I have only bought one house and refinanced it once and I'm in it now. I have tried to think this through and have my own thoughts, but wanted to throw this out for angles I may be missing.
My son would like to buy a house, but of course current mortgage rates are scary. His DPs:
well over 800s across the 3 Ficos and have been for years (he's 30).
He has a coupe of credit cards and a Lowes card that he pays off each month and other than those, his only debt is his truck payment and rent ($1,000 month) and utilities.
He has a secure job (about 5 years now with this company) and with OT (which is mandatory and his past 4 W2s support this), he grosses about $75K annually.
He is precious to me, but he is kind of 'tight' with his money which is why he's had excellent credit from day one that he could get it. He talked to a LO at his CU and showed her on his phone his 3in1 report and he gets DD so she knows his income. She asked him more questions and told him that IF that was the information she would see on the report at the time he applied and all other things remained the same, he would likely be approved for $275K fairly easily. I know him and he won't spend a penny of $200K no matter how much he's approved for 
While I won't make this decision for him, I won't even nudge him in either direction, I did make the following comment to him:
You are paying $1K in rent every month and even if you took out a mortgage where the payments are $1,500 a month and $1K of that payment went to interest (hypothetically you understand), you would be better off than renting. I feel like the $1k in interest can be equated to the $1K rent he's currently paying. Neither are being applied toward a mortgage principal and at least there would be $500 going toward it in the mortgage payment. They would also be in THEIR home (much bigger than this apt) and not dealing with a landlord and noisy/nosey neighbors. The kiddos would have a backyard to play in etc.
Granted they would have Home Owners insurance in addition and normal upkeep (though he wants new or to build new so that he doesn't need to start putting money into it right off the bat). He is also a first time home buy if that makes any difference.
Are my thoughts reasonable? Am I forgetting anything that could go wrong in my ideas on it?
@Anonymalous wrote:Which scores are in the 800s? Mortgages don't use the 3 standard (FICO 8) scores, they use middle score of Experian 2, Equifax 5, and Transunion 4. For an investment as significant as a mortgage, it's probably a no-brainer to pay to see the scores the lenders will really use, just to be sure there are no last minute surprises.
Don't forget an emergency fund. The owner is on the hook for sudden unexpected expenses, like needing a new water heater or roof. So even if the monthly costs is comparable to renting, the variability is much higher.
I think your comparison of $1,000 in interest vs. $1,000 in rent may be fair in terms of assessing equity, but for most people it's the monthly cash flow that's the more important number.
What I was trying to say is that the only difference regarding the $1K in rent and the hypothetical $1K in monthly interest (again, hypothetical monthly interest for simplicity's sake 
) is that if they bought a house, they could think of it as still renting, but at least they would be in their house. Sorry, if I'm not very articulate tonight, it's been a long day and I'm tired. As far as cash flow, he can afford it and he's been saving for years. My question's really not one of whether or not he can afford a house and all of the 'costs' associated with owning a home, it's more about logically seeing the higher costs of current interest rates as not throwing his money away.
There are a lot of perks to owning their own home right now.
Their apartment is a small 2 bedroom and the kids have no where to play, inside or outside. With their own home, they will have a yard and another 600sq ft living space than they do at the apartment, perhaps more. When we consider that renting an 1,800 sqft new house would run them about $2K each month and that they would one day move out of with nothing to show for all that rent money, then the mortgage interests doesn't seem so bad.
Like @MortgageMama pointed out, property taxes would be something to factor in on the mortgage side of the coin, but even that wouldn't tilt the scales in favor of renting.
You're right about the mortgage scores, but I haven't asked him about those and I was referring to his Fico 8s. I'm sure he and the LO looked at Mortgage scores when they talked since it was his 3 in 1 from MyFico that he subscribes to.
Thank you for the input.
Your instinct is correct. Not only will he save money by buying over renting, but his home will likely appreciate over time and he'll be building equity. After a while he can trade up to a nicer home as he makes more money and his family grows.
