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Some Rent vs. Buy Advice for First-Timer Sarah

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When we posted Sarah DiGiorgis' inaugural column about looking for her first home, Curbed reader David Goldfarb wrote in with some advice for her. He said he worries people don't get enough straight talk about the decision to buy a house, and he wishes someone had spoken to him frankly before he made the decision. Hence his words of wisdom, below.

I'm a happy homeowner in South Philly. But I'm also a big proponent of renting. The advantages of home-owning (taxes, sense of community, etc.) are generally overstated, and its downsides (financial and geographic inflexibility, financial risk, etc.) are generally underrated.

You may very well have thought these scenarios seriously, but if you haven't: What if X (where X is less than 5) years down the road you met your partner, who also owns a house? who lives in a different city? who doesn't want to live in West Philly/your house? What happens if you lose your job? What happens if you find a better job in a different city? Each of those scenarios has potentially serious financial ramifications if you own a home, and almost none if you rent.

The Penn programs are great, but I'm not sure they're going to get you what you want. They require a 33/38 income to debt ratio to qualify. Ignoring taxes and PMI if you don't put 20 percent down, and assuming you make $40K, from my feeble calculations, the absolute biggest mortgage you'll be able to afford is $200K. PMI and taxes would decrease that amount further.

I don't know the West Philly housing market well, but I have some doubts that there are many Victorians (even small ones) in the EFL boundaries that meet your requirements and can be had for that price. I hope I'm wrong! This would change if they accepted roommate income as part of the calculation but I'd seriously bet against that. You'd then also have to report it as taxable income, which I'm sure some honorable people do, but I don't know of them.

With the Penn programs, you're also stuck to a limited number of participating banks, which may stick you with a higher interest rate. That's probably a much less big deal, but worth throwing in there.

Don't get me wrong. Owning a house is great. And there are things that you can get from a house you own that you'll never be able to fully get from a house you rent (a permanent garden, for one). And of course, over a long enough period of time, owning is usually a better financial situation. But really, seriously, consider: Is home-owning the right decision for me at this stage of my life?