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You appear to have some financial discipline, so I think you can make it OK. Get a room rented out asap. Not having a car will help too.
I second this. I also live in NJ so I know where you're coming from. Since you're doing this on 1 income, I'd definitely recommend renting a room. If I read your budget correctly, 500 per month left over wont leave much wiggle room. Was that 3155 after taxes including helthcare and the pension? Also, my friend is a teacher and has the option of getting paid over the summer as well. You run a bit of a risk by choosing not to get paid over the summer. What happens if no summer job is available?
Then that puts you in the up to 180,000 price range -as a MAX.
And at that point... if/when... the 25% you committed to today will be even less.
That's a GoodThing as it means you'll actually get most of the benefit of that raise in pay.
I prefer bankrate.com
(see the attached)
Which gets us back to the first point I attempted to make.
If you don't mind, I have one question for you. Does the 3x rule typically apply to the mortgage (200k or so in my case) or price of the home (250k in my case). Thanks.
And by the way the calculator you screen-shotted is off because of the high property taxes here. Like I said a $600 month mortgage just doesn't exist.
I second this. I also live in NJ so I know where you're coming from. Since you're doing this on 1 income, I'd definitely recommend renting a room. If I read your budget correctly, 500 per month left over wont leave much wiggle room. Was that 3155 after taxes including healthcare and the pension? Also, my friend is a teacher and has the option of getting paid over the summer as well. You run a bit of a risk by choosing not to get paid over the summer. What happens if no summer job is available?
If you don't mind me asking, where in NJ are you?
Thanks for the advice. I live 15 minutes west of Atlantic City. The $3155 I make a month is after I pay for my healthcare and pension, yes. And yeah, property taxes are the biggest killer in this situation.
And yes, my job does offer the option of my paychecks being spread over 24 periods instead of 20, but I figure I'm good enough with money that I can forego that.
Also I have some options through the school of picking up additional hours that I will certainly look into.
The only monthly bills I would have are:
Cell Phone Internet Electric Water Gas Food Going Out (rarely do) House Maintenance (house is in great shape btw) A few other small things like haircuts, toiletries, prescriptions...I've tried to think of everything and my monthly expenses adds up to $1050.
OP,
You are not specific about how much you have budgeted for each expense you have listed. If you are presently renting a small apartment and you plan on moving to a house that could easily handle 4 people - I suspect you have grossly under estimated you utilities and house maintenance costs.
For example do you really think you can estimate your water, sewer, electric, air conditioning and heating costs based upon what you are presently paying for a small apartment vs a larger house?
Do you realize for example that in one community your sewer bill could be $300 per year and in a neighboring community it might be $900 a year? Or, that heating and cooling a two story house can be more expensive than a one story house of the same size?
And, it sounds like you would be moving into a single family home that you would need to furnish. Do you already have a lawn mower, tools, etc. to maintain this property or would you have to go out and buy them?
As for going carless, how do you get to the grocery store, doctor's appointments etc. if it is raining or 20 degrees outside? Is there an alternate mode of transportation available to you if your heath or the weather does not permit you to walk or bike to where you want to go? And what about getting around at night? Would you feel safe walking or riding your bike after dark?
I would argue that you are under estimating your monthly expenses and need to talk to people who presently own homes in your desired area to get a realistic view of utility costs in that specific area. Even then, you utility costs could be even higher if your desired home has poor insulation, older windows etc.
What's your current living situation? I know you said you're ok with things being a little tight, but I wouldn't voluntarily choose to live paycheck to paycheck if you can avoid it. Even if the house is in great shape, I wouldn't be surprised if you end up with a few expenses that you didn't anticipate. A big killer for you is NJ's property taxes, but I'm guessing moving to a state with lower property taxes isn't really an option. Over 1600 a month for a 200k mortgage balance sounds crazy to me, but I don't live in a high property tax state.
My current living situation is renting a bedroom form my parents for only a few hundred dollars a month...so you're absolutely right in saying it's really tough to voluntarily go from a very advantageous situation, to living paycheck to paycheck and paying a 1600 mortgage, but I really need to get out of here. I am 30 next month and have been working for 6 years and saving for even longer.
I agree 25% of net is extremely conservative if utilities are getting lumped into it as well. Not even Dave Ramsey is that conservative in his recommendations (he excludes utilities, though I suppose if you take a 30 year mortgage those could about cancel one another out). I played with the 3x income numbers a bit and with semi-reasonable utility estimates there are actually very few situations where that is even mathematically possible (i.e. even buying a home for 100k with 20% down would almost assuredly put you over that when you factor in tax and utilities). It actually won't work for renting either in even many moderate COL areas. My wife and I actually come close, but our situation is vastly different (married, moderate cost area, much higher incomes) and we deliberately under-bought what would still be comfortable, simply because there was no reason not to given the circumstances. The purchase price was around 1.8x income.
That said - I do agree you are reaching and setting yourself up for more of a struggle than you realize here. If you underestimated anything on your budget list, you've got a problem. If you want to rent 1-2 rooms out, that becomes a slightly different story, but I think that would need to be Plan A for you to consider this rather than Plan B.
I know you say long-term, but my point is just that you don't "know" its a good fit long-term if you aren't married. Say your future partner has a job at the other end of the city and would have an hour + commute? By no means do I think everyone needs to wait around to be married/settled to buy a house, but I think stretching that much in this particular circumstance is not a good idea. Potential changes to life circumstances are just a part of it.
Edit: Just saw your last post. I totally get the desire to move out and agree that its about time that happened However, that doesn't require you buy a house. Can't say I know the area very well, but you would likely be better off finding 1-2 roommates and renting a 2-3 bedroom apartment than stretching to buy that house. Any reason you aren't considering that as an option?
Yes, you can "afford" it, but you'd be taking a huge risk. Those NJ taxes make the deal very unattractive to me as it adds another $625 per month to your expenses! To compare, I pay about $120 a month in property taxes on my condo in downtown Honolulu and my parents pay about the same for their townhouse in Brooklyn (both of which cost significantly more than the property you're eyeing). Its unfathomable to me that you'd be paying $225,000 in property taxes over the course of a 30 year home loan (that's only in today's dollars and doesn't account for inflation and near-certain tax hikes).
What would a non-family rental deal cost in the area? If substantially less than what you'd be paying in mortgage and other housing-related expenses, I'd seriously consider going that route over buying.
Anywhere near Atlantic City seems toxic right about now. I think prices there would come down some more in a few years.
Do you plan on staying in the area over 10 yrs? At some point im sure youd move. There's no harm in renting a small apt if you wanna leave your parents house.
My current living situation is renting a bedroom form my parents for only a few hundred dollars a month...so you're absolutely right in saying it's really tough to voluntarily go from a very advantageous situation, to living paycheck to paycheck and paying a 1600 mortgage, but I really need to get out of here. I am 30 next month and have been working for 6 years and saving for even longer.
Why not just rent a room near work from a private landlord? I'm 30 and do it too, I have saved quite a lot of money for my far more meager income than yours. In a few years you can get the same house with a monster down payment ($100k? $120k? $150k?) and a more manageable mortgage.
If you rent a room from your parents or rent a room from someone else, then you might as well buy now and rent 2 rooms to roommates. Do that for 5 years and set aside 1k a month. Then when your income goes up or you get married, stop having roommates.
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