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1) 20% down right now is unnecessary. You should have 20% saved but only put down 10%. If you buy right, you should be looking for a house that is 10% below market value. After living there a year or so and doing some cheap improvements you can do a no cost refi, the appraisal should come in 10-15% higher which will eliminate PMI (this is exactly what I did, doesn't always work that way but even still mortgages are very cheap right now, no point locking down all that extra $)
Stay away from those 3.5% loans as I don't think you can get out of PMI and theres weird refi rules.
2) In my opinion if you're paying rent anyway, theres no reason not to buy a home if thats your goal just because of retirement account. Buy well below your means.
3) I honestly believe if you're not even the slightest bit handy you may be better off being a renter. And I'm totally pro-buying. My first year of home ownership I had to replace a hot water heater, dishwasher, A/C, and 2 sinks. I'm sure there were other things too.. I'm handy and my father is even more handy than me and doesn't live that far so he lends a hand. If I paid someone to do those fixes for me it probably would have been $10,000.. I did it all myself and was maybe out $3,000.
4) Roth IRA.. Depending on your situation, a Roth IRA can double as retirement and emergency fund. The roth you can pull money without fees or taxes as you've already paid them. It is absolutely the last resort and I don't recommend it unless its the difference between losing your house or not.
Number 3. My son, late twenties, wants to buy a house because rent plus a self storage unit is killing him. He has a lot of tools which he can't get rid of. He's looking for a small place with good bones, a roof that will last for a while, and needs updating. One of his friends has worked the trades on and off for 10 years. My friend has been doing that for 40 years. Either one would advise and help if they can. He's very, very handy. He would be able to take care of many of the repairs on his own or with an extra pair of hands.
I do want to emphasize something I touched on about buying at the 100k mark:
For those who may be envious or think this scenario is awesome...it 'will' be pretty awesome IF I can make it happen. I want to stress that although this is my plan I know it won't be easy. As previously mentioned I have a few friends who make about what I do and they mostly bought in the 300k range (+/- ~20k). Their homes are nice and I would love to be in a new/new-ish 250-300k 3/3 brick townhome but I don't think I can save aggressively and travel AND pay for a mortgage that high.
So I am choosing a budget this low that will likely put me in either an area I was never considering living in until purchasing, and/or it will be much older than I want and/or it will be in a location I hopefully do like but VERY small. I am hoping I can end up in the latter because I do believe location is everything and I personally don't care about space.
1) 20% down right now is unnecessary. You should have 20% saved but only put down 10%. If you buy right, you should be looking for a house that is 10% below market value. After living there a year or so and doing some cheap improvements you can do a no cost refi, the appraisal should come in 10-15% higher which will eliminate PMI (this is exactly what I did, doesn't always work that way but even still mortgages are very cheap right now, no point locking down all that extra $)
Stay away from those 3.5% loans as I don't think you can get out of PMI and theres weird refi rules.
2) In my opinion if you're paying rent anyway, theres no reason not to buy a home if thats your goal just because of retirement account. Buy well below your means.
3) I honestly believe if you're not even the slightest bit handy you may be better off being a renter. And I'm totally pro-buying. My first year of home ownership I had to replace a hot water heater, dishwasher, A/C, and 2 sinks. I'm sure there were other things too.. I'm handy and my father is even more handy than me and doesn't live that far so he lends a hand. If I paid someone to do those fixes for me it probably would have been $10,000.. I did it all myself and was maybe out $3,000.
4) Roth IRA.. Depending on your situation, a Roth IRA can double as retirement and emergency fund. The roth you can pull money without fees or taxes as you've already paid them. It is absolutely the last resort and I don't recommend it unless its the difference between losing your house or not.
1) Seems to be differing opinions on this. You make good points for your argument here.
2) I do think I'm in a position right now to buy well below my means. I have been trying to figure out what 'max mortgage amount' I should set myself at. But for now I just picked 100k...basically that number is low enough to show that I pretty much just want to buy 'for as little as possible'.
3) To say I'm not handy would be the understatement of the year. I'm not exactly the type of woman who likes to get my hands dirty. But I will do what it takes to save money. However, I am highly uneducated when it comes to fixing things-I don't have the first clue. And not to sound sexist, but aren't a lot of women?? They still buy homes though.
4) I do have a ROTH IRA already. Hardly anything is in it though.
I tend to agree with MrRational's assessment. Don't buy if you're not planning to "stay put" for a long time. Owning property adds responsibility, not freedom!
