Author Topic: Is it time to start looking for a house?  (Read 2004 times)

breadandbutter07

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Is it time to start looking for a house?
« on: March 29, 2013, 06:22:10 PM »
Hey there, Mustaches!  I've been reading for about a year now, but this is my first post: here goes!

My husband (25) and I (24) live in a medium/small college town and we're starting to get tired of paying rent but having nothing to show for it at the end of the day.  We make $3500/mo and live off of $1800.  Of the living expenses, $830 of that is rent, utilities, and renters' insurance.  Additionally, we're committed to donating 10% or more of our income, so we end up saving $1350 or more per month ($833 of that will go into our Roth IRAs).  Oh, and we're completely debt-free!!!

We'd be hoping to buy a house next spring (so we're still a ways out), but here are a few more important details: 
1.  Through our employer, we will eligible for Minister's Housing Allowance, a benefit through the IRS that makes housing costs (mortgage or rent) tax-excluded.
2.  I'm pregnant and due in October, adding medical and (minimal, I hope) baby costs.  (Our income will not decrease, and we will not be paying childcare expenses.)
3.  We're looking into some free housing options starting this summer/next fall, which could increase our savings dramatically (but they are not places we would be able to live longer than 9 months/1 year, otherwise we would!)
4.  We have about $35,000 saved, outside of our IRAs, and by next year we'll have enough for a decent 20% down payment while still keeping an emergency fund. 


What are your thoughts?  Any advice for a first-time homebuyer? 

Thanks!

shedinator

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Re: Is it time to start looking for a house?
« Reply #1 on: March 29, 2013, 07:01:32 PM »
Congratulations on the baby, and welcome to the forum. We're in the midst of buying our first place (should close May 10), so I know what you're going through...

I don't know that you've really given enough info to answer your question. Off the top of my head, I'm wondering...

1) How are your credit scores? Will you qualify for a mortgage?
2) what are home prices like in your town? Can you get the home you want for what you're currently paying in rent or less?
3) What's the size of the town? If it's less than 10,000, and your income is close enough to the median income of your area, you might be able to qualify for a USDA mortgage, which has a lower interest rate, and increases affordability (although they're a PAIN to work with).
4) How long do you intend to stay? Will it be long enough to actually reap any benefits from owning? You will be losing about six percent of the sale price of the home to commission when you leave, so unless you stay long enough for the home to appreciate or your mortgage balance to decrease, you could net a loss.

There are several rent vs. buy tools out there which would give you a good picture of how these options weigh against one another.

Also, since you mentioned Housing Allowance, I have to ask- Are you doing work which would technically be considered ministerial in nature? My employer recently had to crack down on who was receiving housing allowances because the IRS only wants to see people receive them who are doing actual church work- for instance, I work in the finance department, and no longer qualify to receive HA there. The children's pastor position I might be taking, however, does qualify. I'm not at all questioning your honesty or integrity, just encouraging you to make sure you're in the clear before the IRS says your not (which you may have already done).

Good luck with whatever you decide.

breadandbutter07

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Re: Is it time to start looking for a house?
« Reply #2 on: March 29, 2013, 07:48:39 PM »
Good questions:
1) Not sure of the number.  Probably decent, but not perfect.  My husband has had a credit card for 6+ years and made complete payments every month the whole time.  He did have some medical debt from before he had health insurance that he couldn't pay.  It's been more than 4 years since the accident, so he no longer owes money, but it will show up on his credit rating.  I have nothing to speak of -- perfect CC payments for a few years, no debts.

2) Looking online we've seen some houses in the 150k range that are 3/2s and 1,100-1,700 sq ft, about what we're looking for.  I'm expecting that our mortgage payments will be more than our current rent, but I'm also expecting that if we rented another apartment, it would be more expensive, too.  (With a baby, I'm demanding somewhere with a washer, which our current apt doesn't have.)

3) That sounds neat, but our town is too big.

4)  We intend to stay at least 3 years, possibly longer.  It's also possible that we would move away for 1 year, then come back, but since it's a college town, there's a huge demand for rental space, so I'm not too worried about what would happen if we were gone for just one year. (Or am I too optimistic?)

Good question, too, about the MHA - yes, our jobs are directly ministerial in nature, so we're for sure qualified.