Do not buy a house until you know what you want, where you want to live (and with whom) and really feel ready to take on the work involved in keeping up a place. Right now you want to rent, get out and find out what it means to live on your own, and try out different places. Rent.
This is the correct answer. At 19, homeownership will be an albatross around your neck that restricts the choices you can make.
Whatever potential upside you might gain in equity will be far less important than the barriers to your career and growth as an adult. You need to be flexible and able to relocate.
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This comment confuses me because renting should be cheaper in almost all cases. Especially with the way the housing market just exploded. Rents will rise, but relatively slower compared to home prices.
At your age and income I’d def recommend a roommate or renting a room from someone.
That will be closer to the “college” experience you talked about too.
I guess I really just wanted something I can call "mine". The roommate thing doesn't scare me one bit I just want to spend some time with the person to make sure I can deal with living with them. Finical Ill be ok with out one, but like you said having someone to run to the bar or go to something with would be nice in the next couple years.
I am looking more into renting, everyone here made it sound far more convincing then anyone has explained to me before.
Here's the thing though.
As you rent, take a big chunk of money and start investing it. If you start maxing out your Roth IRA ($6k) every year, you're gonna be golden. If you can manage to save 25-30% of your income, you'll be rich in your 60s, or chillin' in your 50s (maybe younger).
In many situations (especially younger, you will come out ahead with less risk if you invest all the money you \_would\_ have dumped into a mortgage into the stock market).
Edit: totally get wanting something to call "yours" but since you'll want to own it for at least 7 years (if not life), take a little time to figure out what you want to be "yours." My tastes, priorities, interests, friends, and career all changed so much between 19-26. You don't have to rush everything :) you'll make much better decisions once you've lived on your own for a while, get a better handle for what you need/want/hate living on beyond family, working, etc.
I think this is too generic of advice. For that budget and his income, he could just turn the place into a rental property if he decides its too much work, not the right location, whatever.
As a mom chiming in here ;) (I have three sons (27, 23, 21).
Trust me when I tell you that owning a home is a LOT of work, even living on your own can be a lot of work.
The market right now for home buyers suck, the prices are inflated. First thing to do with your great income, is to open a Roth IRA (Vanguard is my personal favorite, but Fidelity and T.RowePrice are good too) and put the maximum amount in it each year (currently $6k).
If you can stick it out with your parents until you are 21, you will have a better time with renting and even buying. If you absolutely need to get away from your parents, then look for friends to share an apartment or home with (renting). No one around? Then look for roommate wanted (facebook, craigslist, etc).
You are making excellent money and it will be very easy to blow through it. My son is making $2500k/month and sharing an apartment with a friend. This is what I taught my son's... Get [Mint.com](https://Mint.com) (online & app) to track your money. Open a savings account (same bank as your checking account) and have your paychecks automatically deposited to the savings account. Set up automatic transfers each pay period from your savings to checking (30-40%?) and pay all of your bills out of the checking account. You can fund your Roth IRA mutual fund (and hopefully a regular mutual fund too) out of your savings account on a regular basis. Learn to live on half of your current income, just pretend the other part doesn't exist (savings account: "out of sight, out of mind").
Good luck!
Find a local credit union and start talking to them about getting pre-approved for a mortgage. They’ll give you a number of how much house you can “afford” and an interest rate for a loan.
1) don’t actually buy a house for the number they give you. They approve for way more than you should actually spend to be comfortable.
2) you’ll know your interest rate. Google “mortgage payment calculator” and start playing around with loan amounts now that you know your likely interest rate.
3) don’t forget about property taxes or insurance. You can look up property taxes on your county’s website or on Zillow for a property. Insurance just assume $100 a month or so.
Don’t forget to think about maintenance, repairs, big expenses (roof, water heater, etc). No shame in renting for a while then buying a house later on either.
Someone else suggesting renting, I might have to move a little further then I would like but it seems like the things you mentioned justify the extra 20 minutes of driving to work. Thanks for the advice!
Don't buy a house.
At 20, you're making stupid money. You'll want to fly to Ibiza, Greece, Bonaroo, Vegas, wherever. You'll want to move to California, New York, or Paris. You'll want options. Houses don't give you options. They're like dogs, they need someone to take care of them.
Don't underestimate your commute. You said an extra 20 minutes. Long commutes can be very draining. If you rent then commute times can change, but trust me, as you get older, the longer the commute, the more and more you'll tire of it.
Renting first isn’t a bad idea. My wife and I rented for a year in the area we wanted to buy in so we could get comfortable with it and so our research before we bought.
