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Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 9:46 pm
by wanderlust14
I've looked through enough of these threads so I guess it is my turn to chime in to see whether this is too much...

I am about ready to make an offer on my first home. I just moved back to this area about 2 weeks ago (though I grew up here so I know it well) and have recently started a new job. I've found the housing market here to be much hotter than I anticipated and am surprised at how fast and the prices the houses in the area are going for. This particular city has seen record growth in the past 5-10 years and prospects are strong for that to continue in the future.

Quick and dirty specifics:
Age: 31
Income: $110k salary with moderate prospects for closer to $130-$150k year 1 and beyond. $110k will be the base indefinitely and should grow from there.
Portfolio: $390k ---have saved vigorously since starting career in mid 20's and have every intention of saving aggressively indefinitely.
Cash: $75k liquid for downpayment/closing costs/etc.


House: $330k
-Great/desirable location, would enjoy living there, completely renovated and turn key. It is more square footage and house than I need as a single individual right now, however, it is a place I would really enjoy coming home to and could envision myself with a family there and staying long-term. I have looked at 20+ houses over the past couple weeks and done research for months and this is significantly nicer than many in the $230-$270k range that I have looked at (**will still need to run the comps to be sure)

Edit: (this will provide a bit more context on the rent vs. buy calculation)
-anticipated monthly mortgage: $1250
-anticipated annual taxes: $2600
-No HOA fees
-anticipated annual homeowner's insurance: $1400

As perspective, rental properties in far less desirable areas with less square footage and less bedrooms/baths are currently renting for around $1100-$1300.


On one hand, I feel like I should go for it as I've spent the previous five years living in a location (different state) where I made a very nice income but had a poor quality of life. However, I'm feeling a bit overwhelmed that this may be happening too quickly and that I'll end up being house poor and not able to save at the rate I desire.

Thoughts/comments appreciated.

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 9:50 pm
by Sandtrap
buy it
you earned it
congratulations
:D

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 9:51 pm
by KlangFool
Rent. Don't buy. You are single. Why would you buy a house?

Klangfool

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 9:56 pm
by wanderlust14
KlangFool wrote:
Thu Oct 05, 2017 9:51 pm
Rent. Don't buy. You are single. Why would you buy a house?

Klangfool
One clarification---I have a large dog and there are very few rental properties in the area that accept large dogs. While a lesser consideration, this is certainly part of the equation.

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 9:58 pm
by TheHouse7
Seriously RENT. You can afford to buy. Find the right person first. Buy a house TOGETHER. You don't find the right house and then put the right significant other in it :oops:

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 10:00 pm
by KlangFool
wanderlust14 wrote:
Thu Oct 05, 2017 9:56 pm
KlangFool wrote:
Thu Oct 05, 2017 9:51 pm
Rent. Don't buy. You are single. Why would you buy a house?

Klangfool
One clarification---I have a large dog and there are very few rental properties in the area that accept large dogs. While a lesser consideration, this is certainly part of the equation.
So, you want to take care of a house in addition to a dog?

Klangfool

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 11:17 pm
by marklar13
Agree with the other posters so far. You can afford it, but if it were me I would rent. You are single now, and it sounds like a lot could change for you in the coming years. Also, I think people tend to underestimate the "true" cost of owning a home in regard to both time and money.

But... that's more of an opinion. I don't think it is a horrible financial choice if you strongly prefer to own rather than rent. You are in a good place financially, and it's your money. Do what you think is going to make you happiest -- I don't think it will make or break you financially either way.

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 11:19 pm
by kjvmartin
Be fearful when others are greedy. Biggest mistake I have made in my life, financially or otherwise, was worrying about skyrocketing house prices and making the wrong housing decision in the wrong frame of mind. There are no do-overs. I'm biased because I got burned.

Look very carefully at the cost to own including incidentals. Turn-key may mean they painted over something really bad that even an inspector would miss.

This may be the right decision for you if it's a lifestyle choice. If you could turn off the outside/market/prestige forces coming down on you and still want to buy it, then you're probably making a good choice.

