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heavenlyfarm

Am I dreaming or is it possible?

heavenlyfarm
9 years ago

Hi :)

So I'm sick of being told that I can't do it and I won't be able to buy a house in the future and afford it! It is what I hear everyday from my dad whenever it comes to my dreams....Anywhos, I would love to hear what everyone here has to say!

I right now make about 25,000-30,0000 a year and am doing my best to save about 40,000 for a down-payment in a few years(10,000/year). I live very thrifty and buy only what I need. Our area is not an expensive place to live at all and I hope to find a house with close to an acre or more to have gardens and chickens!

What do you actually think I can afford? and is it possible to find a home on what I make and keep it?
~Michael
heavenlyfarm

P.S. I do not plan on having cable tv, I am perfectly content with movies and DVDS. It would be just me and I also don't plan on keeping the whole house heated all the time or air conditioned in Summer.

Comments (26)

  • weedyacres
    9 years ago
    last modified: 9 years ago

    A general rule of thumb is don't buy a house worth over 2.5 x your annual earnings. Are there houses in your area for $75K or less?

    The fact that you're looking at a $40K down payment tells me you may be looking for a $200K house. That would be more than I'd recommend you buy.

  • greg_2010
    9 years ago
    last modified: 9 years ago

    There are free mortgage calculators that you could search for that could help you out.

    An example from zillow is below.
    Disclaimer: I have no idea if it's any good. It's just one of the first ones that came up when I did a google search.

    Punching in your $30000 income and $40000 down, it gives a value of $138,000. Of course you can massage the numbers to more accurately match your situation.

    And you should never buy the most expensive house that you can afford. Life happens and unexpected expenses come up. When that happens, you don't want to have to worry about losing your house as well.

    Here is a link that might be useful: Zillow calculator

  • heavenlyfarm
    Original Author
    9 years ago
    last modified: 9 years ago

    Yes there are always some houses around 75,000. and absolutely nothing in the 200,000 dollar range!!!!!!!!!!!!

    I'm hoping to be somewhere around 125,000 or less for a home!!!

    ~michael

  • live_wire_oak
    9 years ago
    last modified: 9 years ago

    Location is everything.

  • Pieonear
    9 years ago
    last modified: 9 years ago

    Good luck. I sure hope your dream comes true.

  • melle_sacto is hot and dry in CA Zone 9/
    9 years ago
    last modified: 9 years ago

    I think it's reasonable that you can save for a home eventually. I think if you're able to save $10,000/year, that's amazing (1/3 of your salary!!!). However, there are maintenance costs that come along with a home so my advice is to start researching average costs of maintenance etc.

    IDK what kind of person your dad is, but I'll tell you that when I was growing up my parents said nearly everything was "too expensive" and they generally griped about the price of nearly everything! Our family was, although I didn't necessarily realize it at the time, part of the working poor. When I turned 16 and started working, they told me it was too expensive to get a car (due to the cost of insurance and gas) and that I should save my money for something "important". As a result, I worked fast food jobs because that was within walking distance. I really wanted to work in retail, but it was too far to walk or bike and my parents wouldn't drive me. I still believed them that a car was just way too expensive. I went to community college (rode a bike or bummed rides from friends) and then university (lived within biking/walking distance of campus). I didn't buy a car until I was in my 20s, out of college, and working full time, all because I believed it was too expensive.

    AND I learned that I could have afforded a car all those other years only I believed my parents that it was too expensive.

    So you need to run your own numbers and be realistic. I'm not saying your dad is wrong, but you do need to figure out a real budget (including food, transportation, bills, utilities, maintenance, emergencies etc).

  • Annie Deighnaugh
    9 years ago
    last modified: 9 years ago

    You might look into buying a duplex so that the rental unit will help you cover your financing costs. It does mean you'll have to deal with tenants, but it can be a great way to make housing more affordable for you.

  • tishtoshnm Zone 6/NM
    9 years ago
    last modified: 9 years ago

    Of course it is possible. Just a couple of notes for you:

    1. The more money you save, the more options you will have. If you can save $10K a year (which would be great), is it better to save for 4 years and buy or keep saving until you can find something to pay cash for? There are a number of ways the paying cash could work out, say getting a bargain foreclosure or some other deal.

    2. After you save for the down-payment, if not just deciding to pay cash, then make sure you save a sizable reserve for when things go wrong, and they will. Water heaters, roofs, etc, all go bad eventually, even the best.

    3. An underwriter will not give one lick about your frugal habits. Going without cable or not heating the whole house (which may not even be an option) will make you more secure but will not influence the underwriter. They will compare your income and work history against the amount you wish to borrow and if it does not follow within their lending parameters, you will have to borrow less (which means saving up more cash).