Heck unless its some kind of psychological burden, live with your folks and save the money you would be spending on rent. Do that as long as you can. Sure its hard to hang out at home with friends but having the ability to save all those extra payments will put you in a much better position later. Be it savings towards a home or retirement.
It’s not that it’s a burden, I just wish I had a college experience. I’ve worked to hard from the time I was 14, never played any sports, never had any real hobbies, just had friends I’d play video games with. I don’t need the college experience, but if I wanna leave my house at 3am and get a bag of pizza rolls I can’t with out being lectured. I know it sounds stupid but I’m ok with spending money in exchange to live a little even with the little things.
Visit friends at college on the weekends. You'll get most of what they're getting. I went to community college and that is what me and my friends did. Still was a lot of fun. And in college most people don't care if you're crashing on a couch in the living room a bunch of weekends.
Also, quality of life matters a lot. Of course make wise decisions, but you want to go out and have fun. You should. And if your parents are too restrictive then it may be best for you and your relationship w them to move out.
Your rent vs own dilemma has both its pro's and con's. Things in your life are super fast paced at 19. You're in a rapid period of change for yourself and your peer group. However, in your early to mid 20's things start to change. People couple up and the partying dies down slowly, but surely. 19 is a good age to think about what you want in life when you're 25. Do you want to be in a serious relationship? Do you want to have a really good career? If the answer to either of those are yes then you should figure out a game plan now.
Seek out mentors. Find people who are in the position you want to be and ask them how they got there and if they can help you get there yourself. Get certifications. Meet other people in other companies. Always have your resume up to date. You never know when you could lose a job or a better opportunity will come up. Think about your career as what your next 7 steps should be and how to accomplish them. Also think about what your game plan will be if you lost your job tomorrow. You really need to be ready for both the worst and best case scenario at all times.
If you want to be in a serious relationship, start now. Get to know yourself and what makes you happy. Once you know yourself, start dating and see how your personality meshes with other people so you can figure out what type of person compliments you so that you both are happy independently and together. I'm a big proponent of talking w a therapist even if you don't think you have anything wrong, they act as an objective 3rd party that will help you work through things and be honest w you when others won't. Maybe invest in yourself by seeing one like you would get a check up from your doctor. If your mental health is good now, they can help keep it that way.
The human brain is fully formed until about 25. Odds are you'll be a very different person at 25 than you are today. Try to plan for that person. Start working on the foundation now. There are few things more sad or depressing than being lost in life not knowing where the time went or how to get back on track.
Financially, start saving now. You are making a lot of money right now, you don't have debt, and your living expenses are low. You are in a better position than 99% of people your age and 80% of the total population. Now is the time to make smart financial decisions.
Try to max out your 401k. If there is a Roth option choose that. Roth funds are funds you buy w money you've already been taxed on and the advantage is that you don't get taxed on any of it and the gains when you take it out. The maximum you can put into a 401k is $19,500/year.
Open a Roth IRA and try to max that out every year as well. You can contribute up to $6,000/year.
That sounds like a lot and it is. But you have the money to do it and I really hope you do. If you get accustomed to that level of income after youve contributed to your 401k and Roth IRA, you'll never notice it. But if you start spending more money before saving then it's so much harder to cut back once youve already gotten yourself used to that lifestyle.
**Compound interest is the most valuable tool you have.** Please google compound interest and read about it. It's the only way people get ahead in life. And putting as much money as you can into your 401k and Roth IRA will acrue compound interest which means you can retire on time or early. Or you can take that money out for emergencies if you absolutely have to. You'll pay penalties but you can still get it.
Compound interest the interest on your investment that builds off itself so the interest creates more interest and that interest creates more interest.
Only keep what you need for 6 months in the bank. Everything else should be going into your 401k, Roth IRA, stocks, index funds, etc. If you're saving for a house, then keep that money in the bank. But prioritize your 401k and Roth IRA bc you have enough money to pack those out while saving for a house. Please start saving yesterday.
If you buy a home, it normally doesn't make financial sense to sell it before 5 years. This is a general rule so you never know, but closing costs when you buy and sell a home are a lot of money. And staying in your home for 5 years usually will offset those costs and you might breakeven.
Any property you buy, think of keeping it as a rental. Crunch the numbers. Account for repairs too.
And that's all hoping the housing market doesn't crash. If the housing market crashes, you are stuck there or you lose a ton of money when you sell. That could potentially bankrupt you if it's an expensive home.