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 11:31 pm
by Christine_NM
"Too much house" means to me that it would be tough to resell if you changed your mind. The way I learned it, the best houses for resale value are the lower priced in the neighborhood. Too big a house for the neighborhood means buyers who want a big house are looking in other neighborhoods.

If you are eventually planning marriage, don't count on keeping this house. It might work for a short time, but I would not count on it as the family home.

Re: Too much house? (nervous 1st time buyer)

Posted: Thu Oct 05, 2017 11:34 pm
by Watty
wanderlust14 wrote:
Thu Oct 05, 2017 9:56 pm
I have a large dog and there are very few rental properties in the area that accept large dogs.
"Very few rentals" is not "no rentals" so I would not let that be a deciding factor. You might not find a place that you would want to rent with the dog for the long term but renting is doable.
wanderlust14 wrote:
Thu Oct 05, 2017 9:46 pm
House: $330k...... this is significantly nicer than many in the $230-$270k range that I have looked at
For $60K to $100K more it should be a lot nicer. :oops:

It could be worth the price difference but you are comparing apples to oranges. Have you looked at a lot of houses in the $330K price range?
wanderlust14 wrote:
Thu Oct 05, 2017 9:46 pm
It is more square footage and house than I need as a single individual right now, however, it is a place I would really enjoy coming home to and could envision myself with a family there and staying long-term.
It would be better to buy a smaller place and then upgrade when you need a larger family home. In addition to the expenses living in the "too big" home alone when you want a family could feel depressing compared to living in a "right size" cozy home.
wanderlust14 wrote:
Thu Oct 05, 2017 9:46 pm
I'm feeling a bit overwhelmed that this may be happening too quickly and that I'll end up being house poor and not able to save at the rate I desire.
From what you have said it sounds like you can afford it. You will be making a bit less than $10,000 a month and even though you will pay a lot in taxes the difference between cost renting and buying will be manageable. I would guess that your mortgage payment would be in the ballpark of $1,500 but renting a nice place where you can have the dog might not cost that much less than that. You would also have other home owning expenses but you would be building up home equity and get some tax advantages.

I would be more concerned about the "too fast" part since it will take a while until you can be sure that your new job will work out.

With you being 31 and having lived somewhere else for five years I would suspect that if you went off to college somewhere else that you have not lived in that city much as an adult and the city may have changed so it could take some time to learn the what the city is like for you now.

I would lean towards renting but I don't see it as being a slam dunk easy choice one way or the other.

I would look at it as two separate decisions;
1) Should you buy now or later?

2) Should you buy the "bigger than you need" home or buy something smaller.

Buying the "bigger than you need" home now is the most extreme combination.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 4:43 am
by WolfgangPauli
I agree with everyone here.. especially in the current market.. rent.. rent .. rent... as a single person you want freedom and houses are big boat anchors. They make a lot of sense for families (family home and all that stuff).. make little sense for single people (financially and otherwise).

Best,

WP

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 5:49 am
by tim1999
How much are the annual property taxes on this house? HOA fees if any? Where I live, the property taxes on a 330k house could be $8,000+ per year and would sway me away from buying if I were living alone and didn't really need all that room.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 5:54 am
by cheesepep
Quite simple. If the comps there are around that price, go for it. $330K for your income and savings is "chump change."

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 6:04 am
by stemikger
Go for it. Buying my home was one of the best moves I ever made. It gave me security and peace of mind. Whether that security was all in my head or not did not matter, it made me feel good.

Where I live, $330K will not even get you a condo, even a townhome on my block starts at $490,000 and all the way up to $600K. Go for it!!!

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 6:12 am
by Jim21713
Based on your input that the area will continue to grow, I would buy with the expectation that the house will appreciate in value over time. If I needed to relocate or buy another house in the same area at a later date, I would have at least kept pace with the market or perhaps accumulated equity.

Do your homework on the area's growth prospects, validate the comps, offer less that the asking price, and have a professional home inspection as a contingency to the purchase.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 6:26 am
by mouses
Buy. The smartest thing I did financially was when I was your age, buying a house. Single people can buy houses! Yes, you do not have to wait until you get married.

