Hi Money Minder,
So, I’m gearing up to start law school next year, and I’m really tired of renting. I’m based in sunny SoCal, and the going rate for a 1-2 bedroom condo is around 400k USD. Right now, I’m pulling in 80k a year with a decent credit score of 690. If I snag a two-bedroom place, I’m thinking about renting out the spare room to help with the mortgage.
Debt-wise, I’ve got a car loan that’ll be history soon (probably end of the year) and about 10k in student loans from undergrad that I won’t have to tackle until after law school. Do you think it’s doable for me to make this homeownership dream a reality? Any tips or a checklist you can share to help me stay on track?
Oh, and a little bonus info: I’m currently rent-free thanks to a scholarship covering housing costs. Time to hustle and save up for that property investment!
Catch you later,
Hoping for a Home
Response from THE MONEY MINDER:
Hello There,
While it’s fantastic that you’re looking ahead and planning for your future homeownership, let’s break down some key points to consider. Firstly, congratulations on securing a housing scholarship, as this frees up significant funds that can be redirected towards your goal of purchasing a condo. Also, it’s commendable that you are diligently working towards paying off your car loan and have minimal existing debt. These factors bode well for your financial health.
Given your current income, a 400k condo might stretch your budget, especially when factoring in potential maintenance costs, property taxes, and HOA fees that come with homeownership. It’s great that you are considering renting out the second bedroom to help with mortgage payments, but remember that being a landlord comes with its own set of responsibilities. Make sure to account for potential vacancies and maintenance costs when calculating your rental income.
In terms of your credit score, a 690 is decent, but a higher score typically results in better interest rates and terms on mortgages. You may want to work on improving your score before applying for a loan to ensure you secure the best possible deal. Additionally, having a healthy emergency fund saved up before purchasing a property is crucial to protect yourself against unexpected expenses.
To make your homeownership goal a reality, consider creating a detailed budget to understand your cash flow and expenses better. Saving aggressively towards a down payment while working on increasing your credit score should be key priorities. It might also be beneficial to consult with a financial advisor or mortgage specialist who can provide personalized advice tailored to your specific situation.
In summary, while buying a condo in Southern California is a lofty goal, with thoughtful planning, disciplined saving, and prudent financial decisions, it is indeed achievable. Best of luck on your journey towards homeownership!
Farewell from THE MONEY MINDER.