  • christopherh
    9 years ago
    last modified: 9 years ago

    There are also other things you can do. You want a few acres. Have you looked into what's available now as far as land?
    I would look into taking the cash you have and putting it into the land where you want to live. Then when the time comes, you can look into a modular home that is right for you. They can build anything you want. You can have one where most of the windows are facing south which saves on heating costs.

    As you save money, you drill the well, install the septic, etc. Then you use the improved land as your down payment on the home itself.

  • trilobite
    9 years ago
    last modified: 9 years ago

    Do you live with your parents? Have you ever lived away? Because, I would probably try to talk someone out of buying a home as their first ever living away from home experience.

    Second, you have no itch for travel? Education? Do you see yourself in the same job ten years from now? Any intention of meeting someone? I think frugal is good, but I can think of a lot of other things you might want to explore before tying yourself to a house.

  • HannahRice
    9 years ago
    last modified: 9 years ago

    Of course it is possible! I work for a mortgage company in Texas and we even have down payment assistance programs. Just keep an eye on your credit to make sure that it meets the minimum requirement for a home loan.

  • jewelisfabulous
    9 years ago
    last modified: 9 years ago

    Just piping up to say that sometimes our family and friends need push-back and a reality check when they're being less than supportive of our goals and dreams.

    Case in point: one of my best friends had ALWAYS purchased the "worst house on the block" -- I mean, a place that most people would choose to push in with a bulldozer rather than renovate. She'd fix them up on a shoestring budget until they were lovely. She didn't do it out of a strong desire to renovate, but because those are the houses she could afford. Unfortunately, those neighborhoods were just on the edge of being really bad -- lots of police activity, druggies kicking in basement doors, etc. No drive-by shootings or prostitutes hanging out on the corners yet, but getting there.

    Due to the combination of a salary increase, an unexpected bonus, and years of extremely thrifty living, my friend had enough money to purchase a brand new home in a brand new subdivision. It definitely wasn't a McMansion, but a sweet little bungalow where she could choose the materials and colors. She was SO excited about having a move-in ready house in a nice, safe, neighborhood for once in her life (she was 55 at the time).

    Wouldn't you know it but that her elderly Mother had to "p - - all over her cheerios" about spending the money. It got so bad, my friend was crying about wanting the house.

    Me, and many of her other friends, rushed to the rescue and reinforced that she wasn't being financially irresponsible in the least, that she deserved to buy this house, and that at age 55 she certainly knew how to budget. It didn't hurt that I ran into her mother in the grocery store and took the opportunity to work into the conversation how impressed I was with my friend's excellent financial management skills and what a deal she was getting on the house.

    I'm happy to say that my friend bought the house and is ecstatic about it. A few months after closing, her Mother somehow "did a 180" and became very supportive of the decision although she had been a real pill about it up to that point.

    So, take heart OP that you know your mind and your budget enough to accomplish your goals. Tell your Dad that you'd appreciate his support rather than have him run down your plans. Ask how he'd feel if you did that to him? If he continues anyway, find your support in other people in your life.

  • heavenlyfarm
    Original Author
    9 years ago
    last modified: 9 years ago

    tishtoshnm, I hope at the time to have a few thousand that I will keep in savings for such emergencies or expenses. At the end of the 4th year of saving, the date is really just my "goal" date for having that much money saved. I plan on keep saving afterwards till I find something as well!

    I am also building credit by using my credit card for any expenses and I ALWAYS pay off in full.(I've always heard debate about doing that but I'd rather not have any linger expense that I can pay right now!)

    trilobite, I did when I was a teenager, think that the best place to live would be Florida where I could garden year round and I longed for Tropical plants(every kids dream right? lol) and had tried living their with an ex.....WAY to HOT for me and thats when I decided, I like my area and zone 6b lol.
    I really would love to maybe go to a close lake for a vacation like we sometimes do as a family but I have no immediate desire to travel. I garden and its my passion and I also love animals so, its always been better to stay at home for those reasons!
    I've considered other less stressful jobs before but I do get paid more then I did before and am moving up but if I make a decision for a job change or too do online schooling, I would make it before I buy a house. This is really just a current plan and I know things change which leads me too.....
    Relationships- It's really hard to meet any guy around my age, in their 20s, that has a serious interest in gardening or animals or any of that around here. I thought it would be easy but you say things like gardening and farm and its blank stares or "too much work"...I am trying to actively date and meet someone which would be great to have someone to do this with and get a house with! But I am definitely not lowering my standards or settling for that reason so I will just let the wind take me with that aspect of life. Even moving in with a friend or if the whole family bought a farm in the future is in an idea but thats all it is right now!
    Again 3 more years is still a lifetime away for me so a lot can happen or change but I need a goal to work towards.

