Long Term Renting Question

short+sassy · November 2015

@PurpleBookmark, I grew up in a typical 3bd/2ba ranch house built in the 50s or 60s. Nothing fancy. Lived there my entire childhood. We never moved. My parents bought the house before I was born and my mom even still owns it...though now she lives elsewhere and rents it.

Of course, I have nothing to compare it to, lol. But I liked it. I think it gave my childhood an even greater sense of stability. Heck, I haven't lived in that house for almost 20 years and my mom hasn't lived there for 10 years. But I still miss not being able to go back there when I am visiting. It will be a very sad day for me when that house is sold because it is such an integral part of my childhood.

I think never having moved as a child also affects me as an adult. I am a "stay putter", lol. Even when I was a renter, it took extreme circumstances for me to move. While its possible I may change my mind at some distant point in the future, I consider my current house my "forever home". It is also the first home I bought.

hoffse · November 2015

My parents built when I was 2-3. I remember it, and I played home depot rather than house because of it.

I vaguely remember their first house - it was a 3/2 split level (I think).

They built a 3/3.5 that could be transformed into a 5/3.5 if needed.

The master, master bath, and half bath are on the main level of the house. That floor also has an offset dining room and a sun room that my mom uses for crafts. The living room is in the middle of the house. The kitchen and breakfast room is through a big archway off the living room, but it is not open to the living room, which I prefer. The living room has a vaulted ceiling, and they intentionally designed the living room to accommodate my mom's upright piano so that it would be a focal point along with the fireplace. Sounds weird, but the location of the piano is one of my favorite things about their house. My other favorite thing is they intentionally built their front porch to be oversized, and it is deep enough for a porch swing to really swing.

The basement is finished with a full bath that could serve as an inlaw suite, and it is accessible. I don't have any siblings, so we used it as a play room when I was growing up, and now my parents have a big TV down there, and they use it as an entertainment room. But it has the attached bath, walk-in closet, and flat access to the driveway. It's very obviously built to be a fourth bedroom.

The upper level has two beds and a bath, with an open den that could be easily closed in to create an extra bedroom. It is designed that way.

We didn't move around. They still live there. I still call it "home" (and I call the house H and I own "the house"). I don't know if the stability gave me any advantage in school. I was with the same group of kids in school K-12, and frankly I wish I had moved school districts a few times to freshen things up. Most of the people I graduated HS with were pretty annoying, and I keep up with very few of them.

The few people I do keep up with are my best friends though, and I did not find any replacements for them in college, law school, or after I moved for work. So I guess the stability didn't really increase the number of friends I had, but it made my relationship very strong with the few I really cared about.

julieanne912 · November 2015

Growing up, we never had a fancy house. The house I was born in was a 3/2 1400ish sq ft I think? Had a nice yard from what I could remember. The problem there was that my parents bought in 1980, when the rates were super high (they got 13% and thought it was an amazing deal compared to the 17-19% most people were paying). Since the builder couldn't sell the rest of the lots, he sold all of them to a self help program that was sort of like a Habitat for Humanity kind of thing. So we were one of 3 houses on the street that were "nice", and the rest were pretty crappy tiny houses with some questionable occupants (a lot of the dads were ex-cons, that was part of the program). So yeah, that didn't help property values at all, and there were some crime issues. Our house was broken into 3 times.... I remember coming home from church one night and having all my toys and clothes tossed all over my bedroom, and they took my little Care Bears wallet.

When I was 7 they decided to leave because of the crime and the local schools were terrible and paying for private school in the larger city next door was getting to be too expensive, and my mom went back to work full time in the larger city as well. They lost money on the sale, so we rented for awhile. The first rental was a townhome, it was fine from what I can recall, but they had to move after a year because the owner found out from the HOA he wasn't allowed to rent it, so he gave my parents 30 days notice to leave. Also my dad was a landscaper, and he couldn't park his work trailer at the house due to the HOA, so he had to park it on a friend's property 20 minutes away, so that added to his already long day.

So we moved again, and had to give up our pets, because the only rental they could find that was in their price range, available right away, and within walking distance to our school didn't allow pets. We were there a few years, and it was fine too, and had some friends on the street since it was right down the street from my school.

Then when I was 10 my folks finally got back on their feet and bought a house. It was a 3/2 1600 sq ft home with a pool that needed lots of updating. I loved it there, and had fun doing stuff like removing wallpaper and fixing the yard with my folks. Had great neighbors too, they were like extended family. Only reason my mom sold it was because my dad passed away and she decided to move to a new city an hour away where I was living for a fresh start.

