Teacher's Montgomery Trade-Off

By Elizabeth Razzi
Sunday, April 29, 2007

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.

E-mail Elizabeth Razzi atrazzie@washpost.com.

© 2007 The Washington Post Company