Current Events > How do I know when it's time to buy a condo?

(+) Yeah! (+)

I'm looking for some advice from some of the more middle-to-upper class people here. I have been mulling this over in my head for awhile now and could use some advice.

Wife and I are solidly middle class, earning a combined $110,000 gross, which is above the median in our area (Chicago Northside). We have credit scores of 810 a d 823. However, in the areas that we want to live in, I'm noticing that the prices are fucking insane. 350,000 I figure we might be able to swing, but 400,000? That would be very hard to make.

But I also see that prices are just continuing to increase. I was hoping to jump into the market when we had about $100-$120,000 saved, but now I'm wondering if, now that we've saved just above $80,000, if we should jump in before things get worse.

What do you guys think? Do you need to know more about our situation?

If it financially makes sense. How much would rent be versus mortgage + other costs? Buying doesn't always make sense.

The truth is, there is no way to know. The bottom could fall out the day after you close, or prices could soar and you could gain equity like gangbusters.

Most likely it will be something in between those extremes.

If you find a condo that you love, in a community you love, that is a good indicator that it's the right time to buy. Your decision should be based on finances and practical considerations, sure, but your heart will tell you whether it's the right place for you.

Damn, condos in Chicago sounds expensive. They're like $200k-300k here in LA.

But I say do it if it makes sense for you financially. It unfortunately doesn't look like the housing market is going to crash like it did in 2008

Really comes down to what you pay in rent versus a mortgage + condo fees.

All I know is youre not alone and most people feel priced out at this point. Were in a house now that we can afford as long as we stay employed. We sold our condo that we could have afforded even without steady pay. Part of me misses the days when I had that buffer.

I dont have an answer but you can get reapproved and find out exactly what your monthly obligation would be assuming a placeholder for property taxes etc

That's the neat part: you don't.

Xenogears15 posted...

But I also see that prices are just continuing to increase. I was hoping to jump into the market when we had about $100-$120,000 saved, but now I'm wondering if, now that we've saved just above $80,000, if we should jump in before things get worse.

You seem very well positioned to buy a $400k home tbqh

It boils down to you willing to spend a lot now or a lot later.

Only you can decide whether owning vs renting is better for your family. Many times home owners take a harsh view of renting as throwing away money but as a home owner who has my house completely paid off I say its not so clear cut. Because even after its paid off between property taxes and insurance you can be paying the same amount as rent on a nice place and thats without factoring things in like upkeep/maintenance and appliances/lawn care and all that type stuff. Also I dont care about accruing value if Im staying in that house forever like where Im currently at. The value going up is irrelevant to me except fucking me on property taxes.

With that said if you think you will be somewhere long term and want to buy, in my 49 years of life Ive never seen property get cheaper over time. Sure you can hope interest rates fall but in that time housing will just increase even more. If you can pay the 20% down payment and find something you like go for it. And if in a few years interest rates drop you can refinance and come out ahead.

If you are determined you want to own I see no advantages to kicking the can down the road. It will only cost more and more. So if you can afford to do it now, do it.

I remember reading somewhere that the amount of house you should buy is 2.5x-3x your household income. So you and your wife would be looking at something in the $275k-$330k range.

The key is comfortable affordability. Just because the bank okays $500k for you doesn't mean you go out and buy a house at that price.

If you arent buying your properties with straight cash, then youre just guessing if its a good time just like the rest of us.

For the most part youre probably going to see the value increase if you can retain the property long enough.

Generally the sooner the better if you already have cash enough for a 20% down payment. If youre going to be living in said home for a while itll hardly matter in the long or even mid term.

Although now is particularly tricky as were likely in for a recession either this year or the coming years that could lead to lower housing prices. But thatll depend on how well or.more likely not Trump handles it.

TheSuperSilver posted...

I remember reading somewhere that the amount of house you should buy is 2.5x-3x your household income. So you and your wife would be looking at something in the $275k-$330k range.

The key is comfortable affordability. Just because the bank okays $500k for you doesn't mean you go out and buy a house at that price.

Too many people ignore your 2nd part. In 2004 when I bought my house I was pre-approved for an amount that made no sense. I flat out told the lender that I could technically make the mortgage payment but only that. I said I would not literally be able to buy food and pay for utilities and other required necessities just to live. I asked her directly how could they possibly approve that. She shrugged her shoulders.

