And it’s really not a 30-year commitment most of the time. It’s very rare for anyone to stay in one home for 30 years these days (although many of our parents did). So when you sell the home, that mortgage is paid off, and you move on to another one, with (usually) tax-free profit to roll into the new house. It’s a great way to build a nest egg.

No risk, no reward.

Your income seems to low unless you get a roommate. Houses can be expensive.

There is no way I’d ever buy a house this early in my life. I feel like I’m just getting started and I can afford all the nice things, I wouldn’t want to tie myself down with a huge mortgage. Like someone else said too, you meet a girl and she’ll probably want to pick out a house herself.

1) The tax benefit to all that interest. Yes! I remember that being a huge selling point when we bought our home 3 years ago… shouldn’t sway you one way or the other as it’s a moot point if you’re not ready to buy yet, but it’s a great thing to be aware of once it’s time :)

2) The years you’re willing to live in the house. This was by far the #1 stupidest thing I chose to ignore. Over price of house, mortgage, amount of space, etc etc. I knew it was smart to stay put for 5-7-10+ years, but I just threw it out the window and said “Oh I’ll be fine” anyways. And here we are 3 years later and I’m going cRaZy here! Nothing to do w/ the house we purchased, but everything to do with the desire to move and live somewhere else.

So big thanks guys! Lots of great points and things to think about for our young house itching friend. I know he’s reading this cuz he passed it along to all his buddies (who knew a finance site could be exciting? haha..), and I can tell you he sincerely appreciates your time. You guys rock. And hopefully this helps others out there considering the big purchase too!

I have a few out-of-the-box clarifying questions for you:

1. Are you averse to taking in roommates? Buying a 3BR 2BA house and splitting costs among 3 responsible adults can pay off big. Just always make sure you can handle the mortgage if your renters decide to ditch.

2. Are you handy? I bought a Fannie Mae owned foreclosure that needed some work. With some skill and our local Habitat for Humanity ReStore, I made the repairs and have another fantastic property.

I believe home ownership provides lots of benefits. Some financial perks and also some intangibles. It should not be thought of as the basis of your financial future though, at the end of the day I love to quote Carlin:

“That’s what your house is, a place to keep your stuff while you go out and get…more stuff! ”

Finally, Ignore what banks and lenders say you can afford. Go with your gut. You are almost always better off with a smallish, low cost 3BR/2BA single family home in a nice neighborhood. There are plenty out there. I recently bought a house for $107k that sold 4 years ago for $230. Great little house. Great Neighborhood. It is now renting for 25% above the mortgage. They are out there.

Happy Hunting!

The biggest items is going to be money to close ie cash flow, and on going maintenance. I am having to write a almost $9,000 check for closing costs yuck! However I did land a 4.00% flat rate. Also, there will be no more landlord and maintenance absolutely will happen.

If you do decide to buy PLAN FOR DELAYS. For example, we bid 150k on the house and the appraisal came back in at 140k. The sellers ended up disputing it, and this put a delay on our closing and now we are stuck closing during the week instead of on a Friday. Home prices continue to fall despite some bright spots in the country and appraisers these days are under a lot of pressure to get the values right because of potential litigation and because of pressure from the banks. Foreclosures and short sales keep driving down prices in areas.

Best of luck. Personally, I’ll be freaking out in 16 hours

Many of your readers have warned about additional costs, which a potential buyer needs to be aware of, but no one has mentioned the tax benefits available to homeowners. All that interest you pay on your mortgage every month is tax-deductible, while your rent payments are not. That by itself will help offset some of the additional costs. And the first-time homebuyer programs will help with some of the upfront costs.

Another factor that no one mentioned is that for the middle class in America, owning a home is the best way to build a nest egg. We’ve grown up in a society that demands instant gratification and having the latest toys NOW, so the enforced investment in a home is unfortunately the only “savings” many people have.

Another tax advantage of owning your home is that when you sell it, the profit you make (and there will be some, if you do your homework and buy it right) is tax-exempt, up to $250,000 if single and $500,000 if married. That’s right, tax-free income, the VERY best kind! And you can do it as often as every two years! See: http://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html

I know a real estate investor who has chosen the neighborhood and school district he wants to live in, and every two years, he buys and moves into another house in the same neighborhood, taking his tax-free gain and using it to establish college funds for his children and invest in more real estate. (Although in today’s housing market, I wouldn’t count on it appreciating enough in just 2 years for there to be a big profit on the sale. It will have to appreciate by an average of 10-12% in order for you to break even on the costs of sale.)

There’s a discussion of rent-vs-buy at Military-Money-Matters.com that’s geared towards military families, but you might find it helpful. There is also a mortgage comparison calculator at https://www.federalreserve.gov/apps/mortcalc/ that will let you compare the monthly payments and amount of equity you would build using several different kinds of fixed rate and adjustable mortgages.

I know this is too long, but one more important thing. I don’t advise people to take out 15-year mortgages, because that locks you into a higher payment amount, and if you have a financial reversal, you have to go through the hassle and expense of trying to refinance. As low as today’s interest rates are, my advice if you decide to buy is to take out a 30-year fixed mortgage at the lowest rate you can get. Then plan to pay it off early by making an additional principal payment with each payment (in the beginning, that could be as little as another $50 or so), or if you can afford it, pay an extra $100 or more every month with instructions to the mortgage company to apply it to principal. (Be sure your mortgage has a “no-prepayment-penalty” clause.)

Then, if you have a financial setback and can’t afford the extra payments you’ve been making, you can drop back to the regular mortgage payment for a few months till you get back on your feet, without the pressure of trying to refinance because you suddenly can’t afford those higher payments. Once you recover, go back to paying the additional principal amounts.

And I personally wouldn’t “pretend pay” — you’ll lose that many months of equity and tax-deductible interest. But figure your finances carefully to make sure you can afford the payments, taxes, insurance, repair fund, etc.

Good Luck!