Teacher’s Mont­gomery Trade-Off

The Washington Post Sunday - - Real Estate - El­iz­a­beth Razzi

There are a few eter­nal truths about life in the Wash­ing­ton area. Among them: Tour­ing the mon­u­ments is much cooler, in all re­spects, af­ter sun­set; the Orange Line is ex­pe­ri­enc­ing slight de­lays; and you have to pay a lot for a home, es­pe­cially if you want to live in one of the closer-in sub­urbs.

You can ponder your own list of eter­nal truths dur­ing your next Metro de­lay. Here, we’re go­ing to take the oc­ca­sional close-up look at that third one: ex­pen­sive hous­ing. In par­tic­u­lar, we’re go­ing to ex­am­ine the op­tions avail­able to peo­ple who pro­vide vi­tal com­mu­nity ser­vices — the teach­ers, fire­fight­ers, po­lice of­fi­cers, Metro driv­ers (and per­haps the oc­ca­sional tour guide).

It’s a good thing all around when peo­ple can af­ford to live in the com­mu­nity where they work. Taxes from their salaries (which in many cases are funded by tax­pay­ers) feed back into the lo­cal tax base. The em­ploy­ees are more fully vested in their com­mu­ni­ties.

To start, we’re shop­ping on be­half of some hy­po­thet­i­cal pub­lic-school teach­ers in Mont­gomery County. What might they af­ford to buy in the county where they work? (It is ter­ri­bly con­ve­nient when a teacher’s kids get the same snow days as Mom or Dad’s school dis­trict.) How much more can they get if they join the masses on In­ter­state 270 and move out of the county? For this lit­tle ex­er­cise, which is hardly a sci­en­tific ex­per­i­ment, we made a few as­sump­tions about our imag­i­nary teach­ers and their life­styles. We also con­sid­ered real-life teacher pay.

Mont­gomery County school of­fi­cials say the typ­i­cal teacher in their sys­tem has a mas­ter’s de­gree and 12 years of class­room ex­pe­ri­ence. Ac­cord­ing to pay scales for the 2006-07 school year, such a teacher earns $68,245.

Be­cause most (though cer­tainly not all) home buy­ers are mar­ried and en­joy the ex­tra pur­chas­ing power of a com­bined in­come, we cob­bled to­gether an ar­ranged mar­riage of two such typ­i­cal teach­ers, which gives them a com­bined in­come of $136,500. (Let’s say they met in grad school.) If you add up their years in grad­u­ate school and at work, they would be in their mid-30s, prime time for rais­ing a fam­ily. That puts them squarely in the ranks of house-hunters who want a home with a lit­tle bit of ex­tra room, an am­ple yard and ex­cel­lent schools. They have $30,000 in sav­ings to cover a down pay­ment and clos­ing costs.

To round out their fi­nan­cial pic­ture, we as­signed them the av­er­age FICO credit score, 723. That means, all else be­ing equal, they could ex­pect to pay an in­ter­est rate that’s about one-quar­ter of a per­cent­age point higher than a bor­rower with the high­est FICO score. Then we bur­dened our happy cou­ple with a $400 monthly pay­ment for one car loan. Such loan pay­ments, of course, limit the amount of mort­gage debt a bor­rower can safely take on. At least we as­sumed our cou­ple doesn’t carry a credit-card bal­ance from month to month, which would fur­ther limit buy­ing power.

We as­sumed our buy­ers would take out a 30-year, fixed-rate mort­gage. That’s a con­ser­va­tive choice, but a con­sumer fa­vorite. They could stretch their money by choos­ing among a variety of types of ad­justable-rate loans, but, of course, that poses a risk that their pay­ments could rise sig­nif­i­cantly in the fu­ture — very likely more quickly than the pay raises most teach­ers in their mid-30s can an­tic­i­pate.

We gave this fi­nan­cial profile to an ex­pe­ri­enced real es­tate agent, Anita M. Cento­fanti, a mem­ber of the board of direc­tors for the Greater Cap­i­tal Area As­so­ci­a­tion of Real­tors and an as­so­ci­ate bro­ker with Long & Fos­ter Real Es­tate in Bethesda. We asked her to es­ti­mate how much our king and queen of the chalk­board could af­ford, and to search for homes on their be­half.

“I’m try­ing to keep our hy­po­thet­i­cal cou­ple well un­der $600,000,” said Cento­fanti. “It turns out there is a lot to choose from.”

Within Mont­gomery County, Cento­fanti’s best pick was a brick split-foyer house on Brad­ford Drive in Rockville. It sold re­cently for $530,000, with the sell­ers of­fer­ing $10,000 to­ward clos­ing costs, which would al­low our teach­ers to de­vote all of their $30,000 to­ward the down pay­ment. The house was built in 1965 and has four bed­rooms, three full baths and 1,363 square feet of liv­ing space. It has a one-car at­tached garage and is within walk­ing dis­tance of the Rockville Town Cen­ter. Their monthly prin­ci­pal and in­ter­est pay­ment on a $500,000 mort­gage at 6.5 per­cent in­ter­est would be $3,160. Even with prop­erty taxes and in­sur­ance, they should qual­ify for that.

If our buy­ers wished to move into a de­vel­op­ment such as Kent­lands or Falls­grove, where stores, en­ter­tain­ment and homes are near each other, Cento­fanti said they would prob­a­bly have to look at town­houses or condo apart­ments be­cause of the higher prices. “I might be in­clined to lower our price point a bit, too, be­cause th­ese com­mu­ni­ties have ameni­ties [such as pools, parks and com­mu­nity cen­ters] which the res­i­dents must pay for in the form of home­own­ers as­so­ci­a­tion and condo as­so­ci­a­tion dues,” she noted.

And what might they get if they hit the high­way? More of ev­ery­thing, in­clud­ing, most likely, time be­hind the steer­ing wheel. If our teach­ers moved one county north, to the Whis­per­ing Creek sub­di­vi­sion just off In­ter­state 70 in Fred­er­ick, they could buy a brand-new, brick Colo­nial with 2,534 square feet of liv­ing space and a two-car garage. It boasts gran­ite coun­ter­tops, maple cab­i­nets, stain­less steel ap­pli­ances and $20,000 that can be ap­plied to­ward clos­ing costs.

If our teach­ers made a $30,000 down pay­ment on that Fred­er­ick home, their monthly mort­gage pay­ment would be $3,129. That’s $31 less than they would pay for the Rockville house.

Maybe they could spend it on gas.


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