I had the discipline to not get into anything more than 33% of my monthly take home. 4 years later in 2008 when the housing collapse happened my lender Countrywide Financial was one of the first giants to crumble. Bank of America bought them. My first thought was Im not surprised and I know why.

Thankfully I had financial discipline to keep myself in check but so many people think just because a bank is willing to do it, it must be ok. The amount of people that not only couldnt afford the house but couldnt afford the 20% down payment so they took an ARM (adjustable rate mortgage) secondary mortgage for the down payment portion got in real trouble because they locked in at one of the lowest rates in 50 years and could still barely afford it and werent smart enough to realize if that rate increases they were screwed. Well it wasnt going to go down anymore in that situation. It only had one way to go.

So seriously your statement is something more people need to take way more seriously and its so much more important than many realize.

So seriously your statement is something more people need to take way more seriously and its so much more important than many realize.

We just bought a house in 2022 so the process is fresh in my mind. The house we ultimately bought was on the lower end of our affordability range. Because of that we can save, travel, renovate, put our kid in private school, etc. It's still a single family home with quite a bit of shell space.

The bank was so quick in throwing money at us though. We just had to make sure that the home we bought made financial sense.

Hospy posted...

Really comes down to what you pay in rent versus a mortgage + condo fees.

emblem-man posted...

If it financially makes sense. How much would rent be versus mortgage + other costs? Buying doesn't always make sense.

We currently pay $1,900/month in rent. And roughly $16.66/month for renters insurance. Every estimate that I'm seeing for what our fees + taxes + mortgage/interest would push our total costs at MINIMUM $2,500. We might be able to swing it, but it would suck for a few years until our wages caught up a bit more (Yay union jobs).

Sariana21 posted...

The truth is, there is no way to know. The bottom could fall out the day after you close, or prices could soar and you could gain equity like gangbusters.

Most likely it will be something in between those extremes.

If you find a condo that you love, in a community you love, that is a good indicator that it's the right time to buy. Your decision should be based on finances and practical considerations, sure, but your heart will tell you whether it's the right place for you.

I understand where you're coming from, but we're not even looking at places yet. Honestly, right now I'm only considering the finances of things, not the vibes.

NoxObscuras posted...

Damn, condos in Chicago sounds expensive. They're like $200k-300k here in LA.

But I say do it if it makes sense for you financially. It unfortunately doesn't look like the housing market is going to crash like it did in 2008

It could also be the neighborhood we're in. We're kinda stuck in it (and we're REALLY lucky to find an affordable place here) as my wife's public transportation options are limited, and we only have one car that I need to commute.

TheGoldenEel posted...

You seem very well positioned to buy a $400k home tbqh

How do you figure? Honestly want to know, because 400k seems to be oir limit, but what I'm getting from you is that we should consider that to be affordable?

TheSuperSilver posted...

I remember reading somewhere that the amount of house you should buy is 2.5x-3x your household income. So you and your wife would be looking at something in the $275k-$330k range.

The key is comfortable affordability. Just because the bank okays $500k for you doesn't mean you go out and buy a house at that price.

Yeah, I've heard that too, which is why I'm wondering. I'm feeling we might be priced out of the better condos.

Xenogears15 posted...

We currently pay $1,900/month in rent. And roughly $16.66/month for renters insurance. Every estimate that I'm seeing for what our fees + taxes + mortgage/interest would push our total costs at MINIMUM $2,500. We might be able to swing it, but it would suck for a few years until our wages caught up a bit more (Yay union jobs).

Yeah, at some point you have to decide if this is going to be a financial decision or a personal decision?

• Note than rent is the max you'll pay for the length of the term. Mortgage is the minimum you'll pay (taxes, damages, condo fee, etc. all add to the monthly cost)
• is it better to rent and save/invest the difference in costs ($2500 -1900). Would it make more sense to have $600 that you could throw into the stock market every single month?
• The home might appreciate and it all ends up evening out in the long term
• Or is all that secondary and you just want the peace of mind of having your own home?

emblem-man posted...

Yeah, at some point you have to decide if this is going to be a financial decision or a personal decision?

