House buying. How did you wrap your head around it

[hannamaren]

We have rented forever. I am 35 and I have worked a "real" job for 10 yrs.
We are looking for a house, but it freaks me out. Our housing costs would double with a mortgage. We would also be much happier with the space, etc.

But when you rent, if things go wonky with your job, etc, you are fine. You can move quickly. But if you own, you drown.

It would be stupid to never buy because in our market, we could do very well with a house as an investment. And for what we want in space, location - we would only save $500ish a month to rent.

I know it is crazy to always think the worst may happen, but my H was fired last year. It is possible.

It will be very hard to bite that bullet. How did you do it?

[Deleted]

Oct 3, 2012 12:46:15 GMT -5 hannamaren said:

But when you rent, if things go wonky with your job, etc, you are fine. You can move quickly. But if you own, you drown.

You simply don't by a house that's so expensive that loss of one income would destroy you financially.

Our house is more than we could afford on one salary, but a lean budget only puts us $500 in the hole each month if it became a reality. We have the savings to do that for a good long while. Not to mention it'd be easy to pick up a job that earned $500/month.

[simpsongal]

I don't think you can go through life planning for the worst. We want kids - what if one has special needs? How could we afford the extra care or me staying home? We'll cross that bridge when you come to it (if ever).

With a house, if one of you lost your job, you can always sell the house. But this is a worst case scenario. As long as you have a small efund and other emergency money if necessary (401K, relatives for loans), you'll eek by until your DH finds another job or you sell the house. Hopefully, you'll have some equity.
That's the way I look at it anyway.

[steph96]

Could you get a house that you can afford on one salary alone? I don't know if that could buy much in your housing market....

[steph96]

Oct 3, 2012 12:52:08 GMT -5 @ameliapond said:

Oct 3, 2012 12:46:15 GMT -5 hannamaren said:

But when you rent, if things go wonky with your job, etc, you are fine. You can move quickly. But if you own, you drown.

You simply don't by a house that's so expensive that loss of one income would destroy you financially.

Our house is more than we could afford on one salary, but a lean budget only puts us $500 in the hole each month if it became a reality. We have the savings to do that for a good long while. Not to mention it'd be easy to pick up a job that earned $500/month.

This is exactly our worst case scenario we are willing to consider.

[cizzle]

My husband is in the military so it was a little easier to commit because we know we have a stable income. However, we bought way, way below what we qualified for so that we could carry the mortgage if we had trouble selling. (We did) So, that's what I would recommend, don't buy too much house!

[CloudBee]

Just like farmer said - buy something below your means.

Also - don't spend all of your cash reserves on a DP, and make sure you still have access to investments, etc.

We would be fine in our house for a couple years if we both lost our jobs.

I wouldn't buy if it strapped me like that.

[housegeek]

Housing costs don't always double, ours are less than half the cost to own than to rent, all included. There's also the option to rent out our house if we lost our income or something, we could keep the house that way until we got back on our feet. Can't do that with renting.

[CloudBee]

Oct 3, 2012 12:51:45 GMT -5 farmvillelover said:

I understand your concern. We purposely sought out a house/mortgage for much less than we were qualified for to allow for the unexpected. We basically pay about the same amount for PITI as we would to rent a decent 2 or 3 bedroom place. I can’t believe a mortgage would be double the amount of rent, that’s crazy to me.

Though her apartment is in the city, I believe it's tiny.

Maybe you need to look outside the city, hanna?

[Deleted]

I don't think what you're feeling is unique to those who are buying for the first time. I've worried a lot before (well even now) deciding on building. What calms me down is knowing we have options if something goes wrong. We have decent savings if we both lose our jobs. And if we have to, we would be okay to sell the house.

[hannamaren]

My rent is low. $1500 per month. Our mortgage would be $3k per month. We are buying below our means (we could be approved for more) we have chosen to go lower. We could manage on one income, it would just suck.

[Susie]

I would have a harder time buying in an area where home prices are volatile. In our area, especially at our price point, demand and prices have been pretty steady. So I didn't really feel like we'd drown if something unexpected happened. We could sell the house (pretty realistically) if we absolutely had to.

