House Hunting

[paulk68]

Well guys i am not really sure what to do? I currently live in a 1500 sq foot cape that my wife and I bought 3 years ago. Between the two of us we do ok and are VERY comfortable with our situation. This makes it easy for me to save money each month for my camaro project. The thing is with the interest rates where they are we are thinking of upgrading to a bigger house. My question is would you guys give up the money you were saving for a car in order to get into a much better house. Or look for something a little bit better, save what you have in the car fund and maybe still save some money each month for a car build? I am 30 years old and am thinking that a house is a way better investment than a car is. What do you guys think?

[dadto2jays]

None of these old buckets are an investment I dont care how nice they are built at the end you would be lucky if you break even. Definetly find your self a house that fits your needs and you can see your self living there for at least the next 15 years. A house no matter what if you buy it right you will always make something out of it as long as you are not in a bad area.

[BuddyP]

I built a 2500 sq/ft home right off the bat.... It's easy to say you'd give up some spending money until you don't have your spending money. If you are comfortable in the place you have and like it... Keep it! Houses aren't the great investment they were 10 years ago, but are still better than a PT car, and now is the time to buy if your in the market for a house.

If I could do it all over again I'd go a bit smaller and cheaper. I'd have a car to drive by now if I did. I'm 34... over the hill really is right around the corner. Don't overspend yourself with payments

My suggestion is keep your home and if you want to, take a little $$ out or refi a SMALL amount extra (if you can get a better % rate) to remodel or add on a little to your existing home. But if you feel the need to spend more $$ per month on a home, maybe look into a 15 year mortgage on your existing home (assuming your not already setup with a 15 yr).

[nickpro_c10]

House... you can always find another project. Plus bigger house means more room for toys

[Curley]

What you should also consider are the property taxes along with the larger mortgage. If you can swing them both and you are still comfortable, then do it. You may not be able to keep the car fund going right away, but your income will continue to increase in time, but the mortgage will stay the same. After a few years you can start the car fund up again.

[Ash]

You can live in a car, but you can't drive a house....J/k. I tend to air on the side of caution when it comes to this subject. God forbid, but take one income out of the equation for a while, maybe add in a family catastrophe, substantial medical bills, etc. Either way, the car fund would be out, but how long can you float on a "This house Vs. That house" scenario if life hits you hard? Not just the added expense of higher mortgage, but higher property tax, home owners insurance, power bill, etc (Only speaking from a Florida perspective where the power bill in the summer will make you cry) I guess my point is that you don't really miss what you never had. Not to be grim, but I watched my sister go through a series of consecutive god-smacks , and in the end, she regretted not keeping her income to debt ratio at a farther distance. Crunch the numbers long and hard.

Will your mortgage be around the same after adding the car money already in savings to the down payment?

[MrQuick]

Well guys i am not really sure what to do? I currently live in a 1500 sq foot cape that my wife and I bought 3 years ago. Between the two of us we do ok and are VERY comfortable with our situation. This makes it easy for me to save money each month for my camaro project. The thing is with the interest rates where they are we are thinking of upgrading to a bigger house. My question is would you guys give up the money you were saving for a car in order to get into a much better house. Or look for something a little bit better, save what you have in the car fund and maybe still save some money each month for a car build? I am 30 years old and am thinking that a house is a way better investment than a car is. What do you guys think?

I don't know, I'd rather put the money into upgrading the house you have or invest into the stock market if you are looking to long term gains. Not much just some.

Are you guys out growing the current house or are you just going by the lower percentage rates? With your commute it might be cost effective to find a plot near work. That right there would add up to huge savings.

I don't know your situation but maybe if you can find a house you can expand on then maybe. House with open property would be cool. But you can always find cool project cars.

Vince

[MonzaRacer]

