How Would You Advise: A young couple (30+) about home buying?

[MinimalistMoustache]

A young couple (I work with) recently shared their plan to purchase a (single-family) home in PNW. They asked me, along with several of their friends who are homeowners, for some general advice on saving up for a down payment.  I responded to questions from my own experience BUT have a few concerns about the feasibility of their plan. Most important: I do not want to make suggestions to them if they don't ask my advice on anything further than pre-purchase savings strategies.

My concern for them involves:

1) The current housing market (particularly in PNW)
2) They are a "new" couple, only together for about 6 or 7 months
3) Combined income = approximately $85,000
4) Mortgage broker advised them they are eligible for loan of $300,000+ (I'm not sure how)
5) They (or at least 1 of them) wants to buy early 2016 (that's only 3 months away)
6) They have very little to no savings and some student loan debt (IDK the amount)

I made efforts to highlight some of my concerns, especially as they wanted to know about the "quickest" way to save for the down payment. They are clearly not mustachians, and I'd love to gradually share with them a more mustachian approach to finance.  I've been debating whether I am doing them a dis-service by not speaking up to some of the issues involved.

How would you advise anyone on real estate purchases without over-stepping personal boundaries or intruding upon their opinions?

[ShoulderThingThatGoesUp]

You work with both, or only one? The new couple thing might be the most concerning. If there's one you know much better, I'd ask for that person's personal email to send some outside-of-work thoughts that they can take or leave.

[Thinkum]

Good god does that scream nightmare to me. Together less than a year and want to buy a house? Want to buy in 3 months and are asking how to save up for a down-payment? Then depending on what part of the PNW, they might be in for a rude surprise when their initial offer is passed over as someone offers thousands if not, tens of thousands over asking, hello Portland.

If you really want to help without sounding judgemental I'd just give them the canned response of giving up some things like Starbucks and eating out. Forgo taking any vacations, yadda yadda yadda.

If you don't mind giving them a piece of your mind, I'd just tell them the problems of putting down small down-payments. I would also highlight the fact that a house is a serious undertaking, both financially and emotionally.   

[rockstache]

Someone close to me is about to do the same. They are married and buying in a much lower cost area, but borrowing money from retirement savings for the down payment. The realtor told them that there is no penalty for this, and they won't hear anything I have to say. I only tried once but it was quickly shut down because I "don't want to buy a house right now, so I couldn't possibly know." I haven't brought it up again since, and won't. I think you can only try once, it is such an emotional purchase for so many.

[civil]

A young couple (I work with) recently shared their plan to purchase a (single-family) home in PNW. They asked me, along with several of their friends who are homeowners, for some general advice on saving up for a down payment.  I responded to questions from my own experience BUT have a few concerns about the feasibility of their plan. Most important: I do not want to make suggestions to them if they don't ask my advice on anything further than pre-purchase savings strategies.

My concern for them involves:

1) The current housing market (particularly in PNW)
2) They are a "new" couple, only together for about 6 or 7 months
3) Combined income = approximately $85,000
4) Mortgage broker advised them they are eligible for loan of $300,000+ (I'm not sure how)
5) They (or at least 1 of them) wants to buy early 2016 (that's only 3 months away)
6) They have very little to no savings and some student loan debt (IDK the amount)

I made efforts to highlight some of my concerns, especially as they wanted to know about the "quickest" way to save for the down payment. They are clearly not mustachians, and I'd love to gradually share with them a more mustachian approach to finance.  I've been debating whether I am doing them a dis-service by not speaking up to some of the issues involved.

How would you advise anyone on real estate purchases without over-stepping personal boundaries or intruding upon their opinions?

When I bought, I made about 75k and was pre approved for a loan of 475k. So 300k on 85k income sounds normal to me. In my case, rents for a 1bd apartment in my area were equal to mortgage payments on a loan of about 275k, so if you could swing the down payment, there were good arguments for both renting and buying. I also bought a house large enough for my boyfriend's children to share with us, and we'd been dating less than a year. I ran numbers one day, decided maybe I should buy, one week later I had an agent and two weeks after that I had my house under contract. Sometimes you just know, or you are willing to take the chance that things will work out. I recently passed my buy/rent breakeven point so I'm glad I bought. It hasn't been an easy road for me, the house or the relationship, but we're all doing pretty good at the moment.

Not saying that's what your co worker is like - just that these factors in isolation are not alarm bells for me.

[okits]

Probably the best thing is to suggest ways to cut expenses and increase income.  This is useful: a) to save the actual down payment, b) to raise funds for maintenance and unforeseen costs once they have possession of the house, and c) to pay legal and realtor fees if the worst happens and they split up, because it may be messy to divide up the equity in the house (or negative equity, if things really suck.)  If this is a co-worker and not a friend you're probably overstepping by advising on a big life choice like this (might be okay if you're their supervisor, though.) The most you can do is point out the substantial risk and responsibility involved in homeownership.  (Most likely it'll be in one ear, out the other, but at least your other suggestions have given them tools to take more financial control of their lives.)

[Jeremy E.]

http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
http://www.mrmoneymustache.com/2015/07/27/rent-vs-buy/

[marty998]

I agree with civil - they can easily afford it (especially from an Australian point of view), but as mentioned before the problems with this purchase will stem from the relationship, not the financial aspect.

[Goldielocks]

To get a down payment that fast, they would need to look at selling a car, boat, rv, and then saving like mad....

Best advice that they might listen to is to avoid PMI.  Quite expensive.

[Easye418]

Probably the best thing is to suggest ways to cut expenses and increase income.

This should probably start off 90% of the threads in this forum. 

As for the new couple thing....are they married only for 6 to 7 months or just dating for 6 to 7 months? 

If they just got married but have been together for 3-5 years, then I see no problem. 

However, 6 to 7 months, they should rent as living with a significant other is a HUGE change of life that some people cannot handle.

[clarkfan1979]

If it doesn't affect you then don't worry about it. I would give them some general encouragement and see what happens. If your older parents make a questionable move and it will directly affect you because you might have to make up for the mistake, then let it rip.

[MinimalistMoustache]

Thanks everyone. Your feedback has been helpful. I'm going to continue to encourage them to save more/spend less and suggest they put an emergency fund in place (if they don't already have one).

We all work for the same company, and it is important that I remain mindful of boundaries. In reading your posts, I feel better equipped to support them with sound (and solicited) ideas beyond the scope of saving for the down payment.

[zolotiyeruki]

Why the rush to buy?  Is there something happening next year that is hurrying their purchase?  Buying a house is a very big financial move.  There will always be houses to buy, so there's no rush.  If someone is rushing them into it, that someone probably is trying to talk them into a bad deal.