However, when you talk about house poor, I assume you actually can afford the mortgage, property tax, insurance, and maintenance, otherwise the answer is no.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 6:42 am
by jaj2276
I bet you are going to regret your decision no matter what. If you proceed with buying, once you buy you're going to wonder what you were thinking (a big anchor, too expensive once you factor in all the updating/maintenance/insurance you have to pay, etc.). Whether it was a good decision or not won't be known until much further down the line.

If you rent you'll have a reminder every month that part of your rent could be going to equity (ignoring the fact that the updating/maintenance/insurance that you don't have to spend could be an equity equivalent).

But since you're single and it seems like you are thinking about family eventually, I would rent. Then you can find your perfect house together (there's ALWAYS another perfect house regardless of how you feel about this house). I had two large dogs (labs) when renting and one thing I was willing to do was to put down a significantly higher security deposit. This would allow the homeowners some piece of mind that if my dogs were awful (they're not), they would have some recourse to remedy.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 7:53 am
by KlangFool
OP,

Do not rush into buying a house.

A) It is the wrong time for you to buy a house. That is the key reason. Financial consideration does not matter.

B) You are single. Is this house at the right location for you to meet others? And, the right location to live and raise a family will be the wrong location to meet others. Vice versa. So, this location will be wrong for now or in the future.

C) Time. Why would you spend more time maintaining the house as opposed to experiencing your life when you are single?

KlangFool

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 7:58 am
by lostdog
KlangFool wrote:
Thu Oct 05, 2017 9:51 pm
Rent. Don't buy. You are single. Why would you buy a house?

Klangfool
+1

It's just wife and I. We're selling in the Spring. We will be renters for life.

In your situation right now. Stay renting.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:08 am
by Strayshot
If you are planning to find a spouse in the next 0-5 years, I would not buy a large home as a single person. Too many variables that could make you sell and eat transaction costs.

If you are not planning on finding a spouse and have geographic job security, buy the house.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:16 am
by stan1
It is a personal preference for you as is owning a large dog. You can afford the house. I understand the challenges of finding a nice rental with a large dog. Make sure the house is well located so that it will be desirable to other people when it comes time to sell. How big is the house (bedrooms and square footage)? A single person even with a large dog can be comfortable in a 2BR/1BA 1000 square feet home so "too large" could be anything bigger than that. For resale purposes I would not buy a house smaller than 3 bedrooms in most markets (exception being a 2BR/2BA in a popular, well located, close in urban neighborhood).

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:19 am
by wanderlust14
tim1999 wrote:
Fri Oct 06, 2017 5:49 am
How much are the annual property taxes on this house? HOA fees if any? Where I live, the property taxes on a 330k house could be $8,000+ per year and would sway me away from buying if I were living alone and didn't really need all that room.

Property taxes around $2600/year. No HOA fees. The mortgage payment would be around $1250/month---as perspective, rental properties that are smaller in terms of bedrooms/baths, less updated, and in far less desirable areas are running around $1100-1300.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:20 am
by FedGuy
Strayshot wrote:
Fri Oct 06, 2017 8:08 am
If you are planning to find a spouse in the next 0-5 years
It must be nice to be able to "plan" to find a spouse and have the universe magically oblige. For a lot of people, it doesn't work out that way.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:23 am
by renue74
Rent.

Every person I've known who bought a home as a single person and then eventually got married ended up selling the home and buying together. EVERY PERSON.

#1: Your price point is pretty much at the upper level of what you can afford.
#2: There will be additional expenses (HOA, Property Taxes, Maintenance, Emergencies (HVAC, plumbing, etc.)
#3: The housing market is super hot right now. I'm not a soothsayer with a crystal ball, and I don't know your geo area...but there could have been better times to purchase than today.
#4: Homeownership ties you to a location. Most millennials I employ or know detest ownership and mention the fact they can move any time they want (within lease agreements, etc.)

If you must purchase....simply go for a cheaper house. I never understood people wanting to buy houses at the top of their budget. We have friends who want to get into the best neighborhood in our town and say stuff like that all the time. Why do that?

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:25 am
by GoldenFinch
Buying the house would not be a mistake, but......

