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House Dilemma 🏑

March 21st, 2018 at 10:51 am

So I got another bid on the house, about $5k more. We have until the 26th to have the bids in and then 15 days after to close. This is my dad's house.

My attorney told me I'll be able to get all my legal fees and tax money back. The good news is, with the sale of the house I should be able to pay off debt.

Here's my dilemma and I need your help. As you all know, I'm following the DR plan. Dave says not to buy a house unless all debt is paid off. And 3-6 month expenses are saved.

First, I can take the money from the sale of the house and pay off all CC debt and half of the lower student loan.

Secondly I can pay off all CC debt except maybe one card πŸ’³ and keep the student loan using the remainder of the money for a down payment on the house.

The house, well villa I'm in is being sold to me for below market price, about $20-30,000 less. The mortgage will be $635 about $300 less than what I pay now in rent.

I'm thinking if I go with option two, I could have the one CC paid off by or before the end of the year and be left with the student loan and a mortgage. I'll be tackling the student loan and with no CC debt (about $1000 a month in minimum payments) I should be able to knock out one loan in a year and a half.

I'm really nervous about letting this villa go, the price is too good to miss out on. Homes in the area sell for about $300k and have stayed high even during the recession, the only slightly decrease. To get this place at $140k is a steal. Plus I've been living here for the last 7 years.

I'm in Palm Beach Florida and yes homes are extremely expensive, we are one of the richest counties, roll my eyes, in the nation. Homes in the worst neighborhoods (crime) are selling for $190k +

If I could pay off Target before the sale, that would leave me with 6 CCs. I'm sure this card will be paid off by end of month early April. With that being said, I'd knock out all CCs except number 10, paying it down by at least half.
Now, I do have about $15k in a savings account. As you all recall that's money I do not want to touch and it's not listed on my sidebar, this would be my 3-6 months worth of expenses should something happen.

I know I know but I'm really leaning towards buying the villa, ugh! I just hate I got myself back into debt, it makes me sick.

18 Responses to “House Dilemma 🏑 ”

  1. jokeabee Says:
    1521631300

    Does the $635 include property taxes and insurance? If not, how much will those run a month/year?

  2. Househopeful Says:
    1521631374

    So I would say that yours is an unusual situation. The mortgage amount that you are talking about - does that include taxes, insurance, PIP, any of those? Have you run a budget where you are now the owner and responsible for sewer, school taxes, repairs, HOA fees (if applicable), appliance replacement/small repairs, etc.

    If you run your budget with those figured and all, how would the the debt repayment look? Would you have any emergency fund?

  3. creditcardfree Says:
    1521631418

    You have a lot of school loans, so this is what concerns me the most. That these will hang around. I do feel better knowing you have the $15K.

    However, can I suggest some questions to ponder? If you had to buy any property in FL or the US, would you live where you currently are? Is this where you want to be long term? Is this the only bargain that exists, or will ever exist? Is making yourself sick by taking on more debt healthy? Does this villa have repairs that need to be made in order to sell later? Will that really make it a bargain? In my opinion, there are always other properties to buy. You are buying into the fact that this is the only home that will ever be a bargain.

    Is there a deadline to purchase this property? Is it on the market or just being offered to you because you live there currently. Could you wait a year and hold the funds while you consider your options?

  4. DW Says:
    1521632436

    I agree with all the comments above. Run your total numbers again. I just don’t see HOA as a part of your calculation.
    HOAs go up and every now and then you may get hit with a special assessment.

  5. Amber Says:
    1521632871

    Hi all,
    So I would be able to put the 20% down with no PMI. If I escrow, then the total amount due a month it would be what I pay in rent, approximately $950-$1100.

    I do have an additional $4K set aside, that I will use to pay the HOA for the year, monthly HOA is $175.

    CCF- Actually, if I was to buy this would be the area and I don't plan on moving from this area. There's no repairs on the home, it's in mint condition. Other than upgrades that I want vs need, nothing needs to be done. I did want a home with a yard but as I get older, being single and no kids, it will be difficult for me to manage. Here there's no yard or external maintenance.

    Yes there's a deadline, the owner has actually held out for me about 5 years and she's ready to sell.

    I've crunch the numbers with my income, CC paid off I can manage the mortgage and loan payments. I'll be able to save about $100 a month and pay and extra $100-200 on the loan. I'll recheck to be sure though, including taxes.

  6. creditcardfree Says:
    1521633185

    I would only sign a purchase agreement AFTER I have the cash in hand from the sale of your Dad's home. Things can change. You don't want something to fall through on that but then obligate you to make a purchase that you cannot because you were relying on the sale of the home.

