Source
r/personalfinance•
stormdaemon

When does age become a factor when purchasing a home?

Housing

I'm curious what how PF feels about purchasing a home/taking up a mortgage when it comes to a person's age.

I turned 40 years old last year and I'm still years away from being debt free. I'm still about a decade away from clearing my student loans and I've recently began having to take care of parents with health issues.

It's been a dream of mine to own a home for about a decade now but it's never really been financially feasible. Given that home loans tend to run 15-30 years I feel like my age is now a factor.

I've lived in a crappy studio apartment in a semi-bad neighborhood for a few years now (as part of my attempt to save money for a down payment) and it's starting to wear on me. I feel like I need to make a decision in the next year or so. I could either 1) Keep living here and take one final push to save up enough for a home purchase, or 2) Give up on home ownership entirely and maybe move to a better apartment and neighborhood to freshen up my living situation.

A couple of pieces of background for your consideration...

  • I currently save a few hundred dollars a month in my current living situation, so I can afford a slight rent increase.
  • I live in the Los Angeles area, where the rent increase has been fairly ridiculous in the past year.
  • I have about $35K saved at this point, but the home costs in Los Angeles is high enough that it really isn't enough for a 20% down payment, even if you include condos.
  • In case you're wondering, my parents don't live with me. They live in another city and I pay for part of their housing and care.

Any feedback would be appreciated. Much thanks.

Posted Jan 11, 2016, 7:39 PM UTC

1432
TooBuyFor•

Sounds like you're miserable.

Being happy is priceless.

Move.

Change cities. Change jobs. Do whatever it takes. But.. move. Get somewhere that you will be happy. It will have more of an impact on your life than you know.

28
stormdaemonOP•

Thank you for the advice. I'm feeling the burden but not at the misery stage yet. Trying to be as practical as possible. :)

3
AlexanderNigma•

  1. I'd just move to a nicer apartment.

  2. Focus on saving for retirement.

  3. You can always move some place cheap when you retire.

3
laurasaurus5•

Why do you have 35K in savings when you're still in debt? I'm not an expert or anything, but your loans are accruing interest and that 35K is not. Put that money toward paying off your loans.

16
FizzleMateriel•

I agree with this, especially considering they're student loans.

5
stormdaemonOP•

Without diving too deep into this, my student loans are at about 125K and I pay about $500 a month due to my income. Due to the amount of the loan all of my payments are going into the interest, even if I overpay by a significant amount. I'm about 4 years into the PSLF program and since I work for a non-profit my goal is to aim for loan forgiveness in about 6-7 years (provided that the program still exists by then). Overpaying or putting all 35K into a 125K won't affect the principle much in my situation.

4
dequeuedWiki Contributor•

That makes sense as long as PSLF would have you come out ahead. Also, if you could get a high paying job, PSLF may not be the way to go.

2
DidntGetYourJoke•

Do you have the option of living somewhere else? $35k could be the down payment for a really nice place somewhere in the midwest.

I moved from DC to Kansas City a little over a year now, bought a house recently and my monthly mortgage payment for a newly built 3 bedroom house is less than I was paying in rent for a shitty 40 year old studio in a not-so-nice part of DC. Moving out of an expensive, overcrowded city has improved my life in a ton of ways and I would highly recommend it to anyone who has the opportunity

5
stormdaemonOP•

I've given that some thought as well but there's two reasons I don't feel like this is an option:

  1. I don't want to move too far away from my parents. They're about two hours drive away right now and given their age and health situations I don't want to be too far from them.
  2. I'm currently working for a non-profit with a decent salary, so this helps me work towards loan forgiveness a bit faster through the federal PSLF program.

My industry is also fairly well-situated in southern California (in particular non-profits) so I feel like there are more options for me here if I were to lose my current position (knock on wood).

2
dequeuedWiki Contributor•

Age isn't really a factor (at least until you are too old to live independently or maintain a property), but being very young generally makes home ownership a bad idea. Where you are in life and how your finances are doing is what matters. As far as being in your 40s or 50s goes, it's not a big deal if you need to sell your home in your 60s or 70s before your mortgage is paid off. The bigger issue would be having to sell your home in the first 5 years (that's #7 below).

