College Connect: Buying Our First Place: Little House, Big Decision

Posted By sabew

Lauren Walsh Life as a Couple

As I think I’ve mentioned in previous posts, Mark and I will be starting our life together in California. Mark is a resident at UC Davis Medical Center in Sacramento for the next five years, so I’ll be moving there when I finish school. We have been searching for housing the last few months and we are always going back and forth between buying a house and continuing to rent. We visited several open houses during my last visit to get a feel for the houses on both the rental and sale market.

We are seriously considering buying a house in Sacramento to live in for the next four years, which we would sell or rent to new residents when Mark finishes his training. Right now, Mark has a rental place, but when I get to California we will need more space, so we will be back in the market. We like that Mark’s place is a rental at times, like when a pipe bursts or the lawn gets overgrown and we don’t have to deal with it. On the flip side, dealing with the landlord is a complete pain in the neck and we hesitate to make any improvements since it will be money lost when we move. There are good and bad aspects to both situations.

Neither of us has ever brought property before so we worry we don’t know enough to make a smart decision and we don’t have enough money to make a mistake. Up until a few years ago, it seemed real estate was typically a safe investment. Home prices generally increased so when you sold your house you made money or at least broke even. But, given today’s economic climate and real estate market, especially in California, we could lose a lot of money from the sale or we could have trouble selling the house at all.

Although some believe the market has virtually bottomed out, interest rates are at all-time lows, and it’s a great time to buy, our Midwestern conservatism kicks in and we worry the market could decline further and we would take a financial loss when selling. We know that overall it probably is a good time to buy and we may take that gamble.

The first question we asked ourselves when we really started thinking about buying a house was; can we afford it? We hope to spend roughly 25% of our combined incomes on housing. We would have to pay a down payment, closing costs, realtor’s fee, property taxes, and maybe some other expenses we don’t even know about. We were shocked to find out from realtors the down payment required is just 3.5%! Through the power of extreme financing, it seems we could afford to buy a house. However, to us, that down payment percentage seems so low – it seems suspiciously low and makes us nervous.

Since we are just starting out financially we don’t have enough equity to hold on to a property as an investment until the California market allows us to get a fair or improved value for our house. In four years we will be moving to a new city and will need a home there so our money can’t be tied up in the California house. Yet, we don’t want to miss a great chance to buy. It is tough decision many people across the country are making. The decision involves a lot of our money and a mistake could mean a huge financial set back.

In the end, whether buying or renting, we will find a great place to call home sweet home for the next four years.

Lauren Walsh is a graduate student majoring in strategic communication at the University of Missouri. She’s has a bachelor’s degree in business from Southern Methodist University. She and her fiancé will marry in October 2011.

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