Hey everyone, first of all I’m grateful for this community and resource. Long time reader, first time poster.
I’m 33, no debt, no dependents, and recently started a new job making $130k base (with additional equity). I rent and comfortably live on around $3,000 to $4,000 (on the higher end) a month. I have around $80k in savings. I love budgeting (it’s fun and fascinating).
For the first time I am reasonably looking at the possibility of buying a house, even though the current market seems to be around $600k in Austin, TX. If my mortgage were around $4,000/month, I could continue to live on/around the $3,000/month lifestyle (which is pretty comfortable for me). After the down payment I would have around $10k in savings. My career trajectory seems solid at this point, and I expect to earn more in the coming years, which would buffer these expenses and savings.
I love home projects (and maintenance), and always do them anyway even at the places I rent. I think I would really appreciate and enjoy owning property. To explore, I reached out to my local bank and was prequalified for a 30yr conventional loan for $650k at 3% interest. My credit score was 807-820.
All this being said, $600k seems like a staggering amount of debt. I could also not buy a house, continue to rent and keep expenses low, save more, invest in the stock market, index funds, retirement, etc. and build a larger investment portfolio.
I feel as though I am at a cross roads in my financial life, and curious to hear any thoughts from others who have navigated this, and what their goals were/are? Thanks for reading!
It’s unlikely you’ll see mortgage rates this low for a long time. It’s one of the only good debts to have. Consider it the same as trading with leverage. Essentially it is, with real estate.
You also could consider putting less down. Some lenders accept as little as 3.5% down in my experience.
House-hacking might not be a bad idea either: an investment and better cash flow if you buy a duplex or greater and rent the other units.
Rent is money you get little return on and never see again.
Mortgage is for something you own, that will continue to increase in value in most cases.
Real estate is rarely a bad investment.
As long as you’ve [followed the prime directive](https://www.reddit.com/r/personalfinance/wiki/commontopics) and have the appropriate emergency savings, taking advantage of matches/tax-advantaged accounts, etc. I see no problem with going for a house. You sound like you’re ready and in good financial shape! Just don’t stop investing (I recommend 20-25% of your gross to always be going into investments) and be prepared for a lot of new recurring expenses that you didn’t have to deal with when renting (ie. things breaking, increased utility costs, property tax, etc)
Understanding the hidden costs of home ownership is important. If you will need to call someone for all things you may find a better return with investments in the long run, depending on purchase condition. With that being said, home ownership is much more then an investment. Some people see it as freedom you can not gain while renting which is more important in some cases.
You are ready my friend. Don’t waste money on rent. You can comfortably afford the house.
Thought about being a landlord at all?
As a first time homebuyer you’d qualify for a 3% down payment, although you’ll probably see a little better rate with 5% or more down. With no other debt you would definitely qualify for $600k+ in financing. With that small of a down payment you would have private mortgage insurance but with your great credit it would likely be less than $100/month. As another poster said, we won’t see these rates again for a long time. In the last 6 months I’ve seen them go from 2.99% to 3.25%. Essentially a 25% increase. A lot of people get really geeked about putting a lot down which is good Dave Ramsey thinking BUT if you’re getting money at 3% and can make 5% in the market, why not take the max loan? You can always pay more if you want, but I sure as hell wouldn’t blow your whole savings nut right now.
You’re a gem of a client to a lender with your great credit and your good salary. You mentioned talking to a bank near you, I’d recommend finding a mortgage broker in your area, a lot of times they have more options. Steer clear of companies like rocket mortgage, you’re just a number to them.
Get yourself a house!!!
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