What kind of cash reserves do you have saved up? The expenses of owning come in bigger chunks then renting, especially with a fixer upper.

Depends. Where? What is the new total rent? Your saving and income? Expected home cost?

Houses cost more than your mortgage payment. Even assuming your including property tax and insurance in the payment. Remember that all maintenance is now on you. Furnace goes on Thanksgiving? Take out your credit card...

How much extra would you budget for general expenses per month? I should figure that out.

Short term no, long term yes.

When I bought my first house it was a financial stretch. When I sold it, the home had appreciated to double what I bought it for. My mortgage and taxes were 50% less than the rent on something half the size.

Your paycheck gets bigger but your mortgage stays the same

New total rent is about $2250. Income varies but averages to about 5K/mo and I typically live off 3k of that and save the other 2K. Home cost would need to beat that $2250 in rent to be worth it - which is probably a 400-500K condo or fixer-upper in my HCL area.

1% of home price per year, except it all happens in one year and costs at least $10k each time it does (not really, but close)

(maybe 2-3% if its an older home)

I've got about 100K, but wouldn't want to put all of that into the house in case of major repairs or job loss (and that includes my retirement savings).

Most "rules" suggest you should expect to spend 1-4% of the home's value a year in upkeep costs. So on a 200K house, that would be $2K a year. That doesn't mean you shouldn't have a larger reserve, especially for a fixer upper. Large repairs like a boiler, HVAC, roof, foundation, etc. can set you back thousands or tens of thousands.

What do you have in savings and how much of a down payment can you afford ?

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That's super helpful - thank you! I'll make a spreadsheet...

That's super helpful - thank you! I'll make a spreadsheet...

It’s not just about monthly expenses, It’s high cost repairs that pop up every couple years.

Your rent is probably covering these things but in a house you have to pay for your electricity/heating/gas, house insurance, and property taxes.

I didn’t buy a fixer upper, but the handful of projects I’ve done over the last couple years require tools which are expensive. Which I assume, if you’re renting, do not have.

It’s better than renting but it’s not cheaper. You also can’t just walk away like you could with a rental.

And while your mortgage stays the same, rent prices, continue to go up as well. When I bought, it was a stretch and more than renting but if I try to rent in my area now, it would be about 2.5x my mortgage.

I've got about 100K including my retirement savings. I'd like to put down no more than 64K to keep a year of living expenses, but I'm not sure if that's realistic.

That's true... My friend bought a house 20 years ago and is paying almost nothing in mortgage now.

That's a good point. I think I'm going to make a spreadsheet and I'll add repairs in against my current rent.

Where in the country are you located? Do you plan to stay there a while ?

Maybe it’s because I’m a farm kid, but this is what I say. Buying the house is a lot like buying a cow. It’s expensive up front. It has lumpy cost associated with it (new roof, new furnace are like going to the vet). It does have the benefit of “free milk” if you don’t count the costs I just mentioned. And once you’ve fed it enough hay or bred it(paid down the principal, maybe see appreciation and potentially invested in it) you can resell it for an increase in value.

At current interest rates you’re probably going to have a larger monthly payment than rent, but if you have the cash outlay, and you’re willing to share the house with someone else who is paying you rent it might be better for you. One day you’ll likely be able to refinance it to lower interest rate, and you’ll have a headache of having to deal with roommates, but it can make sense.

Los Angeles. I don't care for the city but don't have any plans to leave in the next 15 years.

For a condo, there are condo fees to consider. They never go down and at best, only some of it is deductible on taxes. On the up side, the fees may cover some of those maintenance costs mentioned elsewhere. Speaking of taxes, you will likely be able to itemize and this may reduce the amount you pay in federal and state taxes. So, I would set money aside monthly into a maintenance reserve, but also estimate my taxes and reduce withholding by any reduction in taxes (the target is to have just a little more withheld than you will owe so that you get a small return).

That's a good point... I'd liked the idea of renting out some of the house to offset the costs. I need to find out what I can actually qualify for, to see if I can get an extra bedroom or two.