* Note than rent is the max you'll pay for the length of the term. Mortgage is the minimum you'll pay (taxes, damages, condo fee, etc. all add to the monthly cost)
* is it better to rent and save/invest the difference in costs ($2500 -1900). Would it make more sense to have $600 that you could throw into the stock market every single month?
* The home might appreciate and it all ends up evening out in the long term
* Or is all that secondary and you just want the peace of mind of having your own home?

I'm not worried about investing in the market. I've got a pension, and I throw a little at my IRA every month. That's on top of my wife's 401(k) and pension. So there's that. Mostly, this is just for our own peace of mind of owning our own place. We often joke about wanting to paint our own walls and throw up shelves without our landlord getting pissed lol.

The first point is one thing that I'm also kind of stuck on. The fact that while, yes, rent will inevitably increase if we stay here ling enough....will it outstrip the costs of a mortgage? I talk to older people who are paying mortgages of $1,000 or less and it has me thinking...if my own monthly costs can MAYBE be locked into the $2,000s, is that worth taking such a risk?

Wish I could get a condo for 400k. Cheapest ANYTHING in this area is over 700k and at the "lower" end of that it's one bed one bath apartments with like 650 SQ ft and garbage schools.

For financial decisions like this you want to look at the local market. If the services are good and/or the area is actively being developed then the value will likely go up. For a condo it tends not to increase as fast as townhouses and single family houses though.

Look at how much the mortgage and utilities are going to cost relative to your monthly income. Is it sustainable or is it a high ratio? Build out a notional budget, maybe try living by that budget for a month or two and see how it feels. Without knowing your mortgage payment it's hard to gauge.

Have you looked into homebuyer assistance programs and low income assistance options? I've lived in a few different areas and there's usually some subsidized housing option where you can buy a nice property at a significantly lower price if you're under a certain income threshold. And some areas have down payment assistance or other programs for first time home buyers

What is the downside of owning? Mobility.

Make the best choice you can and buy now.

Personally I love St Regis but I totally would buy a condo in BLOCK 37. Try to get within walking distance to the lake whereever you buy.

Wishing you luck.

I always read that condos are pretty lousy to buy compared to a house. They don't appreciate in value as much, they're harder to insure, can be really hard to resell later on, and you have to deal with all the other owners and tenants in the building in terms of repairs etc. Obviously there's not really any houses in the north side, and the nearby inner suburbs are really pricey and have a lot of apartments/condos as well.

TheSuperSilver posted...

I remember reading somewhere that the amount of house you should buy is 2.5x-3x your household income.

Can't imagine anyone has ever been able to do that.

Xenogears15 posted...

We currently pay $1,900/month in rent. And roughly $16.66/month for renters insurance. Every estimate that I'm seeing for what our fees + taxes + mortgage/interest would push our total costs at MINIMUM $2,500. We might be able to swing it, but it would suck for a few years until our wages caught up a bit more (Yay union jobs).

How do you figure? Honestly want to know, because 400k seems to be oir limit, but what I'm getting from you is that we should consider that to be affordable?

youre able to put 20% down, and your mortgage would be about 28% of your gross, which I think is about the upper limits of whats recommended

now me personally I wouldnt want a condo because it seems like all the negatives of apartment living + all the negatives of owning a house with few of the positives

but, obviously knowing nothing about your other finances it seems attainable

The time to buy is when you find a place you want to live for at least 5-7 years that you can afford.

Can't imagine anyone has ever been able to do that.

How so? Median household income is around $80k or so and home sale prices are averaging around $400k. People are already stretching themselves thin as it is.

sfcalimari posted...

I always read that condos are pretty lousy to buy compared to a house. They don't appreciate in value as much, they're harder to insure, can be really hard to resell later on, and you have to deal with all the other owners and tenants in the building in terms of repairs etc. Obviously there's not really any houses in the north side, and the nearby inner suburbs are really pricey and have a lot of apartments/condos as well.

Can't imagine anyone has ever been able to do that.

That...is something to consider, for sure. That being said, where we're looking--Albany/North Park and Lincoln Square--looks to be appreciating in value rather quickly, and seems like hot places to live. So there is that?

Re condo vs. House: we don't want to deal with all the upkeep of a house. I'd rather pay HoA fees and have some of that taken care of for me (outside of special assessments, of course). Also, our household is literally just me, my wife, and our two (soon to be four?) cats. We don't need a house with that few people living here.

