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Time to buy a house

Old 08-05-2022, 09:04 PM
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Default Time to buy a house

Currently renting a cheap small house. Iím just about ready to make a move as a first time home buyer. A little background on myself. Im a 4th year legacy NB FO. I bid for the lowest line credit possible which is usually around 74 hrs. I like taking a COLA every once in a while when available. I feel completely inadequate on making smart money moves. I come from a lower middle class family and was the first to graduate college so I donít really know anyone close to me that has the financial situation I have to ask for advice. I absolutely hated being in debt when I graduated college and have tried to avoid debt since. I just canít get over the amount of money paid in interest over the life of the loan. If it was totally up to me Iíd wait and pay cash for everything. But my wife will leave me if I make her wait any longer. I told her when the airlines return to profitability after Covid then we would get serious. Here we are. I live in a fairly rural part of the South. My dream is to have at least 20 acres with a minimum 4 bed/2 bath. More than likely we will buy property and build. Iíve got $200k in savings. We gross about 200k/year not counting 401k. Donít I have to put 20% down to get a better interest rate or something? I guess my biggest question is how much can I afford? Any other advice on loans or contractors or anything pertinent to what Iím about to get myself into is much appreciated. It seems very daunting to me. Thanks!
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Old 08-07-2022, 10:23 AM
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Without knowing the locale you wish to buy in, it’s hard giving much advice. 20 acres with a four bedroom two bath home 10 miles out of Nampa Idaho can probably be handled on a fourth year Skywest FOs salary far, let alone a legacy FOs salary . In Bethesda, MD, not so much, EVER.

The bad news is that you have missed the cheap money because the fed is raising the rates. The good news is that it will be back eventually, you’ll be making more then, and can probably convert a 5% 30 year to a 2.5% 15 year in a few years when that happens.

my personal suggestion is that you don’t wait. Paying alimony and child support to your current wife will probably allow her to finance a nice house. Unless you want to wait until you upgrade to start a new family with a new wife, it’s probably your best financial move to keep the current one happy.
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Old 08-07-2022, 03:08 PM
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Originally Posted by Excargodog View Post
Without knowing the locale you wish to buy in, itís hard giving much advice. 20 acres with a four bedroom two bath home 10 miles out of Nampa Idaho can probably be handled on a fourth year Skywest FOs salary far, let alone a legacy FOs salary . In Bethesda, MD, not so much, EVER.

The bad news is that you have missed the cheap money because the fed is raising the rates. The good news is that it will be back eventually, youíll be making more then, and can probably convert a 5% 30 year to a 2.5% 15 year in a few years when that happens.

my personal suggestion is that you donít wait. Paying alimony and child support to your current wife will probably allow her to finance a nice house. Unless you want to wait until you upgrade to start a new family with a new wife, itís probably your best financial move to keep the current one happy.

Haha, thanks man. The property around here may not be Idaho cheap, but closer to that end of the spectrum than to MD. With the insane house prices it looks like itís slightly better to build. Iím assuming the size house I want will cost $300 -$400k minimum. The land prices are spread out from about $150K all the way up to $600k for 20 acres. So Iím looking at anywhere from $500k to $1mil. That $1mil number scares me. Good point about refinancing when the rates drop.
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Old 08-07-2022, 04:19 PM
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Originally Posted by SwampFoxx View Post
Haha, thanks man. The property around here may not be Idaho cheap, but closer to that end of the spectrum than to MD. With the insane house prices it looks like itís slightly better to build. Iím assuming the size house I want will cost $300 -$400k minimum. The land prices are spread out from about $150K all the way up to $600k for 20 acres. So Iím looking at anywhere from $500k to $1mil. That $1mil number scares me. Good point about refinancing when the rates drop.
The old rule was that you could afford a home about 3 times your annual income on a 30 year loan but this is the current guidance:

Front-End Ratio

The front-end debt ratio is also known as the mortgage-to-income ratio and is computed by dividing total monthly housing costs by monthly gross income.
monthly housing costs
monthly gross income Front-end debt ratio =
◊ 100%For our calculator, only conventional and FHA loans utilize the front-end debt ratio. The monthly housing costs not only include interest and principal of the loan, but other costs associated with housing like insurance, property taxes, and HOA/Co-Op Fee.

Back-End Ratio

The back-end debt ratio includes everything in the front-end ratio dealing with housing costs, along with any accrued recurring monthly debt like car loans, student loans, and credit cards.
monthly housing costs + all other recurring monthly debt
monthly gross income Back-end debt ratio =
◊ 100%This ratio is known as the debt-to-income ratio and is used for all the calculations of this calculator.

Conventional Loans and the 28/36 Rule

In the U.S., a conventional loan is a mortgage that is not insured by the federal government directly and generally refers to a mortgage loan that follows the guidelines of government-sponsored enterprises (GSE's) like Fannie Mae or Freddie Mac. Conventional loans may be either conforming or non-conforming. Conforming loans are bought by housing agencies such as Freddie Mac and Fannie Mae and follow their terms and conditions. Non-conforming loans are any loans not bought by these housing agencies that don't follow the terms and conditions laid out by these agencies, but are generally still considered conventional loans.

