I (21) graduated with a B.S. in Mathematics in May of 2020 and moved into an apartment by myself in the Midwest (KS) to begin my new desk job (working from home currently). Given my position and high performance, I know that I would like to stay with this company and in this city for awhile, so a home purchase has been on my radar ever since I moved in. My main question is: how long should I wait to buy a house?
-Income: $52,000 Salary Paid Biweekly
-Monthly Gross Income: $4,000
-Monthly Take-Home Pay: $3,000
-FICO Score: ~740
-Debt: $0
-Emergency Fund: $6,000
-Home Savings: $18,000 (+$1,500/month)
-2021 Roth IRA Deposit Fund: $6,000 (+$500/month)
-Roth IRA: ~$30,000 (Max every January)
-401(k): ~$1,500 (3% in, 3% match)
-Rent: $605/month
-Food & Utilities: ~$395/month
Homes I would like to purchase fall in the $150,000 range. My apartment lease ends in May of 2021 and I'm considering two options:
-
Buy a house before my lease ends with 5% down on an FHA loan
-
Renew my lease for another year, save more money, and put 20% down on a conventional loan in 2022
I would like to purchase a home sooner rather than later if it is financially viable for me to do so, thus I am leaning towards the first option.
With my current $18,000 (and growing $1500/month) in allocated home savings, I could potentially use $7,500 of that as 5% down on a $150,000 home and $2,500 on upfront mortgage insurance, and whatever remains can go towards closing, inspection, and moving expenses. My monthly expenses for mortgage, FHA/homeowner's insurance, and property taxes would be ~$1030. I would refinance into a conventional loan once I surpass 20% equity in the property to lower my monthly payment.
If I wait one more year, I would have $36,000 in home savings, use $30,000 down as 20% on a conventional loan, and avoid upfront and ongoing FHA mortgage insurance premiums. Monthly expenses would be ~$825.
In either case, I would be able to use my dedicated $1,500 monthly home savings, as well as the $605 in rent I no longer have to pay, to cover my monthly payments as well as ongoing repair/upgrade expenses or extra principal payments. Additionally, I have several local friends who have expressed interest in renting out a few of my bedrooms after they graduate in December of 2021, so they may potentially be able to cover some or all of my monthly expenses if their tenancy occurs.
Do either of the options seem more viable than the other? As previously mentioned, I would like to go with the first option so that I may get a jump-start on homeownership and equity building, but if it wouldn't be financially wise given my circumstances, I am content in waiting one more year and going with the latter option. Feel free to poke holes in my plans as you see fit.
Side question: Would I even qualify for an FHA loan based on my employment history? I began my $52,000 salary position (semi-relevant to my degree) at the start of June of 2020, attended college for the past three years leading up to May of 2020, and worked part-time all throughout college, with an AGI of ~$26,000 in 2019 and ~$43,000 in 2020.
Thank you
Submitted December 26, 2020 at 05:06PM by RaymondNotRay https://ift.tt/37PVr5y
