[USER]

(Topic: Buying a home for the first time)
When did you guys feel it was a good idea to buy a home?

My husband and I currently rent for $950 a two bedroom duplex, I am pregnant about to give birth any day now, and we have about $50k saved for a down payment.

I know Dave Ramsey recommends 20% down payment and 15 year mortgage.

I feel like doing so would double how much we have to pay each month for a roof over our head and I’m not sure it’s worth it.

And the houses that would be within « budget » I like them less than the duplex we are currently living in.

But we are starting to feel the need to move out within the next year or two because of some issues (new neighbors we don’t get along with, no washer so we have to go to my mothers in law and with a newborn that’s going to be tough.

our landlord was normally paying for heat but mentioned that starting this winter it will change and be at our own expense, and we don’t have a parking spot, so all those things combine kind of start making us wanting to move and have our own place).

Would it be ok a 30 year mortgage but with paying extra towards the principal when possible?

What would you do in our situation?

Thanks

For context I’m 28 and my husband is 36.

[Adam]

Dave’s advice is often out of touch from reality and stems from advice given like 40 years ago.

The key things are keeping your payment affordable within your budget.

rule of thumb is housing should be no more than 25-30% of your gross income, but that depends on your other spending habits.

Are you already saving toward retirement?

Do you have an emergency fund over and above what you would be putting down?

Will the payment on a 30yr mortgage with a smaller down payment be low enough to still save money long term?

Do you see yourself living in this home for at least 5+ years?

Best to talk to a financial advisor or an experienced mortgage professional who isn’t just trying to sell you on buying a home to get a commission.

It’s also not always prudent to pay extra toward a mortgage, especially at your age, when those extra dollars could be better served elsewhere, so it all depends on your situation.

[Shannon]

Can you ask your landlord for a washer? I’m sure they wouldn’t want to lose a good tenant

[Carol]

Real estate broker here.
Even if you can afford the payment on a 15 year loan, I would personally still do the 30 and just pay extra.

My personal thoughts on when it’s time to buy:

-When you feel confident that you will be in the same area for 5+ years and can afford a home that you feel will fit your needs for at least that long.

It definitely sounds like time to find a different rental or consider purchasing.

[Jennifer]

A 30 year mortgage is perfectly fine. Don’t put yourself in a position to be obligated to high monthly payments; just pay extra toward principal monthly.

[Bill]

Dave Ramsey is really anti debt, but that isn’t gospel. It also makes the rent vs own comparison really unfair.

On a 15 yr loan, most of that payment is going to equity, so it’s not the same as renting.

I do agree that using a 15 yr mortgage as a benchmark of what you can really afford is a reasonable thing to do.

That doesn’t mean you SHOULD pay it off in 15 year, but if you need a 30 yr mortgage to be able to make the payments, then you are buying too much house and will have a hard time saving and investing.

Same with cars.

If you need a 7 year car note to make the payment, that car is too expensive for you.

[Beth]

We did a 30 yr and pay extra to principle each month. That way we aren’t locked into high payments but will save on interest.

Note though we bought at a great time and have a 2.6 rate so interest isn’t huge on ours.

[Jeremy]

Lots of rent vs buy questions recently. Every situation is unique and you really need to run the numbers.

There’s lots of great calculators out there that will help you understand the true cost of owning vs renting.

If you think your monthly housing costs will double by buying, and for a place you don’t like as much as the place you’re in, to me that’s a no brainer.

If you can afford that higher payment, take all that excess money above and beyond your rent and invest it.

You’ll come out miles ahead in the long run.

I also think way too many people dramatically underestimate the true cost of ownership.

They don’t factor in things like maintenance, upkeep, taxes, insurance, etc.

If you can get a real handle on the actual cost of ownership vs renting, it’s much easier to make the comparison.

[Rick]

Doing it for the children is a very common reason. It usually is a cover for we want bigger and better.

But that aside, for me it comes down to factors outside the house.

Do you feel your jobs will provide you higher incomes over the next 10 years?

Higher than inflation so not 2-3% “raises”.

Be brutally honest with yourself.

If the answer is anything other than a strong yes, I would probably keep your rent plan going as long as you can.

Buying would be mostly price speculation and that is rarely a good decision.

It can work out but that doesn’t make the decision a good one just the lucky outcome.

If the answer is a strong yes, like most stem degree jobs and a handful of others, I say go for it.

Bet on yourselves.

Bet on your career path.

Bet on you already being on the fire journey path will keep you from making big future mistakes.

Bet on you and go buy the house.

Make sure though to budget your full mortgage x 150% for true ongoing cost to you.

Go in eyes wide open and knowledgeable on the true cost of homeownership.

Good luck with your journey.

[Lisa]

Move! Dealing with the things you listed without kids is one thing, but with a kid…yuck.

Find a nice home, 30 yr mortgage that keeps you in your budget so you can still invest in retirement and savings and enjoy your little one!

Not all debt is bad debt.

[Joyce]

Personally, give birth, make sure you go back to work & then start looking in a year or two.

I had a 34 week preemie & going back to work before he was 3 was not possible.

If we had too much house, that would have been impossible situation.

That being said, 10% down and 30 year mortgage for your house at your age is fine.

Dave Ramsey is great for getting out of debt, but too conservative once you are out of debt for my taste.

[Shannon]

PS don’t ever tell your landlord how much you have saved or threaten to move unless you are protected by rental rate increase laws

[Shannon]

I know I asked about the washer but with that amount of rent, I would keep trying to suck it up and do laundry at mother-in-law’s house.

Houses have a lot of headaches too and will suck up your time.

With a new baby, you may want to just spend all that time playing with the newborn and watching your money grow either in a high yield savings account or in the stock market.

I mean that rent is obscenely low compared to even just mortgage homeowners insurance property insurance and maintenance.

Not to mention having to shell out for your own appliances when they break and taking care of things your landlord would normally do.

I would be interested to know if the law allow someone to charge for heat when it should technically be bundled into the rent

[Lauren]

We waited until we had 20%, and given the market trajectory over that specific time period, I wish we hadn’t; home prices in our area appreciated far faster than our savings did.

But I don’t know that I really wish we hadn’t given the information we had at the time, just that it’s annoying to pay twice as much for a house as we could have 8 years earlier.

[Melissa]

Do a 30, it’ll be ok. Rates are higher now so keep an eye on being able to refinance when you can in the future.

Make sure you can afford your payment right now with current rates and your current income.

Try to make a down payment big enough to avoid PMI if you can.

Paying PMI is just wasted money.

Paying extra on the principal when you can is great but it really depends on your overall financial picture.

You have a baby coming so just give yourself some time.

You might want a few months before making big decisions, or at least before trying to pack up a house and move.

[Lynn]

We purchased when our oldest was two, renting at a great rate. Bought as much house as we could afford at 9% interest, 30 year loan.

Houses were going up faster than we could save.

I don’t regret it.

Lived there, raised our kids there, paid it off early, putting as much as we could afford to extra payments.

Sounds like you have a great start.

[Tony]

Where I live $950/mo would be a helluva deal, with or without a washer or heat included.

But I’m getting the sense that your eventual plan is to own a house somewhere.

If it’s a matter of when – not if – you buy a house and know you’ll be in the same area for the next 5-10 years I would start the process now by talking to a mortgage broker and a realtor to get a sense of the downpayment and monthly payment you will likely have to make sure it fits within your budget.

With falling rates, new real estate regulations, and more supply coming on the market, getting a ‘deal’ on a home seems to be getting more likely, and it doesn’t hurt to be prepared.

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