Home Economics

When it comes to your crib, having a full house beats getting the royal flush.

By Mary Beth Eastman
210 west Writer [send email]
and Iain Eastman, contributor

A man's home is his castle. -- Anonymous
He that goes a-borrowing goes a-sorrowing. -- Ben Franklin

So you live in a nice apartment. Wall-to-wall, nice amenities, not too many roaches. The rent's reasonable -- kinda -- only $550 a month.

That translates into $198,000 over the next 30 years, if your rent stays the same.

Yup. You could be paying out close to a quarter-mil. For a place to live. For a schmaltzy, one-bedroom dive. Wait -- I hear you. You're thinking, "What the hell, I'll buy a house."

Think again.

Unless you're earning on a Mary-Kate/Ashley level, there's no way you could buy enough home for you and your comic-book collection -- let alone fit Uncle Joey in there.

All right, all right. But surely those low interest rates are gonna help you get your Barbie Dream House, right? Right. Except today's lower interest rates means higher house prices. It's a seller's market now: Home prices are as nasty as they wanna be. In other words, the seller can name his game, and you gotta play along.

Let's say you're part of a young couple -- each of you earning $25,000 a year -- with no debt, no car loans, no student loans and $8,000 for a down payment. Doing the math on a mortgage calculator, you might get about $150,000 to borrow. That means paying about $1,250 a month on the mortgage for 30 long years.

Don't forget -- this all hinges on your credit.

Toss in the average young American's $7,000 credit debt, $20,000 in student loans, a car note or two, and you're looking at the buying power of a pre-oil-spill Jed Clampett -- a loan of about $100,000.

Ouch. Do you even have $8,000 for this down payment?

Know how much the average house price is in Baltimore? Just over $200,000. Got your sights set on Boston? Expect to shell out more than $300,000. And the Big Apple? A whopping $341,330.

Back to your money. Know what that $100,000 will fetch in a major metropolitan area? A two-bedroom HUD house, complete with lead paint, water infiltration, mold problems and region-specific graffiti.

That's the top end of the scale.

If you're a single buyer, or -- thank you, Mr. President -- making minimum wage, you'd best cozy up to Mom and Dad again, because the Magic 8-Ball says Outlook Not So Good.

So what's a home-sick young American to do?

If you figure it out, for God's sake, let me know, because my husband wants to invest in a whore house.

Tips for the Young and the Homeless
Thanks to Jim McKenna's site.

Although this all may seem a bit overwhelming, all hope is not lost. It just takes a little planning and preparation.

Or a lot of preparation, if you want a ho' house.

Which I don't.

Really.

1. Establish good credit habits and a favorable credit history. Get a credit card and use it responsibly. Apply for an automobile loan and make your payments on time every month. If you're renting an apartment, put your own name on the lease and the utility bills and make sure the rent and the bills are paid every month. If you're already struggling with credit card debt or have large student loans, take a free workshop from the non-profit Consumer Credit Counseling Service. Call (800) 388-2227 for information.

2. Start saving for a down payment and closing costs. It's possible to purchase a first home in many parts of the country without much in the way of savings. But in high-cost housing areas, starting to save early can be enormously beneficial because you'll get the advantage of compounding interest and have a longer period of time to grow your investments. Open a savings account or a stock brokerage investment account and make regular deposits.

3. Read some books. Your local library and bookstore probably have at least a few shelves of books about financial management and buying a home. Take notes. Make a financial plan for yourself. You can learn a lot about real estate, budgeting and credit on REALTOR.com® too.

4. Research where you'd like to live. Many young people assume they'll continue living in their own home town when they get older, but people are more mobile than ever and chances are good you'll one day live in another city or even another state. Again, the library, bookstore and Web can be excellent resources for information about housing costs and homeownership opportunities around the country.

5. Tap your real estate agent relatives for advice. Parents, grandparents, aunts, uncles or older cousins in the real estate business can give you good information about the cost of housing in the area where you want to live and what it takes to buy a home. Questions to ask: Is housing affordable in this area? How much money would I need to save in order to buy a home? What advice would you give me about planning my financial future? Would you recommend some books that I might like to read about buying a home? Don't be shy. If you have a question, ask someone in a position to know the answer.

Just don't ask my husband.