House question...

[disneysteve]

I mention school districts because I know they are important for resale

I cannot imagine driving by it and seeing another family in it.

"small houses have the same square footage of one FLOOR of this house! And they don't gain equity the same way."

I think you are contradicting yourself. You look at this as a house you would live in permanently, and yet you are concerning yourself with the resale prospects before you've even bought the place.

As for your father's comment about gaining equity, you aren't buying an investment property. You are buying a home, your own personal residence. What's the difference how much value it gains if you plan to live there long-term?

You and your fiance need to decide together if you want this house. If you do, end of story. Save up and buy it. Stop looking at other houses. Stop exploring other alternatives. If you don't want this house, stop looking because you aren't buying for a couple more years and there is no way of knowing how the market will change between now and then. I think you are driving yourself crazy for no reason.

[ScrimpAndSave]

I understand what you are saying. I know I am not buying an investment property...and if I get this house (or one in the same price range), I would be looking at a long term home. I don't want to have to buy another house...but I consider the school district and things like that because I don't know if my fiance will someday get a job elsewhere and we will be forced to move...I guess I just keep things like those on the back burner.

And you are right - I am driving myself nuts. I tend to obsess over things. Sorry.

[disneysteve]

Actually, I think the school district is important, but not for the reason you mentioned. In these parts, at least, the desirable neighborhoods are the ones in good school districts. I would not consider living in the neighborhoods with not-so-good schools. They aren't nice areas. Property values are lower, but so are the demographics of the area. They have a lower tax base and subsequently have a lower level of municipal services.

So I'd want to buy in a good school district because it is generally a better neighborhood, not because of any concerns with resale value of the home.

[ScrimpAndSave]

Disneysteve,

I have to say that is very similar to my area as well (and I don't think we live all that far apart actually)...although NJ is much different market from where I am. The better neighborhoods are in the better school district. More specifically, better neighborhoods are districted within better elementary schools...even though they are all in the same school district. I teach at a low income, urban elementary school...but I live in a township where the students go to a higher end elementary school...even though both schools are within the same district. The demographic is WAY different.

[jIM_Ohio]

houses might keep up with inflation, but have little real return when you factor in mortgage interest.

Think about it this way:

Buy a house for 200k and in a good situation appreciated to 400k in 24 years (3% annual return). In same 24 years you might pay 300k of mortgage interest on property. Did you gain anything?

[ScrimpAndSave]

Jim...thiis true...then why do people consider equity in ahome tobe an amazing gain in investment?

[banditfist]

Jim...thiis true...then why do people consider equity in ahome tobe an amazing gain in investment?

The size of the numbers. If you tell someone that you bought a house for $200k and sold it for $400k...they will think that is an awesome investment. Even if it took 24 years. Hard to do the math in your head to get the interest rate.
For example, the Dutch bought Manhatten from the Indians for $26 in 1604. It is now worth something like $76 billion. The interest rate on $26 compounded from 1604 till today is like 4.3% (no taxation).

This is why housing just barely keeps up with inflation and when it exceeds it, there will be a reversion to the mean.


For the OP, the 2.5x is a guideline. It is an estimate for you. It is irrelevant to your lender when they determine what they will lend you. Your debt-to-income is a much better estimate. If you have tons of revolving credit and maxed out credit cards, they won't give you anything close to 2.5x. There is a direct correlation.

[disneysteve]

houses might keep up with inflation, but have little real return when you factor in mortgage interest.

Jim...thiis true...then why do people consider equity in ahome tobe an amazing gain in investment?

Because most people are bad at math.

[jIM_Ohio]

Most people look at what they bought it for and sold it for.

They do not know how much interest they are paying.

There are other aspects to the transaction I did not mention- my house keeps me in a low tax bracket (for example).