1: Have a t least a $1000 in an emergency fund to start, take all the cash you have and pay off all debts. ALL.
2: Remember the House payment should only be a MAX of 25% of your total monthly take home.
3: Written budget, 1,food,gas,medicine,electric,,,,the monthly essentials plus a little for unknowns.
4: I say allow a specific amount either in savings for car or just a play fund for car to be saved,can also be used as another emergency fund.This fund can be moved around in these steps as funds/life allows. Cutting off your hobby will be hard, if you allow for it and even keep in mind life comes first.
5:Fully funded emergency fund of 3 to 6 months of all household expenses in bank in case of emergency
6:Dont forget to think about saving for future, like investing. Should be around 15% of monthly take home or what you have left.
7: Now me I am a Religious so I believe in giving 10% to church, if your not then think about giving this to a good charity, spread your good fortune. Not donating when you can is called being greedy,,honestly.
8:Dont forget to look into term life insurance, (these are modified steps from the Dave Ramsey plan) ,just in case.
OH and stay away from credit cards and unsecured loans, only things that you can lay hands on like house,land,car,,,titled items, no big screens, home theater systems. Keep your eyes open and have a plan to get what you want, the bigger the down payment, and shorter fixed rate payments and keep the payments in proper ratio.
9: If one of you have a smaller income cut out the higher one and see if the budget CAN survive , For instance you bring in $2000 and other half brings in $1500 and you can locate a good house for say down payment, amount left from sale of old house AND the 25% rule of OTHERS income like $350 month to $500 (breaks percent rule but this is where term life insurance comes in as it let all debt be dumped quickly as your term life ins, should be at least 4 to 5 times your total gross household income.
Daveramesy.com has a list of good people he recommends to help you.
his plan works, keeps you out of debt to banks and in good standing AND keeps car fund going.
Poor planning on your part ,does not make it someone else's fault.
Keep it real, line of attack food ,medicine, lights/utilities, bills, saving, giving,car,everything else.
If you keep your head about you, keep to a good budget and follow it your golden unless both of you loose a job, but then the 3 to 6 month emergency fund allows you to get a job, bank unemployment, use any severance pay to pay down debt nad keep food and lights going.
Any bonuses can be either used to dump on fixed rate mortgages(remember any extra you pay comes off the principle shortening the time of loan and making you save cash).
Now lets say your doing ok now, you have handle on things, house id paid for no read debt to speak of, make emergency fund, have life insurance set for both of you, bills paid for, living expenses covered, and be putting the house payment in bank savings.
While looking at houses have payment numbers for loan amounts in hand, try to have at least 10% to 25% down in "cash" then the selling value of your current residence and your payments going out.
If your lucky you can find great houses on the repo market.
Lots of great houses are going up for sale and local banks are selling them at great rates.
Oh yeah, check your FICO score to start, by the time your done you want it at ZERO,,,after paying off house.
If you pay the house off sooner you can keep that payment going towards retirement/investments/projects(I would split it up).
Also if you have one kid, want another, plan ahead for a surprise third just in case. House size wise plan like this as this can also be for errant lost family member needing a room for a while if you want to help and be ready ,just in case.
I figured out if my budget covers important stuff first the extras can be gravy.
Also if you get paid weekly some months have a 5th check, either getting out of debt fund or car parts, if paid by weekly you get maybe 3 or 4 3 pay months a year. Again either debt fund or car fund.
Think about it if you bring in $2000 a pay and have a budget set up for 2 pay month, then after 2 of them there are a set of Rushforths, maybe with tires if you get a deal!

[ArtosDracon]

Having just bought my first house, I can say for sure that I did it for very specific reasons, not just because I could. We got a hell of deal on a great house, the payments are going to be cheaper than rent(utities will eat up that difference and then some) and thanks to the first time home buyers credit, by this time next year we'll be completely debt free(except for the house) so it would have been foolish for us not to go for it.

If the better interest rates are your only mitigating factor, I would suggest a re-finance, not a whole new house. There are a lot of expenses that go along with a new house that make those interest savings dissapear, and quick.

If there are things about your house that you feel really need improvement, then you might consider a re-finance with some cash from equity, but if you do go that route have very specific plans for the money, not just as spending money. Depending on your current rate and how much equity you decide to pull, your payments might end up the same but with some cash in your pocket.

Really look at all your options before commiting to something like a whole new mortgage.

[vintageracer]

A cheap interest rate is NOT a reason to buy a house or anything else for that matter. A need for a bigger house Yes. A want or desire for a bigger house No!

Remember:

"Wanting Is A Much Greater Joy Than Having"!

Think about all the stuff you thought you "really" wanted, finally got and then 2 weeks later that item was in the closet and out of your mind. It's hard to put a house in a closet so you certainly will use a house and use the house more than any car you will ever have.

Ask yourself this question:

Will the joy still be there ever month when the NEW house payment is due?

[jackfrost]

I agree with most things being said here. when I was 25 I bought a house that (after taxes & insurance) the payments were about 35% of my budget, and for the last 6 years we've had to budget real well to make it work. I wouldn't do that again, even though we got a great deal on the house at the time.

a friend of mine who has a HUGE house (5000 sq ft?) said he wishes he wouldn't have bought it, since most of it goes unused and "we only sleep here".

don't forget, if you buy a new house OR refi, your interest payments start over. also, when considering your budget, don't forget that a house requires a lot of expensive maintenance. we've probably spent 10 grand on our house in the last couple years that wasn't in the plan.

if I could do it over again I'd gladly buy a cheaper house and have some extra cash in the budget. I'd also buy a fixer-upper since I don't mind doing that stuff.

[68sixspeed]

1: Have a t least a $1000 in an emergency fund to start, take all the cash you have and pay off all debts. ALL.

Did you forget a zero there? Maybe change the first number too? 6-8 months wages in savings, MIN. If you are self employed or work on commission make it 1 year. $1k can't cover cash flow just based on when pay day at the start or end of a month. Build at least a decent emergency fund even before fully paying off cc debt.

Back to topic, if you are planning a family I could see a bigger house. Now or later is of course the question. As you know here in CT the property taxes are the killer. (for those in other areas, town property taxes here are $4-10k typically on a typical 3-4 bedroom house depending on the town, add another grand + in vehicle taxes too.) I don't have a massive house just for that reason, I'd rather have a pretty normal house but a bigger toybox. It's all what balance works for you.

[joemac]

General rule of thumb is six months living expenses in cash. Paying off debts is smart as long as you don't just run them back up. Also most "experts" say no more than 32% take home pay in housing expenses.

Stick with the house you've got. You're already invested and have some equity I would assume. Take some of your extra cash and put it in your house and make it nicer if it is getting stale on you. For not a lot of dough you can make some nice improvements. My wife and I got into a house a few years ago since sold that took all of our after tax money and we were quite dissatisfied with the lack of "play" funds.

Houses that you live in personally are not the greatest investments, they actually cost you money to use every month. Some would argue that they are not investments at all they are actually liabilities. If you want investment property purchase one for that reason and rent it out. As stated above do not buy bigger just because interest rates are low, it's not worth it in the end.