Author Topic: Just married, need advice on buying a home in April 2020 (when lease ends)  (Read 3562 times)

Emergo

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Hello,

My wife and I got married last month. We reside in Houston, TX. We currently live in an apartment where we pay $810 (with trash and water) each month.

My salary is $70k annual, hers is $50k annual.

We have decided we need to move into a home of our own because we have too many pets (4). Also, it sucks not having a doggy door.

Our max budget on the house is $150k. I know everyone preaches on this site to put 20% down payment but I don't think that will be possible for us unless we settle for a $80k home.

Me: No credit card debt or other debt
Wife's student loans = $14,000

We have saved $1,400 so far towards the house. We plan to save $2,000 each month starting this November. With my wife's incoming bonus of $3,000, it looks like we will be able to have $14,400 by March.

So, if we go for a $150k home, we will be able to put in nearly 10% down. If we go for a $120k home, it's 12%.

I know people will probably suggest for us to wait a little bit more to save up but I do not think that is an option.

Can people give us tips on buying a first home? Do we refer to a online mortgage broker like what Mr Mustachian suggested in his blog? How do we go about hiring a realtor? Do we even look for a realtor? Or just use online resources to find homes? Can I use some of my 401k money to put in towards the down payment? We are also planning to create a bank account as our joint account for monthly expenses (groceries, bills). Any thoughts on that? Any tips will help...
« Last Edit: October 26, 2019, 09:29:07 PM by Emergo »

seemsright

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No! You need to wait. Owning a home is expensive!

If you cannot put the 20% down and have what I lovely call a 'oh shit' fun you do not have enough money to pay the bank for a house. Things break, things need to be replaced all of the damn time, it is a grand time when the roof and furnace go out at the same time and must be replaced. It is a grand time when the kitchen rained due to a washer failing. It is a grand time when the neighbors tree falls over during a windstorm and knocks down the fence. I can go on and on.

Find a better rental. Do not buy a home. Paying the bank for your home is not as simple as a mortgage and escrow. When the toilet needs to be fixed you do not get to call the landlord when you pay the bank for your home.

Finances_With_Purpose

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Wait, wait, wait.  And we know that's not what you want to hear, but future you will be VERY happy you did so.

You need funds for closing costs, an emergency fund (now you have a mortgage/can't just move in six months), and a sinking fund for maintenance.  Especially if you're buying at 150k in a pricier market. 

You also want to budget out maintenance and other things. 

Pay off the student loan, get to 20% down, get some extra savings well above closing costs in the bank (with some to spare), and THEN think revisit.  Until then, you're just asking for trouble.

Also: do you plan to have kids?  Because that will have a huge impact on your finances, your time, and whether this plan is good or not.  Think that through first in particular, or wait until you have them a while to buy a house, so you know what you're able to do. 

Emergo

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Thanks for the replies so far. But lets say we've already decided we are going to make this bad decision. How would you go about minimizing the fallout from this bad decision? Thanks

Dicey

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Buying the wrong house is an expensive mistake, so my first advice is to slow the fuck down.

Waiting until you have 20% down will give you the time you need to figure out what kind of house at what price will work best for you, long term.

Start by going to Open Houses. Take notes on every house you look at. Keep the flyers. Listen. Learn. Don't get hooked up with a broker just yet. A broker is guaranteed to try to sell you something, it's their job. Don't give anyone your contact information. If you need to create a fake email address, do it. Your job is to learn, not to buy just yet.

Start following Zillow or Redfin or whatever is popular in your area. I use both, because I like Zillow's price history and neighborhood features, but Redfin updates faster.

I strongly advise you to save like crazy. Buying a house is super expensive. There are so many costs beyond the down payment to consider. You're going to be glad you waited until you could really afford it.

« Last Edit: October 26, 2019, 11:15:19 PM by Dicey »

ZMonet

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We have saved $1,400 so far towards the house. We plan to save $2,000 each month starting this November. With my wife's incoming bonus of $3,000, it looks like we will be able to have $14,400 by March.
If you can save $2k/month, why can't you just wait until 12-15 months when you'll have $24-$30k for the down payment?  Can you buy a home with just 10%?  Sure.  But others are right that you'll be in much better shape if you have the 20%.  Whatever you do, make sure the house you buy is the right fit for you for at least the next 5-10 years, but optimally longer.  A hybrid plan of getting a better rental and saving $1500/month until you get to the 20% might be something to consider too.

Based on your combined salaries of $120k, I wouldn't think there would be an issue with buying a $120k-150k house as you're talking about 100%-125% of your yearly salary, which I imagine is growing (if you haven't already, you might want to do a case study to verify).  But, others are right to caution you to slow down to make sure you have all your ducks in a row.  Houses are expensive, both in terms of time and money, and you'll want to limit the stressors on your marriage, especially early on.  Also, it sounds like you're young so it might be smart to take some time to figure out what type of home you both want for the long haul.  As someone else mentioned, do you want children soon?  That might change the type and price point of the house you'll want to get.

Can people give us tips on buying a first home? Do we refer to a online mortgage broker like what Mr Mustachian suggested in his blog? How do we go about hiring a realtor? Do we even look for a realtor? Or just use online resources to find homes? Can I use some of my 401k money to put in towards the down payment? We are also planning to create a bank account as our joint account for monthly expenses (groceries, bills). Any thoughts on that? Any tips will help...

I'd use a Realtor that rebates back some of the commission to you (usually .5 - 1%).  Interview a few Realtors though and make sure you find one you like and isn't too pushy.  Keep in mind that they want you to buy a house quickly, especially if they are rebating back a chunk of the commission to you.

You can look at homes online -- which I'd guess you're already doing -- but you'll likely need a Realtor to get you in the door to actually see the places.  When you do find a home you like, make sure to get a good home inspector and do go on that home inspection with them.  Anything that is especially problematic that the home inspector identifies in the house, you should consider asking for either a repair or money off the purchase price so that you can make the repair.  If the seller is unwilling to do this, you should consider walking away no matter how good a deal you're getting.  This is where having the 20% down AND emergency funds would come in handy to give you more flexibility...Whatever you do, don't fall in love with the house before closing as you'll make really bad decisions on the front end that will set you back going forward.

Don't use your 401k money for a down payment.  In your good situation, this is just a bad idea and is unnecessary.

