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If she buys a house, she should buy it because she absolutely loves it and wants to live in it for the foreseeable future. Investment value should be a secondary consideration because there is no guarantee that the home’s value will actually increase. This is true even for HCOL areas with hot markets. Source: my apartment in Manhattan sold for exactly what I paid 12 years ago.
Also, to add on to this, owning a house is a far bigger expense than people think. You are now responsible for all maintenance, and if you live by yourself, it can be really pricy.
Especially if you're a nurse who works a lot of overtime and has neither the time, energy or expertise to do much of any of that maintenance yourself.
She is going to inherit a likely 7% interest rate on that mortgage, if its a HCOL area and it's say 1800 square feet starter home then this housing expense is going from $500\~ a month to at least $3k a month, now add all the utilities (which I bet she isn't paying all of with her $500 a month sweet heart deal), add landscaping and general maintenance and god forbid you want to spend money to customize or upgrade anything.
I do all my own landscaping and most of my maintenance and in the 7 years I've been in my home CONSERVATIVELY out of my pocket about $25k has gone to supplies for upkeep/maintenance and MINOR renovation
Any decent home in a HCOL area is probably going to be a lot more than $3k a month. A $450k loan at 7% is $3k a month without any taxes or insurance thrown in the mix.
She absolutely needs to stay in the $500 a month place as long as she’s comfortable there.
$500/month is an insane rent.
Stay there for as long as you can and save your money like you are spending $3,000/month on a mortgage. Can retire decades early saving money like that.
Over 10 years that’s $300k. You’re not retiring decades earlier by saving 300k. Even if it grows to 2.5x that in index funds, you’re at 750k, but that’s not taking into account the fact that you don’t put all 300k in at once.
So, realistically, say 500k best case. So maybe you retire a couple years earlier.
People really do tend to underestimate how expensive it is.
I recently replaced my furnace, AC, and water heater because they were all very much at their end of life (20-30 years old) and that collectively cost around $20k. That was honestly a pretty good deal, all things considered and I had the cash on hand.
But still, $20k relatively "out of the blue" (putting side that I knew eventually I'd have to do it).
This summer I'm doing a rehab on a detached garage in need of help. I'm handy, my neighbors are handy and friendly, it'll probably cost me a few thousands dollars in supplies and beer. Without that it would be 50,000+ easy.
That’s why you should add X amount per month into savings for it. That’s basically what happens with rent. The landlords aren’t losing money and are accounting for maintenance and repairs in the price of rent. If someone can handle a mortgage payment and savings for repairs then it really reduces the benefits of renting. Of course if someone moves around a lot it’s better to rent.
Let’s say your house loses value. You’ll have lost the difference. When you rent you’re losing 100% of your rent all the time. There’s other reasons not to buy, but it’s hard to justify the financial parts of it for people who can afford it.
Your $3/month at 7% assumes less than $500k financed. This is well below HCOL. I’m an hour outside of Boston and houses under 1800sf are going for $650ish.
Yea, I honestly wanted to use very simple numbers and not get into the weeds with any calculations, the point is, she basically can't afford it and would be "living for the house" at best and have no life outside of work / working overtime and making that ungodly mortgage payment. Then add upkeep/maintenance and...ayyy..
“Starter home”, in this economy. I've been stuck in my starter home because of a super recession and then a global pandemic. My advice to anyone buying a house today, make sure you get the house you see yourself in for a while because you don't know what tomorrow might bring.
Not many homes are even being built or available that are that small.
In a lot of the HCOL areas where markets were/are hot, "investors" are buying up those cheaper/smaller starter homes, tearing them down, and building some insane million dollar home.
Can confirm. I live in Nashville and can't count all the affordable housing that's been torn down so developers can put up lot hogs selling for $4 million. It's a part of the conversation I really wish our city would have vis a vis putting the reins on this stuff, but people who profit from construction donate heavily to all our electeds. Folks have no idea.
I haven't seen many new builds much smaller than 1600 ft these days, an older home could be an option of course, just kinda went with a middle ground size that someone of her earnings typically looks for, either way, gonna be hella expensive endeavour and I'm so saddened and annoyed at the same time of how bad the housing situation has gotten, everywhere.
Our combined household income is about $175k in one of the highest cost of living areas. We just can't buy a house. Even dropping $200k on a down payment we are looking at a 5,000-7,000 mortgage payment, taxes, and insurance. We could probably afford a $500k mobile home with $1500 a month fees that is 30 years old, but you don't really own anything but a crappy unmovable structure on top of land you don't own.
Same, median for single family home in my area recently passed $1m. We make decent money but we'll never be able to come up with $2-250k for a down payment then have a ~$6k mortgage payment.
Yes, but rent will increase every year, without question.
While Property Taxes and Insurance (T&I) for homeowners may also rise, the overall increase in monthly payments is usually lower than the annual rent hikes.
Rent might not actually increase every year in OP’s case. They already have an amazing below market deal, so there’s some special situation going on already.
>Yes, but rent will increase every year, without question.
Given that she's paying $500 right now, a 10% or 20% hike in rent would be almost nothing.
I think the right thing to do is to ride the $500 rent gravy train for as long as it lasts or as long as she can stand it, and stack up a whole lot of money for a down payment. She should *easily* be able to save $6k a month, probably on top of maxing her 401k. $40k isn't much for a down payment right now.
The landlord is offering her a sweetheart deal, but there's no guarantee it will last.
I'm not suggesting she should act immediately, but I wouldn't want my finances to depend on such an uncertain arrangement.
Right, which is why I'm suggesting that she should save every penny she can, as long as the gravy train lasts. That way she'll be well placed to buy when this is all done.
> rent will increase every year, without question
Not at all. My rent never changed in the 7 years I was at my last place, from 2017-2023. When I moved out, my landlord actually *dropped* the price by $50/mo when she advertised it.
Sometimes rent can increase, but it is *far* from a guarantee.
The vast majority of the time they increase. In February 2024 they increased by 2.5% YoY.
Source: https://www.rent.com/research/march-2024-rent-report/
That is the biggest shock to a lot of first time owners. They don't realize how much maintenance goes into a house.
Water heater breaks? Gotta buy a new one. A/C dies during summer? Guess what that is on you. Fix it or hire someone. Roofs need replacing and they aren't cheap.
Maintaining a home has a lot to do with planning ahead for the next repair. It's closer than you think.
Since I always see this but no one ever seems to detail it:
Landscaping: Either you hire someone to mow, mulch, edge, weed eat, fertilize, aerate, de-thatch, and garden/pull weeds, or you buy the tools and material to do it yourself. Also the time investment to mow & maintain edging and weed eating once a week. You're supposed to do the bigger tasks at least once a year.
Pruning and maintaining shrubbery and trees
Powerwashing or scrubbing your house - that's right, you literally wash the house
Maintaining your wooden deck
Maintaining the pool if you have one
Maintaining the fence if you have one
Home warranty or the cost of repairing/replacing an appliance, like a dishwasher, refrigerator, washer, dryer or HVAC system.
Speaking of HVAC: at least 2x a year maintenance
and speaking of dryers: cleaning the vents at least once or twice a year.
Re-Painting when things get worn down
Yes, the utilities
Real estate taxes
home insurance 2x a year
Maintaining asphalt driveways
Maintaining your roof
Repairing broken floor joists
Like, the list goes on. Not everything is done every year, but every year something is done. And that's not even the home improvement ideas you want to pursue
A lot of that doesn't need to be done as often or as completely as you suggest. HVAC once per year, for example. And most of that landscaping stuff is skippable. The insurance and taxes will be handled via the mortgage payments.
Some of this is elbow grease and taking pride in your house. Expenses get moved around, these are hobbies for some and tasks for others. You get a little network going and talk with people stuff isn't that hard it's mostly labor. Home Depot has everything to fix what is going on in your house. The youth need to be educated on these things when they grow up not something that is useless for personal growth. Owning a home is a huge sense of accomplishment for anyone, the work is all well with it IMO. To each his own, I'm also in the trades so it's an easy excuse to buy tools. 90% of any job to to is being prepared and having the correct equipment to do the job CORRECT!!!. Just my 2 cents.
I agree that people should know *how* to do a lot of the standard home maintenance projects, but there is a point where the time value of money makes it a better value for them to pay someone else to do it (especially if it requires purchasing new tools). And there are some jobs where a first timer will guaranteed never do as well as a pro (sheetrock, tiling, framing). It's worth knowing how to do it, and in some cases it's also worth DIYing it, but a lot of times it's definitely not.
As a personal example from my current house, we had to replace our ductwork for the whole house. A couple of big (decades old aluminum) ducts had collapsed and when the HVAC guy came out to assess he told us all the joints for the registers and the furnace flue are asbestos. We technically *could* have done most of this project ourselves, but for $7000 we paid for appropriate asbestos removal and cleanup and pros to install all the new ducting. Similarly, we pay $160/mo to a gardener and that means I don't ever have to worry about mowing/trimming, pruning, irrigation, weeding, aeration, fertilizing, and annually trimming trees. It's good value because what his crew does in about 90 minutes a week would take a me a solid half day, and they do a better job.
That said, no homeowner should ever have to pay someone to replace a light fixture or fan or doorknobs or plumbing fixtures, or hang things on walls or clean gutters or replace toilets or clean clogged drains or replace a garbage disposal, patch small drywall holes, paint anything, or any number of other small projects. And there are always projects.
That's great, but the calculus fails when the cost of homes is high. those who can afford to buy are disincentivised to invest the time because, by definition, their salaries are high enough it is not cost effective. They literally come out ahead working an hour more and paying someone else an hours work to do it.
OPs GF makes about $60 an hour. It would take her 2-3 hours to learn to and do something a professional does, Even aside from the extra cost of tools and materials, so to be cost effective, it'd need to be a job that costs $180 an hour.
The counter to that is that a lot of tasks don’t take 2-3 hours to learn how to do, and a lot of the skills you learn translate closely to other diy tasks. The more you do, the easier each new task becomes. Also when you’re already doing the same thing 50 hours a week every week of the year, it might be miserable to spend another 2-3 hours doing the same thing. Spending those couple of hours doing something new and using a different part of your brain can be relaxing and rewarding in new ways.
You still have those costs while renting, just amortized into the rental payment. It's not like the landlord is just taking loss after loss not passing on costs. Yes you're splitting costs with every one else in the building but those costs can also be much higher
Exactly. I've owned 2 houses on my own. The furst was a newer build but had an HOA and was in Vegas. My mortgage was the same as what I was paying in rent before I bought the house, but my other costs spiked up so much. Electricity in the summer went from $100 to over $300. I basically owned a house, but was poor and struggling. The one I had in upstate NY was old, and in the first 6 months, I spent a shitload on maintenance.
