Getting gifted a decent amount of money, can I afford a house?

[snervel]

@rosie99 Thanks this is helpful!!

 

[newton3005]

@rosie99 In my area, an older 3 bedroom house is $275 - $325k in reasonably good condition. A comparably sized new build single family home is likely $450k. A new townhouse or condo would be $350 plus HO fees. It seems crazy to me to pay $150,000 to avoid the need to pay perhaps $30 -$40,000 in repairs or updates to an older house. New houses come with HOA rules and fees that are avoided with older properties

 

[faith4truth]

@snervel I strongly caution against contributing towards a house that isn’t in your name. Also, even though your girlfriend’s parents are supplying a down payment, it’s common for mortgage companies to require a solid work history…2 years in my experience at the same job, in order to approve a homeowner for a mortgage. You / she can get pre-approved for a mortgage and then will have better insight into how much money a bank would be willing to lend her.

 

[snervel]

@faith4truth Thank you! Very helpful!

 

[alag]

@snervel Outside of not being married and what others have said, there is a possibility that she graduates and needs to take a job elsewhere. There is plenty of time to get saddled with home ownership, but given your ages and situation it might be wise to keep it light so that you can quickly relocate out of desire or necessity.

 

[celestial33]

@snervel Super late to the party here, sorry.

I don’t see that anyone has mentioned your retirement account. You’re oversaving in your 401K.

You want to first max it out to get your employers benefit (as you said, 3%) and then use the rest (5%) into a Roth IRA, which you can contribute up to $6000 per year.

As someone who bought a house right out of college, housing has only increased since and rates have increased as well. We couldn’t afford even 2/3rds of what we did if we waiting like people said, and we bought in 2022!

I feel like a lot of people have FOMO and are eager to buy houses, but can’t because rates are too high. Once rates start dropping, we’re gonna see prices increase again. So, around 2 years I’d say.

I know many people who have bought a house without being married. There’s just extra paperwork, denote how much you put in exactly, and it’ll be fine. You don’t need to be married to purchase a house together:

However, I do suggest making sure you’ll live in the house for 3 years before leaving. 1 year minimum, but 3 ideally.

 

[snervel]

@celestial33 Thank for your input! We are still researching but it seems like we have decision. Also thank you for the suggestion with the Roth IRA. That was super helpful.

 

[leleh]

@snervel You're not married, so don't go in on a house together until you are. It can be quite messy if something goes wrong.

Once you are married, you want to aim for 20% down on the house, plus closing costs. So, take the money you have saved for buying a house, subtract the average closing cost for your state, and multiple by 5 and that's what you should be looking for in a house. You CAN put less down, but you'll have to pay a few hundred bucks in mortgage insurance each month until you have 20% equity in the home. You can generally get a mortgage for a house worth 3x-5x your annual income, but you really shouldn't spend more than 28% of your income on housing (mortgage + insurance + property tax).

You're going to have to qualify for your mortgage based on your current salaries, not on future potential earnings. So, 76K / year it sounds like. 28% of that is about $1,775 / month, the target for your month payment (mortgage + insurance + tax).

Don't count your HSA or retirement savings as something you can use because you really can't.

Depending on where you live, that might amount to a nice house, or it might mean you decide to keep saving a bit longer.

 

[snervel]

@leleh This is helpful! Thank you! Any reason to have 20% equity as quick as possible thought?

 

[leleh]

@snervel In the absence of 20% equity your lender will require you to purchase private mortgage insurance. PMI will add hundreds to your monthly payment and ultimately add thousands (tens of thousands) to how much you pay for the house.

You can put less down, but it's going to cost you.

 

[snervel]

@leleh Okay good to know! Thank you!

 

[james3248]

@snervel My question is, why is she getting a masters degree to be making $40k at most? She could make more than that with no degree. Is there higher earning potential later on??

 

[snervel]

@james3248 Higher earning potential for sure! She’s really getting her masters to take her Covid year and play the sport she loves. She wants to coach after she is done, where a lot of schools do want a masters for. The pay is awful though, this is actually why I decided not to go into coaching. It seems fun, but looking at the college coaches around me coming in at 5 am to leave at 9pm during the season just to make 40-60k was insane to me.

Head coaches and D1 assistant coaches get paid though!

 

[snervel]

@james3248 Thank you! This is why I posted on Reddit though, I love critical feedback and a little devil advocate because it shows so many different perspectives. Ultimately, non of these people know us personally, have had any conversation with us, or can full understand where we are at. But that being said all perspectives and opinions are valid, so I’d like to hear everyone out!

It is refreshing to see someone not married but engaged purchase a home with their fiancée (because that could very well be us if we decide to hold off on going to the court house)

Your point also made me forget one small detail (HUGE DETAIL) she will not qualify for a loan! Id how I missed that. If she can’t get the loan herself then I will 100% be putting my name on the house. Sometimes I often forget she isn’t able to do the things I can.

You also just broke my heart about the ring. I went lab grown, my setting has lab grown diamonds as well and it is abt 2.5 carats. Total price actually is closer to 6k! I already made my deposit and consider the money to be gone (from a budgeting stand point). I am not familiar with the price of jewelry, and liked to see the ring in person before hand so I didn’t like the idea of rare carat, and every other jeweler was charging a lot more, so I thought I was getting a deal (guess not). Well hopefully I’ll never have to make that purchase again!