Life advice (buying a house)

EMTDAD

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You're basically making ~$35k and probably paying $5k in taxes (really rough math here). That's $2500/mo after tax. About $2200/yr in property taxes, that's $185/mo. Heat, electric, and hot water - let's call that $115/mo. Let's say no down payment, 30yr fixed @ 4.75% with no PMI = $511/mo. Let's say insurance is $89/mo tomake the math easy.

Right there you're down to $1600/mo. Then subtract gas for your car ($200/mo), groceries ($200/mo), car insurance ($100/mo)... I'd suggest you start thinking about retirement as early as possible, maybe $100/mo you put away? That leaves you with $1000/mo for yourself, which isn't really as much as it sounds - go out with some buddies, drop $100; car needs a new starter, drop $150; various shit adds up quickly.

I'd say it's possible but would require patience and self-discipline. Also, don't go solely with my random numbers here - do the math on your own.

Exactly what K did here.. make a budget.. Vertex42.com has lots of free Excel sheets to help with personal finance... see what you can reasonably afford. Forget the online "what can I afford" calculators, as they typically use too little info and overestimate what you can reasonably do. Remember that costs fluctuate so leave some wiggle room to account for that.
 

snax

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Though, I'm not sure of a bloodbath...I think there will definately be a correction. Its already starting to happen.

Condo's drop hard and fast, but there are also monthly fees associated with them, along with taxes. They can be a good investment if you are willing to sit on them for 5 years.
Bloodbath...maybe not. But there sure are alot of people of sketchy means way overpaying for piece of shit houses.

The fees are getting out of hand on alot of these condos. I haven't analyzed alot of them. I have run into a few that were obvious robbings by the developer and management companies.
 

new guy

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I'm with snax. If I didn't have a family to worry about I'd have sold and be waiting it out on the sidelines while renting right now. Look at the historical price for the property (and/or neighboring properties) and ask yourself if you're buying high or low.
 

LuvDog

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I bought my first house at 26 years old. It was about the same price and I was making less. I actually had a fairly decent amount of disposable income because no kids or wife.

Of course that was a long time ago.
 
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Market in MA has been rising ~8% a year. People are asking crazy prices (imho) and getting a dozen offers the night after the first open house, then sell for $15k over asking. It's insane.
 
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How are the schools? Who the F cares, right? Matters for resale. Matters for a life change that results in you caring. Would suck to have kids and be in an affordable house but crap school district and unable to afford to move. I took a righteous beating on a house in 08 to eject from a school district, yes my fault but that's why I'm warning ya.
As mentioned consider ejecting from MA, your money goes a lot further elsewhere. And if you stay also beware of other local employers, do you have the only good gig in humanely commutable distance or are there other options? Rural(ish) places with one decent employer have a negative effect on wages and upward mobility.
One more thing, as an example airplane owners budget for eventual engine replacement, roughly 2,000 hours at $20-40K usually put away money at an hourly rate to cover it or at least expect it. I never see homeowners doing the same for roofs, siding, boilers, etc. Something to consider/be aware of. Working in the trades and/or having family in the trades can help a lot, but don't discount the eventual house big maintenance costs.
There is a joke in here about renters talking about the gun they just bought and homeowners talking about the thing they just painted...
Good on you for thinking about the future and making solid plans.
 

Buck Faker

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Are you currently living with family or are you renting? The difference between rent and ownership costs also needs to be factored in. Many of the costs I'm seeing listed above (food, utilitites, car expenses etc.) shouldn't be much different whether you're renting or owning. Another thing to look at is what your projected income/career growth will be. If you're comfortable with your job security and that your income will increase over time then it's not such a bad thing to bite off a little more now. I know there are no guarantees when it comes to job security but you have to make decisions based on reasonable expectations for career growth; if the outlook is good then go for it. You're asking the right questions and thinking along the right lines which is a good indicator that you'll be one of the successful ones. Good luck!
 

new guy

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Are you currently living with family or are you renting? The difference between rent and ownership costs also needs to be factored in. Many of the costs I'm seeing listed above (food, utilitites, car expenses etc.) shouldn't be much different whether you're renting or owning.
The costs of home ownership are what I remember jumping out at me. As a renter it's a couple of hundred bucks here and there, but it was home ownership that eventually made me numb to having to drop a grand+ at a time.
 

PaulR

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TLDR but do it.
If you can make a living out in the woods, good for you.
Long term: RE only goes up in value. Good investment, pay yourself equity instead of someone else.

Down side: Mortgage rates sorta suck now, up 2% over some pretty historic lows in recent times.
 