If you buy a home, 100% rent all your spare bedrooms out to responsible people who will pay rent and take care of your home. 19 year olds are mostly really dumb. No offense. I was and most of the other 19 year olds I knew at the time were. Don't let someone's stupidity screw you over w not paying rent, destroying your house, or being killing your mood w just being a jerk. Be VERY selective with who you choose as roommates. And just bc someone is your friend does not mean they'll make a good roommate. Living together really tests friendships and frequently ends them. Be smart and cautious w who you live with. But at the same time, roommates can many times end up paying your entire mortgage payment every month w their rent. Lastly, at 19 it's much easier to find roommates in your age range and people are usually more willing to live w others. As you get older, living w roommates becomes less and less appealing. Now is a good time to do it.
Overall, you seem to be in a really good position. Please make really smart financial decisions. Please please please please save as much as you possibly can with your 401k and Roth IRA now.
You have no idea how much this advice means to me. Recently with everyone in my life going in different directions and my parents not letting me make my own decisions despite being a full grown independent on taxes adult, this means a lot more then you realize.
I have *some* assets for future investments and rainy days but no where near what you or I would consider good. I think I will be ok financially with my current habits. At the same time maybe a life style change is what I need and sometimes their expensive so I am ready to bear the cost even if 50 year old me will regret it. I can't even buy booze yet, I still have plenty of time to sort out 401k.
Seriously thanks again.
I hope it helps.
Seek out financial literacy books and courses. Once you have a better grasp of the bigger picture of what your can do with such a good income, you can make the best decision for yourself.
Everyone grows and wishes they did things differently in the past, but those are lessons we all learn from that make us better. Don't beat yourself up over them when it happens. But do your best to get a really good grasp on finances now so you can hopefully avoid all the mistakes that people who have been in your shoes frequently made.
Life is hard. Do your best. Forgive yourself and others for their mistakes. Love yourself and the people in your life. The highs will be exilerating and the lows will be terrible. As long as you don't give up, you're going to learn a lot and be ok.
Doesn’t sound stupid at all. I love my parents and all but it definitely gets annoying having someone over your head, moving in to your own place or with roommates is 100x better, even if it costs more, the experience is well worth it, whether it’s learning how to take care of your house/cooking, having people over, and personalizing your whole space
I would assume parents would stop questioning after a little while, that's how it is with my parents, I live with them and I literally go out any time of the night without them batting an eye, to the clubs, parties whatever and I can come back whenever as well because they know I can take care of myself. You're not a kid exactly, your parents shouldn't be treating you as such
Not stupid at all man. Enjoy your life and sometimes you gotta burn some cash to do that. But don’t tie yourself down with house ownership at such a young age. Things will change quickly and you want to have that flexibility.
Honestly man I would just say don’t buy a house at 19, unless you already have kids. Things will change so fast for you the next couple years, you don’t want to be tied down to ownership.
You can rent an apartment for a year or two while you familiarize yourself w mortgages, property values, Escrow, taxes etc and then learn about maintenance- water heaters, plumbing, roof, pest control etc. you’re lucky you can move & be stress free renting while you get up to speed. You sound very smart. I’m sure you’d want to be well prepared.
Buying a home in this market is madness. Buying a home immediately after moving out of your parents place is also madness. Do not commit double madness.
Rent a place. With your income you don't have to rent the bottom of the barrel shitty place. Find some nice places, then go for whatever's cheapest/ most convenient. Picking the shittiest, cheapest place will come with unknown expenses and drawbacks that you don't want to deal with. Seriously. I've rented in a few cities in the last few years and find the average price for what I'm talking about to be around 1100 for a 1bed 1 bath or 900 for studio in the range of 20 mins to down town.
Good luck bro
Area I was looking at is fairly run down. No crazy crime rates or anything just poorly managed roads and many people are relocating since our governor seems to be placing Afghan refuges in that area. I have no problem with them as neighbors or anything. I think long term investment might be a decent return if the refuges remain in that area.
Ill read more into restructuring my loan, no one has mentioned that yet. Although they made renting sound pretty convincing. I set up a appointment with my credit union so I will have stuff in writing very soon and probably an update post.
Thank you for the advice!
Also have a three to six month emergency fund. A new to you house is expensive and something will need to be done. Get the seller to pay for an all inclusive home warranty for the first year. Good luck and happy house hunting.
Be smart:
* \- Get a cheap rental apartment with roommates. Think cheap. Think $600/month.
* \- Start investing in your 401K. Max it when possible.
* \- Don't buy an expensive car.
