Spend or Save?

Interested in getting some outside opinions.
My company is moving next summer and I’m planning on moving instead of driving further everyday. I can afford to move up in houses quite a bit, which is pretty scary stuff. However, I am totally fine in size and quality of the house I have now. In my mind I have two options. A) Move into the same priced house as I am in now and save for a few more years. Or, B) Move into a house that can hold a family that I am planning on having in a few years. The pros and cons I am coming up with are pretty even for both sides. Being 26, I see myself as being on the fence in age of a starter home and young family home.

When you see the right house do you know? Is getting settled before kids a good idea? I’m sure just about anyone can have an opinion on this.

Didn’t read “wife” anywhere in the equation. Which for me, means do whatever you think is good now, but be ready to change absolutely everything bc that’s what women do to us…..in a good way of course

I always try to approach big projects with the end in mind.

nhamm wrote:

Didn’t read “wife” anywhere in the equation. Which for me, means do whatever you think is good now, but be ready to change absolutely everything bc that’s what women do to us…..in a good way of course

I would stay in the starter home category and roll any extra budget that you have available into paying extra on your mortgage. This will give you some equity that should leave you with a good down payment in the future when you are ready to upgrade or allow you to refinance your starter home and turn it into a rental property with positive cash flow.

Will Roseberg wrote:

nhamm wrote:
Didn’t read “wife” anywhere in the equation. Which for me, means do whatever you think is good now, but be ready to change absolutely everything bc that’s what women do to us…..in a good way of course
I would stay in the starter home category and roll any extra budget that you have available into paying extra on your mortgage. This will give you some equity that should leave you with a good down payment in the future when you are ready to upgrade or allow you to refinance your starter home and turn it into a rental property with positive cash flow.

X3!!!!

I’m a little older and using hindsight. Listen to the posts above. You’ll never regret having cash saved in this situation.

Let’s assume you get married. If you have the bigger house then she will be forced to move into your house, NOT HERS. Sorry for the all caps but that matters more than you can believe. Even if she likes the house she’ll view it as your house never be “ours” or “hers”. Very possible you’ll be buying a new house or a divorce at that point in your future. .

Keep your money saved and more future options available.

It can be really tough to know what you’re going to want in a family house if you don’t currently have kids. Things that seem like no big deal are all of a sudden deal-breakers when you have two little ones. Will’s advice is sound.

If you have not found “the one” you plan on having a family with, I would save and buy a house that could accommodate a small family but something that you would likely out grow as the kid(s) get older. That way you and your future wife can make a decision on a family home together.

I have a long time girlfriend who I live with and she helps by paying me rent. If we were engaged by next summer (not a huge secret to anyone that its coming) she would need a say in the house. Is going in on a mortgage with a fiance too early? Or should we look to keep one name on mortgage and have her as a renter until we are married?

Mookie Blaylock wrote:

I have a long time girlfriend who I live with and she helps by paying me rent. If we were engaged by next summer (not a huge secret to anyone that its coming) she would need a say in the house. Is going in on a mortgage with a fiance too early? Or should we look to keep one name on mortgage and have her as a renter until we are married?

That’s something only you can decide. My wife and I purchased a home together after we were engaged yet before we were married (much to her mom’s dismay). 9 years later, we’ve got 2 kids and are on house #2. If you’ve been together for quite some time and are confident in the relationship, there’s really no reason not to buy it together, but should things go sour, it would be cleaner if you were the sole owner.

Yep,

A smaller more practical house is more than enough for 2 people, and even two adults and a young child. We had a split level ranch when we had our first son, and took our first baby in foster care/adoption. It was actually fine, we didn’t need a 2 acre lot etc… We needed a place to fence in for them to run and for the dog etc… We were at a point in life where we didn’t need more yard to maintain, and more projects to work on etc…..

Now I have a house that costs twice as much, in a nicer neighborhood, much bigger etc… I think every day about how I would be mortgage free right now at the age of 37 if I would paid the same amount in mortgage as I do right now if I would’ve kept that house.

The pros are,
everything is newer and easier to maintain
better neighborhood
better school district
closer to the main city in my area for things like groceries etc…
less time on the road to and from work

The cons are
Property taxes are triple what I had before
Overall mortgage is twice as much
Always feel like I have to keep up with the neighbors, which means I mow twice a week, weedwhack once a week etc…
Snooty and uppity yuppies surround us, not really my people.
People come to my door selling crap all the time, because they think people in my neighborhood have money. Seriously, I bet we get 10 people knocking a week.

There are pros and cons to both, but if it were me, I’d buy a little smaller now and either pay it down big time, or invest that extra money.

I’m kind of in the same boat as you, Mookie. We purchased our home early last year. We got a very good deal on the home and it turned into instant equity for us. We tossed around the idea of selling and moving into a more well suited home for children, but fell in love and made some accommodations to the house to be more kid friendly.

