Should we take on a mortgage?

[kork13]

I don't agree with kork at all.

I think it all goes back to Steve's #6. If you don't look at houses, then you aren't enticed to buy them. It's really that simple.

I have no doubt there will be a BETTER deal for you further down the road. Heck, whose to say someone won't buy the house and then put it up for sale again in a year or two?

MM-- hehe that's exactly the reaction I was rather expecting... honestly, I agree with you (disagreeing with me... ) As I said, it feels almost like bad advice, even though all I'm really saying is "wait, save like crazy, then take another look."

Sagremus, especially given the numbers you posted (thank you), I believe even more strongly that you should just wait. If you save aggressively -- say, saving $1400/mo toward EF & home downpayment, with the extra $500/mo paying down your SL) -- you can be in a much stronger position if you both would be willing to wait another 2 years before buying. At that point, you would have your student loans down to about $40k, and you'd have a full 6-month EF ($18k) and $22k for a full 20% downpayment. Then, I think all of us would absolutely say "go for it," because you would be in a much safer & more secure situation. As MM said, there really are a lot of homes out there for sale, and if you wait, you may very well find something you like even more. But in the end, no matter what, I'm sorry to say that right now is definitely NOT the time for you to buy.

[snafu]

In addition to the points made...it's not smart to buy a home based on emotion. There are many unasked/unanswered questions. What is the overall housing market like in your city? In your specific district how many houses of similar size have been listed, how many sold in the past 8 months and what was the ask to sell ratio? While the realtor fees for seller and buyer seem to be paid by the seller, the seller pays with your money! Realtor fees are negotiable, you can ask for a discount. I hope you are not using the seller's real estate agent.

The remodelled kitchen and bathrm are red flags that need important review. They look nice on the surface but if not done correctly and done well behind the sheetrock, you could have very expensive remediation problems. The realtor can tell you about the permit issued and you could likely check out the history/complaints about the contractor.

Your legal fees at closing will be higher as you will need some special clauses as 'tenants in
common' [or whatever the correct terminology] so that in the future when you are considering selling, the income derived will be correctly allocated.

Like the others, I think buying a house without the required 20% DP to avoid expensive PMI is not a wise decision. You will be house poor on top of $ 62,791. in student loans.

[siggy_freud]

I have no doubt there will be a BETTER deal for you further down the road. Heck, whose to say someone won't buy the house and then put it up for sale again in a year or two?

How do you know what? With interest rates and home prices rising, there is just as much likelihood that even if that house went up for sale in 1-2 years it would be at a much higher value.

I'm not saying he should go for it, but you do have to consider that houses are still rebounding, and in many places values are only going up.

Is it good to buy a house with less than 20% down? No. But if you're renting at $750 a month it's nearly the same as taking $750 a month and burning it. If you could be in a house for $850 a month including PMI, you'll still be burning money, but only $70-100 of that will be PMI. Another chunk will be financing interest, but a sizable portion will be EQUITY. Something you are NOT getting by renting.

I guess it comes down to how long it would take you to save up enough to avoid PMI. Right now the yearly PMI costs would be about what you spend a month in rent. If it takes you 2 years to save up the money, that's nearly 20 years worth of covering the PMI that you've spent in rent.

[MonkeyMama]

@Siggy - There are *always* good deals. Maybe "better deal" wasn't the correct term to use. Real estate fluctuates up and down. Statistically odds are always better if you can wait until in a better financial position. I've been a homeowner for 14 years and have seen several opportunities, even though real estate has mostly gone up (and sky high). Every single year I have been a homeowner I have also watched friends rush into home ownership because "the time is now and there will never be a better time". I think that is a completely ridiculous mindset, and one that I have watched be a constant through absolutely *any* market. It's just, yeah, like I haven't heard that a million times before, when the markety was up or down or sideways (& it was NEVER true).

My personal preference for 20% down has absolutely nothing to do with PMI. I just wouldn't want to be *stuck* if house values fell early on after buying a home. I am fairly debt adverse, but don't mind the mortgage because have always been in a place to sell home in any market (for more than we owed). I would not want to be upside down on a mortgage - then is same or worse as other debt. Putting 20% down is a first step towards remaning above water. Having some funds to deal with the cost of home ownership (OP already said the house needs work) is also pretty important.

[sagremus]

Thanks to all of the advice. We have decided to continue to aggressively pay down my student loan debt and hold off on purchasing the house. We will be stashing an additional 500-750 a month into savings until we have a decent down payment and have agreed to revisit the idea in a year.

[Zedon]

I agree that you should save up 20% down payment and have at least 3 months emergency funds after that. If you are going to net 100k by middle of next year this should be no problem. I net 40% of that and can afford a house 3 times that cost with nearly 2k left over for expenses.

[siggy_freud]

My personal preference for 20% down has absolutely nothing to do with PMI. I just wouldn't want to be *stuck* if house values fell early on after buying a home. I am fairly debt adverse, but don't mind the mortgage because have always been in a place to sell home in any market (for more than we owed). I would not want to be upside down on a mortgage - then is same or worse as other debt. Putting 20% down is a first step towards remaning above water. Having some funds to deal with the cost of home ownership (OP already said the house needs work) is also pretty important.

I won't argue that 20% down doesn't put you in a better, more flexible position. I was mainly just saying that right now the OP is burning $750 a month. Pure and simple. He has an opportunity to turn some 200-300 of that into equity, for an additional cost of $100 per month. I know I'd gladly pay $100 more a month to get an additional 200-300 in equity per month on something.

It's not like he's trying to jump into a house he can't afford. An 800 per month payment on 100k income isn't a stretch. If he weren't aiming for such an affordable place I'd say no way in hell. I got into the market on a similar sized home. 700 sq.ft at $100k. I did an FHA, put a bit of work into it, and a year later refinanced into a conventional because the home was reappraised at 136k with my additional 10k reno investment. The advice at the time would have been to stay away from that home because I didn't have 20% down, but in this case it was the absolute right move to have made.