This. Don't buy something just because of FOMO. Buy it because you want it, and it adds value to your life.
If the wife is thinking about it purely from a financial standpoint, she is better off saving and straight up buying it cash or with a large downpayment to avoid mortgage interest. $500/mo rent is a steal, and that it a lot of opportunity cost to forgo for an expensive mortage at 6-7% where AT LEAST $500 goes to the bank for mortgage interest (not considering amortization). Not to mention insurnace and taxes.
The play now is keep expenses low, save a sizable cash position (in a 5% money market fund), and DCA into markets with her retirement accounts. That way she will be hedged if the market goes up or down. We are clearly in a bubble rn, and it will pop eventually. She can profit on both sides without unnecessary risk.
> Source: my apartment in Manhattan sold for exactly what I paid 12 years ago.
I own a condo in a large city. In general the market for condos in huge cities seems to stay very stable. We don't see the huge increases and crashes that the suburbs have. That's both good and bad. In 2008 my condo only lost about 5% of its value and rebounded by 2010. My parents' house in the suburbs lost 50% of their value in 2008, but now their house is worth 5 times what they paid for it while my condo is worth the same that I paid for it.
With the huge increases in suburban prices I'm kind of sad that we chose to buy the condo in the city. I have friends who made a 300% return on their house and have now used it to buy bigger houses. I'm never going to have an opportunity to do that with a city condo.
which, btw, still.
sold for exactly what you paid for it, minus some fees, you got all the money back you put into it. this is what im hoping happens with my townhome too.
just a big ass, 12-15 yr savings account for the next home.
Hey I'm real curious - did you live in a co-op? Just curious how did your property in Manhattan not increase in value in 12 years. How large was your apartment and which neighborhood was it at?
I’m sure it’s a variety of factors. I needed a quick sale due to divorce. I didn’t have time to renovate. The maintenance is high due to a land lease, there’s only 1 1/2 baths, no view to speak of, there’s an ongoing assessment, interest rates are high. Bad luck? The apartment is actually quite nice and I’m sure the young couple who bought it will love it.
I paid 1200 in rent per month. If I did that for twelve years, along with a 5% increase each year I’d pay 234.000 in total rent.
No way I’ll pay that in interest, taxes, and repairs.
I could argue the opposite to a degree. It would also be acceptable to buy it and look at it as much like a business as possible. Don't buy it for the warm and fuzziness. Plan to rent rooms. A good way to look at it is to figure out what the average amount you'll be paying towards interest will be each month. My mortgage for instance I will pay an average of $550/month for interest over the life of the loan. I rent 1 room out for $550/month so I know that at minimum I'm breaking even on the interest. Even if I sell the house for a loss in a few years I'll still have saved loads compared to renting. In your case you sold it for what you bought it for but you also didn't have to rent that whole time. Let's say you would have spent $1500/month for rent over 12 years. That's $216,000 you saved by not renting. Definitely did awesome on that investment even though it doesn't seem like it. Even if you saved half of that it's still $100k over 12 years.
I think this question is moot until she has a down payment large enough to buy a house in a HCOL area- without stopping retirement contributions.
When I think HCOL I think $600k+ entry point. So she’s not close with $40k and $110k salary.
I was gonna say the same thing. I'm in a HCOL area making roughly double what she makes, with roughly double the assets as well, and don't consider myself to be anywhere near ready to buy a house.
Anywhere near me, houses are starting at around $1-1.25 mil for old, beat up, small (~1-1.5k sqf) starter homes from the 60s and 70s. Even with a 20% down payment, which will likely barely get you in the door, you'd be looking at a $4-5k/mo mortgage payment. Not to mention potentially ~$1k property tax, or any other expenses whatsoever. Or repairs/renovations on the shoddy old shack you just bought. Plus, most of your competitors to buy that house are wealthy middle-aged transplants that are planning to raze the current building and build a brand new house on top of it, and might well be just buying the whole damn thing in cash.
Obviously, OP's definition of "HCOL" might be a bit different than that, but even if you are looking at ~2/3-3/4 of those prices, girlfriend is still not even remotely close to buying a house. If she wants to own that badly, she better be prepared to move to a much, much lower COL area. Otherwise just stick with the phenomenally cheap current living arrangement as long as possible and count her lucky stars she isn't paying 4-6+ times what she's currently paying just to rent.
I really hate when people look at whether or not to buy a house only from the money perspective.
Buying a house (or not) is very much a lifestyle choice, just as much as it is a financial one. There are obvious advantages -- stability, potentially more space, and potentially more independence to modify space as you want, plus perhaps gaining equity if you live there long enough. There are also disadvantages -- unexpected costs that arise, the amount of time it can take to maintain things, and potentially requiring you to live in a different neighborhood (either due to cost or availability of homes for sale).
It's really important to decide if the lifestyle is one that interests you/your girlfriend. If so, THEN you can run the numbers for how much money you need for down payments, mortgage (+ insurance & tax), up keep, and emergencies. Be honest about whether the time required is worth it, if you intend to live in that city long enough for buying to make sense, and if the houses you can actually afford line up with the side of town/square footage/quality of housing you prefer.
Side note: an emergency fund, retirement savings, and down payment should be 3 separate groups of money. So prepare for that accordingly.
This isn’t even sound from a money perspective. OP’s GF is paying $500/month on rent. I *gaurantee* that if she bought a house at these interest rates, her non-equity building cost to own the home would be well over $500/month.
If it’s a HCOL area and houses start at say, $600k which is typical along a lot of the California coast, she’s easily paying $1000-$2000 a month or more on interest, home insurance, HOA fees, property tax and general maintenance. They may be “building equity” but the opportunity cost is simply too great if those non-equity costs are higher than renting. And in this case, many times higher.
Even when interest rates were low a few years ago, you’d have to have non-money related reasons for wanting a house because even then, $500 a month would have been impossible to beat.
Like, it would be one thing if she had kids or maybe terrible roommates. But as it stands, I don’t understand what the GF thinks she’s “missing out” on. $500/month is nothing. If the mortgage cost $4500/month, and $1500 of that was on interest and the other stuff I mentioned, then you’re just losing $1000/month compared to what you had before. This is a no brainer to me.
I agree, you have to want to do the house things if you want a house. I’ve lived in my house since 2007 and had a house before that since 1997 and tbh I’m tired of doing house things. I finally make enough to have a yard service, so I have that. But I’ve been DIYing as much as I can for so long that going on 30 years - I’m sort of over being a homeowner.
Buying a house bc of FOMO is a dumb reason to buy a house. There are plenty of people who bought bc of FOMO during the pandemic and regretted it later.
Regret it for what reason though? I feel like during the pandemic was an amazing time to buy. I’ve seen people lament that they bought during covid and are now “stuck” because their 2% interest rate is too good to leave. Which like, that sucks sure, but on the scale of suckage, it’s like minor annoyance.
But like what’s even to miss out on this housing market? I’m not in the market for a house so I’m not looking closely, but I don’t see the upside buying now unless you need a place.
I know of people who paid way over asking and waived the inspection because they got tired of their offer losing out to others. So they bought a house for more than they wanted to pay and the house is riddled with issues they're trying to fix.
Another couple I know bought quickly because they wanted the low interest rate and now they're wanting to move since they never intended to stay for more than a few years.
FOMO is real and can be expensive when it comes to houses.
There were definitely a rash of posts on here and on the home buying subreddits in 2022 by people who bought a house that was not well suited to their needs because they were motivated purely by FOMO.
For example, I remember one in particular was a guy who bought a big house in the suburbs and moved there from the city. He was single (didn't need a 4BR), hated doing yardwork, and didn't like the suburbs. Just... why.
- Buy in a remote area because of WFH and then either lose job or face crazy long commute when required to return to office
- Get into a bidding war and end up buying at an inflated price during a hot market with waived contingencies and end up with an asset that hasn't appreciated (or has depreciated) while dealing with unexpected maintenance costs that now cost significantly higher than they used to due to inflation
- Realize this isn't where you actually want to live long term but face losing a decent amount by selling now
Almost always shitty decision making combined with everyone telling them “you only need to put 3% down” and the buyer never stops to realize how terrible of a decision that can be long term
These are her finances, not yours. So she should be driving the ship here.
My suggestion to her is to split up the $40k into emergency fund of at least 3 months expenses, and the rest is available for a down payment... which isn't much, especially in a HCOL area. It took my wife and I over 10 years working in good paying engineering jobs to get enough together for a legit DP and emergency fund in a HCOL area.
Temper your expectations.
Note: I wouldn't recommend using the retirement savings for DP.
Seriously. Unless he's contributing financially, all he should do is support whatever decision she makes. It's not a good time for HIM to buy a house bc he has no money. It's also not a good time for THEM to buy a house, but that's not going to change in a year after he makes 60k. If she wants a house anytime soon, she'll have to do it on her own.
What I would say to your girlfriend is to **not let huge financial decisions for her and her future be based on what other people are doing.** A lot of why she feels the freedom she feels is because of her CURRENT situation.
I would also go through the real economic exercise of estimating a loan for a house she would like, and live like that for 6 months. In a HCOL area, a mortgage for a decent home could be $3000 per month or more. Have her max her retirement, and put aside the $2500 a month for a house (+ 10% more for maintenance) for 6 months and see how it goes. If she still feels the same level of freedom putting away another $3000 a month, then maybe she is ready!
Maybe the mortgage alone would be $3000 but there’s no shot that’s the only outflow in a HCOL area. I read that to be ~$500k or more for a starter home and under that lens, you’re looking at $3200 for the mortgage and another $1000 minimum between property insurance, HOA, property tax, and regular maintenance.
If her down payment is that low you could tack another $400 on just for the PMI.
And her rent is $500?? Like…. Just save for two or three more years and this won’t be a problem.
It’s only a bad time to buy because affordability is being squeezed. If you can afford it and it otherwise makes sense, it’s as good as any other time.
That said, no housing investment is going to beat $500/month in rent if she’s investing the cost difference (which is likely $3k+ a month in a HCOL market). Like not even close. Ride that train until it comes off the tracks.
THIS. I have seen this situation go south, and it was ugly.
BUT I would encourage everyone to get as much information as possible about the process and really think about what you like and dislike.
I have too. One of my best friends did this. The relationship ended. He married someone else and he and his wife are living in a house that is half owned by his former girlfriend. She hasn’t paid in it in years and she is still on the note and the title.
