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I'm 22 - Please, NO more renting!

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Anonymous
Not applicable

I'm 22 - Please, NO more renting!

Hello!

 

My question is - How likely am I  to get a small, cheap loan (low interest, no PMI or crazy fees) without cutting off my nose to spite my face?

I'm 22 this year - hooray! I've had open credit lines for about 3-4 years now, avg age 1 year. The FICO I pulled yesterday was in the high 600's, and I feel this could touch the 700's next year. I have about 10k revolving credit with consistent 15% usage which gives me about a 3% debt to income ratio; no auto loan, no student debt at all. Other than avg age of credit, I think I'm doing pretty good.

 

I live in Denver, where rent is easily twice the mortgage on any space - ouch! $400 mortgage payment is a $900 rental payment, not including utility bills.

 

Because of that, I live in an unfinished basement and only pay $230/mo for a windowless room with the damp and spiders, including free heat, water, netflix and  toilet paper - woohoo! I will NOT rent a sleezy one bedroom apartment for 900+! No way, not ever. It isn't that I can't afford the price - I make about $13 an hour, FT and plenty of OT, not including my husband's income - but I just can't justify pissing money on 'more comfortable'. That being said, I pack about $800+/mo away into savings toward buying a house - by mid 2015, I can easily have a 15-20k down payment on about 90k worth of condo. I'm confident I can pay that off in about 5-10 years and own outright, or sell and make a healthy down payment on a house where I would raise a family.

 

Bam, life owned, and I'm leaps and bounds ahead of my 12% unemployed and living-with-mom generation. This can't come soon enough.

 

However, I don't want an FHA loan. I don't want to pay PMI up front, or ever. I don't want to ever pay for any more than I have to. Ideally, an interest rate below the annual increase in property value would be ideal, but I suppose beggars can't be choosers.

 

So - Am I shooting for the moon, or are dreams of valuable equity really within my reach? What's the word, any advice for a young dreamer?

Thanks a bunch for reading!!

 

Message 1 of 11
10 REPLIES 10
StartingOver10
Moderator Emerita

Re: I'm 22 - Please, NO more renting!

Sounds like you are on the right track and that you have planned well.

 

Your savings is admirable Smiley Happy I have to congratulate you ...you sound very together.

 

The average age of your cc accounts is a non-issue. You have had the tradelines for 3 to 4 years so you are good there to make application for a mortgage.

Mortgage insurance is a tool - it isn't ideal to have to pay it. However, if you have enough savings to buy a house with a conventional loan with 5% down and you continue your excellent payment and savings behaviour you can pay down the mortgage to get out of mortgage insurance early. This only works with conventional.

 

OTOH, if you can put down a 10.1% down payment there is a Freddie Mac conventional program without mortgage insurance at all.

 

Have you checked condo pricing in your market? Check real estate taxes too and condo maintenance fee's. The maintenance fee's vary from condo to condo, If you get into a small building with a small association the fees are likely to be much, much higher because there are less people contributing to the common area expenses. There are exceptions to this rule - like if you purchase a 4 unit property and rent out the other three. But you and an agent can discuss all of this and come up with a plan.

Message 2 of 11
Anonymous
Not applicable

Re: I'm 22 - Please, NO more renting!

Thanks! I do save a lot of money, and I have had to work hard to keep my hands off of it sometimes, but I can usually talk myself out of whatever big ticket item I'm looking at by remembering it is house money, haha. Better than my peers just smoking it away. Smiley Frustrated If they have a job at all.

 

I would probably only shoot for a smaller down if the apt/townhouse I end up with needs a lot of initial fixing. In my area..

A fixer = ~50k-75k list price

A small, 1 bed = ~60k-90k

2 beds, one room to rent = ~80k-110k

 

However, I did see a very nice two bedroom in an affluent area nearby to a college listed at 99k, and go for only 56K, so I am also keeping an eye on what properties are actually selling for. 

 

Usually tiny kitchens, baseboard heaters, sometimes shared laundry. I'm not sure where to find the resources to estimate HOA dues, unless looking at a specific property under a specific HOA; However, I do have a number of older peers (Sis and Bro in laws, cousins mostly) whom switched from renting to owning (15 year loan) and their costs are usually just slightly more than what they were renting for. This is from renting 1 bedroom, mold issues, outdated kitchen, under 700 sq ft to buying 2 bedrooms, 900+ sq feet, remodeled kitchen etc. 

 

Property taxes in the area I am looking are minimal on a townhouse/apt so small, maybe a few hundred dollars a year.

 

I mean, either way, I'm pretty confident that the move to purchase a home is the smartest thing I'm able to do, and sooner rather than later before this pesky economic recovery makes home prices completely skyrocket again.

 

Anyways, thanks for chatting with me! I don't have very many good role models for homeownership or good financial behavior in my life - it means a lot to have someone knowledgeable look at my general situation and be supportive. : )

Message 3 of 11
ezdriver
Senior Contributor

Re: I'm 22 - Please, NO more renting!

Congratulations to you! I have a 30 year old and a 26 year old. If only my older one could begin to think like you ... I would celebrate!

 

Anyway, your attitude and mindset will get you across the finsih line for sure. You are on the correct path to home ownership. Just like you see your current housing arrangement to be a means to an end [new home ownership], think of your next purchase the same way ... that it may take a few to get where you really want to be for  long term. Don't be discouraged ... and I have a feeling that you won't. All the best to you in your pursuits.

