Does it make bad financial sense to follow this dream?

[disneysteve]

DH and I have talked for a really long time about wanting a house, we've been saving up for years to get one, I think he's just at the point where it's like 'I want to stop talking about it and do it. What are we waiting for?'

I know the answer to that question - but I am also someone that has never carried any debt, never taken a loan, and has always been in the black - so for me to suddenly loan all of this money feels like jumping off a cliff. )

Just to be clear, I'm not at all opposed to home ownership. My wife and I own one after all. But we bought with 20% down and paid less than 2 times our annual income. There is no way in hell we would have paid 5 times our income or put down less than 20%.

I understand what your husband is thinking if this is something you've been working towards for a long time. He just needs to cool his heels and realize that pulling the trigger and buying before the money is there is a huge mistake that will sink your finances for years to come.

At the same time, you need to realize that buying a house is probably the largest single purchase you will ever make. For the vast majority of folks, it does require taking on debt and signing on the bottom line is kind of like jumping off a cliff. But that doesn't mean you shouldn't do it. You just shouldn't do it until you are ready to do it and you guys are not yet ready to do it (at least not with the scenario you've spelled out). If you can find a more affordable home that fits your budget, that would be different.

[MonkeyMama]

From another perspective, we've actually owned 2 homes. I did say we decided against it in insane expensive city. But we came up with alternatives.

#1 - owned a condo (far less expensive than owning a house). Of course the primary reason we did this was financial. Owning cost about half as much as renting.

#2 - We moved and bought a house elsewhere. This was more of a materialistic type dream, but since it didn't cost us any money (over owning condo in expensive city), it has been a wonderful experience. If I had to stretch so much financially (5 times income?) I can't say I would be so happy. The thing for us, is we found a way to reach a goal while cutting significantly the amount of money we would have to pay to reach that goal. So though "buying more house" doesn't sound like the most zen goal, "buying twice the house for half as much" was a pretty rewarding experience. We simply don't have to work as much as we had originally expected in our 20s. Simply to afford our shelter...

I share as alternate scenarios to reach your goal.

I can tell you specifically the reasons we prefer home ownership:

1 - In our case, it's just cheaper (I understand this is not the case for most)
2 - Stability - this is maybe extra important to us since landlords where we live sell/foreclose very often.
3 - Personal space - we really value a larger home and more personal space than we could realistically afford in our old city. Sure, some people are happy to live in a box. We are just not those people!

If I could find some stability and/or save some money by renting, I would so totally be a renter. I can tell you that much!

I think it's important to meditate on what you want in a home, and what home ownership will give you that renting doesn't. I still haven't got a firm sense of what you are looking for. & I think waiting is a good thing - will give you time to think about it.

[LivingAlmostLarge]

Did the similar to MM and similar COLA so we both get what you are going through. Homes here average $750k in good areas and $500k buys you barely 3/1 bath old homes that need lots of work. New windows, oil heating, no insulation, etc. So another $100k in repairs minimum. Lots of tear downs and complete renovations.

Anyway though, I think the more money you make the more disposable income you have so even if housing takes up more of your income it's okay because if you make $400k buying a more expensive home isn't the same. If it eats up 1/4 your income, the 1/4 to live on is still $100k!

So to me it does matter what people make. So how much home and how much income are we talking about? Perhaps buying with 10% does make sense.

[dojo]

If you've been saving for years and only have 10% to pay upfront, then it's indeed a better idea to hold on. I didn't know about the 3Xincome rule (phew, good to be in this forum, that's for sure) and from what many of our friends here did it was even 7xincome and they're in DEEP TROUBLE now.

Life is short indeed. TRAVEL. See the world. Have sex, eat healthy stuff, do sports. Don't buy a home though, especially when you're not ready yet. If renting in your area is decent, then use this and save more money. In few years, if you put the money you get from that 'salary bump' you might pay 30% of the house or even more. Now that's gonna be a good position to start from.

NEVER enter debt just because your salary increases. This is told by someone who bought a car (4 year payments) and lost the job next year. You have no idea how hard it's been. You never know, god forbid, what happens. Nothing in this life is certain, but death .. sorry for being so grim, but it's the truth. Just enjoy that raise, SAVE MORE and have fun