I’m grateful for my work setup in academia – I get a paternity leave that, combined with the summer break, means I’m off from May-February. The wife (married 4 years) and I (29yo) have a 10-week old and are debating what to do.
We rent in an expensive area in NH (2700/month). Our lease is up in July. Combined income 150-175 (I make 110 and wife’s income as a freelancer fluctuates). We’d like to buy in the next couple years but only have 18 saved right now, I’d like to put 20% down to avoid PMI (so thinking 60-80 saved up), and I’m not willing to cut off retirement contributions. We’re debt free.
The Mrs. loves our current home, but as I said, it’s expensive, and it’s a rental. It’s not a terrible price, but also not great considering we aren’t accruing equity.
I’m thinking we should head to a different, less expensive area of the country for the leave – like Durham, NC, where we used to live (loved it) and still have lots of friends. My wife’s work setup is flexible; she can do it anywhere.
We could get a decent AirBnb down there for 1800-2000/month. It’d be cheaper and would definitely be a fun adventure, but we do have a newborn, would need to go through the hassle of putting stuff in storage and moving (not to be underestimated), and would lose our current place.
That said, the way I see it, this might literally be a once-in-a-lifetime opportunity, and there will be other rentals to check out back north when we return (hopefully a little cheaper). FWIW, the wife and I have a great relationship.
Another option is biting the bullet and just buying a house this summer, using the downtime to handle the move and logistics. But as I said, we’ll only have 20-25 to put down and I think a 300-400K house is our move, so we’d pay PMI. This rental payment kills me, as much as we like the place.
Take this time off and get a second job. You’re young, can put away quite a bit and use to further yourself.
I’d move. Either rent a cheap place for a year while you save, or:
People get belt out of shape about this. I never put more than 10% down on a house. I either buyout the PMI, if it’s cheaper than monthly. If you expect the value of the home to increase, then pay monthly and refinance after 6-10 months, when it’s appreciated and you have saved from second job.
I’ve run this a dozens of times for myself and the added cost of PMI + interest on higher principal is minimal compared to putting the additional funds into market or investments.
See below graphics, based on $400k house and 20% down vs. 5% (min conventional).
I understand this advice completely. I might do some adjuncting to earn a little extra, but I still have some responsibilities at my job (like research) and would really like to use the time to hang with my son. I worked like crazy in my 20s, so the quality time with family would be awesome.
Interesting - had no idea this was an option! I actually got a quote from Rocket Mortgage that PMI might be $100 or less per month. So you don’t think this (or putting the mere 5% down) should be too concerning? Leaning more toward house shopping.
It’s not a bad option. I’ve always found when I do side things for extra income, I do it without stress. The ability to leave at any moment, not worry about supporting family without, etc. make it a much more enjoyable experience.
Yep! It’s a great option.
You might check out going the Broker>UWM route. I haven’t done it, but I really like UWM’s model. They also can complete a loan in 17 days, which is far superior and will make you a better candidate in competitive markets.
It’s conventional wisdom applied on the macro to avoid '08 situations. On a micro level, if you have a good job, under contract, have money in savings, etc. It’s just a heuristic to prevent people from over-stretching themselves. I am putting 5% down on my house I close on in two weeks. I started at 20, then 10 and settled on 5%, because I invested that money. I’m earning 5-7% on the money I would have put down, in quarterly dividends.
J Powell has said he doesn’t see them increasing this year. They’ll consider at end of year. Rates are incredibly low right now, I’m locked sub 3%. I don’t see the fed increasing substantially in next 6 quarters. Historically, under 5-7% was amazing. My first home was 5.25% and I’m 31.
This is what I did. I put down I think about 8%, in a few years my house had appreciated, and I had paid some of it off. I refinanced, got an inspection and got out of PMI. I think I did pay PMI for 3-4 years. Was like $65 a month on a 130K loan.
I always find it interesting that people can be so set on avoiding PMI that they put off buying a house, but then are willing to spend far more on rent for an extended period of time than they ever would have on PMI. How much PMI would be covered by a year’s worth of rent at 2700 a month?