The 28/36 Rule is a commonly accepted guideline used in the U.S. and Canada to determine each household's risk for conventional loans. It states that a household should spend no more than 28% of its gross monthly income on the front-end debt and no more than 36% of its gross monthly income on the back-end debt. The 28/36 Rule is a qualification requirement for conforming conventional loans.

While it has been adopted as one of the most widely-used methods of determining the risk associated with a borrower, as Shiller documents in his critically-acclaimed book Irrational Exuberance, the 28/36 Rule is often dismissed by lenders under heavy stress in competitive lending markets. Because it is so leniently enforced, certain lenders can sometimes lend to risky borrowers who may not actually qualify based on the 28/36 Rule.
https://www.calculator.net/house-aff...alculator.html

That being said, you might want to get in to home ownership in the near future without the 20 acres , when the recession has pushed home prices down somewhat. Right now you are renting which means you are helping someone else pay off their mortgage and getting nothing to show for it - and subject to rent increases if inflation stays elevated.. Generally speaking, large acreage without buildings require either a larger down payment or a higher interest rate than actual houses. Depending on the legacy you are almost certainly out of the high risk of being furloughed if it hits the fan zone. Start building equity now and look for the 20 acres when you upgrade.

As for building, it will cost a little more than you think unless you can do it in stages in which case it will cost a LOT more than you think, because building loans tend to be more expensive that regular mortgages.

But seriously, your family income is about three times the median family income. If you canít own a house making that the country is in deep doo-doo.
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Old 08-07-2022, 05:45 PM
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Exactly the kind of guidance I was looking for Ex. Thanks for taking the time man.
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Old 08-07-2022, 06:05 PM
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Originally Posted by Excargodog View Post
Without knowing the locale you wish to buy in, itís hard giving much advice. 20 acres with a four bedroom two bath home 10 miles out of Nampa Idaho can probably be handled on a fourth year Skywest FOs salary far, let alone a legacy FOs salary.
The good old days are gone. You wonít touch a house on acreage near Boise for under 7 figures now. My life would be a lot easier if you still could.
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Old 08-08-2022, 10:47 AM
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Like Excargodog said, don't go too much in hock. You will earn more later and can upgrade it necessary. A couple thoughts on your acreage requirement. Do you intend to farm it or are you just looking for space from neighbors? If it's about space, then consider buying adjacent to property that can't be developed. The best land, like a boat or plane, is the one owned by someone else that you can take advantage of. Local, county, state or federal lands, whether park or less developed would be preferable to you owning it. Just be careful and be sure of who and how it is controlled. Second, if you build, don't build a castle, Keep the sq footage reasonable, 2000 to 2500 sq/ft if possible. Too much space equals too much furniture, too much storage which means you can and do buy too much stuff you don't need, and too many rooms that you really don't need or use (but your wife did enjoy furnishing).

A home is important, you need a domicile to raise a family and keep you dry. Just remember you have other needs, like visiting family and friends, seeing the world or going fishing. Don't be house poor. You, your wife and family need more in life than a home loan that totally dictates your QOL.
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Old 08-08-2022, 06:09 PM
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Originally Posted by dckozak View Post
Like Excargodog said, don't go too much in hock. You will earn more later and can upgrade it necessary. A couple thoughts on your acreage requirement. Do you intend to farm it or are you just looking for space from neighbors? If it's about space, then consider buying adjacent to property that can't be developed. The best land, like a boat or plane, is the one owned by someone else that you can take advantage of. Local, county, state or federal lands, whether park or less developed would be preferable to you owning it. Just be careful and be sure of who and how it is controlled. Second, if you build, don't build a castle, Keep the sq footage reasonable, 2000 to 2500 sq/ft if possible. Too much space equals too much furniture, too much storage which means you can and do buy too much stuff you don't need, and too many rooms that you really don't need or use (but your wife did enjoy furnishing).

A home is important, you need a domicile to raise a family and keep you dry. Just remember you have other needs, like visiting family and friends, seeing the world or going fishing. Don't be house poor. You, your wife and family need more in life than a home loan that totally dictates your QOL.

Solid advice. The seclusion and privacy is what appeals most to me about acreage. I never really wanted a huge house, but now with 3 loud, nonstop, dearly beloved children, I wouldínt mind a big enough house for a little seclusion and privacy from them too😁. But I do want to provide a permanent home to them and time is flying where the oldest wonít have much time to settle in to a home if I donít act soon.
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Old 08-10-2022, 12:24 AM
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If you want good answers, you have to tell us more. Are you a commuter? From where to where? What Airline? UA and AA are much different than FDX and UPS.

You are bidding min time lines. If you are looking to buy a house, you need to try to max your income. Consider max time lines, or upgrading to a widebody.

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Old 08-24-2022, 04:40 AM
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