newbie and need input quick...please?

[wannabe83]

Hola mustachians! As you can see...I'm a newbie and desperate for advice. And I'm pretty sure what that advice will be, but I need to hear it from total strangers, because, you know, that makes everything feel better sometimes!

My husband and I are house hunting. We have $20k for a down-payment, which isn't much. We also have $12k in savings (don't yell at me about having that in savings vs. stocks please...we're trying to get with the program).

We found a house we really like. It's $152k and 1 mile from my husbands job. (Vs. the 26 miles away we are now). We would need to totally wipe our our entire savings to put 20% down on this house and then start from scratch. (We still have a 401k - we're not touching that). The sellers will pay up to $5k for closing costs/prepaids and $3,000 towards any repairs necessary to finance per inspection. It's a fixer but not unliveable. I *think* it's mostly a cosmetic fixer. It's feels and looks like a cheap apartment - but we see potential.

Anyway - we're a one income, low-income family of 4, making under 35k/year depending on husbands hours. (The work is steady, usually a LOT of OT, kind of sucks. Anyway). It's a sellers market here and every other house is flying off the market like 2 hours after it's listed. Kind of pisses me off.

So are we being total idiots if we buy this house? Yes? I think yes. My gut tells me yes - now I just need you lovely strangers to tell me my gut is correct. I just feel really torn both ways. We currently live in my parents basement apartment - which is killing us. We've been down here for 2 years which was NEVER the plan, so that is making us all the more antsy to just buy.

I have to tell my realtor something by noon-ish. Help?

(I can post the house listing if that makes any difference - just didn't know if that's giving out too much info, being our possible exact address and all...)

Thanks!!

[InnTee]

Wiping out your savings for a down payment on your first house seems too risky, at least by my standards.

Owning a house involves a certain amount of unpredictable costs (the water heater stops working, the roof leaks, etc. etc.). I wouldn't want to be in a situation where I didn't have money to deal with those contingencies.

[Cwadda]

How about a conventional mortgage with 5% down? Yes, you will get hit with PMI but it goes away once you reach 20% LTV.

http://usmortgagecalculator.org

I ran a mortgage scenario for 20% down and got a monthly payment of around $880/month. It seems affordable for your situation but again you have to be careful with repairs and emergency savings, of course.

[Frankies Girl]

Totally my opinion, but if it was me: No. Walk away.

You have a total income of ~35K a year and want to purchase a house for $~150K? That doesn't compute at all. I would at most say look for a nice rental closer to work, but buying - if $150K and up is the median pricing - is not a good option for you at all and you should not be looking for a house at all to buy.

You have no savings to make up for the stupid homeowner stuff that pops up... needing lawn care stuff, fixing the A/C or water heater or other appliance that goes out in the first year, paying for the extras that pop up... taxes, insurance, etc... you'd go into debt fast when that stuff starts hitting you. And you'll likely just barely be getting by, with intense pressure to save every penny and worrying about the next thing that breaks or saying no constantly to your friends/family/children because you literally can't afford even a small amount of variation in your budget. That sounds like an awful way to live...

Home ownership is expensive and messy - don't take it on unless you have adequate funds and salary to minimize the mess. You're not ready at all for that sort of expense with your current salary/savings.

[Heroes821]

Not trying to be harsh here, but 35k for a family of 4 with "lots of over time" should be screaming go make more money.  Rent so you can move closer to a better job.  Obviously without more information we can't be more helpful but check out MMM's jobs over 50k a year posts.  Their are tons of them, probably with less overtime which equals more family time.

Renting will give you the ability to find those jobs and move closer to them to stop commuting so much.


http://www.mrmoneymustache.com/2013/08/05/50-jobs-over-50000-without-a-degree-part-2/
http://www.mrmoneymustache.com/2013/07/25/50-jobs-over-50000-without-a-degree-part-1/

[Vindicated]

1) Savings:  I'm super impressed that you have $32k saved up when your HH income is only $35k.  Way to go!

2) Affording a Home:  There are many "Rules of Thumb" for how much to spend on a home.  I like the rule of 2.5x your income as a top end for what you should spend.  In your case, that's only $87.5k.  If you can find a home for that price that works for you, go for it.  Our home is 1.2x, and it's comfortable financially.

3) Jobs:  I believe you're a SAHM?  That's fine, of course.  I hope that your husband can find a higher paying job, so that you can achieve the goals you want.  Also, you and/or your husband could look into side gigs for additional income.

4) Living with Parents:  Do they want you to move out?  If not, milk that for as long as you can!  That's such a huge savings.  I've joked around with my Wife about moving in with my parents, or having my parents move in, or hers, or whatever.  I'm only half-way joking.  It'd save SO much money!

Good luck!

[Bobberth]

I'm a homeowner and a landlord and let me tell you that the whole 'renting is throwing money away' thing is BS. Renters just have to make a phone call and someone magically takes care of problems. As a homeowner, you have to make that magic happen with time and money. You're buying freedom and certainty along with shelter when you rent.

