Unlocking the Legal Jargon: How AI Legalese Decoder Can Help You Decide Between Buying Without a Big Down Payment or Continuing to Rent
- May 15, 2024
- Posted by: legaleseblogger
- Category: Related News
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## House Buying Help: Seeking Advice from AI Legalese Decoder!
Hello sharks,
I am looking for help/advice on buying a home! I live in Northern Utah and currently I am renting with my husband and two dogs. Between the two of us this year we are projected to bring home just over 100K before taxes. (Woohoo for raises and promotions). We are currently paying off as much debt as we can (Around 8k in credit cards 9k on our car and 9k in student loans) The credit cards should be gone by the end of June, and then we will continue on the car and student loan. Our lease is ending in August and we’re trying to decide what to do next with our housing. We would like to get out of our apartment and into a home (either to rent or buy).
This all leads to my question, is it worth it to pay the extra on a mortgage rather than renting, if we don’t have much to put down? We could have a few thousand saved and I have about 6k in a 401K. I am open to suggestions and advice!
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Renting and home ownership have their advantages and their pitfalls.
If you were to buy a home and not move for a decade you are very likely to be paying less on a monthly basis than if you were renting.
That being said, I would be trying to move into a financial position that is easier to hold that home for a decade. Continue paying off the debt. Especially the credit card debt. Rent a single family home. Put the extra money aside for an emergency fund so you never carry a credit card balance in the future.
Owning a home can be expensive. Once you have cash reserves to cover unforeseen (potentially large) expenses, then buy the house.
If you can’t afford a down payment you can’t afford to buy
You’re only 22. Just keep saving and investing. There’s no rush right now and no need to be locked down financially with a crushing mortgage and putting everything you have into a down payment. And guess what? You’re on the hook for all the repairs for a house which is way more than you probably ever thought it was.
Enjoy renting! It has it’s perks and maybe you want to move somewhere in the next couple of years and won’t be locked in with a house.
I don’t think that having a large down payment is important, but you do need some money for closing costs, pre-payment on property taxes, and that kind of thing. Plus, when you own a house, you have to pay for maintenance and repairs, so you need some money set aside for that. I think you are on your way to being ready to buy a house, but you aren’t there yet. I would focus on paying off the credit card debt first, then increasing your savings. You need an emergency fund no matter what you do, and it doesn’t look like you have one. Also, bump up your retirement savings to 15% of your gross income. You need to be saving more for you and your spouse to live on when you are old.
You are already in debt, you cannot afford to add more debt. So rent for 1 more year, keep same lifestyle (even the raises are coming, don’t increase the spending because of) pay your debt, start saving for the pay down and review the situation next year.
P.S. don’t forget to put in 401k enough to take the match from your employer (401k is tax deducted, and the match from the employer are free money). You are young, that money will build slowly and you will be grateful for it in 30 years.
P.S. you are very mature and responsible for you age. You have all my appreciation.
You have some bad debt. Good thing for the raises cause it seems you were living beyond your means. I don’t see it possible you get a home this year. I’d keep renting, saving, furthering your financial stability.
It might be a good idea to talk with a couple of lenders – or maybe see what’s available online (on as site like Nerdwallet). I would expect it to require more than just a few thousand saved, as you’ll have other expenses besides the down payment, but it’s good to see what you’re up against.
When it comes to affordability, you may have a shot – maybe with something maybe under 300k. Again, there’s no harm in shopping to see what’s out there. And if it doesn’t work out this time around, maybe your next rental will be your last rental.
We’d need to compare the actual numbers (monthly rent vs. monthly Mortgage+escrow). But based on what you’re stating here, sounds like saving up for a few more years might be the way to go.
Couple things
1. Looking into first time home buyer programs in your state. They can give money towards down payment and closing costs.
2. Closing costs are about 4% of selling price so even with 5% down payment add another 4% for closing costs
3 maintenance maintenance maintenance
I would finishing paying off your debt and then save and look at buying in another year
Talking to a lender or credit union is the right answer, they will help you pencil out numbers and then you can decide if it’s worth it. I’m a big buying is better guy (assuming it’s low maintenance or you’re really handy with a fixer upper) but in your case renting another year and stuffing your savings in VMFXX for a year or two is not a bad strategy