[CloudBee]

Oct 3, 2012 12:59:51 GMT -5 hannamaren said:

We could manage on one income, it would just suck.

This is pretty normal. But you could do it. :Y:

[Deleted]

I don't really fret much about anything generally.

We just bought, and that was that.

You are the kind of person who thinks about things a lot and thinks some more about things and worries and considers and re-considers.

Anybody's directive to you to just buy and not worry will not help you.

You are who you are, so make peace with the fact that this is going to be one of the most stressful things you'll ever do in your life.

[dexteroni]

Oct 3, 2012 12:55:36 GMT -5 CloudBee said:

We would be fine in our house for a couple years if we both lost our jobs.

This is our situation too. Building up a big savings / investment cushion was the best thing we ever did for our sense of security. I realize that it's harder to do in a HCOL area, but to my recollection you both have decent incomes, so you should be able to have something put away in a non-DP account.

If buying will empty your savings, or leave you with so little that a job loss would mean you would be screwed within a month or two, then you probably shouldn't buy quite yet.

[drloretta]

We bought a house we could afford on one salary. And I've always bought "cheap" houses. My first one was $23K.

[Deleted]

Actually, right now we have enough in savings/investments that we could pay off our mortgage entirely if we had to. I am very risk adverse, so I wouldn't buy unless I had at least a 10% down payment and a healthy e-fund left over after buying and moving expenses. I also would want to be able to afford the mortgage on one salary-- especially if you think you'll be having another child.

[Balki.Bartokomous]

Oct 3, 2012 12:59:51 GMT -5 hannamaren said:

My rent is low. $1500 per month. Our mortgage would be $3k per month. We are buying below our means (we could be approved for more) we have chosen to go lower. We could manage on one income, it would just suck.

Just because you can be approved for more than what you're buying doesn't mean that you're still within your means.

For us, we made sure that either one of us could pay the mortgage & other necessary bills if someone lost their job and we just have a ton of $ saved up that we can live off of in case we need to. Plus, the place we bought was cheaper than getting a comparable rental & can be rented out in the future, so that's another way we justified our investment.

[Deleted]

For us, we bought below our means but if one of us were to lose our job we would be banking on getting unemployment benifits to keep in our house. We also have an emergency fund that would keep us going for 4 months at our current lifestyle or probably 8 at a barebones budget. I would really not want to touch the emergency fund.

Truthfully I didnt want a house. It doubled our payment and I didnt think we could do it. My husband and I never fight but it was a war to buy the house. I told him he was making us poor and didnt care so he should just buy the house by himself. 2 months after we bought I saw that things were still great and that yes we could afford the house. Now I wonder why we didnt go bigger. You make do somehow.

[hannamaren]

Oct 3, 2012 13:15:30 GMT -5 @misoangry said:

I don't really fret much about anything generally.

We just bought, and that was that.

You are the kind of person who thinks about things a lot and thinks some more about things and worries and considers and re-considers.

Anybody's directive to you to just buy and not worry will not help you.

You are who you are, so make peace with the fact that this is going to be one of the most stressful things you'll ever do in your life.

Yes, you know me well.

Jenny, our 2 biggest bills are childcare and SLs

[Deleted]

We were renters for a long, long time. We literally hated our kitchen because it was so small and couldn't find any other apartments that had bigger/nicer kitchens. We started looking at houses to rent and spoke to some banks kand realized that we could afford a DP and the mortgage would only be slightly more than our rent. Add that to a great house that was on the market in the neighborhood we wanted and we were sold.

The process was a nightmare for us. We had a horrible realtor and a bank who lied to us, but in the end we have our house and I really love it. I'm glad we decided to buy. Especially with the interest rates so low and our mortgage payment so low as well. There were a LOT of up front costs/needs when we first got in there that we didn't have, but after a few months that has settled down to where we can enjoy our place.

