UPDATE post #36 DH's pay is getting cut by more than 1/3, buying a house - Page 2

[GuildJenn]

I hear that you are optimistic about the future.

I just think, from having owned two homes over 12 years - one a fixer-upper and one not - that if your budget is that close to the line, it's just not a good idea. I'm assuming you asked 'cause you want to know. I'm also assuming you've factored in house insurance and taxes and everything.

Now it may be that you have lots of resources to draw on; that you have savings to cover yard tools or that you have a garage full of tools already and that you really know what it's like to care for all that.

But I wouldn't do it. It's not that every year is bad or something. It's just that there's always something. Last week my husband slipped coming out of the shower and knocked into the toilet...the tank broke and bingo, new toilet required. I don't think a warranty would have covered replacement from that kind of accident. Door hinges. Just the weirdest stuff.

I'm not hugely familiar with home warranties but I feel pretty sure that there are sort of co-payments built in and a lot of limitations. A lot of the little repairs around the house would cost more to get someone in than to go and do them, but they still add up to a few hundred dollars a year. Even my sister's two brand-new houses had issues.

The thing is, you can move and not do repairs but when you own the property, you are pushing your own equity down when you don't as well as "storing up" problems for later.

[BetsyS]

Originally Posted by dizzysmom

A home warranty does not cover every repair, and even something small like fixing a small leak in the sink can cost you $50. If you don't have enough wiggle room in your budget to account for those expenses, you'll have problems.

This is where we've been in the last couple of years, and it's not fun. If I had to do it over again, I wouldn't buy until I could prove to myself that we had enough extra in our budget to save up a huge downpayment. Like 40% or something.

[Tradd]

OP, you say that you've been approved before for a loan when you had a worse financial situation than what you'll be experiencing in Feb.

When was this? Everything I'm hearing suggests that borrowing requirements have gotten stricter.

[choli]

A difference of $25 between your rent and your mortgage/property tax/insurance is not going to come anywhere near the difference in expense between renting and owning. Maintenance alone, before you even factor in the moving and commuting expenses would require at least 10 times that amount.

[dachshundqueen]

Now is not always the time for the things that we so desperately want. Part of being an adult is realizing that sometimes the answer is no and sucking it up and working hard to make the answer yes in the near future.

The vast majority of posters are telling you the same thing. Please don't bury your head in the sand. I understand that this is something that you really want but you would be jeopardizing your long term financial health and security to do this.

Drop your budget allotments, pay off your debts, make headway in savings, and see where you are in a year. Perhaps you will have to move to a different apartment, and perhaps your DH's job situation will vastly improve - but neither of us knows the future. The current facts of your situation bear out that this plan is a bad idea, but cleaning your financial house will only help you in the long run.



Liz

[sunflower.mama]

Originally Posted by dizzysmom

A home warranty does not cover every repair, and even something small like fixing a small leak in the sink can cost you $50.

So true. Our realtor got one for us to sweeten the deal and when the 40 year old stove broke the fine print in the warranty was to fix it. Not replace it, and no one could fix something that old. The warranty only costs a couple hundred bucks to purchase...so don't assume it's a magic bullet. It's a contract with fine print like anything else.

I'd be way too afraid to purchase given the insecurity in your income stream, personally. It would feel like a yoke quickly. Esp if you are talking about PITI being $25 less than your current rent, and an increase in said rent being unaffordable. You'll spend way more than $25 a month on homeownership, PITI aside.

[RiverSky]

I also agree with all of the others who say that your situation sounds way too iffy to justify buying a house right now. Plus, there have been numerous articles and pronouncements from the feds saying that real estate prices are projected to continue going down for the next 3-5 years. Wouldn't it be awful if you bought a house now, could barely afford to pay for it, some big things broke and then the value went down and then you were $20K or $40K down in value from what you owe in just a year or two? It can totally happen. I venture to guess that it will PROBABLY happen.

I also think that with the location of the house, the value of it is not likely to go up as much as something located in the city, with that much of a commute.

[Drummer's Wife]

Originally Posted by RiverSky

I also agree with all of the others who say that your situation sounds way too iffy to justify buying a house right now. Plus, there have been numerous articles and pronouncements from the feds saying that real estate prices are projected to continue going down for the next 3-5 years. Wouldn't it be awful if you bought a house now, could barely afford to pay for it, some big things broke and then the value went down and then you were $20K or $40K down in value from what you owe in just a year or two? It can totally happen. I venture to guess that it will PROBABLY happen.

