Need advice on if we should buy a house or move in with my parent for a while

[MikeJones2001]

My wife and I are expecting a baby girl in November. Our lease on our 1 bedroom apartment expires in September and wife has made it clear that she does not want to renew our current lease. 

My father lives in a five bedroom house, in the same city as we live, all buy himself and has extended and offer for us to move in with him if we so choose. My father would charge us about $500 per month rent which would be welcomed since we are gearing up for our first child. 

The other option would be to purchase our first home.  I know the interest rates are rising and home prices are rising as well.

Should we live with my dad for a year or so and wait to buy a house ? Or should we go ahead and buy our first house now ?
If we wait to buy a house we could save some extra money. But my fear is that housing prices and interest rates will be even higher than they are now.
My wife and I have around 115k sitting in VTSAX in our taxable account right now that we could use for a down payment if need be. But I keep hearing JL Collins say "dont buy an F-ing house" in the back of my mind. What would you guys do ?

Also, if we do live with my father for a year or so we will continue to max out our 401ks and ira hopefully. If we buy a house my fear is that we will not be able to max out our retirement accounts because we will be putting that money towards our house.

We plan on living in our current city for at least another 5 years in order to have easy access to child care. But I would love to move to another city in 5 or so years. Any advice would be welcomed

[patchyfacialhair]

My advice is to purchase a house if you want to live in a house that you own, and want to personalize, and can easily afford. I say this as a 5 year homeowner and I mostly hate the maintenance part of owning a house.

If you do decide to buy a house, I'd honestly do this to keep your budget in check:

Household income before tax
minus $40,500 401k max for both of you
minus $taxes/benefits
minus $12,000 iras
minus (market value reliable childcare*)
equals remaining take home pay, aka $XYZ

Make sure your payment plus utilities plus 1% of the value of the home for maintenance totals less than 25% of $XYZ.

*I say to account for market value reliable childcare because while I personally benefit from my mother's help, and a family friend's cheap services, I know that things can change and I need to be able to afford "normal" childcare at the drop of a hat. My mother-in-law is now out of the picture to help us due to her own health issues as she ages. We had planned on using her for help in some cases, but that's not possible now.

Also, be prepared for the possibility that your wife may not want to go back to work. With our first kid, it was up in the air, but with our second, my wife is firmly in the "would rather work than be a stay at home parent" camp.

[MikeJones2001]

patchyfacialhair,

I appreciate the response. I will for sure do the math and see what we come up with. I feel like buying a house is such a big purchase being the fact that me and my wife make around 125k combined per year. So we need to be strategic with our money but on the other hand, the  cost of housing in this country be it rent or mortgage payments aint getting any cheaper.

[Sibley]

How's the relationship with your father? Is your wife comfortable with the idea?

New mom + FIL in house = potentially very unhappy new mom. If she's going to breastfeed, then is she going to feel comfortable not wearing a top while she gets the hang of it? Will she feel comfortable shuffling around the house like a zombie due to sleep deprivation?

How's the housing market in your area? Can you find something you're happy with?

Yes, this is a financial decision, but it's also a relationship and emotional decision. Don't discount those.

[meadow lark]

Yeah…. Really depends on the relationship and the people.  I’m very flexible and love living with other people.  My wife would hate it. 

[lucenzo11]

As others have mentioned, this is really more of a personal question as to whether you and your wife would want to live with your father, but I do have one point to add more related to buying a house.

You mention JL Collins as being the voice of reason to not buy a house. I just want to clarify that JL Collins is not anti buying a house, he's just firmly on the side that buying a house (to live in) is not a good investment. It seems like you want to own a home and that's perfectly okay as long as you understand everything that comes with home ownership. JL has owned many properties, but he only does it when it matches up with his priorities and how he wants to live his life. If you want a house, then buy a house, just don't expect to make any money on it. Especially with a timeline of 5 years before you want to move to another city.

[MikeJones2001]

Thank you everyone for the responses. My wife and I really appreciate it.

[kite]

Move in with your Dad.
If you all get along and nobody abuses alcohol (or whatever), than make the most of this golden opportunity assuming it suites your lifestyle.

Multi-generational homes can be fantastic.  Globally, for the entirety of the history of humanity, it was and remains quite normal. 
You get back-up childcare, he gets an opportunity to bond with a grandchild.
You get financial savings, he gets a financial cushion.
You all get an extra set of eyes & ears, increasing physical safety.

Your single dad likely has zero use for a five bedroom home.  Downsizing is on the horizon, whether next year or 10 or 20 years.  It’s inevitable.  Maybe you’ll help with that, maybe you’ll buy him out. He’s also aging. The thing with aging is that it doesn’t happen all at once. It’s a gradual thing requiring gradually increasing amounts of assistance.  A person can appear at the top of their game when you don’t see them all the time.  But when you are with them around the clock you might notice new signs of personal neglect, difficulty with decisions or the volume of fake charities that conspire to drain the bank accounts of those who are old enough to be grandparents.  More of this is visible when you live there as opposed to when you are visiting.

Even if the live-with-Dad option didn’t exist, If you think you could move away to a new town in 5 years, you risk losing too much money by buying. Keep your options open.

[MikeJones2001]

Move in with your Dad.
If you all get along and nobody abuses alcohol (or whatever), than make the most of this golden opportunity assuming it suites your lifestyle.

Multi-generational homes can be fantastic.  Globally, for the entirety of the history of humanity, it was and remains quite normal. 
You get back-up childcare, he gets an opportunity to bond with a grandchild.
You get financial savings, he gets a financial cushion.
You all get an extra set of eyes & ears, increasing physical safety.