How you divide your finances is a separate, but related, decision your wife and you will need to make.  Tons of ways to do it, but the best thing to do is to avoid any animosity now or in the future.  If you're just starting out and are on pretty equal footing, and it seems like you both are, you might consider just putting all money in a joint account.  If either at you balks at this, you should figure out why,  It isn't that you can't have some/all separate finances, itis just that you should think about why that is necessary.  That said, many people on these forums do just that and don't have any problems (and even avoid some).

Good luck.  It looks like you are in good shape.  We just want to make sure you continue along that path.

Emergo

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Can someone help me convince my wife by sharing why saving 20% is a good idea and what it helps eliminate / save? We read a lot here to save 20% but not sure where to look for the explanation. Read a lot of how it gets rid of PMI but not sure what that truly means

Emergo

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Also for clarification this is more of a starter home for us that we may rent out in the future where we find a bigger home years after

Kris

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Thanks for the replies so far. But lets say we've already decided we are going to make this bad decision. How would you go about minimizing the fallout from this bad decision? Thanks

I think you’re asking a lot from the people on this forum.

“We’re planning to make a really bad decision that goes counter to the entire purpose of the forum we’re on. Please help us rationalize it. Thanks.”

Wait.

Emergo

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Thanks for the replies so far. But lets say we've already decided we are going to make this bad decision. How would you go about minimizing the fallout from this bad decision? Thanks

I think you’re asking a lot from the people on this forum.

“We’re planning to make a really bad decision that goes counter to the entire purpose of the forum we’re on. Please help us rationalize it. Thanks.”

Wait.

Lmao its true... If youre married you will understand. I am actually for everything that has been said here... I just cannot convey it properly

rothwem

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #10 on: October 27, 2019, 08:33:16 AM »
I’m in the camp that thinks PMI is okay to pay.  I don’t want 20-30k sitting in equity, especially if it’s a major portion of my net worth, I’d want it to be working for me. And if you have good credit, PMI only adds effectively a quarter to a half percent on your APR.

With that said, closing costs are pricey. Home maintenance is pricey. Closing costs between a 150k home and a 300k home are not as different as you’d like, you’ll probably end up paying $4-5k in just admin fees and inspections to close on the house, so make sure you have money budgeted.

As for making the best of a mediocre decision, I’d say that you should look for a duplex, or at least a house that can be house-hacked to improve your cash flow.   

Also, don’t get any more dogs. We love the crap out of our dog, but after paying $1500 for surgery on her toe and boarding her for trips out of town at $30/night, I can’t imagine multiplying our dog costs by 4x.


terran

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #11 on: October 27, 2019, 08:49:30 AM »
Can someone help me convince my wife by sharing why saving 20% is a good idea and what it helps eliminate / save? We read a lot here to save 20% but not sure where to look for the explanation. Read a lot of how it gets rid of PMI but not sure what that truly means

According to this article Private Mortgage Insurance (PMI) is 0.5-5% of the original mortgage amount charged per year. So a $100k mortgage would cost an extra $500 - 5000 per year if you put less than 20% down than if you put 20% down. Presumably this is based largely on factors related to your likelihood of default (income, credit scores, downpayment). According to this article, PMI is removed when your mortgage is regularly scheduled to drop below 78% of the purchase price, and you can request that it be dropped earlier if you pay the mortgage down faster or the home value increases (you'll need to pay for an appraisal).

The broader point people are trying to make here is that if you don't have a 20% down payment (especially on relatively inexpensive homes like you're looking at) then you're already in a precarious situation and homeownership comes with many more surprise expenses than renting. $30k just isn't that much money, so calling that a minimum threshold to homeownership isn't that big a hurdle to suggest someone reach before taking on a responsibility that will come with regular expenses of $5-10k on short notice (roof, furnace, etc).

bacchi

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #12 on: October 27, 2019, 09:43:39 AM »
One of the biggest things you can do is disabuse yourselves of the idea of a "starter" home.

Sure, you might move later to get another bedroom for a child or whatever, but the concept just puts you on the treadmill of working to get a bigger and "better" home when what you have is perfectly alright.

Kris

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #13 on: October 27, 2019, 09:49:01 AM »
Thanks for the replies so far. But lets say we've already decided we are going to make this bad decision. How would you go about minimizing the fallout from this bad decision? Thanks

I think you’re asking a lot from the people on this forum.

“We’re planning to make a really bad decision that goes counter to the entire purpose of the forum we’re on. Please help us rationalize it. Thanks.”

Wait.

Lmao its true... If youre married you will understand. I am actually for everything that has been said here... I just cannot convey it properly

I am married. But nope, still don’t understand.

Emergo

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #14 on: October 27, 2019, 10:23:01 AM »
Thanks for the replies so far. But lets say we've already decided we are going to make this bad decision. How would you go about minimizing the fallout from this bad decision? Thanks

I think you’re asking a lot from the people on this forum.

“We’re planning to make a really bad decision that goes counter to the entire purpose of the forum we’re on. Please help us rationalize it. Thanks.”

Wait.

Lmao its true... If youre married you will understand. I am actually for everything that has been said here... I just cannot convey it properly

I am married. But nope, still don’t understand.

Well im sorry we are not entirely on the same page on long term finances as you and your wife. Must be great to be perfect.... Didnt know people here can be condescending

Villanelle

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #15 on: October 27, 2019, 10:56:36 AM »
Given the attitude in your last response, I hesitate to post.  You stated that if that poster was married, they understand.  You were wrong about that, and they told you, and then you got snarky.

But perhaps there is middle ground.  Can you not see about extending your current lease?  Most landlords prefer to be on a summer rental schedule so they may well be willing to at at least a few months.  They buys you more savings time.

To me, the problem is that not only are you locking yourself in to PMI, but you are locking yourself in to a home for which, if you had to leave for some reason, you have very little equity.  If you had to go in a down market, you'd be screwed.  So I'd mention that to the wife as a pitch for a larger down payment.  Also it sounds like you'd be putting all your savings down in order to eek out that ~10% down.  What if the water heater and the fridge die in month 2 of ownership?  You are putting yourself in a terrible position by spending all your savings at a time when you most need it.

Also, I assume you and your spouse are prepared not to buy any new furniture or decor.  Because if you make this choice now, you can't afford it.  If you want to be able to do those things, then you need to wait.  Buying a new house generally comes with a desire to paint and buy a new area rug and fill that empty space in the corner with a new chair.  Maybe you and she don't have any of those desires.  If you do, then commit to waiting another year.  Finish saving up for 20% down, plus a sufficient emergency fund (which should be higher for a home owner than a renter).  Then, whatever else you are able to save can become a "new house" fund. 

