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Hopefully some of you smart queens can give me some guidance.
I make $100k/ year
I have $40k saved in cash
I have a $300 car payment (0%int, will be paid off in a few months)
~$300 student loan payment? Not actually sure what it will be (resuming in a couple months, $35k in student debt)
No credit card debt
800+ credit score
Mid 30's
So I finally got a great job, I made it 6 figures (barely but I'm there!). I thought that would make me feel comfortable to buy a home. Well homes in my area have like doubled in the past 2-3 years. It's remote. I never thought I would stay in this area, which is one of the reasons why I didn't earlier. Now after living here for 10 years, I'm not sure I want to live anywhere else.
Last year I lost my long term rental, due to the owner needed it for family reasons, I decided to move in with a seasonal home owner (gone in the winter here in the summer). So I currently am renting out a room, in October I will have the entire house again.
I really feel like I should be able to buy. I'm worried about getting priced out forever! But taking on a home is a lot, financially and, mentally, emotionally, and time consuming. Even just the process of buying / looking. If I could find something that would put me on the price range of 25% of my take home pay I would be pretty comfortable. However most places would be about 50% of my take home pay. although I wish I would have made the stretch 3 years ago because my income has improved so much, what would have been a stretch then wouldn't be now.
Anyway, small note- my ex made me feel really inadequate for not buying my own home or owning. I small part feels like a failure. BUT I also am saving money, I could easily find a rental for 1,500/month when a mtg would be 2,500/month. I also am not tied down to anything. I could literally empty my savings and have 0 debt.
Please help. Thank you 🙏🏻
Howdy! Congrats on being ready to buy a house. I'll share my experience:
As a single mom of 3 little kids, I bought my home 15 years ago (ancient days!) with 0% down and 6% interest. This was literally days before the housing craah and I got one of the last First-time Home Buyer Fanny Mae loans. Before I bought, I shopped for houses for a year. I wanted the best deal in the nicest neighborhood because I knew it would be a good investment. Finally I found a quality house in an amazing neighborhood, but it needed a ton of updates. It was ugly, but it had great bones. I was house poor for about 2 years (child care cost more than my mortgage!), but as my income increased, things got easier. Eventually I borrowed against the house to remodel it, (raising kids on my own was expensive), and it is gorgeous now and worth 2.15x what I paid for it. PLUS, I was able to raise my kids in an upper-middle class neighborhood with lawyers and executives - as a single mom. My kids are now grown, and I'm getting ready to sell the house. I'm shopping to buy two smaller homes in locations I love, with the proceeds (for myself! - I don't want the hassle of renting to others).
My advice:
Be ruthless in vetting houses. Buy the cheapest house in the nicest neighborhood, even if it needs some updates. The appreciation will reward you much more than if you buy a nice house in a cheap neighborhood. Stay away from "flipped" homes as they're usually cheaply renovated w low quality materials
Negotiate ruthlessly: make sure your realtor is willing to offer the (lowball) price you want
Get a thorough inspection. Pay extra for an engineers' structural inspection and a drain inspection. No surprises!
Look for a house that's been on the market for over 6 months. A year+ is better. Offer 10-20% less than the list price. Move on if they don't take it
Don't get emotionally attached to houses when looking (this is hard I know!). Go for the best deal, best location, best resale value.
Purchase a home warranty. I can't stress this enough! If anything goes wrong, especially the first few years, you won't be on the hook to replace the furnace ($10k) or other large appliances. I had one for several years til I understood the house better - I got a free AC unit ($8k), free washing machine repair and jacuzzi tub rebuild on my $400/year warranty. You can let go of the warranty once you have a better feel for what's on its last legs in the house, and what is doing fine.
Be prepared to be house poor for a year or two. But after that it's so freeing to have the same payment while your income & equity go up! It's like putting $1,500+ in savings every month. Create an amortization schedule and look at it regularly to celebrate how much wealth you are building
Make a list of everything that bothers you about the house when you move in. Then slowly work on the list. You'll stop seeing eg ugly light fixtures after a while & you don't want to forget later.
When you're ready to sell, you're not stuck. Try reading "Sell Your House in Five Days" - I've done this sale method twice and it works like a charm. You can get old editions on Amazon or at the library. It's brilliant. This method saves you 6% on realtor commission. Plus it's done in a week, rather than having people tromp through your beautiful home for months, and low-ball you.
Mortgage interest and property taxes are tax dedications. You can write off tons of $ just because you own a house. My write offs have been up to $20k+ per year. This will keep more of your $100k+ income in your pocket
Set up a home office in the house. Make it 10-25% of the square footage if possible (basement?). You can now write off 10-25% of every penny you invest in the house, on your taxes. Paint? Landscaping? New roof? 10-25% of the cost, off your taxes. You can even deduct 100% of all artwork, supplies and furniture used in the home office. It's called a Schedule C, and you can use it even if you work for an employer. Ask your tax expert for more details
Sweat equity remodeling can be lucrative & increase your home's value. Paint is cheap and takes a weekend to do a couple of rooms. You can buy (large) scrap pieces of Granite/quartz countertops for cheap! And the company installs them for free/cheap. I replaced all my own light fixtures in the house, myself! Except ceiling fans (those are a pain because of the weight and movement - and worth paying for). Insurance will cover your roof replacement(s) & gutters, especially if you get hail storms. Your biggest expenses will be exterior painting, flooring and window replacements. So save money for those. Exterior Painting needs to be done every 8 years or so, and windows/flooring should be replaced only as needed. Buy small evergreen shrubs (like boxwood) for landscaping - I paid $5 each for mine 12 years ago, ripped out some really ugly creeping juniper, and now I have a gorgeous permanent hedge that is green all year. Plant perennials so you're not replacing them every year. Mulch will be your friend, haha.
Donate all replaced appliances, furniture and fixtures. Itemize every item and its value. Use a tool like "It's Deductible" from turbo tax to help. You can save $$$ on taxes this way. Btw, you can deduct literally every t shirt, towel, potholder and mug you donate as well. Itemizing my charitable deductions over the years has saved me $ thousands in taxes - whether you own a home or not!
That's all I can think of for now. Good luck! Owning a house is an adventure, and can be very financially lucrative. Take your time shopping, be really picky and watch for good bones. Have fun!