Message 4 of 11
wa3more
Established Contributor

Re: I'm 22 - Please, NO more renting!

OP is to be commended.  Keep your total housing payment, Prin, int, tax, insurance to about 35-40% of gross income max.

 

EZ, i hear you . I have a 20 and 25 year old that could learn from this.

 

 

Message 5 of 11
d170
Regular Contributor

Re: I'm 22 - Please, NO more renting!

I have a friend 20, who just closed on his first condo in the Ken Caryl area (I'm in Denver as well). Rent is out of control here right now. He lived in Cap Hill and his rent was more than his current  mortgage/ utilities. Best of luck.  You can totally do it!!


Time to Garden!!
EQ 703 TU 752 EX 711 as of 07/19/2014. In the garden until 01/19/2015. Baby steps, baby steps!! Trying for 750 ACROSS THE BOARD.
Message 6 of 11
ezdriver
Senior Contributor

Re: I'm 22 - Please, NO more renting!


@wa3more wrote:

OP is to be commended.  Keep your total housing payment, Prin, int, tax, insurance to about 35-40% of gross income max.

 

EZ, i hear you . I have a 20 and 25 year old that could learn from this.

 

 


The joys of parenthood!

 

I owned house #2 before I got married. My single friends were stunned when I invited them to a party in my first home. By the time that I traded up to my 2nd home while still single, they were not surprised. My kids don't have my drive...but theyr are fortunately good kids. One is a U.S. Marine and the older one is a struggling artist still trying to find her "groove" in life.

 

I just love it when I see young folks driving themselves to achieve specific goals like homeownership. It makes me want to reach for my checkbook to help them ... if only I could.

Message 7 of 11
TRC_WA
Senior Contributor

Re: I'm 22 - Please, NO more renting!


@Anonymous wrote:

 

 

I live in Denver, where rent is easily twice the mortgage on any space - ouch! $400 mortgage payment is a $900 rental payment, not including utility bills.

 

Because of that, I live in an unfinished basement and only pay $230/mo for a windowless room with the damp and spiders, including free heat, water, netflix and  toilet paper - woohoo! I will NOT rent a sleezy one bedroom apartment for 900+! No way, not ever. It isn't that I can't afford the price - I make about $13 an hour, FT and plenty of OT, not including my husband's income - but I just can't justify pissing money on 'more comfortable'. That being said, I pack about $800+/mo away into savings toward buying a house - by mid 2015, I can easily have a 15-20k down payment on about 90k worth of condo. I'm confident I can pay that off in about 5-10 years and own outright, or sell and make a healthy down payment on a house where I would raise a family.

 

 

 


I live in Seattle which is a far cry from my days in the southeast where $150k would get you a 4 bedroom with a pool.  Here I have to spend $300k just to stay out of the ghetto...

 

Sounds like your house saving is going well.  I'm doing something similar, and that is, I'm renting a 3BR for $1500 a month.  I picked up a couple roommates who I charge $750 each... I just pay utilities.  I know right... sweet deal.  I'm banking what I'm not paying in rent every month and once my credit reports are where I want them to be (4/2016) I am going to look into buying something.

 

I may even keep the roommates to pay the mortgage.

 

 

 

 

FICO8 current as of : ----- EQ: --- TU: --- EX: ---
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Total CL: $45,000 --- Total CC UTI: --% --- AAoA: 5.5 years --- Income: $200k
Last app: 11-30-23
Message 8 of 11
wa3more
Established Contributor

Re: I'm 22 - Please, NO more renting!

It is good seeing these young people on the right path.

 

EZ, you should be very proud with a son as a US Marine. I thank him for his service and putting his life on the line for our country.

 

My son is a New York City police officer recently in Brownsville. Dangerous job but nothing compared to military.

 

I wish I could relocate to another, cheaper part of the country. Starter homes here on Long Island  NY start around 300k.

Message 9 of 11
Anonymous
Not applicable

Re: I'm 22 - Please, NO more renting!

Well - it's not all roses, fiscal responsibility. We all know that.

 

But, to all you stable, saving parents who wish their children would follow their lead...

 

In truth, I came from parents who never could save, who had plenty of windfall and entrepreneurial spirit and flushed that on cars, things, rent, food and drugs without thinking about their 40s. 50s and 60s, and without thinking of their kiddo first. My financial operations - to save, save, save! - is based on a solid model of what NOT to do. I've been a parent to my parents since I was about eight, and still go over to my mother's apartment every weekend to help her fix things up.  She's pushing 60 this year, and can't really keep up as well.

 

I'm a kid that was promised college from the start, and when that time came, there was no money or credit for that. Now that I've seen my peers acquire upwards of 20k, 30k, or in some cases even 70k and 80k of student debt and still be working at Target, Starbucks, Home Depot... College is a waste of my money and time. There may be a place for it in my future, but right now, I'd much rather gamble and put elbow grease on a house.

 

I'm not saying you should waste your money as a model for your kids, but it certainly takes a serious wake me up call to convince anyone my age that money is worth holding onto and investing. I even have a friend who is camping on 90k worth of inheritance, and just letting it rot in a savings account. Argh!

 

Yeesh. Thanks for the kind words, everyone!! Very motivating : )

Message 10 of 11
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