Here's my "before you buy a home" checklist of things you should have first:

  1. A solid emergency fund including mortgage and other housing costs.
  2. No high interest rate debts.
  3. Able to continue saving 15% or more for retirement.
  4. A 20% down payment to avoid PMI and prove that you can actually afford it. (How are you going to be able to afford a house if you can't even scrape together a good down payment before taking on all of those costs?
    The 20% applies even if it's a VA or FHA loan and you actually put down less, I don't care what's possible, this is an "are you ready?" list.)
  5. A good credit score and a decent mortgage rate (relative to current mortgage market).
  6. Enough income to pay mortgage and other costs. If you plan on becoming a single-income household in the future, this must be considered before you buy a house.
  7. No intention to move for at least 5 years.
  8. Enough time to maintain and care for a home.
  9. Ability to find an affordable place close enough to work. Long commute times make almost everyone really unhappy.
  10. Buying a house should be economically superior to renting in your situation (i.e., check the NYT rent-vs-buy calculator).
  11. You should actually want a house rather than just following someone else's checklist of what you need to be a complete person.

The money, the credit score, and #7 tend to be a problem for younger people.

For you, the first question is how long it would take you to do those things. The second question is whether you even want a home. It sounds like you'd foremost much rather move somewhere nicer. Is owning a home your dream or someone else's?

3
Fishinabowl11•

In my view, the 20% guideline varies greatly depending on the cost of living of the area you're looking to purchase. It's much easier to save up 20% on a $150,000 home than on a $500,000 home.

1
[deleted]•

[deleted]

2
tealparadise•

Tackling it from another angle, can you use your time to get your parents onto SNAP, medicaid supplement, etc? Can they downgrade their own lifestyle?

2
stormdaemonOP•

They are both on Medicaid so their healthcare costs are mostly manageable (once I get these recent costs dealt with, which should be hopefully resolved in a few months). My mom receives a bit of stipend for social security and my dad has a small 401k. They're both very frugal (they're the type of debate on $5 worth of extra expense) so their lifestyle costs aren't the major issue.

The main issue with them is probably housing. In addition to my mom's recent bout of health issues they are both showing signs of forgetfulness. With the history of Alzheimer's on my mother's side I very hesitant to move them from their home of 20 years to an unfamiliar environment.

1
tealparadise•

You could look into reverse mortgage. There are very few legit companies doing it, but they are out there. If you have no desire or hope of inheriting the house that might be the best option to free up your money.

They also probably qualify for SNAP. Even if they live frugally, $200 toward food means $200 back in their pockets monthly. Don't dismiss this option.

http://www.fns.usda.gov/snap/eligibility#Income

1
stormdaemonOP•

I think their income from social security and my dad's 401k may put them above the poverty line but I will take a look and see if that's possible for them. Thank you for the tip!

1
Personal_User•

It's not age, so much as health, family and financial position.

Right now, you are paying a part of parents housing and care. What is the possibility of your portion of those expenses increasing? Usually they go up, and the longer persons are in eldercare the more costs they incur.

I do think it likely that PSLF or something similar will exist in the future and you seem to be well positioned for those loans to be forgiven, so it's best to just continue there and at the non-profit.

In all honesty, at first glance, it appears the best thing for you to do is keep on keeping on.

2
stormdaemonOP•

Thank you for your thoughts. They currently don't need elderly care at this point but it's a distinct possibility in the future. That's something I am dreading on but I still need to plan for.

1
Personal_User•

Due to my work, I pay careful attention to federal student loan issues. You can never predict congressional or presidential action, particularly when an election is coming up. However, student loans are definitely on the radar of many politicians with total student loan balances exceeding $1.3 trillion. I expect more forgiveness and loosening of the reins on student loan debtors instead of tightening, for more reasons than I can go into in this thread. Short version, I am completely sincere and somewhat knowledgeable when I recommend you stay on the non-profit forgiveness path because that is the most likely outcome for you and many others in your position. Of course there is no guarantee or silver bullet, but that is by far the most likely scenario.

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[deleted]•

[deleted]

1
unixcorn•

What about buying a home and moving your parents in with you? Would solve the traveling problem, and if they went for it, they could sell their current home and use that money as a down payment for a home for all three of you. This may seem strange here in the states, but is quite common to do in other countries.

