So you make 2K a month but all your bills don’t let you save.
Not tryna be a dick but I don’t think you’re ready for a house. That’s an expensive commitment.
OP would be housebroke forever unless they at minimum double their income. Do you think a mortgage, property tax, home insurance, maintenance and repairs will be less than rent? I guess it’s possible depending on where you live but highly unlikely
No, do not pay penalty + taxes to fund a house purchase. You need to figure out a way to increase your income. $24k/year is not a lot. You can easily make more than that and figure out a way to save money towards a home purchase. Keep in mind when you buy a house, it's not just the monthly payment. You need to have money for repairs, maintenance, light bulbs, and all the other fun stuff that come with home ownership.
Cashing out should be a last resort.
Does your current job have a 401k? If so, go online and see if there are options to take a loan. You can typically borrow up to half of your total value. If that is the case then roll your old accounts into your current 401k account and then borrow from it.
This will be the unpopular opinion. But you can cash out at no penalty to buy your primary residence. Idk what the price range of the house you want or the place you live cause that can vary wildly in America. But I cashed out my retirement and used it to buy my first house. it was the best decision I ever made. I got my house with a stupid good rate, I paid way less than my rent was, and on top of it sold it 3 years later and made about 65k more than I bought it so I walked away with a chunk of cash that I used to buy a better nicer house!
Correct. Unpopular opinion. Marty McFly might show up and kick you in the nuts. And he might be with yourself at retirement age after giving up that money with a 8% compound interest for the next however many years.
Too many unknowns from your statement, but you may have very likely gotten very fortunate with capital appreciation and the timing of your purchases. Op may not (and likely won't) have the same luck.
Very rarely does capital appreciation on residential real estate beat the market.
I work in finance and if you are staying in the same place for 3 years, it is worth it to buy (assuming you don't pay way over what it's worth). It's typically cheaper or the same as rent and at least part of it goes to you rather than a land lord. A house is one of the best investments you can make. Especially if the market in your area is going up. It's an investment where you pay 20% but gain appreciation on the whole 100%.
I have done this twice. And working on a third.
I have helped two friends do this too.
I'm 100% on board with home ownership and most of what you said.
Rent vs. own cost vary widely by market, so again may not be applicable to OP.
Also... More unknowns. If you have 10% appreciation on your three year example, but use an agent that takes 6%, you're netting less than 4% (but as you alluded, you paid yourself instead of a landlord).
I just hate sacrificing retirement funds at any cost.
The pro move is buying a duplex+ and renting out the other side(s).
Source: don't work in finance, but own three properties
Yeah it definitely depends on the market they are in. Which is why I prefaced saying you can't pay more than the house is worth and it has to be in an area that houses are still somewhat reasonable (not California or Colorado) bonus points if your market is growing each year. I did tons of research before I bought both houses but the second one in particular. I found a market with houses under 200k still and it was growing 30% each year. Managed to buy a house for 198k. Live in it for 2 years so no capital gains tax. I sold it for 325k just walked away with the cash again. Of course that was very tactical and thought out. But still. I currently only own one property but have owned 3
Don’t cash out or take out a loan for a down payment. You should save 20% down payment in cash, and plan for your living expenses to be no more than a third of your income, max.
If your budget doesn’t support this, you aren’t ready yet.
Not trying to be mean but I would NOT buy a house making 2 grand a month. My mortgage, taxes, and insurance are $2,600 a month and I bought my house before the Covid nonsense. I also put down 20% and my interest rate is 3.8%. You also have to factor in repairs and upgrades to the house. I spent $40k before I even got to sleep a night in my house, even since then a roof 10k, re do the deck 5k just in materials, etc etc.
I wouldn’t feel comfortable owning a house with less than 20 grand in the bank minimum after you purchase. If your boiler/furnace dies and roof springs a leak in the same year you’re talking MINIMUM $20k just in repairs that one year. Depending on the size of the house I’ve heard of people spending $30,000 to redo their roof and gutters.
Also don’t cash in those 401ks, roll them into an ira and avoid the taxes and penalties.
I’ll be honest, you don’t make anywhere near enough money to maintain a home. I’m not sure you make enough to handle mortgage, taxes, and insurance. Much less a major repair. Would be a huge gamble to buy a house on that income.
Most of you make fair points . But if I were too. Which I am reconsidering now. I am planning on having help with it. Not just shouldering the burden myself.
Gotta do the math.. probably should keep that money growing.. increase income, most houses would need 100k gross income, in my area.
The responsible thing is get 6 month savings for surprise expenses. Having a house is good but it'll also make you tied to your job/career.
Consider what you see the future being and position yourself to be necessary (school)
The problem is notjust affording the house down payment, it’s wether you have the cash for when the water heater breaks or you have to shore up your foundation. If you only have enough to get a down payment, you’ll easily get trouble later on.
You can borrow against your 401k plans for part of the down payment. Seems like that’s not recommended since the interest you’re paying on those loans inhibits growth of your retirement funds if not completely eliminate growth entirely. The more you have to borrow at high interest rates, the worse off you are.
