Should i buy a house at 26?
05-03-2012, 04:33 AM
#13
Originally Posted by Heyitsgary' timestamp='1335932976' post='21661410
To answer the specific question, a general rule of thumb is 28% of gross income /month for mortgage, and about 33% for Mortgage, Insurance and PMI. There's also some guidelines about total debt compared to your income. While those are guidelines, I'd suggest listing every expense you have by day/week/month (food, gas, car, insurance, repairs/utilities (estimated), entertainment, etc.... Add it all up and be brutally honest with yourself (the $2 coffee each morning is really $500/year!, $10 for lunch a day - $2500/ year- things add up!) then look at what you really have and make your decision there. Too many people historically got preapproved for a number based on guidelines, and live house poor. They are just guidelines, not set in stone - everyone's situation is different, very different!
The questions about where you want to be/what you want to do are accurate. Most of your payment for about 10 years is all interest, so you won't see any real principle reductions until later in the mortgage. That used to be handled because the general housing trend was upward - so the equity came from appreciation. That's not the case at the moment by any means. So, unless you're in it for the long haul you aren't really paying yourself the principle - you're paying the bank interest.
However, if you feel that your are stable, and vested in the area you live (or will buy), and that you might be there a while, the buyer's market currently might be a great time to get into a house. Also consider that home ownership brings pride, self worth and responsibility. Renting removes liability, allows you to be transient/mobile but offers no tangible assets. Ask yourself if you want to mow the lawn, maintain the house, deal with the 20 year old furnace or a broken refrigerator.
Alternatively, you could change your lifestyle a little, pay your $900 / month rent, and put some/most/all of the difference into an investment account or some other savings, and build up the equity needed later when you are more set. Don't neglect yourself though, your situation now lets you do things that might not be doable in the future, don't sacrifice everything to build up for the future, enjoy it while you can.
Good Luck - the decision is yours, do what's right for you.
The questions about where you want to be/what you want to do are accurate. Most of your payment for about 10 years is all interest, so you won't see any real principle reductions until later in the mortgage. That used to be handled because the general housing trend was upward - so the equity came from appreciation. That's not the case at the moment by any means. So, unless you're in it for the long haul you aren't really paying yourself the principle - you're paying the bank interest.
However, if you feel that your are stable, and vested in the area you live (or will buy), and that you might be there a while, the buyer's market currently might be a great time to get into a house. Also consider that home ownership brings pride, self worth and responsibility. Renting removes liability, allows you to be transient/mobile but offers no tangible assets. Ask yourself if you want to mow the lawn, maintain the house, deal with the 20 year old furnace or a broken refrigerator.
Alternatively, you could change your lifestyle a little, pay your $900 / month rent, and put some/most/all of the difference into an investment account or some other savings, and build up the equity needed later when you are more set. Don't neglect yourself though, your situation now lets you do things that might not be doable in the future, don't sacrifice everything to build up for the future, enjoy it while you can.
Good Luck - the decision is yours, do what's right for you.
I live in CA and got approve for FHA first time buyer for $250. ( cant really find a nice house in orange county for anywhere near that much) Might have to settle for a condo.
My other questions is; what are the benefits of putting 20% down?
Do you plan on staying there? If you meet someone, is it big enough for 2 people? How about a child? Will it be big enough to live in to start seeing the advantages of owning?
Again, the market until a few years ago was going up, so he equity from selling came from appreciation. (You buy for 250, take a lone for 200. After 5 years, you've paid ~8K in principle (estimate). So when you sell, you get 58K + the 50 in appreciation since the house is now sold for 300.) That makes up for the massive interest you've paid over 5 years. When the market is flat, you get back your 50, + the 8, plus nothing! so you've paid interest on the long term side all up front and don't get any return.
Talk to a financial adviser - see if your bank or others in the area offer seminars on first-time buying. This is one community of car people who have homes or rent or both. It's a set of opinions from many people (including me) that aren't really qualified to give advice, but rather our experiences.
