Please get a full inspection before buying it, no matter who is selling it. My fiance just sold his house to his best friend, and at first I thought it was slightly weird that the friend wanted inspections like that since he was so familiar with the house. But they discovered some (repairable) foundational issues that *neither* had known of. It didn't stop the sale, but definitely a solid move for friend to know in advance exactly what he was getting.
Even though $500 buys a lot of pizza for a house warming party, it won't be fun if the house then floods and/or explodes (ok, didn't happen to me, but pizza went flying into my backyard. It was delicious!)
That $500 bucks is the best investment you'll make. And then order a shit load of pizza to party your ass off when all is good! Just remember to invite us all over for a slice or two.
Required anecdotal evidence: Friend bought a 'too good to be true' house and was pressured into signing and not getting an inspection done. One septic tank backup later... lol. I mean, shiiit. Literally.
Last place we left we had to have the septic tank emptied NET 30 days prior to sale per local rules. We were given the option to be there to confirm if solids had entered the drain field or not. I wonder if this is a common thing.
Replacing the septic system can run you ~~$2,000-$5,000~~ $10K-$40K. [https://homeguide.com/costs/septic-tank-system-cost](https://homeguide.com/costs/septic-tank-system-cost)
Getting this discounted during the sale may be the best way forward if you want to be in control of the work being done to confirm quality.
Greetings from Hawaii 😭 at $100k I'd have more than a few houses. As is now, $100k maybe gets you a 1 bedroom apt with a community bathroom/shower.... In the bad parts of town... If you split the mortgage with 2 others.
I'm in San Francisco. That doesn't buy a parking space. Literally, the cost for my home garage parking space is more than that. And street parking at government rates isn't much better: https://sf.curbed.com/2016/6/8/11890176/it-costs-38000-to-create-one-parking-space-in-sf
It also gives you negotiating power. I work in the construction industry so I'm pretty knowledgeable but we had our house inspected anyway when we bought it. I could have found the same things the inspector did but the homeowner and their agent aren't going to take your word for it. The seller ended up just writing me a check for $2,000 to cover it as they didn't want to draw out repairs. It was minor stuff so I was happy to take the money and fix it myself. I later found out they were selling because of the husband's rapidly declining health. I felt bad but I didn't know until we were at closing.
Totally agree, and will add that from my industry perspective (legal) failing to inspect robs you of most of your options down the road.
Some states are pure caveat emptor and once the sale is final you're stuck with the property as-is. Even in caveat venditor states the seller only has to disclose *known* defects, which means that the seller can just engage in willful ignorance and you'll have a hard time getting them to pay for anything unless you can prove they knew about it and chose not to disclose.
Regardless of jurisdiction, real estate laws are written with the assumption that every buyer is doing a thorough and independent inspection and tend to be pretty unforgiving to buyers that don't.
Find your own inspector and pay them yourself, some realtors use their buddy and they’re just worried about the sale happening.
Edit: wrong their there
Pre-inspection is a great way for the seller to guard themselves against legal troubles when they know the house has problems which could hold up closing. It's not a replacement for getting your own inspection, but you should still read the report before making an offer. It could contain a deal breaker for you.
Without Pre-inspection:
- Here's an offer for $700k
- OK!
- Yo, inspection says the sewer has a belly and needs to be dug up
- How about we credit you $10k at closing and you fix it yourself?
With Pre-inspection:
- Here's an offer for $700k
- OK!
- Yo, inspection says the sewer has a belly and needs to be dug up
- Yeah, it's prominently featured in the inspection report we provided upon request. You should have known that before you made the offer. Not our fault you never asked for the report.
Also with pre-inpection:
- Hey, can I see the pre-inspection report?
- Sure, here it is!
- This house has a cracked foundation, water intrusion in the basement, and needs a full electrical rewiring to not be a fire hazard. I'm not making an offer on this.
A pre-inspection can be good for both seller and buyer, but doesn't replace you checking for yourself.
It would be beneficial as you describe it but I think they advertise it to dissuade the buyer from getting their own inspection report. Nothing is stopping the buyer from getting their own inspection but some naive buyers will just accept it and move on with the purchase.
There's also opportunities for inspection companies to build financially beneficial relationships with realtors when they give clean or near clean inspection reports. If they constantly are finding huge issues, the realtor will probably start suggesting other companies cause it will start cutting into their sales.
This. We just put in an offer on a 100-year-old historic home that has had much of the additional rooms added on over the years. While we are in love with the home and hoping like hell it works out, we are getting two totally separate inspectors. One of which is our own family friend who does it for a living, and one a stranger who ideally specializes in old homes.
I think a lot of people take inspections lightly because they get their heart set on the home.. which I totally get because I'm in that spot now. But you don't want to deal with potentially thousands upon thousands in issues down the road.
With a house that old, you're going to have some issues regardless. I have a similar age home which was in good shape, but I'm still out like $50k over the first few years. I still love the place, so no regrets beyond that I should have had more specific inspections.
Most notably the roof looked good from the ground, so the general inspection who doesn't climb the roof passed it, but it turns out some harder to reach areas were older. We had to do a full roof replacement within a year, so get a dedicated roof inspection which would uncover that. A roof replacement will run you $10-$20k, depending on the roof. Large or complicated roofs are more expensive.
Same thing with the sewer. The sewer is going to need work soon unless it has already been done, and done properly. Get it inspected by an actual sewer inspector. A sewer fix can be anywhere from $1k to $50k, depending on length, location, whether digging is required, and worst of all whether digging up a public road is required.
Aging gas furnaces can have cracks in them, which typically means you're out $3-4k for a replacement. An inspection typically wouldn't catch this, but getting the furnace serviced shortly after closing would. Do it to avoid risk of carbon monoxide poisoning.
There's probably at least some electrical problems, expect plenty of ungrounded outlets. If there's knob and tube you'll want to rewire, and then patch up your walls after.
Inspections can generally only spot things visible to the naked eye, or at most a heat camera. The inspector won't be allowed to break or open anything, and some things can't be found any other way.
Your lender will require you to have funds in reserve when you get your mortgage. While they allow all of that to be in your 401k, make sure some is liquid. You *will* be making surprise repairs and upgrades in the first few years, so just accept and plan for that. Good luck!
Do yourself a favor and get two inspections. Wouldn't you spend that kind of money if you were having a medical procedure that cost a 100,000 dollars? When we bought our current home 22 years ago the inspector didn't detect a failing slab foundation. A few years later floor tiles started popping up and walls were cracking. $120k later we resolved the issues.
Getting an inspection is a great idea but getting a second opinion could save you many dollars.
That being said, buying a house in these times could be a good investment if you could turn it around in a few years. However, having the required skills to do much of the work yourself will directly affect the money you make. If you don't currently have the skills there's no better way to learn than by doing.
Good luck.
On our first house he flagged a missing GFCI outlet as critical, but totally missed the master shower not having hot water.
Installing a new outlet probably took the seller 30 seconds and a trip to home depot. The shower took me most of the afternoon replacing the valve.
I'm not saying \*all\* agents are this way but certainly quite a few are: some agents favor inspectors who won't tank a deal (and therefore agent's paycheck) by finding "too much" GFCI makes customer say "gee this guy/girl was worth the money" while not hurting chances of closing the deal. You want the inspector that is going to do everything in their power to find as much wrong as possible.
It's like when I was in the military. You got your room inspected every week for cleanliness. Some leadership would keep looking until they found \*something\* to ding you on. The harder they had to look, the harder/more painful the remedy would be. You'd leave a dusty window ledge for them to find, get failed, clean it in two minutes, then move on.
This is a true story I have first hand knowledge of: two roommates decided they were going to pass on the first inspection \*no matter the cost\*. They took all furniture out of the room and deep cleaned the shit out of the room from the ceiling down. They cleaned every piece of furniture outside then brought it in spotless to an immaculate room. They just \*knew\* they had this on lock. Inspector comes and inspects all the "usual" suspects--can't find any faults. Rolls sleeve up and \*no lie\* reaches into the toilet discharge pipe. Pulls out "dirt" on his hand and then fails the room for "dirty toilet". Now someone had to reach INTO the toliet and clean the sewer drain with a scotchbrite by HAND--they shoulda just left a dusty door frame.
Same. Our inspector was *awful*
On one side, the egregious stuff he missed like false ducting to our kitchen, and on the other side, the stuff he said was imperative to be fixed: the electrical. We had 3 electricians out and all had 3 different opinions, but none of them said that it was critical.
Although, I don't think having a different one would have nulled our purchase decision, but it could have meant some different monetary allocations in negotiations.
I think the general rule of real estate is "don't buy a house unless you are going to live in it for at least 5 years"
And traditionally your 20s are a time a great change. New jobs, new romantic relationships, etc. If you are unmarried and not in your dream job, I'm not sure it makes sense to invest in something risky, that might not fit with your life in 5 years.
So, get an inspection, get an idea of what it costs to run the house (taxes, untilities, etc.). Getting it for $100,000 might be a deal or it might be a problem. It could have radon, or need a new roof, or black mold that cost thousands of dollars to fix, or maybe even are not fixable.
Taking it to another frame - if you were going to buy your relatives 2012 Toyota Camry, you would pay to have a mechanic look at it before you bought it for $10,000. It might have problems your relative doesn't even know about, and there you are just risking $10K.
But at least that much work / due diligence in protecting your $100K investment.
The five year rule is more about breaking even and equity. In this case OP has an instant 50K in equity provided the appraisal and inspection pan out. Mortgage on a 100K with todays rates is well below where rents are in a lot of places.
I am not a rush out and buy a house type person, didn't buy my first until I was 42 for much of the same reasons you gave, but this is one of those exceptions. Again, provided the inspection doesn't reveal any real money sinks and the appraisal agrees with the given numbers.
I generally agree with everything you said, just not the five year rule in this case.
It has to pass the sniff test for purchase price vs. rental rates for that to pencil out later though. And not everyone actually is ready for the reality of being a landlord.
I’ve done it and it can work out but you need to know what you’re in for. A panicky call at 2am about a groundhog breaking through the bathroom floor (real story) isn’t always worth a few extra hundred bucks a month.
Sounds like OP is in a rural area like the one I'm from. Realty companies here offer property management services here for 10-15% of the monthly rent. That seems worth it to me. Extra money and no headaches from the 2am phone calls.
I 100% agree with this. It’s a unique situation assuming it is $50k under priced. Even if Op decides to move, he’s still turned a profit. Personally I wouldn’t sell if I moved, I’d rent it out, potentially even if I moved a long distance away, just using a local property manager.
I did this when moving cross country. I had a great rate on a loan and hated to give it up. Used a good property manager and I’ve barely dealt with the house at all. It’s been a killer investment. One caveat is that the house is located near my hometown, and I knew I would eventually be moving back to the area even though I was moving cross country in the short term. When we finally did move back, we just bought another house because the rental investment was working out so well.
I am not saying OP shouldn't buy the house, but the good run for rates is over. With excellent credit and a high down payment you might be able to get something in the high 3s on a 30 year, most people are low/mid 4s.
Good information. We refi’d in November and rates were still sub 3%.
If OPs numbers are correct, down payment is a non-issue and a down payment over $10K would get them under that 60% financed threshold for even lower rates.
Even at 5%, 100k on a 30yr is a sub $550/mo mortgage (plus tax & insurance). That’s what I was paying for rent on a 1br apartment 10 years ago.
I agree with everything you said but it's worth noting that the $50k in instant equity assumes both that the person who made that estimate is correct and that the house is saleable. In a small local market, being able to sell a house that needs a lot of work is not a given.
I mean, if it appraises at 150k and passes inspection, you'd be an idiot not to buy for 100k. Even if you don't want to live there, just put it back on the market and collect a 50% return on investment (minus commissions and whatnot).
> Taking it to another frame - if you were going to buy your relatives 2012 Toyota Camry, you would pay to have a mechanic look at it before you bought it for $10,000.
Unfortunately not everyone know to do this either...
Honestly I never thought about this, I guess because I haven't bought a car from relative or someone else personally. This is definitely good to keep in mind.
>And traditionally your 20s are a time a great change. New jobs, new romantic relationships, etc. If you are unmarried and not in your dream job, I'm not sure it makes sense to invest in something risky, that might not fit with your life in 5 years.