Our thinking behind our decision, the price isn’t going anywhere but up for our neighborhood so we wouldn’t have a problem keeping the equity we have. We are now expecting our first child and will be staying in our current home for as long as we can.

I would evaluate the neighborhoods in both price ranges and do your best at guessing long term values. If you think the price will either stay the same or go up, I would say buying another smaller home would be the ticket. You can save the money or put more down on your mortgage and get even more in return when it’s time to upgrade. Homes in the starter price ranges tend to stay more stagnant than higher valued homes, at least in my neck of the woods…

Mookie Blaylock wrote:

I have a long time girlfriend who I live with and she helps by paying me rent. If we were engaged by next summer (not a huge secret to anyone that its coming) she would need a say in the house

Knowing that mitigates most of my post. If she has an equal say in the new house then you can start off well.

Is it too early??? Ralph has some good insight.

My situation was somewhat forced on me due to the great recession and horrible timing. Bought a starter townhome, market crashed, and couldn’t sell. Our big thing was whether to live together first and you’ve already crossed that bridge.

patk wrote:

My situation was somewhat forced on me due to the great recession and horrible timing. Bought a starter townhome, market crashed, and couldn’t sell. Our big thing was whether to live together first and you’ve already crossed that bridge.

Ugh! We got hosed by the recession, as well. We took a big hit on the sale, but then again, we got a better deal and better rate on our new home. It still hurt to lose money on the deal, especially considering the upgrades we did to the home.

Also consider what you and your girlfriend want to do after you have kids. I know I am stating the obvious, but kids are EXPENSIVE. Will you be paying for daycare or will one of you be staying home? Do you want to travel? Do you want a new a boat and/or new cars? All of these things are important to think about when you decide how much house you can afford. If your girlfriend wants to be a stay at home mom, can you make the house payment, car payment, etc. on one income and still do fun stuff on the weekends?

If you are in a stable relationship, If you have good long term employment and income. I would consider going for an upgrade. You have a couple great things going for you right now. One is historicaly low interest rates and the other is you can take your time to find the right property. Buy in an established area where some new developement won’t ruin property values increase traffic or cause other problems. The right home can be the best investment you will ever make choose it carefully.

With the current Market, many in the Real Estate Business are expecting another Crash or Market Correction coming by end of 2017.

When you look at prices in many areas and offers on homes being $20,000 or more over listing price, you just gotta know a correction is coming. Especially with a new President being in office.

I know a number of people cashing in their existing homes now, plans to remain in an Apartment for up to 2-years and buy again when the market relaxes. You go in with Cash in the Bank/Down Payment vs. putting out extra cash now and possibly moving in 2 years anyway.

Is the company move that far that commuting is going to be a huge headache? Do you have flexible work hours?

I’ve lived in the same home for over 18-years, making improvements now looking at either staying through retirement with little remodeling to do then or having ready to sell when we want to pull the plug. In this time, I have commuted up to 75 miles one way, currently 22 miles which is 25 minutes working 6:30am to 3pm; that said, working 8-4:30 the commutes run 45 minutes plus. for the 75 mile commute, I worked a 4 day of 12 hour days, 6am-6pm.

Buying now you’ll be paying a prime price due to market, plus points, etc. Are you prepared for a Market Correction of 10%-20%?

For the guy speaking or questioning of living with GF and one of you paying rent. My advice is that is best advice, having known a number of people whom bought together and broke up ending with a huge mess and drawn out battle over selling.

I’ve known many whom bought cars together too. They broke up and forgot about they vehicle was titled in both names until a year or two later when One got a DUI, requiring Whiskey Plates on ALL vehicles owned by those on the title. When you get that notice and there is nothing you can do about without much legal expense.

Keep the home in one-name and split other costs accordingly. If when you get married, then you can change the mortgage and home title. If however you are a small business owner, it may be best to have the home in her name to protect the home from any others should you be sued for something not under your control.

Good Luck!

If you have a house and find the one you think will do.Get a credit check, make sure she dosn’t have 30,000 in credit card debit .
And for Pete sake do not put her name on the house right away. DK

Ralph Wiggum wrote:

It can be really tough to know what you’re going to want in a family house if you don’t currently have kids. Things that seem like no big deal are all of a sudden deal-breakers when you have two little ones. Will’s advice is sound.

x2!

FDR

Buy the smaller place, you will be fine.

I never liked advice on the what ifs if ya break up. It’s understandable in this day and age, but IMO if you ain’t all in you ain’t all in.