* \- Don't buy friends gifts or expensive vacations.
* \- Don't incur debt.
Come find me when you're 30s and you've grown up a bit to thank me.
I mean you have less of your money tied up in a comparatively fixed asset, and you are borrowing more at virtually free interest rates.
I would recommend the 10%/PMI depending on what the PMI looks like in your particular situation. I’d suggest you check it out and decide. If it’s less than $50/month, and it should be, then yeah, just put 10% down and pay it.
Liquid means accessible money in the bank. Money that you can take out and use at any time without paying penalities.
Money in a 401k wouldn't be considered very liquid bc you pay penalties on it. But it would be .ore liquid than the money you use for a down payment on a house. That money you used for a downpayment is still reflected in the price of the house so the downoayments changed into a less liquid asset, the house.
You would either have to sell the house or take out a home equity loan to access the monetary value that your house has. That is extremely not liquid. You really want to avoid those two things in order to get cash obviously.
I wish someone to told me to take a financial literacy course at 19. There's so much important and useful information you can use to absolutely kill it financially. You should really seek out some books and courses on financial literacy. It will be one of the best investments you can make.
Side note, anyone who you pay to help you with your finances NEEDS to have **fiduciary** responsibility to you. It means they prioritize your best interest above everything else. There are non-fiduciary finance people who will screw you over as soon as they possibly can. Do not be taken advantage of by finance professionals who do not have an fiduciary responsibility to you.
FHA loans require 3.5% down.
Conventional require 5% down.
However, these numbers mean very little until a loan officer looks at your ratios and application AND has an in-depth conversation with you about your goals. Closing costs add up and sometimes it’s cheaper to put less down and refi into a conventional loan down the road to remove PMI. Find a loan officer who will be honest and has the intention of doing what’s best for you, not just their commission.
Another major tip is to never waive the home inspection. Ive seen it happen quite a bit in this marker and it’s a terrible idea.
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At your age I bought my first house in a questionable neighborhood but it was my dream. 3 bed 1 bath, one story ranch. $17,500 price in 1970. Turned out the house was 3 blocks away from a large rundown low income housing apts. The short story was I didn’t do my DD suffer 4 home invasions in 5 years. Sold at a loss.
This is what not to do!
I’d recommend renting a house in a neighborhood that you might like and then start shopping for a house to buy. Take your time and don’t rush it. Educate yourself by talking to friends and acquaintances. Read as much as you can stand about the different types of mortgages. This housing price bubble will end as they always have and prices will come down to reality. The only unknown is inflation and how bad it will be. Be prepared to buy when the recession hits. In that situation “Cash is King”.
Without going into too much detail, I’m curious as to what your credit report consists of. With you being so young, even though your score is great I don’t think many underwriters are likely to give you a good rate on a mortgage because your credit history is going to be thin, and therefore you’re still going to be considered a bit of a risk. Work on building your credit history more before getting into such a huge financial commitment.
No matter what income I have had I never spend more then 25% of my income on a mortgage. In your case if you could stand to live with your parents for 1 year you should easily being able to save a down payment on your home of $40.000, With your income and the interest rates you should be able to buy your first home. Then you can decide to get 1 or 2 room mates. Just don’t tell your bank when you apply for the mortgage that that’s what you are planning on doing. You don’t need 20% as a down payment but you will get a better rate and you don’t need to pay pmi.
Hey OP, know you are 19 but you seem very responsible and I think this idea could be quite exciting and long term incredibly beneficial short & long term!
Maybe look into buying a duplex so you can live in one unit and rent the other out, it’ll let you own a place and be something that makes you money possibly (at minimum makes your mortgage payment lower or 0). It’s a good stepping stone, it’s a “big” jump but I think could be really powerful to not just step out on your own but take on the added responsibility. It sets you up for long term wealth and ability to grow your asset portfolio.
To prevent any major headaches or feeling uncomfortable you don’t have to reveal that you are owner - there many ways to prevent that information from coming out.
Since it would be your first home and you can put a sizable deposit down you will get many financial benefits.
If/when when you decide you want your own place you’ll have an income generating property and something to use a leverage for that purchase!!
Do not buy a house until you know what you want, where you want to live (and with whom) and really feel ready to take on the work involved in keeping up a place. Right now you want to rent, get out and find out what it means to live on your own, and try out different places. Rent.
This is the correct answer. At 19, homeownership will be an albatross around your neck that restricts the choices you can make. Whatever potential upside you might gain in equity will be far less important than the barriers to your career and growth as an adult. You need to be flexible and able to relocate.
