Buying a home question- yet another

[Runner02]

Hello all,

I would love some advice/help regarding purchasing a home.

To make a short story long, a family member of mine recently purchased a new home prior to selling his prior home. His prior home is currently for sale and recently was offered to me at ~64K less than asking price. The house is highly competitively priced for the area. Leaving some details out, I could get it for 690-700k for 2600 sq ft. Using the rough math I did, I approximated a mortgage of 4200 including taxes and insurance.

Is it my dream home? Not really, but it is my dream/desired location. The prices in this area continue to rise and homes like this are exception. For example, homes down the street on the canal have been selling over 2 million, 5 million on the open bay, and ~800k to over 1 million not located on the water.

If I continue to save for a down payment and pay off my loans, I'm almost certain I won't find a move-in ready home like this, in this location, for this price at the time I'm ready to buy.

If I didn't have student loans, I would buy the house in a heart beat. My plan was to wait to buy a home until those were paid off, but this is an obvious curveball. I am struggling with whether I can afford the mortgage while I continue to pay my loans off. Realistically, I won't be able to put as much money initially into savings if I bought the home. Money would obviously be tighter too.

Renting until I am ready would be the ideal option, but I realize that could be a nightmare depending on the tenant and I have the obvious risk that it may not be rented 100% of the time.

Details about me:

Single female, 34.

Working with my current employer, 1 year 9 months.

Salary/savings:
~ current 350k base salary on partnership track (with multiple opportunities to work more to make extra)

~ 140k in Vangard funds

~ 20k Roth

~ 30k 401k

~ 30k cash

Current rent:
~1100 in rent. Other than not having a washer/dryer, a few noise issues, and living on the first floor in a non secured building, I am happy.

Sole Debt:
~166k in student loans, originally 244k, at 3.5%, pay 5K a month (paying less is not an option for me, as I want them gone)

Thoughts?

[q-school]

I would buy it. You want a home in that area and his is a deal. You can always sell if your circumstances change.
I would even pay less on student loans if necessary to maintain retirement savings rate. I know you say you want them gone but just to give you an idea of where I stand.

However if you choose not to, I wouldn't sweat it either. It's not your dream house. Nothing wrong with retiring debt first. You just may find other things in your life replace the loans as priorities. Partnership loans. Kids. Parents getting sick. There's rarely a perfect time.

It's just in five years, if your loans are paid off, then you will be looking at an even more expensive house. It sounds like this house will appreciate well and then the profits would be tax free. That will help you afford the next house. Good luck.

[Dr. Mom]

You can afford it.  So, the real question is do you want it?  Spend time being sure you do.  If you do, please be sure to have it inspected to know what you are getting into.  No matter how much you trust this family member, the house could come with many issues s/he is not fully aware of.  Best to know from an impartial source what you are getting into as you will now be on the line for all maintenance and upkeep.  If it is on a septic, inspect that with a septic company.  If the home inspector recommends an HVAC inspection, do that separately also.  Good luck with whatever you decide.

[Donnie]

Agree with others, you can afford it. I suspect you know you can afford it and that you are hesitating because you don't really like the house and are just anxious to buy it because you perceive it to be a great deal. In that case I would be cautious because closing costs, fees, and maintenance will really hurt you if you decide to move in a couple years, even after factoring the "good deal."

I also hate mixing business transactions with family, so would tend to avoid buying this house for that reason. Maybe it's a good deal, or maybe he overpriced it against the advice of is realtor and is now realizing it won't sell there.

[hightower]

DO NOT BUY.  First of all, you don't have enough money for a proper down payment.  Second, you have student loans to pay off.  Pay them off first.  Third, you're single and young.  Why do you need an expensive 2600 sq/ft house now?  Wait until you have a significant other (assuming you want one) and pick a house together.  Who knows, you might end up with someone who makes just as much money as you.  You guys could afford any house you want at that point.  This is not a "once in a lifetime" opportunity.  You will be able to find a great home in a perfect location when the time is right.  Don't buy into the "dream" mentality.  That's emotional buying and it gets people into trouble all the time.

Home ownership is more expensive then just the mortgage payments.  You WILL end up spending more than that in the form of repairs, upgrades, furniture, etc.  Buying this house means you will have trouble paying off your debt in a timely fashion and you will struggle to grow your net worth at a critical point in your life.  Remember, that the younger you are the more valuable your savings are.  Every dollar you save now will be worth so much more than a dollar you save in your 40's, 50's, and so on.  Save, save, save.

