Can I afford a house?

[kglahoda]

@aprilranta Make sure you have a good “oh shit” fund. Once you own a house, expect stuff to break. We had to replace the HVAC a month in. We knew it was old and had to be replaced at some point, but it died within weeks. And on a SF home you can spend anywhere from 7-17+k depending on size, brand and options.

And that’s just one of many things that can happen.

 

[skeptic91]

@aprilranta I would also consider maybe lowering your house budget - I know you said current local average is ~$400k (it's getting there everywhere) but consider looking for homes in the $300k range, which you could definitely afford.

Best of luck!

 

[baelog]

@aprilranta I guess. I waited and wish I hadn’t. Interest rates were suppose to go down last year.

 

[utcool]

@baelog Who told you that?

If inflation is high, the Fed will raise rates to combat inflation.

With luck, they'll start dropping in six months.

 

[davidfmayerphd]

@utcool And once they do go down, demand will go up again because everyone waiting on lower interest rates will be ready to buy.

 

[calvinandhobbes]

@baelog No you just...gotta wait for it to cycle back...let's see...1987...2000...2008....2020...I think around 2027 you should be able to get around 3 % interest rates again.

 

[lovenotrules]

@aprilranta dont ask this question here

go see 3 mortgage brokers and interview THEM

get preapproved

 

[newway]

@aprilranta 30% of gross income for housing costs is the usual guideline. This includes mortgage principal and interest, property tax, home insurance, and utilities (heat, electric, water, etc.).

$130k x 0.3 = $39k or $3250 per month total for all of those things above.

Go find a mortgage calculator, plug in some realistic scenarios with your downpayment and borrowed amount. Add the other components based on real listings in your search area.

In other words, estimate it properly. Know the numbers as best you can without guessing or pulling a YOLO move.

 

[jaycob]

@newway I doubt they can afford it. With a 400k mortgage (because they’re barely putting anything down), the mortgage alone would come out to 2800 a month. Adding all the other items like PMI, home insurance, taxes, maintenance and utilities, this could easily be 4000 dollars a month.

And because their savings are so slim, the moment any big repairs are needed for the house, they are in big trouble.

 

[kahsdfdhdhka]

@jaycob As a mortgage underwriter, the lack of savings isn't a great look. I'm always skeptical of these types of borrowers who make a fairly decent combined income, have little debt but somehow they only have $10k in savings. I hope they have other liquid assets but if they don't, they're setting themselves up for failure buying a $400-500k house.

 

[graciesings]

@kahsdfdhdhka Lol student loans ate up my money in my 20s so that’s a big reason for it. $80k for 3 degrees and a professional certification

 

[asklife]

@kahsdfdhdhka A 400-500k house on that income? Wow.

 

[tinkerbells]

@kahsdfdhdhka What about someone with gross 135k, no debt, 120k cash, 100k invested, with currently only $600 monthly costs (food, utilities). Still a good time to buy a $500k max home. I’ve ran some calculations and seems a little house poor? or am i overthinking jt

 

[helptheman]

@tinkerbells 120k is too much cash not making money. Should’ve at least had 90k in bonds or other safe returns

 

[tinkerbells]

@helptheman Sorry I should have clarified the majority is in short term T-Bills at the moment, you are 100% correct

 

[newway]

@jaycob Yup, agreed. And hopefully OP will explore the math and come up with that on their own.

 

[klawe4]

@jaycob They didn’t mention assets they could liquidate for cash though

 

[semsema]

@newway I bought a Duplex for 408k. PITI is 3349 but my rate is 5.125% That is in Texas with our high property taxes. current rates would lift that.

 

[leakyfaucet]

@aprilranta Do you have an emergency fund that is separate from your $10k house fund? If not you should save up additionally so that buying a house does not immediately deplete your cash reserves.

In terms of building credit: If you only have $600 in collections, why are you paying it off in 6 months and not immediately? The sooner all that is cleared the sooner his credit score will recover.

 

[davidfmayerphd]

@aprilranta I think you are going to have a wake up call when you find out how much closing costs actually are. I know it was surprising for me. Mine were over $11,000 for a home under $230k. I don’t think you will come close to putting down 3% and covering all of the closing costs with $15-20k saved. Your lender won’t let you spend ALL your money on cash to close either. You have to keep some money in the bank. As others have said, having an emergency fund is also wise.

I’d recommend that you start listening to the How to Buy a Home podcast by David Sidoni. That podcast was a huge help to me as a first time homebuyer in 2022.