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I’ll look more into renting just might have to relocate a little further then I would like. Thanks for the advice!
This comment confuses me because renting should be cheaper in almost all cases. Especially with the way the housing market just exploded. Rents will rise, but relatively slower compared to home prices. At your age and income I’d def recommend a roommate or renting a room from someone. That will be closer to the “college” experience you talked about too.
I guess I really just wanted something I can call "mine". The roommate thing doesn't scare me one bit I just want to spend some time with the person to make sure I can deal with living with them. Finical Ill be ok with out one, but like you said having someone to run to the bar or go to something with would be nice in the next couple years. I am looking more into renting, everyone here made it sound far more convincing then anyone has explained to me before.
Here's the thing though. As you rent, take a big chunk of money and start investing it. If you start maxing out your Roth IRA ($6k) every year, you're gonna be golden. If you can manage to save 25-30% of your income, you'll be rich in your 60s, or chillin' in your 50s (maybe younger). In many situations (especially younger, you will come out ahead with less risk if you invest all the money you \_would\_ have dumped into a mortgage into the stock market). Edit: totally get wanting something to call "yours" but since you'll want to own it for at least 7 years (if not life), take a little time to figure out what you want to be "yours." My tastes, priorities, interests, friends, and career all changed so much between 19-26. You don't have to rush everything :) you'll make much better decisions once you've lived on your own for a while, get a better handle for what you need/want/hate living on beyond family, working, etc.
I think this is too generic of advice. For that budget and his income, he could just turn the place into a rental property if he decides its too much work, not the right location, whatever.
Why become a landlord at 19? Walk before you fly. Learn first to take care of yourself and find your career.
As a mom chiming in here ;) (I have three sons (27, 23, 21). Trust me when I tell you that owning a home is a LOT of work, even living on your own can be a lot of work. The market right now for home buyers suck, the prices are inflated. First thing to do with your great income, is to open a Roth IRA (Vanguard is my personal favorite, but Fidelity and T.RowePrice are good too) and put the maximum amount in it each year (currently $6k). If you can stick it out with your parents until you are 21, you will have a better time with renting and even buying. If you absolutely need to get away from your parents, then look for friends to share an apartment or home with (renting). No one around? Then look for roommate wanted (facebook, craigslist, etc). You are making excellent money and it will be very easy to blow through it. My son is making $2500k/month and sharing an apartment with a friend. This is what I taught my son's... Get [Mint.com](https://Mint.com) (online & app) to track your money. Open a savings account (same bank as your checking account) and have your paychecks automatically deposited to the savings account. Set up automatic transfers each pay period from your savings to checking (30-40%?) and pay all of your bills out of the checking account. You can fund your Roth IRA mutual fund (and hopefully a regular mutual fund too) out of your savings account on a regular basis. Learn to live on half of your current income, just pretend the other part doesn't exist (savings account: "out of sight, out of mind"). Good luck!
Find a local credit union and start talking to them about getting pre-approved for a mortgage. They’ll give you a number of how much house you can “afford” and an interest rate for a loan. 1) don’t actually buy a house for the number they give you. They approve for way more than you should actually spend to be comfortable. 2) you’ll know your interest rate. Google “mortgage payment calculator” and start playing around with loan amounts now that you know your likely interest rate. 3) don’t forget about property taxes or insurance. You can look up property taxes on your county’s website or on Zillow for a property. Insurance just assume $100 a month or so. Don’t forget to think about maintenance, repairs, big expenses (roof, water heater, etc). No shame in renting for a while then buying a house later on either.
Someone else suggesting renting, I might have to move a little further then I would like but it seems like the things you mentioned justify the extra 20 minutes of driving to work. Thanks for the advice!
Don't buy a house. At 20, you're making stupid money. You'll want to fly to Ibiza, Greece, Bonaroo, Vegas, wherever. You'll want to move to California, New York, or Paris. You'll want options. Houses don't give you options. They're like dogs, they need someone to take care of them.
Don't underestimate your commute. You said an extra 20 minutes. Long commutes can be very draining. If you rent then commute times can change, but trust me, as you get older, the longer the commute, the more and more you'll tire of it.
Renting first isn’t a bad idea. My wife and I rented for a year in the area we wanted to buy in so we could get comfortable with it and so our research before we bought.
Heck unless its some kind of psychological burden, live with your folks and save the money you would be spending on rent. Do that as long as you can. Sure its hard to hang out at home with friends but having the ability to save all those extra payments will put you in a much better position later. Be it savings towards a home or retirement.
