[Scared-cpa]

Hey, everyone! 🙂

The thread discussing moving out on here has intrigued me to make this post and get everyone’s opinion on it. I don’t know if anyone read my post on the moving out thread, but essentially I am in school for my MBA right now, living at home. I will be finished with my MBA this upcoming summer and will be looking for a job immediately after. I’ve already spoken with a recruiter in the city I’d like to move to (2 hours away) and he said that starting out, I should be able to make around $50,000 as a staff accountant. I’m blind when it comes to the job market so I really just trust his word. My long-term goal is to become a senior cost accountant as I love cost accounting, but I will take whatever I can get at the time. Here is the thing – my plan is to live at home for the first few months I am working and commute everyday to work (4 hour round trip). I know this is far from ideal but my recruiter said most employers in this city want you to start working within a week or so of being hired, so I wouldn’t have time to get an apartment in that time span. Not to mention the fact that I have 2 dogs I HAVE to take with me, which will make it even harder to find a place to live. A friend of the family is a realtor and said she could easily find me a home within my price range in this city. So my plan is to commute for a couple months while looking for a home and then move to the city once I close the deal. The realtor told me I can use the 5 years of school (4 as an undergrad + 1 for MBA) as work experience and a few pay stubs to show the banks what my yearly income will be. My credit score is in the 750’s but I don’t have anything large (like a car) on my credit. If I needed it, my parents would cosign until I can refinance in my name alone. The realtor also mentioned their are loans tailored to individuals like myself that require little to no money down.

How reasonable is this plan? Are there any tips or suggestions you all have? I really do not want to live in an apartment if I don’t have to for several reasons, so I’m hoping something like this can work out. But I’ve also been in the ivory tower that is college for the last 5 years of my life, so I don’t want to plan my future in a nonexistent world.

"The more I practice, the luckier I get."

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[Missy]

Just make sure to consider the real costs of owning a home. With good credit banks will lend more than what is realistic for a homeowner to carry. The bank would have lent me much more than my home cost but I knew if I used what the bank would lend me, I'd be ruined in every sense of the word by one emergency with plumbing, heat, or the roof.

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[Scared-cpa]

I plan on getting a very small house and the good thing about it is there are a lot of those available in the city I will be living. My biggest desire would be a fenced in back yard for the dogs. I don't plan on financing over $130,000 – 150 absolute max. I don't plan on living there forever anyway. Plus monthly payments for a mortgage of that size would be about the same as an apartment so at least I'm paying money on something I own and can renovate/treat however I like.

Do you think it is relatively likely that a bank will give me a decent loan with the situation I described or will I probably need to have it cosigned? I apologize for the questions that I understand you may not know, I'm just hoping someone will lol.

"The more I practice, the luckier I get."

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[Anonymous]

Before buying, I would:

– Make sure my job was steady, especially as someone new to the job market (you can always lose your job unexpectedly, but I wouldn't buy in the first 90 days on the job when you're officially probationary most places, and wouldn't buy till I'd gotten past the first busy season if I was in public, since there's some public firms that have major layoffs after busy season)
– Make sure I wanted to stay in the area that I was buying a house in (if you buy then move somewhere else 3 years later cause you don't like the city you bought in, then the closing costs and interest you've lost will outweigh the little equity you've earned)
– Make sure that I had a very reasonable budget which allowed for the monthly payment, taxes, insurance, etc., with LOTS of room to breath to save and pay extra on the mortgage (personally, I think I'd want to see a way to pay double payment each month – would allow me to pay a few months in advance in case of hard times and also allow me to pay off the house a lot quicker)
– Make sure the house that I can afford is one that I'll want to live in long-term – again, moving after just a couple years isn't very helpful, so if all you can afford to buy right now is something that you'll not want to live in for more than 5 years, then don't buy – just wait for a bit
– If you have other debt (car, credit cards, etc.) get them paid off before buying a house – student loans may not be fully paid off depending on your situation, but at least have made some substantial payments
– Make sure my savings is enough to make a generous down payment and still have savings left over for emergencies (preferably 3-6 months of expenses left in savings)