So yeah, kids don't need a lot of space or fancy houses, I think the most important factor is safety, and after that, stability. I remember being pretty devastated that we had to give up our dog and our cat. That was 25+ years ago and it still makes me sad.

short+sassy · November 2015

julieanne912 said:

Growing up, we never had a fancy house. The house I was born in was a 3/2 1400ish sq ft I think? Had a nice yard from what I could remember. The problem there was that my parents bought in 1980, when the rates were super high (they got 13% and thought it was an amazing deal compared to the 17-19% most people were paying). Since the builder couldn't sell the rest of the lots, he sold all of them to a self help program that was sort of like a Habitat for Humanity kind of thing. So we were one of 3 houses on the street that were "nice", and the rest were pretty crappy tiny houses with some questionable occupants (a lot of the dads were ex-cons, that was part of the program). So yeah, that didn't help property values at all, and there were some crime issues. Our house was broken into 3 times.... I remember coming home from church one night and having all my toys and clothes tossed all over my bedroom, and they took my little Care Bears wallet.

When I was 7 they decided to leave because of the crime and the local schools were terrible and paying for private school in the larger city next door was getting to be too expensive, and my mom went back to work full time in the larger city as well. They lost money on the sale, so we rented for awhile. The first rental was a townhome, it was fine from what I can recall, but they had to move after a year because the owner found out from the HOA he wasn't allowed to rent it, so he gave my parents 30 days notice to leave. Also my dad was a landscaper, and he couldn't park his work trailer at the house due to the HOA, so he had to park it on a friend's property 20 minutes away, so that added to his already long day.

So we moved again, and had to give up our pets, because the only rental they could find that was in their price range, available right away, and within walking distance to our school didn't allow pets. We were there a few years, and it was fine too, and had some friends on the street since it was right down the street from my school.

Then when I was 10 my folks finally got back on their feet and bought a house. It was a 3/2 1600 sq ft home with a pool that needed lots of updating. I loved it there, and had fun doing stuff like removing wallpaper and fixing the yard with my folks. Had great neighbors too, they were like extended family. Only reason my mom sold it was because my dad passed away and she decided to move to a new city an hour away where I was living for a fresh start.

So yeah, kids don't need a lot of space or fancy houses, I think the most important factor is safety, and after that, stability. I remember being pretty devastated that we had to give up our dog and our cat. That was 25+ years ago and it still makes me sad.

Wow!!! Thieves are certainly low lifes anyway. But to actually rifle through a child's toys and clothing and steal a little kid's wallet? That's just a whole other level of worthless human being.

Strongly agree with the 2nd bolded and I'm glad your parents were able to get back on their feet and buy another house, but I'm sorry it was after your all's pets had to be given away. I would be devastated by that also.

PurpleBookmark · November 2015

julieanne912 said:
Growing up, we never had a fancy house. The house I was born in was a 3/2 1400ish sq ft I think? Had a nice yard from what I could remember. The problem there was that my parents bought in 1980, when the rates were super high (they got 13% and thought it was an amazing deal compared to the 17-19% most people were paying). Since the builder couldn't sell the rest of the lots, he sold all of them to a self help program that was sort of like a Habitat for Humanity kind of thing. So we were one of 3 houses on the street that were "nice", and the rest were pretty crappy tiny houses with some questionable occupants (a lot of the dads were ex-cons, that was part of the program). So yeah, that didn't help property values at all, and there were some crime issues. Our house was broken into 3 times.... I remember coming home from church one night and having all my toys and clothes tossed all over my bedroom, and they took my little Care Bears wallet.

When I was 7 they decided to leave because of the crime and the local schools were terrible and paying for private school in the larger city next door was getting to be too expensive, and my mom went back to work full time in the larger city as well. They lost money on the sale, so we rented for awhile. The first rental was a townhome, it was fine from what I can recall, but they had to move after a year because the owner found out from the HOA he wasn't allowed to rent it, so he gave my parents 30 days notice to leave. Also my dad was a landscaper, and he couldn't park his work trailer at the house due to the HOA, so he had to park it on a friend's property 20 minutes away, so that added to his already long day.

So we moved again, and had to give up our pets, because the only rental they could find that was in their price range, available right away, and within walking distance to our school didn't allow pets. We were there a few years, and it was fine too, and had some friends on the street since it was right down the street from my school.

Then when I was 10 my folks finally got back on their feet and bought a house. It was a 3/2 1600 sq ft home with a pool that needed lots of updating. I loved it there, and had fun doing stuff like removing wallpaper and fixing the yard with my folks. Had great neighbors too, they were like extended family. Only reason my mom sold it was because my dad passed away and she decided to move to a new city an hour away where I was living for a fresh start.

So yeah, kids don't need a lot of space or fancy houses, I think the most important factor is safety, and after that, stability. I remember being pretty devastated that we had to give up our dog and our cat. That was 25+ years ago and it still makes me sad.

