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What are your retirement goals? How far behind are you and according to who? How stable is your job and how long are you willing/able to work? My answer is very different if you are a tenured professor who never plans on retiring and "only" has a million dollars but thinks they are behind because their friend has 2 million, versus a construction worker who has zero retirement savings and is starting to have physical limitations that will keep them from working in 5 years.
I haven't seen this discussed yet, but it matters and will help us determine reality. There are lots of "rules" but most are crap. Saying you need to max retirement accounts is a great example. Some times (many times!) It's a great idea. The vast majority of comfortably retired people will not have done so straight through (if ever). Need to stay in a house x number of years? It's not like it's automatically a catastrophic loss if it's 6 years instead of 7 (or 9 instead of 10 or whatever). It is more likely any appreciation/principal won't offset closing costs. That's a difference of a few thousand dollars, not life and death. Obviously, the ideal financially is buy once and stay there forever. In the right market you could sell in two and turn a profit, in the wrong one you could be underwater after 15 years.
Don't think of these as rules, think of these as guidelines. If you want to buy a 100k house on a 100k salary, you almost certainly can afford it. Even if behind on retirement, a smart home purchase is not inherently a bad idea even if it means you save somewhat less for retirement (and you might then need less with a paid off home). Figure out your goals. If you can meet them and buy a house, great! If not - don't. If you want margin for error, leave one. The notion that everyone "needs" to max a 401k is insane. Someone earning 40k/year probably never will. They are also extraordinarily unlikely to have a lifestyle necessitating a maxed 401k over 40 years to continue forward in retirement. This is where personal goals matter.
Retirement goal: Save as much as I can. I know you probably wanted some numbers and a date and/or age I want to retire by. However, I am 38 with only 40k in my 401k so until I can start maxing that out I can't even wrap my head around an actual age or date of retirement because I'm nowhere near being on track for it. Hence the reason why I'm wondering should I just stop saving for a down payment because of how behind I am. Before you ask--I just mentioned in another post that my current income is relatively new. Not all that long ago I was making half of what I make now with tons of debt. I'm just getting into a better position.
Maybe I'm doing things backwards (?). I could max out the accounts and then start saving for a downpayment. If I do that I'll have to revise my budget and see how many more years it'll take me to get a downpayment. I think part of me has this arbitary goal of buying by my 40th birthday to be honest. Probably sounds silly I know...if I don't buy by that age I am wondering how likely I'll do it in my 40s. Maybe I'll be less inclined/have less desire to do it then. Or maybe I'll be in an even better position to. However, the other thing pushing me to buy soon are the rising rent costs. Atlanta is experiencing crazy high growth right now and the real estate market is reflecting it. One of my investor friends has been pushing me to buy this year but I'm not ready...he thinks I will lose out on the opportunity to buy something cheap in another year. He may be right...only time will tell. But I do fear wanting to buy AFTER next year and being stuck with high rents AND then being priced out of the city. It's happening as we speak and it's a very real possibility the longer I wait the less likely I'll be able to get something inexpensive.
Employment: My job is pretty stable (I'm in pharma). I've only been with my current employer about 3.5 years but I've been in the same-ish industry for about 12. I think with the experience with my current employer, I could work for other companies IF something should happen to my job. I'm willing to work until 50 but with current lack of savings a retirement AT 50 is not doable, at least I don't know how it is (what would it take to make that happen? ). If you don't take away anything else from this post, make sure to note this: I'm an INFP who gets by ok in the working world but honestly my happiness is not derived from it in the least (see more about my values below).
I will say this---I am the most indecisive person in the world. I have posted about this on other forums and the responses are making me think in great detail about the reasons behind why I want to buy, my goals and what I value most. Some of the values that are most important to me:
-Indepedence: I don't want to be a burden to anyone. I want to depend upon myself.
-Freedom: I want the ability to travel where I want, when I want. I want to be able to choose to work for an employer or not.
-Time: I want time I currently spend working to be freed to do what I want. Which would be travel or work or hobbies or time with other people or whatever.
I think all three of the above require financial independence....obviously a house isn't 'needed' to get there, right? Honestly at this point after all the reading I'm doing my frame of mind is starting to change and I'm starting to think I need to put all my money into retirement and investments and hold off on worrying about the house. If I do that instead next year I could be in the position of having almost a year of expenses in an emergency fund and a maxed out 401k (possibly ROTH IRA too if I push myself). If I buy a home next year the most I will have is the home--the maxed out retirement funds would have to come after that.
100k for your budget is so cheap I can't even imagine how you couldn't "pull it off". You say your friends own homes that cost 250-300k that make the same as you. To qualify for that you must at least be making 60k a year. At 60k income with a $700 mortgage (assuming you put 3.5% down) would be so ridiculously low you could waste money recklessly (I'm not saying you do) and still afford your home. Good luck and I'm sure you can make it happen.
Yeah, I'm currently renting with a roommate for ~$700. It's been amazing as I can still save but also eat out as much as I want
But I'm moving out in 2 weeks and rent will go up a little over $1100. But I work from home so I'm choosing to go back to living alone for a while. Plus I'm moving close to all the places I Uber or take transit to (grocery store, gym, activities, etc.). I'll be by a train and can walk to everywhere and continue not to own a car for a while longer.