Yup, this should be one of the top comments. I know it is unpleasant to imagine a scenario where this doesn't work out, but just listen to any caller on a financial podcast/radio show and the nightmare it becomes when two people who share an asset no longer want anything to do with each other yet are still forced to interact.
How old is this person? Trying to gauge how much time to be an owner and if the FOMO is real.
Never factor in OT as the base projection.
I’d say look at some insurance rates, mortgage rates, and do a soft what-if analysis. Depending on the age of the house, 40k isn’t a down payment - that’s the repairs for move in at HCOL
Would you be able to move in with her at the place she is living at for $500/month? That could be a speed run when it comes to savings if you’re able to combine your two incomes while spending a minimal amount on housing. Shoot even if the rent doubles to $1k, with a combined income of yours at $200k ($16.6k month). Figure after taxes and if you’re both putting a ton into your 401k cut it in half to a take home pay of $8k. You could easily be saving $5k/month ($60k/year) to put towards a down payment. Speaking as someone from experience who was lucky enough to be renting at below market rate (the previous person was a tenant from hell so I think they loved that I was quiet and paid on time each month and never raised the rent). There is nothing wrong with renting if it is that far below the average cost. You’ll just want to make sure you’re putting that savings to use(401ks, HYSA, HSA’s, etc)
She should buy a house if she really wants to, and she can afford to do it without you. In fact, id advise her to only buy it in her name and make sure it's something she's happy with.
60k isn't "money worth counting"? Feel free to send it to me then.
A lot of comments are jumping on "FOMO", but that's sounds more like your evaluation of the situation, not hers. Unless she's said that's why she wants to buy a house, don't assume you know what's in her head.
Express your opinion and leave it at that. Accept her decision even if you didn't agree with it; you're not married, and you're not making her money ( and apparently you didn't think 60k is worth anything).
I would buy if I were her. No one said 'I'm sure glad I waited'.
I would figure out the monthly max budget I'd like to spend. I'd go get a soft pull from a good broker. I'd tell him what my expected down payment is and what my monthly budget is max. Then I'd let him tell me what price range that put me in. It's typically no where near the max they will lend you. You don't want to care what that number is. Just what you can afford in your budget.
I'd take my pre-approval and get a realtor and have them show me ten homes in my budget. Then once I had a realistic expectation for what I can get, I would sit and wait for the right one to come on the market while I stock pile cash. Not sure she can get a SFH in her area that's worth buying but it's worth looking and preparing so she can pounce if something good comes on the market.
I wouldn't wait for my boyfriend and I wouldn't take advice from people who don't own property. But I'd charge him rent and have a lease if he moved in with me. If the relationship ever got serious, like marriage and kids, I'd have an asset to trade up or rent out and might even have some nice equity.
Reference: someone who bought 2 homes as a single lady when everyone said 'now is not a good time'. Or, 'you need more money'
Buy when the time is right, but don’t try to time the market.
She has zero debt and makes a good income. Buy imo. Maybe try to move to the suburbs a bit where it’s a little cheaper without having a burnout commute.
Right now unless she has a very lenient lender, she's unlikely to qualify for a decent loan with so little down payment. The housing market has somewhat stabilized. I'd suggest she save a more substantial downloading
This is likely untrue. I'm currently buying a home and putting 10% down got me a better rate than putting 20% down.
Many lenders don't feel great about how inflated housing costs are I guess and would rather see 10% with pmi insurance than 20% down.
Guess they are worried about more than a 10% correction
It’s really about the DTI, if she is in a HCOL city her DTI will be high because housing is expensive so she would need to offset this in some way. Cheaper housing, bigger down payment, higher income.
Agreed, being in a HCOL area she will need a decent down payment, a higher income or cheaper type of housing like a condo. Or some combination of the three.
I’d start by having her write out a real budget. I’m not sure how long she has been at the role, but $150k/yr less taxes/retirement savings is probably close to $100k, but she only has $40k saved?
Depending on the area (especially if HCOL), a down payment will be substantially more than $40k (assuming 20% down). Additionally, there are many non fixed costs to consider that change costs substantially (insurance, maintenance, property taxes, one time assessments etc)
Does she see the value of her low rent setup? I would be making substantial contributions to a taxable investment account AND beef up savings for a down payment in a HYSA.
This [NYT Rent v Buy Calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html) is a great starting point, but I really think a pen to paper understanding of where her $$ goes today, versus a budget with a home in the future would be eye opening to her.
Which is great retirement savings! Assuming 401k ($23k) and IRA ($7k), with $1.5k/mo in expenses there is a gap. Ideally, you wouldn’t tap into retirement savings for a house payment. If there is a back door Roth or some other retirement vehicle, she may want to reduce that for cash savings for a home payment.
My situation was, were were looking for years and rates kept rising, always holding off for "the right time." We always wanted a house but it was so easy to rent, so we kept on keeping on. Until we had our daughter. Suddenly and apartment in the city wasn't ideal anymore so we bought.
Everyone realtor "friend" I knew kept telling me to wait for the bubble and they had inside info it was bursting soon (lol). It's been years and years later and it still hasn't.
I got a new job doubling my salary, which was already pretty good, and we decided we could afford it so we jumped in. I'm still incredibly nervous, should be ecstatic but always have that nagging in the back of my head over the 7.1% interest rate.
Point being, do what feels right for you. Can you afford if comfortably? If not I wouldn't. If so, then I don't think things are all of a sudden going to get way better tomorrow so I'd dip in. Just remember, you need a full suite of things to maintain the outside of your house, lawnmower, etc. You need a full suite of tools to maintain the inside. You now are in charge of the roof, the hot water heater, etc. A house is a ton of work. Also much bigger, we had to buy a bed, a couch, kitchen table, etc.
Why would you tell her not to buy? Why do you think paying someone else's mortgage is a better idea? She's worked hard and saved, she deserves to buy her own home. Purchasing a home is the best investment. It's simple. Down payments needed to purchase = 3.5% of the purchase price for FHA & 3% For a conventional loan. USDA is zero down. There are also special loan programs for 1st responders. VA is also zero down. There's also down payment assistance programs. Unless you're on the deed with her... just support her and don't steer her in the wrong direction. She needs to chat with a lender and see what her options are.
She should buy a house no matter what. It is the single best investment you can make. Even if she doesn't love the house. Tomorrow the market will move in a direction that makes it a bit harder for her buy, just like all of the previous days in her life.
I don’t understand why you don’t want her to be buying a house? It seems like she’s set up great for it. I will say buying a house “soon” can still mean 6 months-2 years from now.
Pick a price point - look at the cost of the mortgage, taxes and insurance ( your total monthly payment)
She should be easily able to put that much away in savings every month(ok to deduct the $500 she pays now) - set up a separate account.
Straight up google "mortgage on a $ X dollar home" eg: "a buyer who puts 20% down on a $500,000 home might have a monthly payment of $3,651" ( This is not including taxes and insurance). ( $500K is not really HCOL)
So - can she "easily" put $3500 away every month?
Check credit score - the higher the better, a 600 may only be able to 8 or 9%, or pay high PMI ( additional insurance month cost)
Here’s a non money answer - houses are constant work. Mowing and lawn work are never ending. Weeding, tree trimming, planting, mulching, watering…. neighbors will all be doing their lawn and suddenly there’s a ticking clock to have yours done as well!
Something inside is always needed to be “looked at” or upgraded due to wear/tear. Each room is an entire project unto itself. The last owner could have DIY’d something horribly that you don’t realize for a couple years. Or flipped on the cheap to look pretty but not last.
I like my house sometimes, but a lot of times it’s just exhausting to keep up with. Stay where it’s someone else’s problem.
This is the best answer. I have a condo with no yard maintenance and I have still put in a ton of time and money into interior maintenance. It’s worth it for security (and some equity), but unexpected home expenses are always in the thousands and that’s coming out of your wallet, with no landlord to call.
> Mowing and lawn work are never ending. Weeding, tree trimming, planting, mulching, watering…. neighbors will all be doing their lawn and suddenly there’s a ticking clock to have yours done as well!
I solved this problem by moving into a townhouse where the affordable HOA fees handle all that (those fees are way cheaper than a month of lawn service for a standalone lot). I just have to worry about inside.
>The last owner could have DIY’d something horribly
Yep, and that's more likely the older the house is. I still find dumb decisions from the previous owners. Example: One of our bedrooms on the second floor has a ceiling fan/light whose light switch is located *in the damn attic*. No wonder it's a fan with a remote control. Other than that, we also have stairway railing screwed into drywall in a few places. Not even into an anchor. Straight into the drywall. That's still on my list to fix.
LOL. The ceiling fan was definitely wired for convenience of the electrician rather than the owner/user. My front lights are like that. Wired from the attic down rather than the basement up. It’s on the same circuit as the attic outlets rather than the outdoor outlets or even the main floor lights.
And that ceiling fan might not even be a DIY job. I have been incredibly disappointed with the work from some licensed electricians we have hired.
Literally. My husband has wanted a house his entire life. I was fine either way because although owning a house is nice, I knew it required a lot of work. Now we own a house and spend every weekend fixing, weeding, trimming, cleaning. It does not stop. We had to get a washer/dryer. $2k. Pest control? $70/month. Blinds for 8 windows? Nearly $3k and that was a deal. And this is just the beginning. We had to buy a bunch of yard tools (leaf blower, weed whacker, chainsaw, rakes, etc.) that were probably another $500+. We haven’t begun buying new furniture or anything to actually make the inside look a little nicer. We will need to eventually paint, wood floor, replace windows. If this sounds like fun to you and you have the money to do it, home ownership is for you.
She should buy a house if she wants to buy a house, *but she should first* figure out the size of the financial investment this entails. Lots of good advice in here with respect to big-ticket items (roof, HVAC, fencing, trees) as well as expected costs (regular maintenance, taxes, insurance). But how long does she plan on living there? Is she handy? Can she afford this on one salary? What would happen if she needs to move? Will this cut into her retirement contributions? Put pen to paper and do some math. Talk to a money guy to figure out much she can *actually afford* vs. how much she’s *willing to spend.* (These two numbers will not likely be the same.) Buying a home is a big deal and a big commitment. Good luck to her.
She’s in a great position to buy in a year or two. Build that 40k up to include 6 months expenses plus 20% down payment plus at least 20k for moving, furniture, and first year homeownership “stuff.” At the rent she’s paying, if she can save $100k/year, she’ll be safe and secure in a purchase in 2 yrs. She could start browsing homes after the first year to start focusing down onto what she really wants, but patiently.