Ugh, who would steal a kid's wallet!? That is heartbreaking about your pets : (

Xstatic3333 · November 2015

I'm so sorry about your pets @julieanne912. That must have been awful.

For me, I moved twice as a kid that I remember, and once more as an infant. When I was born, my parents wanted to do the typical thing so they built a new construction house in the country on an acre of land where I could roam. They hated maintaining the land and moved to Condo #1 within a year.

Condo #1 was pretty nice, but it had a very restrictive/grouchy HOA and the town only offered half day, four day kindergarten. My parents again felt the urge for a single family, so we moved to House #2. My dad says they chose this house on an impulse, without really shopping around first. I loved it there-lots of woods, neighborhood kids, etc., but they immediately regretted it. It was by far our largest house at maybe 2,000 sf. The house was old and needed work that they didn't want to do. The house was also at the edge of their budget, and I remember lots of financial stress while we were there. It kind of turned me off homeownership.

After three years they moved to the condo where I mostly grew up. I didn't like the house as much, but I liked that my parents were relaxed and happy again. Their experience have them the philosophy that you should always buy well under your means, as well as that your home is a place to live, not an investment. Those both rubbed off on me big time. I think another lesson is that you should get a home that works for your family, not what you think you should do because "that's what people with kids do." I was much happier living in a simple condo with happy parents than a big country house with stressed and grumpy ones.

cbee817 · November 2015

My childhood was a little crazy. My mom and I lived with my grandparents until I was almost 6 (she and my dad were not married, had just graduated from college, and he left us). From there we moved to an apartment about 45 minutes away so she could teach- we stayed there for 2 years. Then she got a job back near my grandparents at an university lab- we moved to a new apartment and stayed there for 1 year. Then she decided to go to pharmacy school- the closest one was an hour away. At the same time, my aunt was getting a divorce, lived in the city with the pharmacy school, so she, my cousin, my mom, and I rented a house (3 beds/1 bath about 1,100 sq ft- my mom slept in the living room behind room screens) for 3 years and lived together. Once my mom graduated as a pharmacist, she started looking for houses and we were able to buy the one we rented (I was 12). My aunt and cousin moved out to their own place and we stayed at that house until I was 21 (My father reappeared when I was 16, moved to our city, and my parents ended up getting married when I was 20). I moved out after I graduated from college to an apartment for a year with a friend, then bought a condo (1 bed/ 1 bath about 900 sq ft) at 22 by myself. My parents sold the house and moved about 3 hours away, then a year later moved about an hour away. They live in 1,800 sq ft farmhouse with 22 acres. DH lived with me at the condo for a few years, we got married, and bought a house (4 beds/2 baths 1,600 sq ft) in 2007. We've been there since and brought our babies home to that house.. I have a lot of attachment to it (DH doesn't as much) but I know it's because of the way I grew up. If we do move, it'll be for the girls' school- DH works in a top school district of our area and he wants to move into it to give the girls the best opportunity. The houses in the area are usually 4 beds/2.5 baths 2,200+ sq ft and at least $250,000. Day care needs to be completed in order for us to start looking- earliest is Spring 2017. My goal is to minimize moves for the girls- if we do it'll be the only one until they graduate/move out on their own. Then DH wants to move to a townhouse downtown by the waterfront when we retire.

brij2006 · November 2015

I haven't read the other responses, but long term rental just isn't ideal.

Also, the reason so many people have horror stories about homeownership is because they aren't fully and financially prepared for it.

We follow Dave Ramsey, as most of you know. His rules to homeownership are as follows, and I completely agree with it 100%. These are the things that need to be done before purchasing a home. Otherwise you might as well buy a house with an extra bedroom so Murphy can move in. :-)

1. Be completely debt free.
2. Have 3-6 months of living expenses in an emergency fund (including what your new mortgage would be).

3. Have 20% down payment saved up.

4. Buy a home on a 15 year mortgage, that the payment is less than 25% of your takehome pay. This way you aren't overextending yourself and living house poor. You want to have plenty of wiggle room in your budget to save up for future maintenance repairs like a new roof, new furnace, and any other house updates you may want to do.

Homeownership doesn't need to be a burden. It can be a blessing, but it needs the proper planning in order to not be a disaster.

KAdams767 · November 2015

brij2006 said:

I haven't read the other responses, but long term rental just isn't ideal.

Also, the reason so many people have horror stories about homeownership is because they aren't fully and financially prepared for it.

