Home purchase a good idea for me?

Submitted by Needospeedo t3_11edb9v in personalfinance

I'm thinking about purchasing my first home but I'm not sure if it's financially a good idea as it's a big purchase. For starters I've got an 80k down payment so I can avoid PMI. I have a salary of 85k per year. Interest rates are quoted at 6.875% which in the grand scheme of things isn't amazing but hey it's not 10%. Looking at a new 350k townhouse. Which would make a monthly payment of around 2k. I don't have any student loans or debt besides monthly credit cards that get paid off every month. Currently I rent with a family member for 1000 a month but their SO is at there wits end and I'm tired of taking the blunt of their life's inconveniences. I know purchasing a home is an investment but 2k seems kinda steep. This is where the market is at right now. I could only hold out for another year max before being forced to move out anyways. Am I crazy for considering this or is there other factors I'm missing?

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omdongi t1_jadbtph wrote

It's technically within the rule of 36 (or 40). But not sure if you've adjusted for property taxes, maintenance, HOAs, or insurance, which may make it a little tight for you.

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Needospeedo OP t1_jadfbsp wrote

Yes that's kind of what I'm seeing I've got a spreadsheet with expenses. HOA, insurance etc. Comes out to around 1000 left over at the end of the month. How tight is too tight? Whats reasonable? Not looking to be house poor if I can help it.

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omdongi t1_jadzs4i wrote

Yeah could be doable but you're going to really need to budget. Hopefully that's not 1000 before saving money. If it is you probably need to reevaluate the decision.

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Needospeedo OP t1_jae828g wrote

That's 1000 savings every month give or take. I have retirement with a 5% match through work that comes out of my paycheck already. The 1000 is after retirement is taken out already.

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Needospeedo OP t1_jae9njo wrote

Health savings as well are already taken out as well like retirement. I put in the max allowable per year.

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Interesting-Dish8894 t1_jadoenl wrote

youre at the edge of being house poor and when you add in monthly hoa fees of probably several hundred dollars that always go up along with insurance and property taxes then this isn't looking so hot unless you are someone that can really be completely aware of all your money being spent and you don't buy crap you don't need

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Needospeedo OP t1_jadpwy9 wrote

I generally find myself to be good with my spending. I do like to spend on traveling and vacations and don't want to be limited to not going because I'm tight on money. Seems like my gut is right telling me it's too tight.

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HappyJaguar t1_jadc1w2 wrote

Well, if you've got to move out anyway, I'd look at this option along with whatever other options you have in the area. Definitely start on this now before getting forced to move out as buying a house can take months.

Assuming you're single and putting some money into retirement, I'd guess your take home is ~55-65k, so this would be somewhere around 40% of that. I'd check your accounts to see if you're currently saving >$1000 in cash, and see if you can afford to make several $1000+ fixes to the townhouse and still have an emergency fund after you make the $80k down payment.

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Needospeedo OP t1_jadeux2 wrote

I currently save around 1000 per 2 week check. I've done a expense report in excel and I'd have around 1000 left over at the end of the month after the mortgage. This includes hoa, housing repairs, ( which should be near 0 because it's brand new.) .

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HappyJaguar t1_jadifl9 wrote

I wouldn't consider a new construction a reason for it not to need fixes. If you get a fresh lemon, it's still a lemon. I think this is an option for you, but might result in it being your main financial commitment for a long time. If interest rates keep going up there's a decent chance you go underwater while still being unable to move for a better deal.

Or it might work out great.

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Needospeedo OP t1_jadjp7g wrote

Thanks for the input never considered a lemon possibility.

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