That's basically my pre-house-buying checklist that I'd suggest. I don't know what price range you're looking at, so don't know if $50,000 would be sufficient to easily cover expenses or not. I wouldn't buy a house on a “just barely scraping by” budget, because that means the first time there's a hiccup in the budget, you're in trouble. More specifically speaking to your situation, I would consider getting an apartment as an intentionally-short-term thing, like for 6 months, leaving the dogs with your parents for 6 months (assuming the requirement of taking them with you is that you don't want to leave them, but your parents could care for them for a short time if needed), and in that 6 months, you'll get a lot better “real-life” insight into what your budget will need to be like. I've been in your spot, not terribly long ago, and know that it's difficult to really estimate expenses accurately. Throw in a 2-hour move, and you'll really have a hard time estimating! I estimated everything very high (we've had our house for 3 years now, and still haven't had a single month that we used the full budgeted amount for utilities, even though I'd estimate it as a yearly average so anticipated some months would be over and some under!), but could've found that my perception was so wrong that even my high estimates were wrong. I will admit that a couple years before we actually got our house, my boyfriend and I had talked through a proposed budget which would have been completely ridiculous (less than 1/2 of what was actually required), but we thought was attainable at the time. So…I made some bad budgets before I made a good one. 🙂 So, making sure you have good information to base your budget on is important, and may require a short stint renting to figure it out.

Also…I just want to stress a bit the part about having a budget that allows for nice extra payments. The amount of interest you can save over the life of a loan by making additional payments is crazy, and more importantly, it speeds up the day that you actually own your house, instead of the bank owning it. Every bit that you save up for a down payment before you buy reduces your monthly payments and allows you to pay more additional.

In conclusion, if you're in a solid place financially (high savings, low debt, decent job), then buying can be a wonderful way to start out. We bought our house when I was 23 (college grad, CPA, and OK job); worked out excellently for us, and it's paid off now. It was a little tight while we were paying on it, since we were paying so much more than the regular payments, but we made it through and now have the flexibility to save everything we had been putting towards the house, or use it as we see fit (like paying for my MBA all in cash). However, you don't want to be building equity for the bank, so don't buy a place till you're sure you can keep it.

To OP: If you haven't worked yet, then I assume you have little to no savings; give yourself some time to build those. If you can afford to buy in your new city, then you can afford to rent and save a substantial amount, so I'd be a fan of renting for a bit to save up some money. A 2-hour commute is costly in time and money both, so you may be able to live in the city for about the same price as commuting back and forth. Or get a job where you live currently for a year or two and save up before moving to the city? Don't put too much stock in what your realtor says about how easy it all will be, because even though the realtor is a friend, they're still a realtor. Realtors get paid when deals close; there's no such thing as a “buyer's agent” that's truly looking out for you, cause they're trying to make a sale at the end of the day. You might be able to get financing with just a couple paystubs, but that doesn't mean it will be an interest rate that's good for you, or a house that's good for you, etc. Also, I'm not familiar with 5 years of school counting as 5 years of work history for mortgages; sounds like a salesman's yarn. 😐

[Missy]

Not a mortgage lender and I've never heard of one considering education in lieu of income but I'm no expert. My point is while a mortgage payment may be exactly the same as rent, if you have a plumbing emergency that costs about 2k, will you be able to manage? As a renter that 2k is on your landlord. Let's say your monthly mortgage payment is about $900/month. On top of that you'll have utilities, property taxes, the cost of two dogs, even groceries. Just suggesting you make sure to consider all the expenses involved. A home heated by oil can cost 2-3k a year in oil depending on how well insulated it is and the climate. Water and sewer can be over 1k/year depending on local. Property taxes can be several thousand a year. My mortgage now is exactly what I was paying for rent ten years ago but I didn't have these other expenses too. Make a list of all your expected expenses including groceries, dog care and food. Then go to paycheckcity.com and get an estimate of what your take home pay will be based on what you expect to make (don't forget to figure deductions like health insurance if you are nearing the end of coverage from your parents plan) your take home may be somewhere in the neighborhood of 600-700/week and it goes fast if over 1/3 of it is your mortgage payment.