It’s going to cost more monthly for now, but you will lock in that price.

500k with 60k down will run like 3300-3500 a month.

It looks like your break even point would like year 16.

Good point... I definitely wouldn't want a condo long term. And I'll have to do a deep dive into homeownership and taxes cause I think that's going to be important.

Would lenders qualify me for a $3500 mortgage payment if I'm making like 5K a month? I know for rent, they wanted to see 2.5x the rent in income.

Probably not. I think it’s usually 2-3x yearly income.

You may need more down, moving to a cheaper COL area, or raising your income.

Is 5k post tax ?

Don't include your retirement savings. Leave it for retirement. Look to put down the smallest amt that leaves you with monthly expenses that you can reasonably pay. Look at FHA loans (regular and 203k), programs to help 1st time buyers, programs that help certain professions if you are in that profession (my area helps teachers for example). There are sometines programs for purchasing in certain locations. The programs are usually state or county based. Look at training programs for 1st time homebuyers.

In a few other comments you mentioned you have $100k, but that some portion of that is retirement savings. Don’t lump your retirement savings in with your other savings, even mentally. While they may actually help you secure slightly better loan terms, you should not think of those as available savings. And hopefully they are in a 401k or IRA!

That's fair. I really need to start a Roth IRA before I do this year's taxes. Meant to do it last year..... Didn't finish the research into which type on time.

Those are excellent tips... Thank you!

Hmm... That's helpful. I need to run some numbers with a professional.

The 5k is an ugly mix of pre and post tax income. I'm a professional artist.

That’s going to be hard if your income varies a lot month to month

I'd budget 3-4% of a homes non-land cost for maintenance. You can find the value of land and the improvements (i.e., the home) online. It should be public record.

If the home has lots of land or expensive trees/plants/flowers you can add more to maintain them.

Best thing I ever did was buy a small house I liked and dump money into it to make it the way I wanted. I recently sold it but, man, did I love that house. The size and low price meant I could keep putting money into it to make it just the way I wanted. Didn't quite get there as the fence still needed repairing and wood prices soared so much during COVID I skipped that part.

But I loved everything else I did. And there's no way an apartment would ever look like what I did with the house.

Yeah... I mean, it's a hazard of what I do. I've had very brief non-number-based chats with two loan officers, and they said they see it all the time cause everybody in LA works in arts and entertainment.

3-4%... That's a useful number! Thank you.

And your place sounds nice...

Be on notice about FHA loans. If you buy a house with minimum down payment, but then work really hard to get to 80% LTV; the FHA loan won't let you remove the PMI for 5 years anyway.

God no. I used to think that. I was right there with people who complain about things like "I only got approved for 1200 months mortgage but I pay 1500 rent and it's frustrating); but the reality hit me hard once we bought our house. Mortage is such a small percentage of home ownership. First; is that with or without "escrow" (property taxes and homeowners insurance)?

What about PMI? Cant come up with 20% of the principle then you literally pay the mortgage company's insurance policy that protects them from you. It's usually over 100 bucks a month and that doesn't got to any principle or interest payment. It's you paying an insurance policy against you for them.

Your homeowners insurance policy will only cover you if you hit certain milestones. Like, replacing a roof. Where I live a 30 year roof has to be replaced every 15 years to maintain insurance which you have to have if you have a mortgage.

The repair and replacement costs for anything related to your home will blow your mind. Stuff you're used to calling your landlord for will come out of your pocket instead and it is INSANE.

Owning is still, after all that, worth it, but renting vs owning is not a dollar to dollar comparison. Sure; houses usually gain value. But they also cost exponentially more money to maintain. You can gain 20% in equity then replace a roof and be back in debt.

Aren't all of those maintenance costs factored in if you're renting a place? Seems like you would be paying them one way or another

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Insurance, property tax, utilities inflate also.

Yes but as a percentage of COL it’s not nearly as much.

Long term, doesn’t matter much that my parents home assesses for $800k when they bought it for $35k in the 80s