Author Topic: Changed a lot in the last weeks, am I ready for a home?  (Read 4662 times)

MrD

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Changed a lot in the last weeks, am I ready for a home?
« on: July 02, 2012, 10:03:39 AM »
I posted earlier and I had some things to take care of before this question was even relevant, I will post up all the details below and I just want you guys to let me know if you think I am ready to take on a mortgage.

Income: 2900-3500 a month depending on bonus. (This number is after taxes / insurance / and 10% for 401k)

Expenses: 1350 (this is calculated for EVERYTHING, including fun money, movies, etc)

Savings for Retirement: 10.4k in 401K, 5k in ROTH IRA

Savings for down payment / lose job fund as of now: 16k

I plan to save at least 1400 a paycheck to make a larger down payment. I have 10 pay periods left before I want to put down a down payment. So I will have about 30k for lose job money and down payment.

I have talked it over with two realtors and more than likely my payments will be from 980-1150/month depending on where in my range I land. This includes PMI, insurance, taxes, etc. This also assumes a down payment of 15k.

I also used this tool and it agreed with what they said - http://www.drcalculator.com/mortgage/

My current rent is 850 for an apartment.

If I buy this house I would buy it myself and need to be able to afford it on my own. However, I will have my live in girlfriend (Been together 5 years) living with me. She will be paying rent directly to me, around 30-40% of the payments.

Please let me know if you think I am ready or if I should wait more time. I am only 23 but the interest rates and prices are so low right now I feel I can make a hell of a move.


arebelspy

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #1 on: July 02, 2012, 11:10:35 AM »
However, I will have my live in girlfriend (Been together 5 years) living with me. She will be paying rent directly to me, around 30-40% of the payments.

One minor wording tip: don't call it "rent" - a girlfriend of 5 years paying rent to her boyfriend might cause some strains.  Say that she's "splitting" the housing cost (even if the split is you paying the bulk, since it's in your name and you get the equity/principal paydown).  It's a minor thing, and may be of no difference to some people, but for others it's a big difference (her paying you rent versus you two splitting the housing costs).

Good luck!
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MrD

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #2 on: July 02, 2012, 11:12:11 AM »
However, I will have my live in girlfriend (Been together 5 years) living with me. She will be paying rent directly to me, around 30-40% of the payments.

One minor wording tip: don't call it "rent" - a girlfriend of 5 years paying rent to her boyfriend might cause some strains.  Say that she's "splitting" the housing cost (even if the split is you paying the bulk, since it's in your name and you get the equity/principal paydown).  It's a minor thing, and may be of no difference to some people, but for others it's a big difference (her paying you rent versus you two splitting the housing costs).

Good luck!

Any idea input if this sounds like a good idea? I am trying to see if others think I am making a good decision.

arebelspy

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #3 on: July 02, 2012, 11:16:04 AM »
1) Are you buying too big of a house?
2) How long do you plan to live there?
3) Have you run rent versus buy calculators?

http://www.nytimes.com/interactive/business/buy-rent-calculator.html
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

MrD

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #4 on: July 02, 2012, 11:29:51 AM »
1) Are you buying too big of a house?
2) How long do you plan to live there?
3) Have you run rent versus buy calculators?

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

1 - We are buying a 3-4 bedroom house because we plan on living in this place for a while. A nice 3br/4br can be had for around 165k where we are moving to.

2 - At the very least, 6 years

3 - It will save us on average $650 a year at the high end of our spectrum, over $2500 a year at the low/med area.
« Last Edit: July 02, 2012, 11:33:29 AM by MrD »

FI@2022Jem

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #5 on: July 02, 2012, 11:35:46 AM »
However, I will have my live in girlfriend (Been together 5 years) living with me. She will be paying rent directly to me, around 30-40% of the payments.

One minor wording tip: don't call it "rent" - a girlfriend of 5 years paying rent to her boyfriend might cause some strains.  Say that she's "splitting" the housing cost (even if the split is you paying the bulk, since it's in your name and you get the equity/principal paydown).  It's a minor thing, and may be of no difference to some people, but for others it's a big difference (her paying you rent versus you two splitting the housing costs).

Good luck!

Any idea input if this sounds like a good idea? I am trying to see if others think I am making a good decision.

I agree with arebelspy.  It feels yucky to pay your boyfriend rent (at least for me, YMMV).  Our solution: the mortgage is in my boyfriend's (now husband) name, we divided expenses according to our income: ie: i pay phones, internet, garbage, he pays electric, etc, in addition we have a direct deposit set up from my account to a separate account to cover property taxes, repairs, etc. specifically for the house.  It happens automatically each month and it feels more like I am contributing to our overall housing situation as opposed to writing a check to someone like a roommate.  Be sure to get input from your girlfriend about her expectations: communication is key.  Best of luck in finding the right system that works for you and your girlfriend!