05-04-2012, 05:33 PM
#14
Moderator
So, as a frame of reference, I bought the last time the market was stupid-down (2002; the 9/11 bear), and in the interior Bay Area. I never went underwater. . . AND, 10 years later, mortgage, PMI (there was a re-fi and additional money), and insurance put me at parity with rent. Parity. . . with rents seeing a 5% increase presently since 2009.
As it also turns out, my place will be 10 minutes from the future HQ of a very very prominent company. So, within 3 years, my value will probably add 20% sight unseen.
I say all this because, YMMV, and my case is an EXTREME outlier. Most of my friends lost their shirts buying from 1999 on. What I can say this is:
1. Given Property values in your anticipated zip code, will it exceed a 5% rate of return YTY? If not, you're (odds on) better off just taking the $900 delta and putting it in an index fund of some stripe.
2. Do you anticipate living in your residence for 25 years? Or, more specifically, would the place you buy have practical utility for 25 years? Would it be a valuable asset at the end of the mortgage terms?
2a. Do you anticipate your work staying in the area? Part of the utility in the housing equation is your proximity to work. Some folks think I'm insane for having bought (just) a condo, but I have a 20 minute drive to work. My commute is half the length of most of my co-workers, whose household incomes are 2x-3.5x mine. . . and because they bought in further outlying areas, they lost A LOT from purchasing in the mid-aughts on. . .
Just a viewpoint - I've seen some other decent ideas in here too.
As it also turns out, my place will be 10 minutes from the future HQ of a very very prominent company. So, within 3 years, my value will probably add 20% sight unseen.
I say all this because, YMMV, and my case is an EXTREME outlier. Most of my friends lost their shirts buying from 1999 on. What I can say this is:
1. Given Property values in your anticipated zip code, will it exceed a 5% rate of return YTY? If not, you're (odds on) better off just taking the $900 delta and putting it in an index fund of some stripe.
2. Do you anticipate living in your residence for 25 years? Or, more specifically, would the place you buy have practical utility for 25 years? Would it be a valuable asset at the end of the mortgage terms?
2a. Do you anticipate your work staying in the area? Part of the utility in the housing equation is your proximity to work. Some folks think I'm insane for having bought (just) a condo, but I have a 20 minute drive to work. My commute is half the length of most of my co-workers, whose household incomes are 2x-3.5x mine. . . and because they bought in further outlying areas, they lost A LOT from purchasing in the mid-aughts on. . .
Just a viewpoint - I've seen some other decent ideas in here too.
05-06-2012, 05:28 PM
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I bought my first house 3 years ago next month, when I was 25. Went for an FHA loan, wanted to capitalize on the first time home buyer tax credit that the Obama administration was running at the time, and I qualified for a similar loan (mid 200's), which where I live (outside of Washington, DC) similarly buys you a condo, but not much more.
So, our situations are at least somewhat comparable. Very short answer for you, I am happy that I made the purchase. I've been building equity slowly, and my house has been holding its value (not gaining, not dropping either). The tax refund each year is also fabulous. Real estate is not the 100% safe bet investment that it was 10-15 years ago, but if you're planning to stay in one place for while, it's still a better bet than renting, IMO. I haven't felt like I've been throwing my money away; if I were to sell tomorrow, I could potentially clear about 20K, which over the course of 3 years in light of how terrible the market has been, honestly feels like a victory for me.
The rates are even better now than they were, but honestly, it's still a decision you should think long and hard about. From age 25 to 28 (where I am now), my earning power has increased pretty significantly. Were I to buy right now, I'd be looking more in the 400,000 range. It still doesn't buy you the world here (and nor would it in CA), but in that new price range I could afford some things I really wish that this condo had... like a garage for my S2K.
So, just put yourself down the road a few years, see if you'd still be happy in the place you are buying. I would say, at minimum, plan to own the property for 3-5 years or it's probably not worth it. At our age in our 20's, things can change pretty dramatically in 3-5 years, so be as sure as you can before you take the plunge.
