My fiancee and I are in the very early stages of looking for our first home to buy. I'll add as much info as I can, and I look forward to the scrutiny and facepunches.
CURRENT LIVING: We are currently renting a small 1-bed apt in the outskirts of Dallas for 1100. Living expenses only, including utilities, add up to about 1350. I am working from home; not just for now, but in the long term as well. Yes, I work in a little desk in the bedroom all day, every day. SO lives here also and works in the inner city in a bad neighborhood for her first teaching gig. Yes, this year of all years to start your teaching career. We also have a medium-sized dog. Space and sanity are running quite thin. When we moved here 2 years ago, it was to be close to both of our jobs in the office. At that time, I probably would have splurged for a bigger apt, had I known what would happen. Last summer, we knew full well our situation, but decided to stay. We like our apt and decided it was a OMY situation for me putting up with a crappy work-from-home setup, before buying a house. We hate moving, and don't want to move to a bigger apt or rental house only to move again; we don't want to move until we're moving into a house that we're buying. Our lease is up in late August.
WANTS: We want to find an older home to buy this summer (summer off for SO) during the busy buying/selling season. We want a 3/2 or a 4/3 in the suburbs. The biggest thing we want is a BIG yard, preferably with big mature trees. This rules out new developments with tiny lots; we hate new cookie-cutter houses anyway. We want a 1/4 acre lot, at least. We both value room outside, had it in spades in our childhood homes, and want the same for our kids. A flexible space (or 4th bedroom) that could be my office is a must also. We are ok with older homes and neighborhoods and even prefer them. We are fine with buying something with an ugly/outdated interior and DIYing renovation. After researching, it looks like an outdated 3/2 would be around 275; an updated 4/3 would be around 350. We don't need the best public schools, but they need to be at least mediocre. We like open concept designs. A multifamily home could be an option; we like the idea of living in one part and renting the other. We have a couple landlords in the family and are comfortable with the pros and cons. However, most multifamily homes I've seen so far are in crappy areas where we wouldn't want to live.
LIFE: Most of the family is in the area, and we want to be close to them. I love my job and don't see myself working in the office for several years. She doesn't love her job, and will likely be looking and possibly finding a new one before summer starts. We are flexible on geography in terms of work, but restricted in terms of family and avoiding the crappy school districts. We are getting married later this year and want to have kids in the near future, 3-5 years. I believe we'd be in this new home at least 10 years.
EARNINGS: We make about 135k combined. Per month, we are netting about 8500 after taxes, retirement, health insurance. I used to put a lot into my retirement, but have lowered it to the minimum to get the full employer match, in order to add to house savings. I don't want to do a full case study right now, but I do save about 2-3k per month.
SAVINGS: I currently have 24k in one savings account; another 20 in an EF/FU fund. I think I'd be comfortable taking 10 from the latter, so that would make 34k in low-interest savings accounts. Another 12k are in stable stocks/investments in taxable accounts. I stopped contributing to those when getting serious with house savings. After some research, I learned I could take 10 from my IRA penalty-free (taxed, of course). I'm not sure if the latter is a great idea, but it is penalty-free for a first-time home buyer. Adding all of this together, it comes to 45 without the IRA money, or 55 with it. I contribute about 2-3k per month to the first savings account.
DEBT:I have had no debt since January 2019. SO has about 10k in CC loans plus about 2-3k in a private loan for teaching certification. The latter is 0%, but the catch with that is the aggressive payment schedule, about 500 per month. That will be paid off in late summer, and hopefully her CC will be paid off late this year or early next year, after snowballing the other 500 into already aggressively paying off the CC.
MORTGAGE: I've done some research, and if using 50k for a down payment on a 315k home, a 30-year mortgage around 3.0% comes to about 1600; a 15-year around 2.25% is 2200. If we can find a home under 300k, I would be getting close to a 20% down payment. To those clamoring to wait until 20% down payment...I'd point you to my crappy work situation and ask how you'd resolve that. I need to do some more research on closing costs. A 10k estimate may be a little high (?), and I'm not sure how much of that is negotiable, and whether it's added to the mortgage or paid up front. If it's an added expense at the beginning, it would come out of the 45-55k of savings. If doing the 30-year and adding taxes, insurance, and maintenance (normal year, not year 1), I'm estimating about 2500 per month. FWIW, my credit score is about 715. I believe hers is in the high 600s, but improving every month while paying off the CC.
WEDDING: It feels disingenuous not to mention wedding costs. We are estimating the costs at about 10k total: not mustachian, but not quite a consumer sucka level either. We've paid about 3k so far in deposits. Very recently, in-laws declared they were sending us the whole 10k and it's in the middle of transferring. We already decided we would make all the same decisions as previously, when we were expecting to pay everything ourselves. So far we've cash flowed everything, and haven't needed anything from my savings account. I expect this to continue. I'm not counting the added 10k to our numbers, but it is a little wiggle room in wedding expenses, debt, and she wants some cosmetic work done on her car.
PLAN: As of right now, I'm doing tons of research on the home buying process online both around the forum and elsewhere. I asked for a "Home Buying for Dummies" book for Xmas and have been digging into it. We're also starting to visit open houses to see what we like, hate, learn about neighborhoods, etc. I'm pretty knowledgeable about the whole area, but it's taking some work and driving to educate the SO on different areas. My plan for the next few months is as follows...March/April: Continue what we're doing now, and SO figure out her job situation. April: Start applying for loans and going through the lender approval process. May: Interview a few or several realtors and pick one who knows the houses we would like, plus would be patient for first-timers. May/June: Actually start making offers if we feel comfortable. We don't mind taking our time to find the right place and/or getting offers rejected several times. It's more important to us to end up with a house we love and try to avoid as many mistakes as possible. If we don't find something in the summer, getting a new (shorter, but much more expensive) lease is an easy option. I'd much rather do that than make a poor and rushed home buying decision. By the end of the year, I may be able to reach a 20% down payment.
Thanks for reading through, if you made it this far. My main 2 questions are: What should we be doing now that I haven't considered? Are we in a reasonable position to buy a home, or am I crazy? I'll state again: To those clamoring to wait until 20% DP...I'd point you to my crappy work situation and ask how you'd resolve that.
Mustachians, do your worst.