Time to help a reader out! Been getting a lot of similar questions like this lately, so figured I’d pass this along in case any of you are thinking about it too :) And to be quite honest, I think I’m wayyyyy too jaded with home ownership right now to give a non-biased opinion! Haha…
So when you’re done reading, maybe you can chime in and offer some words of wisdom yourself? I’m sure our reader would appreciate it – always good to get varying ideas on this stuff, esp since it’s a major decision!
Here’s the question from Mr. Future Homeowner, followed by my response below:
“I’ve been getting a lot of questions like this lately, so I thought I’d share my thoughts on it via this “Help a reader” post
I have a full time job as a video editor, working for a professional football team. My salary is low 30’s, but they pay for great health/dental/vision insurance, my cell phone, and I basically eat two out of the three meals of the day there. I contribute 5% of my income into my 401k and recently I started an emergency fund with a high yield savings account online (1.30%). My car is paid for (I got it when I was 16 as a gift from my parents) and it is in pretty decent shape.
The things I pay for include rent, some utilities, gas, and the occasional trip to the grocery store. I have about $8,000 in college loans and that is the only “debt” I have. Of course, when I’m not working crazy hours, I do try to have some fun. :)
I’m single, I’m 25, and I’ve been pondering the idea of purchasing my own home. The main reason is because I hate the fact that I’m basically throwing my hard earned money away paying a quarter of my monthly earnings for rent. I feel that I would much rather be putting that money into something I can OWN and build credit and of course, own my own home!
My question is this: According to my budget, I should have my college loans paid off in about 2.5 years. Do you think it would be wise to wait until I pay off my college loans, build up a savings account, and then buy a place of my own? Or… do you think it would be possible to purchase my own home and still pay the mortgage and college loans at the same time.
In April, I finally paid off two large credit cards that I had from college and now I am saving that money that I would be paying for a credit card.
I have read so many different things on this subject and it makes my head spin!”
I agree – it makes my head spin too! And unfortunately there’s no “right” or “wrong” answer here – just the one that YOU are comfortable with, ya know?
- Pros to buying now: Prices are CHEAP! Mortgage rates are CHEAP! So if you know you want to live in an area for at least 3-5 years, then it’s a most excellent time to buy. Update: Can also deduct all that interest! Which is a biggie, can’t believe I forgot about that one.
- Cons to buying now: Credit is MUCH tighter, you’re now in $xxx,xxx amount of more debt, you have to fix everything yourself (lots of $$), and you’re “stuck” in one place.
There are plenty more variables out there as you know, but those are the ones that go through MY mind when I think of this stuff. Personally, I want nothing more than to sell mine and go back to renting :) But then again I overpaid and bought way too much space when all I needed was 1/3 of it. I also have a problem staying in one spot in general, but that’s a totally different story (military brat).
Sooooooo, I’m probably the wrong person to ask about this cuz I’ll try and convince you NOT to buy one yet ;) I’d also probably tell you to save at least $10,000 in an emergency fund first too cuz houses are mad expensive! And you’re on the hook for it all by yourself too. BUT, if you’re asking me for a financially factual answer, I say go for it. The time is great for buying a house (esp your 1st since you don’t have to worry about offloading one either), and it seems you have your head on straight.
Be sure to find a realtor first, though, and get pre-approved so you know *exactly* how much house you can afford (within your budget!!!)). And also so you know what your average monthly payments will be around. Be sure to add in extra for homeowner’s insurance, a few hundred for maintenance, and also condo/home association fees.
Then try pretending paying this mortgage for 3-6 months so you know what it’ll be like! If you’re spending $500 renting, and your mortgage is $1,000, send an extra $500 every month into your savings account. After a few months you’ll see if it’s worth it or not and if you can handle it :)
So basically, follow your heart. I couldn’t get convinced NOT to buy when I really wanted to, but if i had to go back I would have paid more attention and bought a place at least 1/2 as much. There’s no rush – better to get it straight the first time and be 100% comfortable with it. The more you spend on a house, the more you now have to be on the hook for which cramps your lifestyle – esp as a single gent such as yourself.
Here’s a couple other posts sorta relating to this if you need more:
And remember, nothing’s permanent. If you change your mind either way later, that’s OK!!! Mistakes are much easier to overcome when you’re young.
(Photo by Daniel Leininger)
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!