Continue renting or time to buy?

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First things first. I live in CA. San Bernardino County.

I was thinking about maybe taking advantage of the housing market and buy my first home, however there are pros and cons about doing so.

We have a combined income of $ 4000/month.
Our current rent is $ 600, estimate bills monthly $ 700(not counting groceries, eating out, misc spending, fuel for cars).
We are on a debt management program for $ 1009/month with a low double digit total figure. 3 year projected payoff.
The total amount leaving every month is $ 2309.
Our financial obligations ($ 2309) minus our combined income ($ 4000) is $ 1691.
That said, I try to save $ 1000/month towards savings and emergency fund, both separate. That leaves us with $ 691 to use towards food, fuel, etc.

With that said, and I think I covered all the basics, should we continue renting a 2 bed, 1 bath apartment with 5 people (myself, other half, 3 kids) or get into a 3 bed, 2 bath plus 2 bonus room house for $ 148-150K?

Before I close out, I know that we would be adding another $ 600-800 a month to pay for the mortgage and the bills will obviously be higher in a bigger house. So another big question is, do I start buying a house which is an investment or should I stay in my current situation and continue saving the difference?

Thanks to all who respond seriously.

  1. Reply
    July 21, 2011 at 4:13 am

    Start looking now. It will take 2-3 months to find what you want. maybe 6 months.

    when you have enough for a 20% down payment you can lower your monthly payment.

    When you own your home you don’t go out and do stuff. You stay home and enjoy your house! you play with your kids in the yard, walk the neighnorhood…

    enjoy it

  2. Reply
    July 21, 2011 at 4:42 am

    real estate in your area is projected to fall significantly in 2009. with the state in financial trouble and talking about huge tax hikes the situation make well get worse for real estate. also we are far from done with the current national financial crisis. that said, my advise is to continue renting and saving. when you have at least 6 mo or better a year of living expenses saved then start saving for a large down payment, on the order of 25% or more. this will cut your payments down and will allow you to qualify for the best rates.

    be careful about calling your house an investment. your house will take money out of your pocket every month, not put money in it. the only way you will make any money on your house is if it’s value rises beyond what you paid for it and the only way you can get that money is to sell it or gamble on taking the equity out in the form of a loan. many people thought that the price of houses would never fall and took every dime of equity out in the form of loans. when the crisis hit they found themselves buried in loans with houses that were worth far less than the loan amounts. don’t make the mistake of thinking your house is a cash cow.

  3. Reply
    margie k
    July 21, 2011 at 5:01 am

    If you are seriously considering buying a house you have to get with a good realtor that you feel will represent your interests, it may take several before you find one you are comfortable with. Then, get prequalified for a mortgage so you know you are looking in the correct price range. Whatever they tell you is affordable, cut it down so that you have extra money for emergencies etc. ( they will always go to the maximum amount so you spend more, precisely why the country is in a mess right now – be prudent). Then just look at bargain properties and Take Your Time – there are going to be even more foreclosures etc. this year because all of the loans have not gone belly up from 2007 yet. So prepare to see more properties hitting the skids. If you find a property you like and can realistically afford, get a home inspection from a reputable, licensed and insured home inspection company. It’s not a bargain if it needs major repairs, and sometimes they are hidden to your eye. I have been buying, renting, and selling properties for many years, it is how I made the bulk of my money. Property is always a good investment – IF – you keep your eyes open, your emotions out of it, and follow the proper steps. Also I would have to ask you why are you saving $ 1,000 a month when you have the outstanding debt that is going to take 3 years to pay off ?? If you can, only save half that amount each month and put the other half towards paying off that debt. The sooner you get that off your back the better. You seem to have a good handle on where your money goes, that’s important, so is saving, so you are mostly on the right track with your finances. Also remember that if you don’t have the 20% to put down on a property you will have to pay the mortgage insurance until you have 20% equity in the home built up, and it can be expensive. Make sure you check that out. Best of luck. In the long run, purchasing is a good bargain – renting gets you nothing, no matter how many years you rent you walk away with zip.

  4. Reply
    Robert M
    July 21, 2011 at 5:28 am

    You have given this some good thought. Sounds like you will need a four bedroom house before to long, though.

    Have you been to a mortgage broker to see what level of debt you qualify for? Is your credit score over 700?

    Your home is not really an investment it is a place to live. This debt management program is where I would put my excess funds. Pay it off sooner, your credit score will improve, your interest rate, on your mortgage will be less, and you’ll have more piece of mind.

    Definitely be looking for a home. You are on a good track, you should have about $ 25000 in a savings and emergency fund.

    Best of luck.

  5. Reply
    July 21, 2011 at 6:28 am

    If you put 20% down your mortgage would be about $ 680 per month for 30 years at 5.5%. 20% down eliminates the mortage insurance from your monthly payment. You would have to add real estate taxes and homeowners insurance to the monthly payment.
    All of this is before the savings on your income tax because you could now itemize deductions. My guess is that the after tax cost of the mortgage will be close to the $ 600 per month that you are paying in rent.
    There are other costs asociated with owning a house that are somewhat under your control. There is a need for more furniture, repairs, window dressings, yard maintenance etc. These always are in the equation when you own versus renting.
    Given the facts as you have stated I would think that purchasing is a possibility without changeing you finances significantly.
    Keep in mind that you can adjust your income tax withholdings after you buy the house so that you would have more net pay coming into the house.

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