Old timer,  A71'er since 2010.

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[Anonymous]

P. S. Somehow hadn't seen your follow-up post till I posted. Now with that information, you're talking about a $800+ payment before including taxes and insurance. $50k will be about $3,000 per month after taxes. So, if your budget looks something like (monthly amounts):

$1200 mortgage (yes I'm going to push paying extra haha)
$300 utilities (may be low – this is my figure, but my house is very well insulated, if you're buying an older house this may be too low)
$150 home insurance (mine is about $100, but my house is substantially less expensive than what you're looking at)
$100 auto insurance
$50 cell phone
$50 misc expense
——————
$1850 standard recurring expenses

That leaves you $1,150 for food, clothes, car repairs, gas, Christmas, anything medical/dental that you need, etc. That would seem pretty reasonable to me, and would leave some to save.

However, if you have student loan payments, car payment, etc., eating into that money, then it's less reasonable. Say you have a car payment of $250/month and student loans payments that will be about $250/month; that leaves $650, and that's pretty tight to cover everything listed above. Yes, you can live on $650 for gas groceries etc., but there's no wiggle room. I've been on a budget that was tight enough that getting sick and having to go get some Tylenol Cold & Flu so that I could work (usually not a proponent of going to work sick, but was a situation where I had to…) ruined my budget for the month. Just imagine a bigger expense, like replacing car tires! :O That's not a sustainable budget. You don't want to enter a 30-year commitment based on a budget that's super tight.

So…depending on what other bills you have that I don't have listed, I think you could be in great shape, or could be not OK. Factor in, too, that in a couple years, you'll have to buy health insurance, which will decrease your take-home pay. Till you're 26, you're covered on your parent's insurance usually, but that age will come before you know it.

Edited to add: I think MLA have been posting at the same time for both of our posts lol. I forgot property taxes in my budget above. Where I live, they're pretty low, but I'm in the middle of nowhere. 😛 I budget about $40/month for mine, but I'd guess you'd be over $100/month in the city, so that would make it be $1,000 or so left in my first scenario, and $500 or so in the second one.

[Anonymous]

Wow I just looked at housing prices in the city that I think you're planning to move to, and I didn't realize they could be so good! They remind me of the prices around where I live… I've known people in that area and the slightly smaller city to its south, and they all paid ridiculous amounts for their houses, so I assumed everything was ridiculous – like, your $150k max mortgage might not get you much. However, it looks like if you're willing to take something that needs some upgrading inside, you can probably get something for half of that! So…one more tidbit, and then I've gotta go clean my house and pretend to be a responsible homeowner ( 🙂 ):

If you buy something that's structurally sound (make sure you get a good home inspector!) but a little ugly on the inside, you can save tens of thousands of dollars. 70's carpet and tile etc. may not be your dream home, but if you can get it for – say – $40k less than it equivalent house with an updated interior, then you can replace carpet, paint new colors on the walls, etc., and come out way ahead. So, don't let how cosmetics look affect your buying decision, but don't buy an old dump with structural issues, either.

P. S. If you have a $75k mortgage and pay $1200/month on it, you'd have it paid off in 6 years 4 months!!! That would be phenomenal. I'm telling you, owning my home free-and-clear before the age of 30 is an amazing thing. Looks like there's several listings that appear to be in decent areas for $60-75k, with 2-3 bedrooms, a small yard, etc.

[Missy]

Lilla I need to move LOL. My taxes are over 3500/year and trust me my house is nothing special, 1/10 acre and 1600 sf of living space.

