[Scared-cpa]

Hey, everyone! 🙂

The thread discussing moving out on here has intrigued me to make this post and get everyone’s opinion on it. I don’t know if anyone read my post on the moving out thread, but essentially I am in school for my MBA right now, living at home. I will be finished with my MBA this upcoming summer and will be looking for a job immediately after. I’ve already spoken with a recruiter in the city I’d like to move to (2 hours away) and he said that starting out, I should be able to make around $50,000 as a staff accountant. I’m blind when it comes to the job market so I really just trust his word. My long-term goal is to become a senior cost accountant as I love cost accounting, but I will take whatever I can get at the time. Here is the thing – my plan is to live at home for the first few months I am working and commute everyday to work (4 hour round trip). I know this is far from ideal but my recruiter said most employers in this city want you to start working within a week or so of being hired, so I wouldn’t have time to get an apartment in that time span. Not to mention the fact that I have 2 dogs I HAVE to take with me, which will make it even harder to find a place to live. A friend of the family is a realtor and said she could easily find me a home within my price range in this city. So my plan is to commute for a couple months while looking for a home and then move to the city once I close the deal. The realtor told me I can use the 5 years of school (4 as an undergrad + 1 for MBA) as work experience and a few pay stubs to show the banks what my yearly income will be. My credit score is in the 750’s but I don’t have anything large (like a car) on my credit. If I needed it, my parents would cosign until I can refinance in my name alone. The realtor also mentioned their are loans tailored to individuals like myself that require little to no money down.

How reasonable is this plan? Are there any tips or suggestions you all have? I really do not want to live in an apartment if I don’t have to for several reasons, so I’m hoping something like this can work out. But I’ve also been in the ivory tower that is college for the last 5 years of my life, so I don’t want to plan my future in a nonexistent world.

[Anonymous]

I haven't read everything in this post so I apologize if someone has already mentioned this. But something to consider is how long you're wanting to live in the house. I always considered renting as less than owning because you aren't building equity, which is true. However, when you have a mortgage, a very large portion of your payment every month at the beginning of your mortgage goes straight to interest (which is a nice tax deduction). It takes several years to even begin building decent equity in your home. So if you only live in your home 5-7 years before you upgrade to something nicer, you aren't really going to get a lot of it back because you haven't paid much of the principal of your mortgage back.

Not to mention if you're buying a less expensive home, does that mean it's an older home? Older homes are much more likely to have things break, which means extra expenses that aren't your responsibility when you're renting. Have you considered renting a house? That way you don't have the disadvantages of an apartment, but you also don't have the responsibility of owning a home.

I'm definitely a much bigger proponent of buying over renting, but only if you're ready to take on the responsibility of it. Beginning your career and moving away from home for the first time is going to be stress in and of itself, so just make sure owning a home is something you think you're ready for!

Best of luck to you!

[Son]

My two (or more like five) cents:
– most serious buyers I've had when selling my house were already pre-approved before they entered the market. A bank will be able to tell you the max mortgage amount they are willing to finance and you can then start searching within that range. Stay BELOW the max amount they quote you (Lilla and mla made some excellent points as to why);
– based, again, on my limited experience you might need at least 12-15K cash available to close. That includes home inspection, minimal downpayment (5% or so), taxes, title transfer, bank fees and a bunch of smaller items you don't consider – but they do add up very fast. Mind that I was buying directly from the seller so this does NOT include the price of realtor's services (another 3-6%);
– not a great idea to buy a house if you don't have 20% of downpayment ready. You'll typically have to pay for mortgage insurance that can add between $50-$150 and up to your mortgage every month;
– depending on the breeds of your dogs you may have to pay extra for your house insurance (usually for rottweilers, pitbulls etc. or a mix);
– I honestly don't think an apartment is an option given everything you've told us about your dogs and life situation. But, that doesn't mean you have to give up on the idea of renting altogether. There are people willing to rent a room, a floor or even their entire house and are a lot more flexible about animals than property management companies are. You can always get roommates too to share the cost of renting an entire house;
– Many young homeowners I know rent a room in their house to a friend or even people they found through an ad on craigslist etc. to get extra money to pay the mortgage. Consider this as an option to get a little more cash to help with the mortgage, at least during the first couple years.