1
stormdaemonOP•

I thought about that as well. My main concern is that, in addition to my mom's recent bout of health issues, both my parents are starting to show signs of forgetfulness. My mother's family has a history of Alzheimer's so I very hesitant to move them from their home of 20 years to an unfamiliar environment.

1
unixcorn•

Hey I understand that. You gotta do right by your parents. Good to see someone here who actually acknowledges the sacrifices parents make for their children. So many answers on here are very selfish about only looking out for #1.

1
danyun1•

I would probably buy a tiny apartment (=1 room including kitchen, bathroom separate ofc :p) with currently still low interests mortgage (costs about 100k -130k€ here), then use my "rent" to pay off that, while paying off my other debt. That way you are hopefully "financially secure" by the age of 55 (no rent to pay and hopefully some kind of income without working).

As someone who has seen several people past 50 being forced into retirement due to illness etc. I find being able to survive without working past 50 extremely important. (rather some of them were forced to keep on working with their illness).

1
Kwibbian_Kel•

I'm curious what how PF feels about purchasing a home/taking up a mortgage when it comes to a person's age.

I turned 40 years old last year

Given that home loans tend to run 15-30 years I feel like my age is now a factor.

Nah. One way or another you have to pay to live somewhere. Even "paid for" homes come with thousands of dollars in annual tax, insurance, and HOA payments.

I bought my most recent home at age 46. I rented for a decade before that. Age is actually one of the reasons I got back into home ownership. I took stock of my finances at age 45 and everything looked solid for retirement - except for the fact that I was renting.

I currently save a few hundred dollars a month in my current living situation

This is the red flag for me. Home ownership comes with a lot of expenses beyond the mortgage payment.

I have about $35K saved at this point, but the home costs in Los Angeles is high enough that it really isn't enough for a 20% down payment

I got an FHA loan and only put down something like 3.5%. I got stuck with PMI, but I felt it made sense for my situation. Home ownership was simply not doable for me otherwise.

Given that you have minimal extra cash per month, you might consider keeping as much of that $35k in your pocket as possible and doing as I did.

And condo/townhome might also fit your lifestyle better than a house, because you'll have a tighter handle on your out-of-pocket expenses.

1
stormdaemonOP•

I've looked at the condo/townhouse option considering the area that I'm in. You can find decent condos for around $200K in the area whereas houses are closer to $350-400K. The downside is that it does still mean that you're looking at $40K down payment and HOAs around the $200-300 range. It's also seems to be a seller's market right now, so prices are steadily going up.

Just out of curiosity, in your situation with your 3.5% FHA loan what was your duration of your PMI?

1
Kwibbian_Kel•

Just out of curiosity, in your situation with your 3.5% FHA loan what was your duration of your PMI?

Ya know, I believe the FHA has changed their rules to where PMI now runs for the life of the loan. So that would be a factor for you.

I got my loan before the rules changed. I have something like a 7-year minimum PMI requirement, but I don't recall the exact number off the top of my head.

I bought at close to the bottom of the market, which is why I sucked up PMI. I have enough equity that I could re-fi without PMI, so I'm gonna need to crunch the numbers to see whether it's worth it.

1
Meowkins1•

What's keeping you in Los Angeles?

1
stormdaemonOP•

Mostly work and closeness to my parents. The fact that company that I work for is a non-profit means that I'm working towards student loan forgiveness through the PSLF program is also a big factor.

1
AlexGreer•

Regardless of age, most Americans home purchase is the largest investment of their life and will be their retirement vehicle as well.

1
FizzleMateriel•

I'm curious what how PF feels about purchasing a home/taking up a mortgage when it comes to a person's age.

That you probably shouldn't do it after age 45, especially if you're a first-time home buyer and have no equity built up and not in an extremely high-paying job. Especially in California.

I turned 40 years old last year and I'm still years away from being debt free. I'm still about a decade away from clearing my student loans and I've recently began having to take care of parents with health issues.

As another person mentioned, you should put the $35K toward your student loans first.

Any feedback would be appreciated. Much thanks.

If at age 45 (at the very latest) you're still not in a position to buy a home you should probably give up on home ownership and focus on contributing as much to your IRA as possible.

0
skeever2•

Or move somewhere other than LA where house prices aren't insane.

3
FizzleMateriel•

I think I misread OP, I thought he said he was living in the same city as his parents but he's actually not. In which case, yes, he should take your advice.

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[deleted]•

[removed]

0