My lease is up in August and I want to buy a house

[Bearblastbeats]

This will be a first time home buyer situation. I have been trying to clean my credit up and though it is only at a 'fair' standing, I do make a good amount of $$$ to help.

I am currently renting an apartment alone with my dog and my lease is up in August. I plan to get out of apartment living for good as I will be turning 31 next month.

I only have about $2000 saved for this investment atm, so I plan to save significantly more in the next 8 months.

I just refinanced my car so I would like to pay that off ASAP.

Would it better to wait a little longer on the house, maybe another year, and pay off the car? Keep making payments on the car and build up savings for a house?

[Sibley]

You're not ready to buy. Sorry, but you're not. You need to save up a LOT more money. 20% down payment is ideal, but you'll also need savings to buy things for the house, repairs, maintenance, increased emergency fund, etc.

Depending on the interest rate on the car, either pay it off or let it ride. But you need to save for a year or 2 for the house.

[Lews Therin]

Have you done the Renting VS Owning math? There is a lot of factors in play, and just because you're 'at house owning age' doesn't mean it's a good idea. If it's cheaper to rent, why would you buy?

[slappy]

You need way more saved. How much do you intend to save in the next 8 months?

[slappy]

Can you update your case study from last fall?

[Bearblastbeats]

Can you update your case study from last fall?

Income before tax: $60k (I have my review and raise in two weeks, I won't consider it for this study)
Rent: $1,242 (roommate moved out last month, may consider another)
Car loan: $300 (refi a few months back, it is what it is. ~$10,000 remaining)
Car Ins: $190 (up for review in July)
Internet: $70 (Comcast is cheapest in NH)
Heat/HW: ~$50 (mostly kept at 65°F when home.. 60°F when I leave atm)
Electricity: ~$50 (I have everything on power strips which I turn off when I leave)
Student Loans: ~$55 (~$7000 remaining)
Food: ~$200 (maybe less now that I don't drink alcohol as frequently if at all.)
Gas: ~$200-$250 ($0.54 reimbursed for site visits)
Netflix/Amazon Prime: $22
Dog food/supplies: ~$70
Laundry: ~$25

The only time I 'go-out' is when one of my bands play, in which I am paid @ $100-$200 for 3-4 hours of playing. Covers bat tab/transportation.
Work reimburses meals and fuel for job site visits.
I also help my brother with his floor installation business for ~$25/hr. Winter is slow, but picks up seasonally and I work most weekends pulling in $300 or more a weekend from it.

[tralfamadorian]

I agree with Sibley. As your finances and credit stand now, you are not ready. Why don't you set some goals? Take a look at the buy vs. rent calculators as Ben suggested and if you find that buying is the better financial decision, set a credit score and down payment + house emergency fund goals.

[newgirl]

Based on this, it's hard to see how you will be ready to buy by June. You'll need to close on the house in advance of your lease expiration unless you want to be homeless for 2 months.

What are you looking at from a housing price perspective? Have you educated yourself about property prices, taxes, and rents in your area? Let's just say that you were going to buy a house for $150,000. To avoid throwing money away on PMI, you'll need to have at least $30,000 to put down. Depending on the market conditions of your area, you may need to pay your own closing costs. Estimate 3% of the purchase price for this. That's another $4,500. On top of that, you'll need to have cash on hand to pay for moving expenses, any repairs if anything urgently needs to be done, etc. And that's JUST to purchase the house and get you through the first couple of months.

So I'll just be generous and assume you need $37,000 in the bank to purchase.

Also don't forget the impact of a poor or fair credit score. If your score is low enough, FHA mortgage may be your only option, in which case you'll be paying PMI for the life of the loan no matter how much equity you have. If you are able to get a conventional loan with a fair credit score, expect the interest rate to be anywhere between .5 and 1% higher than what you would get with a good credit score. This will cost you tens of thousands of dollars over the life of the loan. Depending on what's causing the poor credit, repair can take months or even years (if you just have to wait for something to fall off or age to the point where it's not a huge hit).

My best guess is that you're 2 years away from being ready to own. Get a roommate, reduce your costs, get your credit score back up, and that will help you be in the best position you can when you really ARE ready in a few years.

[Another Reader]

First, I think you have come a long way since you first started posting.  The person that proposes preparing for a new line of business to his boss is much different than the person from four or five years ago.