    Lol Looking back on this post last night while I was at work, I def was looking for encouragement because I did great saving the first year but I was getting bummed with things lately! My mom at least, I believe do it out of caring and concern also that they don't wanna see me crushed and can't help. They are still paying their mortgage and we have never had money so they wish they could help but they can't right now! My dad on the other hand, has always been that way and has his mood swings! There are days where he will comment about doing it and supportive but most of the time, it is negative nancy and telling me I will be at home forever!(which I also help pay bills here and paid for a new stove and microwave for Christmas so I get upset when he says this as I do try!)

    Also, thank you to everyone who has posted so far!! I will def take this all into consideration and the main point is to keep saving as much as I can I guess!
    ~Michael

    This post was edited by heavenlyfarm on Tue, Jan 20, 15 at 14:29

  • kirkhall
    9 years ago
    last modified: 9 years ago

    What is the debate about always paying your CC off in full? ABSOLUTELY, this is one of the best things you can do for your finances. Hands down, no debate.
    Good Job.

  • Acadiafun
    9 years ago
    last modified: 9 years ago

    The mortgage rates are still very low. It is a good time to buy and I wouldn't let anyone tell you different. The only question is how much house can you afford. I think the recommendation is a house payment no more than 25% of your monthly pay.

  • heavenlyfarm
    Original Author
    9 years ago
    last modified: 9 years ago

    kirkhall, I've just heard from coworkers and people all the time who truly believe it is better to pay it except a small balance and always keep a balance on a credit card! I'm surprised you have never heard of that myth?
    ~michael

  • ncrealestateguy
    9 years ago
    last modified: 9 years ago

    As far as your credit score goes... as long as your credit card balance is 30% or less than your available credit limit, it is looked upon favorably. Assuming you are paying the minimum payments on time! As soon as it goes over this 30% threshold, it starts to quickly ding your score.
    This is probably what your co workers are speaking of, and it is not a myth.

  • greg_2010
    9 years ago
    last modified: 9 years ago

    I'll back heavenlyfarm on this one. I've heard people claim that keeping a small balance on your credit card is better for your credit rating than simply paying it all off every month. But that's a myth.
    It doesn't make sense to me. Maybe they think that the credit card companies would prefer that you maintain a balance because they'd make more money, and therefore the credit card company will give you a better score?! I dunno. Doesn't really matter what their reasoning is, because it's just simply wrong.
    If you don't need to maintain a balance, then don't.

  • OldBarnDreams
    9 years ago
    last modified: 9 years ago

    I agree with greg about the myth of keeping a balance on your credit cards. I have a high limit on the 3 credit cards I use, but pay all of them off every month. My FICO score stays between 840 and 850.

  • ncrealestateguy
    9 years ago
    last modified: 9 years ago

    Just to clarify my point... I did not intend to say that keeping a monthly balance is better than paying off in full every month. That is the best case scenario to increasing your score. What I am referring to is that if you do not pay off your cards in full every month, then make sure that the revolving balance is less than 30% of your available credit. Any balance over this amount will quickly discount your score.
    On another note... there is new advertising on TV about a site that gives you your free credit report and score for free. It is called Credit Karma. They do give you your report for free, but the score is not a FICO score... it is based upon their own formula and will not match your FICO score! In fact, my Credit Karma score was more than 100 points lower than my actual score. I know this because I purchased a new car this week. I don't know the purpose of this score since no lenders use it. So beware. You need to know your FICO score. To the OP, this is one of the first things I would find out, since it does require some time and effort to get the score up to good levels if it is not.

  • probookie
    9 years ago
    last modified: 9 years ago

    "I am trying to actively date and meet someone which would be great to have someone to do this with and get a house with!"

    Dear heavenlyfarm, PLEASE do not handicap your dreams by sharing the purchase of a property with another person without first consulting a property attorney. The attorney can advise you on taking the steps necessary to protect your investment in the event the relationship goes south. I have seen way too many instances of wonderful properties lost because a relationship (married or unmarried, doesn't matter) did not work out and both parties had financial interest in the property. You are working hard to achieve your dream of a home that fits you. If romance comes along, great! But please don't throw common sense out the window. Protect yourself and your investment.