If we had kids I'd definitely be looking at a house.

Had a long talk with the wife last night. Considering our financial situation, the fact that if Trump gets his wish rates might come down, the fact that we have spectacular credit, that we can put down 20% to avoid PMI, and that we know where we want to live...we're going to take the dive next year. We want to save a bit more money (Goal of having $20,000 left after our downpayment), and see how conditions change in about six months from now.

I'm also going back to school next semester for a class, and don't need the stress of buying a home weighing over me while I do that. Thanks for the advice, guys. You were a big help.

Xenogears15 posted...

Every estimate that I'm seeing for what our fees + taxes + mortgage/interest would push our total costs at MINIMUM $2,500.

Is this based on online calculators? Those aren't but so accurate. I'd recommend sitting down with a lender who will factor in your credit score and any first time home owners loan situation to get hard numbers. Back in 2019, my wife and I were in a bind regarding renting and just checked with a lender to see if we could afford to get a home. Because of our credit scores and first time home owner loan, we were able to put 0% down outside of the ~$4k it took for fees and legal. Hell we rolled the closing costs into a second mortgage then refinanced it all into one a couple years ago.

They also did the whole "You can get a loan with us to buy up to a $500k house!" with us.
Yeah no. We asked them what priced house if we wanted the monthly payment to be X amount. Then they gave us that number and we moved forward. Turns out it was a house priced half that.

TheSuperSilver posted...

I remember reading somewhere that the amount of house you should buy is 2.5x-3x your household income.

Oof, that definitely shows why I havent bought a house. At 3 times what I make in a year, that doesnt even reach the price of a lot of empty properties around here.

BlazinBlue88 posted...

Is this based on online calculators? Those aren't but so accurate. I'd recommend sitting down with a lender who will factor in your credit score and any first time home owners loan situation to get hard numbers. Back in 2019, my wife and I were in a bind regarding renting and just checked with a lender to see if we could afford to get a home. Because of our credit scores and first time home owner loan, we were able to put 0% down outside of the ~$4k it took for fees and legal. Hell we rolled the closing costs into a second mortgage then refinanced it all into one a couple years ago.

Wait, you put 0% down on a house? Did you not have to pay PMI?

Xenogears15 posted...

Wait, you put 0% down on a house? Did you not have to pay PMI?

Yup. Only paid $4k from the time we said "I want that house" to when the keys were in my hand. All of that was the legal fees and whatever that weren't closing costs. Closing costs were all rolled into that second mortgage.

We did pay PMI which had our monthly payments around $1.7k a month. We did that for a couple years then when we refinanced, that allowed us to drop the PMI and now we're paying around $1.3k a month with the lower interest rate.

BlazinBlue88 posted...

Yup. Only paid $4k from the time we said "I want that house" to when the keys were in my hand. All of that was the legal fees and whatever that weren't closing costs. Closing costs were all rolled into that second mortgage.

We did pay PMI which had our monthly payments around $1.7k a month. We did that for a couple years then when we refinanced, that allowed us to drop the PMI and now we're paying around $1.3k a month with the lower interest rate.

Yeah, in our situation I'm pretty sure we got to put down the 20% to avoid PMI. Not only do I refuse to pay it out of principle, but I'm not sure it will be very affordable, either.

Also, I forgot to answer your initial question: yes, it was done using online calculators. Evidently, I need to speak to a loan officer or something before I actually budget our costs.

Xenogears15 posted...

Yeah, in our situation I'm pretty sure we got to put down the 20% to avoid PMI. Not only do I refuse to pay it out of principle, but I'm not sure it will be very affordable, either.

Also, I forgot to answer your initial question: yes, it was done using online calculators. Evidently, I need to speak to a loan officer or something before I actually budget our costs.

So it's not just putting down 20% to avoid PMI but equity included. If you pay down 10% and your home goes up in value another 10% then PMI is gone. The market in our area is crazy as well and within a year of owning the house, it's value went up by $50k.

Normally I would avoid PMI out of principal as well but we were in a bind. Knowing that the PMI is dependent on the equity as well, you may decide to set aside your principles to pay it for a year or so as long as it means owning a home and paying possibly the same or lower monthly than your rent.