I also think that with the location of the house, the value of it is not likely to go up as much as something located in the city, with that much of a commute.

yeah that - especially the bolded. This is why I think it's kinda crazy to buy a house right now, or even in the next year. And especially if you don't have a huge down payment to offset the likely depreciation, and savings in the bank and a dependable adequate income for the rest of life's curveballs. There's nothing wrong with renting a house in the area you want to live in. In fact, it makes sense financially on a lot of levels.

[NightOwlwithowlet]

I really understand wanting your own home. It's something I really wanted and we bought one with DH's VA mortgage. While the VA has stringent inspection, there was still $3,000 to 4,000 dollars worth of things that came up over the first year that were missed in the inspections.

We had a VA inspection, an inspection, and had my dad (a former contractor) take a look at the house for and we still missed things (plumbing issues, a new boiler and a four foot sink hole in the drive way) If you have kids under 6 and the house was built before 1978, you should get a lead risk assessment done).

We were very conservative when we bought our house. We bought for $50,000 less than we were approved for and I made sure we could afford the mortgage/insurance/taxes and our car payment on one pay check. Even so the next two and a half years were rough. Things came up with the house that cost extra, with our son's health, and even though it's a "great school district" we still paid for private school. If we were renting, I could've moved two miles over to the school district was perfect for my son. I'd think very hard about it, especially if you are a family with one income in this economy.

[celerydunk]

No offense, but you are already trying to find ways to scrimp together money to pay for the mortgage and you havent even bought the house.

but more likely than not (the good Lord willing and the creek don't rise!), he will have another job by that time that would allow us to make ends meet.

Counting on dh to get another job in this economy is not the most prudent thing to do. The house is not perfect if you have to put an 'except for' in parenthesis. There are plenty of houses on the market. Wait until you are positive he will get the job and you will be able to pay the mortgage AND save money. Then you can find your perfect house.

[Vaske]

I can understand wanting to get out of the city for good. For us, we know we're not ready to do that yet financially, but we have been working on getting ready in other ways, from our apartment:

Starting home-based microbusinesses that are not tied to the city, that will give us some independent income streams

Getting our finances in order, out of debt and building savings

Learning how to cook and preserve real food

Learning how to repair and make things ourselves; investing in tools to do the work

Reading about gardening, and observing other people's gardening techniques whenever we can

Reducing reliance on utilities

Moving away from consumerism and learning where to find more frugal alternatives for what we do need to buy


The book Radical Homemakers put it as making the home once again a center of production, rather than consumption. Also, many of the people profiled in the book had to come up with creative ways of getting out of (or even of remaining in) the city, because it is so hard to accumulate the capital to buy a country place on your own.

This morning I looked up some family history, my great-grandfather didn't start on his homestead until he was past forty and had five children. He still managed to accomplish an amazing amount of building, clearing, and planting (no doubt with a lot of help from the neighbors).

[cristeen]

I agree w everything thats been said so far, but one area that really hasnt been touched is the cost of the commute. My DH commuted for 5 yrs, and we just sucked it up. When he got a new job last year we had to sit down and calculate the cost of said commute. Turns out that by getting a closer job, we're now saving $10,000/yr in commute costs. Neither of us had any idea it was that high or that that was the reason the otherwise good pay fell short. That's approaching $1,000/mo for a "reasonable" 30 min commute. it doesnt sound like you guys have that kind of leeway in your budget, so what happens when your acct is in the red for the month, the gas tank is empty and you still have a week to go until the next paycheck? How does your DH get to work, the kids to school or you to the grocery store?

[Denvergirlie]

I am going to chime in as well, and say that I personally would not be comfortable with buying a house so far out with such a tight budget.

Being a renter is not all bad. I've rented my whole life other than when I lived at home with my parents.

We've had lots of gardens, chickens, paint the walls, etc. We currently live on 160 acres of forest land, and we are 45 minutes from city center. Sure, it can take a bit more effort on your side to find the proper rental location, but I've always been able to find something good with a bit of effort.
It has also been a big lifestyle change. We spend a lot more time at home, a lot less social events, or even talking with neighbors etc. Country living can be isolating, are you okay with not being able to run to the grocery store for a forgotten whatever?

That being said, I've sure noticed that our utilites have gone up in our most current location, along with a great deal more of gas for the truck. We used to live city center, and it was a lot cheaper, but the difference in location, has certainly increased our cost of living. We went from using one tank a gas a month, to a tank of gas every week if not more, as well as a lot less variety in grocery store shopping, which has also increased our expenses. It's been a large change to our budget.

Not to mention that I doubt housing prices are at rock bottom, you are losing a large portion of your income and you are already having trouble making ends meet.

Rent, save money, have a good downpayment and make sure you have a house emergency fund as well as a personal emergecny fund.

Do you have any savings right now? Aside from any monies you would put down on the property?