And I don't like the assumption of "you can always sell if you change your mind."  In 2008 a lot of people who had been thinking that found that the value of their homes had dropped by 50% overnight and selling was suddenly not an option any longer without taking an enormous hit.  It has happened before, it can happen again.

I've been in your scenario before and I am telling you it's not worth it.  Keep renting and paying off debt.  You'll thank yourself later.

We bought our "dream" house when we were in a similar financial situation as you and here I am 5 years later regretting it because I still have 100k of student loan debt and I'm still behind in savings.  If I could invent a time machine, I would go back in time and NOT buy a house until my debt was completely gone and I would save a lot more aggressively.

[jhwkr542]

Lots of red flags to me:
1. Buying from family
2. Family member more than happy to sell it below "asking price"...I could put my house on the market for a billion dollars and just because I offer to sell it $64k below asking still doesn't make it a good deal.
3. You weren't looking to buy currently
4. You'd have a lot of debt
5. You're single (meaning if you find someone, what are the chances you stay in this house for 5+ years?)
6. You seem pressured with buying because of the rising costs but there's no guarantee they won't fall
7. Not only is there the price of the house but you have the costs to fill it (washer/dryer, furniture, etc)

[fasteddie911]

I wouldn't buy.  Financially you could afford it at the expense of more aggressive debt reduction and/or savings.  However, you're single, you seem content with your current living situation, and it seems like you're rushing into the purchase because it's a "deal."  Similar to how people rush to buy items on sale because of the deal, even though they don't really want or need it.

[wideopenspaces]

I think you could go either way on this one as it appears you could maintain current student loan payments and putting 20 percent in retirement and not be house poor.
However, if you don't buy now you could plow even more into student loans or retirement and save a nice down payment for the future house. Personally that is the route I would go.
I'm about your age with 2 kids and honestly a 2600 sq ft home would just be too much house and too much work for me to want to maintain on my own. So you'd either be spending a lot of time keeping up with the inside and outside of the house, it would get dirty or look crappy outside or you'd be paying a fair amount for someone else to do it. So take that into consideration as well. And you need to factor in the cost of furnishing a house that size.
Good luck on your decision!

[Runner02]

Thank you for all the replies! I really do value everyone's opinion. I think you all are right. I'm rushing into a decision because it's a "good deal" rather than sticking on my trajected course I've planned for myself. I think forgoing the house is the best option. There will be others.

By the way, my mom is the realtor .

[StarTrekDoc]

It all depends on your timing and job.

If you value your mom's advice on the market, then use that as your guide over any of us pundits who have no skin in the game.

That said, you have the requisite numbers for the down, low debt and good income to make this work without a stretch. The key questions are market (rely on mom the realtor as all values are local). And your job security/happiness and staying on that job.

My opinion is if you are stable and hcol or appreciating real estate outpacing income, get into the game and change if needed 3-7 years down the line......with Mom the realtor she can crunch the numbers pretty easily for you.

[Donnie]

To put things in a little perspective.  You started working less than two years ago (I think) and already have a positive net worth.  This is great! You currently enjoy a high salary.  Also great!  You are way ahead of most 30-somethings just out of professional school.  You can afford the house, so no matter whether you rent or buy, you will be fine.  This site is about optimizing, but in the grand scheme of things, this decision likely won't matter too much with regards to your final net worth.  Just focus now on whether you actually want to live in the house for a long time and whether the transaction could cause issues with your family if something goes wrong.

[Hatton]

Just a thought.  You live in a community on the water.  You might want to forego this house and wait a few years when you have more money and no loans for a house on the water.

[AnotherSecondOpinion]

It sounds like you can afford it, so I don't think that's the real issue here.

I don't like the idea of selling/buying from family/friends; maybe it's a sincere discount they are offering, but maybe they now have two large mortgages and need to get rid of one of them.  I feel if the house was priced to sell, he/she would not be coming to you as it's in their best interest to maximize their profit from the home sale.

You're still on a partnership track, I would wait until you make full partner (more security) to pull the trigger on buying a home.  You should have your loans paid off in 3 years at which time you'll probably be a partner--so that's when I would do it. At that point you can find your dream home or wait until it comes on the market; either way you would have total control of the situation.

Good luck!