Old timer,  A71'er since 2010.

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[Missy]

And I'm not trying to be a Debbie downer but make sure to consider the logistics of working 40+ hours a week and simply maintaining let alone fixing up a home on your own. Spending every weekend doing yardwork is fun for about two years. If I never had to shovel snow again it would be too soon. And I've intended to paint my kitchen ceiling four months now but ugh…

Old timer,  A71'er since 2010.

Finance manager/HR manager

 

 

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Anonymous]

@mla I know, right? The housing prices in my area are fantastic…and the taxes and such reflect that. One reason that I really like it here. 🙂 Wages are lower around here, too (average household income in my county is just below 50% of national average), but I'm willing to get paid a bit less and have lower local taxes, housing costs, etc. What I'd really like is to get a work-from-home job that pays on national payscale, while I live in my little cheap state. 🙂

[Scared-cpa]

Thanks, everyone! These are some great tips and I appreciate all of them!

Mla, you make some good points about extra surprise costs such as expensive replacements. I hadn't really considered that so I appreciate you bringing it up.

The biggest problems I have with living in an apartment is (1) cost. The very cheapest apartments run in the city are around $600. Any less than that and you're getting in shady areas! And even the $600/month is far from safe to me. (2) Neighbors that are just on the other side of my wall creeps me out a lot for some reason. I've heard horror stories from friends that live in apartments which puts me off a little. (3) Finding an apartment that will allow the plethora of animals that follow me everyone is difficult lol. The few apartments I have found in the city that allow this are very expensive ($1,200+ a month) and usually only allow 1 animal with a typical weight limit of 20 lbs. My two dogs are 33 and 50 lbs. and if I bring the third one, she will be about 40 lbs. I don't know of many apartments that would ever allow this. (4) If I was to find an apartment crazy enough to let me have all of these animals, I seriously believe I would get complaints almost immediately. One of them barks at any sound and sounds are only amplified in an apartment building. Since they are used to being in the country with not many outside noises, they are prone to bark at anything since any sound around here is usually something to be concerned about. Unfortunately, it isn't realistic that I could leave them at home with my parents. My dad is sick and has to be taken care of and once I move my mom will have to find a caregiver for him while she works 40 hours a week. These dogs don't do good with strangers, either lol. I really don't want to put this stress on my parents since it isn't their problem.

Lilla, the city I'm looking to move to is Lexington if that's the one you're referring to, and yes, they are surprisingly cheap for the most part! I was surprised myself! I've also considered living in Georgetown if I can't find anything within the close suburbs of Lexington – I don't have a strong desire to live within the city itself. I won't have a car payment because my car has already been paid with cash and I won't have any student loan debt. The only debt I have is on a credit card and it is less than $1,000. I appreciate all of your advice, too. You gave some great tips!

As far as the education counting, several people have told me that education will count as work experience – not as income itself. Once again, I haven't spoken with any banks about this, but I am interested in finding out the straight truth on this. The realtor friend did tell me this but I am friends with a bank manager in my town so the next time I see him, I will be sure to ask.

"The more I practice, the luckier I get."

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[Scared-cpa]

The house I live in is in a subdivision within city limits, about 2,000 sq. ft. and we own another house in the country on several acres, about 2,000 sq. ft. as well and taxes usually run about $1,000 – 1,200 yearly on each of them. Lexington – I'm not sure of.

I want to purchase a home I don't have to renovate if I don't want to. It doesn't have to be the most beautiful home ever, just as long as it is structurally sound and doesn't need major repairs. I also forgot to mention that if everything goes as planned, my boyfriend will be living with me and will contribute to all of the expenses, as well. Not as much as I will because he will be making less than me and he plans on going back to school once I work for a few years, but that should help out month to month.

"The more I practice, the luckier I get."

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AUD - 68, 79
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I cannot believe I am done.

