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  • Buying First Home - Too soon?

    Hello everyone,

    We are planning to buy our first home, not completely decided but looking. My wife and I are in our mid-upper 30s (no kids) and moved to the new state (much closer to family and friends) last spring. She started her first attending position 6 months ago and so far she is happy with her work, and the location is working for us. We have been in the area for the last 8 months and we are planning to stay here for the long term.

    Our combined income will be around 250K this year and 350K next year. we don`t have any significant debt and we are maxing out our 401K accounts this year first time, we have 6 months emergency fund established.

    Currently we are paying rent around $1800 for 2 bedroom apartment and it is working for us but our lease coming to end soon.

    We have been saving for some time for a down payment and so far we have around 90K.  The houses we are looking around 400-550K range in the area. Usually 1700-2500 Sq. feet and build in the last 10 years and some new builds. The property taxes for 400-500K houses around $8000 - $10000 range per year.

    My questions are;

    1- Is it too soon purchase our first home? Since we are relatively new to the area and new job.

    2- Do we sound OK as far as our finances goes?

    3- Is it better to go with 30 years mortgage or shorter time frame?

    4- Anything else we need consider for the first time home buyers (we know closing costs etc.)?

    any advice/input appreciated.

     

     

  • #2
    1.  Not too soon.

    2.  Yes.

    3.  Personally, I'd go 30 years but be sure you have no prepayment penalties.  You can then have the flexibility to pay it off the way you want.  One extra payment a year to principal drops about 8 years off the loan.  Only you can decide if the increased interest you pay this way is worth the flexibility to you.

    4.  Pay to have it inspected well.  General inspector first.  Then HVAC, septic, or anything else the generalist fudges on or recommends. You then use the inspections to renegotiate the price.  Don't freak out if the inspections find something, you hope they do to renegotiate.  Be sure to require a Termite Bond or inspection.

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    • #3
      Check out the NYT calculator rent-or-buy if it's a good financial move to buy in your situation or area. Your plans sound very reasonable in terms of price point. WCI has some handy thoughts on this and favors a 15 year mortgage. Given your income versus the home price and that you will have the cash for a good sized downpayment, you should be able to do a 15-year.

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      • #4
        Depending upon your speciality you need to consider location.  For me being in a call heavy speciality living close to the hospital trumped other concerns.  Will you have kids?  The house may be too small if you are.  otherwise sounds good.

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        • #5
          Agree with Dr. Mom and hatton1.    Size and location are key factors for longevity in the house.  >3 years - buy.

           

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          • #6
            The finances are certainly fine. I wouldn't worry about timing since the money seems reasonable and you're close to friends and family. I'd go 15 year. When picking out your first home, you really need to think about what is truly important for you. Distance to work, is the house on a busy street, is it 20-30 years old with old windows/HVAC/siding, does it have dead space (ie formal dining room), etc. There is an old thread on bogleheads somewhere about people's regrets on buying their house and what was worth the money.

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            • #7
              1- Is it too soon purchase our first home? Since we are relatively new to the area and new job.

              - Yes too soon.  The physician job market is very unpredictable for certain specialties.  Without more info about specialty, housing costs, job stability etc I wouldnt buy now.  Read Physician on Fire blog about his first house https://www.physicianonfire.com/youngerself/.  Lakehouse he built then lost his hospital job out of the blue.  Took a huge loss to sell.

              We bought out of training, changed jobs and couldnt sell our house b/c 600K house dont sell well in midsized southern town especially when oil economy tanks and house foundation cracks (yes that actually happens, houses are risky).  Just sold it 4 years later after many legal and rental battles.

              2- Do we sound OK as far as our finances goes?

              - Yes, but I think you knew this 

              3- Is it better to go with 30 years mortgage or shorter time frame?

              -  I favor no debt and cash, but since Im not in the mortgage game anymore,  no comment.

              4- Anything else we need consider for the first time home buyers (we know closing costs etc.)?