We follow Dave Ramsey, as most of you know. His rules to homeownership are as follows, and I completely agree with it 100%. These are the things that need to be done before purchasing a home. Otherwise you might as well buy a house with an extra bedroom so Murphy can move in. :-)
1. Be completely debt free.
2. Have 3-6 months of living expenses in an emergency fund (including what your new mortgage would be).
3. Have 20% down payment saved up.
4. Buy a home on a 15 year mortgage, that the payment is less than 25% of your takehome pay. This way you aren't overextending yourself and living house poor. You want to have plenty of wiggle room in your budget to save up for future maintenance repairs like a new roof, new furnace, and any other house updates you may want to do.

Homeownership doesn't need to be a burden. It can be a blessing, but it needs the proper planning in order to not be a disaster.

LOL forever that homeownership horror stories are only because people aren't financially prepared for it. That is so not even close to the truth. Being able to afford maintenance and repairs has absolutely nothing to do with the colossal PITA that some repairs and routine maintenance are. There isn't enough money in the world that I could have thrown at certain problems to make the headache go away.

julieanne912 · November 2015

brij2006 said:

I haven't read the other responses, but long term rental just isn't ideal.

Also, the reason so many people have horror stories about homeownership is because they aren't fully and financially prepared for it.

We follow Dave Ramsey, as most of you know. His rules to homeownership are as follows, and I completely agree with it 100%. These are the things that need to be done before purchasing a home. Otherwise you might as well buy a house with an extra bedroom so Murphy can move in. :-)
1. Be completely debt free.
2. Have 3-6 months of living expenses in an emergency fund (including what your new mortgage would be).
3. Have 20% down payment saved up.
4. Buy a home on a 15 year mortgage, that the payment is less than 25% of your takehome pay. This way you aren't overextending yourself and living house poor. You want to have plenty of wiggle room in your budget to save up for future maintenance repairs like a new roof, new furnace, and any other house updates you may want to do.

Homeownership doesn't need to be a burden. It can be a blessing, but it needs the proper planning in order to not be a disaster.

I have an honest question... what is Dave Ramsey's advice for people who live in a high cost of living area, where getting a 15 year mortgage and still having a payment that is 25% or less of takehome is virtually impossible unless someone makes well into the 6 figures? Just to keep renting, even if it's more expensive to rent than own? Move somewhere else where houses cost less?

I just ask because here in the Denver Metro area, housing is expensive. Our old house, which would be considered a starter home, is worth around $300,000 right now. It's about 30 minutes from downtown Denver, kind of in the middle of nowhere. With 20% down on a 15 year mortgage, the mortgage alone (not counting taxes and insurance) would be $1,775. Add on say, another $300 a month for taxes and insurance, so we're at $2075. So basically, you would need to take home $100,000 a year to "afford" that home based on Dave Ramsey's principles.

If you did a 30 year mortgage, the payment with everything would be more like $1175/mo, so 1475 all in... so a take home of $70,000 would be what's required.

Problem is, the same home would rent for $2200 a month... so where do the people who can't buy a home according to Dave Ramsey's principles go? Even 2 bedroom apartments in a halfway decent area are at least $1200-1400/mo around here, even more in nicer areas with the good schools. Should a family of 4 or 5 stick it out in an expensive apartment because they can't afford a 15 year mortgage with 20% down?

There are some cheaper options, but the homes under $300k these days require work, which means you need more cash, or they are townhomes with higher HOA payments.

I know if I were single, even with my $45,000/year income, I'd be completely screwed here. I couldn't even afford a 1 bedroom apartment by myself because the prices are so high.

KAdams767 · November 2015

And to answer the question, I don't think owning a home is for everyone and that's totally fine. I don't agree at all with the notion that renting is throwing money away and that you have nothing at the end of the time. Um, no, you are paying to put a roof over your head all those years and that's what you got, housing. If you don't have much interest in owning, it isn't any different than most bills, IMO, where you pay for a service or commodity, but no tangible asset.

simplyelise · November 2015

DR actually wiggles quite a bit when it comes to 20% down. I've heard him on his show recommend 10% down for some people. He also doesn't always recommend that people refinance from 30 to 15 because of the closing costs versus interest saved.

Denver and San Francisco and a few other places are just completely out of whack right now. The housing prices should be flowing through so that people see higher wages, but that's not happening. I'm not sure what he would recommend in those circumstances other than telling people to find a higher paying job and change their expectations.

My anecdotal knowledge from watching a crap ton of "My First Place" and "My First Sale" which were both shot in Denver for multiple seasons, is that the Denver market is not something I would want to touch with a ten foot pole. From the 2009-2011 seasons of the first time sellers show, it seemed like the bubble burst extra hard in Denver. And then the dispensary boom and commercial real estate squeeze has pushed up prices all over the place. Dave Ramsey can't base his one-size-fits-all rules on a place like Denver.