^That's true about PMI - you pay it down until you cover the balance of that 20% down payment or your home itself could appreciate over that time period which can make up the difference.

Oof, that definitely shows why I havent bought a house. At 3 times what I make in a year, that doesnt even reach the price of a lot of empty properties around here.

Yes, unfortunately, a lot of folks are stretching themselves in the home buying process and that 2.5x-3x number only represents the ideal scenario.

What ends up happening is that you become house poor. After paying the mortgage there isn't much money left for anything else.

Never try to time the market.

I am a mortgage loan officer. Let me know if you have any questions

Xenogears15 posted...

Wait, you put 0% down on a house? Did you not have to pay PMI?

PMI isn't really that high.

xTreefiddy350x posted...

Never try to time the market.

I am a mortgage loan officer. Let me know if you have any questions

It's less about timing the market (though that does play a role) and more about timing our finances.

With two spouses with credit ratings over 800, what can expect our mortgage rate to be?

Xenogears15 posted...

It's less about timing the market (though that does play a role) and more about timing our finances.

Honestly I think you have more than enough to jump in. Housing prices will continue to go up so that down payment of yours is losing value. Not trying to rush you into it but as that other user said, there's no timing it. Just get in and get hard numbers. They might surprise you.

Xenogears15 posted...

With two spouses with credit ratings over 800, what can expect our mortgage rate to be?

Bump for @xTreefiddy350x

Xenogears15 posted...

Bump for @xTreefiddy350x

Without buying the rate down, you'll be at a rate a little below 7%

xTreefiddy350x posted...

Without buying the rate down, you'll be at a rate a little below 7%

Is that a typical rate in the US?

We just bought our condo here in a High COL area of Canada (victoria, BC) and the rate we got is 3.99%, which is locked in for 5 years. That's on a $450k mortgage

https://gamefaqs.gamespot.com/a/forum/4/4c17e0a8.png

It's currently at the highest since like late 90's.

These are also 30 year rates (and you can refinance if it goes lower)

TheAwesomeMatt posted...

Is that a typical rate in the US?

We just bought our condo here in a High COL area of Canada (victoria, BC) and the rate we got is 3.99%, which is locked in for 5 years. That's on a $450k mortgage

Did you buy a new build?

EDIT: Just realized you said Canada. Yes these are typical of US rates. In the US you can lock in the rate for up to 30 years though

xTreefiddy350x posted...

Without buying the rate down, you'll be at a rate a little below 7%

Can you please explain to me what this terminology means?

Xenogears15 posted...

Can you please explain to me what this terminology means?

One more bump for @xTreefiddy350x

It means what it says in this case. You can pay cash upfront to lower the interest rate you sign onto. When buying a new build, it's an incentive maybe developers will use

emblem-man posted...

It means what it says in this case. You can pay cash upfront to lower the interest rate you sign onto. When buying a new build, it's an incentive maybe developers will use

I never knew this was possible. I've only heard of downpayments on a mortgage. How much would I have to pay to lower the interest rate a point or two?

Xenogears15 posted...

I never knew this was possible. I've only heard of downpayments on a mortgage. How much would I have to pay to lower the interest rate a point or two?

What he said is correct, you can get the interest rate lower by paying more in closing costs. If you are planning on shopping lenders, it's very important you know this. It doesn't have to be a new build though. You can do this with all lenders.

To get the rate down 1% you'll likely have to pay somewhere around 2.5% of the loan. So if the loan is 500k, you'll be paying about $12,500. This will reduce your payments around $300. So if take the $12,500 and divide it by the $300 you are saving, you'll see it will take you about 42 months to get that money back.

It generally takes about 3-4 years to recoup this. I'm not really a fan of buying the rate down on purchase tbh, but i almost also recommend you do it on a refinance.

xTreefiddy350x posted...

'm not really a fan of buying the rate down on purchase tbh

Glad to see you saying that. I remember them explaining the whole concept of buying points to us when buying our home and I didn't see much benefit. My thought was if I had the spare cash to buy points, then wouldn't I just add it to the down payment instead?

With our new build, the builder had an incentive for paying the closing costs and the leftover could be used for buying down the rates if we used their lender.

I'm sure it's not "free money", but yeah, that's my only experience with it.