Dicey

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #16 on: October 27, 2019, 10:58:19 AM »
Thanks for the replies so far. But lets say we've already decided we are going to make this bad decision. How would you go about minimizing the fallout from this bad decision? Thanks

I think you’re asking a lot from the people on this forum.

“We’re planning to make a really bad decision that goes counter to the entire purpose of the forum we’re on. Please help us rationalize it. Thanks.”

Wait.

Lmao its true... If youre married you will understand. I am actually for everything that has been said here... I just cannot convey it properly

I am married. But nope, still don’t understand.

Well im sorry we are not entirely on the same page on long term finances as you and your wife. Must be great to be perfect.... Didnt know people here can be condescending
Emergo you would do well to consider where you are. MMM is the originator of the term facepunch. I don't think anyone has given you one so far, including @Kris. Calling her condescending just shows how unready you are to make such a momentous decision,  IMO. You asked for help. You are being given excellent advice by people who are experienced and who expect nothing in return for the time they are taking to help you. I read Kris' comment as humorous, because I thought it was hilarious when I read it. I'm pretty gobsmacked by your thin-skinned response.

I see Villanelle has cross-posted. I'm sure she is saying the same thing, only better, but I'm hitting "Post" anyway.

plog

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #17 on: October 27, 2019, 11:23:25 AM »
Quote
Thanks for the replies so far. But lets say we've already decided we are going to make this bad decision. How would you go about minimizing the fallout from this bad decision? Thanks

Look, we've decided to shoot ourselves in the foot.  We came to this podiatry site to find out the best way to do it.  So all you doctors telling me not to do it, that's not helpful.  Should I shoot top to bottom or bottom to top?  Perhaps through the arch to the other side?
Then, near my toes or near the heel?  Lastly, caliber?  I own a 44 but could get a 9mm if you guys think thats better.

monarda

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #18 on: October 27, 2019, 11:47:53 AM »
If you know that you'll be renting out this first house sometime in the future, I like the idea of buying a duplex.
But you should do your research to make sure you like the idea of becoming a landlord. Do a LOT of research.

I'm with all the others. Just wait.  Married or not.

If you feel you must go ahead, borrow money for the 20% downpayment from your parents and pay them back in a year.

Emergo

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #19 on: October 27, 2019, 12:12:34 PM »
I didnt intend to sound rude. My point was that i agree with all the posts here and im thankful. I was just hoping people would understand my situation and probably half the pop who are the same way as in them and their spouse probably are not agreeable on these subjects. In my shoes, i accepted that it would be hard to change her mind and getting tips on how to change her mind wasnt helpful at the time. But im thankful

Noodle

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #20 on: October 27, 2019, 12:43:19 PM »
As someone who is experienced with the market you want to buy in...even $150,000 is not a lot of money. If you are comfortable going into neighborhoods that are gentrifying, like EaDo, you can probably get something less expensive, or if you work in one of the suburbs and want to live out there. But even there it's likely going to be an older home at that price, and South Texas is REALLY hard on homes...between the unstable land that means foundation problems, the fact that having hurricanes come through every 10 years is hard on roofs, the fact that you need to run AC most of the year, etc. Banks are also getting picky about which properties they will lend on because so much of the housing stock flooded during Harvey, in places that weren't on the flood maps. So if you are going into an older home you need to do it with a really solid emergency fund. I have a close friend who owns an older home and so far they have replaced the roof, the AC, the water heater, the flooring after the water heater flooded, the siding, taken down several large trees...and that's not counting the stuff that was in the wants column, like major appliances.

That said, there's no reason you can't start working on this now...researching agents and lenders and neighborhoods, visiting things in your price range to see what you're really looking at buying, working on the budget, etc. Then when something comes along that's a great buy, you'll feel confident about it. I was probably "looking" for a good year before I got a realtor and started seriously shopping. And you may not need to worry about the date of your lease ending...most of my leases have converted to month-to-month after a year. Worth checking into with your landlord.
« Last Edit: October 27, 2019, 12:45:43 PM by Noodle »

AccidentialMustache

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #21 on: October 27, 2019, 12:59:12 PM »
Also for clarification this is more of a starter home for us that we may rent out in the future where we find a bigger home years after

A good home for you is not necessarily a good rental. Now you have to sets of needs to fill in finding said house

Villanelle

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #22 on: October 27, 2019, 01:18:57 PM »
I didnt intend to sound rude. My point was that i agree with all the posts here and im thankful. I was just hoping people would understand my situation and probably half the pop who are the same way as in them and their spouse probably are not agreeable on these subjects. In my shoes, i accepted that it would be hard to change her mind and getting tips on how to change her mind wasnt helpful at the time. But im thankful

But earlier... [bolding mine]
Quote
Can someone help me convince my wife by sharing why saving 20% is a good idea and what it helps eliminate / save? We read a lot here to save 20% but not sure where to look for the explanation. Read a lot of how it gets rid of PMI but not sure what that truly means?

I'm confused.  Now you are saying that the advice on how to change her mind wasn't helpful. But earlier you asked for exactly that, and yet now you are frustrated by those responses? 

Look, if you want to buy a house you can't afford, then buy it.  If that part of the decision is 100% made, then so be it.

What advice is there to give?  Find a house you want, and buy it and hope it all turns out find.  That's pretty much exactly how you'd buy a house when you actually could responsibly afford it.  The same "tips" apply.  Don't buy more than you can afford (well...), get an inspection, be reasonable about wants vs. needs, don't look at it as a "starter house" because that concept generally ends up being more expensive in the long run.  Don't buy it you don't plan to live in it for 5 years.  Remember that you can't move a good house but may be able to fix up an okay house in a location you love.  Remember commute time and expense.  Factor in schools if you plan to have  school aged kids while you live there.  Don't buy the nicest or biggest house in the neighborhood.

There.  Is that better?

La Bibliotecaria Feroz

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #23 on: October 27, 2019, 01:34:22 PM »
I have bought multiple houses with 5% down. First time, lost every penny I ever had. We needed to sell and it was 2010. Trashed our credit, too.

Second time, made a bucket of money out of it after only owning for two and a half years. I think I got $23K and the ex got a little more because he had been paying the mortgage an extra year.

