Home Buying in Boston>Question Details

Laura, Other/Just Looking in Brighton, MA

Dis/advantages to AMI-restricted homes?

Asked by Laura, Brighton, MA Tue Aug 23, 2011

Hi, I am a graduate student in Boston who will be here for at least another four years. I would really like to live by myself, but the rent would set me back at least $1,300/month. Currently, I pay $700, but my roommates are kind of driving me nuts. There's a condo I'm interested in with AMI restrictions, which as an underpaid minion (hence the graduate school) I meet. Even with school I expect my income to be relatively stable over the next few years. With a little effort I could swing a 20% down payment and get a 15-year mortgage at about $1,150 a month. Taxes are under $1,000/year, though I do not know what the condo fee is. I've read about the restrictions attached to these low-income units regarding selling, but they seem fairly reasonable to me. Does looking into buying this condo seem like a good idea? What are the biggest risks? Thanks for your help!

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There are advantages and dis-advantages to purchase a 40B, Hopp, or Lipp houses (deed restricted properties for lower income home.) You are correct that you can get what seems to be a great deal in a market or area that you may not be able to afford. You may want to consider the financing you will need in order to purchase a deed restricted property.

I always recommend to my buyer they look to get pre approved with an MHP Soft Second loan(below market interest rate, no PMI even without 20% down and they LOVE deed restricted property). Even with your larger down payment, it would be a good choice. For more information, visit my website and click on MHP Soft Second

I suggest you attend a CHAPA approved First Time Home Buyer class (you will need the certificate for the MHP loan). You will probably need to contact the Boston Home Center for a list of area classes, if you need help with that, check out my website for class dates. I teach several classes a month for several areas non profits, so finding one that fits your schedule should not be too hard.

Given current market conditions, it is possible that you could find a home/condo that suits your needs that does not have the deed restrictions. Therefore when you think of reselling (especially given your time line) you have a larger net to cast when seeking out potential buyers. It is possible to get a good deal in today's market. The MHP Soft Second loan does not need to be coupled with deed restricted property!

I suggest sitting down with someone who specializes in First Time Home Buyers and understand all of your options, that way you can make the best decision for you!

Good Luck,
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1 vote Thank Flag Link Wed Sep 14, 2011
Consider also sitting down with an independent certified financial planner. They may be able to give a broader assessment of your specific financial situation, and the short and long-term benefits and risks involved with the real estate options.
0 votes Thank Flag Link Wed Sep 14, 2011
What are your job prospects for staying in the area once you graduate? Is your chosen field likely to be hiring locally & will the property you're interested in be convenient for commuting? You should sit with a mortgage professional & attorney to review your current situation and see how any restrictive covenants might affect your short term & long term goals. Might finding new roomates or housing options be a more beneficial course of action? There are alot of variables & the advice from the proper professionals can best assist you in making these very personal & financial decisions.

Hope that helps,
0 votes Thank Flag Link Mon Sep 5, 2011

4 years is not a reasonable amount of time to be buying a home. Most of your interest is front-loaded and you would pay down very little equity in 4 years. In addition, there is very likely restrictions on renting that type of unit. The best, and most honest advice? Don't buy it unless you play on being here longer than that.
0 votes Thank Flag Link Sat Sep 3, 2011

You are wise to consider getting a house or condo and creating equity, rather than throwing the money away on rent.

Please consider that, with the real estate prices falling, there may be now affordable options even without such restrictions--especially if you find a roommate that will offset some of the costs.

A friend of mine, in grad school, had wisely purchased a home with family help. There were other grad students who then lived with that individual, making for a very positive environment, helping both her recoup costs and providing reasonable rent for the fellow students. Ultimately, it was a real winning situation for all involved.

Properties that have affordable-housing restrictions may not be as desirable, though, unless you are certain about being able to handle the restrictions related ultimately to the sale. However, you may be able to get a better deal on the price.

Note that, after 8 years of renting in Brighton, I ultimately bought not my ideal, but a reasonable old house in another nearby city that needed some work. In retrospect, the amount of money spent on the rent was unwise.

Please consider thinking creatively, see if you can find some fellow students interested in living in a home or an affordable option, and try to establish equity rather than rent early on. You may be able to make a difference in your life and in the lives of other students as well.

Even if you end up having some roommates driving you crazy, having the mortgage paid would perhaps compensate for the increased troubles. As Mr. Shapriro mentions, the 30-year mortgage may be a better option as well, although I'd add that no prepayment penalty would be helpful to allow you the flexibility of paying the mortgage down quickly.

Kudos on your willingness to think creatively, and hopefully establish a better living and equity situation for yourself.
0 votes Thank Flag Link Sat Sep 3, 2011
Crazy for you buy at this point if you may sell in 4 years.
You will lose money.
0 votes Thank Flag Link Wed Aug 24, 2011
I thnk you have a plan. I would suggest going with a 30 fix to keep your payment under 1k. The condo fees could be high so you need to plan for that. Since you are a student and you might be looking to move sooner you should check out to make sure there is no minimum time associated with living there. The restriction might only be in what you could profit when you sell. There are some great rates for these types of loans.
0 votes Thank Flag Link Tue Aug 23, 2011
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