Should I buy a home or should I wait?

**minnie1928** · 12-05-2009, 05:55 PM

I'm going to vote that you wait. You have to have a house under contract by April in order to get the tax credit. For all intents and purposes, you have no down payment and no emergency fund. Those are both key. No down payments loans aren't there like they were a few years ago. To get the best rates and to be in the best financial position, you'll want at least 20% to put down on the house. Also, I don't think the housing market will be fully "recovered" in 2 years so while the prices may go up somewhat...I don't think it will be by a huge, dramatic amount.

Also, FWIW you might consider making minimum payments on the student loan and the car until the credit card is paid off. Then once that is done, continue making minimums on the lowest interest and send the remaining money to the higher rate loan.

ps-congrats on nursing school!

**fruitbowlk** · 12-06-2009, 05:00 AM

You should wait until you clear up all your debt and save atlease 3-6 months of monthly expenses. And have a good downpayment.

**disneysteve** · 12-06-2009, 06:10 AM

Welcome to the site! You should not buy a home based on market conditions, tax incentives or any other outside factors. You should buy a home when you are financially ready to do so and it meets your needs. Based on what you've posted, you are not ready to buy a home.

You have monthly expenses of $2,000 and an emergency fund of $50. You need to have a bare minimum of 3 months of expenses (6K) and ideally 6 months or more (12K+) before buying a home. You also need a 20% down payment (15K-19K in your price range).

As for the budget you posted, one item stands out. You are spending $380.00/month on food for one person. That's a lot. There are plenty of people here who spend that much to feed 2 or 3 people (maybe 4). I would suggest looking into ways to trim that. If you could knock it down by even $100, that would give you extra money to throw at debt reduction and savings.

The good thing is that the CC will be gone in a few months and free up $300/month. That will help out a lot.

For now, I'd focus on getting rid of the CC, then paying extra on the debt (student loan or car) with the highest rate while simultaneously putting money each check into your emergency fund.

**MonkeyMama** · 12-06-2009, 06:21 AM

Actually, OP didn't say much about savings, so I assume there really isn't any.

She said she is saving $50/month.

The thing that is missing from this picture is a good down payment. I certainly don't see why you would buy right now.

**disneysteve** · 12-06-2009, 06:30 AM

Sorry. I misread that as you have $50 in your EF. You meant you are putting $50/month into your EF. Can you tell us how much you have in savings currently?

**JenniferG** · 12-06-2009, 07:17 AM

Thanks everyone for all of your wonderful advice. The general consensus is that I should wait to purchase a new home, which is also what my gut and good judgment tell me. The frugal me really wants to snatch up a good bargain while it's a buyers market, however doing so may cost me in the long run. I've decided to continue to put 250.00 a month towards savings for a new home and 50.00 towards a EF. Right now the interest on my car loan is 6.0% and student loan is 4.85% Once my CC is payed off in 3 months I will use that extra 300.00 a month and increase my car payment to 450.00 student loan to 200.00 and whatever is left over will go toward my EF savings. A decent amount of my income that I don't configure into the $2400 take home comes from call pay, travel pay, evening/weekend diff and overtime. I will allocate this additional money towards saving for a new home. Should a true emergency come up I will tap into my new home savings. My goal will be to purchase a home in 2012 when I turn 30 with 15k to 20k for a down payment on a new home.

Steve, I currently have $300 dollars in savings. I know this amount doesn't sound like much but when I graduated back in May I had 3500 on my Wells Fargo CC. I started working full time in July and since then have paid it down to 1k by making several payments a month. I recently received a letter from Wells Fargo saying they were increasing my APR to 24% from 21%. I have excellent credit my fico is 718 and have never been late on any of my bills or ever over drafted my account. I did call Wells Fargo to see if they could lower this and they refused to, however they did say that there was an across the board APR increase to all cardholders. Apparently in Jan some new bill regulating CC companies s going to go into effect so the credit card companies have been scrambling to increase APRs before Jan. Evil Huh? I for one will not contribute to their cause anymore! My top priority right now is paying that sucker off.

380 a month is alot for food but I tend to buy alot of lean meats, fresh veggies, and other high quality foods. I think the 80 dollars a month eating out is a bit much considering i'm spending 65 to 75/ week on food. I could reduce my eating out 40 dollars a month and add the extra 40 to my EF.

**disneysteve** · 12-06-2009, 08:51 AM

Originally posted by JenniferG View Post

I've decided to continue to put 250.00 a month towards savings for a new home and 50.00 towards a EF.

Should a true emergency come up I will tap into my new home savings.

I'd suggest flipping those priorities for now. It is more important to fund your EF than your house fund at this point. Short term goals need to be taken care of before long term goals exactly because they are short term. You don't know when a financial need will strike. It could be next month, next week or tomorrow. Sure, you could borrow from your house fund, but you shouldn't have to. It might seem like semantics but I think it is more about mindset.

**JenniferG** · 12-06-2009, 09:05 AM

Thanks for the suggestions Steve, you make valid points. Putting 15k down on a new home will do me no good if I were to lose my job without an adequate EF in place. I'll focus on getting 8k into my EF and then start on saving for a new home.

**wincrasher** · 12-07-2009, 01:12 PM

Saying you are ready for home ownership is also more than having the down payment.

Your monthly expenses will be about 30% of your mortgage payment each month just for maintenance. Property taxes and insurance are paid each month, usually thru escrow - so you need to add that in. Then there are all the fun things like furniture, appliances, the occasional roof repair and furnace replacement.