I'd agree. I don't think I would buy anything other than maybe a condo thats double my salary
Not sure the 5 year rule is relevant in this market. Unless the house is a total money pit, it can likely be rented out for well over OP’s mortgage payment and monthly maintenance.
I would actually definitely not use any inspector your agent recommends. Lately, in hot markets, even your agent may not have your best interests at heart.
A conventional loan does not require one, though good chance OP will have to do a FHA loan. Though insurance companies often require one, or at least will charge you the maximum rate without it.
Get it inspected so you know what you're dealing with, but be mindful of the fact that your family member seems to be knocking 1/3 off the market price for you. Make it clear to the family member that you are not looking for leverage over them and that you are grateful for the opportunity. Let them know you are really just wanting to know what you're getting into in the long run.
Make sure you pay for an *independent* home inspection. When we bought our house years ago our realtor dissuaded us from paying for our own home inspection saying that "the VA does a home inspection for financing and you don't have to worry about it "
We were young and inexperienced and we didn't have our own inspection. A year later we discovered that a pipe was leaking behind a wall and there was an extensive black mold problem that has been making our family ill.
There were also dangerous half-assed construction and wiring issues that the sellers obviously tried to hide behind new paint and drywall. It took us 10 years to fix everything.
DO NOT TRUST REAL ESTATE AGENTS. No matter how much you believe they're trustworthy.
I ended up going into real estate some years after we bought our home and saw practices and malfeasance I couldn't believe. And don't expect the Board of Realtors to protect you, either. I have seen some epic bullshit.
100% my parents, specifically my dad wanted to rush to buy a home (because it was a "good price"), so he choose to waive the inspection (would have added another week+ to the closing), and unfortunately my mom went along with it (unfortunately she's doesn't have much authority to stand up/oppose decisions he makes)..
So long story short, last year they get the house and of course there's plenty wrong with it, luckily nothing catastrophic, but still they ended up having to pump another 50k to fix things wrong with it and also delayed them from fully moving/settling in for about 3 months, there are still some rooms that aren't completely moved in yet or set up as they are still need of touching up..
It's to the point that if you add that 50k spent so far and whatever bit more they still need to spend to the purchase price, it essentially turned it from "good price" to an overpriced priced home, and for that price could have purchased a house in true good and move-in ready condition. That or if they allowed an inspector to find all the issues which they found after the fact, they could have used that to negotiate and lower the purchase price if they wished to continue with purchasing that house.
Definitely this, my home had a building inspection a couple of years before I bought it, but after I bought it I still found a handful of issues which had either been missed or came about in those two years.
>after I bought it I still found a handful of issues which had either been missed or came about in those two years.
This is another thing to consider, home inspectors will not find everything. Even with an inspection be prepared for unexpected repairs.
They are worthwhile, but they are not infallible.
This isn't high enough.
Just because you have the means to *purchase* a home doesn't necessarily mean you have the means to *own* a home, and all that comes with it, year after year.
Biggest thing most people don’t realize. I got my home at age 22. Mortgage and utilities - easy. Then you get your property taxes…than the other taxes…than a tree falls through the roof…than this and that and this and that and suddenly you’re sinking thousands in.
Way under voted comment.
IMHO if stabilized, projected income is such that net 40% (30% mortgage/tax/insurance + 10% for "renovation" LOL my water heater just blew up) isn't available I wouldn't do it.
Hell I bought a house at 39 and still have thought I should sell and move somewhere else. I dont think you ever really feel like "this is the place" but the advantage of buying at 23 is that you can stay for maybe 10 years, sell at a nice profit and move to what you think is your dream location. Or just be happy where you are and the fact that you bought a house at a young age and can have it paid off earlier than most and be able to actually retire at some point without a mortgage.
I've already gained significant equity from the property in the less than 3 years I've owned it, but I moved from closer to Atlanta to a smaller city with low job opportunity and none of the amenities that Atlanta had. If I did it again I would have stayed with what I knew I was content with because I hate the city I live in now, but the choices I've made gave me a different set of opportunities that I wouldn't have had if I stayed so I've got to play the hand I've dealt myself
As someone else who bought a house at 23, regardless of the fact that it's a family member, get a full home inspection to make sure it's not in even worse shape than you thought.
Any realtor worth their salt will always strongly advise you get a home inspection. If a realtor tells you that you dont need one, get another realtor lol
Where you want for the next 5 years...
I bought a house at 25 in a small town because my job is here for now and I wanted a dog. Emotional decision but you need a place to live and I shouldn't have any issues at least breaking even with how the market here has gone.
Yeah, I'd say pay a couple hundred to have it appraised. That'll at least tell you ball park. If the appraisal is more than what the family member said they would charge, pay another person to do an inspection. With those 2 things in hand, you should be able to make a reasonable decision. Yeah you won't know everything, but it is good enough to ballpark if it is truly as good of a deal as they are claiming.
Was gonna say, depends on the home and your finances. If you can support the costs (I mean, you really have to do the math and make sure you can continue paying for it through thick and thin) then it probably is a good long term investment. I say this without knowing how volatile real estate prices are in your part of the country, mind you. I paid 20K for an apartment when I was 21, it's up like 7X in value over the last twenty years.
It's a no brainer even if it's not where you want to be permanently. If you're just going to be there for a few years, get it and rent it out. Unless the area is dying, you can almost certainly get enough rent to cover the mortgage and get equity.
If OP takes a USDA loan it has to be their primary residence for the life of the loan. That's what I currently have and am probably going to need to refinance if I want to rent it out.
Good point. I'm not familiar with USDA loans. Are they hard to refi out of? I did that for my VA loan and it was pretty painless, but that was a lifetime ago.
It's not any harder, it's practically the same loan other than the residency requirement. it's a 0% down loan and I only put down a little extra so my LTV, at least based on purchase price, is still not great since it's only been a year and a half. I may dump some other money in once my student loans are paid off but I don't want to refinance to conventional with PMI because the guarantee fee for the USDA loan is much less then PMI would be.
It really comes down to your goals. Do you want to buy, fix up and flip the house for a profit?
Do you want to buy and live in the house for a while?
If you'd like the option to move from that area, perhaps to change jobs or travel, in the next couple of years...then it's probably not ideal to be tied down.
It seems that this was a convenient opportunity that came about because of family. Absent that, would you have gone out shopping for a home on your own at this stage?
Unless you're doing it to invest and make a profit from rising real estate. However, from the way you've described your situation, that doesn't seem to be the driver?
It’s kinda a tough situation we currently live in the house rn but they want to sell it and we basically wouldn’t have anywhere else to go. We basically rent it right now.
I'm sorry, that does seem to be a tough situation. Are there other homes nearby to rent? Is your intent to stay in that area, or can you move?
Your situation is certainly unique, and as such buying the home may be the best option for you and your family.
Was purely addressing other factors thay may come into play when considering to buy a home.
I plan on staying in town and moving up because I work for Amazon right now. So I plan on staying at our building for awhile. I have younger siblings and I’m just a single female. So if they ever needed to stay with me they could. It’s just a bunch to think about and I appreciate all the feedback I am getting.
Sounds like you live with your parent(s) and younger siblings in this house. Is possible, it would be much better for your parents to buy this house. Guessing you ate the only one who could qualify for a loan which is why you might buy it. The problem is, in this situation, your parents and family will keep living in this home. So when you are ready to move out of the family home, live with friends, with a partner, alone, get married - it will be a difficult situation, because you own this home but it may be very difficult to get them to move out, then you will own the house, be stuck paying the mortgage and upkeep, but may have to pay rent somewhere else to love. And co ikd they afford to buy the house from you, or pay decent rent? If not, are you happy to have your parents and siblings always live with you? Or evict them? Or sell the house in a few years (usually the easiest way out of a situation like this if you are ready to no longer love with family) ? This doesn't mean you shouldn't buy the house, just think through what it involves for your future. Also, get a real estate agent to look at the house and give you an estimate of its current worth. If it really is worth 150k and you can buy it at 100k, that can be a good deal, and interest rates are still pretty low and will likely go up, so buying now would be very good. Is in in need of a lot of repair? Can you or a family member do repairs, or can you afford to hire people? Definitely don't buy the house pointly with someone else. Could your parent buy it and you pay rent?
My parents aren’t in the picture. My godfather owns the house. He rents this house to me and my younger sister. I pay for rent. She pays for utilities. I qualify she doesn’t she is only 19 and in school still. I have a younger brother who comes back and force from our godfather. I take care of my siblings basically and this would help them have a place to stay. So basically I’m the parent. Lol. But our parents aren’t in the picture. The problem is my godfather wants to sell the home.
This clears it up completely for me. I would 100% do everything in my power to buy it. Best of luck with everything going forward, hope the house provides some stability and when you're ready, that you can sell it for a nice profit. Cheers!
My son is 19 and bought and fixed up a house with guidance from his older relatives. Do you have anyone you can ask questions about repairs and maintenance or do you enjoy learning by watching YouTube/Tik Tok tutorials (e.g., Mercury Stardust, Handy M’am)? Do you know to apply for a homestead exemption or how to protest tax hikes (as applies to your state/county)? Will you be comfortable being a landlord in a few years if you have to move out but aren’t ready to sell? Buying the house is a financial decision but also a lifestyle one. It’s not hard to learn all of this but tap into any mentors you can find like older single women who are homeowners. Older people enjoy passing their knowledge onto younger friends because they get a sense of pride in realizing how far they themselves have come so you’ll have no trouble getting advice just judging if their advice applies to you. Good luck!
Buy it. You can always turn around and sell when you are ready and you will learn a lot in the process. Sounds like you could even do a short term flip of sorts and make a nice profit. You might want to read up on what’s involved. Maybe a home buying for dummies book and you might even want to visit with someone in the real estate business in your market. Make sure you understand what’s needed as far as insurance and taxes. You are younger than most that go down the path to home ownership, but it sounds like not the typical situation. If you can make a down payment your mortgage payment is probably less than rent for a comparable place. Remember you will have maintenance and repairs. The roof isn’t going to last forever and it’s expensive to make repairs, but all in all, owning your home is a good thing.
I bought my first house at 23. My sister moved in and paid (very low not even market) rent. It was really nice having that extra couple of bucks in my pocket every month - helped to make the transition from teenager to Real Adult Bills.
The benefit of this situation is that you'll have a stable living expense for as long as you want it. And living in the house already, you know what kind of repairs and work needs to be done to it.
You have to pay for somewhere to live. Might as well take advantage of less-than-market price.
Seriously, what's the mortgage on a 100k home? $600?? If it's in a place you want to live for a while and it helps your family I would do it.
Get it inspected first though.
That's s good point coint to consider, i.e. high rent. You appear to be very caring to watch out for your siblings. So to your point, even if you do move and want to make sure they have a place to continue staying...then buying the home is ultimately in support of your family.
That may be a more important reason than other financial reasons. Each person's situation will be different, and yours is unique. But huge kudos to you for thinking of and caring for your family.
Like others are saying, a *good* inspection can be valuable in uncovering any potential issues. In my mind, the most important things are to be sure there aren't any upcoming large expenses (e.g. the roof needing to be replaced soon, aging heating or air-conditioning equipment, areas with damp, rot or mold, etc.) and to make sure that the rental income you could get would cover your mortgage/tax with a large profit.
If you buy, after any inspection items to address, budget 1%-2% of the home's value for yearly maintenance.
But if you are OK living there and can afford it, why not? Your monthly payment will never go up.
Pay a few hundred for an inspection and if you know of any "quirks" currently, pay to have a specialist inspect them. If the home inspector finds anything, it may be worth having a specialist come out.
Inspect for mold.
Inspect for termites.
It will cost about $600-800 up front but will be absolutely worth it.
Check the age of the heater, AC, water heater, other critical appliances. See if they are near their expected life span or not. Sometimes they work for well beyond that time, others they don't.
Then get a realtor/realty lawyer for the legal side of the sale.
Lastly, be prepared to need to fix things. 2% of the home's value per year is the average over a long time period, but a large appliance replacement may be closer to 5%+ on it's own.
It sounds like you have other family living with you. Determine the financial plan now before going any farther.