Given your rent and your income it seems you should have plenty to be able to save and have fun too, unless there's some additional expenses we're not privy to here.
About staying put---I don't have a 'plan' about that either way right now. I just don't. I could stay where I'm currently at forever. Or I could move in a year. On average though in the past 16 years of renting I have moved approx. every 18 months for varying reasons. (In fact I'm packing this weekend to move in 2 weeks to another side of town.) Twice were moves to separate states. The other moves were all within the same city but to different parts of the city.
Well I haven't posted my entire budget obviously, but right now I 'do' feel I save and also have fun.
One of the underlying questions I have is something along the lines of "Should I be having less fun and saving way more?" It's a good question. Because now that I'm saving a house downpayment, nothing is going into retirement funds. Originally I posted this thread wondering if I can't max out the retirement funds and save for a 20% downpayment and a fully funded emergency fund....then am I really ready to buy a home?
Because many will say that on my income, I should be able to do all three of the above, and if I am not, then perhaps I'm not ready...
(I do think I could do all three but it would require cutting out all wants which includes primarily travel.)
Do you want a house or a condo? "Home" is unspecific. Either way there will be expenses, though with a condo they're more structured into a dues system.
Your "don't buy until" expectations are very conservative. And your budget vs. income are highly unusual. A lot of people buy at 4x income (used to be 3x when interest rates were higher). With your level of savings, even a much lower down payment would be safe, though personally I'd probably use some of your massive bank account do to a larger down payment...six months of expenses is fine.
I agree with the poster who said your payments will be much lower than your current rent (amazing how cheap sale prices are in your area!). You should consider a fairly short mortgage duration like 15 years, so it's paid off in time for an early retirement.
No preference RE: a house versus a home. The things I'm most concerned about when buying right now:
1-That I keep the home purchase well below my means. After buying I: (a) need to be able to max retirement accounts and (b) want to be able to travel more.
2-Location of the property. I reallly really want to stay within the city still and continue to not own a car for as long as I reasonably can. Also, even if I do decide to buy a car again I'd prefer to be in an area where I can walk many places. I live in a city made for driving with all the traffic one could ever want If by the grace of God I can find a property within my low budget in the city, it would be great as I could still access all kinds of amenities and be close to the things I like to see and do rather than having to drive to those things.
RE: Trying to buy at 1 times my income: Well for one, I can't afford the payment on a property 4 times my salary. 2 times would be much more reasonable. But at my age (and like I said, being behind on retirement funds), I feel I need to go below that in order to save aggressively. I'm not sure where you got the massive bank account part from...again I mentioned I'm behind on retirement savings. What I'm saving right now for a home I just started being able to do that. Otherwise that money would be going into savings but it's like I've always had that amount to save--my current income hasn't been at this level for very long. Just 4.5 years ago I was making half of what I make today with a bunch of debt. I'm just getting to a place where I can feel I can do certain things and want to be making the right decisions/moves.
I have not seen anyone saying you need to see the books if you buy into an HOA. Ask about the reserves, if they have ever had a "special" assessments, etc.
Mine was dictated by the market, it was cheaper to own than rent. Whatever you do, do not overbuy. Stick to a budget you are comfortable with.
My wife and I decided that we only want to buy what one income can afford. If a situation ever occur that there will only be one income for the rest of our life, we can still live and keep the home. Of course, this may not be an option because the market and the housing prices have come a long way since it bottom. I see too often friends of ours who got their dream home but struggling to stay above water. That's not a way to live.
RE the bolded: very smart decision. If I ever get married I'd like for my future husband and myself to do the exact same thing.
I do want to emphasize something I touched on about buying at the 100k mark:
For those who may be envious or think this scenario is awesome...it 'will' be pretty awesome IF I can make it happen. I want to stress that although this is my plan I know it won't be easy. As previously mentioned I have a few friends who make about what I do and they mostly bought in the 300k range (+/- ~20k). Their homes are nice and I would love to be in a new/new-ish 250-300k 3/3 brick townhome but I don't think I can save aggressively and travel AND pay for a mortgage that high.
So I am choosing a budget this low that will likely put me in either an area I was never considering living in until purchasing, and/or it will be much older than I want and/or it will be in a location I hopefully do like but VERY small. I am hoping I can end up in the latter because I do believe location is everything and I personally don't care about space.
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.
I don't want to stay in place anywhere for 7 years ever.
Then you absolutely want to rent.
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.
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If by the grace of God I can find a property within my low budget in the city, it would be great as I could still access all kinds of amenities and be close to the things I like to see and do rather than having to drive to those things.