However, I have to agree that you are not yet ready to buy.  Yes, renting in your area, with or without room mates, is not fun.  Your history of renting demonstrates that.  However, it's better than losing a house in foreclosure that was leveraged to the hilt and had mortgage insurance on top of the mortgage payment.  In your shoes, I would tighten up that credit score and save a down payment.  Maybe a year or two more of renting, but you got a bit of a late start on saving and investing.

I would start looking at houses and talking to lenders to see what you will have to do to get a good rate and terms.  It might be possible to get a low down payment loan with a slightly higher rate but no PMI, if your credit score is good.  Pay off that car, and keep it.  You will be ready to buy before you know it.

[Dicey]

The thing that jumps out at me is your thread title.  You "want" to buy a house, but do you have a firm grasp on managing Wants vs. Needs? It seems you may have some work to do in that respect before you are ready to take this giant step. The decision is yours, but in my extensive experience, houses cost a fuckton of money. The stronger your position going into a home purchase, the better. This is particularly true when experiencing a market downturn. Real Estate is always cyclical, so it's better to be as prepared as possible.

[Bearblastbeats]

Newgirl and another reader have a better understanding of where my head is at.

I am familiar with what housing costs to maintain and am familiar with repairs. My mother passed ten years ago and for those 4-5 years after I was the executor of her estate. I also am a flooring installer by trade and an engineer. I've built and renovated houses with my family and have helped both parents run and maintain them. I feel that I'm experienced enough to do a majority of the work myself or with help from my brother.

As far as wants vs. needs. It would like to say it leans more on the need side. I'm a musician and a dog owner. Drums are loud, apartments have too many people, and they're is no room to let my Labrador run free. also, my rent is more than most peoples mortgages.

All I require is a 2-3 bedroom ranch with a basement for rehearsal. Renting a rehearsal space is $300-500 a month.

Houses in the locations I'm looking at are 200-250.

I like how newgirl laid down a game plan so I can actually see a timeline of events instead of the majority of people saying "NO DONT DO IT."

thanks.

[eaknet]

It’s not that people are saying, “No don’t do it.”  They’re saying, “No don’t do it YET.”

I agree with the consensus that you’re in no position to buy a house, if you could even get a lender to underwrite a mortgage. You make a good income, and should be able to put together funds for a house in rather short order, but don’t jump the gun.


Sent from my iPhone using Tapatalk

[Lews Therin]

I am familiar with what housing costs to maintain and am familiar with repairs. My mother passed ten years ago and for those 4-5 years after I was the executor of her estate. I also am a flooring installer by trade and an engineer. I've built and renovated houses with my family and have helped both parents run and maintain them. I feel that I'm experienced enough to do a majority of the work myself or with help from my brother.


Houses in the locations I'm looking at are 200-250.

I like how newgirl laid down a game plan so I can actually see a timeline of events instead of the majority of people saying "NO DONT DO IT."

This is good info. When you take the Rent VS Buy calculator, and put in all the info, it will allow you do figure out when the best point to buy will be. If house / rent costs are hugely in favor or buying, then you might want to start looking, but you have very little leeway at this time. By figuring out exactly how much you are losing/gaining by renting, you will have a better estimate of when to buy.

This is however not to say you can't start researching the market and looking at every single listing. Then when you have enough to do the downpayment/feel secure on payments, you will know which are good deals, which are worth buying.

[KTG]

You're not ready to buy. Sorry, but you're not. You need to save up a LOT more money. 20% down payment is ideal, but you'll also need savings to buy things for the house, repairs, maintenance, increased emergency fund, etc.

I agree with this 100%.

My parents repeatedly told me before I bought that (1) Homes are A LOT of responsibility, and (2) are VERY expensive. You are not really able to grasp how true both statements are until you own one. I was lucky to get a great home in great condition some 5 or so years ago and still hemorrhaged money the first couple of years not just fixing it up and making basic repairs, but to also more expensive things like replacing an AC unit and pool pump. But even things like furniture and so on will add up. The thing is that you just have no idea when the next thing is going to break, and its all on you to get it fixed, and if you don't things deteriorate pretty quickly. I also have a pretty big property, and its times consuming to take care of.