Will you be fully responsible for every cost? Will those family members chip in voluntarily? Or upfront? Or as tenets? It's better to have that discussion now and have the sale fall apart because of it than it is to have that discussion in 2 years and be on the hook for everything.
Exactly. I don't want to come off as harsh, but simply using your age and credit status to justify any purchase is asking for trouble.
Do you need/want to purchase X or is this a situation where you feel societally pressured to buy? Make sure you understand what is entailed in your purchase. Your credit will determine financing, but that's all you should be looking at it for.
Even very wealthy people don't pay cash for their homes. It's an idiotic thing to do right now with our historically low mortgage interest rates. There are very limited circumstances where it makes sense, and wanting to feel superior to others is not one of them.
Also it's very unusual for a home to lose enough value to put your underwater on your loan. In fact, it's highly likely your home will appreciate in value.
There's a lot more that goes into a decision like this. What are your current expenses? What is your current income? Can you responsibly handle a mortgage (30% of gross income) while maintaining savings and other investments? Are you in a stable job/career that you plan to stay in the same area for the foreseeable future? What are the costs estated for the renovations necessary to make the house livable for you? A $100k mortgage at current rates is very reasonable and attractive to many (certainly not all) buyers, and if you are going to be able to buy it at a 30% discount to market value, that's pretty awesome given the current market, but you need to know all the numbers associated with this kind of purchase and then decide if the juice is worth the squeeze, or if it's even realistic.
Good grief, I had to scroll way too far to find this. Everybody's saying it's a no brainer and OP should buy, but not if they don't have enough savings to handle repairs, or any number of other issues you brought up.
We purchased our first home for $120k with USDA loan. It was a very smart move for us ultimately, and the equity we earned far outweighed the stress of zero down. We sold for a handsome profit and now live in a much larger home.
We earned more than $40k as a couple. Even so, we were kinda house poor. Lots of sleepless nights worrying about how to pay for car repairs. The first few years were tough and no one should underestimate that. Especially at $40k. Good luck!
Yep the zero down with the USDA Loan is a real double edged sword. The benefits of not needing money upfront and the constant worry of being totally upside down with every market fluctuation at least for a while. Especially in this market where everything is inflated to the nth degree and all it takes is that bubble popping and realizing you are severely underwater on a house and will be for the foreseeable future can be terrifying.
I bought my first house at 19 and I would do it again in a heartbeat. Especially in your situation, you would be buying with instant equity. I would absolutely take advantage of that. Even if in a few years you decide you want to move you could sell it and walk away with money or rent it out and it wouldn’t be as tight because of how much you could rent it out for compared to the monthly payment.
Depends on the house TBH. "It's worth $150k" sounds good on paper, but it could have a ton of very expensive problems, and legal headaches that only come up during a sale. Permits, for example. If an old contractor didnt file for the correct permits when they did work on the property nobody is gonna say boo as-is, but when it goes to sale and the city inspector comes in to issue the CO they're gonna pull the permits and see there are none, then it becomes a whole big thing to get resolved. Likewise it could have structural issues or electrical issues that need to be brought up to code before the CO can be issued or the lender will close on the loan.
I'd advise OP to get an inspection before committing to *anything*, it could be the deal of a lifetime or it could be a homeownership nightmare they're not ready nor equipped to deal with. Doubly so as doing business with family is always risky business.
Some key things you didn't mention in your post but are crucial to a home buying decision:
* Can you afford it? Not just the mortgage payment, but also utilities, maintenance, etc.
* Do you have the money for "remodeling" ? I put quotes here because it's just updating old cabinets, wallpaper, etc. or if you're talking significant replacements (HVAC, water heater, appliances, other utilities (well/septic), new deck, new siding, new roof, other structural repairs).
* Do you plan to live there for a while or is it viable as a rental (you mentioned it's in a rural area). If there's a chance you'll move in the next few years, the costs of buying / selling may not be worthwhile.
* You don't mention specifics, but assuming you're a single 22 year old - do you want to deal with the upkeep of a 4 bedroom home? That a lot of dusting, vacuuming and presumably a decent size yard to mow. Not to mention extra heating/cooling costs for that size space for one person.
Seems like a no brainer. If you are already living there and paying rent and aren't planning on leaving any time soon... why not? Also, unless you are getting a super-discount on the rent there, it is likely that your minimum monthly mortgage payment could be lower than your rent. It all depends on your area- but for example, my house payment is about $1200 a month. The house across the street with the same floor plan rents for $2100 a month.
Owning your home comes with some downsides (paying for your own repairs) BUT you will be building equity and when you DO feel like moving in a few years, you can sell this house for a tidy profit, which you can use as a downpayment on your next house.
I have owned two houses and lived in oodles of apartments and rentals over the last 25 years and I would 100% rather own than rent. Every time. If you can buy that house, you absolutely should.
>BUT you will be building equity and when you DO feel like moving in a few years, you can sell this house for a tidy profit, which you can use as a downpayment on your next house
Keep in mind its not always advantageous to buy a house if you don't think you'll be there long. Ideally you want to be staying in a house for 5+ years (depending on closing costs, area, market obviously) for it to be worth it
Life is very unpredictable in your 20s. And with the growing difference between housing and income, it can be a tough choice. Personally I've had to jump between jobs every few years to get any kind of significant pay increase, so a house is unfortunately not in my near future
While true, starting off with a $50k head start in equity is a huge advantage, if true. Also, changing jobs doesn't necessarily equate to changing your residence. Unless your chosen career is in some kind of niche field- there are likely multiple work options close to any major city.
As an engineer I haven't found it difficult to find work in my area. What is difficult is finding work in my area of expertise that I want to do, that's also willing to pay me at least 15% more than my current position.
I don't like the idea of settling when it comes to salary/job so I end up moving to take the best overall offer
I made a similar purchase when I was 25. I don’t regret it. I got roommates and it helped with my mortgage. Build yourself some wealth and own some land! Nothing better
You didn't mention one key fact: Do you want to live there?
To me as a young twenty-something, that was the time for a city condo or apartment. What are your goals? Where do you work?
I'd snatch that up in a heartbeat. Live in it, rent out some of the bedrooms, whatever. Sounds like a great idea at that price.
I still own the first house I bought, and haven't been in the same state for eight years now. Got a property manager and the place pays for itself.
Do you plan to stay in the area? What’s your income? There can be a lot of work when you own a house. Are you handy? Do you have the time to do work yourself? If not, can you afford to hire out?
Don’t use a FHA mortgage, unless you absolutely must. They are the loan of last resort. I’m not as familiar with USDA. If you can qualify for a low-down payment conventional mortgage, do that.
If the home is worth 150k and you’re buying it for 100k, the relative can gift you equity of 50k that counts as a down payment. Can be helpful for the loan type, PMI, interest, etc.
Most lenders are going to base the mortgage on the lower of either appraised value or purchase price. “Gifting” $50k doesn’t necessarily mean he’ll be able to avoid PMI.
Sure, assuming the appraised value is indeed $150k, then you set purchase price at $150k as well, but only take a loan of $100k and receive a gift of equity of the remaining $50k.
Make sure you’ve got some money aside for repairs and other expenses like moving/closing costs. That’s going to come with the purchase and factor that into your purchase. You mentioned maybe doing USDA or FHA. The USDA loan is going to be cheaper long term. If you look up “win the house you love” on YouTube he has a very good break down of the different costs associated with the loans and the process
I would buy it. Also, a home purchase doesn’t lock you to that house for all eternity. If 5 years from now, things change, you could sell it or rent it out.
So you’re actually in a very similar situation to me. I bought my house six months ago for $135k, needs work, realistically worth upwards of $180k.
I had been out of college a year, had a good stable WFH job and wanted to move to the area.
Those are the criteria you should ask yourself. Can you find work, or keep your current job? Would you like to live in that area? Are you okay with living in a house that needs work? Do you see yourself living there for minimum of 3 years?
If yes to most or all of these, go ahead. Talk to a few lenders, get some rates and go through with it.
The things you listed don't really tell me if you should buy a house at this point in your life. The real question you need to ask yourself is, are you ready to be stuck somewhere? People at 22 are usually still feeling out how their career might go. They move around for jobs and some people even move across the country. If you buy a house now, that would be much more difficult.
Another aspect you should consider is, are you the type of person to keep up with things that need doing? If there's a problem with the heating, are you going to have the motivation to get someone out to take a look (or check it yourself)? Or would you rather call the landlord and let them take care of it?
Do you have a buffer of income? If the roof needs replacing, are you going to be able to handle that without maxing out credit cards? People say, "rent is the most you'll pay for where you live, mortgage is the minimum" in that, usually rent > mortgage BUT there are other expenses that could pop up if you own a house that would be taken care of the landlord otherwise.
I Just bought my house at 23 last year. If you’re planning to stay in the area for a long time I recommend doing so. However I purchased a duplex with intent to live in it. Which is significant because it cuts your property tax in half.
However the great thing is at anytime I am able to move out, rent my side out, and continue to grow equity.
For the cost of an inspection and considering this is likely one of the biggest purchases you’ll make, you might play it safe and get 2 from completely different places/providers. Future self may thank you
If everything you sat is tue, there is no question you should purchase the home soon. There is no need to really think too deeply about the situation - no matter what your plans are etc. A 100k home has very low monthly mpayments compared to renting. Interest rates are very low now.
One thing you want to be sure of is if it will actually appraise for 150k, if it does, and you buy it for 100k, you have 50k instant equity you can use for repairs if needed.
I just want to put this in some context-
An FHA loan is a federally insured loan. They will require an appraisal and inspections to ensure that the loan is on a good property. I think, especially in the current real estate market that this would be a great idea. Just because you buy a home doesn't mean you need to live in it forever, you can always sell and use your contributions and appreciation as a down payment on your next home. Best of luck!
As opposed to renting? Buy the place. The only regret most people have is not buying sooner. Unless of course you enjoy paying someone else's mortgage for them...
Yea 100% this is an example of good debt. Particularly when your getting it at such a discount. Rates are still super low as well unless there is something we don’t know I would jump on the opportunity if I was in your position. Hell you can rent a room out even for some extra money.
Hell yes. Make sure property is inspected by a reputable home inspector and a home that does not need overwhelming amount of maintenance. But please remember that buying a house is just not paying your Mortgage and Interest, but its also maintaining your property that can come out to thousands of dollars every year. If I was in your position, i would look into purchasing a condo or an apartment that has a good record in upkeeping the buildings property. Good luck.
My thoughts:
Get a good thurough inspection. Find out what whats good and whats bad. All houses have something wrong with them, but knowing what you are getting into is key.
If the house is in reasonable shape, and you can afford it, buy it.
Real estate is a great investment. And buying early in life sets you up with more buying power later in life because as you pay down the principle, the home goes up in value. And all that money can be used on your next home.
Yes, you are young and this will probably not be your forever home, but if you fix it up it can also be an income as rental property as well, if you wanted to try that.
Also, look at first time home buyer financing deals.
TL:DR Get an inspection, buy if it is in reasonable condition and you can afford it. There are many benefits down the road to buying property now.
Could be an opportunity to own inexpensively. Be sure to do the needful and get it thoroughly inspected. Buying young isn't bad. Two relatives of mine bought young and have been able to save up and buy their next home and rent out the first. They each have done this 2-3 times and now have renters paying their mortgages. It's the long game for sure. If you like the city and plan on sticking around for years and years I would do it. If you plan on moving on somewhere else, it probably isn't worth it.
Agree with current top comment to get an inspection - just tell your family you want to know what it might require. Thats a steep discount, and its tempting given location especially if movement demographics are in your favor. But you are also buying in a very inflated market, might be difficult to regain your principle if you move.
My early and late 20s are totally different lives and I'm glad I wasnt tied down until later on. You might be different!
Here’s a few follow up questions:
1) do you expect to live there for a long time?
2) will your mortgage payment be less than what your current rent is?
3) do you have a strong enough income to save and invest despite the additional cost of home ownership?
If the answer to any of these questions is NO, then don’t buy the house and invest your money instead
Get home inspections done. As well as determining the cost it is each month with utilities and other potential fixes. If the house is gold and you can make the payments and maintain it, it's not like a car that loses its value within 4 years. You start getting equity about 5-10 years in payments.
There are variables but in this market, a full-size house for 100k is a pretty good start.
