Author Topic: First-time home buyer in CA in my 40s  (Read 1051 times)

Roks

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First-time home buyer in CA in my 40s
« on: May 29, 2019, 04:31:21 PM »
Hello fellow Mustachians! I just signed up for this forum today! I wish I knew about Mr. Money Mustache and the FI community several years ago when I was making unwise spending choices. But, alas, here I am.  I can use your help, as I feel a little defeated.  I am not where I'd hope to be in life.  I've been hit with a few personal challenges, but I'm at a point where I want to make my finances and early retirement a priority.  I learned about FIRE, MMM and Dave Ramsey last year.  As a result, I got my spending in order, saved 65% of my income, paid off my car and student loans and now am debt-free! Whooohoooo!

I would like to save up to buy a house, but the problem is that no matter how I crunch the numbers, it'll take me at least three years to save up for a decent down payment (I want to put at least 20%, preferably more down), closing costs, plus have extra money to buy appliances and furniture AND that includes an inheritance my dear mom left me.  I am so grateful I have at least that, but even still, it feels daunting to buy a home where the housing price is between $450k-$600k. 

My low rent is only 14% of my income. I just started to invest in Vanguard's VTSAX, but I'll have to put that on hold as I save up for a house.  I'm bummed about that because three years is a lot of time, especially for me, who would like to retire in my 50s! 

I would like to buy a home with a 15-year mortgage and would like my monthly mortgage payment to be no more than $1,800/mo. If you have any advice about how to save faster, or if I should wait to buy a house and put all my money in Vanguard, I would love to hear from you.  Thank you all!
« Last Edit: May 31, 2019, 05:53:34 PM by Roks »

waltworks

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #1 on: May 29, 2019, 09:31:10 PM »
Renting is a no-brainer here. Your rent is dirt cheap and you're single, what do you need a house for? Housing costs don't stop with a mortgage payment - you'll be paying quite a bit more for insurance, property taxes, and of course a big chunk (at least a couple hundred dollars a month) for maintenance.

I mean, if you're going to be collecting a $100k/year pension in a few years, do whatever you want. If you actually need to accumulate some investments to make RE work, buying a $500k+ house is probably the worst move you could make.

-W

blingwrx

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #2 on: May 29, 2019, 10:50:18 PM »
Please run some mortgage calculators and rent vs buy calculators.

600k house with a 15yr mortgage at todays rates and 20% down will cost you $4100 a month after factoring in insurance and property tax.
600k house with 30yr mortgage and 20% down is around 2.9k a month.
450k house for 15yr mortgage and 20% down is around 3k a month.
450k house for 30yr mortgage and 20% down is around 2.2k a month.

Another factor is the amount of time it will take you to save up that down payment interest rates will likely go up and you'll be that much closer to retirement age where it might not make sense to buy a house as your income may be reduced.
 
Most likely you won't find anything good in California at the lower end of your price range unless you really live out in the burbs or its a major fixer upper then at that point you may need another 100k for repairs and renovations.

If you want lower monthly payments you can't go with the shorter mortgage you'll need to look at a 30yr mortgage.

Buying make 0 sense if you're only paying $840 a month in rent. Run some buy vs rent calculators and it will be very obvious renting is the way to go if housing prices are that high in your area. Stay where you are as long as your landlord will have you, it's a sweet deal.

As other guy mentioned single does not need a house. Focus on the early retirement instead and enjoy life and travel instead of paying mortgage payments on a big house you don't need. If you meet someone maybe in the future your plans may change and you might not even want this house.

Roks

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #3 on: May 29, 2019, 11:07:41 PM »
Thank you for the responses! There is a part of me that feels like I would like to have a decent place of my own, plus my sisters and family that live two hours away are most likely to visit if I get a house because they will have a place to stay. I've also lived at my current apartment for five years and would like a change, but rent has really gone up in the area.

However, you're right, it makes the most sense for me to stay where I'm at.  I've tried mortgage rent vs. buy calculators and all the evidence points to renting. A huge plus is that I really love the location, have my own parking space and have such a great landlord who has not raised the rent!
« Last Edit: May 29, 2019, 11:10:29 PM by Roks »

spartana

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #4 on: May 29, 2019, 11:10:03 PM »
And married doesn't need a house either. Two can share a one bedroom apt with ease. OP has a major sweet deal on rent - a price that in most of Calif wouldn't even cover a room rental - and should keep that as long as possible. Invest your money and FIRE when ready then look for a lower housing cost area. As a long term homeowner who sold a place in Calif,  renting is the way to go here at this time.
« Last Edit: May 29, 2019, 11:12:25 PM by spartana »

talltexan

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #5 on: May 30, 2019, 07:56:04 AM »
First of all, congratulations on living with a 65% savings rate.

