Author Topic: Just getting started- maybe future homeowner- tough decisions  (Read 1578 times)

dizzy

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Just getting started- maybe future homeowner- tough decisions
« on: December 31, 2019, 09:05:00 AM »
Sooo, really new to all of this, but trying to do all the research possible.

38, never thought about buying a house.  Then 2 years ago a place across from my best friend (one of only very few of my friends who owns- most of them rent, can't afford/not interested to buy) became available for very cheap.  I had no idea about buying a house.  And of course no savings for this as a thruhiking, vagabonding, hippie musician weirdo.  Did learn that even if I had money I couldn't buy until Jan 2020 at earliest due to being newly self-employed.  Then another close friend had a lot of stress last summer, at age 65, when the place he'd rented for 15 years evicted him so they could rip it down and build condos.  It took him 7 months to find a new place, and the new place is cramped and above his budget- he's really struggling.  I don't want that to be me in 30 years.

I found out about a savings program called IDA that matches low-income people like me 2:1 up to $2k- ie, save $2k, they will give you $4k.  There are also a bunch of first time home buyer programs that offer $, should be able to avoid closing costs, and get another $10-20k towards down payment at minimum.  I also went to the intro NACA workshop a year ago, though they said bc of the self-employed thing it would take at least another year to qualify.  My accounts are kinda a mess from all the bank bonus signups I do so uncertain I will go through the NACA process or not- I talked to some people and they said it's further really complicated if you are self-employed.  This year AGI should be like $33k, will be probably $40ish in future. I'm saving 50% of income since Oct 2019 since I finally paid off last of biz startup expenses in the past 4 years.

In the meantime I started dating a guy who is amazing!  But, he lives in the suburbs and my commute would 1. be longer 2. be more expensive, and require a car.  I don't own a car, and where I work it's impossible to park one, so this would require driving a car 20-40 minutes (depending on traffic) to a public transit stop and then taking the train 20 more minutes and walking another 5-10.  In general I loathe having a car and avoided having one most of my adult life.  I mean, I'm a thruhiker. 

So issue right now is trying to decide what I will do.  I make a lot less money than my boyfriend and would be eligible for a lot more programs when applying without him.  He bought in 2006 and his home value has gone down $30k, it never really occurred to him that he wouldn't just live there forever.  Also he is actively looking for new jobs, finally after 8 months found a possibility, though it's also a 1-1.5 hr commute from either his house or my rental, and really just a stepping stone to get out of previous job, won't be permanent. 

I feel a possible idea is to qualify/buy something affordable on my income, and then have less stress in moving in together (which we would already be doing except that the commute from each other's homes to works doesn't make sense at all right now).  If we get married (which we are actively discussing) then we could decide what we wanted to do legally/financially, like have an option to buy into the house if I purchased it if he wanted to.  I'm also ok with him just selling his house if he wanted to and investing that into his retirement accounts too, I made different choices than him in my 20s-30s (no regrets tho!).  My idea would be to find something walkable to an efficient public transit (train, metro) that works for both of us.

I know I would save $ to just move to his place, he said he wouldn't charge me rent.  But it would easily double my commute and make it more expensive as well- I just feel a total sense of dread and isolation about it (as an adult I've been a city girl, except on travels where I go into the wilderness.  Can't walk or bike to anywhere from his house).  I really broke down how I felt with commuting and house stuff a couple weeks ago when talking about M word and W word (I guess I hadn't been direct enough in previous months- we are only a year into the relationship anyway).  He is coming around to the idea about maybe moving one day, though change is hard for him, and he's lost a lot of $ on the house (timing + not desirable location + too small for typical folks), and put in a lot of sweat equity.

Reading the article on MMM about "true cost of commuting" is what brought me to this site. I would love any feedback.

affordablehousing

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Re: Just getting started- maybe future homeowner- tough decisions
« Reply #1 on: December 31, 2019, 09:57:19 AM »
It sounds like you're handling a lot. Buying a house personally should be the least of your worries. Figure out your relationships, where you want to be, how you want to do your job, etc. It sounds like you are right on the divide of a tough decision- be as poor as possible to try to get as much for free, or work as hard as you can to earn it outright. I'm not being argumentative, it's a tough decision. And you have the chance to shack up with someone who if you joined forces would make you confront working hard. I think that's the decision you have to make about whether to set your sights on growing your business, or continue to solo through life and qualify for special programs and whatnot.

dizzy

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Re: Just getting started- maybe future homeowner- tough decisions
« Reply #2 on: December 31, 2019, 11:19:42 AM »
Mmmm, I have no plans to massively develop the business, I thought I mentioned I'm looking at $40k +/- in future.  I have no expectation that it will increase or decrease massively (I get a 1099, but my main work gives me set rate per hours plus commission on top - also cash tips ;)  This job has 3 day workweek all in a row, chill boss, awesome clients, it's really a situation at this point which would be SO hard to find elsewhere.  I've lived off $10-15k/year the rest of my life so I'm pretty sure I can keep the lifestyle creep down.

If it makes any difference again I would be looking at a place 3-4x/annual income.  $50k (these would require work tho) to about $160k.
Neither my boyfriend and I want a big house, we aren't planning on kids either. 

waltworks

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Re: Just getting started- maybe future homeowner- tough decisions
« Reply #3 on: December 31, 2019, 04:27:16 PM »
Wait, am I missing something here?

If you want to buy a house purely because you don't want to end up evicted and in bad shape when you're 65, your issue isn't really about a house. It's about having sufficient savings/investments to support your lifestyle. Having a house can be a part of that, or it might not. In your case, it sounds like 1) you would be stretched to afford a house of any kind and 2) this particular house came along at a time when your life is pretty up in the air.

Buying a house in that situation is a terrible idea. Make a financial life plan of some sort, figure out your relationship, and then decide if you should buy a house. If you're really living on $10-15k/year and make $40k, it should be easy to save up money pretty quickly and put yourself on track to be financially stable when you're 65. In fact, if that's really how you live, you should have a pretty solid stache built up already. If not, maybe it's time to look hard at your actual spending and income.

-W

AMandM

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Re: Just getting started- maybe future homeowner- tough decisions
« Reply #4 on: January 03, 2020, 10:10:31 PM »
I'm with Walt. Buying a house and ensuring financial stability are separate decisions. Read the Shockingly Simple Math post on the MMM blog https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/. If your reported earning and spending are accurate and stable, you have plenty of time to save enough money to maintain your current lifestyle indefinitely.

The decision whether to buy a house is more connected to your boyfriend/future husband. Do you want to settle down together or go vagabonding together? Where does each of you plan to work and for how long? How does each of you feel about commuting? What is important to each of you in terms of space/local amenities/environment? How do you feel about being tied to one location? Will you combine finances once you are married?  When those questions are aired, then you can talk rent vs buy using calculators such as the NYT one.




Dicey

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Re: Just getting started- maybe future homeowner- tough decisions
« Reply #5 on: January 03, 2020, 10:25:40 PM »
I follow a blog called "Granola Shotgun" and have a lot of resoect for Johnny's point of view, though i don't slways share it. What happened to your friend has happened to many of his. The problem is not that they didn't buy houses. In many cases, it's that they didn't bank the difference between their rent and the cost of home ownership. In other words, for whatever reason(s), they couldn't manage to live on less than they earned.

It's also why I favor investing over prepaying the mortgage: because having a shitload of discretionary money is unbelievably freeing. Talk about power!

I'm a real estate geek, but I frimly vote no on buying a house right now. Most of those furst-time buyer programs come with hoops and strings. Save your own down payment while you figure out what your future relationship will look like.