That was enough to put down... 5% again? Or maybe I did 10%? I'm actually blanking. It must have been 5 ish. Because I have two school-age boys and apartment living was hell.

So if you are thinking of waiting, the most persuasive argument I'm aware of is that putting down more money makes it less likely that you will be trapped by your house. We just sold and lost all our money; other, more sensible people stayed trapped by their houses.

If you are determined to buy next spring, I say start going to open houses NOW. It will give you and your wife time to get on the same page and to see if your price range is realistic for the kind of house you want. Get to know the neighborhoods that are possibilities.

Would it be better to wait? Eh, probably. But I'm not gonna face punch you for something I've done over and over again. When you are tired of living in an apartment, doing so is a special kind of hell. If you save as much as you are talking about, you should be able to put down 5% and still have a good cash cushion. IME there is not much advantage to putting down 10% than 5%--but ask your mortgage person--and it's better to have cash. You will want furniture. Something will happen like, in the house I just bought, after we moved in we realized the basement was musty and we needed to pull up the carpet and put in a new floor. It's always something.

Oh, and choosing a mortgage person. This can be tricky because they put a lot of work into trying to get your business and you can only choose one. Be prepared to be a little ruthless and get quotes. Ask around for recommendations. I used a guy that was recommended by someone else on the forums, actually!

Ditto for realtors. I didn't like the one I used as a buyer's agent but she was great as a seller's agent. Find someone who will take the time to help you find the right house and not push you to buy everything you look at.

Good luck!

GreenToTheCore

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #24 on: October 27, 2019, 05:35:23 PM »
Can someone help me convince my wife by sharing why saving 20% is a good idea and what it helps eliminate / save? We read a lot here to save 20% but not sure where to look for the explanation. Read a lot of how it gets rid of PMI but not sure what that truly means

One approach would be to have an If This, Than That discussion for all the options and talk about what works best with your values and future plans. Might be useful to have your wife visualize the different scenarios instead of some intangible "we'll buy a house later" goal.

For example:
1) If we buy a house now, we'll have $14,400 to pay towards the house. Then:
- we'll need to pay PMI, which would increase the total money paid to the mortgage by $5000 every year.
- when (not if) a major house item breaks, we'd have to take a loan to fix it, costing $xxx.xx in interest on top of the average $2,000.00 cost.
- we won't have any money left over in the budget for a new rug/couch/pictures/patio furniture/etc.
- we won't be able to contribute to retirement savings for a while, missing out on $xxx,xxx.xx in opportunity costs
- etc. (mustachians, what else can we think of?)

2) If we buy a house later (pick out a specific date), we'll have $40,000 to pay towards the house. Then:
- in the meantime, we could rent a place for $xxx.xx
- we would have $xxx.xx to put into savings each month, increasing our savings by $xxx,xxx.xx in ten years
- we wouldn't have any worries or stress when a major house item breaks
- we could have a $xxx.xx budget for new rug/couch/pictures/patio furniture
- our retirement savings would be $xx,xxx.xx larger
- etc.

3) same as #2 but pick a different date with a different down payment amount


Filling out the numbers/amounts is the hard part but if this is an approach you'd like to try I'm sure this community would be happy to help you figure out the analysis.
Also, the "How to convert your significant other" thread might lend some ideas for when you talk with your wife. https://forum.mrmoneymustache.com/ask-a-mustachian/how-to-convert-your-so-to-mmm-in-50-awesome-steps/

Hope this helps.

charis

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #25 on: October 27, 2019, 05:53:20 PM »
We put down 3.5 on an FHA loan in 2010 and four years later refinanced to a conventional loan and dropped the PMI, merely because the value rose quickly in those years.  We could reasonably predicate that, but there are no guarantees.

Dicey

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #26 on: October 27, 2019, 07:48:10 PM »
We put down 3.5 on an FHA loan in 2010 and four years later refinanced to a conventional loan and dropped the PMI, merely because the value rose quickly in those years.  We could reasonably predicate that, but there are no guarantees.
Do you mean "predict" that? If so, how? Inquiring minds want to know.

charis

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #27 on: October 28, 2019, 08:16:22 AM »
We put down 3.5 on an FHA loan in 2010 and four years later refinanced to a conventional loan and dropped the PMI, merely because the value rose quickly in those years.  We could reasonably predicate that, but there are no guarantees.
Do you mean "predict" that? If so, how? Inquiring minds want to know.

For several reasons unique to this particular house, we got it at a steal in a sought after neighborhood.  And we got lucky because the market was at a low when we bought, which we suspected, but like I said, no guarantees.  But none of that really factored into our decision - we liked the neighborhood, only considered what we could easily afford (so we were going to buy anyway), had no plans to sell (and still don't after 10 years), and would receive the 8K home buyer's credit after closing.

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #28 on: October 28, 2019, 09:07:09 AM »
+1 for the House Hacking advice.  While I'd love for you to have 20% + a reserve fund, if you're going to buy sooner than later, put 3.5% - 10% down and house hack.

If you're pretty sure this first home purchase will be a "starter home", the smartest thing you can do is purchase a duplex or or other small multi-family and live in the one of the units while renting out the other. This will drastically reduce your living costs (or allow you to live for close to free) and drastically increase your savings rate while you're both still young, childless and flexible.  Then, in a few years when you decide to upgrade, hopefully you've done the math and keep the property as a rental - which (if you've read/researched/bought smart) should more than cashflow and pay for itself.  If I could go back in time and talk to my younger, just-married self, I would tell myself to house-hack before kids.  If you aren't sure what House Hacking refers to - check out Bigger Pockets. I think they just published a book about it.

My understanding of the Houston-area market is that its hot, especially for multi-family properties. But I'm sure if you looked diligently and included surrounding areas, you could find a nice duplex with a yard for the animals and be well on your way to making a smart long-term decision.  The other benefit to house-hacking is that you have a easier chance of seeing this first property as an investment, and perhaps can feel less emotional about it.  My experience of first-time homebuyers (myself included) is that they tend to start upping their budget once they start shopping and fall in love with a particular property or area.  Suddenly that $150k max budget turns into a $200k max...  If you know in advance you need to shop for something that will make a good long term/cash-flowing investment, you're less likely to let HGTV visions take over the process.  :)

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #29 on: October 28, 2019, 09:39:45 AM »
meh, I bought my first place with only 3% down ($82K in 1996).  Stayed in it for 6 years, then sold it for $120K.  I got pretty lucky. 

