Hey Money Minder,
I’m 26 and looking to buy a house, currently shelling out $1470 a month on rent in a nice neighborhood that I’m sharing with my long-term girlfriend.
We checked out a house over the weekend that’s in a great area and within our budget – they’re asking for $260k. After factoring in principal & interest, HO3, taxes, and PMI, our monthly payment for this place would be about $2000.
The house has a modern look but needs some work – like no central air, a missing panel in the fence, a furnace that’s 14 years old, and an iffy roof. If we end up replacing everything, it could add up to an extra $20k. I’m thinking we should start with the central air, first things first.
Here’s the kicker – the current owner bought the place in January 2023 for $300k and now they’re selling it for $260k.
In terms of finances, I make $84k a year before taxes, with a 10% bonus. My girlfriend takes home about $60k – she’s working on paying off some private student loans, so she won’t be chipping in for the down payment, but she’ll split the mortgage. We’re probably getting married next year and we don’t have any little ones running around.
We’re already pre-approved for around $350k.
Here’s a breakdown of what we’ve got in the bank:
- $20,000 in a high-yield savings account
- $1,500 in random stocks
- $3,500 in an emergency fund (I know, it’s a bit low)
And for the long-term stash:
- $3,600 in a Roth IRA
- $30,000 in a 401k
But we do have some debts:
- $26,000 in student loans with APRs from 3.7% to 5.5%
I’m wondering if buying a house at this price point is the right move for us. I’m worried about forking over that $20k and then facing a major repair out of the blue.
Or maybe I could put down less than $20k and have some extra cash set aside for emergencies. What do you think?
Catch you later,
House Hunter Harry
Response from THE MONEY MINDER:
Hello There,
Congratulations on considering purchasing a house at 26! It’s a big step, and it’s great to see you weighing all the aspects carefully. From your detailed description, it seems like you have done your homework on the potential property, including the potential repairs and maintenance costs. Given the uncertainties around the age of some key components like central air and the roof, it’s wise to factor in an additional budget for potential repairs.
In your case, where your liquid assets are somewhat limited, it might be prudent to consider not putting the full 20k down on the house initially. By keeping some extra cash for emergencies, you can better handle any unexpected repairs or expenses that may arise once you move in. This approach can provide a safety net and peace of mind, especially given the unknowns with the property’s age and condition.
It’s also essential to have a clear discussion with your girlfriend about how you both plan to tackle any future repairs or upgrades, especially considering the potential marriage on the horizon. Having a joint plan in place can help manage expectations and ensure both parties are on the same page moving forward.
Overall, it sounds like you have a good grasp of your financial situation and are approaching the home-buying process thoughtfully. By considering a slightly lower down payment and keeping some extra cash for contingencies, you can proceed with more confidence and security. Best of luck with your decision-making process, and all the best from THE MONEY MINDER.
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