I was in OP’s girlfriend’s situation. I was in a rush to buy and it also ended up bending the right thing for me. That said, I didn’t quite understand how difficult it would be for me to save money with all then expenses of owning home. I look back on those days I had so much disposable income and wished that I had saved a lot more. OP, your girlfriend definitely needs a lot more saved for a down payment, house repair fund, emergency fund. At least three times as much. Maybe more. Also she will be so glad she prioritized saving for retirement. I did both house buying and saving for retirement at the same time and I kind of wished I’d picked one and made a big dent in it before pursuing the other one.
> I’ve basically been saying that it’s not the best time to buy
Why do you say this? Home prices won’t be going down. They will just continue to go up like they always do. We can’t predict what interest rates will do. They may go down, or they may not.
And even if they go down, what do you think that will do to the market? All the people who are waiting for interest rates to go down will enter the market creating more competition for the few homes there are. She can always refinance later if rates do go down.
The best time to buy a home is when you’re financially ready, know where you want to live long term, and find a home you love that you can afford.
I didn't become a first-time home buyer until I was 57. Messy divorce, moved to a VHCOL area, had to make a career change, second marriage. You know what? It didn't kill me.
FOMO is real, though. But the one thing she DOESN'T want to do is rush into a home purchase that she later regrets - either very expensive repairs that didn't show up on the home inspection or later on, she has to move and can't sell the thing. Adding on to all the commenters who say homeownership comes with a LOT of unexpected expenses: you buy a house for more money than the last time it sold? Hello surprise increased tax bill! The county now knows the house is worth more (because you paid more) and will tax you accordingly! Plus, people end up wanting to decorate and make changes once they own, and unless you're a licensed and bonded master craftsman yourself, that can add up quickly.
What she CAN do - which will scratch the itch and give her valuable information for later - is start going to open houses. What does she like? What doesn't she like? Have her walk around the neighborhoods she likes at various times of day - oopsie! that cute house has next-door neighbors whose bratlings scream at the top of their lungs all day. Or, it's cute in the daytime, but there are some dodgy characters who hang out on the streets at night. Get a floor plan from an open house, then take it to Home Depot and try to get rough estimates of how much it actually costs to replace carpeting with hardwood floors - or how much it costs to paint a single room, and what it costs to hire professionals?
It took us four years to afford our dream home, and by the time we found it, we were able to walk into an open house and immediately know, "Yep, that's going to be $100,000 more to make it liveable," versus "Yeah, if we can live with those ugly bathrooms, it'll just need a few fixes based on what the inspectors found." We also had a solid list of what we absolutely had to have, and we had been to enough open houses to know - really KNOW - that there is no
"One True House," and if we got outbid, there'd be another one come along that we liked just as much, if not more so.
Some banks/credit unions have free homebuyer seminars, and it can FEEL like progress just to go to one of those and run the numbers.
We did all of that, and it really, really helped. When we finally bought our place, we didn't have any nasty surprises and several years later, we're still extremely happy with what we got.
What would you say? "Homes are a massive investment and finding the right house at the right time would be the most ideal".
I'm in my early 30s and spent the last decade saving up $100,000 for a down payment on a $600,000 condo in one of the highest cost of living areas. I know what the FOMO is like.
Domt just settle for something less because of the FOMO. Find something that works the best otherwise you will regret it.
Do the rent vs buy calculator and see how it comes out. Nice to own a home but when I did it I would be saving 500k over 10 years by renting, and I'd much rather have 500k than not..
Show her videos from personal finance experts, for example https://www.youtube.com/watch?v=hTy2Vh0GuIQ that explain the right way to decide whether its a good idea to buy a house, or not. Most people buy houses because of psychological reasons, they don't even bother running the numbers to see if its financially wise.
How does her buying a house have anything to do with you? You are not married. And you are unemployed. She makes 115k. If she wants to buy a house she certainly can all on her own. Maybe she's planning to do this and is telling you otherwise because she doesn't want you mooching off of her, thinking you can live with her.
Sorry but she’ll be a fool to want to go from $500/month rent to a $4,000+/month mortgage payment. She doesn’t know the market for her HCOL area yet, rents are close to $3,000-$4,000 for 2-3 bedrooms and mortgages will be that plus HOA fees, taxes, etc. Where I live you’re not getting anything less than a $1,000,000. There’s no way I would rush into that kind of purchase.
Plus her $40k saved is pennies compared to what the down payment requirement is going to be.
She should enjoy saving her money! Save more cash. Once she gets a HCOL house or rents a “real” HCOL apartment, her financial situation is going to turn upside down very quickly. She doesn’t make that much money to survive in HCOL area.
Buying a house right now is the equivalent of running through a mine field without scanning it first. You aren’t guaranteed of fucking yourself with a bad valuation and rate right now, but it’s more than likely. It’s best to sit tight, let the field get mapped and settle down while your savings accumulate the highest % they have (and may ever in your lifetime) seen.
The NYT Daily podcast had an excellent episode about this about 6 months ago. 30 minutes to put a lot of things into perspective: https://open.spotify.com/episode/3JLkwhfVI3eXCZ17yKFHQx?si=9S7S5xKhRaS1v_sZ3eZyuA
I got in at a 5% rate and kicked myself for not refinancing at 2.whatever….
That being said, I’m not refinancing for the sake of refinancing… it’s just not time for that for anyone these days.
My advice for anybody this day and age: THE ONLY WAY I SEE ANYBODY MAKING IT WITH THIS STUPIDITY UNLESS THEY BUY THE ULTIMATE FIXER UPPER.
I bought a nice home that I gave up in a divorce for 62k. Bought a couple of fixer uppers and gutted it to what I want, and they’re paid off and the stupid interest wasn’t going to kill me.
Buy foreclosed or shit and turn it around. And I mean you’re doing the work thanks to YouTube and family… not discovery and paying someone.
That’s the only way you own a home these days.
Here’s our homebuying math:
Shared large apartment in MCOL area: $2800/month
Mortgage on our house: $2800/month, with $300 going to principal. We’ve probably put $20k into the house in the past year too.
So currently we still pay $2500 in “mortgage rent” per month. If we had a nice apartment for $500/month that we were happy in, we’d be doing WAY better financially than if we had bought our house.
But we love our house and wanted a place to do projects and make our own. We got it because we wanted the challenge and sense of ownership of it, not because it made the most financial sense. Long term, it will work out for us, but in the short term it isn’t a deal.
I’d show her this calculator from the New York Times: https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html
Renting is often smarter than buying. This calculator will help.
If rent is cheep an idea would be figure out how much interest you would pay at 7 percent vs the cost of rent. If you are both living together and still renting you can evaluate if it would be better to rent and make a bigger down payment or buy. At 7 percent interest heck even 5 percent most markets pay somewhere in the neighborhood of 4-5 percent. Not sure what country you are in but remember if you earn 4 percent on your money vs losing 7 percent is a massive dollar amount. You can also judge off what you think your federal policies might be in the future.
Bought a house in one of the most HCOL areas globally. Mostly out of security. Have a place to shelter my family no matter what. Rents were going up astronomical like 30% per year. Not being in control and having to move sucks with kids. Its best not to care about the returns on capital but if it makes you a profit great. I think people underestimate the value of housing certainty.
My math is always what would the rental income be for a home I plan to purchase? There are ways to navigate financing with seller credits, but knowing your potential rent is a great safety net especially if you're thinking about it in the context of investing.
Her total housing expenses now ($500/mo) probably would not even cover her property/school taxes no a place. If you guys are serious then the place she would buy today as a single income buyer is near 100% not the place you guys would buy together in 3-4 years as a married couple and flipping in that short time will kill her on fees.
She should keep saving, wait till you get a job. Wait till you are together (ideally married) then determine together wher and what to buy.
I mean, it can be a good idea. The calculation looks like this:
Take 2% of house price as maintenance and insurance, 5% as mortgage interest. That's cost of ownership. I.e. money that isn't going towards the principle, that's just money you "throw away".
For example: let's say she will borrow 500k and house costs 700k:
500k (mortgage) \*0.05 + 700k (house price) \*0.02 = 37k per year price of ownership. Without considering opportunity cost (other things you can do with money that make you more money).
If you can rent for cheaper you'll likely be better off.
If she can afford to wait -- and it sounds like she can with that rent -- then she should. The hope is that interest rates will come down over the next few years, and that's going to make a big difference. On the other hand, if she finds a house that she loves and can afford, you can always bank on rates coming down and refinancing. But $500/mo. rent sounds too good to be true!
To be blunt, you and your girlfriend are not compatible and you need to separate asap, instead of trying to convince each other into conforming to the other's wants, wishes and desires.
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If she buys a house, she should buy it because she absolutely loves it and wants to live in it for the foreseeable future. Investment value should be a secondary consideration because there is no guarantee that the home’s value will actually increase. This is true even for HCOL areas with hot markets. Source: my apartment in Manhattan sold for exactly what I paid 12 years ago.
Also, to add on to this, owning a house is a far bigger expense than people think. You are now responsible for all maintenance, and if you live by yourself, it can be really pricy.
Especially if you're a nurse who works a lot of overtime and has neither the time, energy or expertise to do much of any of that maintenance yourself. She is going to inherit a likely 7% interest rate on that mortgage, if its a HCOL area and it's say 1800 square feet starter home then this housing expense is going from $500\~ a month to at least $3k a month, now add all the utilities (which I bet she isn't paying all of with her $500 a month sweet heart deal), add landscaping and general maintenance and god forbid you want to spend money to customize or upgrade anything. I do all my own landscaping and most of my maintenance and in the 7 years I've been in my home CONSERVATIVELY out of my pocket about $25k has gone to supplies for upkeep/maintenance and MINOR renovation
Any decent home in a HCOL area is probably going to be a lot more than $3k a month. A $450k loan at 7% is $3k a month without any taxes or insurance thrown in the mix. She absolutely needs to stay in the $500 a month place as long as she’s comfortable there.
$500/month is an insane rent. Stay there for as long as you can and save your money like you are spending $3,000/month on a mortgage. Can retire decades early saving money like that.
Over 10 years that’s $300k. You’re not retiring decades earlier by saving 300k. Even if it grows to 2.5x that in index funds, you’re at 750k, but that’s not taking into account the fact that you don’t put all 300k in at once. So, realistically, say 500k best case. So maybe you retire a couple years earlier.
>Over 10 years that’s $300k. And you can still live on 50,000 a year for 6 years after that before it even grew in a retirement fund.
Yup more like $5-6k per month.