George D

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I have been writing mortgages for 22 years, guiding first time buyers is what I do.
Assuming you have minimal debt, the numbers work fine from a qualifying perspective. Since you are in a rural area, you most likely qualify for a no money down USDA loan which will give you a low fixed rate and allow you to put money into the property. You can certainly put money down as well so you have some equity, but I am guessing a $98,000 house is going to need some work. You are better off putting that money into the house as repair/renovation as opposed to putting it against the sales price and getting into credit card debt as long as the repairs improve the value.
Assuming a sales price of $98,000, I would guess that your insurance would be about $800 a year, maybe $2,400 a year for property taxes.
Even with the USDA PMi, your total monthly payment is only around $812 for principal, interest, taxes and insurance. Even with no downpayment, you'll still need around $5,000 for closing costs, pre-paids and escrows unless the seller is willing to pay part of it.
Underwriters use debt to income ratios to determine what you can afford and yours falls right in line with what is allowed. However, I am not a big fan of letting a bank tell you how much you should be spending, only you really know that as everyone spends money differently.
When I have clients that are uncertain about their ability to afford a home, I have them come up with a budget of what they will be spending on utilities if they aren't already paying them, add the mortgage payment, and then write themselves a check every month for that amount. That is going to give you a real world feel for what your life will be like. Keep in mind if you are living at home you will also have groceries and other random housekeeping things to spend money on. If you find yourself totally broke at the end of the month after writing that check, you need to adjust your spending habits. The last thing you want to do is get into a property you can't sleep in because you are stressed out. It doesn't come into play on the mortgage side, but you are also at an age where having a room mate could work well and help contribute to the payment. If you have any questions, just PM me. I have helped quite a few people on NES with thier mortgages.
 

1776

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What you buy now and have loans on will cost you double in 15 yrs.
The right property, or if you do all your own work, may double in 15 yrs

Zillow any area and click on the dots to show all related history and costs
 
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drgrant

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The costs of home ownership are what I remember jumping out at me. As a renter it's a couple of hundred bucks here and there, but it was home ownership that eventually made me numb to having to drop a grand+ at a time.
Hereafter referred to as a "house unit". Very few things you do to a house involve less than 1 house unit... lol. (1000 bux).
 

Buck Faker

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I have been writing mortgages for 22 years, guiding first time buyers is what I do.
Assuming you have minimal debt, the numbers work fine from a qualifying perspective. Since you are in a rural area, you most likely qualify for a no money down USDA loan which will give you a low fixed rate and allow you to put money into the property. You can certainly put money down as well so you have some equity, but I am guessing a $98,000 house is going to need some work. You are better off putting that money into the house as repair/renovation as opposed to putting it against the sales price and getting into credit card debt as long as the repairs improve the value.
Assuming a sales price of $98,000, I would guess that your insurance would be about $800 a year, maybe $2,400 a year for property taxes.
Even with the USDA PMi, your total monthly payment is only around $812 for principal, interest, taxes and insurance. Even with no downpayment, you'll still need around $5,000 for closing costs, pre-paids and escrows unless the seller is willing to pay part of it.
Underwriters use debt to income ratios to determine what you can afford and yours falls right in line with what is allowed. However, I am not a big fan of letting a bank tell you how much you should be spending, only you really know that as everyone spends money differently.
When I have clients that are uncertain about their ability to afford a home, I have them come up with a budget of what they will be spending on utilities if they aren't already paying them, add the mortgage payment, and then write themselves a check every month for that amount. That is going to give you a real world feel for what your life will be like. Keep in mind if you are living at home you will also have groceries and other random housekeeping things to spend money on. If you find yourself totally broke at the end of the month after writing that check, you need to adjust your spending habits. The last thing you want to do is get into a property you can't sleep in because you are stressed out. It doesn't come into play on the mortgage side, but you are also at an age where having a room mate could work well and help contribute to the payment. If you have any questions, just PM me. I have helped quite a few people on NES with thier mortgages.
Good advice, George will steer you straight I'm sure. I forgot to mention: I sell homeowners insurance, feel free to message me if you want a quote or to go over things, happy to help a fellow NESer out too.
 

M125X

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Hereafter referred to as a "house unit". Very few things you do to a house involve less than 1 house unit... lol. (1000 bux).
I like that term. As a homeowner it is very true. Also as a homeowner you should make sure you know how to do work yourself. Otherwise you’d better have some dough to cough up for repairs, improvements to build equity, etc
 

rommel

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Lots of good advice. I will add a different perspective to consider. Choose your house wisely. If you plan on staying long term, avoid a house with high ground water. You will be fighting it forever.
If you are not sure how long you will stay then try to consider that you may need an exit strategy, in case you need to get out or want to get out for another house. Also plan renovations based on your expected ownership length. If you plan to live there long term then fix things once, so do it correctly no matter the cost. If you are not sure if you will stay there long then fix things on a budget that gives you a better return on your investment.
 

Dennis in MA

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You're basically making ~$35k and probably paying $5k in taxes (really rough math here). That's $2500/mo after tax. About $2200/yr in property taxes, that's $185/mo. Heat, electric, and hot water - let's call that $115/mo. Let's say no down payment, 30yr fixed @ 4.75% with no PMI = $511/mo. Let's say insurance is $89/mo tomake the math easy.