Xstatic3333 · November 2015

@julieanne912, the Denver metro area sounds very similar to how Boston is right now. I loved Boston so much when I lived there and thought I'd be a MA girl until I died. When it came time to buy a house, however, even towns that I feel "meh" about with medium schools that aren't even especially close to the city had starter homes in the $300,000 dollar range to start. The only way to go cheaper was a total fixer upper, which we didn't think was a good fit with us both working full time and not being that handy.

This won't work in every situation, but what we did is move to another city around an hour a way. It has many of the pros of big city life-great culture, fun free things to do, great food, etc.-but real estate hasn't ballooned here yet. A big con is the schools; although our neighborhood school may be okay, we're not sure we'll feel comfortable using public schools when the time comes. There are many private and Catholic options nearby that cost less than daycare will, however, so we know we have those options. Our mortgage on a solid starter home (that we may stay in forever) is less than most of our friends' rents on 1 BRs in the immediate Boston area. I can't even fathom what it would cost to rent a 3-4 BR there.

I'm not a DR follower, but one thing I really agree with him about is keeping my housing costs at 25% of take home. Anything more than that just doesn't sit right with me. I miss Boston but with the career paths we chose, we just can't make the life we want for our future family there anymore.

julieanne912 · November 2015

simplyelise said:

DR actually wiggles quite a bit when it comes to 20% down. I've heard him on his show recommend 10% down for some people. He also doesn't always recommend that people refinance from 30 to 15 because of the closing costs versus interest saved.

Denver and San Francisco and a few other places are just completely out of whack right now. The housing prices should be flowing through so that people see higher wages, but that's not happening. I'm not sure what he would recommend in those circumstances other than telling people to find a higher paying job and change their expectations.

My anecdotal knowledge from watching a crap ton of "My First Place" and "My First Sale" which were both shot in Denver for multiple seasons, is that the Denver market is not something I would want to touch with a ten foot pole. From the 2009-2011 seasons of the first time sellers show, it seemed like the bubble burst extra hard in Denver. And then the dispensary boom and commercial real estate squeeze has pushed up prices all over the place. Dave Ramsey can't base his one-size-fits-all rules on a place like Denver.

If we weren't planning on staying in our house for 30 years, we wouldn't have bought in this market. But in fact, that's why we built new instead of buying, and stretched ourselves a bit to afford it. We couldn't find a "used" house we'd want to stay in for 30 years in our price range (which originally was up to $400,000, so you'd think we could find something!) without doing extensive renovations. Even since we did our contract in April of 2014 (closed in Feb of 2015), the builder base price of our model has gone up almost $40,000. It's going to crash at some point, and we're OK with that to be honest since we love our house and it's still a roof over our heads.

It's nuts, and I feel very badly for people trying to buy their first home in this crazy market, and feel even more for those who cannot buy and don't make $100,000/year, because they're paying astronomical rents that they really can't afford.

But yeah, H bought his old house in 2008 (the one mentioned above)... so not quite at the peak but not at the best time either. He paid $220,000 for his house brand new. When I showed up in 2012, it was worth like $190,000. We sold it last May for $260,000.... 10k above our asking price, in 12 hours. And like I mentioned, it's now worth $300k. Our old neighbors bought their house in 2007 for $225,000. They sold for $318,000 this year.

brij2006 · November 2015

DR's recommendations are merely a suggestion. Not everyone is going to agree with it or believe it's the right way to do things. We personally wish we would have done what he recommends. We made $60k/year when we bought our house for $49k and with $0 down. We actually took out another $11k in mortgage so that we could remodel it since it was a foreclosure and we had room to finance more and still be under 80%. Yet we had $75k in student loan debt combined, and I had a $25k brand new car loan on my measly $30k/year income.

Guess what. Murphy sure as heck moved himself into our spare bedroom. 6 months after purchasing the home, H lost his job and started suffering from depression. Since he was a single guy on unemployment, he received $400/month in income. Yet our mortgage was $300 of that. We about lost our house. In that same time our AC unit quit on us, and we spent 2 summers picking up the pieces and smoldering in 100 degree humid midwest heat while we tried to save up money to fix the AC unit, let alone finish the remodeling.

Long story short, cash in hand does matter when it comes to buying a house. Had we had a fully funded emergency fund and no debt payments when we bought our home and all of this happened, we wouldn't have been calling and negotiating with the mortgage company about extending the due date of our mortgage payment, just so we could pay to keep the lights on or food on the table. We also would have had the means to be able to continue the remodeling and not just live in our bedroom, bathroom, and kitchen because those were the 3 rooms semi-finished.