You say you are single and can see raising a family in the house. The problem here is you have to marry someone who also wants to raise a family in that house so that complicates things a bit. Also, taking care of a house is more work and money than you may initially think. If you are single with few cares, why burden yourself with responsibilities before you need to?

Just my two cents worth two cents. :happy

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:30 am
by 3CT_Paddler
Have you considered a duplex? Depending on where you are in the country, you may find something affordable that gives you a yard and basically covers your mortgage by renting out the other unit.

I would not be in a rush to buy a house in the current market unless you are planning on living in the area longer than five years and your payment is about equal to what you would pay in rent. You bank the payment to principal in buying a house, but maintenance and transactional costs can swamp those savings if you decide to move in 2 years.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:34 am
by unstartable
Assuming you have little to no consumer debt, you should be in good shape. The house isn't too expensive.

My #1 question at this point would be: How good is the reno? Does it just look nice, or were things done correctly.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:43 am
by sjt
renue74 wrote:
Fri Oct 06, 2017 8:23 am

Every person I've known who bought a home as a single person and then eventually got married ended up selling the home and buying together. EVERY PERSON.
OK, but it still may be better to buy...
renue74 wrote:
Fri Oct 06, 2017 8:23 am

#3: The housing market is super hot right now. I'm not a soothsayer with a crystal ball, and I don't know your geo area...but there could have been better times to purchase than today.
#4: Homeownership ties you to a location. Most millennials I employ or know detest ownership and mention the fact they can move any time they want (within lease agreements, etc.)
The stock market is super hot right now. I have no crystal ball, but it's at an all time high. There may have been better times to purchase than today. Should I hold off investing in index funds?

Homeownership does tie you to a location, but perhaps OP is not "most millenials".


Klangfool - I enjoy your posts but I do not understand your aversion to home ownership! Again, it's a personal choice. OP - if you like home maintenance and want a place for your dog, it's a good neighborhood, then do it. Personal experience follows:

I bought a house in 2012 (my second) at age 27 for about $250k ($50k down). I took a 15 year loan and had a bunch of yard maintenance but over 2 acres for my dogs to run and 2100 square feet. The mortgage was comparable to renting a 950 sq ft apartment. I sold in June of this year for over $300k - so I essentially doubled my money - plus paid down the principal a bit over that time. I suppose I could have rented a small apartment for the same price, and instead put my down payment in the market, and came out about the same financially.

Again, it's a lifestyle choice. You may come out ahead, you may not. If it does cost more than renting in the end, you've paid for the extra space and you will certainly have more knowledge and experience. Some folks here like to buy new cars, some like to travel, some like to own homes. It's your money - you choose how to spend it.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:46 am
by lthenderson
Like most of the others, I would rent. Here is why I think that:

1. If you have to ask if you are buying too much house, the answer is always yes. You have doubts and when making a large purchase such as a house which will most likely be the biggest purchase you ever make, you shouldn't have a single doubt. It is much safer to buy less of a house and make do than to stretch for a house and suffer should something in your life change financially for the worse.

2. I've been in your shoes and twice as I was just about to the point of buying a house as a single guy, the rug got pulled out from under me. The third time I was ready to pull the trigger, I met the woman who would become my wife while on vacation... in another country! After we were married, she wanted a place that was OURS not MINE and in a different town. Together we bought a house thinking it was a forever house. It was for ten years and then our careers took a unexpected turn (for the good) and we ended up moving to our current house. We love it and still do. However there is a house up the street that is coming up for sale and we love it even more. Moral of the story, no matter how "forever" you think a house might be, it isn't. Things change especially with the addition of a spouse, later kids, and later retirement.

3. Even turnkey houses require work that affects the time you currently have free to do whatever. If you don't do that work, you end up with a house ten years down the road that realtors describe as "needs updating." I enjoy working on my house but I'm married with children and don't have single friends knocking at my door to do an impromptu road trip either.

My advice is to keep saving up that money so when the time is right you can buy that house which will probably be the first of several you own in your lifetime.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 8:56 am
by JBTX
You can afford it. It is really a lifestyle choice. Are you looking to settle a bit, spend weekends at home farting around the house, doing yard work etc? If so then you should be fine.