  7. creditcardfree Says:
    1521633432

    That sick feeling you are getting thinking of more debt MAY be your guidance system telling you something. This seems like something to pray on? And since you always appreciated your dad's financial wisdom, what advice would he give?

  8. Amber Says:
    1521633457

    Thanks. I had the attorney review the contract nothing signed yet. The seller was trying to get me to pay her closing cost, I told her no. In addition, we will note that the purchase is contingent upon the sale of the other home.

  9. Amber Says:
    1521633536

    Definitely praying. I'll post the numbers later so you all can view, I value your opinions

  10. rob62521 Says:
    1521646113

    I guess what I'm wondering is in previous posts you were interviewing for another job somewhere else. How would this house play into it?

  11. DW Says:
    1521647381

    It sounds like you have your mind made up. Can you afford to pay the mortgage by yourself if SO stops paying?

  12. snafu Says:
    1521650919

    If you are hung up on DR's protocols, I point out they are easy to memorize slogans very helpful for people who have gotten themselves over their heads in debt. His views on investments are weak. I think you got the message and are diligently ridding yourself of debt. I believe you have a written plan to take yourself through to zero consumer debt. You certainly understand potential pitfalls of home ownership, nastiness of pre loaded interest on mortgages and ever increasing costs of tax, insurance, HOA and a sinking fund for maintenance.

    One thing you've not yet described here is a comparative of units in your price point, cost per square foot, compare & contrast the on-line, plus and minus features. A 2nd question is what is the best rate you can get on a mortgage? Rates are expected to increase, every single point is critical over such a lengthy term. Next, have you considered a 15 yr mortgage? Due to the way interest is front loaded, could you handle that cost? [I don't know if SO consistently, contributes to the rent] If he departed, would that affect your plan?

  13. LuckyRobin Says:
    1521661131

    I'm very wary of the idea of you buying the home before your debts are paid. You've already experienced how easy it is to get back into debt again, and with homeownership comes all the little upgrades you will want to do. It will be a temptation every day to do those upgrades and to "just put it on the card." You may be convinced you will never do that again, but it happens to people who get out of debt all the time, and it could happen to you. Especially if you are still with your SO. Speaking of him, if you own the house, will he just figure he no longer has to pay anything? What if you want him out? You'll be the owner, he'll be considered a tenant and if he doesn't want to leave it takes several months to get him out legally. Right now you can walk away at the end of your lease if you need to, leaving him behind.

    Also, what happens if you lose your job and you still have debts to pay on top of a mortgage? Unemployment only goes so far and it is not far. $15K as an EF may seem like a lot now, but as someone who went through 10 months of my husband being unemployed and having to buy our own medical insurance, I can tell you that money will go a lot faster than you think it will. I'd double your $15K before even thinking of buying a home.

    I think you are letting this deadline pressure you into making a choice you aren't quite ready to make. If it were me, I'd rent for a couple more years, get the debt gone, get the savings built up, get the down payment where you want it, then purchase a home. It is easy to rush into things and it is hard to wait. But you may end up with some pretty severe buyer's remorse if you do this.

    Ultimately it is up to you, but you need to think long and hard on this decision and not let things pressure you into making a choice you really aren't ready for.

  14. DW Says:
    1521667719

    Another thing to consider, SO’s changing (i.e. paying bills on time, spending freeze...) tied to the fact that you’re buying this home and he wants to latch on?

  15. ceejay74 Says:
    1521668920

    In addition to property taxes make sure you check into homeowner insurance, as well as utilities. Were there some covered by your rent that will now be your responsibility? With all these additional costs, will it still be $300 less per month? Also will you have to pay for an inspection before you can make an offer? We did, and my realtor didn't think to let me know about that.

    I understand the drive to own a home. Both times I bought, it wasn't the most practical decision I ever made and it was a huge financial stretch. I love my current home, so emotionally it was the right decision, but it has definitely caused more expenses and headaches than I foresaw.

  16. Jenn Says:
    1521676779

    I don't think you should buy the villa, especially if you have the option of continuing to rent it. (It's not on the market.) Don't rush it if you can resist the temptation. You'll be debt free soon enough and in a more stable position.

  17. Bluebird Says:
    1521896469

    Hi Amber, I don't think you should buy the villa. There are more affordable places near you in nice areas. As you know, less debt will give you more freedom.

  18. crazyliblady Says:
    1522351093

    Along with ALL of the costs of homeownership (property taxes, insurance, maintenance, HOA dues, etc.), if I were you, I would also consider how long I plan to live in that area. If I did not plan on staying there for a long time, I would strongly consider renting an apartment or house. I wish I had known about all the costs involved in owning a home.

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