Pre-first home blues

[elessar78]

So just want to rant...

Yet another one of our friends is becoming a first time home owner. It just never seems like it will happen in the near future for us. My wife and I are in our early thirties, while most of our friends took that plunge a few years back.

I feel like we're doing most things right financially but it's just frustrating to see our peers "get there first". I know it's bad to get into the "keeping up with the Joneses" mentality, and I won't, but it digs at me for some reason.

/rant.

[bjl584]

Your friends might be buying too much house. You just don't know. Be patient, keep saving, and your day will come. Often when you see people around you with fancy new toys, they are financed up to their eyeballs. It's all just smoke and mirrors in most cases.

[disneysteve]

I agree with Brian. Just because friends are doing it doesn't mean they should be doing it. And, of course, you likely also have friends who earn more and/or have lower expenses and can afford it. In either case, don't let it get to you. The time to buy a house, or anything for that matter, is when it makes sense for you. I happen to think home ownership is way over-rated in this country anyway.

[jpg7n16]

“He that can have Patience, can have what he will”
-Benjamin Franklin

“We tend to forget that happiness doesn't come as a result of getting something we don't have, but rather of recognizing and appreciating what we do have.”
-Fredrick Keonig

I'd just look at it this way - by the time you actually get a home, you'll be closer to paying it off than they will. And they started years earlier!

[Joan.of.the.Arch]

I think you will find yourself happy if you take what you see is the wiser route.

[cypher1]

Originally Posted by elessar78

So just want to rant...

Yet another one of our friends is becoming a first time home owner. It just never seems like it will happen in the near future for us. My wife and I are in our early thirties, while most of our friends took that plunge a few years back.

I feel like we're doing most things right financially but it's just frustrating to see our peers "get there first". I know it's bad to get into the "keeping up with the Joneses" mentality, and I won't, but it digs at me for some reason.

/rant.

Don't get me wrong, I love my home, location, and fortunate to be able to afford on my own. But if I could do it all over, after finding this site, I'd have stayed home a couple more years helping my parents (judge all you want), save for a 20% downpayment, plus 6mon EF, plus a budget for moving expenses/supplies/furntiture, spend no more than 3 times my income, and not buy more house than I truly need. Or just buy a fixer up, since I've been motivated with home improvements/projects.

Granted I'm not looking at family anytime soon, but there really shouldn't be any rush with keeping up with the Joneses Rent is a need, home is a want as others have said. I also agree home ownership is overrated. You don't own the house, the house owns you. I now look at renting with envy, since you have more financial freedom to re-locate upon careers, invest more, and no mortgage to hold you back. If I were you, I wouldn't be so haste to judge others around you, but to continue focusing on your goals and priorities. You'll get there, but on your own time and when time is right.

[elessar78]

Thanks all. I needed that.

Yeah we have friends in different situations; some make more, some have lower expenses, some spent too much, some inherited money, some got help from parents, and some have no business owning.

There are other factors too. Our parents have offered to help, but we weren't convinced we wanted to live in our area for the appropriate amount of time to make home ownership work for us.

It's just one of those things, where I know it's the right decision for us to not be in a home right now, but all the voices and pressures around me keep "asking why we're still renting?"

[snshijuptr]

Respond to the voices/people with the numbers you figured out that support renting. A year ago my parents were pressuring us to buy a home, and I just calmly cited the numbers. I do the same thing for myself every time I get the itch to look at realtor.com.

[elessar78]

Care to share your figures? I'd like to do similar research, what was your baseline for the home price? Just to start as a comparison point.

[jpg7n16]

Originally Posted by elessar78

but all the voices and pressures around me keep "asking why we're still renting?"

I think that's a bad place to argue from.

Why should you buy a house when you're not financially ready?
Why should you buy a house when you plan to move shortly after?
If the cashflow's the same, what advantage is there to owning the house rather than renting it?
Which has more flexibility? (renting)
Which has more risk? (ownership)
Why should you have to foot the bill for the company to be insured against your non-payment (PMI)?
Can you ever lose money by having your apartment go down in value?
What if you want to move and the house won't sell?


Make the burden of proof be on the buy side.

Renting is cheap, easy, lower risk and flexible.


And you shouldn't compare your figures to someone else's scenario.