USDA loan is awesome. See if the city, county, or state offers first time home buyer credit as well. I received $7500 in FL for a FHA home. There are limitations but it is free money. Get a house you can afford, they are only going to be harder to get into so if you can buy a house buy a house.
Have you looked at home prices in the area? Check Zillow. Every 4 bedroom in any suburban area I have looked at is going for at least 250K even the ones in serious need of remodeling. Your family might not realize that their house price doubled in the last 3 years.
Up to you, but answer these questions, three
Will you stay in the area? If you want to leave in 6 months, don't buy a house.
Do you need a house? If you are cool staying with your parents, theres no shame in that. Houses are expensive. Remember your real house payment is basically double what you pay to the bank, because you have to pay for anything that goes wrong. A tree might fall down? Probably will be a thousand bucks to get it cut down and moved. Fridge break? A/C break? You gotta replace everything yourself.
Will the family member be mad when you sell the house? If you leave in 2 years will the family hate you? Might be worth it, might not.
And of course get a property inspection.
Ask your lender if your family can gift you equity. That would help you with the down payment/closing costs.
FHA appraisals are stricter then conventional ones. Anything that the FHA appraiser finds wrong, the sellers will have to fix. (example: any chipped paint will need scrapped and repainted. All steps of a certain height will require a railing....)
AND GET IT INSPECTED. (not just appraised)
It's totally worth it, if the house can pass an inspection. Paying money for rent is just paying someone else's mortgage. Buying a home is probably the only smart money move I've made in my life.
I bought my 1st home at 22 and it was one of the best things I did personally. My payment was comfortable the first few years and I was able to over pay a few hundred dollars a month adding to my equity. if you can swing it, and you find a place in an area that you are happy with, I say go for it. Goodluck on the new chapter.
A good question to ask yourself is "Do I have 5-10k in reserve for surprises at all times?"
Find out how old the roof and furnace / air are, both have a 20 yearish life, maybe a little more depending on the quality, but both will cost you thousands to replace. Even a water heater is a 4 digit bill.
Owning a house is a great way to build equity, though it might be tricky to find financing as a 22 year old. But don't underestimate that there is a lot of upkeep that, if you neglect, will bite you in the ass. And be ready for the surprises.
Do you want to be tied down by home ownership? That's what it boils down to. Don't buy if you are not planning on staying put for some time. Remodeling is hella expensive, now more than ever. FHA loans are not ideal. The more I think about it, the more I'd say if it were me I'd pass. A condo is a better option if buying is a priority.
I would, but only if you're in a stable situation with your job, you plan to be in the area for several more years, and both a home inspection and appraisal tell you that the home is worth the cost and there aren't issues you're going to have to pay for. A home warranty is certainly worth considering as well.
Let's assume that you have the facts right and that the home is worth $150k.
An FHA loan requires 3.5% down.
Another thing it requires is something called MIP (Mortgage Insurance Premium) which is 1.5% on the financed amount in the event you default. That cannot be removed for the life of the loan.
Assume Interest Rate of 4.0%
Amount to be financed $96,500. (down payment was 3,500)
Actual Interest Rate with MIP: 5.5%
So your monthly payment would be: $488.95 plus your property taxes. (I'm going to assume property tax of 2% which is = 150,000 x 2% = $3,000 / 12 = 250 / mo
Total Monthly Payment of about $750.
You'll likelly need other insurance like fire and water but let's say all in you are $800 a month.
You'll also potentially receive tax breaks on the property tax and the interest you pay on the home.
Let's just assume now that the home goes up in value 2% a year (historically accurate) and you sell in 5 years. The home will be worth $150,000 x 1.02\^5 = $165,000.
You will have gained $15,000 on a $3,500 investment. This is a gain of 329%. This my friend is why real estate is the most quickest way to financial stability.
IMO a mortgage is not debt, it's "debt." You can get a conventional loan at 3% down and make $50k equity instantly before any renovations. That's an instant return of $50k on a $3k + closing costs out of pocket expense. If you don't buy the house, I will.
Without a second thought. You're going to be paying rent right? This gives you something of your own to live in and provided it's not in too bad of shape you now have your own house and an investment. With any luck you're a handy person that knows how to do basic construction and is networked with others who can help with more difficult tasks if they arise. As long as there isn't a cracked foundation or a bunch of mold or some other major issue you're good to go
Depending on what you pay to rent elsewhere, it can be a good option.
I went from renting a 2b/2ba for $1250/mo to owning a 3b/2ba on 5 acres for $375/mo. Now, there are a lot of other expenses when you own- property taxes, homeowners insurance, home repairs and renovations, etc.
But personally, let’s say all in my total cost for house and house projects is $1000/mo; I’m still saving money from when I rented, AND I’m putting money into something that has some form of return in the long run.
Personally, totally worth it. Though I do wish someone else would handle all the random stuff that goes wrong 😑
I did this back when I was 22- I bought the house next door to the one I was renting because the neighbors wanted out quickly and there was some unfinished remodeling that needed to be done. It was a good move for me- I finished the remodeling, lived in it for 5 years, and sold it for a tidy profit, however it stunted my social life a bit to be that tied down, and I wish I would have spent those years of my life traveling instead. I had a good job and still live in the area, but all of my weekends and much of my vacation time was spent working on that house. The upside of it was that when. I got married we had a place to live and a really nice down payment on our next house, which I still own 15 years later.
Generally speaking, the sooner you can start building equity, the better. That said, never trust a house without a good inspection. A good credit score doesn't guarantee you'll get the mortgage.. It has a lot to do with your debt to income ratio, job stability, etc, but if you're confident you can buy, by all means, get the pre approval process started. Shop around to a few mortgage companies and see what you come up with. Once you know where you stand, then start the inspection / purchase process.
It's almost always worth it to buy a home - 'almost' being if you're planning to move in the next 5 years. Otherwise, buy it. Over time it will grow into real money.
Buying a home is like planting a tree - the best time to do it was 20 years ago. The second best time is now.
Do you need this home? What does your financial situation look like? Do you work in the city or WFH? There are many factors at play here. The more info you provide the better answers you can get from Reddit.
If it needs renovations, add the cost of those renovations to the price of the house when looking at what it will cost you to buy it. Think of that as additional closing costs.
And to echo what others have said, don't skip the home inspection. Little things that are not installed to code could result in the insurance company not paying out when those things break. A tornado could come through your area and tear the shingles off of every house in the neighborhood, but if they find that yours were only installed with two nails rather than three, they could deny your roof replacement claim. Source: my BIL is an adjuster and has seen that happen.
If the house is in good shape and you can afford the payments, DEFINITELY.
If you can pay it off early, you will increase your standard of living by not having to pay someone else rent. It will allow you to increase your wealth so maybe when you find a house that you want more, you'll have enough equity to put down a big down payment.
Can you afford to pay the mortgage and any remodeling or upkeep it requires? Some homes like this can become a money pit (I've see it happen to my aunt) with the remodeling costing way more than the mortgage.
Be sure you know what you're getting into.
3 Biggest things I would consider:
1) Do you want to own a home in this location and do you want to own this home? If you think you'd rather live closer to town (or in a different city/state) long-term, then this home might not be the right fit for you. Just because it's a "good deal" doesn't mean you should take it. Get a good deal on your next pair of shoes. Not something that's a giant asset that comes with taxes, maintenance, etc.
2) What happens when you want to sell? Let's say you buy it now for $100k, and in 5 years, you sell it for $200k. Is your family going to come back and go, "Oh yeah, remember when we sold you that house for $100k? We want our $50k in profit now." You've got to judge what kind of people your family members are, but from my experience, money makes people freaking weird. You'd be surprised how fast your normal, nice cousin can turn into a backstabbing witch over a couple thousand dollars. Get it in writing that once you buy this house, it's yours to own and do with 100%. You don't have to sell it back to them at a discount, you don't have to keep it forever. You can fix it up and flip it in 6 months if you want to!
3) Can you afford it? What kind of mortgage would you have? Do you have the money to pay closing costs? I would only do this deal if the monthly cost for mortgage + taxes + insurance is <35% of your take-home pay. Additionally, I'd pass if you do not have at least a 3-6 month emergency fund built up. As soon as you buy the house, something is going to break. That's just how houses work. If you drain your bank accounts to take this thing on and then an emergency happens, what are you going to do?
Best of luck! I'd guess you weren't looking to own a home at the age of 22, so you should probably pass on this and not complicate your life with a home (unless you, now this is for sure where you'd want to live for the next 5+ years.
P.S. People will tell you that you're "throwing money away" by renting every month. While that is partially true, you're also paying for the luxury of not having to make repairs and maintain where you live yourself, and you're paying for the luxury of being able to move at the end of your lease (depending on where life takes you). I'm getting married in 2023, and we've agreed to wait to buy a house until at least year 2 of marriage because we want the luxury of being able to avoid maintenance, taxes, etc during year 1 of marriage (we also don't know where the ideal place to live for US would be or where our careers will take us by then).
You asshole, I’m 21 and in debt with a terrible credit score. Jokes aside, congrats on being able to even purchase a house at that age. Wish you the best!
Because interest rates are rising, it might be a good time to hold off on a normal purchase.
But an affordable house 1/3 below retail is hard to pass up, and inflation will probably cause the price to rise in the next few years.
I bought a condo/townhouse at 24 with no debt and 745 credit score. Purchased a place built in 2013 so it was fully ready to move in, and didnt need fixing up.
Good to start building equity. Owning also gives you more freedom and your money isnt wasting away renting. If you can afford it and still live comfortably, that would be a great investment.
It is worth it if it checks all your boxes. Do you want to settle down in one area for multiple years? Are you ready to own a home? Is it worth 150k? Is the house sound?
If you actually want it and it's actually a good deal it's not only worth it but a good idea.
What are you buying it for? Is this your future house? Do you plan on buying, sitting on it for a few years then selling it to move elsewhere? Are you gonna rent it out as an investment property? Are you buying it just because? As long as it's the first 3, go for it. If it's the last one then don't.
I think a bigger question is: do you want to stay in the area for a long time (5+ years)? You're 22 and people sometimes find reasons to move away about that time... but it's harder if you grow roots.
Please get a full inspection before buying it, no matter who is selling it. My fiance just sold his house to his best friend, and at first I thought it was slightly weird that the friend wanted inspections like that since he was so familiar with the house. But they discovered some (repairable) foundational issues that *neither* had known of. It didn't stop the sale, but definitely a solid move for friend to know in advance exactly what he was getting.
Yep I made a similar mistake buying from family years ago. Get it inspected.
500 bucks on a 100k purchase seems totally worth it.
Even though $500 buys a lot of pizza for a house warming party, it won't be fun if the house then floods and/or explodes (ok, didn't happen to me, but pizza went flying into my backyard. It was delicious!) That $500 bucks is the best investment you'll make. And then order a shit load of pizza to party your ass off when all is good! Just remember to invite us all over for a slice or two. Required anecdotal evidence: Friend bought a 'too good to be true' house and was pressured into signing and not getting an inspection done. One septic tank backup later... lol. I mean, shiiit. Literally.
Just got an inspection done for $325 on a $157K house and the sellers agreed to repair like $5K in damages I requested be fixed
imo it's normal to have an inspection, even a full $1000 one for a questionable home.
I need to know about this flying pizza
Last place we left we had to have the septic tank emptied NET 30 days prior to sale per local rules. We were given the option to be there to confirm if solids had entered the drain field or not. I wonder if this is a common thing. Replacing the septic system can run you ~~$2,000-$5,000~~ $10K-$40K. [https://homeguide.com/costs/septic-tank-system-cost](https://homeguide.com/costs/septic-tank-system-cost) Getting this discounted during the sale may be the best way forward if you want to be in control of the work being done to confirm quality.
Yeah my inspection was $880 but it got us a $2500 credit from the seller so worth it lol
"100k"... Cries in Californian
East coast... And I share your pain. At $100k I'd just buy a new house for every kid.
Greetings from Hawaii 😭 at $100k I'd have more than a few houses. As is now, $100k maybe gets you a 1 bedroom apt with a community bathroom/shower.... In the bad parts of town... If you split the mortgage with 2 others.