Lastly, buying a house is an enormous commitment and you have to understand it's not your property until you've made the last payment. Please don't take this the wrong way – but something in your post resonated with the thoughts I was having myself at that stage in my life: don't make the mistake of getting a new and shiny thing just because someone tells you you can (bank, realtor etc.). It seems great to own a house, great to have no roommates etc. But you're getting yourself into the biggest financial decision of your life, and there's a ton of money at stake. You have no idea if you'll like you job, colleagues, Lexington etc. I'd say a year or two of renting would give you a much better perspective on whether you should settle in Lexington, but then again it's just me.

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[Track55]

As someone who spent 6 years working on foreclosures, sometimes 7 days a week, dont do it!! We saw a lot of sad stories but the bank will still foreclose. Wait until youve worked a year.
For example, no one hired by PWC at my school ever lasted one year. You never know how you will like ur job or if theyll like you.
U have ur life ahead of you! Chill…

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Studying for Ethics exam

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Business and Industry

[Scared-cpa]

@son I definitely would want to get preapproved, otherwise I feel like it is a waste of time shopping around when you're not even sure if you would be able to get it financed. I would also be perfectly fine renting a home if I could find one, that wouldn't be a problem to me whatsoever. I just know that the chances of that are low. My parents own a second house, like I mentioned in a previous post, and rent it out to people. She has no restrictions on animals but mainly because it is in the country so that's where most people who have animals would live. But her renters have also mentioned it is difficult to find a home that will allow more than one animal. I don't mind paying a pet deposit, and feel as though that would be absolutely reasonable, but 2 or possibly 3 dogs may be pushing it for about anyone haha. I can understand your concern about me possibly not liking the city. And that is indeed always a possibility. One thing I can correct you on, however, is that I do not go into this situation lightly. I have always been very cautious for my age and I understand the uncertainties and risks that come along with owning a home. I am not dead set on this idea yet, and probably won't be until I actually have to make the decision later in the year. I just know that this is the most ideal possibility for my situation (unless of course I can find a home to rent). I just don't know any other way to go about moving to Lexington in such a short period of time to find a place to live with my particular needs.

One thing I need to point out to you guys is that the chances of me living somewhere other than Lexington is slim to none. Maybe another large city in the state, but that's about it. The town I live in is very small (population of about 3,000) so there are pretty much no businesses that are interested in a CPA. No large companies have companies here and those that are here (typically locally owned) run their accounting department all by themselves. Which could probably explain why most businesses don't last more than a year here. The closest town to me is about 45 minutes away but it is not much bigger. The only option I have there is a hospital. Lexington is about 2 hours away and is the closest “real” city to me, which provides many more opportunities. I'm not interested in working for a B4 or anything of the sorts. A few companies in Lexington I would love to work for include Lexmark, Xerox, Tempur Sealy, Jif, Lockheed Martin, Valvoline, Georgia Pacific, or GE. All of these companies have a large presence in Lexington I'm hoping I can get on at one of these places and work my way into a cost accounting role if at all possible. Whether I like the job or not, I will be staying in the city – there really is no other option for me.

@Track55 I can see where you're coming from and understand what you're saying. This is a real concern. Given the circumstances I have given, what would be your suggestion for me?

[Key522]

@scared_CPA slow down enjoy life! Having a mortgage is big responsibility although it seems as if your part of the country have low tax rate. The average tax rate by me is $10k a year. Renting allows you to grow and understand budgeting. Renting also allows you to see where you really want to live. You are young you don't want to worry about repairs. You should be making money, traveling and enjoying life. Invest your money somewhere else. I hate when ppl say renting is throwing away money! You have to live somewhere 🙂

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[Substantive Testing]

I would say do it only if you know you can afford the mortgage (have to consider student loans if any). There is no age for buying home, and you can consider it mostly as an investment. You do not have to picture yourself living there forever (Thanks god exchange 1031). If you are going to be making 50k and just borrowing 150k, then you should be able to live comfortably. Just make sure you like the house and the job.

[Son]

scared_cpa, that's the thing – after 2-3 years of working for any of the companies you've listed you'll be pretty valuable to any Fortune500 and will be able to move out of state should you want/need to. That being said, you need to get into one of those companies first.

I think the best option for you right now is keep everything on the table. You need to find a job first, and that will answer many of the questions you have. The job may pay more or less money than you expect, be located in a part of the city that has more rent options for someone like you or have none whatsoever etc. Your plan is viable, but even you won't be able to make a decision until you see the whole picture.

