When to Purchase a Home

[Ficklone02]

Given the assumption that you are "firmly entrenched" I don't think this is risky, yes, more risky than renting. You can get a 15 year mortgage that would be equivalent to what you pay in rent. Now it may not be a 250k - 350k house and it may not be as nice as the apartment you could get. But saving 20,000 dollars for a 100k mortgage in 1.5 years is very attainable without any help. Your life may consist of two jobs and living on a bare bones budget.... but attainable.

The reason I think its risky is the fact that this person is combining that with buying a business and just out of school.

I 20% down on and 15 year notes on my rental properties.....but have a steady job and am in my 30's.

 

[Ficklone02]

My dad was just saying a few weeks ago that he should have bought a house in Ames when I started at ISU. Between me and my siblings, we had people living in Ames from 2001 to 2014, with only a year or two gap in there.

Great idea . . . now! :twitcy:

Same for us! Only, 1992 - 2006.

 

[Wesley]

I will throw in my 2 cents. Wife and I spent the first 3 months of our marriage in CR, then moved to Dallas and rented in the Uptown area for 2 years. Last summer we decided we decided we we're ready to set roots and started looking for a home to buy. I'll try and keep this short. Bought a home at 4% interest, 30 year mortgage with only 5% down. We pay $93 a month in PMI and probably will for 5-10 years. It's not ideal, but no way we had 20% or would be very close in the next few years when we really wanted to purchase. We will plan to refi in the near future to a 15 year to build equity quicker and hopefully get a lower rate. We did buy thinking of the future (unlike most places in Iowa, school districts make a HUGE difference), we bought in a good school district, and bought a home that we would feel comfortable with adding a few children to. We also bought a house that is perfectly suitable for most people, but we want to update here and there, so we set money aside to do so every month. Things I recommend from my personal experience: Budgets are your friend. Realtors and others will sell you on PITI (Principal, Interest, Taxes, Insurance) under something like 35% of your income. I think this is far too high. When we bought, we were at about 25% of take home, now we are around 21%, and that's with throwing a little extra to principal every month. I thought 25 was a good number to give you flexibility. So if your take home is $4k/month, I personally wouldn't get into something more than $1k all-in. You don't want to be "house-poor" and not be able to live or improve your house because PITI is draining you.

You, sir, are the lucky recipient of the 4% boost for mortgage. There had been a 50 years of 7-8% average and as high as 18%.This meant 35% of take home. Enjoy.

 

[CarlHungus]

I'll offer a bit of a different perspective as I just purchased a home a few months ago. A lot on here say to put 20% down to avoid the PMI. While this is ideal, the reality is a lot of people looking to buy their first home don't have this. We put down 5% on our house. There are different options for paying the mortgage insurance. We just paid lump sump up front which was just under 4k, and it's all done with. Another option is lender paid mortgage insurance; they pay it for you and your interest rate goes up about 0.25% I think. As long as you have decent credit and put at least 5% down, your interest rate should be under 5% which is still historically very low.

I would keep your housing payment under 25% of your gross monthly pay (ex: if your monthly pay is $4000.00, then I wouldn't go above $1000.00 for your mortgage payment, this would include taxes and insurance). Also, keep your overall debt-to-income ratio under 36%

Have somewhere between $5000-$10,000 in liquid reserves available after you move in. That way if your furnace needs replaced or something like that, you'll have the funds to cover it and it will help you rest much easier at night.

Lastly, just because the bank approves you for a very high loan amount, it doesn't mean you can afford that loan amount. The loan amount we ended up taking was less than half of what we were approved for, and our mortgage payment is just under 20% of our gross monthly income.

Good luck!

 

[IASTATE4LIFE]

I am not a huge fan of buying homes during a sellers market phase of the cycle. It really doesn't matter how low the interest rate is if your home drops 20% in value and you have to pay realtor fees on top of that. I would wait for this cycle to turn down before buying anything. Unless of course you find a diamond in the rough from a desperate seller, foreclosure, or something along those lines.