Congratulations on planning to purchase your first home.  My advice to you is:
1. you have 6 months, start saving as much as you possibly can right now, but don't put it all on the house. You need some buffer.
2.  Expect to spend another $10K in the first year.   Because you'll want to have things that fit in the new house.  If you don't spend it, that's great.  If your mustache-muscles are strong, great you won't need it.  But if you're jonesing this hard to buy the house, you'll be jonesing even more for that "perfect chair for that little spot by the front door", or whatever.
3.  Take your time in finding the right home.  Figure out a way to take emotion out of it.  Home-buying and selling are incredibly emotional.  People do stupid things.  KNOW that if you don't get THIS house, there will be another, even better one available next week.   That's just reality.  Never insult a seller or say anything negative about the home.  Instead, praise them on their foresight in buying such a great house.  Compliment them on their decor (even ask if they'd be willing to sell some small piece of furniture or knick-knack.)  If they like you, they'll cut a deal. And if they like you and there's a bidding war, you will win.  THAT'S how emotional people get.  Truly.
4.  Don't use an inspector that the realtor recommends.  That's a conflict and they should know better. 
5.  Don't sign a buyer's agreement.  Not needed.  But be honest and stick to your word.  If you work with someone and they help you find a house/negotiate/close, then of course you don't cheat them out of their side of the commission.   But if the relationship isn't working out, then you want to be able to move on.  So just don't sign a buyer's agreement. 
6.  If your dogs bark, be a good neighbor and move somewhere without other people.  And don't think a dog-door will solve all your problems.  You still have to walk your dogs and you still have to pick up after them. 
7.  Have fun, be excited, congratulations on your recent nuptials, and enjoy life. 

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #30 on: October 28, 2019, 10:06:00 AM »
I'm following this thread with great interest. The similarities are eery. Let's see...mid- to late-20s couple, talking about engagement/marriage, I make 70, she is training for a teaching career (50? 55?), so would be 120 combined in the future, want to buy a house together, starting to save, but nowhere near 20%. I do have a healthy EF (checks balance...17,790) that would be used for home maintenance. I just started another savings account that I'm calling the Love Fund or RWHH (ring, wedding, honeymoon, house DP, maybe that order?) currently at 6,780. So total combined savings are at 24,570. She has a few small CDs and such but not counting those for now. Savings rate should start to go up now that SO is working (substitute teaching) again and we'll start splitting the bills again soon. We're even in Texas, but in Dallas. From our discussions of the house we want and the local market, I'd imagine the price would be 250-300. We are open to house hacking, renting the house later, duplex...have discussed each.

So the advice for 20% is sage. I knew that already, but reading here is helping to reaffirm it. I may even request that the SO read this thread in its entirety. Personally, I don't think it makes sense to buy a house until knowing where the SO will be working. It's hard to know how far out that will be. If she finds a job next school year, then maybe we will look when the apt lease ends a year from now? I imagine needing a lot saved for the ring and wedding anyway. We talk about a smaller and nontraditional (maybe destination? or at least Somewhere Else?) wedding. So we don't want to spend the $ that SO's best friend is on the huge traditional southern wedding, but if there is travel involved, then it wouldn't be cheap.

The ? I struggle with is if we're trying to save a lot to reach 20% in the next 1-2 years, then should I hit the brakes on all of the retirement $ I'm saving right now? I'm currently saving 1k/mo in my 401k (my work has 15% salary max, stupid). How do you prioritize tax-advantaged 401k $ and employer match vs trying to save 20% for a house DP? I mean...is it prudent or stupid to not save a dollar for retirement until AFTER reaching 20%? If I don't stop saving for retirement, it would take forever to reach 20%. Maybe not forever, but 5-10 years feels like a looooong time to wait. Things will become more clear when SO starts a normal teaching job. Also, we're happy in our apt (1k/mo) right now. I'm not sure how long we'd be happy with it regardless of how much we'd have saved, as life goes on and after marriage and thinking about kids.

Part PTF, part sympathizing with OP, and part asking for genuine advice. Don't want to hijack the thread, but sounds like others are in a similar situation as myself and could benefit.

Tl/dr: what would you tell a 20-something about prioritizing saving for a 20% house DP vs retirement savings?

FrenchToast

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #31 on: October 28, 2019, 10:16:12 AM »
Advice I haven't seen...find a lender that doesn't have PMI.
But 20% down is the way to go.

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #32 on: October 28, 2019, 10:36:34 AM »
I bought my first property with PMI, not fully understanding that I was paying for insurance that provided zero protection for me. Like most people, I grew to despise it. This topic has been addressed a number of times on this and other forums.

I also didn't work for a company that offered a 401k plan and their pension vesting plan took years to qualify for. A lot has changed since then, fortunately. I was hell bent on buying a house, so I didn't save anything specifically for retirement in my twenties. All of this predated the internet, and financial information simply wasn't readily available then.

Somehow, I survived and even made it to FIRE. But this forum is an offshoot of a blog dedicated to reaching FIRE or at least FI, as efficiently as possible. You want to buy a house with nothing down and no back-up funds? Sure, go ahead. Buy anything you can qualify for and live the life you want to live. If you instead want to achieve your goals as efficiently as possible, consider well the advice that has been offered by so many on this thread who have been there and done that.

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #33 on: October 28, 2019, 10:36:42 AM »
Let’s back up a bit here. Is all of this house talk spurred by the fact that OP has four animals?

Since we have a culture of questioning the status quo here, I’ll touch the third rail: why do you have four animals? Do you have to continue having four animals? How long will this last?

Please be cognizant if the fact that you are contemplating a potentially bad financial move, the repercussions of which could follow you around for years, all for animals which which may very well no longer be in your lives at that point? Don’t put the cart before the horse here. You can find a different rental and wait until you are more financially stable. Or is the animal excuse merely masking your own desires?

I have purchased property three times. The first two were for emotional reasons and I didn’t think long enough and hard enough about what we were doing or why. Both times it was a mistake. The first time it cost dearly. The second time we got lucky and broke even. But in both cases we would have been much better off renting and spending more time reflecting on what our goals were in life and how to get there. Personally I think real estate is romantic and seductive and makes lots of people make bad financial decisions.

Dicey

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #34 on: October 28, 2019, 10:50:28 AM »
We put down 3.5 on an FHA loan in 2010 and four years later refinanced to a conventional loan and dropped the PMI, merely because the value rose quickly in those years.  We could reasonably predicate that, but there are no guarantees.
Do you mean "predict" that? If so, how? Inquiring minds want to know.