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[Jdn9201]

I haven't read every post in this thread, but thought I'd chime in to the OP. It sounds like you are being smart approaching this decision, but I'd caution you against buying a house right after school. I relocated to a different state after college and was in good shape compared to many my age (no debt, decent first year job, moderate cost of living, etc.) but I waited for 2 years. I figured 2 years was long enough for me to decide if I liked it enough to make a long-term commitment, which is what buying a house is. Home ownership has worked out for me, but overall it's overrated. There's expenses that come up unexpected and if you happen to lose your job or need to move in a hurry, you don't have as many options as when renting. Also – don't be scared into the decision by knowing about real estate prices going up. You have to make the best decision for yourself – irregardless of what the market is doing or your peers are doing. That's how people got slammed 10 years ago because they were too aggressive and bought more than what they could afford.

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[Meg267]

Have you looked into a townhouse? We bought a townhouse when I was 23. My husband is in pharmacy school, barely working. I work full time as a staff accountant and am studying for the CPA. We decided a townhouse was the best option for us because we knew we wanted to be in this area for at least 3-5 years. Plus, by buying a townhouse, we pay HOA dues (which are pretty reasonable) and we don't have to worry about any outside maintenance. That was a huge one for us. Every Friday during the summer the lawn is mowed and during the winter I don't have to worry about shoveling 14 inches of snow before going to work. There are 4 townhouses in my building and we own an end unit. It's beautiful inside. The houses across the street from us look the same inside and they are twice as much! Definitely make a budget and see where you are. Keep your options open. We own a dog even!

[Track55]

A good rule of thumb is save the equivalent expenses in savings for a year. If you can't, it means you would not have been ready. If you can, there's your down payment.

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[Missy]

Regarding the commute at first, that's going to vary person to person. I would HATE a 2 hour commute and wouldn't do it for a week. My husband on the other hand loves driving and would commute 4 hours without a complaint. Personally if you're on the fence try it daily at regular commuting times for a week or two and see if you're weary fast before you commit to it. Timing is everything, if you start that commute during summer vacation you may find it more stressful when school is in session.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Anonymous]

@scared_cpa I can tell you right off the bat it will entirely depend on the location (i.e. cost of where the property is) but it will be tough.

A big question is if you'd have $ for a down payment and if you have student loan payments.

With 20% down, and no payments, you should qualify RIGHT NOW for up to a $240k sale price (my not being a loan officer estimate). With increasing rates in the future, less. I'm pulling numbers out of my ends, but you're upper limit would be there in the mid 200s with what I'm hearing. Again thats just my guess and that's with no debt and 20% down.

The best thing I can say is to call a loan officer – they will do a “back of the envelope” projection for you on what you'll qualify for. It's 15 minutes on the phone. That or doing a loan amortization table on excel with total debt payments (all of your debts) not exceeding 40% of your gross income.

I hope that helps.

[Want2BeCPAsoBad]

I became a homeowner at the age of 21, even before I completed my bachelor's. I've been independent since the age of 16. My only advise to you is get the job FIRST go through the first year and THEN look for home. My house is about 300k, which is really low in the bay area. (Again I bought it in 2005), I never had any problems paying mortgage. But I am very organized with my money. I drive an old car, paid for my school as I went, and hold no credit card debt. If you have any student or car loans pay those off before getting yourself into a mortgage. Good luck!

[Anonymous]

I didn't read the whole thread, but buying a home right out of school is a bad idea. Renting until you are an established 1-3 year professional would be smarter. Better rates, better down payment, more secure employment, etc.

Also if you bought a house, you would pass up potential opportunities to relocate for better positions.

[Scared-cpa]

Thanks everyone for your posts! I have read all of them and everyone makes good arguments for and against the decision. I appreciate all of the opinions because I believe they are invaluable to an inexperienced individual like myself.

Just in case you didn't read the entire post because I notice some comments mentioning bills I don't have, I will go ahead and summarize quickly again.

My car has been paid off, I will have no student loan debt. The only debt I currently have is credit card debt < $1,000 which I hope to have paid off before I begin working. I will not begin working (thus 4 hour round trip commute daily) until I am finished with school, so around August (school finished in July). The only other responsibility I will have when working is studying for this exam if I don't complete all four parts by then. My biggest problem would be a down payment and enough savings like you all mentioned. I have practically exhausted my savings with tuition and this exam, so that would be my absolute biggest problem. In an ideal world, I would stay home a year or so while working and save a good chunk of my income towards moving, but the job opportunities for an accountant in this area are few and far between. The cost of living is low in this area so I would probably start out at $40,000 maybe if I could even find an appropriate job.

[Author]

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