I have no regrets, I have never been happier, but the cost of owning a home far far exceeds the mortgage. If you are budgeting your life based on what kind of mortgage you can afford and not setting aside good money a month to save for maintenance and repairs, the home will bury you.

Take you time and save. And when you do buy, be sure you really love the house, because you are going to spend a awful lot of time with/on it.

[Lulee]

Any chance you would consider renting a ranch or small house somewhere for the few years it takes you to clear loans and save the 20% down payment?  It might be easier to find a band rehearsal/dog friendly space in a house.  And with a roommate, you should still be saving money over your current situation.

While you're planning out the future acquisition, you'll want to factor in the bloody property taxes which, for those outside of NH, are HIGH to make up for the fact we don't have a personal income tax.  https://www.revenue.nh.gov/mun-prop/municipal/documents/taxrate.pdf (also available in an Excel format so you can sort it) seems like it would help you choose which towns have more reasonable taxes.  Why waste time looking at houses in areas with killer tax rates?

I like watching what's on sites like http://www.jsjauctions.com/ for a couple of reasons.  I can see if there are sections of distressed houses in an area that might make that town or area of a town worth avoiding.  I can see if there are certain ranges of properties that are foreclosed on which might indicate a soft market for a particular price range or type of house.  The number of properties goes way down when the market heats up and goes way up, in spurts, as the banks try to offload foreclosures without tanking the overall rates in any particular area.

As motivated as you are, I expect you'll be in a house of your own in a few years time.  And done properly, without PMI and with enough emergency funds beyond the 20% down to help you weather any hiccups like a failed water heater that might stymie the average Joe Housebuyer.

[Dicey]

Newgirl and another reader have a better understanding of where my head is at.

I am familiar with what housing costs to maintain and am familiar with repairs. My mother passed ten years ago and for those 4-5 years after I was the executor of her estate. I also am a flooring installer by trade and an engineer. I've built and renovated houses with my family and have helped both parents run and maintain them. I feel that I'm experienced enough to do a majority of the work myself or with help from my brother.

As far as wants vs. needs. It would like to say it leans more on the need side. I'm a musician and a dog owner. Drums are loud, apartments have too many people, and they're is no room to let my Labrador run free. also, my rent is more than most peoples mortgages.

All I require is a 2-3 bedroom ranch with a basement for rehearsal. Renting a rehearsal space is $300-500 a month.

Houses in the locations I'm looking at are 200-250.

I like how newgirl laid down a game plan so I can actually see a timeline of events instead of the majority of people saying "NO DONT DO IT."

thanks.

I must say, I find myself mildly irritated that you are refuting the "majority of people " by providing a slew of additional, relevant information. Had you bothered to provide these details in the first place, you might have received answers more to your liking.

Based on this statement alone, "I only have about $2000 saved for this investment atm, so I plan to save significantly more in the next 8 months." I stand by every word of my original reply.

[soccerluvof4]

If you want to buy a home for 200k then you need 40k or 250 you need 50k and you have 2k on a 60k salary with maybe a raise and so so credit.  So maybe look for a rent to own option.  This way you can perhaps get what you want and the payments will count towards a down payment. In most markets now you will probably pay top dollar and then some though if you can find something. So start looking, see whats out there and see if someone will work with you BUT I agree , you got aways to go to say the least.

[Capt j-rod]

Based on what you've provided you are cash rich and credit poor. Be careful amassing a huge amount of cash quickly as the bank likes a clean paper trail. Installing flooring for cash doesn't show up on the tax return. Next I would consider a duplex. Live in 1/2 and let the other 1/2 help with the burden. Fix it up, switch sides, fix that one up and then decide as to where you want to be.
Option b: drink the cool-aid borrow everything you can get, pay PMI, higher interest rates, and saddle up like the rest of the Sukka's in this lame ass country who are piss poor and can't get out.

[accolay]

Yeah. Getting your credit rating up is probably even more important than having cash. Keep working hard on it. Besides, isn't August one of the busiest house buying months?

Keep hustling through the year and start looking for a house after Christmas once your credit is fixed.