If you have a better credit score and it makes sense for just you to mortgage then do it, if it makes sense for her, then do that. It’s whatever you’re both comfortable with, and if you’re not that comfortable with it WTF you doing anyways? Good luck man, houses and marriages will be the most god forsaken frustrating thing you’ve done in your life, but also the most rewarding. It’s what makes a home, and brings ya home.

Just make sure you have plenty of garage space. I recently went through this and ended up with alot more house than I needed since the starter homes didn’t have enough garage for a 20′ boat (I only had a 16′ boat at the time but knew I’d be upgrading soon). I never thought I’d fill up that 3 stall garage by myself but it didn’t take long.

I bought my perfect starter home years ago when I was in much the same situation as you. It’s never been big or flashy, but suited our needs well and while we grew it still was enough and we adapted. Paid it off several years early because we made it work instead of going deeper into debt and having more than we needed. Saved lots of money for education, always enjoyed nice things/toys, and now maxed out on our 401 for retirement. My advice which is only what worked for me…..keep it simple and live, don’t just exist like many others do.

Generally lean towards being as frugal as possible, but right now the interest rates are very good. If you are planning on eventually getting a larger more expensive home down the road I personally would buy now if you can afford it comfortably. Regarding the market crashing in coming years can’t really see that happening barring a national disaster of sorts. Rates are good and prices are up but banks are not lending willy nilly. If the price isn’t at a certain amount you won’t see new construction. people are getting above market price because there is a low supply. Prices will stabilize as supply increases but builders generally don’t build for practice they need to be making money to make it worthwhile.

I was recommended to not buy a “house” but to buy a place to sleep on a quality property. I bought a decent house on the nicest property I could afford. I’m on a beautiful lot on an awesome lake. My house could be gone and I won’t lose money.

The recession didn’t and won’t hurt quality building locations. A lake, a small river, some nice trees, an acre or two of woods… all of these things make a property special. The houses losing value are just that, houses

You can always improve a house. It’s hard to improve a property.

A couple of things I’ve learned that might help in the decision.

– The world’s top economists have correctly predicted 40 of the last 10 recessions. In other words, nobody can correctly time the market or predict the future. Buy when it makes sense for you and be responsible in what you spend.

People get in trouble with housing when they do 2 things:
– Buy based on speculation about future prices.
– Overextend themselves.

Avoid doing these 2 things and you’ll be able to weather any storm.

– Houses are expenses, not investments. Investments can be liquidated. Expenses have to be paid. Since you NEED a place to live, you can’t just “cash out” a house and pocket the money. You have to buy in the same market that you sell in.

This is not applicable NOW, but think about this carefully when considering starter home vs more future oriented purchase.

– Interest rates matter a LOT. A lot of people will advise against buying because “house prices have gone crazy”, but delaying can cost much, much more if interest rates rise by several points. Consider whole cost of ownership, not just purchase price.

Grouse

I think what most everyone here is saying is to plan for the worst and hope for the best. We bought our starter home in summer of 2006 when prices were high and I knew that, which is why I did not buy a fixer upper at the time (still in the house, BTW). Now that the market is more favorable, I’m willing to make home improvements hoping the market “should” reward the money I’m spending when we go to sell in the next couple years.

My 2 cents:

– Buy a starter home and save every penny you can.
– Your house is your place to live, first and foremost. Never count on earning any additional equity besides the payments and improvements you make yourself.
– Location, location, location. School district plus variety of inventory matters a lot for resale, know that ahead of time.
– Know your time frame. Make sure you’re willing to live in any place for 5-10 years minimum before you buy it, anything less and you’re left to market whims and timing that may not be favorable for you.
– Know what condition of a home you’re looking to buy. Be honest about the amount of cash + sweat equity you’re willing to invest in the next 2-3 years. Tough to go fishing/hunting if you’re gutting a kitchen, especially if you start a family at the same time. Money gets tight fast with diapers, daycare, etc.
– Your name only on mortgage and property. I certainly hope everything works out but its much more pleasant to add her later than it would be to take her off if something goes south.
– Like Carroll, I believe a price correction is coming as well but as Grouse said, you can’t bet on it. Be realistic with the market right now and then reset expectations when you go to sell. Only one thing happens when you try to assume something…

Lots of good advice from everyone else. Hope this helps, good luck.

I’d also consider a smart rental unit close to work. Something that will still impress a young lady but you can drop without any regrets. No mowing, shoveling, etc or having to own all that equipment.

I agree that there is another correction coming and I would not risk putting money into what you think might be equity. That could lock you into a place you and the misses don’t love down the road. Right now I would rent rent rent until you have the ideal home in your sights. This is coming from someone who’s hasn’t rented since 1995.

I’ve been in our home now 13 years, and my youngest is two years from leaving home. If we want to leave and we get another correction in the market, we will have to sell at or below original selling price of our home. Home equity is no longer a given.

ET