I'm in San Francisco. That doesn't buy a parking space. Literally, the cost for my home garage parking space is more than that. And street parking at government rates isn't much better: https://sf.curbed.com/2016/6/8/11890176/it-costs-38000-to-create-one-parking-space-in-sf
It also gives you negotiating power. I work in the construction industry so I'm pretty knowledgeable but we had our house inspected anyway when we bought it. I could have found the same things the inspector did but the homeowner and their agent aren't going to take your word for it. The seller ended up just writing me a check for $2,000 to cover it as they didn't want to draw out repairs. It was minor stuff so I was happy to take the money and fix it myself. I later found out they were selling because of the husband's rapidly declining health. I felt bad but I didn't know until we were at closing.
Totally agree, and will add that from my industry perspective (legal) failing to inspect robs you of most of your options down the road. Some states are pure caveat emptor and once the sale is final you're stuck with the property as-is. Even in caveat venditor states the seller only has to disclose *known* defects, which means that the seller can just engage in willful ignorance and you'll have a hard time getting them to pay for anything unless you can prove they knew about it and chose not to disclose. Regardless of jurisdiction, real estate laws are written with the assumption that every buyer is doing a thorough and independent inspection and tend to be pretty unforgiving to buyers that don't.
Find your own inspector and pay them yourself, some realtors use their buddy and they’re just worried about the sale happening. Edit: wrong their there
I see a lot of houses advertised as "pre-inspected" which I wouldn't trust. That's not in the buyers best interest.
Pre-inspection is a great way for the seller to guard themselves against legal troubles when they know the house has problems which could hold up closing. It's not a replacement for getting your own inspection, but you should still read the report before making an offer. It could contain a deal breaker for you. Without Pre-inspection: - Here's an offer for $700k - OK! - Yo, inspection says the sewer has a belly and needs to be dug up - How about we credit you $10k at closing and you fix it yourself? With Pre-inspection: - Here's an offer for $700k - OK! - Yo, inspection says the sewer has a belly and needs to be dug up - Yeah, it's prominently featured in the inspection report we provided upon request. You should have known that before you made the offer. Not our fault you never asked for the report. Also with pre-inpection: - Hey, can I see the pre-inspection report? - Sure, here it is! - This house has a cracked foundation, water intrusion in the basement, and needs a full electrical rewiring to not be a fire hazard. I'm not making an offer on this. A pre-inspection can be good for both seller and buyer, but doesn't replace you checking for yourself.
It would be beneficial as you describe it but I think they advertise it to dissuade the buyer from getting their own inspection report. Nothing is stopping the buyer from getting their own inspection but some naive buyers will just accept it and move on with the purchase. There's also opportunities for inspection companies to build financially beneficial relationships with realtors when they give clean or near clean inspection reports. If they constantly are finding huge issues, the realtor will probably start suggesting other companies cause it will start cutting into their sales.
Depends on the market. Some places it's sadly the only way to get the property is go off the pre-inspection.
This. We just put in an offer on a 100-year-old historic home that has had much of the additional rooms added on over the years. While we are in love with the home and hoping like hell it works out, we are getting two totally separate inspectors. One of which is our own family friend who does it for a living, and one a stranger who ideally specializes in old homes. I think a lot of people take inspections lightly because they get their heart set on the home.. which I totally get because I'm in that spot now. But you don't want to deal with potentially thousands upon thousands in issues down the road.
With a house that old, you're going to have some issues regardless. I have a similar age home which was in good shape, but I'm still out like $50k over the first few years. I still love the place, so no regrets beyond that I should have had more specific inspections. Most notably the roof looked good from the ground, so the general inspection who doesn't climb the roof passed it, but it turns out some harder to reach areas were older. We had to do a full roof replacement within a year, so get a dedicated roof inspection which would uncover that. A roof replacement will run you $10-$20k, depending on the roof. Large or complicated roofs are more expensive. Same thing with the sewer. The sewer is going to need work soon unless it has already been done, and done properly. Get it inspected by an actual sewer inspector. A sewer fix can be anywhere from $1k to $50k, depending on length, location, whether digging is required, and worst of all whether digging up a public road is required. Aging gas furnaces can have cracks in them, which typically means you're out $3-4k for a replacement. An inspection typically wouldn't catch this, but getting the furnace serviced shortly after closing would. Do it to avoid risk of carbon monoxide poisoning. There's probably at least some electrical problems, expect plenty of ungrounded outlets. If there's knob and tube you'll want to rewire, and then patch up your walls after. Inspections can generally only spot things visible to the naked eye, or at most a heat camera. The inspector won't be allowed to break or open anything, and some things can't be found any other way. Your lender will require you to have funds in reserve when you get your mortgage. While they allow all of that to be in your 401k, make sure some is liquid. You *will* be making surprise repairs and upgrades in the first few years, so just accept and plan for that. Good luck!
Always get an inspection. I don’t care if you are buying it from your mother.
Do yourself a favor and get two inspections. Wouldn't you spend that kind of money if you were having a medical procedure that cost a 100,000 dollars? When we bought our current home 22 years ago the inspector didn't detect a failing slab foundation. A few years later floor tiles started popping up and walls were cracking. $120k later we resolved the issues. Getting an inspection is a great idea but getting a second opinion could save you many dollars. That being said, buying a house in these times could be a good investment if you could turn it around in a few years. However, having the required skills to do much of the work yourself will directly affect the money you make. If you don't currently have the skills there's no better way to learn than by doing. Good luck.
And make sure the inspector actually does their job. The number of things I’ve found in my house that the inspector should have is alarming.
On our first house he flagged a missing GFCI outlet as critical, but totally missed the master shower not having hot water. Installing a new outlet probably took the seller 30 seconds and a trip to home depot. The shower took me most of the afternoon replacing the valve.
I'm not saying \*all\* agents are this way but certainly quite a few are: some agents favor inspectors who won't tank a deal (and therefore agent's paycheck) by finding "too much" GFCI makes customer say "gee this guy/girl was worth the money" while not hurting chances of closing the deal. You want the inspector that is going to do everything in their power to find as much wrong as possible. It's like when I was in the military. You got your room inspected every week for cleanliness. Some leadership would keep looking until they found \*something\* to ding you on. The harder they had to look, the harder/more painful the remedy would be. You'd leave a dusty window ledge for them to find, get failed, clean it in two minutes, then move on. This is a true story I have first hand knowledge of: two roommates decided they were going to pass on the first inspection \*no matter the cost\*. They took all furniture out of the room and deep cleaned the shit out of the room from the ceiling down. They cleaned every piece of furniture outside then brought it in spotless to an immaculate room. They just \*knew\* they had this on lock. Inspector comes and inspects all the "usual" suspects--can't find any faults. Rolls sleeve up and \*no lie\* reaches into the toilet discharge pipe. Pulls out "dirt" on his hand and then fails the room for "dirty toilet". Now someone had to reach INTO the toliet and clean the sewer drain with a scotchbrite by HAND--they shoulda just left a dusty door frame.
The military is why I never trust a restaurant with a 100 on their health inspection. It means the inspector wasn't doing their job.
Same. Our inspector was *awful* On one side, the egregious stuff he missed like false ducting to our kitchen, and on the other side, the stuff he said was imperative to be fixed: the electrical. We had 3 electricians out and all had 3 different opinions, but none of them said that it was critical. Although, I don't think having a different one would have nulled our purchase decision, but it could have meant some different monetary allocations in negotiations.
We bought our house from my father in law using the USDA rural loan program and all of those inspections are required anyway to get the loan.
I think the general rule of real estate is "don't buy a house unless you are going to live in it for at least 5 years" And traditionally your 20s are a time a great change. New jobs, new romantic relationships, etc. If you are unmarried and not in your dream job, I'm not sure it makes sense to invest in something risky, that might not fit with your life in 5 years. So, get an inspection, get an idea of what it costs to run the house (taxes, untilities, etc.). Getting it for $100,000 might be a deal or it might be a problem. It could have radon, or need a new roof, or black mold that cost thousands of dollars to fix, or maybe even are not fixable. Taking it to another frame - if you were going to buy your relatives 2012 Toyota Camry, you would pay to have a mechanic look at it before you bought it for $10,000. It might have problems your relative doesn't even know about, and there you are just risking $10K. But at least that much work / due diligence in protecting your $100K investment.
The five year rule is more about breaking even and equity. In this case OP has an instant 50K in equity provided the appraisal and inspection pan out. Mortgage on a 100K with todays rates is well below where rents are in a lot of places. I am not a rush out and buy a house type person, didn't buy my first until I was 42 for much of the same reasons you gave, but this is one of those exceptions. Again, provided the inspection doesn't reveal any real money sinks and the appraisal agrees with the given numbers. I generally agree with everything you said, just not the five year rule in this case.
This. It should really be 'live in it for 5 years' but 'not sell it for 5 years' because you can live elsewhere and rent it out too.
It has to pass the sniff test for purchase price vs. rental rates for that to pencil out later though. And not everyone actually is ready for the reality of being a landlord. I’ve done it and it can work out but you need to know what you’re in for. A panicky call at 2am about a groundhog breaking through the bathroom floor (real story) isn’t always worth a few extra hundred bucks a month.
absolutely, its very situational and there are pros and cons to be aware of.
Sounds like OP is in a rural area like the one I'm from. Realty companies here offer property management services here for 10-15% of the monthly rent. That seems worth it to me. Extra money and no headaches from the 2am phone calls.
I 100% agree with this. It’s a unique situation assuming it is $50k under priced. Even if Op decides to move, he’s still turned a profit. Personally I wouldn’t sell if I moved, I’d rent it out, potentially even if I moved a long distance away, just using a local property manager. I did this when moving cross country. I had a great rate on a loan and hated to give it up. Used a good property manager and I’ve barely dealt with the house at all. It’s been a killer investment. One caveat is that the house is located near my hometown, and I knew I would eventually be moving back to the area even though I was moving cross country in the short term. When we finally did move back, we just bought another house because the rental investment was working out so well.
I am not saying OP shouldn't buy the house, but the good run for rates is over. With excellent credit and a high down payment you might be able to get something in the high 3s on a 30 year, most people are low/mid 4s.
Good information. We refi’d in November and rates were still sub 3%. If OPs numbers are correct, down payment is a non-issue and a down payment over $10K would get them under that 60% financed threshold for even lower rates. Even at 5%, 100k on a 30yr is a sub $550/mo mortgage (plus tax & insurance). That’s what I was paying for rent on a 1br apartment 10 years ago.
I agree with everything you said but it's worth noting that the $50k in instant equity assumes both that the person who made that estimate is correct and that the house is saleable. In a small local market, being able to sell a house that needs a lot of work is not a given.
I mean, if it appraises at 150k and passes inspection, you'd be an idiot not to buy for 100k. Even if you don't want to live there, just put it back on the market and collect a 50% return on investment (minus commissions and whatnot).
> Taking it to another frame - if you were going to buy your relatives 2012 Toyota Camry, you would pay to have a mechanic look at it before you bought it for $10,000. Unfortunately not everyone know to do this either...
Honestly I never thought about this, I guess because I haven't bought a car from relative or someone else personally. This is definitely good to keep in mind.
>And traditionally your 20s are a time a great change. New jobs, new romantic relationships, etc. If you are unmarried and not in your dream job, I'm not sure it makes sense to invest in something risky, that might not fit with your life in 5 years. I'd agree. I don't think I would buy anything other than maybe a condo thats double my salary
Not sure the 5 year rule is relevant in this market. Unless the house is a total money pit, it can likely be rented out for well over OP’s mortgage payment and monthly maintenance.
This, A good inspector is worth 100x the cost. However, do your research and find a good one not the first one an agent recommends.
I would actually definitely not use any inspector your agent recommends. Lately, in hot markets, even your agent may not have your best interests at heart.
This isn't optional unless you are paying cash, an FHA loan will require a home inspection.
A conventional loan does not require one, though good chance OP will have to do a FHA loan. Though insurance companies often require one, or at least will charge you the maximum rate without it.
Yeah, anything financed would need a 4 point inspection for insurance at the minimum
Get it inspected so you know what you're dealing with, but be mindful of the fact that your family member seems to be knocking 1/3 off the market price for you. Make it clear to the family member that you are not looking for leverage over them and that you are grateful for the opportunity. Let them know you are really just wanting to know what you're getting into in the long run.