For several reasons unique to this particular house, we got it at a steal in a sought after neighborhood.  And we got lucky because the market was at a low when we bought, which we suspected, but like I said, no guarantees.  But none of that really factored into our decision - we liked the neighborhood, only considered what we could easily afford (so we were going to buy anyway), had no plans to sell (and still don't after 10 years), and would receive the 8K home buyer's credit after closing.
Thanks for the follow-up, @Charis. It sounds like you really did your homework and knew what you were getting into. You don't say if this was your first home purchase, but it's clear you did your research. Also, you chose an affordable house that you could live in long term, which is super smart. You made an educated choice, and it paid off.

Your situation is clearly different from the OP's. The effort put into studying the market and understanding your needs and finances put you way ahead of the OP, based on the information that's been provided thus far. They could learn much by following your example. I agree that for the right deal, PMI isn't the worst option. The real problem here is that the OP hasn't done any real research and is at risk of making an emotional and uninformed decision, which tilts the odds heavily out of their favor.

Note to @Chris, if you get these pings. Sorry, I typo'd that and didn't catch it.
« Last Edit: October 28, 2019, 11:08:40 AM by Dicey »

charis

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #35 on: October 28, 2019, 11:05:00 AM »
We put down 3.5 on an FHA loan in 2010 and four years later refinanced to a conventional loan and dropped the PMI, merely because the value rose quickly in those years.  We could reasonably predicate that, but there are no guarantees.
Do you mean "predict" that? If so, how? Inquiring minds want to know.

For several reasons unique to this particular house, we got it at a steal in a sought after neighborhood.  And we got lucky because the market was at a low when we bought, which we suspected, but like I said, no guarantees.  But none of that really factored into our decision - we liked the neighborhood, only considered what we could easily afford (so we were going to buy anyway), had no plans to sell (and still don't after 10 years), and would receive the 8K home buyer's credit after closing.
Thanks for the follow-up, @Chris. It sounds like you really did your homework and knew what you were getting into. You don't say if this was your first home purchase, but it's clear you did your research. Also, you chose an affordable house that you could live in long term, which is super smart. You made an educated choice, and it paid off.

Your situation is clearly different from the OP's. The effort put into studying the market and understanding your needs and finances put you way ahead of the OP, based on the information that's been provided thus far. They could learn much by following your example. I agree that for the right deal, PMI isn't the worst option. The real problem here is that the OP hasn't done any real research and is at risk of making an emotional and uninformed decision, which tilts the odds heavily out of their favor.

100% agreed, and yes, first time buyers.

Dicey

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #36 on: October 28, 2019, 11:17:14 AM »
We put down 3.5 on an FHA loan in 2010 and four years later refinanced to a conventional loan and dropped the PMI, merely because the value rose quickly in those years.  We could reasonably predicate that, but there are no guarantees.
Do you mean "predict" that? If so, how? Inquiring minds want to know.

For several reasons unique to this particular house, we got it at a steal in a sought after neighborhood.  And we got lucky because the market was at a low when we bought, which we suspected, but like I said, no guarantees.  But none of that really factored into our decision - we liked the neighborhood, only considered what we could easily afford (so we were going to buy anyway), had no plans to sell (and still don't after 10 years), and would receive the 8K home buyer's credit after closing.
Thanks for the follow-up, @Chris. It sounds like you really did your homework and knew what you were getting into. You don't say if this was your first home purchase, but it's clear you did your research. Also, you chose an affordable house that you could live in long term, which is super smart. You made an educated choice, and it paid off.

Your situation is clearly different from the OP's. The effort put into studying the market and understanding your needs and finances put you way ahead of the OP, based on the information that's been provided thus far. They could learn much by following your example. I agree that for the right deal, PMI isn't the worst option. The real problem here is that the OP hasn't done any real research and is at risk of making an emotional and uninformed decision, which tilts the odds heavily out of their favor.

100% agreed, and yes, first time buyers.
Erp, typo fixed, charis. Although autocorrect really, really wants your screen name to be chairs.

A long time ago, in a previous decade, I remember reading an article in the LA Times Real Estate section, which used to be great. It was about first time home buyers and the things they "needed" to have in their homes and the ways they were willing to stretch themselves financially to get them. One person in particular stated that she "had" to have granite countertops and that her new condo simply "must" go up in value. It made my alarm bells screech. Then the market crashed. I always wondered what happened to her.

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #37 on: October 28, 2019, 11:19:34 AM »
 Just wanted to put this in here as i did not see it mentioned.  On your home inspection, as said before , accompany the inspector on the tour.

 My sister has an RE license in another state. She has an inspector who is very thorough that she recommends. He has pointed out issues with houses that have caused the buyer to-- think twice about the purchase / back out of the purchase/ or negotiate a lower price. RE Agent sister is not happy, when inspector finds these issues, but she is attempting to find the best house for her clients, and will continue to recommend him, even though it potentially costs her angst and commision. So don't automatically rule out the inspector your buyers' agent may suggest.

What wasn't mentioned. Any inspection contracts i have seen limited the liability of the inspector, to the cost of the inspection only.  Example, you sign a contract for $500 to have your potential house inspected.  The inspector misses thru honest fault, or negligence; the leaky roof, inadequate electrical panel, or termite damage.  Assume you buy the house and then figure out these glaring problems after you've moved in. Your recourse is to sue for the $500 you paid them. Not $10,000 for a new roof, $2000 for a sub-panel , or $4000 for termite remediation....
« Last Edit: October 28, 2019, 11:23:31 AM by six-car-habit »

Dicey

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #38 on: October 28, 2019, 11:37:35 AM »
Just wanted to put this in here as i did not see it mentioned.  On your home inspection, as said before , accompany the inspector on the tour.

 My sister has an RE license in another state. She has an inspector who is very thorough that she recommends. He has pointed out issues with houses that have caused the buyer to-- think twice about the purchase / back out of the purchase/ or negotiate a lower price. RE Agent sister is not happy, when inspector finds these issues, but she is attempting to find the best house for her clients, and will continue to recommend him, even though it potentially costs her angst and commision. So don't automatically rule out the inspector your buyers' agent may suggest.