So, our situations are at least somewhat comparable. Very short answer for you, I am happy that I made the purchase. I've been building equity slowly, and my house has been holding its value (not gaining, not dropping either). The tax refund each year is also fabulous. Real estate is not the 100% safe bet investment that it was 10-15 years ago, but if you're planning to stay in one place for while, it's still a better bet than renting, IMO. I haven't felt like I've been throwing my money away; if I were to sell tomorrow, I could potentially clear about 20K, which over the course of 3 years in light of how terrible the market has been, honestly feels like a victory for me.
The rates are even better now than they were, but honestly, it's still a decision you should think long and hard about. From age 25 to 28 (where I am now), my earning power has increased pretty significantly. Were I to buy right now, I'd be looking more in the 400,000 range. It still doesn't buy you the world here (and nor would it in CA), but in that new price range I could afford some things I really wish that this condo had... like a garage for my S2K.
So, just put yourself down the road a few years, see if you'd still be happy in the place you are buying. I would say, at minimum, plan to own the property for 3-5 years or it's probably not worth it. At our age in our 20's, things can change pretty dramatically in 3-5 years, so be as sure as you can before you take the plunge.
05-07-2012, 02:45 PM
#16
I am with S.hasan546, and would advise you to steer clear, for a variety of reasons. Don't buy into this "our economy is recovering" nonsense. You will likely lose value over the next few years, even in a nice area. There is only one reason to carry a home mortgage, and that is for the interest deduction. How significant will this factor be for you? If the current administration has their way, that deduction will be eliminated anyway, at least for higher income brackets.
Financial considerations aside, do not underestimate what a royal PITA home ownership can become. I love the privacy, but I HATE the hassle. Stuff wears out, breaks, clogs, leaks, hail damage requiring contractors that then cause even more problems, maintenance, home insurance rates getting jacked for no reason, property tax going up while your value declines... I could go on all day. Then wait until you get started on modifying your home. You think sinking $ into your precious S2000 adds up? Pennies on the dollar compared to what you will be getting into.
Rates are the best you will likely ever see. Aside from that, the "pro's" are limited. Don't even consider buying a condo or townhouse or into a community that has home owner's association fees. What a rip. Married? Kids? If not, save up and buy a small apartment building, live in one unit and rent out the others. At least that way you will be able to write things off easily.
Financial considerations aside, do not underestimate what a royal PITA home ownership can become. I love the privacy, but I HATE the hassle. Stuff wears out, breaks, clogs, leaks, hail damage requiring contractors that then cause even more problems, maintenance, home insurance rates getting jacked for no reason, property tax going up while your value declines... I could go on all day. Then wait until you get started on modifying your home. You think sinking $ into your precious S2000 adds up? Pennies on the dollar compared to what you will be getting into.
Rates are the best you will likely ever see. Aside from that, the "pro's" are limited. Don't even consider buying a condo or townhouse or into a community that has home owner's association fees. What a rip. Married? Kids? If not, save up and buy a small apartment building, live in one unit and rent out the others. At least that way you will be able to write things off easily.
05-21-2012, 12:37 PM
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Buy it - if you don't like living in it down the road rent it out and have other people fund that investment. Rentals right now in CA are nuts. Also I am not sure how with this level of income you have you are any more free to travel the world than with a house. Unless you get the house and room mates.
A house for yourself should be viewed long term - and long term prices are going to rise it's a simple law of supply and demand - CA is 180,000 new homes short every year and they can't build apartments that fast. Plus if things get too desperate they will make it easier for illegals to pool buy, estimates are there is a trillion and a half in new housing potential there if they do.
A house for yourself should be viewed long term - and long term prices are going to rise it's a simple law of supply and demand - CA is 180,000 new homes short every year and they can't build apartments that fast. Plus if things get too desperate they will make it easier for illegals to pool buy, estimates are there is a trillion and a half in new housing potential there if they do.
05-29-2012, 04:17 PM
#19
05-29-2012, 08:14 PM
#20
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If you say so, my property will pay it self in 10 years from the rent I get! You tell me again if it's stupid or not! 142K property cost, 1500 monthly rent I collect from my tenant.. Make the calculation and get back to me