Author Topic: When should you buy a house?  (Read 1341 times)

Emergo

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When should you buy a house?
« on: December 17, 2018, 11:29:23 AM »
I'm 30, earn 70k annually, engaged. My fiancee is 24, earns 40k annually.

I have about 80k in my 401k
10k in my Roth
And nothing else in investments
I don't have much saved in my bank. I know I should have 3 to 6 times living expenses saved
I don't have a car payment
Only debt I have is to pay my Lasik which I got last year

My fiancee has some debt,
She is paying off her college, her credit card.

We want to get a house in about 3 years that's about $150k. We live in Houston, Texas. We want to put in a downpayment of 20% and we both realize that it will take a lot of saving to do that. Around $450 each from both of us a month

Is our plan feasible? Or should we just look into renting a house as a plan? We want a house because we have three small dogs. Our current rent is $800 a month.

Home Stretch

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Re: When should you buy a house?
« Reply #1 on: December 17, 2018, 11:35:36 AM »
If you can rent a house for around the same rent you're paying now, then I would say go ahead and rent a house for 2-4 more years while you save up a downpayment. That's kind of the best of both worlds, right? I just checked Zillow for Houston rental prices and it looks possible to find a small rental house for that kind of budget, although I have no idea if any of the homes I saw are near where you work/live.

I would definitely recommend knocking out the Lasik and credit card debt before saving a dime for a downpayment.

mozar

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Re: When should you buy a house?
« Reply #2 on: December 17, 2018, 01:43:00 PM »
Also, considering the fact that you are thinking about this now, keep in my mind places that flooded last year when you start looking.

Emergo

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Re: When should you buy a house?
« Reply #3 on: December 17, 2018, 07:04:41 PM »
Any decent rental house would cost $1100-1300. Thanks for the replies?

When are the basic essential rules that need to be met to say you are ready for a home?

tralfamadorian

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Re: When should you buy a house?
« Reply #4 on: December 18, 2018, 08:12:34 AM »
If comparable houses would cost $1.2k to rent or $150k to buy, particularly with the high real estate taxes in TX, long term renting would most probably bring you ahead financially.

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When are the basic essential rules that need to be met to say you are ready for a home?

I would say that all debt should be paid off. Student loans (unless in a forgiveness program) and frivolous face punch worthy stuff like credit cards and lasik. Then save a 25% down payment and six month emergency fund that would cover all living expenses including the new house PITIA plus a cushion for something like a new roof or a new HVAC.

TheHardenedInvestor

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Re: When should you buy a house?
« Reply #5 on: December 18, 2018, 08:18:14 AM »
Any decent rental house would cost $1100-1300. Thanks for the replies?

When are the basic essential rules that need to be met to say you are ready for a home?

Most people live well above their means when it comes to a house. Don’t do that and you’ll be fine. Sticking to a $150k or less house is a great goal for your income but have the 20% down at least and absolutely zero debt. I like 50% down but that’s me. Roughly 1.5 times your gross income is about what you could spend. Bottom line, live below your means and be the richest person in your neighborhood and you’ll find that life is good.

ketchup

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Re: When should you buy a house?
« Reply #6 on: December 18, 2018, 08:23:09 AM »
1. Make sure rent vs. buy is in favor of buying cost-wise in your area.  This isn't always as cut and dry and you may think.  You're not "just throwing away your money on rent" like many believe.  Run the numbers, all of them.  Mortgage payment vs monthly rent is a bad comparison.
2. Make sure you actually want to live in the area for at least 5-10 years.
3. Make sure you actually want to own a home.  Do you enjoy working on house projects?  Does the idea make you want to throw up?  You can rent a house just as easily as an apartment.
4. Save up your 20% down payment.  Don't bother putting down more than that, unless you're paying 100% cash for a place that a bank won't finance.
5. Save up another 10k for when something stupid happens or is noticed in the first six months of homeownership.
6. Budget so that you're not completely screwed if one of you loses your job.  Ideally this means a 50%+ savings rate or a decent sized emergency fund.

Hit all those points and you're in good shape to then purchase a house.

AccidentalMiser

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Re: When should you buy a house?
« Reply #7 on: December 18, 2018, 08:28:43 AM »
1. Make sure rent vs. buy is in favor of buying cost-wise in your area.  This isn't always as cut and dry and you may think.  You're not "just throwing away your money on rent" like many believe.  Run the numbers, all of them.  Mortgage payment vs monthly rent is a bad comparison.
2. Make sure you actually want to live in the area for at least 5-10 years.
3. Make sure you actually want to own a home.  Do you enjoy working on house projects?  Does the idea make you want to throw up?  You can rent a house just as easily as an apartment.
4. Save up your 20% down payment.  Don't bother putting down more than that, unless you're paying 100% cash for a place that a bank won't finance.
5. Save up another 10k for when something stupid happens or is noticed in the first six months of homeownership.
6. Budget so that you're not completely screwed if one of you loses your job.  Ideally this means a 50%+ savings rate or a decent sized emergency fund.

