a little highher than that $175-180 range (which won't get you anything worthwhile) talk to your lender about opening two mortgages, the second of which covers part of a downpayment to get you to 20% to both avoid PMI as well as raise your lower level.

 

Just an idea, just try to talk to a lender who can explain things to you. I highly recommend National City and can make a recommendation by PM if interested.

 

You might want to rent for a year or so to save up for a downpayment, around here doing 100% financing or close to it will hurt you in the long run. Having graduated in Dec. 2005 and just bought an awesome house in Lombard (April 2007 close) for $280k, I might be able to lend you some valuable, current tips that will make sure you wind up with an affordable mortgage payment while making sure that your interest rate is fixed and you aren't paying too much interest with those monthly payments. If you have any questions just let me know.

[StrangeSox]

With the feds cutting rates like crazy, it might not be a bad time to take out a mortgage.

[Balta1701]

With the feds cutting rates like crazy, it might not be a bad time to take out a mortgage.

All I'll add again is...take your time. With the markets dropping, this probably won't be the last rate cut before this is over. And right now, this is the definition of a buyer's market. If you can't get a home you like for the price you want with the mortgage you like, wait a couple weeks and see what happens.

[Rex Kickass]

If renting was throwing your money away, very few people would rent.

 

Here are some good reasons to rent, not buy.

 

1. Your future may be more uncertain. You got a new job, you aren't on a contract, you aren't sure about the area you live in.

 

2. Your market may be overpriced. Where I live, despite the fact that the housing market has been dead for a good year, I can rent for cheaper than a comparable place would cost in mortgage alone. I have a two bedroom apartment, to get a similar size condo, my mortgage payment would be approximately 100 dollars a month higher and that doesn't even factor in property taxes that I'm not responsible for.

 

3. Your house isn't a gold mine. Generally, you do make money from your house over time in the form of equity. But the superheated returns we saw over the first half of this decade is neither sustainable nor normal. Generally, you make equity slowly, and over a long period of time. Given the current state of the market, there may be better short to medium term investments.

 

4. You aren't responsible for maintenance of your property if you rent. If something just up and dies, like a furnace or a water heater or a roof, you aren't responsible for the cost of replacement. If you're looking at a tight budget to handle a house, would you be able to handle something going wrong too?

[CanOfCorn]

If renting was throwing your money away, very few people would rent.

 

Here are some good reasons to rent, not buy.

 

1. Your future may be more uncertain. You got a new job, you aren't on a contract, you aren't sure about the area you live in.

 

2. Your market may be overpriced. Where I live, despite the fact that the housing market has been dead for a good year, I can rent for cheaper than a comparable place would cost in mortgage alone. I have a two bedroom apartment, to get a similar size condo, my mortgage payment would be approximately 100 dollars a month higher and that doesn't even factor in property taxes that I'm not responsible for.

 

3. Your house isn't a gold mine. Generally, you do make money from your house over time in the form of equity. But the superheated returns we saw over the first half of this decade is neither sustainable nor normal. Generally, you make equity slowly, and over a long period of time. Given the current state of the market, there may be better short to medium term investments.

 

4. You aren't responsible for maintenance of your property if you rent. If something just up and dies, like a furnace or a water heater or a roof, you aren't responsible for the cost of replacement. If you're looking at a tight budget to handle a house, would you be able to handle something going wrong too?

 

Well said, Rex.

 

[Jenksismyhero]

All I'll add again is...take your time. With the markets dropping, this probably won't be the last rate cut before this is over. And right now, this is the definition of a buyer's market. If you can't get a home you like for the price you want with the mortgage you like, wait a couple weeks and see what happens.

 

Wouldn't you be able to refinance your mortgage? I don't know if a bank will want to rewrite it 2 weeks after you sign, but they would 6 months or a year later. I don't see how that will hurt a ton, unless we're talking 2-3%, which the Feds can't possible do. NPR this morning said analysts are expecting another .5% on top of the .75% decrease that just went through this morning. Sizable, but not too significant.

 

I'm in the same boat though. We're looking to buy come next April when our lease is done. Our problem is I gotta find an attorney job here pretty quick before my massive loan payments begin. But we're hoping to find something soon. Our 2k a month rent is ridiculous, even for Wrigleyville.

 

And for the buy now/wait convo - isn't a lot of that the higher end homes? I mean, if he's looking at the 200k range, isn't that usually safe? You might lose 5-10k, maybe 15k, but that's nothing compared to the 2-300k+ the morons (yes morons for buying such property) in California are losing.

[Balta1701]

And for the buy now/wait convo - isn't a lot of that the higher end homes? I mean, if he's looking at the 200k range, isn't that usually safe? You might lose 5-10k, maybe 15k, but that's nothing compared to the 2-300k+ the morons (yes morons for buying such property) in California are losing.

On the other side of that token though is the fact that you would expect his rent to be significantly lower out there. Hence, I'm paying more in rent than what some people here are paying in mortgages. If, for example, he were to pay $500 a month, that's a $6000 bill for 1 year. If $15k is the potential drop (I think that's maybe in the middle, I think 30% is entirely possible in many areas and 15% could well be the nationwide average, although it's hard to say anything more without knowing that specific market...but I'd still say there's a solid chance of bigger drops than that)...then that's nearly $10,000 in price that you could save by renting for a year and then buying after further drops, and that's not even considering a higher end home or bigger price drops.