Just remember when you buy there is a tendency to want to fill up your nice house with new furniture and decor.

From a purely financial perspective you are probably better off renting, but you can afford this house and it seems like it is what you want to do. I'm typically a big proponent of renting as long as you can but in your case buying this house seems like an acceptable choice

If you decide to change jobs, would you still work in the same area? you are kind of putting down roots so make sure this is where you want to be from a career perspective.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 9:01 am
by financeidiot
Not going to vote either way, you can definitely afford the house. Given your status and recent job switch, don't forget to consider the value of mobility for increasing your salary and mitigating risk.

If you switch employers and locations in 2 years, could you get a higher salary (especially considering you just moved and increased your salary)?
How has your new firm and industry handled rough economic times in the past? If things go south, what is the risk of losing your job?
How did the housing market handle rough economic times in the past? If things go south (or go south for the dominant industry where you are), what do you expect will happen to housing prices (for example, look at natural gas towns now that gas prices have dropped)?
If you don't like your new employer or got laid off, would you want to stay in the area? Would you stay even if you had a lower paying job?
Does your current employer work in multiple locations? Could you advance your career faster by moving around when others refuse to?

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 9:15 am
by learning_head
wanderlust14 wrote:
Thu Oct 05, 2017 9:46 pm
could envision myself with a family there
Others have mentioned this: you might be underestimating whether your future family will want to envision themselves in what they will see as YOUR house. When one person moves in with another, quite often, psychologically, they may feel it's YOUR place, not YOURS-and-THEIRS; no matter what you say or how they re-decorate it.

Also, flashier places may attract wrong kind of potential mates ;-)

As for how financials work out , you have to figure out the true costs of owning vs renting. Here is an updated version based on discussion in another thread:

Rent is a throw away money to live somewhere for a period of time. Rent should be compared to throw away money expenses when owning a house, including
- insurance
- property taxes
- maintenance (estimates I've seen are ~2% of house cost, per year)
- extra utility payments (e.g. because house is larger or because some utilities might be included in rent)
- NOT mortgage itself, but mortgage specific costs:
(a) (after-tax) interest and other fees, for minimally required mortgage
(b) opportunity cost for the money you'd spend on mortgage itself - i.e. would you be able to invest that money in tax-advantaged plans thus saving you some more on taxes?

(By "minimally required" mortgage, I mean mortgage that you MUST get because you don't have enough funds for full house price - could be $0 or more.)

Whether you buy house for cash or decide to use a larger than minimally-required mortgage is then a separate financial decision; e.g. based on whether you want to get a loan in order to invest more in the markets / retirement accounts / somewhere else

P.S. On another note, someone once told me "never buy a house with more bathrooms than you are willing to clean"

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 1:31 pm
by soccerrules
tim1999 wrote:
Fri Oct 06, 2017 5:49 am
How much are the annual property taxes on this house? HOA fees if any? Where I live, the property taxes on a 330k house could be $8,000+ per year and would sway me away from buying if I were living alone and didn't really need all that room.
+ 1 This jumped out at me as well. The home we own is worth a little more than the one you are looking at and our taxes are @ $9,000. $2,600 seems really low.
Agree with other posters about renting for YOU, right now.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 2:43 pm
by Slacker
soccerrules wrote:
Fri Oct 06, 2017 1:31 pm
tim1999 wrote:
Fri Oct 06, 2017 5:49 am
How much are the annual property taxes on this house? HOA fees if any? Where I live, the property taxes on a 330k house could be $8,000+ per year and would sway me away from buying if I were living alone and didn't really need all that room.
+ 1 This jumped out at me as well. The home we own is worth a little more than the one you are looking at and our taxes are @ $9,000. $2,600 seems really low.
Agree with other posters about renting for YOU, right now.
In many states/cities $2600 property taxes on a $330,000 property is typical. We pay $3500/yr on a $500,000 property in Denver and our house is in a special tax district that causes the taxes to be 33% higher than the older neighborhoods. The taxes on the homes around Phoenix are around 0.9% of property value (this will depend on which city in Phoenix metro). The taxes in Reno tend to be around 0.8% of property value. I think the houses around Atlanta tend to be a little less than 1% of property value as well.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 3:00 pm
by soccerrules
Slacker wrote:
Fri Oct 06, 2017 2:43 pm
soccerrules wrote:
Fri Oct 06, 2017 1:31 pm
tim1999 wrote:
Fri Oct 06, 2017 5:49 am
How much are the annual property taxes on this house? HOA fees if any? Where I live, the property taxes on a 330k house could be $8,000+ per year and would sway me away from buying if I were living alone and didn't really need all that room.
+ 1 This jumped out at me as well. The home we own is worth a little more than the one you are looking at and our taxes are @ $9,000. $2,600 seems really low.
Agree with other posters about renting for YOU, right now.
In many states/cities $2600 property taxes on a $330,000 property is typical. We pay $3500/yr on a $500,000 property in Denver and our house is in a special tax district that causes the taxes to be 33% higher than the older neighborhoods. The taxes on the homes around Phoenix are around 0.9% of property value (this will depend on which city in Phoenix metro). The taxes in Reno tend to be around 0.8% of property value. I think the houses around Atlanta tend to be a little less than 1% of property value as well.
Valid point. I know some states like Texas have higher property taxes but no state income tax.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 3:16 pm
by ToastCrunchToast
Homeownership is usually a poor investment, financially - unless you are quite lucky.