[marty998]

I'm a homeowner and a landlord and let me tell you that the whole 'renting is throwing money away' thing is BS. Renters just have to make a phone call and someone magically takes care of problems. As a homeowner, you have to make that magic happen with time and money. You're buying freedom and certainty along with shelter when you rent.

I disagree with this - you are most definitely not buying certainty and freedom when you rent. You are subject to the wishes of a landlord, you have no security of tenure and you are limited as to what you can do to make your shelter into a home.

OP - you have a family and I think you recognise it's time for your family to be independent of your parents.

So what if it wipes your savings by buying? It doesn't mean you'll never be able to save again. When I bought a place, I saved another $6k in between contract date and settlement/closing.

Use the purchase as motivation to earn a better living and continue bettering your life.

[calimom]

$35,000  with "lots of overtime" equals pretty low income. OP, why don't you have a paying job? Sure, small kids/homeschooling whatever, but you can't afford the luxury of that, plus buy a house, plus plus plus. Life is expensive, even in a relatively LCOL area. Props to you for the high savings, but you may not really be able to afford this dream house.

[wannabe83]

Thank you guys for confirming what I already knew!

We will continue to watch and wait. It's a sellers market right now, and about 6 months ago houses were only about $100k in this area - so perhaps our patience will pay off in the long run.

Depending on the season, my husband's job is 48/hrs week (unless it's busy), and he just got a raise yesterday (yay!), so now we will make a little more each year - base pay being just over $37k. But during busy seasons it's more like 52 hours, and he's been going in on Saturdays lately so we can sock more away for a down payment (so this wouldn't be forever) - plus he's getting free training on that day. A new job isn't in the picture for various reasons that I won't delve into here. It may not be much, but I'm thankful for him being home for dinner each night and having weekends off (except for right now, by choice).

I'm not getting a job. The schools here suck (They all have C & D ratings. One even has an F! Not sure how that school is even existing anymore...) and I kinda had kids to be the main person raising them...though sometimes I dream...lol! I'd rather be patient and save more/wait to find a cheaper house, than give up being a SAHM. Besides, I save way more money being home than I could earn. It's not worth it to me any way it would swing - either kids would be in crappy schools, or I would be working opposite shifts/weekends and so forth. A mon-fri job isn't the norm here in my little po-dunk side of the world ;-)

Thank you all so much for your words of advice and reason again! We (my husband and I) both really appreciated it!

[SwordGuy]

Buying a house that's 4.4 times your gross salary is a stretch.

What kind of interest rate are you getting?

What do rents cost in your area?

Can you get rid of a car because you'll be so close to his work?

What is the difference in monthly costs after you take all that into account?

Because if your monthly costs don't drop, you've just tossed away your life savings and now that your expenses are higher, it will be even harder to replace them.

So, unless you report back with "Wow!  We'll save an extra $500 a month because of this!" it's probably a horrible idea.

[waltworks]

The 25 miles less commuting is worth something. 50 miles round trip is costing you something in the ballpark of $20-25 a day in gas/maintenance/depreciation even if you have a junker car that gets good mileage. If DH is working 25 days a month, that's a cool $400 saved right there. Not counting his time/health, of course, both of which are substantial costs but hard to put a price on. An extra hour every day with the family (or an extra hour of overtime/training?) is nothing to scoff at.

I'd think about it but only put down 5% and do an FHA loan if that will work here. PMI won't kill you and you can get rid of it with a little work/luck/raises to put some more money in the mortgage.

Have you considered doing some informal daycare/in home babysitting for other families? That would be an easy way to keep being a SAHM and bring in a little extra money, perhaps even enough to pay most of the mortgage (20 hours a week at $10/hour...) - and it's something you (probably) can't do while living with the 'rents.

Good luck! You guys are kicking butt to have an entire year's salary saved!

-W

[Megma]

The 25 miles less commuting is worth something. 50 miles round trip is costing you something in the ballpark of $20-25 a day in gas/maintenance/depreciation even if you have a junker car that gets good mileage. If DH is working 25 days a month, that's a cool $400 saved right there. Not counting his time/health, of course, both of which are substantial costs but hard to put a price on. An extra hour every day with the family (or an extra hour of overtime/training?) is nothing to scoff at.

I'd think about it but only put down 5% and do an FHA loan if that will work here. PMI won't kill you and you can get rid of it with a little work/luck/raises to put some more money in the mortgage.

Have you considered doing some informal daycare/in home babysitting for other families? That would be an easy way to keep being a SAHM and bring in a little extra money, perhaps even enough to pay most of the mortgage (20 hours a week at $10/hour...) - and it's something you (probably) can't do while living with the 'rents.

Good luck! You guys are kicking butt to have an entire year's salary saved!

-W

Just chiming inn to say if you do buy a house,  babysitting 1-2 kids could be a great way to add to your income while still allowing you to stay home. Even covering the after school hours for a nearby mom could bring in some extra money  but i could see this being hard while living with your parents maybe.

Though I'd wonder if you can afford this house on your current income...