[sillygoosegirl]

I know that feeling. We we've been looking at houses for ages (since I was 22, I'm 30 now), planning to buy for ages, but for various reasons it just was never quite the right time. We started working with a realitor about 2 years ago, but didn't love any of the houses. Or at least didn't both love any of the same houses. After like a year, we finally found a place we both wanted to put an offer on. And we did. And then we freaked out. I mean, we're run the numbers like a million times and we want to buy a house for a large variety of reasons. But we are so used to renting, the security, the flexibility, etc. It just felt so spir of the moment. Whatever house we buy, we plan to be there 30+ years. That's a big commitment. We felt like we were getting married to the house after just a first date. Wanted time to think about it. I mean, of course we've been thinking about it for like 8 years, but we don't want to buy the wrong house in this market, since we'll be stuck with it for several years at least. Of course, every other house we'd been sure about was pending by the time we felt sure... Hence not getting to the offer stage with any of the others. We didn't get that house, which is just as well.

Anyway, we decided to start looking more seriously at the short sales. At least the way they run it around here, the buyer isn't under obligation while the bank decides, but the bank isn't allowed to consider other offers until they've given us the option to buy. So we put in our offer and have been waiting 6 months so far. The waiting kind of sucks, and it will really suck if it doesn't go through in the end, but we have had the time we need to think about it, and we feel sure now. Actually, we've felt sure for months now. Yes, it'll cost twice as much as our current place, but it's also going to be much nicer in many ways... Totally worth it.

[aurora]

Oct 3, 2012 13:15:30 GMT -5 @misoangry said:

...
You are who you are, so make peace with the fact that this is going to be one of the most stressful things you'll ever do in your life.

Miso has a very good point. I tend to fret a lot, and buying the house was in fact one of the most stressful things I have done in my lift. Putting enough down that we were fairly sure we could sell if something went drastically wrong did help, and it got better with time (we've approximately tripled our equity now compared to the equity when we bought).

Other than that, I probably annoyed everyone I know fretting about it. Universally they told me it would be OK, and they were right.

[mbcdefg]

We saved up enough for a 20% down payment, closing costs, money for all the furniture, and several months' worth of e-fund.

And once MH received tenure at work we started seriously looking. We looked in a price range that we could theoretically still afford (though it'd be tight) on his salary alone since my job at the time was unsteady.

I was ready to buy WAY before that since I hated our rental with a passion, but he had to be prepared for every single scenario.

[lys]

We lived very frugally and saved for 6 years prior to buying our first home . We had a good emergency fund in place as well as additional savings for furniture and some renovations. We bought a house that was affordable on one income.

Before buying have a good handle on your finances.
Keep your mortgage + PMI+insurance+taxes+utilities to an amount that is reasonable for YOUR budget (general recommendation is 25-28% of your TAKEHOME pay 30-35% if in a HCOL area).

[w2w]

Big efund/liquid investments and don't buy so much that you are squeaking by every month.

[RoxMonster]

It was nerve-wracking for us too. We ran the numbers I don't know how many times, and it still made me a little sick to sign that loan application at the bank haha! It's a lot of money, no doubt.

H and I realize the unexpected can happen at any time. Either one of us might lose our jobs (though we have good job security now), might get sick, we might have a huge expense at home when something breaks, etc. We were comfortable with our savings to cover something that happened or to live off it if necessary for awhile if someone got laid off. We realized that there is never any certainty in things like jobs, health, etc., so if these always kept us from buying, we never ever would buy.

Knowing the money would work definitely helped ease my mind, but the whole process was still very nerve-wracking.

[Deleted]

We were young and stupid.

That's all I got.

[Doggy Mommy]

Ditto buying below your means. Had we spent what we qualified for when we bought our house, we would have been SCREWED when DH got laid off. But we didn't spend every last penny on a house. When he was laid off, we could make it work on my income alone (barely, but we made cuts and made it work). It's also important to have a good emergency fund cushion to fall back on.

However, before this house, we owned a townhouse and buying that place is by far our biggest financial regret. We absolutely would have been better off renting longer. Because of this, I'm not a fan at all of buying a place that you know you will outgrow in 3 or 4 years. IMO, real-estate should be bought for the long term. I know people have made money buying and selling real-estate, but it isn't something that worked out for us at all.

ETA: For DH, what helped was making tons of Excel spreadsheets and seeing that owning would be better for us long-term than renting.