What wasn't mentioned. Any inspection contracts i have seen limited the liability of the inspector, to the cost of the inspection only.  Example, you sign a contract for $500 to have your potential house inspected.  The inspector misses thru honest fault, or negligence; the leaky roof, inadequate electrical panel, or termite damage.  Assume you buy the house and then figure out these glaring problems after you've moved in. Your recourse is to sue for the $500 you paid them. Not $10,000 for a new roof, $2000 for a sub-panel , or $4000 for termite remediation....
Totally agree. I also don't trust home warranty providers because their contracts have the same kind of gotchas.

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #39 on: October 28, 2019, 09:31:17 PM »
The ? I struggle with is if we're trying to save a lot to reach 20% in the next 1-2 years, then should I hit the brakes on all of the retirement $ I'm saving right now? I'm currently saving 1k/mo in my 401k (my work has 15% salary max, stupid). How do you prioritize tax-advantaged 401k $ and employer match vs trying to save 20% for a house DP? I mean...is it prudent or stupid to not save a dollar for retirement until AFTER reaching 20%? If I don't stop saving for retirement, it would take forever to reach 20%. Maybe not forever, but 5-10 years feels like a looooong time to wait. Things will become more clear when SO starts a normal teaching job. Also, we're happy in our apt (1k/mo) right now. I'm not sure how long we'd be happy with it regardless of how much we'd have saved, as life goes on and after marriage and thinking about kids.

Part PTF, part sympathizing with OP, and part asking for genuine advice. Don't want to hijack the thread, but sounds like others are in a similar situation as myself and could benefit.

Tl/dr: what would you tell a 20-something about prioritizing saving for a 20% house DP vs retirement savings?

You're thinking way ahead, which is great.  That's the way to do this. 

To your question: You evaluate it exactly the same way you would if you were deciding whether to buy a Lexus or to save more for retirement.  It's pretty easy. 

Houses are consumption goods.  Realtors will say otherwise, but this is the one thing that Rich Dad actually nails.  Houses cost you money, and you'll always want a place to live. 

Investments make you money, and you'll need money.  It'll never be easier than once you're newly-married: two incomes, no kids yet. 

So, short answer: retirement, retirement, retirement.  You won't get to go back and save for retirement again.  You get a ___% savings for every dollar you throw in there (25% or so, per your comments) from tax savings alone.  It's not even close. 

You can always push out your house purchase, but you can't always push out your retirement saving, especially if you stretch yourself at all when buying a home. 

Pro tip: you're a ways out, but you'll want to think hard about whether you're having kids and whether DH/DW will work once you do.  That's a huge factor, and your house decision absolutely depends upon it.  Buying a fancy house (or even normal-seeming one!) may severely limit your options and can add stress.  This is a huge financial decision, so think those things through.  We know more than one family whose house plan and kid plan didn't agree with one another.  (Corollary: don't buy a house for people who aren't yet alive or very nearly here...) 

In retrospect, it's probably easiest in many cases to get married, have kids, and only then buy a house as needed: by then, your financial situation and marriage situation are a lot more secure and you have way more information (kids, income, spouses working, kid costs, etc.). 

GizmoTX

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #40 on: October 28, 2019, 10:07:53 PM »
It is perfectly possible to rent a house, not just an apartment, and you'll be able to determine if the house lifestyle is for you without the commitment of a purchase. If you later decide to purchase a house, you should then have a much better idea of what you prefer. Meanwhile, you're not on the hook for repairs or replacements, and you can easily move for a job transfer.

ysette9

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #41 on: October 29, 2019, 01:30:20 AM »
It is perfectly possible to rent a house, not just an apartment, and you'll be able to determine if the house lifestyle is for you without the commitment of a purchase. If you later decide to purchase a house, you should then have a much better idea of what you prefer. Meanwhile, you're not on the hook for repairs or replacements, and you can easily move for a job transfer.
Ding ding winner!

marty998

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #42 on: October 29, 2019, 02:57:59 AM »
I'm surprised you can only save $2k a month when you are pulling in $120k combined and your current housing costs are $800 a month.

Where is all the rest of your money going? Do you have car loans and other expensive things being paid for each month?

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #43 on: October 29, 2019, 06:43:23 AM »
I just bought a house this year, but did not wait to save 20% and I kind of wish I would have.

I decided to buy when the (very cheap) place I was renting was not being kept up by my landlord.  AC went out in the middle of a South Florida summer... took a month to fix.  Water wasn't paid when the landlord went on vacation, took a week to turn back on.  Infested with cockroaches and ants, and she would spray maybe once every now and then.  Toilet leaked, AC (once it was "fixed") was inefficient sending my electric bill through the roof.  Things kept going wrong and kept getting overlooked, I started looking elsewhere.  Found out renting in this area would cost me the same as buying each month, so I elected to buy.  I put down 5% on a fairly new (2016) townhouse.   

I did not think about the closing costs when I was calculating, so I dipped into my emergency fund to help cover those.  I do have some left in case of an emergency, but not nearly enough as I would like.  I do not have anything extra for those fun things to help make the house mine.  I have the same old furniture I've had since my first apartment in Florida which I'm okay with.  I'm not okay with having spent my emergency fund.

Hindsight is always 20/20.  I would have sucked it up in that scrummy apartment another year and saved 20% plus closing costs on top of my emergency fund.

DenverDad

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #44 on: October 29, 2019, 09:26:46 AM »
Plenty of comments already on the wisdom behind making a 20% down payment.  I would suggest that you really need to research specific issues that houses you are looking at may have. My previous home was built in the early 1970s. We knew it had clay pipes, but we didn't really understand what that would mean prior to living in the home since everyone said it wasn't a problem to deal with roots, which was wrong. It would have cost anywhere from $8-$12 thousand to replace the sewer line completely or have a sleeve inserted into it. The short to mid-term solution was finding a company that sprayed a foam root killer in every 18 months to the tune of about $300 a pop, and that was after several roto rooter visits. Still could never use more than single ply toilet paper. :)

Also had aluminum wiring in the home, which we knew about from the home inspection, but again, we had no idea what that actually meant other than it was potentially not good. After two outlets started burning up randomly, we pulled every outlet out and found at least 5-6 where the wires were melting. The cheapest permanent solution was only provided by two companies in a large metro area to the tune of $4,500. 

New windows to replace the original single pane aluminum windows where half wouldn't stay open, had no workable locks, significant draft, etc. Another $6,000.

