Reader Question: No Debt & An Impending Raise – Time to Jump In?

Here’s a question I received from a reader over the weekend:

I have $50k in the bank, no debt, make 50k per year and am confident in a position that will pay 75k per year starting 06/10. Let’s assume that if the position doesn’t happen, I will take a second job to make up the difference.

I’ve never owned a home. Rent for me is one room in a house and just $400/mo. A place I buy would need to be on the eastside.

I’ve lived well below my means for years (and also been a Seattle Bubble reader for that amount of time). But in my current situation I’m seriously considering a first home. Your opinion on my situation would be appreciated.

– “Seattle Bill”

Here’s my advice for Bill:

1) Structure your budget around what you already have today, not what you might have sometime in the near future.

You’re making $50,000 today. That’s what you have to work with, not $75,000. If you buy today, setting your budget based on a future expectation of a massive increase in salary, you’re setting yourself up for failure.

Here’s what I recommend to anyone that is considering buying, in any market. First, go to your preferred mortgage broker, bank, or credit union and find out what kind of loans you are qualified for, how much you can borrow, and what your monthly payment would be. Getting a pre-qualification does not require you to commit to a lender or a loan, but will tell you for sure how much you can borrow.

For example, let’s say you were pre-qualified for a $250,000 loan, with a monthly principal + interest payment of $1,100. Add in probable taxes and insurance (we’ll say another $350 / month), and you’ve got a total monthly PITI obligation of $1,450. With a yearly salary of $50,000, that comes out to 34% of your gross income.

Here’s a simple affordability calculator I posted earlier this year to help you quickly calculate your own personal affordability situation.

Personally, my absolute upper limit would be 30%, but even that would come out to $1,250 a month for you, which is over three times what you’re paying right now. Figure out what you think you’d be comfortable with, and then force yourself to live with that budget for six months, saving the difference between your current rent and your expected monthly house payment.

If you succeed in living within that budget for six months, you’ll have a pretty good idea of what other sacrifices you’ll have to make to buy the house, and you’ll have another $5,000+ in the bank to help pay for closing costs or your down payment. If your salary does end up rising by 50%, either stick to what you could afford with $50k, or get pre-qualified again with the new salary, and “test drive” your budget again with the new salary.

2) If you decide to buy, pay a price that you think is fair for the house today (assume that it may stagnate or decrease in value in the future).

One surefire way to set yourself up for financial problems in the future is to rationalize your decision to buy a house by convincing yourself that it is a great financial investment.

There are plenty of great reasons to buy a house. Buy a house because you want a place that you have control over. Buy a house because you want stability. Buy a house because you want to plant a garden. Buy a house because you want to breed Irish Wolfhounds. Just don’t buy a house because you think it will make you money. Maybe it will, maybe it won’t, but that factor should not be a part of your decision-making process.

3) Keep your eye on bank-owned houses, and look for homes that need a little work.

There are definitely some good deals to be found out there today, but they’re not in the owner-occupied homes that have been “upgraded” with hardwood floors, granite countertops, and a fresh coat of paint on the outside. High curb appeal may sell a house fast, but it doesn’t sell a house at a good bargain. If you’re willing to put in a little bit of work, look for bank-owned fixers.

The Bottom Line: Know what you’re getting into.

Nobody can tell you what you should do, since no two people have the same financial situation. My recommendation is just that you do the research, critically evaluate your finances, and should you decide to buy, do so with realistic expectations.

So what’s your advice for Seattle Bill? Let’s hear from the commenters.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

74 comments:

  1. 1
    buystocks says:

    If doing just for financial reasons (implying this from lack of any other reasons in the users message), then wait, research, and watch. Lots of sellers still not yet in the acceptance phase of their depreciated assets on the eastside and MI.

  2. 2
    AMS says:

    Never fall in love with a home, as it will not love you back. That said, if you find a home that is clearly within your means and you are buying it to enjoy, then the purchase decision is much different than someone who buys with fantasies about how much money they will make.