[Dicey]

Based on what you've provided you are cash rich and credit poor. Be careful amassing a huge amount of cash quickly as the bank likes a clean paper trail. Installing flooring for cash doesn't show up on the tax return. Next I would consider a duplex. Live in 1/2 and let the other 1/2 help with the burden. Fix it up, switch sides, fix that one up and then decide as to where you want to be.
Option b: drink the cool-aid borrow everything you can get, pay PMI, higher interest rates, and saddle up like the rest of the Sukka's in this lame ass country who are piss poor and can't get out.

Wait! He says he has $2,000 saved. How is that "cash rich"?

I am retired from the flooring industry, so I know damn well what a good installer can make. Why is his credit bad and where are the fruits of his labors? His back and knees won't last forever. When they go, what will he have to show for it?

[Bearblastbeats]

Based on what you've provided you are cash rich and credit poor. Be careful amassing a huge amount of cash quickly as the bank likes a clean paper trail. Installing flooring for cash doesn't show up on the tax return. Next I would consider a duplex. Live in 1/2 and let the other 1/2 help with the burden. Fix it up, switch sides, fix that one up and then decide as to where you want to be.
Option b: drink the cool-aid borrow everything you can get, pay PMI, higher interest rates, and saddle up like the rest of the Sukka's in this lame ass country who are piss poor and can't get out.

Wait! He says he has $2,000 saved. How is that "cash rich"?

I am retired from the flooring industry, so I know damn well what a good installer can make. Why is his credit bad and where are the fruits of his labors? His back and knees won't last forever. When they go, what will he have to show for it?

I only install on the weekends with my brother or if coworkers give me work. My day job is a project manager. Why do I only have 2000 saved? Well, i paid off all my credit card debt, I also cut my car loan and student loans in half. I kept the 2000 for a buffer and am throttling that amount up in 2018. August wasn't the end all be all as for buying a house. I wanted to know where I stood in the grand scheme of things. I do know I need to work on my credit. I had a voluntary repo about 7 years ago and that should be off my score in a year or so. I also have checked in with the 3 bureaus and everything else looks OK.

Other than those two loans, my expenses are minimal. I expected to need to rent for another year or so but I want to get the ball rolling. I don't necessarily have a lot of people in my life to give me any guidance in these things.

 

[Roadrunner53]

We built our home new in 1975 so we know where the skeletons are buried. We were in the house about 5 years and our septic system failed. The septic system installer put in a defective system and was out of business by the time of our problem. So we had to install one...again! The pump in our well has gotten hit by lightening twice so we had to replace that twice. We had a terrible snowstorm in October (about 5 years ago) before the leaves came down and tree in our yard came down from the weight of the snow. We had to hire a tree guy to cut down a bunch of trees. Our boiler had to be replaced twice due to age. Driveway paving twice. A few years back we put on vinyl siding and replaced the deck for the second time. We replaced the roof twice. We have had other things replaced over the years too. Not to mention riding lawn mowers, push mowers, leaf blowers, ladders, snow blowers (2). Tools of all sorts. I could go on and on. My point is, owning a house is more than the mortgage payment, real estate taxes and house insurance. Even with a brand new house over time things break and need replacement. It is a money pit new or old. So be aware, owning a house is a wonderful thing and I would encourage it but it is also a money sucking machine too.

[Bearblastbeats]

We built our home new in 1975 so we know where the skeletons are buried. We were in the house about 5 years and our septic system failed. The septic system installer put in a defective system and was out of business by the time of our problem. So we had to install one...again! The pump in our well has gotten hit by lightening twice so we had to replace that twice. We had a terrible snowstorm in October (about 5 years ago) before the leaves came down and tree in our yard came down from the weight of the snow. We had to hire a tree guy to cut down a bunch of trees. Our boiler had to be replaced twice due to age. Driveway paving twice. A few years back we put on vinyl siding and replaced the deck for the second time. We replaced the roof twice. We have had other things replaced over the years too. Not to mention riding lawn mowers, push mowers, leaf blowers, ladders, snow blowers (2). Tools of all sorts. I could go on and on. My point is, owning a house is more than the mortgage payment, real estate taxes and house insurance. Even with a brand new house over time things break and need replacement. It is a money pit new or old. So be aware, owning a house is a wonderful thing and I would encourage it but it is also a money sucking machine too.

The way I see it is that, I would rather put money into something that is mine. At the end of the day if things break it is to be expected and things will always cost $$$. I wouldn't mind fixing things as I have been building and renovated since I was big enough to carry a tool box. Consider it a hobby to me.