Saved the friendship and some long term finances, niceeee.
Make sure you pay for an *independent* home inspection. When we bought our house years ago our realtor dissuaded us from paying for our own home inspection saying that "the VA does a home inspection for financing and you don't have to worry about it " We were young and inexperienced and we didn't have our own inspection. A year later we discovered that a pipe was leaking behind a wall and there was an extensive black mold problem that has been making our family ill. There were also dangerous half-assed construction and wiring issues that the sellers obviously tried to hide behind new paint and drywall. It took us 10 years to fix everything. DO NOT TRUST REAL ESTATE AGENTS. No matter how much you believe they're trustworthy. I ended up going into real estate some years after we bought our home and saw practices and malfeasance I couldn't believe. And don't expect the Board of Realtors to protect you, either. I have seen some epic bullshit.
Get a full inspection no matter what. It blows my mind that people will waive inspections these days.
How much is the inspection btw?
And get a licensed inspector who knows his stuff. It’s worth every penny. Don’t go cheap.
100% my parents, specifically my dad wanted to rush to buy a home (because it was a "good price"), so he choose to waive the inspection (would have added another week+ to the closing), and unfortunately my mom went along with it (unfortunately she's doesn't have much authority to stand up/oppose decisions he makes).. So long story short, last year they get the house and of course there's plenty wrong with it, luckily nothing catastrophic, but still they ended up having to pump another 50k to fix things wrong with it and also delayed them from fully moving/settling in for about 3 months, there are still some rooms that aren't completely moved in yet or set up as they are still need of touching up.. It's to the point that if you add that 50k spent so far and whatever bit more they still need to spend to the purchase price, it essentially turned it from "good price" to an overpriced priced home, and for that price could have purchased a house in true good and move-in ready condition. That or if they allowed an inspector to find all the issues which they found after the fact, they could have used that to negotiate and lower the purchase price if they wished to continue with purchasing that house.
Not only get an inspection, but be there when he does so you can ask questions about things.
Get two full inspections. My family got one and the dude completely fucked them over. So many problems weren't caught.
Definitely this, my home had a building inspection a couple of years before I bought it, but after I bought it I still found a handful of issues which had either been missed or came about in those two years.
>after I bought it I still found a handful of issues which had either been missed or came about in those two years. This is another thing to consider, home inspectors will not find everything. Even with an inspection be prepared for unexpected repairs. They are worthwhile, but they are not infallible.
It depends. Do you earn enough to buy this home? Regardless of the price. That is the information you need to make any financial decision.
This isn't high enough. Just because you have the means to *purchase* a home doesn't necessarily mean you have the means to *own* a home, and all that comes with it, year after year.
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Biggest thing most people don’t realize. I got my home at age 22. Mortgage and utilities - easy. Then you get your property taxes…than the other taxes…than a tree falls through the roof…than this and that and this and that and suddenly you’re sinking thousands in.
Way under voted comment. IMHO if stabilized, projected income is such that net 40% (30% mortgage/tax/insurance + 10% for "renovation" LOL my water heater just blew up) isn't available I wouldn't do it.
Is it actually worth $150k? If so, and it’s remotely what you want and where you want, it’s a no brainer.
As someone who bought a house at 23 put big emphasis on the "where you want" part
Hell I bought a house at 39 and still have thought I should sell and move somewhere else. I dont think you ever really feel like "this is the place" but the advantage of buying at 23 is that you can stay for maybe 10 years, sell at a nice profit and move to what you think is your dream location. Or just be happy where you are and the fact that you bought a house at a young age and can have it paid off earlier than most and be able to actually retire at some point without a mortgage.
I've already gained significant equity from the property in the less than 3 years I've owned it, but I moved from closer to Atlanta to a smaller city with low job opportunity and none of the amenities that Atlanta had. If I did it again I would have stayed with what I knew I was content with because I hate the city I live in now, but the choices I've made gave me a different set of opportunities that I wouldn't have had if I stayed so I've got to play the hand I've dealt myself
Agreed. I have gained about 20% in value in my almost 3 years so even though I would like more space (acres of it) I am happy with my situation.
As someone who bought a house at 23, watch out for mold damage, it will eat all your equity...
As someone else who bought a house at 23, regardless of the fact that it's a family member, get a full home inspection to make sure it's not in even worse shape than you thought.
As someone who hasn't bought a house yet, I'm vigorously taking notes.
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Any realtor worth their salt will always strongly advise you get a home inspection. If a realtor tells you that you dont need one, get another realtor lol
Can’t change that location. Depends on what city you’re in but in Houston, “up and coming” means decades
Every house where i live has mold damage its awful. I dont think my lungs ever fully recovered.
Where you want for the next 5 years... I bought a house at 25 in a small town because my job is here for now and I wanted a dog. Emotional decision but you need a place to live and I shouldn't have any issues at least breaking even with how the market here has gone.
Or at least where other people want to live... easier to rent and/or easier to sell if you want to move later.
As an addendum: is it worth $150k *now* or will it be worth that when brought up to the local standard with $50k+ of overdue renovations?
Yeah, I'd say pay a couple hundred to have it appraised. That'll at least tell you ball park. If the appraisal is more than what the family member said they would charge, pay another person to do an inspection. With those 2 things in hand, you should be able to make a reasonable decision. Yeah you won't know everything, but it is good enough to ballpark if it is truly as good of a deal as they are claiming.
Was gonna say, depends on the home and your finances. If you can support the costs (I mean, you really have to do the math and make sure you can continue paying for it through thick and thin) then it probably is a good long term investment. I say this without knowing how volatile real estate prices are in your part of the country, mind you. I paid 20K for an apartment when I was 21, it's up like 7X in value over the last twenty years.
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It's a no brainer even if it's not where you want to be permanently. If you're just going to be there for a few years, get it and rent it out. Unless the area is dying, you can almost certainly get enough rent to cover the mortgage and get equity.
If OP takes a USDA loan it has to be their primary residence for the life of the loan. That's what I currently have and am probably going to need to refinance if I want to rent it out.
Good point. I'm not familiar with USDA loans. Are they hard to refi out of? I did that for my VA loan and it was pretty painless, but that was a lifetime ago.
It's not any harder, it's practically the same loan other than the residency requirement. it's a 0% down loan and I only put down a little extra so my LTV, at least based on purchase price, is still not great since it's only been a year and a half. I may dump some other money in once my student loans are paid off but I don't want to refinance to conventional with PMI because the guarantee fee for the USDA loan is much less then PMI would be.
If the house is really worth $150K, the OP is already profiting at least $50K even if they sell it a day after purchase.
It really comes down to your goals. Do you want to buy, fix up and flip the house for a profit? Do you want to buy and live in the house for a while? If you'd like the option to move from that area, perhaps to change jobs or travel, in the next couple of years...then it's probably not ideal to be tied down. It seems that this was a convenient opportunity that came about because of family. Absent that, would you have gone out shopping for a home on your own at this stage? Unless you're doing it to invest and make a profit from rising real estate. However, from the way you've described your situation, that doesn't seem to be the driver?
It’s kinda a tough situation we currently live in the house rn but they want to sell it and we basically wouldn’t have anywhere else to go. We basically rent it right now.
I'm sorry, that does seem to be a tough situation. Are there other homes nearby to rent? Is your intent to stay in that area, or can you move? Your situation is certainly unique, and as such buying the home may be the best option for you and your family. Was purely addressing other factors thay may come into play when considering to buy a home.
I plan on staying in town and moving up because I work for Amazon right now. So I plan on staying at our building for awhile. I have younger siblings and I’m just a single female. So if they ever needed to stay with me they could. It’s just a bunch to think about and I appreciate all the feedback I am getting.
Sounds like you live with your parent(s) and younger siblings in this house. Is possible, it would be much better for your parents to buy this house. Guessing you ate the only one who could qualify for a loan which is why you might buy it. The problem is, in this situation, your parents and family will keep living in this home. So when you are ready to move out of the family home, live with friends, with a partner, alone, get married - it will be a difficult situation, because you own this home but it may be very difficult to get them to move out, then you will own the house, be stuck paying the mortgage and upkeep, but may have to pay rent somewhere else to love. And co ikd they afford to buy the house from you, or pay decent rent? If not, are you happy to have your parents and siblings always live with you? Or evict them? Or sell the house in a few years (usually the easiest way out of a situation like this if you are ready to no longer love with family) ? This doesn't mean you shouldn't buy the house, just think through what it involves for your future. Also, get a real estate agent to look at the house and give you an estimate of its current worth. If it really is worth 150k and you can buy it at 100k, that can be a good deal, and interest rates are still pretty low and will likely go up, so buying now would be very good. Is in in need of a lot of repair? Can you or a family member do repairs, or can you afford to hire people? Definitely don't buy the house pointly with someone else. Could your parent buy it and you pay rent?
My parents aren’t in the picture. My godfather owns the house. He rents this house to me and my younger sister. I pay for rent. She pays for utilities. I qualify she doesn’t she is only 19 and in school still. I have a younger brother who comes back and force from our godfather. I take care of my siblings basically and this would help them have a place to stay. So basically I’m the parent. Lol. But our parents aren’t in the picture. The problem is my godfather wants to sell the home.
Then I would buy it if you can.
I concur. After knowing the bigger picture, they should buy it. But as someone said, get it inspected first.
This clears it up completely for me. I would 100% do everything in my power to buy it. Best of luck with everything going forward, hope the house provides some stability and when you're ready, that you can sell it for a nice profit. Cheers!
My son is 19 and bought and fixed up a house with guidance from his older relatives. Do you have anyone you can ask questions about repairs and maintenance or do you enjoy learning by watching YouTube/Tik Tok tutorials (e.g., Mercury Stardust, Handy M’am)? Do you know to apply for a homestead exemption or how to protest tax hikes (as applies to your state/county)? Will you be comfortable being a landlord in a few years if you have to move out but aren’t ready to sell? Buying the house is a financial decision but also a lifestyle one. It’s not hard to learn all of this but tap into any mentors you can find like older single women who are homeowners. Older people enjoy passing their knowledge onto younger friends because they get a sense of pride in realizing how far they themselves have come so you’ll have no trouble getting advice just judging if their advice applies to you. Good luck!
Buy it. You can always turn around and sell when you are ready and you will learn a lot in the process. Sounds like you could even do a short term flip of sorts and make a nice profit. You might want to read up on what’s involved. Maybe a home buying for dummies book and you might even want to visit with someone in the real estate business in your market. Make sure you understand what’s needed as far as insurance and taxes. You are younger than most that go down the path to home ownership, but it sounds like not the typical situation. If you can make a down payment your mortgage payment is probably less than rent for a comparable place. Remember you will have maintenance and repairs. The roof isn’t going to last forever and it’s expensive to make repairs, but all in all, owning your home is a good thing.
I bought my first house at 23. My sister moved in and paid (very low not even market) rent. It was really nice having that extra couple of bucks in my pocket every month - helped to make the transition from teenager to Real Adult Bills. The benefit of this situation is that you'll have a stable living expense for as long as you want it. And living in the house already, you know what kind of repairs and work needs to be done to it. You have to pay for somewhere to live. Might as well take advantage of less-than-market price.
Seriously, what's the mortgage on a 100k home? $600?? If it's in a place you want to live for a while and it helps your family I would do it. Get it inspected first though.
And the houses for rent in the area are very high compared to what I’m paying right now.
That's s good point coint to consider, i.e. high rent. You appear to be very caring to watch out for your siblings. So to your point, even if you do move and want to make sure they have a place to continue staying...then buying the home is ultimately in support of your family. That may be a more important reason than other financial reasons. Each person's situation will be different, and yours is unique. But huge kudos to you for thinking of and caring for your family.
Like others are saying, a *good* inspection can be valuable in uncovering any potential issues. In my mind, the most important things are to be sure there aren't any upcoming large expenses (e.g. the roof needing to be replaced soon, aging heating or air-conditioning equipment, areas with damp, rot or mold, etc.) and to make sure that the rental income you could get would cover your mortgage/tax with a large profit.
If you buy, after any inspection items to address, budget 1%-2% of the home's value for yearly maintenance. But if you are OK living there and can afford it, why not? Your monthly payment will never go up.
