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If you can pull this off GO For It!!!!! It's great to be at to do this at 22!!!
I wish I did the same when I had the chance; now it's too late for me, but I tell the same thing to my kids! This is great for "fall back" income. Just make sure the location is awesome.
Quote:
Originally Posted by pegasuskevin
Hello, I am a recent college graduate, who is thinking about buying a condo in my hometown of San Diego. I am a San Diego native and have lived in many areas of San Diego, thus I know the ins and outs of San Diego fairly well. I have acquired a job that pays 45k starting, hopefully reaching 60k+ in the next year or so. It is my desire to not live with my parents, but secure housing that would benefit me right now and the future.
For housing, I am looking to buy a 3 room condo for around 350k-400k. I will make a down payment of 20% and have a 15-30 year mortgage (leaning towards 15 but any input on what I should do would help). My credit score is 782 (for what that is worth) and I have no debts to pay. Additionally, I will live in one of the rooms and rent the two others out for around 1k each. As a San Diego native, I have many connections/friends from college, thus I know that I can easily fill these spots.
Does this seem like a smart move financially? I like to think ahead, while still making the most of the present and this seems like a smart move (I think? I have no experience with real estate). Pertaining to my current situation, I will have a place to live and roommates to fill it with. Additionally, in years to come, I will have most of the payment done and in time to potentially welcome a family (or kick roommates out for more privacy). This condo will be situated in a location that allows young adults/early families to flourish (I will pick a smart spot). Lastly, I know that San Diego is the city that I want to live forever. Despite being a native, I have traveled across the world almost every year and now know that this is my home. Since I have made up this part, I want to start securing my future.
How does this sound? Any tips and advice would be appreciated.
Thank you!
P.S.- I have no experience with real estate. I was recently bored and started to think about my future. My knowledge only extends to what I have read so far. Please help me catch up with this lingo!
No one mentioned this but a lot will depend on your other outstanding debts and payments - meaning do you have:
Credit cards, car loans, student loans, personal loans. Basically anything that shows up on your credit report will be factored in.
Here's some quick numbers:
$350 purchase price with 20% down...
Finance $280k at 4.25% for 30 years = $1,377/month.
Taxes? What is the yearly and divide by 12.
Home Insurance? What is the yearly and divide by 12
Condo fee (association fee?) What is the monthly
Car payment (just an example) = $275
credit cards monthly = $150
You get the point.
Add up the monthly expenses listed above and divide by your income (monthly.)
What is your income montly? A $45k salary divided by 12 = $3,750/month
You won't qualify. Your Debt to income with JUST the mortgage is 37% not including property taxes, home insurance, condo fees, monthly payments to credit cards, car loans, student loans, etc...
Lenders will not allow you to use the rental income. That's room rent and the days of being able to use hat income is long gone.
In adition you need to establish your employment. It does NOT have to be 2 years if you are working straight from college but 1 year of employment is good. Also if you get bonus or Overtime you have to be receiving that consistantly in order to use it to qualify.
Alright everyone, thank you for the tips and advice. This is something that I want to do, but I think I need to be more reasonable. I do agree that mortgaging a house at 350k is not ideal for the situation that I am in currently. However, what do you think about a 200k-250k home? This home would be 2 bedrooms, not 3. I will also be renting a room out for 1k for the next 1-8 years, so that is additional revenue, but I know that I should not and cannot rely on this (though I 100 percent know that I can rent it out to a friend).
Anyway, does a 200k-250k house/condo sound more appropriate? Additionally, what if I got family members to sign with me? Even though I just graduated college, my parents are still paying for a majority of my bills and I do not have to pay for anything besides leisure expenses. I believe that this is beneficial because I know that I will be living in San Diego for the next 10-15+ years and I rather not throw my money into rent. I understand that I may have to wait a bit longer and build a better repertoire as a young professional. I am just trying to plan in advance. Thanks again to everyone!
Last edited by pegasuskevin; 06-27-2015 at 12:21 AM..
Even though I just graduated college, my parents are still paying for a majority of my bills and I do not have to pay for anything besides leisure expenses.
Personally, I'd spend some time paying all of your own bills before jumping into home ownership.
I don't think anyone else mentioned it yet but be sure that any condo association you consider will allow you to rent rooms that way. Around here, most won't allow co-occupants unless they are immediate family members. If they are not, then the condo rules regarding tenants kick in and some association rules don't allow any rentals, some allow rentals but for a minimum period, and some will also only allow a certain number of rental contracts per year. There can be hefty fines to the owner if the rules are broken. Another consideration would be parking. Be sure that having three cars for one unit won't be a violation. Bottom line, be absolutely certain you read all the rules before purchasing.
Anyway, does a 200k-250k house/condo sound more appropriate? Additionally, what if I got family members to sign with me? Even though I just graduated college, my parents are still paying for a majority of my bills and I do not have to pay for anything besides leisure expenses. I believe that this is beneficial because I know that I will be living in San Diego for the next 10-15+ years and I rather not throw my money into rent. I understand that I may have to wait a bit longer and build a better repertoire as a young professional. I am just trying to plan in advance. Thanks again to everyone!
Yes, if your parents cosign the place with you it will be easier. I just hope they know that they will be responsible to pay the mortgage if you can't.
I don't think anyone else mentioned it yet but be sure that any condo association you consider will allow you to rent rooms that way. Around here, most won't allow co-occupants unless they are immediate family members. If they are not, then the condo rules regarding tenants kick in and some association rules don't allow any rentals, some allow rentals but for a minimum period, and some will also only allow a certain number of rental contracts per year. There can be hefty fines to the owner if the rules are broken. Another consideration would be parking. Be sure that having three cars for one unit won't be a violation. Bottom line, be absolutely certain you read all the rules before purchasing.
Not allowing rentals is not the same thing as not allowing you to have a roommate. If they allow 2 or 3 people in your unit you can get a roommate or have someone live with you, all they can do is do a background check on the person if the community requires it.
I do agree that mortgaging a house at 350k is not ideal for the situation that I am in currently. However, what do you think about a 200k-250k home?
You need a budget!
Write down all your expenses (food, cell, tv, gas, etc) and home ownership expenses, taxes, hoa fees, and figure it out with NO ROOM MATE. A paying room mate is not a guarantee and should not be factored into your equation. You need to be able to afford it on your own according to "your" expenses, not what a bank will approve you for.
Do the math and the math will tell you what to do.
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