    I just finished my coffee purchased this morning at my local Starbucks. Was it a financially sound purchase? No way. Did I enjoy it? You bet. Was it within my means? Yes. I didn’t buy it thinking that I’d be ‘priced out forever’…

    When I read this, “Rent for me is one room in a house and just $400/mo,” I cannot overlook two things:

    1. The drastic change in living conditions.
    2. The drastic increase in housing costs.

    If “Seattle Bill” buys, he’d better be prepared for the dramatic shift.

  3. 3
    Ray Pepper says:

    Wow…the answer is obvious. Did you say 400.00 per month?? I would keep paying 400.00 a month and keep stock piling all the dough you will be making at the job. Keep looking for GEMS over the next 5 years and when you find an absolute steal then you pull the trigger. Go to the King County Auctions and watch what the homes/condos are selling at. But at 400.00 (assuming you are happy) it would take a few M-80’s under my butt to get me off my recliner to buy something.

    Home prices are going nowhere and don’t buy because rates are low. If I hear that again from Buyers I’m gonna blow my top. Have the sellers buy your rate back down to 5% when rates go up. That is no reason to buy.

    Heck by the end of 5 years you could pay cash if you want !

    Keep saving and looking! You will know when its time because you will have found a GEM of a deal!

  4. 4
    AMS says:

    RE: Ray Pepper @ 3 – From a financial perspective, the answer is clear. But what if “Seattle Bill” simply wants a better place to live, and it is within his means? (Better is measured against the conditions he seeks to live within.)

  5. 5
    Matt says:

    make sure you budget for repairs, ESPECIALLY if you buy something that needs fixing. make some calls and find out, by rough estimate, how much it costs to paint the exterior, or replace a water heater, furnace, roof, or update your electrical if necessary. budget for these, because they WILL happen.

  6. 6
    Kary L. Krismer says:

    The Tim, that is probably one of the best pieces you’ve written. My only criticism would be if they have $50,000 set aside they probably have been living on the budget you mention. It was a good suggestion to make, but they’ve probably already followed that advice.

  7. 7
    Kary L. Krismer says:

    By AMS @ 2:

    Never fall in love with a home, as it will not love you back.t.

    I think that whether you should worry about falling in love with a house depends on how picky you are. We’ve had buyers that like virtually everything we show them. For such a buyer that would be good advice. Then there are people that are very particular. There are so many different variables to a house, that if you’re picky it can be very hard to find the right mix.

    The wife and I were looking at places 12-13 years ago, and never did find anything we liked. When we started looking again about 2-3 years ago, it was still tough, but at least we found one.

  8. 8
    Ray Pepper says:

    RE: AMS @ 4

    We were given no information that he did not like where he lived. All that is stated is “in my current situation”.

    I would advise anyone only paying 400 a month to always look but he has a genuine opportunity to put ALOT of money away during a time of economic financial instability. That is the price of a car payment!!

    If circumstances change or we are provided more information then we must reevaluate. But the answer is more then obvious.

  9. 9
    AMS says:

    RE: Kary L. Krismer @ 7 – “. Then there are people that are very particular. There are so many different variables to a house, that if you’re picky it can be very hard to find the right mix.”

    Ok, let’s put this in perspective.

    If you find exactly what you desire, and it’s the same price as others, then it’s a great deal for this one buyer. I assume the others are not over-priced. That said, never fall in love with a great deal.

    Only love things that can love you back.

  10. 10
    Ray Pepper says:

    In thinking about 400.00 a month rent…I paid that back in 1986 when I moved to Espana Apartments in Bellevue, next to Sammamish HS, with my roommate.

    In recalculating it would take 3 M’80’s, and a a foaming dog- snapping at my feet, to get me off the recliner to change that financial scenario- while making 50k plus a year!

  11. 11
    AMS says:

    RE: Ray Pepper @ 8 – If he’s happy, why would he even consider a move?

  12. 12
    Ray Pepper says:

    RE: AMS @ 11

    because so many people and media keep saying we have hit a bottom and now is the time to buy….Not to mention hes got 50k sitting around and human instinct is to think (maybe I should spend it) rates are low, homes look cheap, Fed Bonus Bucks, etc……..

    Hes right on track to be in an excellent financial position for the rest of his life. Not that a home purchase will cause his financial failure but again were talking 400 a month!!!!!!! Good Lord!

