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Regarding the bold...I can't max out the 401k 'and' max an IRA 'and' save 15k annually right now for a home. That's almost $40,000.
You said you have emergency fund of 2-3 years' expenses. Why such a huge amount? If I'm reading all your numbers correctly, you could take 20% down out of that account and still have a way bigger emergency account than most people.
You said you have emergency fund of 2-3 years' expenses. Why such a huge amount? If I'm reading all your numbers correctly, you could take 20% down out of that account and still have a way bigger emergency account than most people.
I don't see where I wrote that....I have a few months' worth in expenses, not years. That's why I mentioned earlier being behind in retirement savings and am currently diverting retirement funds into a downpayment fund.
I don't see where I wrote that....I have a few months' worth in expenses, not years. That's why I mentioned earlier being behind in retirement savings and am currently diverting retirement funds into a downpayment fund.
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.
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.
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.
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.
I know markets differ greatly but your rent to own ratios quoted in here make me wish I did not live in CA. I live in Sacramento which isn't your LA/SD/SF but outside of undesireble areas, you're not buying a house for under 350k; and that's on the very low end. I rent a room in an area where most homes in my neighborhood cost 450-700k and 4 blocks away I can rent an apartment for $1100 ish which is around a $200k mortgage. Owning is very expensive here to the point I think I'll never be able to own a home even though I save a lot of money (max 401k and Roth). Those that do own homes seem to pay 50%+ of gross to afford their mortgage. I couldn't live that house poor and give up all retirement savings to just own a home and all the expenses that go with it.
We bought a house in fall 2015. It was "only" $150/m more than lot rent for a mobile home we owned. But that $150 makes a bigger difference than we thought. It does take away money from retirement we had not thought of.
Our mortgage is only 20%+/- of income, and we put 10% down. But we could have put 20% down. We wanted a cushion just in case but later paid extra principal with that 10%, have made many many extra principal payments so we now own 52% of the purchase price.
Some things to consider: you mentioned condo. Condos scare us, so do HOAs. Unless I had no other option, I would not buy a condo. You have rules regarding etc. ESPECIALLY if you are planning to move in 7 years or less. You can't just "rent it out" to cover mortgage if it doesn't sell in a reasonable time. A house you can, unless HOA restrictions forbid it. I don't like having too many people telling me what I can and cannot do with my home so much.
Next, I also second and third the motion to NOT buy if you are moving in 7 years or less. It doesn't make sense if you are just looking to save a few bucks on rent. You may NOT: get more than you paid; get what you paid; be able to actually rent it if you move; be able to afford updates or necessary repairs that comes up.
We immediately paid that 10% back towards principal but spent way more that we thought updating our house. We now have 3 more years of some accumulated debt doing that. Sure we own 52%, but we have 15% accumulated debt, too. Good news is 3 years more paid off. But those there years is missed money for retirement or to pay down more. Our efund pretty much got wiped out due to reduced hours for my OH, medical expenses, vehicle expenses, and other unforseen circumstances. So w are now tighter than we thought. Keep that in mind. Life and the "s" word happens, often when you least expect it.
I also would NOT go with the 3%down. You could end up under water if when you do move easily. At least if you put 10-20% down you may get the balance out if it if your market tanks, which one never knows. You might not find it worth while if you don't stay. I mean you could also get an interest only mortgage IF they still have them, but if it tanks you could owe. You're smart about your finances don't be stupid and try to cheap out in down payment. Buying a home is not like buying a car with several options, many of which put people underwater in car.
Best of luck if you buy. Be smart about it, you say you don't want to curtail lifestyle, but do that to get your dp, and still save your dp. It's only for a little while, won't hurt too much.
I hope I have put this in thoughtful order.
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