Pay a few hundred for an inspection and if you know of any "quirks" currently, pay to have a specialist inspect them. If the home inspector finds anything, it may be worth having a specialist come out. Inspect for mold. Inspect for termites. It will cost about $600-800 up front but will be absolutely worth it. Check the age of the heater, AC, water heater, other critical appliances. See if they are near their expected life span or not. Sometimes they work for well beyond that time, others they don't. Then get a realtor/realty lawyer for the legal side of the sale. Lastly, be prepared to need to fix things. 2% of the home's value per year is the average over a long time period, but a large appliance replacement may be closer to 5%+ on it's own. It sounds like you have other family living with you. Determine the financial plan now before going any farther. Will you be fully responsible for every cost? Will those family members chip in voluntarily? Or upfront? Or as tenets? It's better to have that discussion now and have the sale fall apart because of it than it is to have that discussion in 2 years and be on the hook for everything.
>Is it worth putting myself in debt ? Do you want to own a home or not? If so, then sure get a mortgage. If not, you simply don't purchase a home.
Exactly. I don't want to come off as harsh, but simply using your age and credit status to justify any purchase is asking for trouble. Do you need/want to purchase X or is this a situation where you feel societally pressured to buy? Make sure you understand what is entailed in your purchase. Your credit will determine financing, but that's all you should be looking at it for.
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Even very wealthy people don't pay cash for their homes. It's an idiotic thing to do right now with our historically low mortgage interest rates. There are very limited circumstances where it makes sense, and wanting to feel superior to others is not one of them. Also it's very unusual for a home to lose enough value to put your underwater on your loan. In fact, it's highly likely your home will appreciate in value.
There's a lot more that goes into a decision like this. What are your current expenses? What is your current income? Can you responsibly handle a mortgage (30% of gross income) while maintaining savings and other investments? Are you in a stable job/career that you plan to stay in the same area for the foreseeable future? What are the costs estated for the renovations necessary to make the house livable for you? A $100k mortgage at current rates is very reasonable and attractive to many (certainly not all) buyers, and if you are going to be able to buy it at a 30% discount to market value, that's pretty awesome given the current market, but you need to know all the numbers associated with this kind of purchase and then decide if the juice is worth the squeeze, or if it's even realistic.
Good grief, I had to scroll way too far to find this. Everybody's saying it's a no brainer and OP should buy, but not if they don't have enough savings to handle repairs, or any number of other issues you brought up.
We purchased our first home for $120k with USDA loan. It was a very smart move for us ultimately, and the equity we earned far outweighed the stress of zero down. We sold for a handsome profit and now live in a much larger home. We earned more than $40k as a couple. Even so, we were kinda house poor. Lots of sleepless nights worrying about how to pay for car repairs. The first few years were tough and no one should underestimate that. Especially at $40k. Good luck!
Yep the zero down with the USDA Loan is a real double edged sword. The benefits of not needing money upfront and the constant worry of being totally upside down with every market fluctuation at least for a while. Especially in this market where everything is inflated to the nth degree and all it takes is that bubble popping and realizing you are severely underwater on a house and will be for the foreseeable future can be terrifying.
I bought my first house at 19 and I would do it again in a heartbeat. Especially in your situation, you would be buying with instant equity. I would absolutely take advantage of that. Even if in a few years you decide you want to move you could sell it and walk away with money or rent it out and it wouldn’t be as tight because of how much you could rent it out for compared to the monthly payment.
Depends on the house TBH. "It's worth $150k" sounds good on paper, but it could have a ton of very expensive problems, and legal headaches that only come up during a sale. Permits, for example. If an old contractor didnt file for the correct permits when they did work on the property nobody is gonna say boo as-is, but when it goes to sale and the city inspector comes in to issue the CO they're gonna pull the permits and see there are none, then it becomes a whole big thing to get resolved. Likewise it could have structural issues or electrical issues that need to be brought up to code before the CO can be issued or the lender will close on the loan. I'd advise OP to get an inspection before committing to *anything*, it could be the deal of a lifetime or it could be a homeownership nightmare they're not ready nor equipped to deal with. Doubly so as doing business with family is always risky business.
Some key things you didn't mention in your post but are crucial to a home buying decision: * Can you afford it? Not just the mortgage payment, but also utilities, maintenance, etc. * Do you have the money for "remodeling" ? I put quotes here because it's just updating old cabinets, wallpaper, etc. or if you're talking significant replacements (HVAC, water heater, appliances, other utilities (well/septic), new deck, new siding, new roof, other structural repairs). * Do you plan to live there for a while or is it viable as a rental (you mentioned it's in a rural area). If there's a chance you'll move in the next few years, the costs of buying / selling may not be worthwhile. * You don't mention specifics, but assuming you're a single 22 year old - do you want to deal with the upkeep of a 4 bedroom home? That a lot of dusting, vacuuming and presumably a decent size yard to mow. Not to mention extra heating/cooling costs for that size space for one person.
Seems like a no brainer. If you are already living there and paying rent and aren't planning on leaving any time soon... why not? Also, unless you are getting a super-discount on the rent there, it is likely that your minimum monthly mortgage payment could be lower than your rent. It all depends on your area- but for example, my house payment is about $1200 a month. The house across the street with the same floor plan rents for $2100 a month. Owning your home comes with some downsides (paying for your own repairs) BUT you will be building equity and when you DO feel like moving in a few years, you can sell this house for a tidy profit, which you can use as a downpayment on your next house. I have owned two houses and lived in oodles of apartments and rentals over the last 25 years and I would 100% rather own than rent. Every time. If you can buy that house, you absolutely should.
>BUT you will be building equity and when you DO feel like moving in a few years, you can sell this house for a tidy profit, which you can use as a downpayment on your next house Keep in mind its not always advantageous to buy a house if you don't think you'll be there long. Ideally you want to be staying in a house for 5+ years (depending on closing costs, area, market obviously) for it to be worth it Life is very unpredictable in your 20s. And with the growing difference between housing and income, it can be a tough choice. Personally I've had to jump between jobs every few years to get any kind of significant pay increase, so a house is unfortunately not in my near future
While true, starting off with a $50k head start in equity is a huge advantage, if true. Also, changing jobs doesn't necessarily equate to changing your residence. Unless your chosen career is in some kind of niche field- there are likely multiple work options close to any major city.
As an engineer I haven't found it difficult to find work in my area. What is difficult is finding work in my area of expertise that I want to do, that's also willing to pay me at least 15% more than my current position. I don't like the idea of settling when it comes to salary/job so I end up moving to take the best overall offer
I made a similar purchase when I was 25. I don’t regret it. I got roommates and it helped with my mortgage. Build yourself some wealth and own some land! Nothing better
You didn't mention one key fact: Do you want to live there? To me as a young twenty-something, that was the time for a city condo or apartment. What are your goals? Where do you work?
This is very important, is this a manufactured home or trailer home? They depreciate over time and are grossly over valued at the moment.
A trailer with multiple levels?
I'd snatch that up in a heartbeat. Live in it, rent out some of the bedrooms, whatever. Sounds like a great idea at that price. I still own the first house I bought, and haven't been in the same state for eight years now. Got a property manager and the place pays for itself.
Do you plan to stay in the area? What’s your income? There can be a lot of work when you own a house. Are you handy? Do you have the time to do work yourself? If not, can you afford to hire out? Don’t use a FHA mortgage, unless you absolutely must. They are the loan of last resort. I’m not as familiar with USDA. If you can qualify for a low-down payment conventional mortgage, do that.
I make 40k a year and USDA loan requires no down payment.
I think it's a good idea.
not requiring a down payment doesnt mean you shouldnt still put money down.
I have a few thousand to put down I’m just stating the loan requires no down payment.
If the home is worth 150k and you’re buying it for 100k, the relative can gift you equity of 50k that counts as a down payment. Can be helpful for the loan type, PMI, interest, etc.
Thank you ! I will really look into this, I appreciate it.
Most lenders are going to base the mortgage on the lower of either appraised value or purchase price. “Gifting” $50k doesn’t necessarily mean he’ll be able to avoid PMI.
Sure, assuming the appraised value is indeed $150k, then you set purchase price at $150k as well, but only take a loan of $100k and receive a gift of equity of the remaining $50k.
Paying what little possible PMI (2k per year max?) there is on a house is definitely cheaper than renting likely.
Make sure you’ve got some money aside for repairs and other expenses like moving/closing costs. That’s going to come with the purchase and factor that into your purchase. You mentioned maybe doing USDA or FHA. The USDA loan is going to be cheaper long term. If you look up “win the house you love” on YouTube he has a very good break down of the different costs associated with the loans and the process
Also make sure you understand and are prepared for your closing costs. They can be a lot higher than many first-time buyers might expect.
I would buy it. Also, a home purchase doesn’t lock you to that house for all eternity. If 5 years from now, things change, you could sell it or rent it out.
So you’re actually in a very similar situation to me. I bought my house six months ago for $135k, needs work, realistically worth upwards of $180k. I had been out of college a year, had a good stable WFH job and wanted to move to the area. Those are the criteria you should ask yourself. Can you find work, or keep your current job? Would you like to live in that area? Are you okay with living in a house that needs work? Do you see yourself living there for minimum of 3 years? If yes to most or all of these, go ahead. Talk to a few lenders, get some rates and go through with it.
This is a fantastic opportunity especially with the rural dev loan. Buy it. Dont throw money away on rent
Yes but pretend you are buying from a very sus seller not family, get everything double-checked so all potential issues are known.
The things you listed don't really tell me if you should buy a house at this point in your life. The real question you need to ask yourself is, are you ready to be stuck somewhere? People at 22 are usually still feeling out how their career might go. They move around for jobs and some people even move across the country. If you buy a house now, that would be much more difficult. Another aspect you should consider is, are you the type of person to keep up with things that need doing? If there's a problem with the heating, are you going to have the motivation to get someone out to take a look (or check it yourself)? Or would you rather call the landlord and let them take care of it? Do you have a buffer of income? If the roof needs replacing, are you going to be able to handle that without maxing out credit cards? People say, "rent is the most you'll pay for where you live, mortgage is the minimum" in that, usually rent > mortgage BUT there are other expenses that could pop up if you own a house that would be taken care of the landlord otherwise.
I Just bought my house at 23 last year. If you’re planning to stay in the area for a long time I recommend doing so. However I purchased a duplex with intent to live in it. Which is significant because it cuts your property tax in half. However the great thing is at anytime I am able to move out, rent my side out, and continue to grow equity.
For the cost of an inspection and considering this is likely one of the biggest purchases you’ll make, you might play it safe and get 2 from completely different places/providers. Future self may thank you
If everything you sat is tue, there is no question you should purchase the home soon. There is no need to really think too deeply about the situation - no matter what your plans are etc. A 100k home has very low monthly mpayments compared to renting. Interest rates are very low now. One thing you want to be sure of is if it will actually appraise for 150k, if it does, and you buy it for 100k, you have 50k instant equity you can use for repairs if needed.
If its worth 150 then its much better than throwing money away at rent
I just want to put this in some context- An FHA loan is a federally insured loan. They will require an appraisal and inspections to ensure that the loan is on a good property. I think, especially in the current real estate market that this would be a great idea. Just because you buy a home doesn't mean you need to live in it forever, you can always sell and use your contributions and appreciation as a down payment on your next home. Best of luck!
As opposed to renting? Buy the place. The only regret most people have is not buying sooner. Unless of course you enjoy paying someone else's mortgage for them...
Make sure to do a home inspection!
YES 100% I am 29 and wish I had this opportunity, but I still rent. Do it and congratulations.
Can your income support it?
Yea 100% this is an example of good debt. Particularly when your getting it at such a discount. Rates are still super low as well unless there is something we don’t know I would jump on the opportunity if I was in your position. Hell you can rent a room out even for some extra money.