  13. 13
    AMS says:

    RE: Ray Pepper @ 12 – If he’s happy where he is at, then I’d never suggest he even consider a move! That would mean both of the following:

    1. Chances to decrease satisfaction
    2. Increased cost

    That said, there must be cracks in the foundation for the question to even be asked.

    I always get a little leery when someone says something like, “I’ve never been convicted of murder.” No, it does not say they actually committed murder, but who says something like that?

  14. 14
    WestSeattleDave says:

    Let me see — he has $50K in the bank, and (assuming) he qualifies for a $250K loan, he has $300K to spend on a house. On the Eastside. On an income below the median for Seattle. That’s the kind of thinking that got us into this mess.

    Can you buy a house on the Eastside for $300K? Can you buy a house ANYWHERE for $300K (one that doesn’t require another $20-50K to make habitable)?

    I think Seattle Bill’s eyes are bigger than his wallet. He needs to save a lot more money, get that job with the 50% pay raise, or probably both. And while he’s waiting, the prices he’s looking at should come down some more.

  15. 15
    Herman says:

    How old is Bill? If he’s 40+ then I’d say don’t buy. That’s no time to take on a 30-year mortgage.

    But I bet Bill is a youngster. He probably has lots of earning years and raises in front of him. In that situation I think you can take on a bigger debt for a first-time buy.

    Seattle’s a good spot to settle in for 7 years. If the planning horizon is less than that, don’t buy.

    I think the question is whether he can find something for $300k. Don’t buy a condo.

  16. 16
    Scotsman says:

    RE: WestSeattleDave @ 14

    My thoughts exactly. He can’t buy anything worth having, sad, but true. Except maybe a condo, and that’s a losing proposition from the start.

    Wait, continue saving- you’ll likely never be able to save like you can now with no wife, no kids, no house. Make sure the new job comes through- there’s a lot of change on the wind, and much of it will be surprisingly negative. If you want something different, consider spending a bit more on a nicer rental of your own.

  17. 17

    Look Out the Window, Don’t Listen to the News

    Look around at the shopping mall activity [how few people are there and how many bags they have or are they just walking around empty handed], the restaurant businesses, closed businesses in your neighborhood, reduced street traffic since a year ago, empty movie theaters, etc, etc….

    Go to the Bureau of Labor Statistics and look up unemployment with severe underemployment as follows:

    http://www.bls.gov/news.release/empsit.t12.htm

    Check this chart every month, its currently 17% and going up; when it get’s back down below 10%, perhaps consider buying, if “ya just gotta”.

    Remember, the stock market is riding a commodity increase this year because of dollar devaluation….IMO, when our dollar devalues is also not a good time to buy RE….maybe gold? LOL

    The bottom line, were losing many times more jobs than we’re creating with chronic uncontrolled population growth added in too. A horrifyng time to go into debt.

    IMO, until wages go up as growth goes down, RE will never be a good investment ever again in Seattle. Keep smiling and keep renting.

  18. 18
    Genob says:

    As for test driving the new monthly payment/budget, I would add an additional 10% or so to the anticipated monthly payment to account for the trips to Home Depot that the renter doesn’t have to make.

  19. 19
    rentRloser says:

    If the guy is satisfying with the $400 rent life style. Why change? The home purchase decision should based on needs not wants. The guy is still single obviously, the risky of lose only one and total income is high. A $400 space maybe is just a room for sleep. Double that to improve the life a bit. Buying later.

  20. 20
    LeftOverpricedSeattle says:

    By Ray Pepper @ 10:

    In thinking about 400.00 a month rent…I paid that back in 1986 when I moved to Espana Apartments in Bellevue, next to Sammamish HS, with my roommate.

    Ray,

    Next you are going to tell me that you know Linda at the Combo….

    I bought a ’83 Reliant at the Espana once. Blown head gasket… $300.00 for the car… $300.00 worth of parts and my free time later and I had some cheap wheels. Those were the days!

    Remember when the Sammamish Totem was torched by some Lake Washington HS kids?

    Thanks for the trip down Memory Lane!

  21. 21
    rentRloser says:

    A real estate is a highly leveraged, not liquidable, high transition cost asset. A single guy with $50k saving and $50 income to buy in Seattle is very risky if not impossible. On the other hand, I doubt if he has enough space to streach his legs. Do housing budge still follow 30% of your income rule?

