Help me decide on buying a home for the first time.

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mspiggy

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mspiggy
May 9, 2021 26 Comments

Price: $715k
3 bedroom 2.5 bath 1600sqft townhouse no hoa.
Brand new construction in shoreline, WA.
No backyard
2 car garage
Home Office

Will I be happy living in it? Yes
Is it overpriced? Not sure
If so, by how much?
Is $50k overpriced OK (could you take a $50k hit?)? I would survive, but it wouldn't be pleasant.

What if the market goes under (aka 2008)? Not likely anytime soon. At most it will be flat. But no-one can know. All home buyers are taking this risk right now, not just you.

Will I be able to sell it easily in the future, should I need to? Yes
For the same price or more? Not sure

Will it be a good rental property, should I ever need to leave Seattle? Yes

Will I be able to get full mortgage price (including escrows) as rent? Not sure.

Am I buying now just because of low interest rates?
Yes and no. I do want a home, but low interest rates have accelerated that decision.

What is the difference in monthly payments between a 2.875% interest rate and a 3.875% interest rate?
About $400/month

Is that significant?
Not for me. That's about $5000 a year.

So is the accelerated decision appropriate?
Not in terms of affordability.

What about in terms of amortization schedule?

It costs about $3500/mo, $1000 of which is principal, the rest being pmi+interest +property tax. Mortgage interest deduction + property tax deduction saves $6k a year, or $500/mo.
$3500-$1000-$500 =$2000/mo. This is about the same I'm paying in rent.

Putting $1000/mo into principal vs $1000/mo into stock market: real estate grows at avg 3%/year, index fund will grow at 7% per year. Index fund is more liquid.

However, rent can and will probably increase after low covid rates. Expect to see $2500/mo in near future.

What other benefits do you get?
+ garage space
+ ability to install car charger for electric car.
+ extra bedrooms to rent out on airbnb

What other negatives?
-higher monthly costs
-longer commute
-tied up equity, difficult to liquidate

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