However, that's not always, or even usually, the reason folks want to own a home. It's the pleasure they take out of having something that is their own.

If that's what you're after, and you're willing to take on the work, worry, and risk of moderate financial loss, then go for it. The reason we make money is to get things that are important to us. Sometimes, those things we "purchase" aren't strictly material - they are the pride and satisfaction of ownership, security, fulfillment of a dream, broadened horizons, things like that.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 3:24 pm
by Meg77
You can definitely afford it - heck, it sounds like you could pay cash for it if you wanted to. Personally in your situation though, what I would do (and what I did) is buy a place that you want to live in but that would also make a decent rental property. Plan to live there until you get married and convert it to a rental when you pick out a home with your SO.

I owned a small condo happily for 9 years prior to getting married then rented it out. Had the benefit of low maintenance but also enabled me to build equity and get some tax breaks. For the record though, I'd still have been better off just investing the down payment and renting in hindsight. Monthly payments were a couple hundred bucks cheaper as an owner, not including the tax breaks. But I had to replace a water heater and wanted new counters while I was there which ate away at that monthly savings. Plus the market went up up up over that decade, as it tends to do, so my equity growth effectively would have happened anyway. Not saying I regret the decision though - buying is more of a lifestyle choice than a financial one.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 3:48 pm
by davebo
I wouldn't buy a house if I were you. I don't know anyone that ever purchased a house before they had a spouse that ended up keeping the house after they got married. Renting is a great way of testing out neighborhoods and finding what you like and dislike about places. I'm almost 40 and on my 3rd home, which I thought was absolutely perfect when I bought it....now I'm realizing that it's not perfect and I would move again if it didn't cause so much disruption.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 3:57 pm
by gougou
It's pretty clear that buying is a much better financial and lifestyle choice for you.
- You can definitely afford a $330K house (only 3x base salary, and you have $390K financial assets, you probably only need to put down $70K)
- Monthly obligation of ~$1600, probably very comparable vs if you rent this house, so you'll build equity and enjoy tax deductions vs renting
* I think your HO Insurance quote is way too expensive. My $1.2M house only cost around $800/year
- Even if house only appreciates 3% per year that's $10K/year or $800/month
- Much more freedom and stability vs rent

Some cautionary notes:
- The transaction is expensive. When you sell the house, you'll pay about 5% commission and some other closing costs, total about $20K. So you must stay in the house for several years to allow the appreciation to cover such expenses.
- You might overpay if you are not good at negotiation.
- Possible real estate crash? I think real estates are much less volatile and appreciate steadily over time. But you may be unlucky and this is out of your control.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 4:23 pm
by vaught
Many posters have cautioned that this is not the best "time" to buy a house. That stands out to me.

Not because the posters are wrong but it just seems counter to the philosophy of most Bogleheads when it comes to speculating or timing the market (housing in this case).