  22. 22
    Poetrywater says:

    As someone who almost jumped in the mess and knows how awesome it is to own a home and how easy it is to rent… I encourage this gentleman to wait. Breathe and wait… Find a better rental if you want a better space :)
    There will be better prices coming… When we pulled out of our recent house deal, the owner (an investment broker) immediately took another $5K off the price if we bought.

    He knows what’s coming. We all do.

    Softwaredeveloper, thanks for the link!

  23. 23
    Jillayne says:

    I have lots of advice but I’ll just provide this one thought:

    After you decide on a neighborhood, discover how much comparable homes rent for, in that same neighborhood. Now figure out if that would cover your monthly payment.

    You might decide to buy but then later realize that you’d like to live someplace else for whatever reason.

    Maybe you hate your neighbors. Maybe you fall in love and your new sweetie wants to live somewhere else. Maybe he/she has a nice place and you’d both rather live there. Maybe your sweetie comes ready made with a 3 pack of kids and you need a bigger place. Maybe you don’t like your commute or the neighborhood is too noisy.

    For whatever reason, you decide you’d like to move…..but in a declining market, you could be in a position where selling the home might be harder than it sounds. In that event, now you can put a renter in there.

    I know we can’t account for every unknown variable but it’s important to have a plan B, beyond “oh, I’ll just sell.”

  24. 24
    David Losh says:

    You should find a house to rent.

    If you are currently living in a shared housing situation you may want to rent a place big enough where you can rent rooms. If you want to live alone in a house you should see what that’s like.

    Just rent to see if home ownership may suit you and if the payment may be a burden. Any way you slice it, waiting a year will be a good idea.

    As an aside, unless you are handy, and like working on places, never buy something that needs work unless it is something you would do anyway. Never buy at auction unless you can afford to gamble away your entire cash investment.

  25. 25
    real-a-TOR says:

    A spokesman for the National Association of Realtors, Lucien Salvant, said, “Any time there is a lot of money around, there is going to be people attracted to it with evil intent.”

    http://online.wsj.com/article/SB125599683058895389.html

    Wow. Best. Statement. Ever.

  26. 26
    Leigh says:

    So if you bought a house using the $50K as a dp could you still be in a position to save another $50K after PITI and a repair/maintainance fund? I have met many folks who theorized that buying a home would be forced savings but what actually happened is they just accumulated more debt via the credit cards. Kind of hard to break the coffee, cafe, great restaurant, vacation behavior even though you now have a hefty mortgage hanging over your head.

    SO like someone stated earlier, continue to rent and save the difference and see how that lifestyle suits you.

    As for earning potential, depends on your field. As an RN for ten years now the best we see these days is a 3% annual raise. Sure, early on you get those teaser ‘anniversary raises’ but those go away after about 5 years.

  27. 27
    S-Crow says:

    Speaking of renting……you know what absolutely kills sales? Having TWO homes next to the home for sale in the immediate cul-de-sac for rent at $1175 and $1250. Probably drives the agent nuts. The home for sale is smaller. No math needed.

  28. 28
    AMS says:

    RE: S-Crow @ 26 – Depends on the purchase price of the home… If the purchase price were around $100,000, then it’s an easier decision to buy.

    With annual rent multiples over 20, it’s an easy decision to rent.

  29. 29
    Ben says:

    My advice for this gent would be to keep renting.

    I know people making double what he makes now, and make double what he will be making if he gets his raise, and these folks don’t feel comfortable buying in the Eastside now.

    Find something to rent for $1000 a month. You will see what it is like to spend more than double what you are spending now on housing, you still will pay less than buying so you can save, and you will get more for your money so you will live better.

  30. 30
    Snigliastic says:

    RE: Ben @ 28
    Exactly. I make double his raise amount, have a bigger downpayment, and am nervous to pull the trigger on a 300k house. I was going to buy last May, did some research including this site, and have probably saved 40k so far (unrealized, of course).

  31. 31
    Objectivity says:

    If you’re happy at your $400. mo place, don’t move.

