[CPApracticer]

Trying to pursue American Dream. Since most people here have good judgment and have considered buying a home before, I thought this may be a good place to ask.

House 1: 430k, built in 2015, 4 bedroom 3 bath. Single family. Construction /condition of the house is 10/10, everything is new, nice kitchen and rooms. However, it is located in a low income neighborhood. 1/3 white, 1/3 black, 1/4 Hispanic. AVG income in NY is 57k, this neighborhood is 43k. Maybe neighborhood will be better 20yrs from now and house will go up in value. Commute is 1hr 20minutes

House 2: 570k, built in 2003. Multi family home. Will live on 2nd and 3rd floor with 3 br and 3 bath. Construction/condition is 8/10. Can rent the first floor and pick up an extra 1k a month. Good neighborhood. 77% white, 10% Hispanic, 8% Asian. AVG income in NY is 57k, this neighborhood is 67k. Commute is 1hr 40 minutes. Or with express bus, commute is 1hr which cost $13 a day.

I am a 25yrs old single, working in midsize accounting firm, w/ big four experience. My parents and I have been renting our whole lives. We are pursuing our dreams of owning a home. With parents help I can take on a mortgage and pay 50% down. We have narrowed it down to two houses. First house is more affordable, and the house itself is better than 2nd house, however the neighborhood is just okay, and we are not able to rent out part of the home. Still a low crime neighborhood that is quiet. Second house is still a good house, located in a good neighborhood, and we can receive rental income from it. Both these houses are slightly above my means, but I can still pay the monthly mortgage and have some savings left over. Considering all this, which should I go for?

F: 54 (4/13) 60 (4/14) 67 (9/14) 66 (10/14) 63 (11/15) 79 (2/16) PASSED
A: 60 (5/13) 80 (4/16) PASSED
R: 60 (7/13) 61 (2/15) 70 (4/15) 77 (7/15) PASSED
B: (6/16)

[CPApracticer]

bump

F: 54 (4/13) 60 (4/14) 67 (9/14) 66 (10/14) 63 (11/15) 79 (2/16) PASSED
A: 60 (5/13) 80 (4/16) PASSED
R: 60 (7/13) 61 (2/15) 70 (4/15) 77 (7/15) PASSED
B: (6/16)

[fuzyfro89]

https://www.paycheckcity.com/cokronos/netpaycalculator.asp

According to this, a 65k salary (assuming 1 personal deduction) would give you ~$3.8k per month after taxes.

I'll let you choose the house and personal lifestyle factors you prefer, but let's assume the cheaper one just for fun.
https://www.mortgagecalculator.org/

A 430k purchase is likely at least a 344k mortgage (20% down), 30 yr, 4%:
– Mortgage payment = $1,642 (for reference, a 15 yr would have a 2,545 payment)
– Tax = $358 (let's just guess 1% of 430k, though I think it may be higher)
Mortgage plus tax = $2,000/month
Then consider insurance, utilities, and maintenance… so probably at least $2,300/month.

You can probably swing the payment, but it's a tight squeeze. Could you float the mortgage if you didn't have a job? Who is planning to contribute toward it (you, brother, parents)? Do you want to live there for at least 5 years?

At that level of expected payment, a bank may not give you a loan (>50% of take home pay), but that's a different consideration once you decide what you want to do.

Given your family (will) pay $1,450 plus utilities in the coming year, it's at least $500+ more to own a home per month, but could be worthwhile if someone in the family plans to stay long term.

[Missy]

The first thing to do is get preapproved for a mortgage. If that's not done yet the entire discussion is moot. If you've already been preapproved, assuming the amount would cover either home, it's a matter of personal preference as arguments can be made for both.

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

[MaLoTu]

I think mla is right, getting a pre-approval on a loan is paramount.

I also think you need to evaluate another concern that mla brought up, which is whether living with your parents is a good long-term plan. I have had my in-laws live with me and it will invade your privacy eventually. If you ever plan on getting married then I would take this into consideration. It sounds like your parents are going to depend on you to make the mortgage and it will partially be their home. Selling in the future because your wife doesn't want to live with your parents will leave either you or your parents at a disadvantage.

[Track55]

I don't think a 25-year old should be buying a home. You're assuming you will always be employed. I worked in the foreclosure industry for 6 years. Why not start with a condo?

Do you have 8 months worth of bills saved in the bank? Are you putting $200-300 in your 401K every month? That may a better idea.