So what I'm saying is you need to consider all the expenses required. I don't see the income yet to support that without getting into trouble.
You'll probably never live cheaper than you are right now, so think about that.

**TurnDebtIntoDebt** · 12-15-2009, 10:13 AM

Buying a home is a big responsibility; make sure you are ready before you plunge right into it. You need to have at least 3 to 5 months worth of your income saved. Also, do you have what you need already before you buy? It would be best to purchase what you need for the home a little at a time instead of furnishing your home afterwards and getting into more debt after you have obtained a mortgage. Also, how are you with your budgeting? If you are not disciplined with your finances you are not ready yet. Have in mind before you apply for a mortgage, your budget. Don't go over 28% of your monthly income. That includes insurance and taxes, maintenance, etc. Also, pay off your debt. The better your credit score, the better the interest rate you can obtain. Plan and research first before you act. Search for the best rates, etc.

**nataliya** · 12-23-2009, 09:10 AM

I think you should wait, especially in this economy. Homes prices may continue to drop.

**investingnoob** · 12-26-2009, 08:45 AM

Everyone made valid points. As tempting as it is with the low prices, interest rates, and tax bonus its hard to say no.
But if your not ready then your just setting yourself up for failure.

I almost took the plunge and bought my first home, I am 21 and felt way to young to do it. I'm glad I stuck to my gut feeling and waited.
Right now I'm just trying to pay my car debt which was at 21k and now got it to 7k.
My credit card debt is nonexistent.
Once i get my car paid off i'll have no debt.
I'll be able to put even more in my EF and down payment fund.
Making me in a much better position to buy a house then.

I wouldn't however cut your healthy food diet out. I tend to spend a lot on my food but i'm a gym rat.
Plus my protein shakes and pre work out mixes are not cheap. But I refuse to cut that out of my life, life is just too short.

**jIM_Ohio** · 12-28-2009, 08:07 AM

Originally posted by JenniferG View Post

I've recently graduated nursing school and I'm considering purchasing my first home since home prices are so low right now. The 8,000 dollar tax credit to first time home buyers is also a huge incentive for me to take the plunge into home ownership right now. Since I'm a new grad I have very little in savings at the moment. If I do choose to buy a home it will be some time in June when the lease is up on my apartment. My question is should I save up for a year or two and buy a home when the market has recovered, or should I take advantage of low home prices and the 8k tax credit. Homes in this area are very affordable 75,000 to 95,000 can get you a 3 bedroom 2 bath house in a decent part of town. I've recently opened an ING account specifically for saving for a new home and plan on contributing this years tax return (est. $1200) to my savings.

Debt:
15k car loan
1k wells fargo credit card
5k student loan

Take home: 2400-2800 depending on overtime (Any OT worked will go towards saving for a home)

Rent: 575.00
Car payment: 330.00 (will increase this to 450.00 when CC is payed off)
Student loan: 100.00 (The min is $50 I plan on increasing my payment to $200 when my CC is payed off)
Wells fargo CC: 300.00
Electric: 75.00
ATT: 55.00
24hr fitness: 25.00
Gas: 60.00
Groceries: 300.00
Eating out: 80.00
Pets: 40.00
Car Insur: 60.00
Netflix: 10.00

Total: 2010.00

New Home Savings: 250.00 (+ Overtime pay)
Emergency fund: 50.00
Misc Spending: 100.00

Total: 2460.00

7% of my income is going to my 401k

Hello Jennifer. Welcome.
If you choose to buy, it will be tight. Because up to 12% of your income is from overtime (it appears), my advice would be to NEVER spend the overtime, save it only. Not just before you buy the house, but after you buy it too.

If you are SERIOUS about getting the house, I will tell you you can do it, here is how.

Let's assume a December 2010 move (not June)
In January, sent $500 or $1000 to the credit card

starting in March of 2010
$250/mo going to house fund times 10 months is $2500
$400/mo from overtime, times 8 months is $3200
$300/mo from credit card payment times 10 months is $3000

$8700 is available for a down payment in December
wait 12 months longer and $16000 is available (Dec 2011)

I do NOT suggest you pay off the student loan or car faster. My logic is that when student loan is paid off after you are in the house, you increase your cushion more... if you pay off the student loan sooner, you lose the liquid savings and the $100/mo it frees up per month would take 30 months to show a dent in the house down payment plan.

If you chose to move between June and December of 2011 I think you will still find low prices, and will probably be able to get a house you want.

**amarowsky** · 12-30-2009, 11:42 AM

Start looking now for a house. If you find one you really like and plan on being in the area for a while, go for it. With how cheap houses are now, you can buy them with full time wages at McDonalds.

Also keep in mind if you seriously start looking in the next few months, by the time you find the one right for you, you should be able to have a few extra G's saved up. And if you have some friends and don't mind living with people you can probably get a few roommates for whatever the going rate is in your area. Play it right then and use their supplementary rent to fund your EF up and after its done, Do what you want to. Pay off the house early, travel, go back to school, or buy a really cool expensive bird and play pirate *my personal fav*

Be careful and make your decisions wisely. But I think it is wise to buy a house soon if you have the means. I don't believe the housing market will be this low for much longer. If I was in your shoes, I would probably try and buy a house within 9-12 calender months.

Should I buy a home or should I wait?