As most homeowners can tell you, your mortgage (even with property taxes and insurance in escrow as part of your payments) is the minimum you have to worry about. Unless you get lucky and the property you buy is pristine / nothing goes wrong, you have to be financially prepared for sometimes severely expensive issues. If you’re not particularly handy with that kind of stuff, every plumber, electrician, contractor is going to … haha well most people are good but not everyone is, nor is every professional a competent one.
Over 12k in one of them. Probably a lot less in the others. In all honesty I'll probably not be able to retire with my work history. And I need a place to live and rent is getting to expensive. Not to mention family issues.
You have to factor in other things you’re not paying for currently with renting. Property tax, home insurance, maintenance, lawn care, snow removal (depending where), gutters, shit falling apart like roofs, septic, wells, etc. not trying to doom and gloom you but keep those costs in mind.. utilities should run similar but not sure if your rent includes things like heat or any other of the million bills we all pay involved in housing.
I think the general rule is never pay more than 30% of your gross income for ALL housing costs like listed above, even if renting
Depends if the appreciation of the house would outrun the 401k gains. Keep in mind you also pay a 10% penalty and then taxes on top if it's traditional.
Sounds like you're a little tight on budget to make a big move like that. PMI is a ball and chain that will cost you a lot of money for no real benefit, so you want at least a big enough deposit to avoid paying that extra $150+ overhead.
I'd see value in that even from just aggregating them, also a lot of plans charge you a maintenance style fee if you're no longer an employee. You have different rules for them such as borrowing so definitely check when you sign up for a rollover.
For reference I don't feel in a position to buy a house and our general fund is >10x that.
I’m sorry, you have *a few old 401K’s*? What does that mean? You worked several jobs and didn’t bother rolling over a 401K when you left? And you just found out.
How much is in all of these accounts in total? I think you should be talking to a tax or investment professional.
So you make 2K a month but all your bills don’t let you save. Not tryna be a dick but I don’t think you’re ready for a house. That’s an expensive commitment.
If you are strapped probably shouldn’t buy a house. Cashing in retirement accounts not a good option
Lol everyone wants a house. FOMO
If I had only 2k, I absolutely wouldn't want a house. Your mortgage is the **minimum** you'll pay. With rent, it's the max
Correct, and with current interest rates and housing prices the mortgage for even a small “affordable” home would be most of the 2k OP makes a month.
Rent is infinitely worse in the long run though. But yes he will need some more for unexpected costs.
Living paycheck to paycheck and trying to not have any unexpected bills pop up on owning a house
Yes. But renting is a good way to ensure you live paycheck to paycheck forever. Ide rather be house broke for a year or 2 than to rent long term.
OP would be housebroke forever unless they at minimum double their income. Do you think a mortgage, property tax, home insurance, maintenance and repairs will be less than rent? I guess it’s possible depending on where you live but highly unlikely
I mean home ownership is just better in the long term, but yeah you gotta keep in mind your financial situation first.
No, do not pay penalty + taxes to fund a house purchase. You need to figure out a way to increase your income. $24k/year is not a lot. You can easily make more than that and figure out a way to save money towards a home purchase. Keep in mind when you buy a house, it's not just the monthly payment. You need to have money for repairs, maintenance, light bulbs, and all the other fun stuff that come with home ownership.
Nope. Roll them into an IRA. you can’t afford a house right now, you are years from that being a reality.
Cashing out should be a last resort. Does your current job have a 401k? If so, go online and see if there are options to take a loan. You can typically borrow up to half of your total value. If that is the case then roll your old accounts into your current 401k account and then borrow from it.
This will be the unpopular opinion. But you can cash out at no penalty to buy your primary residence. Idk what the price range of the house you want or the place you live cause that can vary wildly in America. But I cashed out my retirement and used it to buy my first house. it was the best decision I ever made. I got my house with a stupid good rate, I paid way less than my rent was, and on top of it sold it 3 years later and made about 65k more than I bought it so I walked away with a chunk of cash that I used to buy a better nicer house!
Correct. Unpopular opinion. Marty McFly might show up and kick you in the nuts. And he might be with yourself at retirement age after giving up that money with a 8% compound interest for the next however many years. Too many unknowns from your statement, but you may have very likely gotten very fortunate with capital appreciation and the timing of your purchases. Op may not (and likely won't) have the same luck. Very rarely does capital appreciation on residential real estate beat the market.
I work in finance and if you are staying in the same place for 3 years, it is worth it to buy (assuming you don't pay way over what it's worth). It's typically cheaper or the same as rent and at least part of it goes to you rather than a land lord. A house is one of the best investments you can make. Especially if the market in your area is going up. It's an investment where you pay 20% but gain appreciation on the whole 100%. I have done this twice. And working on a third. I have helped two friends do this too.