    Your cash flow will be the envy of many, and you can live a nice debt free life.

    Things are getting worse. Don’t believe the media hype. Cash will be king (preferably in a different currency)….Wait at least one more year.

    Regards,

    Kirkland Bankruptcy and Real Estate Lawyer

  32. 32
    Ray Pepper says:

    RE: LeftOverpricedSeattle @ 20

    So it appears we used to hang in the same area. How’s this.. Remember Hoagy’s Corner? How about the Mustard Seed at Crossroads? The Black Angus night club ? Are they even still there? The pitch and put? Jafco-way gone! Ming Tree-way gone!

    Ahhh the Good old Days of Bellevue. Moved there when I was 20 from San Jose. Now when I drive down NE 8th Street and NE 4th I’m simply amazed.

  33. 33
    LeftOverpricedSeattle says:

    Hoagy’s corner was right next to the Ming Tree…. Square Cow Fun Bar??? lol!!! I went to the one in Bellingham once!

    Eastgate still had a Denny’s across the freeway from BCC and Jafco was just down the street from Flakey Jake’s AND Trident Imports…

    All car dealers now I think, Lexus and Porsche, etc.

    Ahh, but see, I am originally from San Francisco and spent time in Reno as well, remember?

    Back when it was called Marriott’s Great America in Santa Clara and the Turn of the Century became the Demon and a kid fell off of Willard’s Whizzer!!

    Sigh… can’t go back huh?

  34. 34
    Hector says:

    The executives told all of us in management last month that in appreciate for all of our hard work we would be getting our annual raises this month instead of waiting until March.

    This week they told us they will be laying off a sizable portion of management by the end of October…

    Keep renting and saving bro.

  35. 35
    Scotsman says:

    RE: Ray Pepper @ 32

    Wow- The Mustard Seed and Black Angus. I’ll go back further- the VW dealership on 116th. 1967. How about when the Seafirst Tower @ 13 stories was the new “skyscraper” in Bellevue? Treachery and old age overcome youth and beauty again… ;-)

  36. 36
    BillE says:

    I wouldn’t bank on a raise or promotion that’s 8 months away, especially in this economy. Still lots of positions getting cut. I also wouldn’t count on using that whole $50k as a down payment. Some will need to be saved for a rainy day fund, some might be needed for “house stuff” when you move in, some might be needed for closing costs.

    “I’ve lived well below my means for years (and also been a Seattle Bubble reader for that amount of time).” Me too, and it sucks. I’ve been putting a lot of things off until I have a house but I REFUSE to pay too much.

  37. 37
    John T. says:

    I have a question for you guys. I have been a long time reader of this site and see where Tim says not to go over a third of your gross wages for house payments, taxes, and insurance. I thought I have read at other financial/Real Estate sites not to go over a third of your net pay. I don’t feel comfortable going over the take home pay level. That way I can continue adding to my retirement fund and saving for the unknown.

    Am I crazy to think like that?

  38. 38
    Leigh says:

    And to those in health care, even if any of this universal health care stuff doesn’t go through there will be much pressure to bring down costs. Keep your eyes and ears open and don’t be a passive player in all this…

  39. 39
    Pegasus says:

    Forget buying the home for now. You need to get a life first. Earning 50K on your way to 75K and you are spending only 400 dollars a month to put a roof over your head? Get out of your cubbyhole and spend some time in the real world. Meet some friends. I bet you have an ant farm or seamonkeys for company.

  40. 40
    Mike2 says:

    An $1100/month payment on a $250K mortgage? I get $1380/mo at 5.25%

  41. 41
    NoMoreWork says:

    RE: Pegasus @ 38 – Really?! Because the amount you spend on rent has a direct correlation to the quality of “life” you have? How can you judge this person? Ant farm? Seamonkeys? Nice try at the humor at the end but using your logic all I can assume from your name is that you love mythical flying beasts and playing D&D all day. Perhaps it is you who needs to get some real friends and not just the ones you play Hero Quest with.

    Ridiculous.

    Seattle Bill – Sounds like your making plenty of money and living below your means which is a great situation to be in. As long as living at $400/mo is tolerable I would continue to do so and build wealth. That being said, sometimes its necessary to move (fiance for me) but I would advise against doing so until you have a sizeable down payment and are settled in the new job. Best of luck!

