Buying a house in your early - mid 20s

[constant struggle]

Well I just turned 24 years old this week, I live in my parents house(I don't want to be manouche!), although they don't really live there for the most part. I have been saving a good amount of money for a down payment. I also need to buy a car in June 2010 when my lease expires, which I am also saving for. So I'd like to get out of the house before I turn 26. I do not want to rent or have roommates. I am looking towards a condo unit most likely I would want 2 bedrooms 1.5 baths. I live in New Jersey so real estate is pretty expensive here, I have enough for 20% down right now, but with the job market I do not want to bounce into anything too quickly incase I do lose my job. I hear you really should not purchase a place more than 3x your yearly income, would you say this is true?

Any tips/pointers/guidance from you older folks would be great, or anyone who has gone through this recently.

Thanks

 

[GQgeek]

Personally, I think it's a bad idea to buy until you are full-fledged into your career, unless you are sure you won't/don't want/have to move. If you are completely done school and are sure you won't be moving, go for it after prices drop a little more.

 

[musicguy]

Congrats on your prospects!

Although I'm not much older than you I am a homeowner. I'm sure you're aware of this, but make sure you factor in property taxes. NJ property taxes totally suck. I would totally recommend getting a fixed rate mortgage also.

 

[constant struggle]

I am full fledged into my career already. I am in my ideal industry in the exact type of role I wanted for my starting job. There is plenty of growth opportunity within the company as well.
Also the area I am in can always use more application developers, plus NYC commute is not out of the options either if ever neccesary.

 

[thekunk07]

areas i like:

glen ridge
cranford
montclair
franklin lakes

3-4x your annual salary seems about right.

 

[Ambulance Chaser]

General rule is that mortgage + HOA/condo fees should not exceed 28-35% of your pre-tax income. That percentage can be higher if you do not have credit card, student loan, or other significant debt.

Take a look at a lot of places to figure out what are your must-haves, nice-to-haves, and don't-cares. Don't let your real estate agent pressure you into making an offer if it doesn't feel "right"; you need to feel an emotional connection to your condo. Be realistic about your lifestyle, e.g., don't buy a place with a large formal dining room if you rarely throw dinner parties. Keep in mind that you can change almost anything about a condo except its size and its location.

 

[dtmt]

I've bought and sold two pieces of property and I'm not that much older than the OP.... at this point in time however, I would wait it out for at least another 6 months at see what happens.

Also, I would buy as long term as absolutely possible. My guess is that prices will start reaching bottom in a year or so, after which they will be flat for a long, long time so selling/moving would be costly. For example, if you end up getting married in a few years and want to move up to a bigger place, the costs of selling, realtor fees, excise tax, closing, moving, etc could easily reach $50k just to change houses. I don't know what your specific plans you have, but whatever they are you should probably consider about a 10-year horizon when buying a place.

 

[constant struggle]

I have absolutely 0 debt.

 

[onion]

I bought my condo when I was 22 (2 years ago, this month). I already had a full time job in the field I want, and was done with school. I think it was a good decision, and looking back I would do it again.

I put, I believe 10% cash down, and got a fixed rate of 6.5%. If you have a decent credit score you can probably get a much lower rate though (which is why I'm about to refi). At the time, my mortgage payment + HOA dues came out to around 25% of my yearly income.

As far as fixed or adjustable, I would say it depends on your circumstances. I don't plan on moving in the next 3 or 4 years , so fixed worked better for me, but my older brother who bought a condo at the same time got an adjustable since he probably will be moving.

Edit: FWIW, I also had no debt at the time.

 

[constant struggle]

I do plan on waiting until 2010 to purchase (maybe a raise + end year bonus? could help!), just getting my homework done now...

 

[gdl203]

I would plan on going with a low leverage (i.e. vastly over-equitizing) in such an uncertain market

 

[GQgeek]

Originally Posted by gdl203

I would plan on going with a low leverage (i.e. vastly over-equitizing) in such an uncertain market

Is the other choice even an option right now?

 

[gdl203]

Originally Posted by GQgeek

Is the other choice even an option right now?
Yes, unfortunately. I'm talking LOW leverage, like 40-50% equity

 

[dtmt]

Also, another thing I'm considering if I ever buy a home again (in addition to a large downpayment) is to get an extremely long term loan, maybe even 40 years, but pay off extra principal each month on a schedule to have the whole thing paid off in 10-15 years. I ran the numbers once and found that the total amount wouldn't be that much more than an actual 15 year mortgage, but this way I could drop down to the super low 40-year payment if I was ever out of work for a while, or decided to go back to school or start a business or something.

 

[blackdarkeye]

Originally Posted by GQgeek

Personally, I think it's a bad idea to buy until you are full-fledged into your career, unless you are sure you won't/don't want/have to move. If you are completely done school and are sure you won't be moving, go for it after prices drop a little more.

will they drop anymore?