I know that if I started a thread that said I was going to stop contributing to all investment accounts because it doesn't seem like the best time to invest since it has been such a bull market lately, I would get many justified responses that I was trying to time the market and that is impossible.


Back to the OP, if you are comfortable with the PITI payment and responsibilities and time that come with homeownership (and judging by your savings rate you are certainly responsible and thrifty) I say go for it.

You clearly want it. Only you know best. Many have cautioned that it will be a bad decision if you end up moving soon. But likewise it would be a good decision if you end up staying put (as you seem to think you will) and build equity.

Good luck in your decisionmaking. Certainly get advice of a realtor. I'm assuming realtor gets paid by Seller's side in your area. Realtor will be able to help justify your offers when negotiating. And get a respected thorough inspector. In my experience paying the extra $100 for an inspector that has certain structural qualifications has been more than worth it.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 4:32 pm
by Strayshot
FedGuy wrote:
Fri Oct 06, 2017 8:20 am
Strayshot wrote:
Fri Oct 06, 2017 8:08 am
If you are planning to find a spouse in the next 0-5 years
It must be nice to be able to "plan" to find a spouse and have the universe magically oblige. For a lot of people, it doesn't work out that way.
Hah!

Maybe OP is celibate, or had a disastrous relationship that they never again wish to repeat. I don't pretend to know. We can only plan based on our known intentions at the current time. If OP acts on what they know and life changes (buys the house having no intention of a spouse and meets a wonderful person from <insert non-local geographic location here> and has to move) than OP will do the best he/she can given the change.

If you are implying that planning is not a worthwhile activity, I recommend picking black over red at the roulette table and hoping random chance enables your retirement.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 5:54 pm
by runner540
vaught wrote:
Fri Oct 06, 2017 4:23 pm
Many posters have cautioned that this is not the best "time" to buy a house. That stands out to me.

Not because the posters are wrong but it just seems counter to the philosophy of most Bogleheads when it comes to speculating or timing the market (housing in this case).

I know that if I started a thread that said I was going to stop contributing to all investment accounts because it doesn't seem like the best time to invest since it has been such a bull market lately, I would get many justified responses that I was trying to time the market and that is impossible
Vaught, many BH posters, myself included, believe that the decision to buy a single home is very different from the decision to invest regularly in an index fund:

1. Single house, neighborhood, city, state: undiversified risk

2. Leverage: few BH would suggest taking a margin loan to buy stocks, yet people recommend it all the time for real estate since rates are subsidized by Fannie/Freddie

3. Illiquid and high transaction costs to realize any gains

4. There are usually good substitutes for an owned home: you can rent in most markets.

5. Carrying costs of maintenance, taxes and insurance, versus only capital gains tax on realized gains in an index fund.

6. Single price: you cannot dollar cost average the price of your home.

7. I'm sure smarter folks have a few more reasons that it's worth thinking about valuations and market timing. Obviously, the longer your planned holding time, the less these factors matter, but OP doesn't seem to be sure of a long hold.

Edit: long term history of the stock market has resulted in real returns. Long term history of the housing market nationally suggests that it tracks inflation, plus 1-2%, but that is before considering the carrying costs above. While some markets have experienced outsize gains, arguing that someone should thus "invest" to get those gains is like picking stocks. None of us really know which real estate markets will outperform the market in the future.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 6:54 pm
by mouses
renue74 wrote:
Fri Oct 06, 2017 8:23 am

Every person I've known who bought a home as a single person and then eventually got married ended up selling the home and buying together. EVERY PERSON.
That is not true in my circle. Also, some people don't get married. Why should a single person not have a home of their own vs. having a landlord control their home? Especially with a large dog, a rental place could go no pets and then at the end of the lease the OP has to go looking for another place.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 7:40 pm
by angelescrest
renue74 wrote:
Fri Oct 06, 2017 8:23 am
Rent.

Every person I've known who bought a home as a single person and then eventually got married ended up selling the home and buying together. EVERY PERSON.
Buy.

Every couple I’ve known who bought their first home together either got divorced or eventually had kids and ended up selling the home and buying something else. EVERY COUPLE.