But if you're proceeding no matter what, buy the cheaper house.

AUD - 74, 99 !!
REG - 74, 92
BEC - 83
FAR - 73, 86

Studying for Ethics exam

California candidate
Business and Industry

[Anonymous]

Anytime you buy a home, you're assuming you will remain employed, and whether you're 25, 35, 45, or 65 really doesn't make any difference in the fact that it's an assumption. Personally, I think a 25-year-old buying a home is a very good thing, but that anyone buying a home should never buy as much home as they can afford, but only as much as they can very easily and quickly pay off and only as much as they need…and only buy when they have – and can keep – several months' living expenses in the bank, after the down payment. I bought younger than 25, but from the start we paid 3x as much as our mortgage payment. Anyone who is buying and will have their budget tapped out at just paying their minimum I have an issue with, but if you're paying extra, start young and go for it! If you buy a house at 25 and pay it off in 15 years, that means by 40 you own your house free and clear!

I am curious, though, Track55 – why do you suggest starting with a condo instead of a house? I'm assuming by your phrasing that you mean buying a condo rather than buying a house, which would mean going in debt either way, so I'm not sure how a condo would be more advantageous? I've never understood the allure of condos. 😐

[Biff-1955-Tannen]

I think he was just operating under the assumption that a condo would be cheaper than a house.

I personally plan on looking for a condo for my first place. Biggest reason is that I will be looking around 200k range. For that, I can get a decent newer condo, whereas if I were to look for a house for 200k I would either be buying in a low class city, or buying 30 year old house that will A) not be as nice B) require its fair share of maintenance.
HOA fees will kind of suck, but slightly lower property taxes will somewhat compensate that.
Once I'm more established in my career/higher salary/more savings, I will look for a decent home to buy that I won't just be settling for.

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[Anonymous]

See, I live in the middle of nowhere, where my house cost under way less than that brand new. So, to me, condos are associated with big-city expensive living – couldn't imagine getting one for less than around $200k (which is substantially more than my house cost), and then there'd be HOA fees, etc., so I associated them with being expensive, compared to my country living. However, comparing them to the price of a city house – like the ones the OP mentioned – I can see where you're coming from and where Track55 was probably come from as well. If a condo, in-town, is considered the 1/2-cost option for building equity, then it makes more sense why it would be recommended for younger people who are starting out and have tighter finances.

Since condos are all part of the more expensive (and higher-compensated) city life in general, I never think of them as a cheaper option, so hadn't really realized that compared to an in-town home, an in-town condo is a much cheaper option. Thanks for sharing. 🙂

[Track55]

@ Lilla and Biff – yes you are right. Perhaps I am spoiled looking at the world through southern CA eyes. I did mean that condos are a lot cheaper than homes out here. And he is talking about New York which is urban.

My zip code does not have condos, but let's look where I work. Last month 17 homes were purchased for $400k, while 11 condos were bought for $275. The city where I went to high school had a home price of $470 and a condo price of $350. For the most part condo's are cheaper.

My friends who are single started off small and worked their way up. My friends who lived with significant others rented homes before buying one, but then that's two incomes.

Yes, I personally would not live in a condo as I was grew up with backyards and pets. But if I ever buy investment property, I would probably start small. My childhood neighborhood has houses at $275.

Since the original post says he has enough money to pay 50% down, then why not just pay for the place in cash? He didn't sound like a backyard-sy person to me.

AUD - 74, 99 !!
REG - 74, 92
BEC - 83
FAR - 73, 86

Studying for Ethics exam

California candidate
Business and Industry

[Missy]

and I know this is not what you asked, but if your parents have adult children they're at least my age. If they are in a position to put up to $285k as a down payment on their first house at this point in their life I hope they are seeking the active advice of someone with years of financial planning experience. Ive seen people 45,50 even 55 years old taking huge chunks of money out of their 401(k) thinking they're making an investment that will support them in their retirement and learn at 70+ years old they will not be retiring (my FIL is over 70 and still working because he wouldn't listen to me when he wanted “his” money at the age of 55.) At 25, investments with risk are the way to go. At 50, not so much.

It may well be a wise move, or it may not. But a lot of people assume you're a financial whiz kid if you're studying for the CPA and its important to realize that there's still good reason to call in an expert especially with that much money on the line.

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

[alboreland]

NYC has more coops than condos. I don't think there are many condos in the city and there are alot in Long Island and NJ.

[Author]

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