Last week I was talking to my older sister about how I wanted to buy my own house. She basically told me that I'd fail because I didn't have a high income. I was furious that she would think I'd fail. She was furious because she thinks I have no idea what I'm doing. My sister and her husband make $100,000 a year. I made $12,000 last year (not including bonuses which I get 4 times a year and my income tax return which I count as income because it goes straight into my savings account). I can totally see why she would think I couldn't afford a house of my own.
But here's the thing. It's not about how much money you make. It's about what you do with the money you make. My sister bought her house for $2xx,000. The house I want to buy is 1/3rd of that price and it's actually a really, really nice house. Almost nicer than her's (lol)! Sometimes I read the blogs on here and see that many of you have monthly mortgage payments that are higher than my monthly income! I'm like, man, I want to have that much money! But I don't NEED a $2xx,000 house. My sister spends close to $150 per week on groceries. I could easily spend less than $20 on groceries and still make nutritious meals because I don't buy expensive meats all the time and I shop using sales and coupons. I can't remember the last time I bought something for myself that wasn't a necessity. My older sister bought her husband a $1300 TV for Valentine's Day. I went on a short vacation last month. I bought a $2 box of cereal and a $1.59 quart of milk for my breakfast. I set a limit on how much I could spend eating out. I always picked one of the cheapest items on the menu. Water to drink only. If my sister and her husband went on the same vacation I did, they would have spent 3 times the amount I spent on food alone! I have one friend who spends $1200 every year on Christmas gifts. She buys for maybe 8 people. I buy for 7 people and last year I spent about $300 on really nice presents. She spent $40 on a trivet for her sister. $40! FOR A TRIVET! WHY?! I have a coworker who is a single mom living with her own parents. She really wants to move out of her parent's house so she can start her own life with her daughter but she can't afford it. On her lunch/dinner breaks at work, she spends $10-12 every time! I bring food from home and my meal costs no more than $1!
I do understand that unexpected expenses come up. That's why I have an emergency fund. And if my emergency fund dwindles down to nothing, I'm not afraid of using credit cards because I'm absolutely responsible. Am I never going to buy a house because an unexpected expense may or may not come up that I might not have the cash for? I have a friend who has almost $500,000 in medical debt. Is she never going to buy a house of her own because she has a serious illness?
I'm going to take this one day at a time. I'm going to make smart choices. Dental insurance. Medical insurance. Hazard insurance on the house. If an unexpected expense comes up, so be it. I'm never going to be a millionaire. This is my life. And my happiness. I'm going to do the best I can.
I'm in a talkative mood tonight.
March 30th, 2010 at 01:01 am
March 30th, 2010 at 01:16 am 1269911787
Be very careful about buying a house while you are that young. It's not just an investment, it's a place to live and if you decide you want to move, or take a job cross country don't count on being able to sell it (even in a good market) or rent it.
My fiance and I had to cancel our wedding because my income isn't enough to comfortably rent a 1BR place for us, and his entire monthly salary goes towards his 3rd of the house he owns with his brothers so until he is rid of the house, he can't contribute. I can't move in with them. So I have to continue renting with a roommate and he has to continue living there, 2 1/2 hours away from me.
So we have to put our future on hold because he bought a house he never intended to stay in, (that when he bought it seemed like a great investment) and now he can't get rid of it. We are in our mid 30's so you can imagine how hard this wait is on us.
You are 22. You have plenty of time before you need to be tied down to a house. I would wait until you are older and more certain of where you want to live. I wouldn't buy a house unless I knew for sure I'd be cool with staying there for at least 10-15 years.
It's great that you have goals and are smart with your money. But just keep in mind that there can sometimes be consequences to buying before you are really ready. The days of flipping houses are long over.
March 30th, 2010 at 01:18 am 1269911893
March 30th, 2010 at 01:19 am 1269911974
Also- you definitely understand money and frugality- so you might understand that cheap money is better than expensive money. You want the house- but will your income/job qualify you for a good interest rate? Even when you can afford the house based off your savings- make sure you are not just buying a house you can afford but are also getting the best deal- sometimes patience pays off big time.
Keep blogging and saving and the right situation will crop up.
March 30th, 2010 at 01:41 am 1269913293
That being said, I Can totally identify. We have a nice house, and paid almost $300k, BUT, we moved from a very expensive area. Most our friends paid $500k for condos and $700k for shacks. IT is absurd. The state is expensive (rent, land, any type of housing) and I am happy with our mortgage payments. We'd be hard pressed to do much better. (Don't get me wrong, if we didn't care that much about our home we could go cheaper - it just comes down to your values. Certainly don't spend a lot on a house if you can find something nicer for cheaper).
March 30th, 2010 at 01:46 am 1269913597
I don't have any plans on moving. My entire family is here. I doubt I'll want to move across the country for a job. I don't think there's many employers looking for people to relocate without a college education.
If I don't qualify for a low interest mortgage, I'll have to figure some things out.
My only other option besides buying my own house is moving back in with my parents. I don't want to do this. I'll have to pay rent to them and I feel like that's just throwing money away.
Thanks everyone for your advice. It is seriously very much appreciated!
March 30th, 2010 at 02:16 am 1269915389
You are paying for a service and often rent includes more than just a roof over your head. You usually don't have to worry about all of the utilities (I've only ever had to pay gas and electric), you don't pay insurance.
You don't have to worry about maintainence, you don't have to worry about lawn care, snow or storm debris removal or pests because your landlord is responsible for that.
If you are in a complex, you might have a nice pool or a gym. I lived in a complex with a huge indoor heated pool once. I miss that.