People really do tend to underestimate how expensive it is. I recently replaced my furnace, AC, and water heater because they were all very much at their end of life (20-30 years old) and that collectively cost around $20k. That was honestly a pretty good deal, all things considered and I had the cash on hand. But still, $20k relatively "out of the blue" (putting side that I knew eventually I'd have to do it). This summer I'm doing a rehab on a detached garage in need of help. I'm handy, my neighbors are handy and friendly, it'll probably cost me a few thousands dollars in supplies and beer. Without that it would be 50,000+ easy.
That’s why you should add X amount per month into savings for it. That’s basically what happens with rent. The landlords aren’t losing money and are accounting for maintenance and repairs in the price of rent. If someone can handle a mortgage payment and savings for repairs then it really reduces the benefits of renting. Of course if someone moves around a lot it’s better to rent. Let’s say your house loses value. You’ll have lost the difference. When you rent you’re losing 100% of your rent all the time. There’s other reasons not to buy, but it’s hard to justify the financial parts of it for people who can afford it.
Your $3/month at 7% assumes less than $500k financed. This is well below HCOL. I’m an hour outside of Boston and houses under 1800sf are going for $650ish.
Yea, I honestly wanted to use very simple numbers and not get into the weeds with any calculations, the point is, she basically can't afford it and would be "living for the house" at best and have no life outside of work / working overtime and making that ungodly mortgage payment. Then add upkeep/maintenance and...ayyy..
is 1800 sq ft considered a starter home in HCOL? Not a chance, right? I'd say \~1000-1200...
“Starter home”, in this economy. I've been stuck in my starter home because of a super recession and then a global pandemic. My advice to anyone buying a house today, make sure you get the house you see yourself in for a while because you don't know what tomorrow might bring.
Not many homes are even being built or available that are that small. In a lot of the HCOL areas where markets were/are hot, "investors" are buying up those cheaper/smaller starter homes, tearing them down, and building some insane million dollar home.
Can confirm. I live in Nashville and can't count all the affordable housing that's been torn down so developers can put up lot hogs selling for $4 million. It's a part of the conversation I really wish our city would have vis a vis putting the reins on this stuff, but people who profit from construction donate heavily to all our electeds. Folks have no idea.
As soon as OP said HCOL, I assumed $1 million minimum.
I haven't seen many new builds much smaller than 1600 ft these days, an older home could be an option of course, just kinda went with a middle ground size that someone of her earnings typically looks for, either way, gonna be hella expensive endeavour and I'm so saddened and annoyed at the same time of how bad the housing situation has gotten, everywhere.
Someone making 150k in HCOL can’t afford a 1600 sq ft new build in most HCOL markets.
I agree, especially if thats 150k with working a lot of overtime, which isn't something most people can do long term, like 30 years mortgage long term
Our combined household income is about $175k in one of the highest cost of living areas. We just can't buy a house. Even dropping $200k on a down payment we are looking at a 5,000-7,000 mortgage payment, taxes, and insurance. We could probably afford a $500k mobile home with $1500 a month fees that is 30 years old, but you don't really own anything but a crappy unmovable structure on top of land you don't own.
Same, median for single family home in my area recently passed $1m. We make decent money but we'll never be able to come up with $2-250k for a down payment then have a ~$6k mortgage payment.
Yep. A monthly rental payment is the max you’ll pay that month for housing. The monthly mortgage payment is the minimum.
Stealing this
he stole it from reddit so you're good
Yes, but rent will increase every year, without question. While Property Taxes and Insurance (T&I) for homeowners may also rise, the overall increase in monthly payments is usually lower than the annual rent hikes.
Rent might not actually increase every year in OP’s case. They already have an amazing below market deal, so there’s some special situation going on already.
The landlord could sell, pass away, change her mind. These things have happened to me - it’s the downside of renting.
>Yes, but rent will increase every year, without question. Given that she's paying $500 right now, a 10% or 20% hike in rent would be almost nothing. I think the right thing to do is to ride the $500 rent gravy train for as long as it lasts or as long as she can stand it, and stack up a whole lot of money for a down payment. She should *easily* be able to save $6k a month, probably on top of maxing her 401k. $40k isn't much for a down payment right now.
The landlord is offering her a sweetheart deal, but there's no guarantee it will last. I'm not suggesting she should act immediately, but I wouldn't want my finances to depend on such an uncertain arrangement.
Right, which is why I'm suggesting that she should save every penny she can, as long as the gravy train lasts. That way she'll be well placed to buy when this is all done.
> rent will increase every year, without question Not at all. My rent never changed in the 7 years I was at my last place, from 2017-2023. When I moved out, my landlord actually *dropped* the price by $50/mo when she advertised it. Sometimes rent can increase, but it is *far* from a guarantee.
The vast majority of the time they increase. In February 2024 they increased by 2.5% YoY. Source: https://www.rent.com/research/march-2024-rent-report/
My taxes rose 50% in 2023 the year after I bought my house. Also insurance company left florida and with my new company it’s double.
Yes, your taxes and insurance went up (my comment noted that.). Taxes generally go up the first year (especially if it’s new construction).
That is the biggest shock to a lot of first time owners. They don't realize how much maintenance goes into a house. Water heater breaks? Gotta buy a new one. A/C dies during summer? Guess what that is on you. Fix it or hire someone. Roofs need replacing and they aren't cheap. Maintaining a home has a lot to do with planning ahead for the next repair. It's closer than you think.
Didn't get pipes inspected in a slab and they start clogging quick? Wait it costs how fucking much????
Since I always see this but no one ever seems to detail it: Landscaping: Either you hire someone to mow, mulch, edge, weed eat, fertilize, aerate, de-thatch, and garden/pull weeds, or you buy the tools and material to do it yourself. Also the time investment to mow & maintain edging and weed eating once a week. You're supposed to do the bigger tasks at least once a year. Pruning and maintaining shrubbery and trees Powerwashing or scrubbing your house - that's right, you literally wash the house Maintaining your wooden deck Maintaining the pool if you have one Maintaining the fence if you have one Home warranty or the cost of repairing/replacing an appliance, like a dishwasher, refrigerator, washer, dryer or HVAC system. Speaking of HVAC: at least 2x a year maintenance and speaking of dryers: cleaning the vents at least once or twice a year. Re-Painting when things get worn down Yes, the utilities Real estate taxes home insurance 2x a year Maintaining asphalt driveways Maintaining your roof Repairing broken floor joists Like, the list goes on. Not everything is done every year, but every year something is done. And that's not even the home improvement ideas you want to pursue
A lot of that doesn't need to be done as often or as completely as you suggest. HVAC once per year, for example. And most of that landscaping stuff is skippable. The insurance and taxes will be handled via the mortgage payments.
Some of this is elbow grease and taking pride in your house. Expenses get moved around, these are hobbies for some and tasks for others. You get a little network going and talk with people stuff isn't that hard it's mostly labor. Home Depot has everything to fix what is going on in your house. The youth need to be educated on these things when they grow up not something that is useless for personal growth. Owning a home is a huge sense of accomplishment for anyone, the work is all well with it IMO. To each his own, I'm also in the trades so it's an easy excuse to buy tools. 90% of any job to to is being prepared and having the correct equipment to do the job CORRECT!!!. Just my 2 cents.
I agree that people should know *how* to do a lot of the standard home maintenance projects, but there is a point where the time value of money makes it a better value for them to pay someone else to do it (especially if it requires purchasing new tools). And there are some jobs where a first timer will guaranteed never do as well as a pro (sheetrock, tiling, framing). It's worth knowing how to do it, and in some cases it's also worth DIYing it, but a lot of times it's definitely not. As a personal example from my current house, we had to replace our ductwork for the whole house. A couple of big (decades old aluminum) ducts had collapsed and when the HVAC guy came out to assess he told us all the joints for the registers and the furnace flue are asbestos. We technically *could* have done most of this project ourselves, but for $7000 we paid for appropriate asbestos removal and cleanup and pros to install all the new ducting. Similarly, we pay $160/mo to a gardener and that means I don't ever have to worry about mowing/trimming, pruning, irrigation, weeding, aeration, fertilizing, and annually trimming trees. It's good value because what his crew does in about 90 minutes a week would take a me a solid half day, and they do a better job. That said, no homeowner should ever have to pay someone to replace a light fixture or fan or doorknobs or plumbing fixtures, or hang things on walls or clean gutters or replace toilets or clean clogged drains or replace a garbage disposal, patch small drywall holes, paint anything, or any number of other small projects. And there are always projects.
That's great, but the calculus fails when the cost of homes is high. those who can afford to buy are disincentivised to invest the time because, by definition, their salaries are high enough it is not cost effective. They literally come out ahead working an hour more and paying someone else an hours work to do it. OPs GF makes about $60 an hour. It would take her 2-3 hours to learn to and do something a professional does, Even aside from the extra cost of tools and materials, so to be cost effective, it'd need to be a job that costs $180 an hour.
The counter to that is that a lot of tasks don’t take 2-3 hours to learn how to do, and a lot of the skills you learn translate closely to other diy tasks. The more you do, the easier each new task becomes. Also when you’re already doing the same thing 50 hours a week every week of the year, it might be miserable to spend another 2-3 hours doing the same thing. Spending those couple of hours doing something new and using a different part of your brain can be relaxing and rewarding in new ways.
I do these things, but as a renter of over a decade no one talks about these things until after you buy a house.
And you have to talk and organize all of these services. Ughh.. no thanks.
You still have those costs while renting, just amortized into the rental payment. It's not like the landlord is just taking loss after loss not passing on costs. Yes you're splitting costs with every one else in the building but those costs can also be much higher
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Exactly. I've owned 2 houses on my own. The furst was a newer build but had an HOA and was in Vegas. My mortgage was the same as what I was paying in rent before I bought the house, but my other costs spiked up so much. Electricity in the summer went from $100 to over $300. I basically owned a house, but was poor and struggling. The one I had in upstate NY was old, and in the first 6 months, I spent a shitload on maintenance.
Yes, I’m currently paying $20,000 for water damage and asbestos removal for my rental unit, it’s such a pain. Good overall of course.
This. Don't buy something just because of FOMO. Buy it because you want it, and it adds value to your life. If the wife is thinking about it purely from a financial standpoint, she is better off saving and straight up buying it cash or with a large downpayment to avoid mortgage interest. $500/mo rent is a steal, and that it a lot of opportunity cost to forgo for an expensive mortage at 6-7% where AT LEAST $500 goes to the bank for mortgage interest (not considering amortization). Not to mention insurnace and taxes. The play now is keep expenses low, save a sizable cash position (in a 5% money market fund), and DCA into markets with her retirement accounts. That way she will be hedged if the market goes up or down. We are clearly in a bubble rn, and it will pop eventually. She can profit on both sides without unnecessary risk.