Now I do agree that some areas are very over-inflated on their housing prices. We used to live in Chicago, and both received job offers at the same income we were getting paid when we moved back to our small town. When running the numbers, we knew we could barely make it on $60k/year in Chicago. Even if we rented a studio apartment. So we had to make a choice. Either move back to our small town and make $60k/year but not have to prolong purchasing a home, marriage, starting a family, investing, etc. Or stay in Chicago on a hope and a dream that our incomes double within 5 years so that we can eventually start saving to purchase a home.

Was our choice to move where COL was lower, what others would have chosen? No. But we knew it was our best option to get what was ultimately most important to us, and that was family.

So really, buying a home on making less than $100k/year in a HCOL area, may not be the best option. Even had we earned $100k/year in Chicago, I don't think we would have purchased a home until that income was higher. But also, $100k salary is much different in different parts of the country. Higher COL also means higher income, and vise versa.

brij2006 · November 2015

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.

We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.

But again, I'm anti-debt and anti-risk.

julieanne912 · November 2015

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

brij2006 · November 2015

julieanne912 said:

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

All of that stuff is just crazy to me. It just screams "not the right time to buy a house." But that's also my comfort level playing in there as well. Yet I know so many people who use an FHA or VA loan to buy a home right now. "want it and want it now" mentality.

If I lived in an area like that, I would probably just prioritize greatly. Try to figure out if we could get by with living in a smaller/less expensive rental to be able to save up more for a down payment. Wait even longer to buy. Or maybe live further out of the city for the time being so that we can pay lesser rent and save more. I would also probably forego luxuries, upgrading vehicles, vacations, etc in order to save more for a down payment.

I know DR will occasionally mention stopping retirement for a short period of time in order to save up a large down payment. He only recommends this if it's going to be less than 3 years (I think, or maybe it's 2 years), and if it's going to get you at least 10% down on a house. If it's going to be longer than that, or yield less than 10% down, he does not recommend it.

julieanne912 · November 2015

brij2006 said:

julieanne912 said:

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

All of that stuff is just crazy to me. It just screams "not the right time to buy a house." But that's also my comfort level playing in there as well. Yet I know so many people who use an FHA or VA loan to buy a home right now. "want it and want it now" mentality.

If I lived in an area like that, I would probably just prioritize greatly. Try to figure out if we could get by with living in a smaller/less expensive rental to be able to save up more for a down payment. Wait even longer to buy. Or maybe live further out of the city for the time being so that we can pay lesser rent and save more. I would also probably forego luxuries, upgrading vehicles, vacations, etc in order to save more for a down payment.

I know DR will occasionally mention stopping retirement for a short period of time in order to save up a large down payment. He only recommends this if it's going to be less than 3 years (I think, or maybe it's 2 years), and if it's going to get you at least 10% down on a house. If it's going to be longer than that, or yield less than 10% down, he does not recommend it.

These prices I mention ARE outside the city... our old house was on the very outer reaches of the Metro area... 30+ minute commute to pretty much anything. City prices are even worse....400k+ for a tiny older house.

I'm also firmly in the camp of it almost always better to buy than to rent, unless you know you aren't going to stay somewhere for at least 5 years or if rents truly are significantly lower than the cost to own.

kmurphy2131 · November 2015

julieanne912 said:

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

That is exactly the problem that we have. Our rent is currently (and I hate to admit this on the board - I don't want to debate it) $2200/month and that is total within reason for our area. It will likely go up 150-200 a month in the spring. We can get a starter home (350,000ish) for less than 2200 payment with only $10,000 down. we should have more than that to put down by the time we buy in the spring, but I don't want to touch my 6 month efund (which has enough to cover a mortgage payment that big). granted,we make a combined $140,000 this year and probably closer to $160-170,000next year...but still. It just doesnt make sense to me to pay nearly $2400 a month in rent just to save more of a down payment, since the renting will cost more in the short term. it is so confusing/complicated (or at least i make it that way) We will live in this area at least until retirement, it's where my husbands job is and his job won't change until retirement at this point, so it makes sense to buy.

Frugalmama2009 · November 2015

We live in a very HCOL city. Starter home, about 1300 sq ft is over 400,000. My sisters just bought their first condo for 280,000 that's just a small 800 sq ft 2 bedroom. My parents are lifelong renters, they are renting for 1900/month for the same unit my sisters bought. The house they rented growing up was offered to them for 300,000 in 1999. It was a beautiful home in one of the best communities. They passed. That house is now worth over 1 million, our city had a crazy boom so I know that's not typical. But my Dad is 70 and still working and I so wish they didn't have to worry about making rent payments. That 1900/month could help out big time. How do people buy in my city, I don't know. Thankfully DH and I bought our first condo for 100,000 in 1999, sold it for a town home, sold that for our home. So now we are in a 450,000 house with a 200,000 mortgage. My friend just bought her first town home, her mortgage is twice ours. It's crazy, no way we could afford that.