  42. 42
    John says:

    When you can rent for $400, your savings can go up really quickly. But then, once you are used to seeing your bank account grow, it is hard to justify paying 3-4 times as much and using up your savings for a down payment. Getting married with kids in the future can change that though.

  43. 43
    Aaron Franklin says:

    In life, I generally say ‘follow your gut’, but one of the few exceptions is real estate. Ask yourself: how would you feel if you didn’t get that $75k salary increase, and how would you feel if the value of the home you bought decreased? What is your reason for buying? Make sure reasoning is more of a long-term plan than a feeling like if you don’t buy now you’ll miss your chance. Personally, I would stick with the $400/month room if possible – the market will continue to go down, and you’ll probably end up paying more than this in interest, taxes and maintanence if you buy. Also, ask yourself if you want to be tied down – I know multiple people who ran out and bought a house to take advantage of the first time buyer tax credit, then soon after realized they are stuck in Seattle for who knows how long. So why are you signing up to pay AT LEAST $1,000/month more than rent when you can just bank that money?

  44. 44
    Basement Dweller says:

    Been reading Seattle Bubble for awhile now and have learned a ton about buying/not buying houses in Seattle as a result, but this is the first comment I’ve made. Thanks to Tim and all the savvy commentators here.

    As many have stated, buying could be a good if it’s not for financial reasons and Seattle Bill really wants to own a home.

    If it IS for financial reasons, and is just an urge to do something with that saved money, investing it may be a better option– historically stocks have provided far better returns than houses, and investing in a low-fee index fund is a relatively safe way to see returns on investments. I don’t see that comparison come up much here, because this site is real-estate focused, but my point is there may be better ways to put that money to use and see returns on it.

    Tim’s affordability calculator is cool. Also, I haven’t seen it mentioned yet on this site, so thought I’d link to it, awhile ago the NY Times made an online calculator where you can compare renting vs. owning. It is here:

    http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

  45. 45

    RE: John T. @ 37
    No, you are totally not crazy to think that. You should never spend more on mortgage than you can comfortably afford.

  46. 46
    truthtold says:

    RE: Pegasus @ 39 – Thanks for accurate insight…or at least reading my mind.

  47. 47
    wreckingbull says:

    RE: Scotsman @ 35 – Don’t forget Lollipop Park, Bellevue’s destination amusement center. I think you can even see the tower in the background:

    http://www.flickr.com/photos/sedanman/489255053/

  48. 48
    Scotsman says:

    RE: wreckingbull @ 47

    Wow! Thanks for sharing, that was so cool!

  49. 49
    The Kid says:

    RE: Ray Pepper @ 32
    Mustard Seed is still there.
    Black Angus stopped being a nightclub and turned into a steakhouse 20 years ago or so after a corpse was found in a dumpster out back.
    It closed down two months back due to lack of business. My wife was the front end manager.

    Anybody remember “Saratogas Trunk”?

  50. 50
    LeftOverpricedSeattle says:

    The Saratoga Trunk, Sure, go and have your lunch in a giant Pepsi Can, right next to “Wallpapers to Go”.

    What about Pizza and Pipes in downtown Bellevue and Bernies and Bottoms next to Bellevue Square?

    And then there was always Yonny Yonson’s in the Sternco Center…

  51. 51
    anony says:

    I would go use BECU’s loan consultant or something similar (any good faith estimate from a lender/broker) to get a more accurate estimate of closing costs and monthly payments. It includes hazard insurance, PMI, property taxes, etc. I would also add in an estimate of maintenance costs, and don’t forget the utilities if you aren’t paying those now. The entire $50K won’t go for down payment, maybe $7-9K will go to fees, appraisals, escrow, etc. and the monthly payment will be a few hundred higher than just principle and interest.

    Once you have estimated realistic costs, then you can look at whether you can afford it. I like The Tim’s idea of taking rent + savings for a few months, but I would use what you have been saving for the last few months to get an estimate. I don’t see the need to keep “test driving” budgets over and over. If your paycheck (net) goes up by $500/mo, you can afford about $500 more. If you need more money than what you come up with and think you can live on a bit less, then try it out, but consider furniture and other housing related things you will want to be buying.