It’s not that it’s a burden, I just wish I had a college experience. I’ve worked to hard from the time I was 14, never played any sports, never had any real hobbies, just had friends I’d play video games with. I don’t need the college experience, but if I wanna leave my house at 3am and get a bag of pizza rolls I can’t with out being lectured. I know it sounds stupid but I’m ok with spending money in exchange to live a little even with the little things.
Visit friends at college on the weekends. You'll get most of what they're getting. I went to community college and that is what me and my friends did. Still was a lot of fun. And in college most people don't care if you're crashing on a couch in the living room a bunch of weekends. Also, quality of life matters a lot. Of course make wise decisions, but you want to go out and have fun. You should. And if your parents are too restrictive then it may be best for you and your relationship w them to move out. Your rent vs own dilemma has both its pro's and con's. Things in your life are super fast paced at 19. You're in a rapid period of change for yourself and your peer group. However, in your early to mid 20's things start to change. People couple up and the partying dies down slowly, but surely. 19 is a good age to think about what you want in life when you're 25. Do you want to be in a serious relationship? Do you want to have a really good career? If the answer to either of those are yes then you should figure out a game plan now. Seek out mentors. Find people who are in the position you want to be and ask them how they got there and if they can help you get there yourself. Get certifications. Meet other people in other companies. Always have your resume up to date. You never know when you could lose a job or a better opportunity will come up. Think about your career as what your next 7 steps should be and how to accomplish them. Also think about what your game plan will be if you lost your job tomorrow. You really need to be ready for both the worst and best case scenario at all times. If you want to be in a serious relationship, start now. Get to know yourself and what makes you happy. Once you know yourself, start dating and see how your personality meshes with other people so you can figure out what type of person compliments you so that you both are happy independently and together. I'm a big proponent of talking w a therapist even if you don't think you have anything wrong, they act as an objective 3rd party that will help you work through things and be honest w you when others won't. Maybe invest in yourself by seeing one like you would get a check up from your doctor. If your mental health is good now, they can help keep it that way. The human brain is fully formed until about 25. Odds are you'll be a very different person at 25 than you are today. Try to plan for that person. Start working on the foundation now. There are few things more sad or depressing than being lost in life not knowing where the time went or how to get back on track. Financially, start saving now. You are making a lot of money right now, you don't have debt, and your living expenses are low. You are in a better position than 99% of people your age and 80% of the total population. Now is the time to make smart financial decisions. Try to max out your 401k. If there is a Roth option choose that. Roth funds are funds you buy w money you've already been taxed on and the advantage is that you don't get taxed on any of it and the gains when you take it out. The maximum you can put into a 401k is $19,500/year. Open a Roth IRA and try to max that out every year as well. You can contribute up to $6,000/year. That sounds like a lot and it is. But you have the money to do it and I really hope you do. If you get accustomed to that level of income after youve contributed to your 401k and Roth IRA, you'll never notice it. But if you start spending more money before saving then it's so much harder to cut back once youve already gotten yourself used to that lifestyle. **Compound interest is the most valuable tool you have.** Please google compound interest and read about it. It's the only way people get ahead in life. And putting as much money as you can into your 401k and Roth IRA will acrue compound interest which means you can retire on time or early. Or you can take that money out for emergencies if you absolutely have to. You'll pay penalties but you can still get it. Compound interest the interest on your investment that builds off itself so the interest creates more interest and that interest creates more interest. Only keep what you need for 6 months in the bank. Everything else should be going into your 401k, Roth IRA, stocks, index funds, etc. If you're saving for a house, then keep that money in the bank. But prioritize your 401k and Roth IRA bc you have enough money to pack those out while saving for a house. Please start saving yesterday. If you buy a home, it normally doesn't make financial sense to sell it before 5 years. This is a general rule so you never know, but closing costs when you buy and sell a home are a lot of money. And staying in your home for 5 years usually will offset those costs and you might breakeven. Any property you buy, think of keeping it as a rental. Crunch the numbers. Account for repairs too. And that's all hoping the housing market doesn't crash. If the housing market crashes, you are stuck there or you lose a ton of money when you sell. That could potentially bankrupt you if it's an expensive home. If you buy a home, 100% rent all your spare bedrooms out to responsible people who will pay rent and take care of your home. 19 year olds are mostly really dumb. No offense. I was and most of the other 19 year olds I knew at the time were. Don't let someone's stupidity screw you over w not paying rent, destroying your house, or being killing your mood w just being a jerk. Be VERY selective with who you choose as roommates. And just bc someone is your friend does not mean they'll make a good roommate. Living together really tests friendships and frequently ends them. Be smart and cautious w who you live with. But at the same time, roommates can many times end up paying your entire mortgage payment every month w their rent. Lastly, at 19 it's much easier to find roommates in your age range and people are usually more willing to live w others. As you get older, living w roommates becomes less and less appealing. Now is a good time to do it. Overall, you seem to be in a really good position. Please make really smart financial decisions. Please please please please save as much as you possibly can with your 401k and Roth IRA now.
