SO and I have been staying at her father’s house last 1.5 years for health reasons/being close to her family (my SO has cancer). We’re ready to be living on our own together again, and move out of her father’s place. We’re unsure if we should be looking at buying or renting. We’re both 26. Plan to move out in ~4 months.
Location: Carolinas USA (rural-ish area). Homes that fit our needs (& wants) are around $175k-$285k. We would look at renting for around $1500/mo total (including utilities and such) (Also – we have a large dog).
​
**Income (pre-tax):**
Me: $86,000/yr ($4,600 take home/mo after taxes)
SO: $44,000/yr ($2,700 take home/mo after taxes)
Combined: $130,000/yr ($7,400/mo take-home after taxes)
​
**Total Monthly Expenses** *(food + loan payments+ car/pet insurance + ‘everything else’ .. on average)*
Me: $1000/mo
SO: $850/mo
Combined: $1850/mo
​
**Assets:**
Me:
* $4,500 checking (usually keep checking balance around here & move money elsewhere)
* $6,000 Emergency Fund/General Savings
* $20,000 stock/ETF mix in personal investment account
* $9,000 in Roth-IRA
* $13,000 in 401K.
SO:
* $11,000 in bank account.
* No investment accounts. (as I’m typing this noting to prioritize helping her setup an IRA)
​
**Debts:**
Me:
* $11,000 auto loan balance (5.9% interest) remaining on car ($250/mo payment, car’s value is $25,000 – I have been pouring extra money into this loan/mo due to 5.9% rate)
* ~~$24,000~~ $4,000 federal student loans in covid forbearance (I am subject to $20k forgiveness should it go through)
* No revolving credit card debt.
SO:
* ~~$22,000~~ $2,000 federal student loan debt (subject to $20k forgiveness as well)
* Car is paid off (car is worth $4,000)
​
At this point, we do not pay rent as we’re staying at SO’s father’s house. **We are also expecting an additional ~$1,500 in added monthly expenses through Nov 2022-Nov 2023**, as my SO will be getting specialized medical treatment outside of US (not covered by insurance).
We had more saved up, but had spent around $35,000 in medical costs over last 1.5 yrs. More than half of this number being payment to prepare her specialized medical treatment overseas.
We have never owned property, only rented. I know the market isn’t prime for buyers at the moment. Realty is not my specialty, and there’s a ton I don’t know about this entire experience. Have just started researching first time homebuyer tips.
Based on our current financial situation, should we consider buying a home? As I mentioned, we’re planning to move in ~4 months or so, giving us time to save more for a down payment. We do not plan to continue staying with her father.
Please let me know if any additional information would be helpful – just looking for general advice as we will be moving in 4mo.. to seriously look into buying and building equity in a home, or just plan to rent somewhere as we build up our wealth? Thank you!
First off, I’m sorry to hear that your SO has cancer and I wish you the best as you navigate that together.
I think renting for the short term as you save up more would be effective, understandable, and perhaps wise. I know from family experience how medical bills can pile up, and I think having extra savings to be able to deal with that if it arises would be something you’d appreciate. I also think, that aside, it’s good to take time and find a house that suits your needs, and know that renting isn’t “wasting money” per se as you still need a place to live and your privacy living on your own is also worth it.
Stay at a family’s house if you can. If you can’t, just be aware that a house is a significant financial and time commitment beyond what you pay in your mortgage. Even if rent is about the same as owning, there are always extra costs to owning.
Rent for now and continue to save more so you can put 20% down + have 8 months worth of expenses saved.
You can Def afford to buy in those home ranges… no reason to rent unless you want to move very soon far away…
Buy, don’t rent. Given inflation, even at today’s interest rates you will make out. You can easily afford a home in your area. Buy something in a good school district.
I would buy, due to still-rising house prices in NC and future uncertainty. There are a lot of protections for home owners that aren’t there for renters.
I would buy using FHA loan and minimal down payment (about3.5%). Housing prices (price of house and interest rates) are rising faster than most people can save, so getting to 20% down is hard. To me aquiring the asset, especially as a first time buyer, is the best way to gain wealth as appreciation will likely outstrip the rate at which you can save. Your mortgage payment, including principal, taxes and ins, at the 175k-200k price point will probably be the same as rent, especially if you consider the tax benefit. And the tax benefit is not just interest on the loan, but also state/local taxes and real estate taxes. You can adjust your withholding to increase your take home pay using an estimate of taxes with a mortgage. But the appreciation is the big deal. For a first time homebuyer, I would never recommend waiting until you have 20% to put down.
I would buy one of those properties around 175k and I would put a 20% down payment on it so that your payment is only around 1k a month and you are building equity and paying off a home. Best of luck and prayers to your family.
You do need to add a house maintenance fund if you buy and beef up your emergency fund. And wife, as you noted , needs retirement fund.
If you can, I would buy new or recent construction to minimize the risk of house repair expenditures. Get a good home inspection and require that sellers provide funds for repair of items noted in inspection report.
I always say that the important decisions are made for you.
If in 4 months, you haven’t found a home and still want to move out…
Rent.
>my SO has cancer
Is there any reason to move out of her father’s at this time other than wanting to not live with parents?
I don’t know the whole situation but saving as much as possible and spending as little as possible right now is probably the best move.
>e had more saved up, but had spent around $35,000 in medical costs over last 1.5 yrs
I mean you definitely don’t need to go into more debt with a mortgage right now. Even a 12 month lease may cost a lot of money if you try to break it when you need to. Once again I don’t know what the outlook is but err on the side of caution in this situation.
A house comes with a lot of added responsibility for maintenance and lots of unexpected expenses when things break. Ideally you’d have no other debt, a year saved for your mortgage, and an additional savings of like 10k for when stuff breaks unexpectedly that insurance won’t cover. And right now you don’t know what to expect in even the near future. You might lose your SO’s income due to hospitalization or worse.
In America, 75% of the time buying is better, as Mortgage Interest and most taxes are tax deductible. In essence, every renter is subsidizing the buyer for first homes. Look for Monthly affordability. Mortgage payments are the key including real estate tax and homeowners Insurance. Under FNMA/FHLMC guidelines that payment must be under 1/3 of your gross income. In English, $3000 a month or under. Please marry your SO with a Prenuptial agreement if you are in LOVE. CFPr here for over 40 years.
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