Buying a house is a way to spend discretionary income to improve your quality of life. In particular, if you have children, it's how you buy your way into the town with the good school system that typically has no inexpensive apartment housing stock. If you look at your all-in home ownership costs, you pretty much always do better renting a small place and investing the difference in the market. There are exceptions where property prices soar in economically vibrant areas but you're talking a $100K house which, by definition, means you're not in one of those areas.
Good point RE: the bolded. I would say this is true for the limited areas with 100kish homes I'd be looking at.
RE: renting a small place and investing the difference....this is difficult. There is no difference to invest if the rent is higher than a mortgage + taxes, fees, maintenance. I'm about to move into a studio that's a bit over $1100. I got a good deal as the market rate is in the 1300s. As a matter of fact I just tried to push my move in date out by 2 weeks and they said I'd have pay 1330ish for my entire lease as that's the market rate if I chose to move in later (which of course I decided against doing).
There are brand new apartments going up right next to the place I'm about to move in to. They are going to be starting at minimum in the 1900s. I personally think that I might be priced out of huge parts of the city if I don't buy and lock in a mortgage next year. That's one of my biggest concerns but perhaps my fear is unfounded...I don't know yet. I'm living in a city experiencing crazy growth right now due to employment opportunities and the rise of the entertainment industry here. While in theory I could invest the difference, each year the rent here is going up by so much that I fear there won't be a difference to invest and that buying would have been a better decision so I could lock in a reasonable mortgage amount.
Example:
2012--Was paying $650 for a 700 sq foot one bedroom in a building 20-something years old. (Mind you, they also always gave a month or half a month off rent upon move in). Just checked online today and that same unit is $1182. No renovations. No changes in amenities. And a few months ago they confirmed they also do not do any move in specials anymore (no half or month off upfront).
If I continue to rent I will likely have to purchase a car and move 20something miles away from where I am now. Because the studios across the street from me are going for 1500-1600 and that's clearly a mortgage pretty much anywhere.
We recently purchased a house. I walked in with a $3000 tree cutting bill. Then 23k in landscaping a year later.
Truthfully I'm tell people that if they have a good hold on their finances you don't need 20 down. It's a smart way of doing it as PMI is really wasted money but that's my opinion. Basically 1 year PMI an be one or even two house payments. Making one extra house payment a year really shortebs your payments.
If I continue to rent I will likely have to purchase a car
and move 20something miles away from where I am now.
The question still comes back to how long you'll be in that town and/or near that job.
And how your earlier statements about mobility can be 'reconciled' to the practical
realities of NEEDING to remain in that town and/or near that job for ownership to make sense.
Once you cross that bridge then it's just about the mechanics of loans and cash management.
But until you do... it's all just conversation.
How do you know?
Do you feel the need to spend every other weekend at Home Depot?
When you decide you care about what kind of appliances, flooring, and paint is on the walls.
When spending thousands remodeling seems fun instead of flying some place fun.
The question still comes back to how long you'll be in that town and/or near that job.
And how your earlier statements about mobility can be 'reconciled' to the practical
realities of NEEDING to remain in that town and/or near that job for ownership to make sense.
Once you cross that bridge then it's just about the mechanics of loans and cash management.
But until you do... it's all just conversation.
I work from home so I'm not really tied to where I work anymore.
I used to be, but I negotiated the ability to work from home last year and decided to move back to my home state. Although the primary reason I wanted to work from home was the flexiblity to work anywhere so I could live/work in a multitude of places fyi.
That means that YOU have more say in the where than most. Good for you.
But once that where is said you still need to be willing to stay put.
Ideally... you should be eager to stay put.
And as a renter you can have that sort of latitude.
But as an owner it's nearly impossible to manage both.
To have your cake and eat it too.
Oh, I totally get it.
At this point I think 'living' in a bunch of different places is a bit out of the question. I think I need to consider having a 'home base' (probably where I currently live) and just traveling whenever I can. With a home, I could Airbnb or rent it out or home swap during times of travel in the future, while this is isn't really an option as a renter.
I work from home so I'm not really tied to where I work anymore.
I used to be, but I negotiated the ability to work from home last year and decided to move back to my home state. Although the primary reason I wanted to work from home was the flexiblity to work anywhere so I could live/work in a multitude of places fyi.
Speaking from personal experience, that doesn't last forever. I telecommuted from 2009 to 2016. Poof. Gone. Good luck finding telecommuting work when you live somewhere that's either a long distance or a soul-crushing commute from the jobs that want you to be an office drone. When it happened to me, I had two paid-for homes, a funded retirement portfolio, and 4 years of living expenses in my emergency fund. Are you equipped to pay a mortgage, property taxes, homeowners insurance, utility bills, COBRA health insurance continuation, and the rest of your life expenses for many months? Not from what I'm reading in this thread. Until you are wealthy or ready to retire (which also requires being at least somewhat wealthy), your house needs to be near jobs or you're looking at foreclosure and bankruptcy if your job vaporizes.
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). If you don't take away anything else from this post, make sure to note this: I'm an INFP who gets by ok in the working world but honestly my happiness is not derived from it in the least (see more about my values below).
But I work from home so I'm choosing to go back to living alone for a while. Plus I'm moving close to all the places I Uber or take transit to (grocery store, gym, activities, etc.). I'll be by a train and can walk to everywhere and continue not to own a car for a while longer.