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 7:44 pm
by BlueEars
Our first house was bought in Silicon Valley in 1975. So much depends on luck but all you have to really know is yourself.

Best of luck!

Re: Too much house? (nervous 1st time buyer)

Posted: Fri Oct 06, 2017 7:55 pm
by Compound
If you really want the house right now, seems you have the finances to do it. Like others are saying, the future you envision with a potential spouse shouldn’t really apply to your present situation, except to say that the spouse may not want to live there. If you’re set on buying a place now, I’d suggest seriously considering Meg77’s advice:
Meg77 wrote:
Fri Oct 06, 2017 3:24 pm
You can definitely afford it - heck, it sounds like you could pay cash for it if you wanted to. Personally in your situation though, what I would do (and what I did) is buy a place that you want to live in but that would also make a decent rental property. Plan to live there until you get married and convert it to a rental when you pick out a home with your SO.

I owned a small condo happily for 9 years prior to getting married then rented it out. Had the benefit of low maintenance but also enabled me to build equity and get some tax breaks. For the record though, I'd still have been better off just investing the down payment and renting in hindsight. Monthly payments were a couple hundred bucks cheaper as an owner, not including the tax breaks. But I had to replace a water heater and wanted new counters while I was there which ate away at that monthly savings. Plus the market went up up up over that decade, as it tends to do, so my equity growth effectively would have happened anyway. Not saying I regret the decision though - buying is more of a lifestyle choice than a financial one.

Re: Too much house? (nervous 1st time buyer)

Posted: Sat Oct 07, 2017 1:17 pm
by lightheir
I would actually encourage you to buy in this situation. I think it's as close to a no-lose situation for you, honestly.

I hear loud and clear all the financial concerns listed above, all of which are legitimate, including poor liquidity, undiversification, and additional costs etc. I also agree that renting may very well be cheaper and more convenient (possibly a lot more so) compared to buying.

I bought not too long ago though, and even without the market appreciation, you will learn a LOT about homeownership and homebuying with this first purchase. The key thing here is that you can easily afford this house on your income - even if the whole thing goes totally bust, and you have to sink $50k into it AND the house value drops by 30% in a few years, you will still be able to cover the expenses without undue hardship, and then you will know first hand whether home ownership is for you.

There are also tons of intangibles about buying that are seldom mentioned in these sorts of threads. Sure, they come with an equal number of annoyances and responsibilities, but those intangibles can end up over time being worth more than the dollar value placed on the home and its upkeep.

I'd say take the plunge, take the (reasonable) risk, and don't be afraid - you can do it. Money isn't meant to be hoarded for that never-coming rainy day, it's meant to be spent on life-changing possibilities like this. Plus, even if it's a total wash, you will be 100x more educated about what to do and what not to do if you're considering buying another house in the future, possibility with a spouse.

Re: Too much house? (nervous 1st time buyer)

Posted: Sat Oct 07, 2017 2:38 pm
by wilked
I agree with the others, keep renting.

1. Stay mobile - you are in the age / demo / and marital status that affords mobility (often with big pay raises!) don't complicate it with home ownership
2. You are in the age where probably a lot of your friends are getting married. More likely than not you will too (basic probability). Wait and buy a place with spouse
3. Most advising to buy a home bought their home years ago and have enjoyed a massive tailwind of appreciation. There is no guarantee that continues, and it likely biases those posters. Use caution there

Re: Too much house? (nervous 1st time buyer)

Posted: Sat Oct 07, 2017 3:05 pm
by michaeljc70
vaught wrote:
Fri Oct 06, 2017 4:23 pm
Many posters have cautioned that this is not the best "time" to buy a house. That stands out to me.

Not because the posters are wrong but it just seems counter to the philosophy of most Bogleheads when it comes to speculating or timing the market (housing in this case).
That is exactly what I thought.

When will he get married? Who knows? It could be 10 years. It could be next year. I don't know that I would be waiting to buy because of that.

Re: Too much house? (nervous 1st time buyer)

Posted: Sat Oct 07, 2017 4:02 pm
by wilked
We don't know for sure, but we do have a strong dataset to pull from

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