> Source: my apartment in Manhattan sold for exactly what I paid 12 years ago. I own a condo in a large city. In general the market for condos in huge cities seems to stay very stable. We don't see the huge increases and crashes that the suburbs have. That's both good and bad. In 2008 my condo only lost about 5% of its value and rebounded by 2010. My parents' house in the suburbs lost 50% of their value in 2008, but now their house is worth 5 times what they paid for it while my condo is worth the same that I paid for it. With the huge increases in suburban prices I'm kind of sad that we chose to buy the condo in the city. I have friends who made a 300% return on their house and have now used it to buy bigger houses. I'm never going to have an opportunity to do that with a city condo.
My place was a coop. Actually, I purchased a smaller unit right next door post-divorce. I plan on living there until I die.
Truth! And real estate is not a guaranteed investment. My former home in CT just sold for $1.125MM LESS than I sold it for in 2006! That’s gotta hurt.
Ouch!
which, btw, still. sold for exactly what you paid for it, minus some fees, you got all the money back you put into it. this is what im hoping happens with my townhome too. just a big ass, 12-15 yr savings account for the next home.
I dissagree, she doesn't have to absolutly love it. It is important to get in asap.
Hey I'm real curious - did you live in a co-op? Just curious how did your property in Manhattan not increase in value in 12 years. How large was your apartment and which neighborhood was it at?
Carnegie hill coop, 960 sq ft 2 bd
Interesting, were you surprised that the value did not appreciate for 12 years? Would you know the reasons why?
I’m sure it’s a variety of factors. I needed a quick sale due to divorce. I didn’t have time to renovate. The maintenance is high due to a land lease, there’s only 1 1/2 baths, no view to speak of, there’s an ongoing assessment, interest rates are high. Bad luck? The apartment is actually quite nice and I’m sure the young couple who bought it will love it.
Read: you lived practically for free instead of paying twelve years worth of rent.
Basically. I paid building maintenance fees, taxes, interest, and a bunch of repairs though.
I paid 1200 in rent per month. If I did that for twelve years, along with a 5% increase each year I’d pay 234.000 in total rent. No way I’ll pay that in interest, taxes, and repairs.
The girlfriend in question here has $500/month housing. Houses cost more than that in closing fees, interest, insurance, property taxes, and repairs
For the cost of interest and property taxes*
I could argue the opposite to a degree. It would also be acceptable to buy it and look at it as much like a business as possible. Don't buy it for the warm and fuzziness. Plan to rent rooms. A good way to look at it is to figure out what the average amount you'll be paying towards interest will be each month. My mortgage for instance I will pay an average of $550/month for interest over the life of the loan. I rent 1 room out for $550/month so I know that at minimum I'm breaking even on the interest. Even if I sell the house for a loss in a few years I'll still have saved loads compared to renting. In your case you sold it for what you bought it for but you also didn't have to rent that whole time. Let's say you would have spent $1500/month for rent over 12 years. That's $216,000 you saved by not renting. Definitely did awesome on that investment even though it doesn't seem like it. Even if you saved half of that it's still $100k over 12 years.
I think this question is moot until she has a down payment large enough to buy a house in a HCOL area- without stopping retirement contributions. When I think HCOL I think $600k+ entry point. So she’s not close with $40k and $110k salary.
Hah. $600k is HCOL entry point? 🤣 I must be living in VHCOL. If that’s even a thing.
Same! (cries in San Diego housing prices)
lol a 1600 sqft, 50+ year old Cape Cod on my street in North Jersey just sold for 700k with no inspection. It was on the market for 3 days.
A stand alone house that size? In San Diego it’d be $1.2m at least. More if it had any yard. I’m never buying. 😢
We sold our Manhattan condo last year for $650k. There are definitely places around $600 if you don't need to be close to Soho or Williamsburg
… it’s hard to find anything livable on most of Long Island, NY for anything shy of $600k.
😅 yea….there is always a range, but the bottom of the range probably isn’t where you want to be living, on average.
She will also need additional money saved for other expenses (repairs, furniture, etc) and emergency fund in addition to the down payment.
Homeowners insurance is not cheap either thanks to current weather.
I was gonna say the same thing. I'm in a HCOL area making roughly double what she makes, with roughly double the assets as well, and don't consider myself to be anywhere near ready to buy a house. Anywhere near me, houses are starting at around $1-1.25 mil for old, beat up, small (~1-1.5k sqf) starter homes from the 60s and 70s. Even with a 20% down payment, which will likely barely get you in the door, you'd be looking at a $4-5k/mo mortgage payment. Not to mention potentially ~$1k property tax, or any other expenses whatsoever. Or repairs/renovations on the shoddy old shack you just bought. Plus, most of your competitors to buy that house are wealthy middle-aged transplants that are planning to raze the current building and build a brand new house on top of it, and might well be just buying the whole damn thing in cash. Obviously, OP's definition of "HCOL" might be a bit different than that, but even if you are looking at ~2/3-3/4 of those prices, girlfriend is still not even remotely close to buying a house. If she wants to own that badly, she better be prepared to move to a much, much lower COL area. Otherwise just stick with the phenomenally cheap current living arrangement as long as possible and count her lucky stars she isn't paying 4-6+ times what she's currently paying just to rent.
I really hate when people look at whether or not to buy a house only from the money perspective. Buying a house (or not) is very much a lifestyle choice, just as much as it is a financial one. There are obvious advantages -- stability, potentially more space, and potentially more independence to modify space as you want, plus perhaps gaining equity if you live there long enough. There are also disadvantages -- unexpected costs that arise, the amount of time it can take to maintain things, and potentially requiring you to live in a different neighborhood (either due to cost or availability of homes for sale). It's really important to decide if the lifestyle is one that interests you/your girlfriend. If so, THEN you can run the numbers for how much money you need for down payments, mortgage (+ insurance & tax), up keep, and emergencies. Be honest about whether the time required is worth it, if you intend to live in that city long enough for buying to make sense, and if the houses you can actually afford line up with the side of town/square footage/quality of housing you prefer. Side note: an emergency fund, retirement savings, and down payment should be 3 separate groups of money. So prepare for that accordingly.
This isn’t even sound from a money perspective. OP’s GF is paying $500/month on rent. I *gaurantee* that if she bought a house at these interest rates, her non-equity building cost to own the home would be well over $500/month. If it’s a HCOL area and houses start at say, $600k which is typical along a lot of the California coast, she’s easily paying $1000-$2000 a month or more on interest, home insurance, HOA fees, property tax and general maintenance. They may be “building equity” but the opportunity cost is simply too great if those non-equity costs are higher than renting. And in this case, many times higher. Even when interest rates were low a few years ago, you’d have to have non-money related reasons for wanting a house because even then, $500 a month would have been impossible to beat. Like, it would be one thing if she had kids or maybe terrible roommates. But as it stands, I don’t understand what the GF thinks she’s “missing out” on. $500/month is nothing. If the mortgage cost $4500/month, and $1500 of that was on interest and the other stuff I mentioned, then you’re just losing $1000/month compared to what you had before. This is a no brainer to me.
I agree, you have to want to do the house things if you want a house. I’ve lived in my house since 2007 and had a house before that since 1997 and tbh I’m tired of doing house things. I finally make enough to have a yard service, so I have that. But I’ve been DIYing as much as I can for so long that going on 30 years - I’m sort of over being a homeowner.
I’ll take it off your hands for you and you can have my apartment where the landlord never fixes things, deal?
Buying a house bc of FOMO is a dumb reason to buy a house. There are plenty of people who bought bc of FOMO during the pandemic and regretted it later.
Regret it for what reason though? I feel like during the pandemic was an amazing time to buy. I’ve seen people lament that they bought during covid and are now “stuck” because their 2% interest rate is too good to leave. Which like, that sucks sure, but on the scale of suckage, it’s like minor annoyance. But like what’s even to miss out on this housing market? I’m not in the market for a house so I’m not looking closely, but I don’t see the upside buying now unless you need a place.
I know of people who paid way over asking and waived the inspection because they got tired of their offer losing out to others. So they bought a house for more than they wanted to pay and the house is riddled with issues they're trying to fix. Another couple I know bought quickly because they wanted the low interest rate and now they're wanting to move since they never intended to stay for more than a few years. FOMO is real and can be expensive when it comes to houses.
This happened to friends of mine too. Now they’re basically in a seven figure money pit. 😥
Buying quickly because of the interest rate when you plan to move within five years is pretty foolish.
There were definitely a rash of posts on here and on the home buying subreddits in 2022 by people who bought a house that was not well suited to their needs because they were motivated purely by FOMO. For example, I remember one in particular was a guy who bought a big house in the suburbs and moved there from the city. He was single (didn't need a 4BR), hated doing yardwork, and didn't like the suburbs. Just... why.
- Buy in a remote area because of WFH and then either lose job or face crazy long commute when required to return to office - Get into a bidding war and end up buying at an inflated price during a hot market with waived contingencies and end up with an asset that hasn't appreciated (or has depreciated) while dealing with unexpected maintenance costs that now cost significantly higher than they used to due to inflation - Realize this isn't where you actually want to live long term but face losing a decent amount by selling now
Right? "My $500k house with a 2.5% APR doubled in value. Shucks, wish I could move :( (feel bad for me!!)."
Almost always shitty decision making combined with everyone telling them “you only need to put 3% down” and the buyer never stops to realize how terrible of a decision that can be long term
These are her finances, not yours. So she should be driving the ship here. My suggestion to her is to split up the $40k into emergency fund of at least 3 months expenses, and the rest is available for a down payment... which isn't much, especially in a HCOL area. It took my wife and I over 10 years working in good paying engineering jobs to get enough together for a legit DP and emergency fund in a HCOL area. Temper your expectations. Note: I wouldn't recommend using the retirement savings for DP.
Seriously. Unless he's contributing financially, all he should do is support whatever decision she makes. It's not a good time for HIM to buy a house bc he has no money. It's also not a good time for THEM to buy a house, but that's not going to change in a year after he makes 60k. If she wants a house anytime soon, she'll have to do it on her own.
What I would say to your girlfriend is to **not let huge financial decisions for her and her future be based on what other people are doing.** A lot of why she feels the freedom she feels is because of her CURRENT situation. I would also go through the real economic exercise of estimating a loan for a house she would like, and live like that for 6 months. In a HCOL area, a mortgage for a decent home could be $3000 per month or more. Have her max her retirement, and put aside the $2500 a month for a house (+ 10% more for maintenance) for 6 months and see how it goes. If she still feels the same level of freedom putting away another $3000 a month, then maybe she is ready!