Right there you're down to $1600/mo. Then subtract gas for your car ($200/mo), groceries ($200/mo), car insurance ($100/mo)... I'd suggest you start thinking about retirement as early as possible, maybe $100/mo you put away? That leaves you with $1000/mo for yourself, which isn't really as much as it sounds - go out with some buddies, drop $100; car needs a new starter, drop $150; various shit adds up quickly.

I'd say it's possible but would require patience and self-discipline. Also, don't go solely with my random numbers here - do the math on your own.
Those are all real solid #'s. Taxes will probably run a squidge more with FICA added in.

I think I was making $50K when we bought our $125K house 24 years ago. And that was SCARY! Now I'm one of the "old folks" in the neighborhood. LOL.

$17/hr is REALLY scary at a 98K house. My $125K was BRANDY-NEW in 1994. Yours likely won't be. Roof leaks? Boiler blows? Rat infestation? Yer screwed.

Save save save save save. And get to a job at $25/hr.
 

new guy

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I like that term. As a homeowner it is very true. Also as a homeowner you should make sure you know how to do work yourself. Otherwise you’d better have some dough to cough up for repairs, improvements to build equity, etc
Amen. I battled a bathtub drain that wouldn't drain for an hour last night, resuming the fight again this morning at ~5AM. I prevailed, and saved myself a few hundred bucks in the process. Between fixing stuff, replacing stuff, and maintaining the yard it never ends.
 

s4mt3k

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Don't buy now. Prices are going to crash.
Also - think investment property even though you will live in it (and get FHA of course).
Before you know it you'll outgrow and and instead of it being throwaway (it'll take a long time to pay and gain equity) - you can use it as an investment property (ie rental).
 

Obie1

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To me, it's simple--if you believe in yourself and your future, go for it. If not, don't. When I bought my first house, paying the mortgage each month meant other things were sacrificed. Seven years later, with growing income, the payments seemed trivial, and the value of the house (with sweat equity) doubled. That allowed me to buy the next house and eventually to build our forever house. Yeah, the first plunge is scary, but it's a bet on you and your future and really helps you learn some important things.
 

hminsky

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I have to be honest, the best thing you could do is figure out how to increase your salary.

I've been 'house poor' and it was kind of drag. It might be a good house, or it might be a money pit, I don't know, it's hard to tell until you've lived in it for a while. Our first house we bought cost roughly 3x our annual income at the time, and that was difficult to handle when we needed to do some modestly sized renovations and repairs. To save money I even tried to remodel one of the bathrooms myself (note to self, don't try to get a job as a tile setter). It was satisfying to be able to do some maintenance, but tough to always be worrying about how to come up with the cash for inevitable repairs. It will be much easier to manage with even a little more headroom on the budget.

But yeah, it's a leap of faith. I thought when we bought our house that nobody would ever ever pay more for it than we did at the time, but eight years later the price had almost doubled (don't count on that though! )
 
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PennyPincher

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make sure your house payment (mortgage, taxes, insurances) are no more than 1 weeks take home pay (less if you usually end up owing at the end of the year). Then figure out if you can do everything else you need and want to do, including budgeting for household repairs, and then you should have your answer. Oh yeah, when "painting that picture" of you as a homeowner, paint it with bad case/worst case scenarios in mind. Too many people (us included) have painted it with the "best case scenario" and ended up in the deep end of the pool.
 
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EMTDAD

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Hereafter referred to as a "house unit". Very few things you do to a house involve less than 1 house unit... lol. (1000 bux).
which goes along with the home improvement store unit... = $100, as in you don't leave HD or Lowes without dropping minimum of $100, more often multiples thereof.
 

Buck Faker

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To me, it's simple--if you believe in yourself and your future, go for it. If not, don't. When I bought my first house, paying the mortgage each month meant other things were sacrificed. Seven years later, with growing income, the payments seemed trivial, and the value of the house (with sweat equity) doubled. That allowed me to buy the next house and eventually to build our forever house. Yeah, the first plunge is scary, but it's a bet on you and your future and really helps you learn some important things.
Exactly. It's ok to choke on the house a little in the beginning. I thought I was going to die when I bought my first house, three years later I refinanced down to 15 years. OP is 22 years old and seems like he's on the ball, I imagine there's a lot more upside to his future than downside.
 
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just like everyone said....list out all the bills. The mortgage is usually the biggest...

Other than the utilities don't forget to factor in food, gasoline, maintenance and car repair...clothes and other ancillaries like toiletries and so on....

Best thing to do is pick a price, make a budget and try to stick to a budget for three to six months...if you are successful then you should be able to take the step.

Best of luck with whatever you do....
 

BrianWilson

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Go for it. Busting your butt to get ahead is not only what it takes, it's also the American way. At one point in our early days my wife and I were working 5 different jobs between us to get it done. Pay a little (or a lot if you can) extra on it every month as well.
 
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