Paint, new water heater, stove and frig to replace broken units, furniture that "had" to be purchased, large trees that had to be trimmed, shingles damaged from falling tree branches, yard tools, etc. Another $5,000 - $8,000 easy.

This was all in the first 5 years of home ownership, so I can't stress enough to really do your research and know what you are getting into. We fixed a lot of stuff on our own as well that would have made some costs, such as the damaged roof shingles, easily cost 5x-10x more.   

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #45 on: October 29, 2019, 09:45:24 AM »
It is perfectly possible to rent a house, not just an apartment, and you'll be able to determine if the house lifestyle is for you without the commitment of a purchase. If you later decide to purchase a house, you should then have a much better idea of what you prefer. Meanwhile, you're not on the hook for repairs or replacements, and you can easily move for a job transfer.
This.  And if you really love the rental you can always offer to buy it- owners may say no, but when our last tenants inquired we threw back 5% less than  what we’d list it at.  Ultimately they went for something else and we got new tenants, but it was a possibility.

I did buy with 10% and while I’d do it over again, I wouldn’t do it now.  I know we can’t predict the future but I bought in 2011 when housing here was down over 50% from 2007 highs, rates were low, and prices were clearly beginning to recover.  We could easily afford the payment and put extra toward the principal each month to get rid of PMI early, had no other debt, and perhaps most importantly the 10% was not my full savings, I still had a solid five figure fund to handle repairs AND a 3 month efund.  Now?  The market has been going up for 9 years already, this is not a time I would want to risk being underwater on a home- again we can’t predict the future but I would be a lot more wary of things losing value in the next five years than I was when we were coming out of a recession.

It sounds like you want to rush into buying a house throwing every dollar you can save into the down payment and STILL being short of 20% and for a lower priced home (which makes me think you’ll want something bigger/better that you didn’t rush into in a few years) in your market.  Bad idea.

But if you absolutely insist on following through with this bad idea:
1) buy something you can easily rent out should you not want to live there anymore.  And I don’t mean “well WE would be happy to pay X to live here so someone else will too” I mean look on Zillow and CL and see what rentals in that zip/area actually go for and that it’s substantially more than your mortgage (and seriously if it isn’t at least double the mortgage payment rent those yourself instead, there are far more costs to ownership than the PITI payment).
2) don’t put every dollar you can down.  You’ll need it for repairs.  A friend JUST bought her home and the basement flooded between the previous owners moving out and them in.  They are sure it was the previous owners detaching their washing machine incorrectly but they consulted with a lawyer who basically told them they had a 50/50 shot of recovering their deductible from them and would be out his costs to boot if they lost so didn’t recommend moving forward.  Our water heater failed and while we had a home warranty they were happy to cover the EXACT same model only, which no one carries anymore and would take 2 weeks to ship to us, so we could buy a new one ourselves that we can actually get parts for in the future  or deal with cold water for two plus weeks and get the same crappy unit.
3) don’t fall in love and buy more than you can EASILY afford.  Like if one of you gets laid off you can still make the payment, especially since it doesn’t sound like you have a solid efund to deal with that kind of hit, and you can’t just sell the place (and when you do count on 6% for realtors and several grand more for seller closing costs- buying and selling transactions are EXPENSIVE).
4) buy “newer” construction.  That doesn’t mean brand new, but old houses mean old problems that were built to old codes and you’ll have to bring them up to current with every repair.

Daisyedwards800

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #46 on: October 29, 2019, 11:43:08 AM »
I've read through your post history, and it sounds like you have a very young wife (24) who you want to please, but you know this is a bad decision.  From prior posts, I know you have been struggling whenever an emergency comes up (ER visit, father needed a car and help with rent etc.), and that you are not ready to own a home.  Your wife appears to have had credit card debt (still does?) and other debt.  She probably is very financially illiterate from your prior posts.  She is used to being in debt and taking on more debt than she should.  I would recommend before buying a home, listen to financial podcasts, read personal finance books together, and do not sign for anything like a mortgage until she gets up to speed with financial literacy.

partgypsy

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #47 on: October 29, 2019, 03:10:36 PM »
So, I'm not going to touch on 20% down since others have. Is it possible to get a month to month lease and stay longer at current location? Even another 6-12 months would very much help to get a cushion.

I also echo the post of looking at a lot of houses, without a realtor (once you get a realtor they will push push push you to buy). And I think you need to think clearly and decide whether this is a residence, or something you are going to convert to a rental. You never know what life will throw at you. If you want a home, try to find a home you can reasonably imagine staying at, particularly if everything doesn't go as planned? Or if you know that you are getting it as a rental, many of the parameters you are going to look at is going to change, such as wanting proximity to universities/places of business, but not minding a smaller lot or not the best school zone, etc. 
Good luck on putting on the brakes!
« Last Edit: October 29, 2019, 03:13:00 PM by partgypsy »

Raenia

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Re: Just married, need advice on buying a home in April 2020 (when lease ends)
« Reply #48 on: October 31, 2019, 09:14:38 AM »
I'm not 100% on the NO PMI crowd - we put 5% down on our house, even though we could have put more - but you don't seem to be calculating all the costs of buying a house.

-5-20% downpayment
-5-10% closing costs
-Moving - packing supplies, trucks, movers, time off work, etc
-Immediate repairs - there will almost always be something you want to fix before moving in, whether it's the water heater on its last legs or electric out of code.  Don't assume this will be paid by the seller.
-Personalizing - paint, switch plates, furniture, curtains, there will inevitably be something you 'need' to make the place feel like home
-Emergencies - move in and 2 weeks later the washing machine dies and floods the basement, or the refrigerator dies and takes all your frozen foods with it, or the roof leaks and fries your computer.  Plan for these things!

If you can't save up a 20% downpayment, it's a good bet you'll have trouble cashflowing when the AC breaks down or the dishwasher leaks.  And after you spend all your available cash on the house, what happens when the car breaks down, or pet needs expensive vet bills, or you lose your job?

We chose to put only 5% down, plus 5% for closing costs, because that let us keep another 5% in ready cash in addition to our regular emergency fund, so that when the water heater, furnace, AC, and washer/dryer all needed to be replaced in the first 3 months living there, we were able to handle it without dipping into our investment accounts.  And yes, all those things happened to us, in addition to the electrical work we knew would be needed before moving in.  PLEASE calculate the actual costs of owning, not just the costs of buying, and make sure your wife understands.  Buying a house is far more expensive than just the downpayment.