Hit all those points and you're in good shape to then purchase a house.

Wise words.  I have nothing further except to say that I wish my twenty-something children were as clear-headed as both the OP and @ketchup.  I’ll keep working on them.

nereo

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Re: When should you buy a house?
« Reply #8 on: December 18, 2018, 08:58:14 AM »
1. Make sure rent vs. buy is in favor of buying cost-wise in your area.  This isn't always as cut and dry and you may think.  You're not "just throwing away your money on rent" like many believe.  Run the numbers, all of them.  Mortgage payment vs monthly rent is a bad comparison.
2. Make sure you actually want to live in the area for at least 5-10 years.
3. Make sure you actually want to own a home.  Do you enjoy working on house projects?  Does the idea make you want to throw up?  You can rent a house just as easily as an apartment.
4. Save up your 20% down payment.  Don't bother putting down more than that, unless you're paying 100% cash for a place that a bank won't finance.
5. Save up another 10k for when something stupid happens or is noticed in the first six months of homeownership.
6. Budget so that you're not completely screwed if one of you loses your job.  Ideally this means a 50%+ savings rate or a decent sized emergency fund.

Hit all those points and you're in good shape to then purchase a house.

+1 to Ketchup's list.
Here's a very good calculator for approximating when it's better to rent or buy.  run the numbers to see where your market falls.
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Agree that you'll want an additional ~$10k in savings for the unexpected (#5, above). 

Also - do not skimp on inspections before you put in an offer.  Not just a GC's home inspection, but have have the sewer line scoped, chimney, test the water & soil, lead-paint (if the home is pre 1977) etc.  In total expect to spend ~$2k getting everything evaluated - but this can often unearth trouble spots which you can demand get fixed before closing (or at least you're aware of potentail problems downstream).

MDfive21

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Re: When should you buy a house?
« Reply #9 on: December 18, 2018, 09:58:50 AM »
since you've used 'fiancee' for the correct gender, i'd say you're ready to buy a house.

ketchup

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Re: When should you buy a house?
« Reply #10 on: December 18, 2018, 10:21:20 AM »
since you've used 'fiancee' for the correct gender, i'd say you're ready to buy a house.
Huh, TIL.  Maybe to make things easier we should just go with The Room style "future wife" and "future husband" all the time.

nereo

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Re: When should you buy a house?
« Reply #11 on: December 18, 2018, 10:36:02 AM »
since you've used 'fiancee' for the correct gender, i'd say you're ready to buy a house.
shouldn't it be 'fiancée' - if we wish to be linguistically true?

RetiredAt63

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Re: When should you buy a house?
« Reply #12 on: December 18, 2018, 04:31:53 PM »
since you've used 'fiancee' for the correct gender, i'd say you're ready to buy a house.
shouldn't it be 'fiancée' - if we wish to be linguistically true?

Yes, but not everyone is familiar with when to use é and when to use è.   At least OP had the extra e.

CindyBS

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Re: When should you buy a house?
« Reply #13 on: December 18, 2018, 06:59:36 PM »
I would recommend not buying a house until you are married.  Perhaps that is old fashioned, but I would not enter into such a large purchase with someone I wasn't married to or a close relative.

MDfive21

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Re: When should you buy a house?
« Reply #14 on: December 19, 2018, 07:27:08 AM »
since you've used 'fiancee' for the correct gender, i'd say you're ready to buy a house.
shouldn't it be 'fiancée' - if we wish to be linguistically true?

Yes, but not everyone is familiar with when to use é and when to use è.   At least OP had the extra e.

that was my rationale.  the é is a special character that most people probably don't know how to type on a keyboard.  (i don't either fwiw)

back on topic tho.. i would add to ketchup's list that if you're on a marriage track or life-partner track then buying a house is probably fine, but if it's just a partner for now type of relationship keep renting.  you want your relationship to last as long as the mortgage or at least as long as you plan to live in the house.

in Houston be aware of the flood plain obviously, and at $150k are you looking at townhomes?  be very aware of all the potential issues that come with townhome HOAs, shared building space and maintenance.  i'm renting a TH now and there was a problem after Harvey with all of the units flooding and some people walking away.  there was talk of selling or not selling the whole property and factions of owners on both sides fighting it out.  also collective upgrades like going from a 1960s era central tower cooling unit to individual ac units was drama.  currently the whole property is on one electric meter with shared payments.  some owners are pushing to install individual electric meters, but a faction of heavier users is blocking it due to their use, plus it will cost some ridiculous $$ to rewire the whole place.

on the other hand, Harvey was a freak storm and if you're handy, you can pick up a house with no drywall right now for pretty cheap and build it out your own way.