Buying a house while in graduate school?

[twocosmicfish]

This is actually not really true. In most places, home values are still quite high. Lower than last year for sure, but still high. Point being, they could still have a ways to fall, in which case buying now is not a good idea.

You have me on the home prices - they have fallen considerably compared to a few years ago, but may not be done falling yet. The question then becomes "are they going to fall TOO much?"

With the 10%/$8000 tax credit for buying this year, plus the low low low interest rates, I still think it a good idea, especially if you are going one of those places that has seen the biggest drops in housing prices. If you are going to a college town like State College or College Station it is a bit tougher - they have not really seen much drop in the market due to the captive academic population.

For those with downpayment issues, you may want to check out the USDA Rural Development and FHA loan guarantees - they require 0% and 3.5% down respectively, and at least one will usually apply in any given area.

[synthla]

With the 10%/$8000 tax credit for buying this year, plus the low low low interest rates, I still think it a good idea, especially if you are going one of those places that has seen the biggest drops in housing prices. If you are going to a college town like State College or College Station it is a bit tougher - they have not really seen much drop in the market due to the captive academic population.

I just bought in a college town that hasn't seen huge drops for that reason, but I also don't think there's any reason to expect that those drops will suddenly come because the academic population isn't going anywhere. I also found that the rental stock in town wasn't that great for similar reasons - mostly student/relatively-short-term rentals in not-the-best condition. My all-in mortgage/taxes/insurance payment is at least 30% less than what I would pay in rent for something of similar quality. That was with 20% down, but it would still be very competitive even if I'd had to make a much smaller down payment.

[timuralp]

Here's something to consider: figure how much you're paying rent/year, multiply that by 5 or 6. That's money you won't see back. Then figure out how much your mortgage is, the interest you're paying, and the line at which it's still more profitable to buy a house. If you find that you're better off even with a modest house price drop, you should consider it. Oh, and in a lot of places you can get houses with almost 0 down and just the closing cost on your grad stipend.

[jasper.milvain]

Looking at a mortgage schedule to figure out how much principle you'll build up can be very encouraging as well.

We currently pay $1100/month rent for a small two bedroom with a washing machine in the back yard. We're looking at places literally twice the size of our current apartment, some with insuite laundry, storage, covered parking and *gasp* DISHWASHERS (the ultimate luxury) at prices that would result in a $900 mortgage, and get bumped up to $1200-$1500/month with utilities and condo fees. Even if we don't do much more than break even financially, the difference in our quality of housing will be more than worth it.

[liszt85]

Are there different laws that govern buying property in the US by a foreign national? Where can I get info about this?

[cath2024]

I'm almost positive there's not. If the money's green they'll take it. If you would need a mortgage, I bet a mortgage broker could tell you if you qualify.

[jasper.milvain]

I just put an offer in on a condo in my PhD city! Eep! Wish me luck.

ETA: My husband and I had our offer accepted. We put in a deposit, and the deal is set pending financing.

[synthla]

I just put an offer in on a condo in my PhD city! Eep! Wish me luck.

ETA: My husband and I had our offer accepted. We put in a deposit, and the deal is set pending financing.

Congratulations and good luck! I'll finally be moving across country and into the house I bought soon... very excited about that.

[larbre]

The annual tax is not ignoble in considering this issue at all. Paying several K's every year can be painful while in a graduate program.

[jasper.milvain]

Congratulations, Synthla!

Larbre, the tax on our condo will only be ~$1500/year. Very manageable.

I've been playing with mortgage calculators and amortization schedules, and it looks like we bought so cheaply that our monthly payments will be around $750 with the current low interest rate on a 20 year mortgage. Isn't that crazy? Of course, we have condo fees and tax on top of that, and we'll be slowly re-paying the money we borrowed from my husband's RRSPs to top up our down payment. You can remove up to $25 000 from RRSPs without penalty to buy a first home in Canada, as long as you pay it back within 10 years. It will all add up to a very manageable amount, though.

[synthla]

Yep, in the right places, there are some really good deals. I went with a 30-year fixed mortgage on the house I bought and my combined mortgage, tax and insurance payments are less than $850 per month. Property taxes are very low in my area and my interest rate is under 5%. Obviously it doesn't make sense for everyone and people have different financial (and spousal) situations, but for me this will be a much better way of spending my housing money than a similar amount (or more) for an apartment or university housing that would be half the size, without a yard, and 20-30 years older.

[liszt85]

Would it make sense to buy a house/condo if you are an international student living with your spouse (who does not work for the time being due to restrictions on the F2 visa) and if you don't intend to settle down in your college town? What do you do after you graduate? Rent it out? What would your responsibilities be as a landlord after that? Would your presence or occasional visits be required?

Also what was the down payment that you guys made on your house/condo? Say I have upto $20,000. Can I get a decent 1BR/2BR house with that amount in Columbus?

[jasper.milvain]

I can't answer a few of your questions, but I'll tackle the ones I can.

I'm counting on us being in my PhD town for at least five years, if not ten (delays and leaves could stretch the degree, plus guaranteed sessional work after graduation if I can't find a job). That length of time should be enough for us to build up a respectable amount of principal. When we move, we'll sell. I don't expect house prices to stay this low forever, so if we're lucky we'll have some profit to add to the principal we've accrued. If you rent a place out, there are companies that you can hire to manage the rental for you so that you're not trying to be a long distance landlord while (hopefully!) on the tenure track. They take a percentage of the rent.

We put a 36% down payment on our condo, made up of some money I inherited and some we took from my husband's RRSPs. At least in Canada, the rule is that if you don't have a 20% down payment, you have to get extra insurance on your mortgage, which is costly. Obviously, the more you are able to put down, the less interest you'll have to pay and the more of your money you can keep.

I strongly suggest playing around with an amorization calculator like this one:

http://www.bretwhissel.net/amortization/amortize.html

It shows you how many dollars from each payment go to interest, and how many to principal. At first, the majority of your montly payment goes into the bank's pocket. Try playing around with different lengths of time and different mortgage amounts and seeing how the ratio of interest to principal changes. You can also look at the 5 year mark and see how much you will have accrued over the course of your PhD. I love toys like this.

[Usmivka]

Same problem as above:

Because my partner and I are moving to a new city and no longer getting a W-2, the bank considers us self-employed (not accurate for tax purposes, but the way the banks work...) and want a two year prior history. My partner and I are each getting stipends in excess of $30k, and have enough for 20-40% down on most places we feel are affordable, but this still isn't good enough for the banks because they don't know how to deal with stipends. So our application will be rejected shortly, unless a policy change that is in the works at the bank comes through, but even then it will be far too late to save me wasting a year's rent--this is all based on conversation with the mortgage guy helping me at the bank. It seems like if you aren't staying in the same city, this avenue is closed.

[rising_star]

You might want to look into first-time homebuyer programs wherever you're moving to, as they often have more flexibility than going directly through the bank.

Also, Usmivka, you could look for a short-term lease (semester or 6 months), if you're sure you'll be able to get the income requirement situation worked out in time to buy a place once the short-term lease ends.

[Usmivka]

Thanks for the ideas.

Cheers

[Golden Monkey]

I'm doing this myself right now. The area I'm moving to is still not cheap to rent, but really cheap to buy, so buying will actually lower my cost of living (a lot.)