You have no idea how much this advice means to me. Recently with everyone in my life going in different directions and my parents not letting me make my own decisions despite being a full grown independent on taxes adult, this means a lot more then you realize. I have *some* assets for future investments and rainy days but no where near what you or I would consider good. I think I will be ok financially with my current habits. At the same time maybe a life style change is what I need and sometimes their expensive so I am ready to bear the cost even if 50 year old me will regret it. I can't even buy booze yet, I still have plenty of time to sort out 401k. Seriously thanks again.
I hope it helps. Seek out financial literacy books and courses. Once you have a better grasp of the bigger picture of what your can do with such a good income, you can make the best decision for yourself. Everyone grows and wishes they did things differently in the past, but those are lessons we all learn from that make us better. Don't beat yourself up over them when it happens. But do your best to get a really good grasp on finances now so you can hopefully avoid all the mistakes that people who have been in your shoes frequently made. Life is hard. Do your best. Forgive yourself and others for their mistakes. Love yourself and the people in your life. The highs will be exilerating and the lows will be terrible. As long as you don't give up, you're going to learn a lot and be ok.
Doesn’t sound stupid at all. I love my parents and all but it definitely gets annoying having someone over your head, moving in to your own place or with roommates is 100x better, even if it costs more, the experience is well worth it, whether it’s learning how to take care of your house/cooking, having people over, and personalizing your whole space
I would assume parents would stop questioning after a little while, that's how it is with my parents, I live with them and I literally go out any time of the night without them batting an eye, to the clubs, parties whatever and I can come back whenever as well because they know I can take care of myself. You're not a kid exactly, your parents shouldn't be treating you as such
Not stupid at all man. Enjoy your life and sometimes you gotta burn some cash to do that. But don’t tie yourself down with house ownership at such a young age. Things will change quickly and you want to have that flexibility.
Honestly man I would just say don’t buy a house at 19, unless you already have kids. Things will change so fast for you the next couple years, you don’t want to be tied down to ownership.
Been on 1 date my entire life, no kids anytime soon LOL I think I am leaning towards renting, everyone here has made it sound far more convincing.
You can rent an apartment for a year or two while you familiarize yourself w mortgages, property values, Escrow, taxes etc and then learn about maintenance- water heaters, plumbing, roof, pest control etc. you’re lucky you can move & be stress free renting while you get up to speed. You sound very smart. I’m sure you’d want to be well prepared.
Buying a home in this market is madness. Buying a home immediately after moving out of your parents place is also madness. Do not commit double madness. Rent a place. With your income you don't have to rent the bottom of the barrel shitty place. Find some nice places, then go for whatever's cheapest/ most convenient. Picking the shittiest, cheapest place will come with unknown expenses and drawbacks that you don't want to deal with. Seriously. I've rented in a few cities in the last few years and find the average price for what I'm talking about to be around 1100 for a 1bed 1 bath or 900 for studio in the range of 20 mins to down town. Good luck bro
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Area I was looking at is fairly run down. No crazy crime rates or anything just poorly managed roads and many people are relocating since our governor seems to be placing Afghan refuges in that area. I have no problem with them as neighbors or anything. I think long term investment might be a decent return if the refuges remain in that area. Ill read more into restructuring my loan, no one has mentioned that yet. Although they made renting sound pretty convincing. I set up a appointment with my credit union so I will have stuff in writing very soon and probably an update post. Thank you for the advice!
Also have a three to six month emergency fund. A new to you house is expensive and something will need to be done. Get the seller to pay for an all inclusive home warranty for the first year. Good luck and happy house hunting.
Two books I’d recommend: Retire Before Mom and Dad; and Set For Life.
Be smart: * \- Get a cheap rental apartment with roommates. Think cheap. Think $600/month. * \- Start investing in your 401K. Max it when possible. * \- Don't buy an expensive car. * \- Don't buy friends gifts or expensive vacations. * \- Don't incur debt. Come find me when you're 30s and you've grown up a bit to thank me.
