[jfengineer810]

Hello, I first wanted to start off letting people know this isn't the normal Buy vs Rent a home question.
I just recently graduated with a civil engineering degree, and I make a little less than $50k a year. I'm living at home currently as my parents are allowing me to get on my feet and save up before making a harsh decision. They seem to feel that me even thinking about buying vs renting is jumping the gun a little. However, I feel differently, and I'd like to move on as quickly as possible.

So here is where it gets tricky. If I buy, I would be renting to a couple friends, the same amount per month (probably around 500; utilities included). So that would be an additional $1000/month. These are trusted friends, so no need to convince me to stay away from renting due to risky business. I rented throughout college, with 2 to 3 friends without ever having an issue. So, It would be a 3 bedroom, 2 bath, in the Windsor area. I have great credit and just recently received a pre approval which states "a conventional mortgage minimum of 5% down, seller paid closing cost. The loan will be at today's prevailing interest rates for a term of 360 months". I know that doesn't include much information, but the way he seemed to talk about it, I would not have any problem getting a 170k loan. My sibling recently bought a house for 180k, 5% down, renting to 1 person and doing just fine. (Making about the same as me).

Now, I have a few friends that are looking to do the same, in the same town that I am interested in. They also plan on renting, so I'm wondering if its better to just pay the $500 a month, stress free, for however long I feel like staying, and save for something nicer down the road, or going with buying and being the one renting out to different friends. Either way, I do want to move out, so living at home isnt an option (for much longer, hoever I plan on being there for another 6 to 10 months approximately). Any thoughts or personal experiences greatly appreciated. Thanks.

[willow wind]

The big question is, do you have the money to buy. If you get pre-approved for a $ 170,000 loan, that means you can buy a house worth about $ 179,000.

You still have to come up with the down payment. A 5% down payment on $179,000 is about $ 8950. So you would need that in the bank at a minimum.

After you buy, you'll need to furnish your home, plus pay the utility/ phone/cable companies another boat load of fees to get you set up. Plus buy all the stuff you'll need for outside maintenance. Even buying cheap or off Craigslist, all adds up. You're going to hope your newly purchased home needs no repairs or at least things you can let go for the time being. Houses being houses, something will always happen.

You did say you weren't going to try to buy for several months, so maybe it's going to depend on how good you are at saving up for your down payment and keep another maybe $ 5,000 for all the other things you'll need to spend on/plus emergencies.

Remember location is everything. Your first house doesn't have to big or perfect. But is has to be somewhere that you can sell it easily down the road ( the less buyer objection to the neighborhood, the easier to sell ).

If you can get the money together, I'd say go buy yourself a house in several months. By the way, I'd check with at least two other lenders and make sure all are giving you a green light. There are a lot of fly by night places floating around on the internet.

Whether you rent to friends or not has no bearing on the mortgage loan. Just make sure you can carry that loan on your own should one or more move out at the same time.

PS mom & dad, especially mom, are simply going through empty nest syndrome. They'll get over it eventually-lol.

Good luck

[jfengineer810]

Thanks for your reply. 10k in the bank at the moment. $400 monthly car loan that I've been paying since August. So the roommate thing I feel would be essential. Kind of regret buying a car, and not just buying something old to get around for 4k.

[Stratford, Ct. Resident]

Originally Posted by jfengineer810

Now, I have a few friends that are looking to do the same, in the same town that I am interested in. They also plan on renting, so I'm wondering if its better to just pay the $500 a month, stress free, for however long I feel like staying, and save for something nicer down the road, or going with buying and being the one renting out to different friends. Either way, I do want to move out, so living at home isnt an option (for much longer, hoever I plan on being there for another 6 to 10 months approximately). Any thoughts or personal experiences greatly appreciated. Thanks.

Why don't you let them live together in 1 unit(2 or 3 Br.), and live by yourself in your own(1 Br.) unit?

[jfengineer810]

Units? If I bought a 3 bedroom house I'd rent the 2 other bedrooms to two separate friends.

[Stratford, Ct. Resident]

Originally Posted by jfengineer810

Units? If I bought a 3 bedroom house I'd rent the 2 other bedrooms to two separate friends.

Units. As in a 2-family house.

[jfengineer810]

Oh, I thought about a 2 family. There's not many here in Windsor, and this is where I'd like to say, or perhaps Windsor locks. If I do find one I'd definitely go with that, it sounds like a better idea. However I'm sure the prices are higher.

[Stratford, Ct. Resident]

Originally Posted by jfengineer810

Oh, I thought about a 2 family. There's not many here in Windsor, and this is where I'd like to say, or perhaps Windsor locks. If I do find one I'd definitely go with that, it sounds like a better idea. However I'm sure the prices are higher.

They generally are higher, but you will qualify for a larger loan. Your $180K loan estimate for a single-family is pretty ambitious. The affordability calculators are saying you will qualify for ~$140K loan on a single-family.

[JayCT]

I would recommend you saving at least another $8,000 before buying. You may need money for closing costs and other items. Then definitely go ahead and buy. Good luck, Jay

[whattodowhattodo]

I'd strongly suggest making a full budget to determine what you can actually afford rather than basing how much you will borrow on what you could be approved for, which is often substantially more than people can afford. For a true budget, you need to track what you're spending and what you need to save as well as your monthly bills. There are a lot of great budget websites out there so you should be able to find one that helps you sort out of all of the different categories (I personally like YNAB).

Also, typically when you put down less than 20%, you're stuck paying PMI, possibly for a long time. It sounds like you have the ability to save up that 20% rather quickly and could avoid paying PMI altogether. Rather than throwing away money on PMI, I'd suggest either staying at your parents' house or renting until you have that saved up.