PurpleBookmark · November 2015

Xstatic3333 said:
I'm so sorry about your pets @julieanne912. That must have been awful.

For me, I moved twice as a kid that I remember, and once more as an infant. When I was born, my parents wanted to do the typical thing so they built a new construction house in the country on an acre of land where I could roam. They hated maintaining the land and moved to Condo #1 within a year.

Condo #1 was pretty nice, but it had a very restrictive/grouchy HOA and the town only offered half day, four day kindergarten. My parents again felt the urge for a single family, so we moved to House #2. My dad says they chose this house on an impulse, without really shopping around first. I loved it there-lots of woods, neighborhood kids, etc., but they immediately regretted it. It was by far our largest house at maybe 2,000 sf. The house was old and needed work that they didn't want to do. The house was also at the edge of their budget, and I remember lots of financial stress while we were there. It kind of turned me off homeownership.

After three years they moved to the condo where I mostly grew up. I didn't like the house as much, but I liked that my parents were relaxed and happy again. Their experience have them the philosophy that you should always buy well under your means, as well as that your home is a place to live, not an investment. Those both rubbed off on me big time. I think another lesson is that you should get a home that works for your family, not what you think you should do because "that's what people with kids do." I was much happier living in a simple condo with happy parents than a big country house with stressed and grumpy ones.

Good point, I'm glad your parents found the right situation for your family. I can certainly see being stressed over a big house, no matter where we go I think 1500 sf or less would be my ideal. DH and I both like smaller spaces and it's easier to clean!

julieanne912 · November 2015

kmurphy2131 said:

julieanne912 said:

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

That is exactly the problem that we have. Our rent is currently (and I hate to admit this on the board - I don't want to debate it) $2200/month and that is total within reason for our area. It will likely go up 150-200 a month in the spring. We can get a starter home (350,000ish) for less than 2200 payment with only $10,000 down. we should have more than that to put down by the time we buy in the spring, but I don't want to touch my 6 month efund (which has enough to cover a mortgage payment that big). granted,we make a combined $140,000 this year and probably closer to $160-170,000next year...but still. It just doesnt make sense to me to pay nearly $2400 a month in rent just to save more of a down payment, since the renting will cost more in the short term. it is so confusing/complicated (or at least i make it that way) We will live in this area at least until retirement, it's where my husbands job is and his job won't change until retirement at this point, so it makes sense to buy.

I hate that you think it's shameful to admit here what you pay in rent when you live in a HCOL. $2200 a month is very reasonable when you live in an expensive area. Not to be rude, but some posters need to remember that not everyone lives, or can live, in an area with a low cost of living. I would totally buy if I were you, to be honest. Throwing $2200-2400 a month in rent away just to save up an extra 10 grand to buy is a complete waste of money in my opinion. Also with your income level, you could benefit a lot from the tax deductions that owning a home provides.

brij2006 · November 2015

kmurphy2131 said:

julieanne912 said:

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

That is exactly the problem that we have. Our rent is currently (and I hate to admit this on the board - I don't want to debate it) $2200/month and that is total within reason for our area. It will likely go up 150-200 a month in the spring. We can get a starter home (350,000ish) for less than 2200 payment with only $10,000 down. we should have more than that to put down by the time we buy in the spring, but I don't want to touch my 6 month efund (which has enough to cover a mortgage payment that big). granted,we make a combined $140,000 this year and probably closer to $160-170,000next year...but still. It just doesnt make sense to me to pay nearly $2400 a month in rent just to save more of a down payment, since the renting will cost more in the short term. it is so confusing/complicated (or at least i make it that way) We will live in this area at least until retirement, it's where my husbands job is and his job won't change until retirement at this point, so it makes sense to buy.

If there's a way you can still get into a mortgage that is conventional, with that down payment, then I personally would probably buy.

Another thing I know DR suggests for people in HCOL areas, is to make sure the PMI is not part of the full term of the mortgage. So that way you can plug away at paying extra toward the mortgage, and once you get to 80% of the homes value financed, then having the option to remove the PMI.

julieanne912 · November 2015

brij2006 said:

kmurphy2131 said:

julieanne912 said:

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

That is exactly the problem that we have. Our rent is currently (and I hate to admit this on the board - I don't want to debate it) $2200/month and that is total within reason for our area. It will likely go up 150-200 a month in the spring. We can get a starter home (350,000ish) for less than 2200 payment with only $10,000 down. we should have more than that to put down by the time we buy in the spring, but I don't want to touch my 6 month efund (which has enough to cover a mortgage payment that big). granted,we make a combined $140,000 this year and probably closer to $160-170,000next year...but still. It just doesnt make sense to me to pay nearly $2400 a month in rent just to save more of a down payment, since the renting will cost more in the short term. it is so confusing/complicated (or at least i make it that way) We will live in this area at least until retirement, it's where my husbands job is and his job won't change until retirement at this point, so it makes sense to buy.