MrD

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #6 on: July 02, 2012, 11:40:35 AM »
However, I will have my live in girlfriend (Been together 5 years) living with me. She will be paying rent directly to me, around 30-40% of the payments.

One minor wording tip: don't call it "rent" - a girlfriend of 5 years paying rent to her boyfriend might cause some strains.  Say that she's "splitting" the housing cost (even if the split is you paying the bulk, since it's in your name and you get the equity/principal paydown).  It's a minor thing, and may be of no difference to some people, but for others it's a big difference (her paying you rent versus you two splitting the housing costs).

Good luck!

Any idea input if this sounds like a good idea? I am trying to see if others think I am making a good decision.

I agree with arebelspy.  It feels yucky to pay your boyfriend rent (at least for me, YMMV).  Our solution: the mortgage is in my boyfriend's (now husband) name, we divided expenses according to our income: ie: i pay phones, internet, garbage, he pays electric, etc, in addition we have a direct deposit set up from my account to a separate account to cover property taxes, repairs, etc. specifically for the house.  It happens automatically each month and it feels more like I am contributing to our overall housing situation as opposed to writing a check to someone like a roommate.  Be sure to get input from your girlfriend about her expectations: communication is key.  Best of luck in finding the right system that works for you and your girlfriend!

I appreciate the advice, I am just concerned about what would happen if we broke up. I would say 999/1000 we will be together until we die, I just don't want to screw myself financially because I drew the 1/1000.

I just want to protect myself is all. Any ideas how I can do this? Splitting up bills would be fine as well, but how she feels about contributing doesn't really make a difference to me or her. No matter where the money is going it is not getting her equity in the house. The main reason for this is I would be putting down the down payment and sole person on the mortgage.

grantmeaname

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #7 on: July 02, 2012, 11:42:12 AM »
What would you do with the second, third, and fourth bedrooms?

$30k down on a $165k house is 18%. If you could stretch just a little bit, or buy just a bit less house, you could dodge PMI entirely. That would lower your payment pretty substantially.

MrD

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #8 on: July 02, 2012, 12:11:06 PM »
What would you do with the second, third, and fourth bedrooms?

$30k down on a $165k house is 18%. If you could stretch just a little bit, or buy just a bit less house, you could dodge PMI entirely. That would lower your payment pretty substantially.

As far as bed rooms: 1- master, 2- home office (I work from home some weeks, 3- guest bedroom, if we have a 4th it would be for cardio equipment but more than likely we may end up with a 3 bed room house.

Once I hit 30k I think I will save at least 7.5k for a fund encase I lost my job, although this is very improbable. So I would have 22.5k to put down on the house, or even less considering we will need to pay for other things. Such as inspections, maybe a new appliance if one is gone etc. That is why I am estimating all of this with a 15k down payment.

arebelspy

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #9 on: July 02, 2012, 02:10:49 PM »
I appreciate the advice, I am just concerned about what would happen if we broke up. I would say 999/1000 we will be together until we die, I just don't want to screw myself financially because I drew the 1/1000.

I just want to protect myself is all. Any ideas how I can do this? Splitting up bills would be fine as well, but how she feels about contributing doesn't really make a difference to me or her. No matter where the money is going it is not getting her equity in the house. The main reason for this is I would be putting down the down payment and sole person on the mortgage.

Reread my first post.  I didn't suggest she'd get any equity.  In fact, I didn't suggest that anything different happen from what you're currently planning, except that you call it something different.  Instead of calling it "her paying you rent" you call it "we split the mortgage payment" (by her paying you rent)...

You'll do the exact same thing (she cuts you a check for 30-40%), you just don't call it rent.. it's splitting the bills. 
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Gerard

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #10 on: July 03, 2012, 06:06:12 AM »

Reread my first post.  I didn't suggest she'd get any equity.  In fact, I didn't suggest that anything different happen from what you're currently planning, except that you call it something different.  Instead of calling it "her paying you rent" you call it "we split the mortgage payment" (by her paying you rent)...

You'll do the exact same thing (she cuts you a check for 30-40%), you just don't call it rent.. it's splitting the bills.

I don't know about the US, but in Canada if you live together for two years, and she's contributing to the house payment, she's entitled to a share of the house if you split up. She might even be entitled to a share if she doesn't contribute (based on her assumed non-monetary contributions to your relationship).

Guitarguy

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Re: Changed a lot in the last weeks, am I ready for a home?
« Reply #11 on: July 08, 2012, 08:19:56 AM »
Thought I might chime in: I just got a job at Us Bank about a month and a half ago, and I've already had at least 5 customers come in who've run into trouble sharing accounts with girlfriends/boyfriends that they thought they were going to be with forever. (That's an average of almost one person a week!) I would definitely run the numbers and figure out the impact on your monthly cashflow if she hypothetically "moved out."