[RockRaines]

Well Schaumburg is almost like a mini city in itself. Has the mall close by, a pretty big theater and a bunch of different restaurants of all sorts. Not 2 mention has some of the best public schools in the area.

I was under the impression he just got out of school a few years ago, I would think someone of that age would like to be near the actual city in the area. For older people, yes, schaumburg is nice with schools and restaurants.

[NorthSideSox72]

Lots of great posts in here. I'll echo the points about knowing your current life (how stable is your job? How much extra cash do you have in case something goes wrong?), and that rates and prices will probably bottom sometime this year (give or take, who knows), and that the Chicago market has pretty much always (in recent times anyway) been less liable to experience the big ups and downs of some other markets.

 

And I'll add these...

 

--Almost everyone stretches a bit to get in their first place. You have to balance between stretching a little, and a lot. Having your mortgage payment, assessment (if any), increased utility costs and property tax bill be a bit more than your current rent is stretching a little. Going 10% in as opposed to 20% is stretching a little. No one can answer this balance for you without knowing your financial and career details, so, I'd advise finding someone in the real estate industry WHO YOU TRUST, if you can, and get some help. Don't go with what an agent or mortage company tells you in terms of how much mortgage you can afford.

 

--Because of the housing market's weakness, if you do buy, don't leap at the first thing you come across. Find a list of places you like, make low offers, and try to find someone motivated to sell. That will help you later in equity.

 

--I personally would never put down less than 10%. Closer to 20% is better, but, sometimes its not possible.

 

--Overall, in the Chicago area market, I think its a good time to buy.

 

[SoxFanForever]

Sorry guys. My internet has been jacked up the past few days thanks to Comcast. Thanks to a new modem though we are back and running.

 

Like I said in a previous post, I appreciate the info on all this. I wouldn't be opposed to renting for a while with one of my buddies. I would really like to live in Chicago for a while. However, my job is out in Schaumburg so I would want to find a place that is a reasonable drive.

 

Rock, you are right. I've been out for a little over 2 years and would like somewhere with more of a night life and people closer to my age range.

 

Also, I have around 15K saved up as I said earlier. I invested a large amount of money in an IRA and some other funds earlier this year which is why I am a bit short on a down payment right now.

 

Living at home is nice as I don't have a rent to pay and can save up. However, I am at the point where I would really like to be on my own.

[RockRaines]

Sorry guys. My internet has been jacked up the past few days thanks to Comcast. Thanks to a new modem though we are back and running.

 

Like I said in a previous post, I appreciate the info on all this. I wouldn't be opposed to renting for a while with one of my buddies. I would really like to live in Chicago for a while. However, my job is out in Schaumburg so I would want to find a place that is a reasonable drive.

 

Rock, you are right. I've been out for a little over 2 years and would like somewhere with more of a night life and people closer to my age range.

 

Also, I have around 15K saved up as I said earlier. I invested a large amount of money in an IRA and some other funds earlier this year which is why I am a bit short on a down payment right now.

 

Living at home is nice as I don't have a rent to pay and can save up. However, I am at the point where I would really like to be on my own.

Seriously, not to be down or disrespect any of the people that live in the burbs, or love the burbs, but the best life decision I EVER made was living in Chicago from my early 20's and now moving from my middle to my late 20's. If I had to do it all over again, I would do it twice.

[iamshack]

Seriously, not to be down or disrespect any of the people that live in the burbs, or love the burbs, but the best life decision I EVER made was living in Chicago from my early 20's and now moving from my middle to my late 20's. If I had to do it all over again, I would do it twice.

 

Absolutely. If at all possible, one thing EVERYONE should do is live in the City for a year or two. It's unlike anything the suburbs can offer, and it's probably one of the best cities to live in in the entire world.

 

I moved there for a year while I was in law school, and absolutely loved it. Moved back to the burbs to sort of help a friend out (he bought his own place and needed a renter he could trust), and to save a little money myself, but I am 100% intending to move back for at least a few years before I get married and have some sort of actual responsibilities.

[CanOfCorn]

Sorry guys. My internet has been jacked up the past few days thanks to Comcast. Thanks to a new modem though we are back and running.

 

Like I said in a previous post, I appreciate the info on all this. I wouldn't be opposed to renting for a while with one of my buddies. I would really like to live in Chicago for a while. However, my job is out in Schaumburg so I would want to find a place that is a reasonable drive.

 

Rock, you are right. I've been out for a little over 2 years and would like somewhere with more of a night life and people closer to my age range.

 

Also, I have around 15K saved up as I said earlier. I invested a large amount of money in an IRA and some other funds earlier this year which is why I am a bit short on a down payment right now.

 

Living at home is nice as I don't have a rent to pay and can save up. However, I am at the point where I would really like to be on my own.

 

There's always Jefferson Park/Portage Park. It's right on the Kennedy and the blue line to take you downtown. You are still in the city and can make it downtown real quick. And it's not quite as expensive. Just a thought.