If you have obnoxious, noisy neighbors in the building, your landlord can get involved and kick them out if they don't shape up. When I lived in a large rental condo complex, it was SILENT because there were no outside neighbors...Everyone within earshot has the same landlord.
Now that I live in a rental house, there are other houses near me and my landlord has no say over what the guy 10 feet away does or over his barking dog that he ties up all night.
Just a difference a lot of people don't think about. You get a noisy neighbor in an apartment building... something can usually be done. You buy (or even rent) a house next to a noisy homeowner who likes to make chainsaw sculptures on the back of his lawn, which is 10 feet away from your bedroom window at 8 am every Sunday...well, you're out of luck.
March 30th, 2010 at 02:18 am 1269915484
March 30th, 2010 at 02:22 am 1269915778
Btw, I'm not against renting. In some cases, I think it's better to rent because you don't have to worry about certain expenses that might pop up. I'm actually currently living in a rental property. However, if I get the house I'm looking to buy, the mortgage payment, taxes, and insurance would actually be cheaper than my current rent amount.
March 30th, 2010 at 02:32 am 1269916327
When my fiance and his brothers bought their money pit it was "the perfect time to buy" because they planned to flip the house after living there for 5 years max, sell and make a huge profit.
Well...2 years into that my fiance meets me.
3 years in he gets engaged to me.
3 1/2 years in, their entire cul de sac (8 homeowners) get sued for maintainence of a retention field that they were all supposed to be maintaining (none of them were). Any chance of even trying a short sale on the house are gone. The court date is in 3 years and then they can try to sell.
4 years in we cancel our wedding because he can't afford the house payment and to help me pay for the wedding and our life together and I can't afford to do it alone.
During this time, his youngest brother's fiance gets tired of waiting for him and leaves him. (She wants children so time is important to her...she can't wait till she is 40 to get married).
His middle brother's girlfriend has confessed to me that she is considering leaving as well. She is a bit younger but is getting restless.
I don't want kids so time is not that important to me. I can wait for fiance to get his life together but I still can't afford to pay rent for both of us. Cancelling our wedding was the most painful thing either of us have ever had to do and it is because of that house.
That house that was purchased before they were financially ready "at the right time to buy". With any luck within 3 years the court date will happen on time. Hopefully it won't drag on. Hopefully they'll win. Then they can try to sell the house at a loss.
With any luck 4-5 years from now I will married to and living with my love. But before that house is gone? I just don't see how it's possible. Not off the salary I make now.
So to answer your question, the time to buy is when you have enough for a good downpayment, a good chunk of cash in savings for the inevitable repairs and issues that will come up and most important, when you are absolutely certain you are okay with staying where you are for 10-15 years.
March 30th, 2010 at 02:40 am 1269916837
I have heard VERY successful stories from young people buying homes- and I know homes can be a thorn in someones side. I guess it comes down to a few biggies: Do you think saving at the rate you have been saving/predict you can save in the future will buy you a significantly better place? If you have $x today...but in 2 years you have $x+$5k ...that might be a significant difference in house. And I guess...do you think the house you are considering will ultimately help you or hurt you when you look back on the purchase in 10 yrs. I know you cannot predict the future...but do you think this property will be your next step to building your financial empire, or is it a solution to not moving back in with your parents? I just think that when you are in your early 20's your tastes/lifestyle and even your finances change drastically during this time because you are also going to be making decisions about marriage/kids/jobs...and a house can be a big burden on those decisions. ...but like I said, some people I knew bought around your age and it was great for them. Some people are more focused than others. Some people are more clearly seeing their life path at a younger age. I was all over the place at your age. The house bug didn't hit me till I was 26-27yrs old...and then it hit me HARD. So I can empathize that you want it. You just have to know yourself, and know what you can handle. You have to be proud and mature enough to pass on houses that are too much upkeep/work for you...and you have to be patient enough to know what you want and to wait for it. Don't settle- settling for a house that is a little too old, a little too much fix up is a fast way to the poor house.
March 30th, 2010 at 02:55 am 1269917714
March 30th, 2010 at 04:26 am 1269923214
March 30th, 2010 at 12:54 pm 1269953642
I now live in a house worth $500,000, again mortgage free. I have never made more than $8200 a year in my life.
It is not what you make that counts; it is what you keep!
Go for it! Get yourself a house you can afford.
March 30th, 2010 at 02:17 pm 1269958669
snshijuptr-That's not the plan anymore. And in fact, you're right. She is moving in with her significant other in June. We had thought about all of this before we put in an offer on the house and when it fell through, that's the reason why we decided againt buying another house.
Ima saver-Thanks for the encouragement!
March 30th, 2010 at 02:36 pm 1269959779
When I bought my house I was only making $50,000, which is pretty modest for my area. But I didn't buy the house until I was 36 becus i wanted to keep saving so I could have a large down payment ($95k) which i wanted, in turn, so that my monthly mortgage payments would be manageable. And it's worked out great, becus my salary has never been higher than $75K and i've been laid off a number of times since then.
April 1st, 2010 at 08:18 pm 1270153136
Jerry
April 4th, 2010 at 03:02 am 1270350172
Personally, I believe house (note I'm calling it a house, not a home) prices are only going to go down, despite the first time buyer tax break, gov programs to keep people in their houses, etc.
Also, if you are in FL, test for mold and Chinese drywall - both thrive in heat and humidity, can be invisible in a walk through inspection and will make your house unsaleable and perhaps unliveable.
"I'm never going to be a millionaire." Make 30K for 40 years and a million dollars will pass through your hands. remind yourself that your job is to keep as much of it as you can.