Indeed, you may have lifestyle reasons that mean you wish to end your rental situation at some point. It's totally reasonable to wish to own a place of your own.

But real estate prices in CA are INSANE. With that savings rate, you may be able to accumulate some other pot of investments that pay your rent for a better place.

Example:
$2,000 monthly rent could be safely withdrawn from $600,000 invested in the Vanguard Wellington fund (which is approximately 60% stocks, 40% bonds)

So instead of buying that house for $600,000, think about what you could rent for $2,000 a month.

For more on this type of thinking, check out the https://www.financialsamurai.com/ blog.

Roks

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #6 on: May 30, 2019, 08:31:09 AM »
Thanks so much! This is great advice. Thanks for the link to the financial samurai blog! Iíll check it out. Iím feeling much better about my situation. I guess Iíve felt like an outsider from my family & friends who have owned homes for more than 15 years, but Iíd rather retire early and live in different places. My only other concern is that I stay at my current job until I can receive my pension and healthcare benefits, but it is so incredibly boring and unfulfilling  to be there some days. Not sure what to do about that.

spartana

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #7 on: May 30, 2019, 11:24:27 AM »
Thanks so much! This is great advice. Thanks for the link to the financial samurai blog! Iíll check it out. Iím feeling much better about my situation. I guess Iíve felt like an outsider from my family & friends who have owned homes for more than 15 years, but Iíd rather retire early and live in different places. My only other concern is that I stay at my current job until I can receive my pension and healthcare benefits, but it is so incredibly boring and unfulfilling  to be there some days. Not sure what to do about that.
I think this is wise especially as a single working person. Houses generally require much more TIME to maintain as well as much higher expenses then a rental apt. Time the you could be using to earn more or play or socialize more. I'm a single woman with some serious DIY skills and I was very overwhelmed with trying to do it all solo and have a life too. Between all the household chores, repairs and maintenance, a job that required a lot of OT (also former Cal state eemployee), a long commute, several pets, various time-consuming physical hobbies and trying to date and have a social life I met with mega-burn out. FIREing helped a lot but I was still spending WAY too much time (and money) on basic home maintenance.

So besides the much higher costs you'll incur buying (so many costs!) home ownership as a single working person can be a huge time-suck that can be soul killing. Your family can crash at a motel when they visit and once FIRE you can move closer to them if you want.

As for job burn out before you hit your pension can you quit early and get a reduced pension once your meet eligibility age? I left my job at 42 and could collect my CalPERS Public Safety pension once 50.

Roks

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #8 on: May 30, 2019, 12:14:44 PM »
Thank you, spartana!! Your advice is very helpful! 

I'd love to learn more about government pension and FIRE?  I can't collect my pension until I'm 55.5 (another 13 years) and need to be with the state for at least another 10 years for my health benefits to vest.  I'm afraid to leave any sooner as my pension will be minuscule and I won't have enough saved in my VTSAX and other funds to live off of that.  I feel a bit locked, but if it's just another 10-13 years, I can do it.


spartana

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #9 on: May 30, 2019, 12:33:35 PM »
Thank you, spartana!! Your advice is very helpful! 

I'd love to learn more about government pension and FIRE?  I can't collect my pension until I'm 55.5 (another 13 years) and need to be with the state for at least another 10 years for my health benefits to vest.  I'm afraid to leave any sooner as my pension will be minuscule and I won't have enough saved in my VTSAX and other funds to live off of that.  I feel a bit locked, but if it's just another 10-13 years, I can do it.
I was in the same situation. I needed to work more years to get health insurance benefits even if I could get a pension once I was 50 or older because I was vested after 5 years. I had worked 10 plus bought back some of my military time for additional service credit years to add to my pension. While the military service credit time counted as "years worked" towards the pension, it didn't count towards "years worked" for health insurance. So I'd need to work 10 more years. I could have done it and still retired at 52 instead of 42, with a higher pension plus medical insurance,  but I had other health care options (and had paid off my house and no debt) and things I wanted to do while younger so pulled the plug. The Golden Handcuffs were hard to shake off though!
« Last Edit: May 30, 2019, 12:35:11 PM by spartana »

Roks

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Re: First-time home buyer in CA at age 43 (solo)
« Reply #10 on: May 30, 2019, 01:31:55 PM »
That's excellent!  It's great you figured all that out and were in a position to retire at 42!!

Hopefully I can find some joy in my work.  I just realized that I would have to be here until I'm 55 to get my health care benefits :/ Maybe my podcasting & personal development dreams will take off before then!!