Your single dad likely has zero use for a five bedroom home.  Downsizing is on the horizon, whether next year or 10 or 20 years.  It’s inevitable.  Maybe you’ll help with that, maybe you’ll buy him out. He’s also aging. The thing with aging is that it doesn’t happen all at once. It’s a gradual thing requiring gradually increasing amounts of assistance.  A person can appear at the top of their game when you don’t see them all the time.  But when you are with them around the clock you might notice new signs of personal neglect, difficulty with decisions or the volume of fake charities that conspire to drain the bank accounts of those who are old enough to be grandparents.  More of this is visible when you live there as opposed to when you are visiting.

Even if the live-with-Dad option didn’t exist, If you think you could move away to a new town in 5 years, you risk losing too much money by buying. Keep your options open.

thanks for the advice everybody. I always can count on some sound advice which really makes me think. 

[reeshau]

Avoiding the current market is not a great reason to move in with your Dad.  Your location shows the dirty South, so know this: while higher interest rates are expected to slow price growth in the hottest (market) Southern cities, it is not expected to actually bring prices down.  More than 25% of buyers last month were cash offers; they don't care about rates.

So, what happens if next year is worse?  Just punt and continue another year?  How many years would you stay, max?

Another consideration: one of the most important line items on your mortgage application is going to be your on-time rent payments.  While you are paying your Dad rent, I expect It's an informal arrangement.  Even if you sign a contract, is he reporting the payments to a credit agency?  No doubt the arrangement will save you money, but it will likely complicate your mortgage application.

High rates won't last forever, although anyone over 40 would not call 5% high rates at all.  Mortgages were 5% as recently as 2018.  So, don't project any immediate deal with your lifetime finances--you can always redinance down the line.  Other ways to combat current rates, if you believe they will come down later, would be to pursue an ARM or buy down your interest rate by paying points.

Move in with your Dad, if you think it would be good for your family.  If the only benefit is financial, I would question the wisdom.

[Sibley]

Avoiding the current market is not a great reason to move in with your Dad.  Your location shows the dirty South, so know this: while higher interest rates are expected to slow price growth in the hottest (market) Southern cities, it is not expected to actually bring prices down.  More than 25% of buyers last month were cash offers; they don't care about rates.

So, what happens if next year is worse?  Just punt and continue another year?  How many years would you stay, max?

Another consideration: one of the most important line items on your mortgage application is going to be your on-time rent payments.  While you are paying your Dad rent, I expect It's an informal arrangement.  Even if you sign a contract, is he reporting the payments to a credit agency?  No doubt the arrangement will save you money, but it will likely complicate your mortgage application.

High rates won't last forever, although anyone over 40 would not call 5% high rates at all.  Mortgages were 5% as recently as 2018.  So, don't project any immediate deal with your lifetime finances--you can always redinance down the line.  Other ways to combat current rates, if you believe they will come down later, would be to pursue an ARM or buy down your interest rate by paying points.

Move in with your Dad, if you think it would be good for your family.  If the only benefit is financial, I would question the wisdom.

I haven't rented for 5 years now, but I have never had any landlord regularly report rental payments to the credit bureaus. And all but one of the landlords were corporates. My rental history had zero impact on my mortgage application. Agreed with the rest of your comment though.

Edit: I see you used to be in Dublin. Things may well be different there.

[2Birds1Stone]

Never heard of a mortgage application having reported rental payments on it......lifelong renter who applied with 3 different mortgage companies in 3 different states this year..

[reeshau]

I may well have overstated.  Actually, we rented in Dublin, because we weren't staying indefinitely.  (And housing there has been crazy since 2017)

I may have overstated the importance.  I do see that Fannie May is looking to push for more inclusion of rental info, but as a way to help renters qualify.

https://www.businessinsider.com/personal-finance/rent-payments-build-credit-score-fannie-mae-2021-12

But this looks to be initiated by the renter, not the landlord.  So, I don't dispute your accounts at all.

[rockeTree]

This is 100% about your family relationships. Do you and your wife and your dad all value close family relationships beyond the immediate couple and their children? Do you get along with your dad? Does your wife genuinely like your dad, not just find him easy to be polite to when she sees him twice a year or whatever? Does he like her? Does he respect your marriage? Do you have very divergent housekeeping standards? Are either of them real complainers such that he will find her complaining about anything in the house given his generous decision to help you with housing intolerable or she will find his complaints about the baby crying or how long her showers are intolerable and inhumane? Does your dad need help on top of the care your baby will need, or can he provide help with the baby? Do you have similar ideas on what's good for a baby? Will another grandparent feel so snubbed that they will make your life hard over this? This could be really beautiful and a way to strengthen all your connections and provide a secure and loving welcome to the baby or a nightmare that damages your relationships for years. All three of you should talk, a lot, before you make a decision. Good luck!

[MikeJones2001]

Thanks again for the responses. Yall have made me really think about what would be best for my family now and in the future. I really appreciate it.

[Shuchong]

You've gotten a lot of great advice.  Just want to add my own personal experience in case it's helpful.

I'm looking for a house and living with my parents.  I expected to find a house before now, but inventory is low and it's taking a while.  I wouldn't assume that you can just "go ahead and buy our first house now."   You may look until November and still not have a house.  (Or you may start looking now and then end up having to break your lease or pay both a mortgage and rent.) 

If you live with your father, assuming you all get along (big assumption!), you have an ideal house-hunting situation.  You don't have to worry about breaking a lease.  And you can save more.  And you can be flexible when making offers -- things like "if you want three months to move out, we can do a leaseback" that sellers may find attractive. 

Also, you get more time with your dad!  You get the chance to completely rewrite the "depressing math" that says you've probably only got a small amount of days left that are spent with him (https://www.nytimes.com/2022/02/25/opinion/covid-pandemic-depressing-math.html)