Sure, you might make it if you buy now, but personally there is no way I would be able to sleep at night being so close to the edge. Do you really want to add this additional stress to your life right now? Make sure you are not looking at just the positives without looking at some of the possible negatives.

Best of luck

[rightkindofme]

When you get into a situation where you live so far away from everything, what are you going to do when you have catastrophic car failure? There will come a time when it will be hundreds, maybe thousands of dollars to maintain a running vehicle. Do you really think you will be able to pay for that?

My husband often says that owning a house is *not* a way to save money. Owning a house is a way to hemorrhage money. Don't do it. We don't have a fixer upper. We had to replace our roof last year (that happens over time). Do you think you will be able to save up $15,000 just to have that sitting around when you need it? (And we got the cheap roof.)

[newbymom05]

Yeah, I have to agree w/ what everyone else is saying--don't do it. I wouldn't do it b/c of your finances, but I also wouldn't move out to a rural area w/ 2 small children and my partner a long car ride away. God forbid, what if something happened?

Good friends of ours are farmers w/ 2 working farms, one in the city and one in the country. They recently moved their main operation to the country location and my friend is having a really hard time adjusting, and she's lived/worked on farms all her life. She's finding it really isolating. No restaurants, the only food store is a WalMart 30 minutes away, all the food is processed or really expensive b/c it has to be trucked in...I think that's the reality of a lot of rural areas. Her husband keeps buying more land cheaply because everyone who lives there is trying to get out to move to where there are jobs. All those people have crazy commutes, just like you're considering.

Also, taking care of 5 acres would be a big deal. Even if you just focused on the area directly around your house it'd take someone at least an hr a week. Gardens = way more time. How are you going to do it w/ a baby? And w/ your DH in the car for practically a whole extra work day, is that how you'll want him to spend his weekends?

Sorry to be a downer, but I even if you made your plan work financially, I think you would quickly come to regret it. I agree w/ those saying rent in the area and see how it goes.

[ltlmrs]

Thank you everyone for the advice! And thanks especially to those of you who charitably assumed that I was genuinely seeking advice and not trying to justify a decision I've already made.

We have decided not to buy this particular property.

However, we've spoken with both a financial adviser and our accountant (who has been doing my taxes for ten years and has a very clear picture of our financial situation) and they both agreed that buying a house would not be a bad idea for us right now. We must, however, find something that is at least $150 less than our rent payment and we will put that difference towards house maintenance (in addition to some savings we have already that although earmarked for something else could be used for repairs if absolutely needed). We did the number crunching and if we find something that is actually *closer* to DH's work we would have some wiggle room for an emergency fund and can continue with our debt snowball on his income alone even if he does not find extra work beyond what he's got already lined up. We would not be able to do this if we continue renting.

The city we live in also has a down payment assistance program that we qualify for that would give us 10% of the purchase price. This will be very helpful.

We are planning on doing as much work as possible ourselves. DH helped put an addition and roof on his parent's house and is willing to learn other maintenance skills. In fact, our landlord is not very good about repairs so while DH was working, I've done some things like plumbing and caulking myself anyway.

And since we're planning on staying in this theoretical house for at least 5-10 years, I don't think we're going to worry about resale value. We had originally intended to not buy a "starter home" since DH is quite a bit older than I am, but if this is what we must do before we can own our dream property, then that's what we'll do.

That said, I'm not sure if such a house exists, but we'll keep our ear close to the ground and meanwhile try to save as much money as possible while DH brings in a good paycheck. This thread has certainly helped me prioritize some things. Thank you!

BTW, Vaske, you and I think a lot a like. Your list is very close to the list of things we've been working on the entire time we've been married

[shelbean91]

Glad you've made the decision that works for you. I think now isn't a bad time to buy a house - I've actually been thinking about trying to buy a second house to rent out. I'm NOT doing that at this point b/c we don't have near enough expendable income or emergency fund, but if we did, I would. My MIL rents - I'd buy to rent to her.

We originally purchased the house we're in as our 'starter' house and expected to be here 3-5 years. We purchased when we were both working, but bought something we could afford to keep if one of us stayed home with the kids. We've now been in the house 11 years and we've been able to have someone home with the kids the majority of the time they've been around.

Also - good thing about a pay cut is it may put you into a lower tax bracket. When we went to 1 salary, we went down and ended up with a giant refund. We then adjusted our withholding and all is good.

[Violet2]

OP if the mortgage is going to cost you only $25 less than rent and you can't afford your rent to increase HOW will you pay for the extra gas for the longer commute????? I think gas costs are going to be a problem for you.

I know you're in love with that house, it is SO hard to walk away sometimes, but I am not sure you would be okay financially.

Good luck.

V