    Oh, and keep in mind you will still want to be saving something. If rent + savings amounts to $1600/mo, you may only want to spend $1200 on housing if you feel the need to save $400 for a rainy day.

    Don’t buy anything that has been flipped or any new construction condos/townhouses unless you know how to spot shoddy workmanship and cheap materials and/or they offer a good home warranty. There are a lot of places out there with little more than cardboard holding up the granite counter tops.

  52. 52
    anony says:

    I forgot the last step. If you buy a place you will have something a lot less than $50,000 in savings, you will be reducing the amount you save monthly by at least $1200, and you will probably have less spending money.

    Is the quality of life improvement you will get with the house worth the monthly cost and the hit to savings? If so, and you picture yourself being happy in that house for a lot of years, go for it.

  53. 53
    Herman says:

    Come on fellahs, I’ll bet his $400/month room is barely a step up from living with his parents. Let the guy move onto the next phase of his life. This is a reasonable time to buy for someone with a good future and a sense of responsibility.

  54. 54
    Snigliastic says:

    RE: Herman @ 53 – NOT!!

  55. 55
    Scotsman says:

    RE: Herman @ 53

    Buy what??? Show me that nice home for $300K on the eastside.

  56. 56
    Ray Pepper says:

    RE: The Kid @ 49

    Thats the place I was thinking of but forgot the name Saratogas Trunk… Benfranklin Bank used to be on the corner and across 520 was another nightclub. I forgot the name……..

    Lollipop Park? Scotsman…..I was born in 1966…never knew of Bellevue till 1986.

    I grew up in Bay Area and its never the same since Frontier Village got swept away!

  57. 57
    Toona says:

    Bill,
    I have a home on the upper west ridge of Woodinville that you might like. Come over, take a look, check out comps, and if you like it, make me an offer. If you want, I’ll e-mail pictures to you first. Hey, it’s a long shot, but I thought “Why not?”. And if it works out for both of us, then we’ll throw in a Seattlebubble donation for the lead.
    Let me know…
    Toona

  58. 58
    Toona says:

    RE: Scotsman @ 55

    How about this? You might not think it’s “nice”. But it’s not bad as a starter. It’s in my neighborhood so be nice…

    http://seattle.craigslist.org/est/reb/1427274641.html

  59. 59
    cheapseats says:

    RE: Scotsman @ 55 – I am not saying that I would buy, but there are houses on the east side for under 300K…

    http://www.redfin.com/WA/Sammamish/5215-192nd-Pl-NE-98074/home/263100

  60. 60
    cheapseats says:

    RE: Hector @ 34 – I am fairly certain we work for the same company…

  61. 61
    anony says:

    RE: Toona @ 58 – Just because a short sale is listed for $320K (or 299K, cheapseats) doesn’t mean you could get it for that much. Some people list a house for less than the bank would take in an ill advised attempt to drum up interest.

    I still think $300K is a bit of a stretch for $50K/yr and $50K total savings. It would have to be move in ready with relatively little maintenance required.

  62. 62
    Pegasus says:

    I think Bill needs to progress very slowly. How about renting an apartment with a complete bedroom and kitchen and your very own bathroom first. See if that makes you agoraphobic(fear of open spaces). If that works out then try dating. Get a pet…one that can move around and doesn’t just sit on a shelf. See….buying a 3 bedroom house and living in the pantry by yourself is not all that rad that you think it might be. Slowly….one step at a time. You can do it!

  63. 63
    anony says:

    RE: Pegasus @ 62
    A. You are an a$$hole.
    B. I know plenty of people with low cost rooms and great lives. Eg. You can rent a 4 bedroom $1600/mo house with your 3 best friends, have plenty of open space, and a much more healthy dating and social life than some idiot in a Kirkland townhouse reading housing blogs all day.

    That also goes for Herman @ 53 and anyone else making assumptions about the quality of this guys life.

  64. 64

    The Tim, I love your advice in this post…have you ever considered a career as a mortgage professional? (I’m serious).