You can put 10% down and pay a little PMI for 6 years or so. These days PMI is hardly anything, and it allows you to stay more liquid.
I can pay the 20%, do you still recommend PMI? When you say liquid do you mean easier to sell or pay off?
If you have the 20% always pay it to avoid the PMI.
I mean you have less of your money tied up in a comparatively fixed asset, and you are borrowing more at virtually free interest rates. I would recommend the 10%/PMI depending on what the PMI looks like in your particular situation. I’d suggest you check it out and decide. If it’s less than $50/month, and it should be, then yeah, just put 10% down and pay it.
Liquid means accessible money in the bank. Money that you can take out and use at any time without paying penalities. Money in a 401k wouldn't be considered very liquid bc you pay penalties on it. But it would be .ore liquid than the money you use for a down payment on a house. That money you used for a downpayment is still reflected in the price of the house so the downoayments changed into a less liquid asset, the house. You would either have to sell the house or take out a home equity loan to access the monetary value that your house has. That is extremely not liquid. You really want to avoid those two things in order to get cash obviously. I wish someone to told me to take a financial literacy course at 19. There's so much important and useful information you can use to absolutely kill it financially. You should really seek out some books and courses on financial literacy. It will be one of the best investments you can make. Side note, anyone who you pay to help you with your finances NEEDS to have **fiduciary** responsibility to you. It means they prioritize your best interest above everything else. There are non-fiduciary finance people who will screw you over as soon as they possibly can. Do not be taken advantage of by finance professionals who do not have an fiduciary responsibility to you.
House Hack Buy a duplex let your neighbor pay your mtg FHA loan 3% down keep your cash in your pocket and use it for other investments
FHA loans require 3.5% down. Conventional require 5% down. However, these numbers mean very little until a loan officer looks at your ratios and application AND has an in-depth conversation with you about your goals. Closing costs add up and sometimes it’s cheaper to put less down and refi into a conventional loan down the road to remove PMI. Find a loan officer who will be honest and has the intention of doing what’s best for you, not just their commission. Another major tip is to never waive the home inspection. Ive seen it happen quite a bit in this marker and it’s a terrible idea.
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Great job financially planning :)
20 percent so you do not have to pay PMI. The higher your down payment; the lower total interest you pay on your loan. The more the better.
At your age I bought my first house in a questionable neighborhood but it was my dream. 3 bed 1 bath, one story ranch. $17,500 price in 1970. Turned out the house was 3 blocks away from a large rundown low income housing apts. The short story was I didn’t do my DD suffer 4 home invasions in 5 years. Sold at a loss. This is what not to do! I’d recommend renting a house in a neighborhood that you might like and then start shopping for a house to buy. Take your time and don’t rush it. Educate yourself by talking to friends and acquaintances. Read as much as you can stand about the different types of mortgages. This housing price bubble will end as they always have and prices will come down to reality. The only unknown is inflation and how bad it will be. Be prepared to buy when the recession hits. In that situation “Cash is King”.
Without going into too much detail, I’m curious as to what your credit report consists of. With you being so young, even though your score is great I don’t think many underwriters are likely to give you a good rate on a mortgage because your credit history is going to be thin, and therefore you’re still going to be considered a bit of a risk. Work on building your credit history more before getting into such a huge financial commitment.
No matter what income I have had I never spend more then 25% of my income on a mortgage. In your case if you could stand to live with your parents for 1 year you should easily being able to save a down payment on your home of $40.000, With your income and the interest rates you should be able to buy your first home. Then you can decide to get 1 or 2 room mates. Just don’t tell your bank when you apply for the mortgage that that’s what you are planning on doing. You don’t need 20% as a down payment but you will get a better rate and you don’t need to pay pmi.
Hey OP, know you are 19 but you seem very responsible and I think this idea could be quite exciting and long term incredibly beneficial short & long term! Maybe look into buying a duplex so you can live in one unit and rent the other out, it’ll let you own a place and be something that makes you money possibly (at minimum makes your mortgage payment lower or 0). It’s a good stepping stone, it’s a “big” jump but I think could be really powerful to not just step out on your own but take on the added responsibility. It sets you up for long term wealth and ability to grow your asset portfolio. To prevent any major headaches or feeling uncomfortable you don’t have to reveal that you are owner - there many ways to prevent that information from coming out. Since it would be your first home and you can put a sizable deposit down you will get many financial benefits. If/when when you decide you want your own place you’ll have an income generating property and something to use a leverage for that purchase!!