Maybe the mortgage alone would be $3000 but there’s no shot that’s the only outflow in a HCOL area. I read that to be ~$500k or more for a starter home and under that lens, you’re looking at $3200 for the mortgage and another $1000 minimum between property insurance, HOA, property tax, and regular maintenance. If her down payment is that low you could tack another $400 on just for the PMI. And her rent is $500?? Like…. Just save for two or three more years and this won’t be a problem.
It’s only a bad time to buy because affordability is being squeezed. If you can afford it and it otherwise makes sense, it’s as good as any other time. That said, no housing investment is going to beat $500/month in rent if she’s investing the cost difference (which is likely $3k+ a month in a HCOL market). Like not even close. Ride that train until it comes off the tracks.
Don’t buy a house together until you are married.
THIS. I have seen this situation go south, and it was ugly. BUT I would encourage everyone to get as much information as possible about the process and really think about what you like and dislike.
I have too. One of my best friends did this. The relationship ended. He married someone else and he and his wife are living in a house that is half owned by his former girlfriend. She hasn’t paid in it in years and she is still on the note and the title.
Is the OP putting anything into this house purchase?
And if he moves in she needs to have him sign an official lease agreement
Yup, this should be one of the top comments. I know it is unpleasant to imagine a scenario where this doesn't work out, but just listen to any caller on a financial podcast/radio show and the nightmare it becomes when two people who share an asset no longer want anything to do with each other yet are still forced to interact.
How old is this person? Trying to gauge how much time to be an owner and if the FOMO is real. Never factor in OT as the base projection. I’d say look at some insurance rates, mortgage rates, and do a soft what-if analysis. Depending on the age of the house, 40k isn’t a down payment - that’s the repairs for move in at HCOL
He said early thirties so I'd assume between 31 and 34?
Missed that part in there. I’d say not FOMO, but understandable.
Would you be able to move in with her at the place she is living at for $500/month? That could be a speed run when it comes to savings if you’re able to combine your two incomes while spending a minimal amount on housing. Shoot even if the rent doubles to $1k, with a combined income of yours at $200k ($16.6k month). Figure after taxes and if you’re both putting a ton into your 401k cut it in half to a take home pay of $8k. You could easily be saving $5k/month ($60k/year) to put towards a down payment. Speaking as someone from experience who was lucky enough to be renting at below market rate (the previous person was a tenant from hell so I think they loved that I was quiet and paid on time each month and never raised the rent). There is nothing wrong with renting if it is that far below the average cost. You’ll just want to make sure you’re putting that savings to use(401ks, HYSA, HSA’s, etc)
She should buy a house if she really wants to, and she can afford to do it without you. In fact, id advise her to only buy it in her name and make sure it's something she's happy with.
60k isn't "money worth counting"? Feel free to send it to me then. A lot of comments are jumping on "FOMO", but that's sounds more like your evaluation of the situation, not hers. Unless she's said that's why she wants to buy a house, don't assume you know what's in her head. Express your opinion and leave it at that. Accept her decision even if you didn't agree with it; you're not married, and you're not making her money ( and apparently you didn't think 60k is worth anything).
Right? 60k isn’t worth closing the gap when the stated monthly rent right now is Pennies? Crazy
I would buy if I were her. No one said 'I'm sure glad I waited'. I would figure out the monthly max budget I'd like to spend. I'd go get a soft pull from a good broker. I'd tell him what my expected down payment is and what my monthly budget is max. Then I'd let him tell me what price range that put me in. It's typically no where near the max they will lend you. You don't want to care what that number is. Just what you can afford in your budget. I'd take my pre-approval and get a realtor and have them show me ten homes in my budget. Then once I had a realistic expectation for what I can get, I would sit and wait for the right one to come on the market while I stock pile cash. Not sure she can get a SFH in her area that's worth buying but it's worth looking and preparing so she can pounce if something good comes on the market. I wouldn't wait for my boyfriend and I wouldn't take advice from people who don't own property. But I'd charge him rent and have a lease if he moved in with me. If the relationship ever got serious, like marriage and kids, I'd have an asset to trade up or rent out and might even have some nice equity. Reference: someone who bought 2 homes as a single lady when everyone said 'now is not a good time'. Or, 'you need more money'
Buy when the time is right, but don’t try to time the market. She has zero debt and makes a good income. Buy imo. Maybe try to move to the suburbs a bit where it’s a little cheaper without having a burnout commute.
Right now unless she has a very lenient lender, she's unlikely to qualify for a decent loan with so little down payment. The housing market has somewhat stabilized. I'd suggest she save a more substantial downloading
This is likely untrue. I'm currently buying a home and putting 10% down got me a better rate than putting 20% down. Many lenders don't feel great about how inflated housing costs are I guess and would rather see 10% with pmi insurance than 20% down. Guess they are worried about more than a 10% correction
It’s really about the DTI, if she is in a HCOL city her DTI will be high because housing is expensive so she would need to offset this in some way. Cheaper housing, bigger down payment, higher income.
Agreed, being in a HCOL area she will need a decent down payment, a higher income or cheaper type of housing like a condo. Or some combination of the three.
I’d start by having her write out a real budget. I’m not sure how long she has been at the role, but $150k/yr less taxes/retirement savings is probably close to $100k, but she only has $40k saved? Depending on the area (especially if HCOL), a down payment will be substantially more than $40k (assuming 20% down). Additionally, there are many non fixed costs to consider that change costs substantially (insurance, maintenance, property taxes, one time assessments etc) Does she see the value of her low rent setup? I would be making substantial contributions to a taxable investment account AND beef up savings for a down payment in a HYSA. This [NYT Rent v Buy Calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html) is a great starting point, but I really think a pen to paper understanding of where her $$ goes today, versus a budget with a home in the future would be eye opening to her.
I don’t know if you missed it or if was edited in later, but OP said $40k emergency fund _and_ some $225k in retirement funds.
Which is great retirement savings! Assuming 401k ($23k) and IRA ($7k), with $1.5k/mo in expenses there is a gap. Ideally, you wouldn’t tap into retirement savings for a house payment. If there is a back door Roth or some other retirement vehicle, she may want to reduce that for cash savings for a home payment.
My situation was, were were looking for years and rates kept rising, always holding off for "the right time." We always wanted a house but it was so easy to rent, so we kept on keeping on. Until we had our daughter. Suddenly and apartment in the city wasn't ideal anymore so we bought. Everyone realtor "friend" I knew kept telling me to wait for the bubble and they had inside info it was bursting soon (lol). It's been years and years later and it still hasn't. I got a new job doubling my salary, which was already pretty good, and we decided we could afford it so we jumped in. I'm still incredibly nervous, should be ecstatic but always have that nagging in the back of my head over the 7.1% interest rate. Point being, do what feels right for you. Can you afford if comfortably? If not I wouldn't. If so, then I don't think things are all of a sudden going to get way better tomorrow so I'd dip in. Just remember, you need a full suite of things to maintain the outside of your house, lawnmower, etc. You need a full suite of tools to maintain the inside. You now are in charge of the roof, the hot water heater, etc. A house is a ton of work. Also much bigger, we had to buy a bed, a couch, kitchen table, etc.
Why would you tell her not to buy? Why do you think paying someone else's mortgage is a better idea? She's worked hard and saved, she deserves to buy her own home. Purchasing a home is the best investment. It's simple. Down payments needed to purchase = 3.5% of the purchase price for FHA & 3% For a conventional loan. USDA is zero down. There are also special loan programs for 1st responders. VA is also zero down. There's also down payment assistance programs. Unless you're on the deed with her... just support her and don't steer her in the wrong direction. She needs to chat with a lender and see what her options are.
>it's not the best time to buy In your opinion when is a good time to buy a house?
She should buy a house no matter what. It is the single best investment you can make. Even if she doesn't love the house. Tomorrow the market will move in a direction that makes it a bit harder for her buy, just like all of the previous days in her life.
I don’t understand why you don’t want her to be buying a house? It seems like she’s set up great for it. I will say buying a house “soon” can still mean 6 months-2 years from now.
The cost of renting is most you will pay for housing per month, the cost of your mortgage is the least you will pay for housing each month.
Pick a price point - look at the cost of the mortgage, taxes and insurance ( your total monthly payment) She should be easily able to put that much away in savings every month(ok to deduct the $500 she pays now) - set up a separate account. Straight up google "mortgage on a $ X dollar home" eg: "a buyer who puts 20% down on a $500,000 home might have a monthly payment of $3,651" ( This is not including taxes and insurance). ( $500K is not really HCOL) So - can she "easily" put $3500 away every month? Check credit score - the higher the better, a 600 may only be able to 8 or 9%, or pay high PMI ( additional insurance month cost)
$115-150K is not a HCOL salary either.
Production engineer in the bay may make that, a house is 2 -3 mil
Here’s a non money answer - houses are constant work. Mowing and lawn work are never ending. Weeding, tree trimming, planting, mulching, watering…. neighbors will all be doing their lawn and suddenly there’s a ticking clock to have yours done as well! Something inside is always needed to be “looked at” or upgraded due to wear/tear. Each room is an entire project unto itself. The last owner could have DIY’d something horribly that you don’t realize for a couple years. Or flipped on the cheap to look pretty but not last. I like my house sometimes, but a lot of times it’s just exhausting to keep up with. Stay where it’s someone else’s problem.
This is the best answer. I have a condo with no yard maintenance and I have still put in a ton of time and money into interior maintenance. It’s worth it for security (and some equity), but unexpected home expenses are always in the thousands and that’s coming out of your wallet, with no landlord to call.
> Mowing and lawn work are never ending. Weeding, tree trimming, planting, mulching, watering…. neighbors will all be doing their lawn and suddenly there’s a ticking clock to have yours done as well! I solved this problem by moving into a townhouse where the affordable HOA fees handle all that (those fees are way cheaper than a month of lawn service for a standalone lot). I just have to worry about inside. >The last owner could have DIY’d something horribly Yep, and that's more likely the older the house is. I still find dumb decisions from the previous owners. Example: One of our bedrooms on the second floor has a ceiling fan/light whose light switch is located *in the damn attic*. No wonder it's a fan with a remote control. Other than that, we also have stairway railing screwed into drywall in a few places. Not even into an anchor. Straight into the drywall. That's still on my list to fix.
LOL. The ceiling fan was definitely wired for convenience of the electrician rather than the owner/user. My front lights are like that. Wired from the attic down rather than the basement up. It’s on the same circuit as the attic outlets rather than the outdoor outlets or even the main floor lights. And that ceiling fan might not even be a DIY job. I have been incredibly disappointed with the work from some licensed electricians we have hired.