Figure out what a home would cost that's 2.5-3x your yearly income. ($50k income is $125,000-150,000) And whatever multiple of your income, move the decimal 1 place to the right and you've got your approximate percentage of take-home income spent on housing (assuming 20% down). So a home that costs 2.5x your income would require about 25% of your take-home income each month for principal, interest, taxes and insurance. (actual is around 23-25%, but this method is soooo much easier!)

If you don't believe me, you can use the free calculator here to confirm : Calculators - Mortgage estimator

[wrk4lvg]

Originally Posted by snshijuptr

Respond to the voices/people with the numbers you figured out that support renting. A year ago my parents were pressuring us to buy a home, and I just calmly cited the numbers. I do the same thing for myself every time I get the itch to look at realtor.com.

I'd love to see those numbers

[elessar78]

well i'm not comparing his numbers. I want to do my own comparison based on my situation. I just want to see a template of how he went about to do it.

[jpg7n16]

Originally Posted by elessar78

well i'm not comparing his numbers. I want to do my own comparison based on my situation. I just want to see a template of how he went about to do it.

Oh then I misunderstood sorry


If you want a comparison, just take the free calculator Calculators - Mortgage estimator and use the purchase price as the home price plus closing costs. Then enter how much downpayment you could do, and the interest rate you expect (around 4-5% likely). Use the property tax it calculates, and the $481 insurance figure - from the side column.

Compare to your rent.


For instance, if you're renting for $1100 today, and your parents are trying to 'help' you get into a $200k home (plus 5k closing costs). And they'll 'help' you by making $10k of the downpayment for you, with your $10k you've saved up so far. (still not enough for 20% down) 4.75% rate on loan.

Put in calculator - calculator says, $1,341.38.

And ask how that helps you out. Nearly $250/month more. (21.94% more)



I realize I'm not snshijuptr and so maybe you didn't care to see my comparison, but that's how you have to do it. Run the numbers and compare the results.

[elessar78]

No. That's a good starting point. Thanks.

And I just did a quick run through using the link you provided. But even in a theoretical exercise, I'm boring. I only entered a house that is 2X our annual income. So the monthly payment seems doable (mortgage, PMI, insurance), but that doesn't include maintenance costs, furnishing, etc.

[disneysteve]

Originally Posted by elessar78

But even in a theoretical exercise, I'm boring. I only entered a house that is 2X our annual income.

Nothing wrong with boring. If more people would be boring, the whole housing mess wouldn't have happened.

When we bought our house, we earned 85K. We bought a house for 142K, so less than 1.7X our income. Boring can be very good.

[bjl584]

Originally Posted by disneysteve

Nothing wrong with boring. If more people would be boring, the whole housing mess wouldn't have happened.

When we bought our house, we earned 85K. We bought a house for 142K, so less than 1.7X our income. Boring can be very good.

The whole point of the book "The Millionare Next Door" was about how people that were unassuming and boring members of the community were the ones that had the wealth. Boring can be good indeed.

[snshijuptr]

I have an excel spreedsheet with the following:

For Buying a House:
Monthly Rent
Yearly Tax Benefits of mortgage divided by 12
Current Monthly home savings * mortgage interest/12 (only if you plan to redirect your current savings)
Monthly Renters Insurance
Changes in commute (monthly gas, monthly auto insurance)

Against Buying a Home:
Monthly interest Currently earned on down payment money
Additional monthly utilities
Monthly maintenance costs
Home Owners Insurance monthly
Property Taxes monthly
Monthly changes in commute expenses (gasoline, insurance)
Monthly Home Owner's Fees
Moving/Closing/Home setup Costs divided by months to remain in location

Take the For and subtract the Against. This is the amount of interest you should be paying. This assumes you will eventually sell the house for the inflation adjusted price you paid for it, getting back all of your down payment & principal. Alternatively, and more conservatively, this is your monthly mortgage payment.

For me, the final number is $412 because at the moment I don't pay any utilities except electricity and I'm possibly moving in 2-3 years. So also living in Southern California, buying is not an option

[LivingAlmostLarge]

Also wanted to add, perhaps you want a dream first home, whereas others settle for less. My DH and I bought 9 years ago at 21 and 23, a 1 bd condo. BEFORE all of our friends. BUT everyone else was like "I want two bedrooms at least, townhouse, etc". So we bought early something we could afford. Trade off? Absolutely.

Depends on what seems important. FWIW, we traded that in for our townhouse which suits us for now and we'll be trading that in for a SFH one day.