If there's a way you can still get into a mortgage that is conventional, with that down payment, then I personally would probably buy.

Another thing I know DR suggests for people in HCOL areas, is to make sure the PMI is not part of the full term of the mortgage. So that way you can plug away at paying extra toward the mortgage, and once you get to 80% of the homes value financed, then having the option to remove the PMI.

We actually paid our PMI up front... it was like $4,000 but that's way less than it would be over the life of the loan or even part of the loan. Also on FHA loans now, you can't ever get away from PMI unless you refinance completely, even if the value goes above 80%.

brij2006 · November 2015

julieanne912 said:

brij2006 said:

kmurphy2131 said:

julieanne912 said:

brij2006 said:

I will also add that DR does touch on HCOL areas. As simplyelise stated, he does move it around a bit to say that 10% down and using the figure of 30% of your take home pay, is sufficient to get you into a home in a HCOL area. But the being debt free and having a fully funded emergency fund is what will give an additional buffer for "just in case."

Me personally, I wouldn't feel comfortable buying a $300k home on a $100k salary.
We are actually there right now and are getting cold feet. We gross right under $100k in income, and we are looking at paying cash for up to a $200k home. Even with the added property taxes, insurance, and upkeep of going from a $100k to a $200k home, we're getting cold feet. And that's without a mortgage. Looking at our budget even without debt payments, I can't even imagine having a $2,000 mortgage payment on top of taxes, insurance, and upkeep in a HCOL area.

ETA: This is just my personal risk factor. If I made $100k/year in a HCOL area that it took $300k in order to buy a basic home in a good neighborhood. I would not buy yet. I would continue saving, even if it's only a small amount, and try to figure out a plan to get my income up so that it was at a comfort level to be able to purchase something where the cash flow was a bit better.
But again, I'm anti-debt and anti-risk.

Part of my question is, how do you continue to save when the rents are just as high or higher than the mortgage payments for the average house? That's how it is here... and incomes don't necessarily keep up with the higher COL. I just don't see why you wouldn't buy on a 30 year loan with less than 20% down if 1) The cost to own is still less than the cost to rent, or even the same 2) You know you're going to be in the area for a decent amount of years.

I know my H and I are on the higher end of what people our age make as a combined income here, and that's just because of his profession. My income is more average for this area.

I should also say, I 100% agree with you that you should have an E-fund and a decent downpayment (maybe not 20%, I know we opted to do 10 and saved the rest of our cash) before buying a home. I work in escrow/title now, and I see contracts come through... most of these people buying starter homes are buying with FHA or VA loans with very little or no down. Out in my area, they even offer USDA loans with 0 down, and there's also state downpayment assistance programs that grant up with 3% of the downpayment to combine with an FHA loan, meaning you only need .5% to buy a home. That's scary to me, since I lived through the last crash (been in real estate in some capacity or another since 2001).

That is exactly the problem that we have. Our rent is currently (and I hate to admit this on the board - I don't want to debate it) $2200/month and that is total within reason for our area. It will likely go up 150-200 a month in the spring. We can get a starter home (350,000ish) for less than 2200 payment with only $10,000 down. we should have more than that to put down by the time we buy in the spring, but I don't want to touch my 6 month efund (which has enough to cover a mortgage payment that big). granted,we make a combined $140,000 this year and probably closer to $160-170,000next year...but still. It just doesnt make sense to me to pay nearly $2400 a month in rent just to save more of a down payment, since the renting will cost more in the short term. it is so confusing/complicated (or at least i make it that way) We will live in this area at least until retirement, it's where my husbands job is and his job won't change until retirement at this point, so it makes sense to buy.

If there's a way you can still get into a mortgage that is conventional, with that down payment, then I personally would probably buy.

Another thing I know DR suggests for people in HCOL areas, is to make sure the PMI is not part of the full term of the mortgage. So that way you can plug away at paying extra toward the mortgage, and once you get to 80% of the homes value financed, then having the option to remove the PMI.

We actually paid our PMI up front... it was like $4,000 but that's way less than it would be over the life of the loan or even part of the loan. Also on FHA loans now, you can't ever get away from PMI unless you refinance completely, even if the value goes above 80%.

Oh yeah, paying it upfront is a great option as well.

FHA loans have gotten crazy over the past few years. There is so much more fine print.

Long Term Renting Question

Re: Long Term Renting Question

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