Alternatively, you could make a move to buy a house well before you can afford 20% down, and instead get your ass in a house now, and make extra payments towards your principle until you hit the 20% and the PMI goes away. Overall, that will save you money AND get you in a house that much earlier. The 20% down ideal is a boomer way of thinking, and IMO, it’s no longer a smart way to handle money.
I’m like Chris. I put down the absolutely minimum I can everytime I buy a house. Rates are stupidly low now, it’s absolutely worth it. I want to keep myself as liquid/flexible as possible, not have a shit ton of money sunk into a downpayment. You never know what life is going to throw at you, ESPECIALLY when you already own a house, lol.
What’s your thinking on buying a house if you aren’t 100% certain you’ll stay in the region long term? I like my job a lot but wouldn’t rule out leaving for something better in the next few years.
I bought when it was still a buyer’s market (2013). The house is now worth over $200K, and I owe about $93K on it. Its a 2 bed, 2 bath at about 1400 SQFT. The big thing about it is in a good area for the Twin Cities metro (the HS near my house often ranks in the top HS national lists). Yes it was conservative. I was approved for about double the amount I took out, but was just out of college, and nervous about it (in hindsight I think that was a good instinct).
I like not owing much on a house, as well as not having too much house. I pay less than most of my renting friends, but have over a 100K of equity in 7-8 years of ownership.
I don’t think a house is a good investment if looking at buying more house than you need (it is a good investment vs renting as you need somewhere to live). I would rather have the smaller house, and dump more money into investments.
I’m 37 and I’m on my 6th house. I still own 2 of my previous houses, and I have lived in all of them. The worst I’ve done is broken about even on a sale, after commissions, taxes, etc. Generally, I’ve been able to make money and use that towards my next down payment. There are lots of ways to do it, depending on whether you need to cash out of your house when you move or not. My other houses are rental properties now. It’s impossible for me to know if that’s a viable option for you in the future, but in general, it’s certainly a thing that can be done.
Buying/selling/moving can be very stressful, no question, but I’ve gotten used to it, and it’s made me better/more comfortable with the process each time. I had intended to stay in my last house for longer, but ended up selling after a year and a half because the market was favorable, and I was willing/able to move.
More generally: nothing is 100% certain. The need for certainty can be paralyzing for many people, and it keeps people glued to the status quo. I have friends my age who tell me every year ‘I was gonna buy a house this year, but x y and z came up, I’ll wait one more year’, and this process repeats indefinitely. Don’t be that person, lol. If you want a house and can afford it, go buy a fucking house! lol. There’s a LOT of info out there you can read up on to make sure you buy the right kind of house in the right kind of area if you want to make sure you never lose money on your investment.
Mind if I ask the prices of the those houses? Guessing they’ve gradually increased over time? I know real estate in TX is different from NH/MA.
Any tips? We hired movers last time. It wasn’t bad – like $3,000 for help for one day – but that’s still a decent price. Not sure if I’ll do it again this time.
They have, aside from when I got divorced and lost half my assets (I had to sell the house I had with my wife, and although I was the only one who put any money into it, she was entitled to half of the sales proceeds). That was a small step backwards, but even with that happening a few years ago, my first house was 120k, and my last one was around 700k.
The actual move itself is relatively easy. I’ve hired movers for all my moves, it’s always worth it, even in a relatively small house IMO. I meant more in terms of all the other things, getting your house on the market, usually while you still live there, keeping it ready every single day for showings, trying to time your sale to be close to when you buy to avoid homelessness, or 2 mortgages (I had the latter for 5 months on my last sale), negotiations with potential buyers, etc.
Your first purchase is significantly easier, because you’re not selling at the same time. It’s the coordination that compounds the stress. Just buying is much more manageable. BUT on the flip side, you’ve never done it before, and some people get a little overwhelmed, there’s a lot to learn in the buying process. A good, experienced agent is super valuable even as an experienced buyer, and ESSENTIAL for a first time buyer.