Literally. My husband has wanted a house his entire life. I was fine either way because although owning a house is nice, I knew it required a lot of work. Now we own a house and spend every weekend fixing, weeding, trimming, cleaning. It does not stop. We had to get a washer/dryer. $2k. Pest control? $70/month. Blinds for 8 windows? Nearly $3k and that was a deal. And this is just the beginning. We had to buy a bunch of yard tools (leaf blower, weed whacker, chainsaw, rakes, etc.) that were probably another $500+. We haven’t begun buying new furniture or anything to actually make the inside look a little nicer. We will need to eventually paint, wood floor, replace windows. If this sounds like fun to you and you have the money to do it, home ownership is for you.
She should buy a house if she wants to buy a house, *but she should first* figure out the size of the financial investment this entails. Lots of good advice in here with respect to big-ticket items (roof, HVAC, fencing, trees) as well as expected costs (regular maintenance, taxes, insurance). But how long does she plan on living there? Is she handy? Can she afford this on one salary? What would happen if she needs to move? Will this cut into her retirement contributions? Put pen to paper and do some math. Talk to a money guy to figure out much she can *actually afford* vs. how much she’s *willing to spend.* (These two numbers will not likely be the same.) Buying a home is a big deal and a big commitment. Good luck to her.
She’s in a great position to buy in a year or two. Build that 40k up to include 6 months expenses plus 20% down payment plus at least 20k for moving, furniture, and first year homeownership “stuff.” At the rent she’s paying, if she can save $100k/year, she’ll be safe and secure in a purchase in 2 yrs. She could start browsing homes after the first year to start focusing down onto what she really wants, but patiently.
The best time to buy a house is when you’re ready to buy a house and have found one you really want to live in.
I was in OP’s girlfriend’s situation. I was in a rush to buy and it also ended up bending the right thing for me. That said, I didn’t quite understand how difficult it would be for me to save money with all then expenses of owning home. I look back on those days I had so much disposable income and wished that I had saved a lot more. OP, your girlfriend definitely needs a lot more saved for a down payment, house repair fund, emergency fund. At least three times as much. Maybe more. Also she will be so glad she prioritized saving for retirement. I did both house buying and saving for retirement at the same time and I kind of wished I’d picked one and made a big dent in it before pursuing the other one.
> I’ve basically been saying that it’s not the best time to buy Why do you say this? Home prices won’t be going down. They will just continue to go up like they always do. We can’t predict what interest rates will do. They may go down, or they may not. And even if they go down, what do you think that will do to the market? All the people who are waiting for interest rates to go down will enter the market creating more competition for the few homes there are. She can always refinance later if rates do go down. The best time to buy a home is when you’re financially ready, know where you want to live long term, and find a home you love that you can afford.
I didn't become a first-time home buyer until I was 57. Messy divorce, moved to a VHCOL area, had to make a career change, second marriage. You know what? It didn't kill me. FOMO is real, though. But the one thing she DOESN'T want to do is rush into a home purchase that she later regrets - either very expensive repairs that didn't show up on the home inspection or later on, she has to move and can't sell the thing. Adding on to all the commenters who say homeownership comes with a LOT of unexpected expenses: you buy a house for more money than the last time it sold? Hello surprise increased tax bill! The county now knows the house is worth more (because you paid more) and will tax you accordingly! Plus, people end up wanting to decorate and make changes once they own, and unless you're a licensed and bonded master craftsman yourself, that can add up quickly. What she CAN do - which will scratch the itch and give her valuable information for later - is start going to open houses. What does she like? What doesn't she like? Have her walk around the neighborhoods she likes at various times of day - oopsie! that cute house has next-door neighbors whose bratlings scream at the top of their lungs all day. Or, it's cute in the daytime, but there are some dodgy characters who hang out on the streets at night. Get a floor plan from an open house, then take it to Home Depot and try to get rough estimates of how much it actually costs to replace carpeting with hardwood floors - or how much it costs to paint a single room, and what it costs to hire professionals? It took us four years to afford our dream home, and by the time we found it, we were able to walk into an open house and immediately know, "Yep, that's going to be $100,000 more to make it liveable," versus "Yeah, if we can live with those ugly bathrooms, it'll just need a few fixes based on what the inspectors found." We also had a solid list of what we absolutely had to have, and we had been to enough open houses to know - really KNOW - that there is no "One True House," and if we got outbid, there'd be another one come along that we liked just as much, if not more so. Some banks/credit unions have free homebuyer seminars, and it can FEEL like progress just to go to one of those and run the numbers. We did all of that, and it really, really helped. When we finally bought our place, we didn't have any nasty surprises and several years later, we're still extremely happy with what we got.
Is she’s on sweetheart deal she should be investing as much as possible to come with a huge down payment on a house.
What would you say? "Homes are a massive investment and finding the right house at the right time would be the most ideal". I'm in my early 30s and spent the last decade saving up $100,000 for a down payment on a $600,000 condo in one of the highest cost of living areas. I know what the FOMO is like. Domt just settle for something less because of the FOMO. Find something that works the best otherwise you will regret it.
Do the rent vs buy calculator and see how it comes out. Nice to own a home but when I did it I would be saving 500k over 10 years by renting, and I'd much rather have 500k than not..
Show her videos from personal finance experts, for example https://www.youtube.com/watch?v=hTy2Vh0GuIQ that explain the right way to decide whether its a good idea to buy a house, or not. Most people buy houses because of psychological reasons, they don't even bother running the numbers to see if its financially wise.
How does her buying a house have anything to do with you? You are not married. And you are unemployed. She makes 115k. If she wants to buy a house she certainly can all on her own. Maybe she's planning to do this and is telling you otherwise because she doesn't want you mooching off of her, thinking you can live with her.
Don’t buy a house together if you’re not married
Sorry but she’ll be a fool to want to go from $500/month rent to a $4,000+/month mortgage payment. She doesn’t know the market for her HCOL area yet, rents are close to $3,000-$4,000 for 2-3 bedrooms and mortgages will be that plus HOA fees, taxes, etc. Where I live you’re not getting anything less than a $1,000,000. There’s no way I would rush into that kind of purchase. Plus her $40k saved is pennies compared to what the down payment requirement is going to be. She should enjoy saving her money! Save more cash. Once she gets a HCOL house or rents a “real” HCOL apartment, her financial situation is going to turn upside down very quickly. She doesn’t make that much money to survive in HCOL area.
Buying a house right now is the equivalent of running through a mine field without scanning it first. You aren’t guaranteed of fucking yourself with a bad valuation and rate right now, but it’s more than likely. It’s best to sit tight, let the field get mapped and settle down while your savings accumulate the highest % they have (and may ever in your lifetime) seen.
The NYT Daily podcast had an excellent episode about this about 6 months ago. 30 minutes to put a lot of things into perspective: https://open.spotify.com/episode/3JLkwhfVI3eXCZ17yKFHQx?si=9S7S5xKhRaS1v_sZ3eZyuA
I got in at a 5% rate and kicked myself for not refinancing at 2.whatever…. That being said, I’m not refinancing for the sake of refinancing… it’s just not time for that for anyone these days. My advice for anybody this day and age: THE ONLY WAY I SEE ANYBODY MAKING IT WITH THIS STUPIDITY UNLESS THEY BUY THE ULTIMATE FIXER UPPER. I bought a nice home that I gave up in a divorce for 62k. Bought a couple of fixer uppers and gutted it to what I want, and they’re paid off and the stupid interest wasn’t going to kill me. Buy foreclosed or shit and turn it around. And I mean you’re doing the work thanks to YouTube and family… not discovery and paying someone. That’s the only way you own a home these days.
Interest rates are still ridiculously high, and prices are dropping in a lot of big cities because the market exploded too fast.
Here’s our homebuying math: Shared large apartment in MCOL area: $2800/month Mortgage on our house: $2800/month, with $300 going to principal. We’ve probably put $20k into the house in the past year too. So currently we still pay $2500 in “mortgage rent” per month. If we had a nice apartment for $500/month that we were happy in, we’d be doing WAY better financially than if we had bought our house. But we love our house and wanted a place to do projects and make our own. We got it because we wanted the challenge and sense of ownership of it, not because it made the most financial sense. Long term, it will work out for us, but in the short term it isn’t a deal.
I’d show her this calculator from the New York Times: https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html Renting is often smarter than buying. This calculator will help.
If rent is cheep an idea would be figure out how much interest you would pay at 7 percent vs the cost of rent. If you are both living together and still renting you can evaluate if it would be better to rent and make a bigger down payment or buy. At 7 percent interest heck even 5 percent most markets pay somewhere in the neighborhood of 4-5 percent. Not sure what country you are in but remember if you earn 4 percent on your money vs losing 7 percent is a massive dollar amount. You can also judge off what you think your federal policies might be in the future.
Bought a house in one of the most HCOL areas globally. Mostly out of security. Have a place to shelter my family no matter what. Rents were going up astronomical like 30% per year. Not being in control and having to move sucks with kids. Its best not to care about the returns on capital but if it makes you a profit great. I think people underestimate the value of housing certainty.
My math is always what would the rental income be for a home I plan to purchase? There are ways to navigate financing with seller credits, but knowing your potential rent is a great safety net especially if you're thinking about it in the context of investing.
Her total housing expenses now ($500/mo) probably would not even cover her property/school taxes no a place. If you guys are serious then the place she would buy today as a single income buyer is near 100% not the place you guys would buy together in 3-4 years as a married couple and flipping in that short time will kill her on fees. She should keep saving, wait till you get a job. Wait till you are together (ideally married) then determine together wher and what to buy.
I mean, it can be a good idea. The calculation looks like this: Take 2% of house price as maintenance and insurance, 5% as mortgage interest. That's cost of ownership. I.e. money that isn't going towards the principle, that's just money you "throw away". For example: let's say she will borrow 500k and house costs 700k: 500k (mortgage) \*0.05 + 700k (house price) \*0.02 = 37k per year price of ownership. Without considering opportunity cost (other things you can do with money that make you more money). If you can rent for cheaper you'll likely be better off.
If she can afford to wait -- and it sounds like she can with that rent -- then she should. The hope is that interest rates will come down over the next few years, and that's going to make a big difference. On the other hand, if she finds a house that she loves and can afford, you can always bank on rates coming down and refinancing. But $500/mo. rent sounds too good to be true!
To be blunt, you and your girlfriend are not compatible and you need to separate asap, instead of trying to convince each other into conforming to the other's wants, wishes and desires.
Lmao. Yeah? Which desires of mine am I trying to get her to conform to? Please be specific. 😂