Dilemma - 1) Is it financially wise for us to buy a home? 2) Is it more expensive/ risky to go with a cheap foreclosure compared to a newer, but more costly home? 3) Reviewing our case study, what advice do you have to empower us to achieve financial independence? Is this home purchase a reasonable way to help us achieve that goal?
Overview: Looking at a $55k foreclosure in a relatively low crime neighborhood in Michigan. 3 bedroom, 1 bath. My husband and I have a lot to learn about DIY and what it'd take to live in such an old home. But we have good friends with experience in this and think we could learn.
Income/expenses:
We currently make $69,120 combined gross annual income. $4236 monthly take home.
Jobs - husband works at a call center, no degree, no college debt; job is within cycling distance from our prospective house. I work at a marketing company; have degree and college debt; allowed to work from home, but average an hour commute, twice a week.
Newlyweds (ages 26 and 30, no kids)
Transportation: We sold our old cars and put the money towards a 2014 used car w/ 6000 miles; averages 60mpg; (paid 11k and warning, we have a loan of $1000. We still owe this $1k on it but have the cash to pay it off and decided to wait another month as our checking account gives us 4 percent back monthly and the car loan interest rate is less than 3, so we are making a bit by waiting). I technically work an hour away, but only have to physically go in once or twice a week, if that. My husband cycles to work sometimes.
Expenses: We are currently saving half our income
-Debts: The aforementioned $1000 car loan. We also slowly chip away at a $30k college tuition loan each month. The debt is 0% interest as it came from my dad. No official pay off date. Unfortunately I do now owe almost a thousand in medical bills from an unexpected medical issue this month. Again, we have the money, but that just impacts how much we can use for the house.
-Housing: 700 plus utilities for a one bedroom apt. (Note on rent vs buy: we ran all the numbers, including property taxes, PMI, utility estimate, insurance, and it will be cheaper monthly to buy a home compared to rent.)
-Food: groceries ($270) and restaurants ($57) monthly
-Gas: budget $300 but we definitely don't use that. This month, we haven't bought gas at all (but that was due to Speedway rewards points accumulating to a $180 gas card; regardless, with our 60mpg vehicle, we don't pay much in fuel costs)
-Car insurance: $65 per month
-Car loan: $100 per month (remember - we are better off making the min payments on this 1k loan due to the 4% monthly dividends from our checking/savings account)
-Health & Personal Care: $100 monthly (will be more because of that $1000 medical bill I mentioned)
-Home: $25 monthly (misc stuff like sponges and laundry soap. We don't always use 25, but budget that just in case)
-Internet: $40 per month
-Phones: $50 per month (for both of us)
-Utilities: $70-$100 per month (we know we need to lower this, but it's been hard to manage and track, as our apartment doesn't give us access to even VIEW the meter, much to our frustration. They estimate often, too, so our bills are all of the place)
-Church tithe: $350 monthly
-College debt: $300 monthly (remember - 0% interest; $30k debt to my dad)
-Credit card debt: Essentially, nothing. We use credit cards for the rewards points, but pay them off right away.
-Savings: Right now, just about 7k. We are saving aggressively and will save 2k each month going forward.
-A couple hundred in a mutual fund. Not eligible for employer's fund yet (new employee probationary period)
-About a hundred in a Health Savings Account
Now about that house:
We can put just 10 percent down. Preapproved for 3.12%interest rate, 15 year mortgage. and still have enough in savings for emergencies and to work on the house. Unless, of course, I'm grossly underestimating. I simply made a spreadsheet with most common repairs needed on 1920s homes and used the avg narional cost. We also had a handyman friend do an unofficial inspection and he found nothing wrong, other than recommending more energy efficient windows, as only half have been replaced. The Furnace is five years old. They also did a new roof this year. New circuit breaker box/electrical. No garage, but we want to build one. Lots of windows and in great placement for energy efficiency! No appliances, but we get to buy at cost through a friend. I really want to forgo the fridge purchase and convert an ice chest into a fridge for optimal efficiency.
Am I too optimistic about our abilities to own and maintain this home? Any advice? I know an official home inspection might prepare us for common problems, like termite damage or structural damage. But just wonder if anyone out there has gone a similar route and might be able to offer up some wisdom!