              - 3 things you need to know:

              1. Houses are risky

              2.  House are risky

              3. Houses are risky

              I'm clearly sour grapes, but I know many people that got burned on houses for so many reasons: 09 recession with housing crisis (think 30-40% house loss or still havent sold), flooding not covered by insurance, hurricane damage not covered (flooding doesnt always count), oil economy tanks and all white collar house go for sale at once.   It's like I said, MD jobs are ever changing and now with healthcare in the govt hands, who knows what will happen.  I would play it safe.  If you dont need the space and just want a nicer house because, well its nicer, read about hedonic adaptation and continue to rent.   Your mortgage deduction will be somewhat phased out if your income keeps rising and you wont build much equity at all for the first 5-7 years.

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              • #8
                I'm in the home ownership is overrated group. They cost a lot more than people think. Not saying it's not a good idea if the finances work though. I'm also in the if you can't afford the 15 yr mortgage than you prolly can't really afford it. But i know most won't agree with this.

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                • #9


                  We bought out of training, changed jobs and couldnt sell our house b/c 600K house dont sell well in midsized southern town especially when oil economy tanks and house foundation cracks (yes that actually happens, houses are risky).  Just sold it 4 years later after many legal and rental battles.
                  Click to expand...


                  Is this the home sale that resulted in your 500k cash surplus?

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                  • #10
                    i like the thirty year mortgage.  why tie up so much capital in an illiquid asset that the banks are willing to give you cheap money for?  it's frequently one of the few tax breaks physicians can get.  plus if you believe in inflation might as well pay back in cheaper dollars.

                    if you know for sure after 5 or 7 years you are going to stay in that house long term, you can pay off quickly if you desire.  you have gotten a lot of the tax break, and at that point the job security will be a more known quantity to you.  if you don't want that house, you have more flexibility to move into a different house.  if you change jobs, having liquid assets is always nice.

                    i don't think it is too soon.  we always bought a house right when we moved.  of course, some of this was during the go go 90s and 00s where houses started appreciating the second you bought them, so lots of profit in the early years.  even so, my wife really enjoyed owning and would not have done it differently.

                    jmo

                     

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                    • #11
                      Agree with q-school.  Rates are still low and I would personally start a 30 year loan.  You can always prepay if you decide to pay off sooner.

                      You can afford it.  I would not buy unless the home would meet our needs for size and location for at least 5 years.

                      Perhaps watch the movie Moneypit again...

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                      • #12
                        Sort of, very astute forum! Paid the house off 600K when che old times sell it and mortgage deduction was heavily phased out from Pease Law. Selling for 75K loss not including foundation repair and legal cost issues. Same house, but not a surplus if surplus = profit. Lesson learned. We rent 1-2 years when moving from now on, no new construction.

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                        • #13


                          Sort of, very astute forum!
                          Click to expand...


                          I take it this reponse is for me so... thank you? I guess.

                           


                          Selling for 75K loss not including foundation repair and legal cost issues. Same house
                          Click to expand...


                          I have more questions now such as how much was the house when you bought it and how much did you sell it for if you still walked away with 500k? If it was located in a southern state/area it must have been stunning with good acreage for that price point.

                           


                          Lesson learned. We rent 1-2 years when moving from now on, no new construction.
                          Click to expand...


                          Renting for 1-2 years following any move is an important lesson many of us have learned from experience. I think this forum/WCI's site has saved countless people from making this same, very costly mistake.

                          Why no new construction? Seems as if many around these parts love new construction.

                           

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                          • #14
                            You're in a fine position to purchase a home. Go for a 15 yr loan if you can get a low 3% rate. You can easily afford it with no other debt and the savings on interest will be significant.

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                            • #15
                              @GXA I'm watching The Money Pit right now. After having been through an entire whole house renovation of an 1885 Victorian home, it pretty much hits the nail on the head of what we went through, lol! A little over the top, but didnt feel like it at the time

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