  • ken_adrian Adrian MI cold Z5
    9 years ago
    last modified: 9 years ago

    i did not finish reading all the replies ...

    but .. in case no one else mentioned such .... you need to also budget money .. OTHER THAN THE DOWN PAYMENT ...

    you will need furniture ... paint.. carpeting .... or cleaning of carpet .... locksmith ... washer.. dryer... fridge ... car repairs.. etc ....

    i went straight from the parents house to my own house... it came with washer/dryer.... mom popped for a smallish fridge ...[she had saved the money i was paying her rent ... gave it all back to me] ... i had the carpets cleaned.. as a bachelor i didnt care if it was new ... and it was in decent shape ... painted the whole house inside ... the garage out back ... since i had 2/3 of an acre.. i had to buy a riding lawnmower ... after doing it by hand the first time... lol ...

    i hope you get the drift ... and after a while ... i got tired of all the hand me down furniture.. and upgraded the couch and got me a man recliner... lol ... mind you... the cheapest one i could find.. but it was mine ....

    this was back in the early 90's .. and i think i put 20 down on a 99k house ... but i was making about 40k per year..

    there are all kinds of costs and expenses ... and if you zero yourself out on the down payment ... and the house payment thereafter .... you are going to be really hard squeezed.. the first time something breaks down ...

    so... do insure.... you have a nest egg for such ... changing your numbers to like 30 down.. and 10 in savings ....?????

    finally .... there is no reason.. to put 40k down.. on a 75 k house .... in fact.. many might suggest its not financially wise ...

    but that is why you are talking about all this now .... and high 5 for that ...

    talk with a local real estate professional .... they might invest in your house/financial education .... for a sale down the line .... and if they wont... they arent someone you would want to do business with anyway ....

    good luck

    ken

  • ardcp
    9 years ago
    last modified: 9 years ago

    here is my take: you have got to live somewhere so can you buy for the same or less than the cost of rent? many first time home buyer loans do not require a large down payment.
    my parents were dirt poor in the 70s and bought a hud house in an area that wasn't dangerous but not super desirable either. 9 year later that sold it for $120k more than they bought it at. no one would have thought they could afford a house either and they had to borrow a down payment.
    if you are a frugal person, you will know what is over your head. i can hear that you know what you are willing to spend so my guess is you will be fine. the market, all over the country, still has a lot of foreclosures/hud homes that would be a great start. especially if you are willing to live in a not posh town.

  • weedyacres
    9 years ago
    last modified: 9 years ago

    Even if you pay off your balance in full each month, your credit report still shows the monthly balances (the balance that was due and that you paid off). That's what shows how much of your credit limit you've used. You can't tell from your credit report whether those balances were paid off or rolled over to the next month.

    I think what the "carry a balance" people erroneously think is that if you pay it off each month, those will show zero, as though you didn't use the card. And that can be interpreted as not using your card, which fails to demonstrate that you can repay loans.

    So ALWAYS pay off the balance. There is ZERO benefit to carrying it.

  • ncrealestateguy
    9 years ago
    last modified: 9 years ago

    Ken wrote,
    "talk with a local real estate professional .... they might invest in your house/financial education .... for a sale down the line .... and if they wont... they arent someone you would want to do business with anyway .... "

    Good luck with that!
    To the OP... if you live near a decent sized city you can go to Meetup.com and join a group that shares similar interests as you. There are hundreds, if not thousands of different categories! I joined the Wild Mushroom Foraging Group, and have met a lot of interesting people. (I am happily married. I did not join to find a chick that likes to hunt for wild mushrooms!)

  • edlincoln
    9 years ago
    last modified: 9 years ago

    Where do you live? There is no way you could afford a house on that in my area, but you certainly could in some other areas.

    Your parents are probably just giving you this advice because recently a bunch of folks bought houses they couldn't afford and ended up getting foreclosed on.

    ken_adrian gives good advice.

    Also, you talked about not heating your house. You just can't do that in my area...the pipes would freeze. Would be an option in some places. Not air conditioning is of course an option.

    Credit ratings...are complicated. The biggest factor of course is whether you pay your bills on time. (Duh). once you get beyomd that it gets more complicated. They also look at the old of your oldest credit account. (So don't cancel your oldest credit card). The number of "periods" you have paid on time. (So if you can switch to paying bi-weekly you build credit faster), how close you are to being maxed out. (So there are isolated circumstances where just raising your credit limit will improve your credit). However, having too much available credit can hurt you. (Because they are worried what would happen if you actually used all of it.) If you have a lot of cards canceling the newer ones might help. If you have a lot of credit card debt talking the credit card companies into raising your credit limits might help. I used to work in lending.

    If you are thinking of farming...that's not just a home purchase, that a business.

    This post was edited by edlincoln on Sun, Jan 25, 15 at 1:17

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