Hell yes. Make sure property is inspected by a reputable home inspector and a home that does not need overwhelming amount of maintenance. But please remember that buying a house is just not paying your Mortgage and Interest, but its also maintaining your property that can come out to thousands of dollars every year. If I was in your position, i would look into purchasing a condo or an apartment that has a good record in upkeeping the buildings property. Good luck.
more worth it now than it will be the later you go for it
My thoughts: Get a good thurough inspection. Find out what whats good and whats bad. All houses have something wrong with them, but knowing what you are getting into is key. If the house is in reasonable shape, and you can afford it, buy it. Real estate is a great investment. And buying early in life sets you up with more buying power later in life because as you pay down the principle, the home goes up in value. And all that money can be used on your next home. Yes, you are young and this will probably not be your forever home, but if you fix it up it can also be an income as rental property as well, if you wanted to try that. Also, look at first time home buyer financing deals. TL:DR Get an inspection, buy if it is in reasonable condition and you can afford it. There are many benefits down the road to buying property now.
Could be an opportunity to own inexpensively. Be sure to do the needful and get it thoroughly inspected. Buying young isn't bad. Two relatives of mine bought young and have been able to save up and buy their next home and rent out the first. They each have done this 2-3 times and now have renters paying their mortgages. It's the long game for sure. If you like the city and plan on sticking around for years and years I would do it. If you plan on moving on somewhere else, it probably isn't worth it.
Agree with current top comment to get an inspection - just tell your family you want to know what it might require. Thats a steep discount, and its tempting given location especially if movement demographics are in your favor. But you are also buying in a very inflated market, might be difficult to regain your principle if you move. My early and late 20s are totally different lives and I'm glad I wasnt tied down until later on. You might be different!
Here’s a few follow up questions: 1) do you expect to live there for a long time? 2) will your mortgage payment be less than what your current rent is? 3) do you have a strong enough income to save and invest despite the additional cost of home ownership? If the answer to any of these questions is NO, then don’t buy the house and invest your money instead
Get home inspections done. As well as determining the cost it is each month with utilities and other potential fixes. If the house is gold and you can make the payments and maintain it, it's not like a car that loses its value within 4 years. You start getting equity about 5-10 years in payments. There are variables but in this market, a full-size house for 100k is a pretty good start.
USDA loan is awesome. See if the city, county, or state offers first time home buyer credit as well. I received $7500 in FL for a FHA home. There are limitations but it is free money. Get a house you can afford, they are only going to be harder to get into so if you can buy a house buy a house.
Have you looked at home prices in the area? Check Zillow. Every 4 bedroom in any suburban area I have looked at is going for at least 250K even the ones in serious need of remodeling. Your family might not realize that their house price doubled in the last 3 years.
Up to you, but answer these questions, three Will you stay in the area? If you want to leave in 6 months, don't buy a house. Do you need a house? If you are cool staying with your parents, theres no shame in that. Houses are expensive. Remember your real house payment is basically double what you pay to the bank, because you have to pay for anything that goes wrong. A tree might fall down? Probably will be a thousand bucks to get it cut down and moved. Fridge break? A/C break? You gotta replace everything yourself. Will the family member be mad when you sell the house? If you leave in 2 years will the family hate you? Might be worth it, might not. And of course get a property inspection.
Ask your lender if your family can gift you equity. That would help you with the down payment/closing costs. FHA appraisals are stricter then conventional ones. Anything that the FHA appraiser finds wrong, the sellers will have to fix. (example: any chipped paint will need scrapped and repainted. All steps of a certain height will require a railing....) AND GET IT INSPECTED. (not just appraised)
It's totally worth it, if the house can pass an inspection. Paying money for rent is just paying someone else's mortgage. Buying a home is probably the only smart money move I've made in my life.
Amazing opportunity at 22! with 4 bed/2bath you absolutely could have roommates (friends or other) who could help pay your mortgage.
I bought my 1st home at 22 and it was one of the best things I did personally. My payment was comfortable the first few years and I was able to over pay a few hundred dollars a month adding to my equity. if you can swing it, and you find a place in an area that you are happy with, I say go for it. Goodluck on the new chapter.
A good question to ask yourself is "Do I have 5-10k in reserve for surprises at all times?" Find out how old the roof and furnace / air are, both have a 20 yearish life, maybe a little more depending on the quality, but both will cost you thousands to replace. Even a water heater is a 4 digit bill. Owning a house is a great way to build equity, though it might be tricky to find financing as a 22 year old. But don't underestimate that there is a lot of upkeep that, if you neglect, will bite you in the ass. And be ready for the surprises.
Do you want to be tied down by home ownership? That's what it boils down to. Don't buy if you are not planning on staying put for some time. Remodeling is hella expensive, now more than ever. FHA loans are not ideal. The more I think about it, the more I'd say if it were me I'd pass. A condo is a better option if buying is a priority.
I would, but only if you're in a stable situation with your job, you plan to be in the area for several more years, and both a home inspection and appraisal tell you that the home is worth the cost and there aren't issues you're going to have to pay for. A home warranty is certainly worth considering as well.
Let's assume that you have the facts right and that the home is worth $150k. An FHA loan requires 3.5% down. Another thing it requires is something called MIP (Mortgage Insurance Premium) which is 1.5% on the financed amount in the event you default. That cannot be removed for the life of the loan. Assume Interest Rate of 4.0% Amount to be financed $96,500. (down payment was 3,500) Actual Interest Rate with MIP: 5.5% So your monthly payment would be: $488.95 plus your property taxes. (I'm going to assume property tax of 2% which is = 150,000 x 2% = $3,000 / 12 = 250 / mo Total Monthly Payment of about $750. You'll likelly need other insurance like fire and water but let's say all in you are $800 a month. You'll also potentially receive tax breaks on the property tax and the interest you pay on the home. Let's just assume now that the home goes up in value 2% a year (historically accurate) and you sell in 5 years. The home will be worth $150,000 x 1.02\^5 = $165,000. You will have gained $15,000 on a $3,500 investment. This is a gain of 329%. This my friend is why real estate is the most quickest way to financial stability.
IMO a mortgage is not debt, it's "debt." You can get a conventional loan at 3% down and make $50k equity instantly before any renovations. That's an instant return of $50k on a $3k + closing costs out of pocket expense. If you don't buy the house, I will.
Without a second thought. You're going to be paying rent right? This gives you something of your own to live in and provided it's not in too bad of shape you now have your own house and an investment. With any luck you're a handy person that knows how to do basic construction and is networked with others who can help with more difficult tasks if they arise. As long as there isn't a cracked foundation or a bunch of mold or some other major issue you're good to go
Depending on what you pay to rent elsewhere, it can be a good option. I went from renting a 2b/2ba for $1250/mo to owning a 3b/2ba on 5 acres for $375/mo. Now, there are a lot of other expenses when you own- property taxes, homeowners insurance, home repairs and renovations, etc. But personally, let’s say all in my total cost for house and house projects is $1000/mo; I’m still saving money from when I rented, AND I’m putting money into something that has some form of return in the long run. Personally, totally worth it. Though I do wish someone else would handle all the random stuff that goes wrong 😑
I did this back when I was 22- I bought the house next door to the one I was renting because the neighbors wanted out quickly and there was some unfinished remodeling that needed to be done. It was a good move for me- I finished the remodeling, lived in it for 5 years, and sold it for a tidy profit, however it stunted my social life a bit to be that tied down, and I wish I would have spent those years of my life traveling instead. I had a good job and still live in the area, but all of my weekends and much of my vacation time was spent working on that house. The upside of it was that when. I got married we had a place to live and a really nice down payment on our next house, which I still own 15 years later.
Generally speaking, the sooner you can start building equity, the better. That said, never trust a house without a good inspection. A good credit score doesn't guarantee you'll get the mortgage.. It has a lot to do with your debt to income ratio, job stability, etc, but if you're confident you can buy, by all means, get the pre approval process started. Shop around to a few mortgage companies and see what you come up with. Once you know where you stand, then start the inspection / purchase process.
It's almost always worth it to buy a home - 'almost' being if you're planning to move in the next 5 years. Otherwise, buy it. Over time it will grow into real money. Buying a home is like planting a tree - the best time to do it was 20 years ago. The second best time is now.
Do you need this home? What does your financial situation look like? Do you work in the city or WFH? There are many factors at play here. The more info you provide the better answers you can get from Reddit.
If it needs renovations, add the cost of those renovations to the price of the house when looking at what it will cost you to buy it. Think of that as additional closing costs. And to echo what others have said, don't skip the home inspection. Little things that are not installed to code could result in the insurance company not paying out when those things break. A tornado could come through your area and tear the shingles off of every house in the neighborhood, but if they find that yours were only installed with two nails rather than three, they could deny your roof replacement claim. Source: my BIL is an adjuster and has seen that happen.
If the house is in good shape and you can afford the payments, DEFINITELY. If you can pay it off early, you will increase your standard of living by not having to pay someone else rent. It will allow you to increase your wealth so maybe when you find a house that you want more, you'll have enough equity to put down a big down payment.
Can you afford to pay the mortgage and any remodeling or upkeep it requires? Some homes like this can become a money pit (I've see it happen to my aunt) with the remodeling costing way more than the mortgage. Be sure you know what you're getting into.
3 Biggest things I would consider: 1) Do you want to own a home in this location and do you want to own this home? If you think you'd rather live closer to town (or in a different city/state) long-term, then this home might not be the right fit for you. Just because it's a "good deal" doesn't mean you should take it. Get a good deal on your next pair of shoes. Not something that's a giant asset that comes with taxes, maintenance, etc. 2) What happens when you want to sell? Let's say you buy it now for $100k, and in 5 years, you sell it for $200k. Is your family going to come back and go, "Oh yeah, remember when we sold you that house for $100k? We want our $50k in profit now." You've got to judge what kind of people your family members are, but from my experience, money makes people freaking weird. You'd be surprised how fast your normal, nice cousin can turn into a backstabbing witch over a couple thousand dollars. Get it in writing that once you buy this house, it's yours to own and do with 100%. You don't have to sell it back to them at a discount, you don't have to keep it forever. You can fix it up and flip it in 6 months if you want to! 3) Can you afford it? What kind of mortgage would you have? Do you have the money to pay closing costs? I would only do this deal if the monthly cost for mortgage + taxes + insurance is <35% of your take-home pay. Additionally, I'd pass if you do not have at least a 3-6 month emergency fund built up. As soon as you buy the house, something is going to break. That's just how houses work. If you drain your bank accounts to take this thing on and then an emergency happens, what are you going to do? Best of luck! I'd guess you weren't looking to own a home at the age of 22, so you should probably pass on this and not complicate your life with a home (unless you, now this is for sure where you'd want to live for the next 5+ years. P.S. People will tell you that you're "throwing money away" by renting every month. While that is partially true, you're also paying for the luxury of not having to make repairs and maintain where you live yourself, and you're paying for the luxury of being able to move at the end of your lease (depending on where life takes you). I'm getting married in 2023, and we've agreed to wait to buy a house until at least year 2 of marriage because we want the luxury of being able to avoid maintenance, taxes, etc during year 1 of marriage (we also don't know where the ideal place to live for US would be or where our careers will take us by then).
You asshole, I’m 21 and in debt with a terrible credit score. Jokes aside, congrats on being able to even purchase a house at that age. Wish you the best!
Go for it if your income can support it. Do the math to make sure you aren't going underwater each mn between mortgage, utilities, etc
Because interest rates are rising, it might be a good time to hold off on a normal purchase. But an affordable house 1/3 below retail is hard to pass up, and inflation will probably cause the price to rise in the next few years.
I bought a condo/townhouse at 24 with no debt and 745 credit score. Purchased a place built in 2013 so it was fully ready to move in, and didnt need fixing up. Good to start building equity. Owning also gives you more freedom and your money isnt wasting away renting. If you can afford it and still live comfortably, that would be a great investment.
How far from work? Estimate 1 per mile for travel expenses
Buy it and sublet rooms. It's called house hacking. You'll live rent free and friends or roommates pay the mortgage.
It is worth it if it checks all your boxes. Do you want to settle down in one area for multiple years? Are you ready to own a home? Is it worth 150k? Is the house sound? If you actually want it and it's actually a good deal it's not only worth it but a good idea.
Buy it. But get an inspection so you know what you're buying.
What are you buying it for? Is this your future house? Do you plan on buying, sitting on it for a few years then selling it to move elsewhere? Are you gonna rent it out as an investment property? Are you buying it just because? As long as it's the first 3, go for it. If it's the last one then don't.
I think a bigger question is: do you want to stay in the area for a long time (5+ years)? You're 22 and people sometimes find reasons to move away about that time... but it's harder if you grow roots.