How much can you negotiate: a lot!
First, let me address the common misconception in your question. Paying rent is not throwing money away. Youâ€™re only â€œthrowing money awayâ€ if youâ€™re in an environment where housing â€œpricesâ€ are rising. Pick up a newspaper tomorrow and youâ€™ll go no further than the front page to see a story that confirms that house values are not rising.
In todayâ€™s environment, renting is not throwing money away. Itâ€™s a very prudent thing to do, but few Realtors will tell you that. Additionally, they wonâ€™t explain the â€œRent-Buy decision.â€ Take a look at my last paragraph, then google â€œrent buy decision.â€
Buying a house that may decrease in value 30-50% in the next 3 years; now thatâ€™s throwing money away. But, if you can be assured that youâ€™ll stay there for the next 10+ years, then I doubt youâ€™ll have trouble breaking even on a sale or maybe even making some money. You may sell into the next housing mania.
Assuming you have a 20 percent down payment, which most banks will require these days on a non-FHA loan, youâ€™re looking at a loan amount of $180K on your $225K home â€“ a payment of around $1100 before taxes, utilities and upkeep. Not bad.
But, since youâ€™re a first time home buyer, you may qualify for an FHA loan. Link below. With this, youâ€™re looking at a 3 percent down payment and a larger loan amount. Same house price, now youâ€™re payment is $1300, before taxes, utilities and upkeep. Youâ€™re already a little bit above your $1200 rental payment. To be fair, maybe the house is better than your rental accommodations and youâ€™re willing to pay a premium. Additionally, you may be able to deduct some of your mortgage interest â€“ contact a tax professional.
If you want to drive a hard bargain â€“ and you do, and you can â€“ then I recommend that you find out what this house sold for around 1998. Or, what a comparable house was selling for at that time. Thatâ€™s your starting point, and probably close to what you want to pay.
If you really want to do your homework â€“ find out what this house will RENT for. Can you rent this house out to someone and still pay off the mortgage, taxes and upkeep? If the answer is no, then the price is too high.
Best of luck to you,