[Anonymous]

Lexington's prices are so much better than I expected. I didn't want to say the city name in case you didn't want it mentioned, but there's some awesome houses on there!

Agree that you don't want anything that requires renovation. Ugly but solid. 🙂 Like, you don't want to have to redo wiring to avoid risk of a fire, or redo plumbing straight out of the gate, or anything like that. Where I live, a frequent issue is copper being stolen from houses (all copper wiring and plumbing) if they've stood empty, and that can cost you quite a pretty penny to replace. But, something with colors on the wall that you don't prefer may be worth it. If you're paying – say – $300/month less on your mortgage than you would with a “pretty” house, you can use that $300/month to hire a painter. Just be absolutely certain that it's solid structurally and safe if you're getting something a little older – having a highly qualified home inspector is an important piece of things.

As far as the boyfriend living with you and helping with expenses…I'd treat it similarly to how I would treat something that you can rent part of it: anything you get is awesome, but don't count on it for the budget. Doesn't sound like you'll have to. 🙂 But don't let yourself be convinced to get something $200/month out of your budget since he'll be helping with it, cause whether he's helping with it or not is as of yet unknown. Anything could happen to change that – not saying that I think you're going to break up, but there's lots of factors that could affect his ability to help. If you get something that you can afford on just your income, then his is extra and makes the way easier. Also means if something happens to your job, there's less to try to cover from his job.

Overall, after seeing the Lexington prices and seeing that you could get something for less than $100k, I'm much more in favor of you making this jump. Commit to paying extra and to saving, and enjoy the opportunity to buy for so little. Pay it off quickly, start saving what you were paying, and then if you decide you want to upgrade to something “nicer” in the future, you'll probably be able to do so in cash. 🙂 When someone is in their 20's and getting a $500k mortgage I wince, but less than $100k is much more favorable.

[Scared-cpa]

My plan is to purchase a house within my own price range – as if I am paying for everything myself. I was raised to be very independent and depend on no one. And that's how I pretty much always plan to be. That way in case we were to break up or he decided he wanted to go to school full-time without working, we could swing it. I want to live well within my means (or around here we say don't get above your raisin').

My long-term plan is to purchase a house for cheap, like you said, live there for several years and save up money and then upgrade to a larger house. Even when I can afford something bigger, I don't want to spend an extravagant amount on a house. And luckily in Lexington you can get nice homes for pretty cheap – usually under $300,000 for a great house. So that's the plan! I also think it is great that you paid your house off so soon. I would love to do that. I don't plan on having kids until I'm in my 30s, so it would be nice if I had most or all of a mortgage paid and I could save more for them. I'm glad you think it is a reasonable possibility. It makes me feel less like a delusional college kid who has no idea what she is talking about to get a mortgage at 23 haha.

"The more I practice, the luckier I get."

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[Missy]

Now I'm coming around to your plan. When I bought my house I was engaged to my ex husband (long story). I got the mortgage entirely on my own just because I always wanted his income to be mad money. We've since remarried but have each lost our job, at different times in the last few years. It was very nice that for the few months one or the other of us were unemployed not a single bill was late in fact we continued to pay extra on just about everything during that time. He recently started his own business and while his income decreased at first we were fortunate not to depend on it for living expenses. Plus it's really hard to maintain a home single handedly but having someone else to mow the lawn occasionally or hold the ladder makes it tremendously easier.

Old timer,  A71'er since 2010.

Finance manager/HR manager

 

 

Licensed Massachusetts Non Reporting CPA since 2012
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[Scared-cpa]

Sounds like you knew what you were doing and everything went as planned when one of you lost your jobs. Do you think it is a good idea to commute to work for a little while and then try to get a mortgage or something else? Since you know most of my information now, what would you say is the best plan of action in your opinion?

"The more I practice, the luckier I get."

FAR - 67, 82 (Expires 07/31/18)
AUD - 68, 79
REG - 75
BEC - 82

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I cannot believe I am done.

[Author]

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