Quote:
|
Originally Posted by neatdesign
So when I hear "monthly debt payments" I actually don't just think of our credit card/loan payments -- I think of ALL our monthly expenses. Because of that, I don't feel like we're ever going to be able to afford to buy a house, because we're just scraping by as it is.  Even if the mortgage payments are the same as what we're paying now in rent. |
If your mortgage payment is going to be the same or close to your current rent payment, I don't see any reason why you can't buy a house, especially considering the fact that your mortgage interest and property taxes will be tax deductible. In addition, if you get a 30-year fixed loan, you're guaranteed that your monthly payment will never increase (aside from property taxes if your home value increases), unlike your rent, which can be raised every year. As your income increases, it will be easier for you to manage your monthly budget. Also, as the previous poster said, these days you don't need to pay 20% down to buy a house. When I bought a house 5 years ago, I payed 5% down and took a piggy back loan to avoid paying PMI (private mortgage insurance). You must pay PMI if your first mortagage is greater than 80% of the purchase price; however, this can be avoided by taking a second mortgage in the amount of 15% of the purchase price. Even though the interest on the second mortgage is higher than on the first mortgage, it's usually better than paying PMI because PMI is not tax deductible. However, if the interest rate on the second mortgage is too high, it may be better to pay PMI, which can be eliminated later when your house value rises and your equity reaches 20%. Buying the house was the best decision I ever made. It has since doubled in price, and I wouldn't be able to buy the same house now, even though my income also rose significantly.
In conclusion, you don't need to be debt-free to buy a house. You just have to analyze your financial situation and see if you would be able to make the mortgage payments without overextending yourself. However, I strongly recommend that you first build an emergency fund, sufficient to live off for 3-6 months. Once you have your emergency fund and 5% downpayment, you can start looking for a house.