The freedom to knock down a wall, play my drums, let me dogs run wild, or just listen to music as loud as I want without neighbors banging on the floor above me appeal to me and I would gladly pay that much more to have a little peace of mind.

[Roadrunner53]

That's good you have the ability to fix stuff. However, when you have to pay other people to fix or replace just make sure you have some savings because these things break down when you are least prepared it seems. Of course the heating system always breaks in the winter and ac system always breaks in the summer. Appliances break down anytime they feel like it. Good luck on buying a home. We love living in our home. When I was a kid my parents rented for years and years and were at the mercy of the landlord. I am glad not to live like that in my married life.

[Dicey]

Based on what you've provided you are cash rich and credit poor. Be careful amassing a huge amount of cash quickly as the bank likes a clean paper trail. Installing flooring for cash doesn't show up on the tax return. Next I would consider a duplex. Live in 1/2 and let the other 1/2 help with the burden. Fix it up, switch sides, fix that one up and then decide as to where you want to be.
Option b: drink the cool-aid borrow everything you can get, pay PMI, higher interest rates, and saddle up like the rest of the Sukka's in this lame ass country who are piss poor and can't get out.

Wait! He says he has $2,000 saved. How is that "cash rich"?

I am retired from the flooring industry, so I know damn well what a good installer can make. Why is his credit bad and where are the fruits of his labors? His back and knees won't last forever. When they go, what will he have to show for it?

I only install on the weekends with my brother or if coworkers give me work. My day job is a project manager. Why do I only have 2000 saved? Well, i paid off all my credit card debt, I also cut my car loan and student loans in half. I kept the 2000 for a buffer and am throttling that amount up in 2018. August wasn't the end all be all as for buying a house. I wanted to know where I stood in the grand scheme of things. I do know I need to work on my credit. I had a voluntary repo about 7 years ago and that should be off my score in a year or so. I also have checked in with the 3 bureaus and everything else looks OK.

Other than those two loans, my expenses are minimal. I expected to need to rent for another year or so but I want to get the ball rolling. I don't necessarily have a lot of people in my life to give me any guidance in these things.

Instead of stressing yourself out, renew your lease or find another rental situation, and keep reading here until you've amassed a more substantial DP, plus a reasonable EF. I have been house poor before, with significantly more reserves than you're proposing, and it was not fun. Talk about feeling trapped.

Add: I just read Roadrunner53's responses and I agree wholeheartedly.

[Sibley]

Just because you have the skill to DIY things doesn't mean they're free. I'm DIYing a ton of stuff. I've still spent around $10k since June on repairs, etc for my house. Lack of time/energy is the only thing that's delaying about $7k more of expenses right now. And that's with a ton of DIY. Materials are not free.

Just keep plugging along saving money for a down payment AND a hefty emergency fund. Once you've got the money, then you're in a better position to buy. In the meantime, look into renting a house or something.

[Bearblastbeats]

Just because you have the skill to DIY things doesn't mean they're free. I'm DIYing a ton of stuff. I've still spent around $10k since June on repairs, etc for my house. Lack of time/energy is the only thing that's delaying about $7k more of expenses right now. And that's with a ton of DIY. Materials are not free.

Just keep plugging along saving money for a down payment AND a hefty emergency fund. Once you've got the money, then you're in a better position to buy. In the meantime, look into renting a house or something.

I was renting a 3 bedroom ranch before this apartment but the landlords daughter came back from the west coast and he gave me 30-days to move so her family could take it. At that time, this apartment was the only place i could get into with a 100# Labrador due to weight restrictions and not enough time to look. If i were to break lease to find cheaper housing it will cost me around $5000. After a 60-day notice and those 2 months of rent, they require another 2 months rent to terminate the remainder of the lease with no further responsibilities.

They do allow transfers; however, there is a $500 transfer fee assessed if I transfer mid lease. There are 1 bedrooms available right now, but the rates are a bit high. There is one on the 1st floor without a patio (instead of the slider, there are windows in the living room) and that is renting at $1,140 per month and the other we have is on the 3rd floor with a balcony, renting at $1,170 per month.

If I were to go with the $1140 option, plus $35 for dog fee. I am only saving 67 a month.. after spending $500 to move.