July 15, 2024
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THE MONEY MINDER

“I’m considering buying a house on the outskirts of the city, something ~350k”: Wanting to invest in a home, but unsure if it’s financially wise. How can I make the right choice?

“I’m considering buying a house on the outskirts of the city, something ~350k”: Wanting to invest in a home, but unsure if it’s financially wise. How can I make the right choice?

Hey Money Minder,

I’m a 25-year-old making 120k plus a 10k bonus, living in a MCOL area. I have some savings and investments, but I’m unsure if I can afford to buy a house or if it’s even the right move compared to renting.

I’ve got money in my 401k, Roth IRA, a taxable investment account, and a HYSA. I also have student loans and pay 1157 in rent with a roommate. I’m thinking about buying a house for around 350k on the outskirts of the city once our lease is up.

Do you think my money is in the right place? Will I be able to comfortably afford the house on my own with all the expenses that come with homeownership? Or should I just keep renting and save and invest more? Let me know what you think!

Sincerely,
Homebuyer Hopeful

Response from THE MONEY MINDER:

Hello There,

Although your financial situation seems stable and well-managed, buying a house is a significant financial commitment that requires careful consideration. Based on your current income, savings, and investments, it seems like you are on the right track with contributing to your retirement accounts, having emergency savings in a high-yield savings account, and keeping your student loan payments manageable.

Before deciding to purchase a home, I recommend evaluating your overall financial goals. Consider how buying a house aligns with your long-term objectives, such as building wealth, financial stability, and achieving homeownership. It’s important to analyze not only the affordability of a mortgage payment but also other related expenses like property taxes, insurance, maintenance, and utilities.

Given your age and financial situation, it might be prudent to continue renting for now, especially if you are enjoying a significantly discounted rate living with a roommate in a prime location. Renting provides flexibility and freedom to allocate your money towards savings, investments, and other financial goals.

If you still wish to explore homeownership, I suggest taking a closer look at your budget, determining how much you can comfortably afford for a mortgage, and factoring in potential future expenses. Consider working with a financial advisor or mortgage professional for personalized advice on whether buying a home is the best financial move for you at this stage.

Remember, there is no one-size-fits-all answer, and the decision to buy a home should align with your overall financial plan and lifestyle. It’s essential to weigh the pros and cons carefully before moving forward with such a significant investment. Take your time to evaluate all options and make an informed decision that aligns with your financial goals.

Best of luck with your decision-making process, and feel free to reach out if you need further guidance or support in navigating your financial journey.

Farewell from THE MONEY MINDER.

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