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I have friends with several kids, low incomes, no savings, and they purchase decent homes. We have no kids, make 98K together (38K and 60K) have about 15k saved and can barely afford a 190K townhome. Closing costs, down payment etc....would wipe out more than half our savings. But I went for it anyways. Tired of being scared. I'm 40 and never owned a place. Always rented. Was it wrong to jump into this? I always think of what if. I know other bills are going to come up. Medical, dental stuff. Dog bills. Need new furniture. I feel like this might be a wrong move. But what can I do? Always be scared and stay in the same rented home? (Already been here 7 years).
This may seem harsh ... but at this level of income, if you have only 15k saved, you need take a long, hard look at your spending. Without kids and without home maintenance expenses, even in a high cost of living area, it should be eminently possible to save more than 15k every single year. Look at it this way - without a cushion, what will you do when the inevitable major home expense pops up? An unplanned water heater replacement here, gutter and roof replacement there, and we're talking major cash outlays.
The good news is that with proper budgeting, unless there are major circumstances that you haven't told us about, carrying a 190k home at 98k should be no problem. So, that's the first step. I've heard good things about YNAB, but even an old fashioned spreadsheet does the trick.
how much was your rent? i am also surprised you haven't saved more considering you make a decent income and you're 40 y.o. did you have a lot of student loan debt? are you in a HCOL area?
i think with your income you should be fine buying a $190K townhome. with 20% down your mortgage should run about $1200 a month approximately.
The lender told us that it would be $1550 with nothing down and that includes taxes (which are $5600 a year) and approx home owners insurance? No student debt.
Our rent is $1350. Plus we only started making what we make now in the last year. I made 38K for a long time in the past and husband made 48K. At one point I was making 31K but luckily found a job that brought me back up to 38K. Funny how people I know think we have a lot saved. They live paycheck to paycheck though.
A good rule of the thumb is to check affordability of the home on a single income. A 1550 payment puts you at 31% debt to income for a 60k salary. This isn't terrible, but isn't particularly comfortable, either. However, renting at the current prices you mention is going to be almost certainly cheaper for you than owning, because you also need to factor in maintenance and HOA dues. Have you thought about your motivations as to why you'd like to buy and whether they are emotional or rational? Financially, right now it seems to make sense to keep renting and to put the difference into savings. If you still want to buy now, I'd make it a priority to save at least an additional 30k in emergency reserves during the next 24-36 months.
Is it affordable at 98K?
I want to own a place. Otherwise it just continues to throw money away? The place we live in now is nice but it's all orginal from 1984. Needs a major touch up and damages from when our dogs were pups. I'd like a yard for our dogs. A ranch home. I also refuse to live in a low income area. Call me a snob but I grew up and always lived in a upper middle class area.
1550 at 98k is great. The major concern is inadequate reserves right now. If you address this issue aggressively, you should be ok. As for the other considerations, it is really up to you. I would only caution that the throwing away money argument likely doesn't apply in your situation. There is a very good chance that with your numbers you would come out ahead if you rent and invest the savings, as opposed to paying the mortgage and having the homeownership expenses. With that said, of course, the intangibles you mention matter, too.
The best way to afford and save more is to budget and spend much less than you make. Cancel cable and get netflix. Cancel your iphone plan and get a prepaid phone and use your apps on wifi when you get home, Rarely eat in a restaurant, dont buy fancy cars a simple toyota corolla will save you thousands.
As your income grows, keep your spending the same. Your savings will soar and you will have much more money to do the things you want to do like afford a better house.
I dont make much more than other people I know, but I'm never complaining about money like them because I know how to budget and I dont waste money on all the stuff they call necessities. Like $150 month cable bills.
I have friends with several kids, low incomes, no savings, and they purchase decent homes. We have no kids, make 98K together (38K and 60K) have about 15k saved and can barely afford a 190K townhome. Closing costs, down payment etc....would wipe out more than half our savings. But I went for it anyways. Tired of being scared. I'm 40 and never owned a place. Always rented. Was it wrong to jump into this? I always think of what if. I know other bills are going to come up. Medical, dental stuff. Dog bills. Need new furniture. I feel like this might be a wrong move. But what can I do? Always be scared and stay in the same rented home? (Already been here 7 years).
Buying a home is easy with that income; The trick is where. If you live in a high COL state, forget about it. California, for example? You're about $100k too low.
But I'm curious when you say you can "barely afford" a $190k townhome. That doesn't sound right. A 30-year mortgage would be...what...$1100/month? At that income you should be able to handle that.
If you're concerned about the down payment, you could always go FHA, with a 3-10% down. Just keep in mind you're then going to be paying mortgage insurance on top of the mortgage amount. Still would be in your income comfort zone.
Just for comparison sake, I as a single no child person made not much less than you per year, about $12k saved, and bought a $265k house. Mortgage alone is about 1/4 month's pay, which isn't bad. But then I live in Washington State, which has no income tax, and I work from home, thus I have no commute-related expenses. Reasonably comfortable, I did have some large expenses as part of my new job and some work I chose to do on the home, but I'm not struggling.
So yes, it can be done and it's not difficult. I would say it really does depend on the state though. Were I still living in California, I would not have had the same opportunity. Income tax, house prices too high, job market not great, no work-from-home opportunities...just not good. Never mind water Nazis.
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