    I would add that Seattle Bill should practice making mortgage payments for at least 6 months since they’re used to $400. They can pay the difference to a savings account and increase their savings…try on that payment before you’re stuck with it. (looks like you said this all ready)

    If this person is considering a bank owned home, FHA 203k’s are pretty popular these days…especially a streamlined 203k which allows up to $35k to be financed with the purchase price.

  65. 65

    RE: Ray Pepper @ 32 – Jafco–I can’t remember the last time I heard Jafco…omg…you crack me up!

  66. 66
    Scotsman says:

    RE: Ray Pepper @ 56

    Velvet Turtle? Disco?

  67. 67
    Scotsman says:

    RE: Toona @ 58

    I stand corrected, if it could be purchased for $300-325K. There’s nothing wrong with that, it would probably work out to be very close to renting an equivalent home. My only caution would be that in three years there very well could be a selection of similar homes for $300K, and a few short sales or maintenance deferred repos for $200. And while Bill may qualify for the payment, I think he would find it a bit tighter than he imagines if the raise doesn’t come through. Best to wait, nothing to lose and perhaps much to gain.

  68. 68
    Scotsman says:

    RE: cheapseats @ 59

    Interesting- good for a guy who likes to have a lot of projects- cars, boats, etc. Flip gone bad?? Looks like the seller is going to kiss about $50K goodbye on this one. I’m a little surprised it hasn’t sold, but you never know until you’ve seen it in person.

  69. 69
    whiteonrice says:

    RE: Scotsman @ 68
    Seriously? Based on what reconditioned banks will be lending in 2 years time, that house will go for no more than 150,0000 (2x income)….

  70. 70
    Scotsman says:

    RE: whiteonrice @ 69

    Yeah, that was kind of my first thought, but then I’m amazed by the number of folks who are convinced this is the bottom. For them, that house represents a great opportunity… and even now there are plenty of buyers.

  71. 71
    Lilypad says:

    RE: wreckingbull @ 47 – Okay I was born in the late ’60’s, and have lived my whole life on the Eastside, and I don’t remember that at all!! At Bel Square? I’m going to have to call my mom today. I was a fat kid, so the thing I remember most is the Hickory Farms store there by the wishing well where they gave out free samples of those little hard candies wrapped to look like strawberries…

  72. 72
    Lilypad says:

    Stupidity confession: we bought at the peak in 2007 with the expectation that I would go back to work part time (I was an unpaid slave, i.e. mother and wife), and I did get a job less than 2 months later. We had a huge rainy day fund, and extra money every month. Peachy keen. Then just 2 months after that, I got sick and could no longer work. (I’ll refrain from launching into a rant about insurance companies and how they want to ruin you.) Bottom line now: the rainy day fund is dry, the down payment is gone and we’re going through a short sale just to unload this home, the bane of my existence. So please, don’t buy anything with the expectation that you will earn more soon and everything will be fine. Everything may not be fine, and it can happen in the blink of an eye. And no matter how much savings you have, it can go bye-bye too.

  73. 73
    old timer says:

    Late to the party, as usual.

    Never the less, the young man should very carefully consider
    the prospect that the house will take total control of his wallet.
    The payments for P+I, and taxes aside, there will be
    capricious and immediate demands for attention from the house.
    From the roof to the plumbing to the electrical appliances,
    at the most inopportune moments possible, will come calls
    for the emergency application of scads of cash.
    Sometimes, the other parts of life, sensing that they might be
    shortchanged, will issue their own demands – the car, the dentist, the job changes.
    Add in the unanticipated costs of “Oh, I gotta have…”, which you will find as soon as you
    have empty rooms, and you’re settling onto the end of a very short chain.

    Yeah, it’s nice to have your own space, make noise when you want
    but like everything, it comes with a cost, a lot of which is buried in invisible print.
    Best of luck to you.

  74. 74
    posthoc says:

    I would second Tim’s advice, which is never to count income until it’s actually in hand. Used to live in DC and knew countless young, ambitious, career-minded people who were absolutely convinced that their 40-50K jobs would lead to 70-100K jobs in the next few months. Need it be said that not everyone got those promotions? Buy a house on what you can afford right now, rather than what you think you might be able to afford–and leave yourself a safety margin, because incomes can and do decrease.

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.