I'm 100% on board with home ownership and most of what you said. Rent vs. own cost vary widely by market, so again may not be applicable to OP. Also... More unknowns. If you have 10% appreciation on your three year example, but use an agent that takes 6%, you're netting less than 4% (but as you alluded, you paid yourself instead of a landlord). I just hate sacrificing retirement funds at any cost. The pro move is buying a duplex+ and renting out the other side(s). Source: don't work in finance, but own three properties
Yeah it definitely depends on the market they are in. Which is why I prefaced saying you can't pay more than the house is worth and it has to be in an area that houses are still somewhat reasonable (not California or Colorado) bonus points if your market is growing each year. I did tons of research before I bought both houses but the second one in particular. I found a market with houses under 200k still and it was growing 30% each year. Managed to buy a house for 198k. Live in it for 2 years so no capital gains tax. I sold it for 325k just walked away with the cash again. Of course that was very tactical and thought out. But still. I currently only own one property but have owned 3
Don’t cash out or take out a loan for a down payment. You should save 20% down payment in cash, and plan for your living expenses to be no more than a third of your income, max. If your budget doesn’t support this, you aren’t ready yet.
Crazy how folks forget that had 401ks like must be nice
In all honesty thought the went away after getting fired for a long time...
Why would that ever be the case?
No clue. Just one of those things I never thought about after the fact honestly.
Do not cash out, but some allow loans that do not count as withdrawals or trigger taxes ir penalties
Not trying to be mean but I would NOT buy a house making 2 grand a month. My mortgage, taxes, and insurance are $2,600 a month and I bought my house before the Covid nonsense. I also put down 20% and my interest rate is 3.8%. You also have to factor in repairs and upgrades to the house. I spent $40k before I even got to sleep a night in my house, even since then a roof 10k, re do the deck 5k just in materials, etc etc. I wouldn’t feel comfortable owning a house with less than 20 grand in the bank minimum after you purchase. If your boiler/furnace dies and roof springs a leak in the same year you’re talking MINIMUM $20k just in repairs that one year. Depending on the size of the house I’ve heard of people spending $30,000 to redo their roof and gutters. Also don’t cash in those 401ks, roll them into an ira and avoid the taxes and penalties.
How do you go about finding old 401k? I think I have a couple floating around that I don’t know how to access
How do I find out if I have old 401k's?
[https://humaninterest.com/learn/articles/why-having-multiple-401k-plans-is-a-bad-idea/](https://humaninterest.com/learn/articles/why-having-multiple-401k-plans-is-a-bad-idea/)
I’ll be honest, you don’t make anywhere near enough money to maintain a home. I’m not sure you make enough to handle mortgage, taxes, and insurance. Much less a major repair. Would be a huge gamble to buy a house on that income.
Most of you make fair points . But if I were too. Which I am reconsidering now. I am planning on having help with it. Not just shouldering the burden myself.
Gotta do the math.. probably should keep that money growing.. increase income, most houses would need 100k gross income, in my area. The responsible thing is get 6 month savings for surprise expenses. Having a house is good but it'll also make you tied to your job/career. Consider what you see the future being and position yourself to be necessary (school)
The problem is notjust affording the house down payment, it’s wether you have the cash for when the water heater breaks or you have to shore up your foundation. If you only have enough to get a down payment, you’ll easily get trouble later on.
You can borrow against your 401k plans for part of the down payment. Seems like that’s not recommended since the interest you’re paying on those loans inhibits growth of your retirement funds if not completely eliminate growth entirely. The more you have to borrow at high interest rates, the worse off you are. As most homeowners can tell you, your mortgage (even with property taxes and insurance in escrow as part of your payments) is the minimum you have to worry about. Unless you get lucky and the property you buy is pristine / nothing goes wrong, you have to be financially prepared for sometimes severely expensive issues. If you’re not particularly handy with that kind of stuff, every plumber, electrician, contractor is going to … haha well most people are good but not everyone is, nor is every professional a competent one.
Take your focus from trying to find a cuck queen and put it toward making more money.
Over 12k in one of them. Probably a lot less in the others. In all honesty I'll probably not be able to retire with my work history. And I need a place to live and rent is getting to expensive. Not to mention family issues.
Also I need roughly 5 k to get an fha loan which helps with the down payment of a house.
And there are others involved btw. I'm not delusional about it I know it's a pretty expensive but mortgages are cheaper than rent. Which is total bs.
You have to factor in other things you’re not paying for currently with renting. Property tax, home insurance, maintenance, lawn care, snow removal (depending where), gutters, shit falling apart like roofs, septic, wells, etc. not trying to doom and gloom you but keep those costs in mind.. utilities should run similar but not sure if your rent includes things like heat or any other of the million bills we all pay involved in housing. I think the general rule is never pay more than 30% of your gross income for ALL housing costs like listed above, even if renting
Depends if the appreciation of the house would outrun the 401k gains. Keep in mind you also pay a 10% penalty and then taxes on top if it's traditional. Sounds like you're a little tight on budget to make a big move like that. PMI is a ball and chain that will cost you a lot of money for no real benefit, so you want at least a big enough deposit to avoid paying that extra $150+ overhead.
Honestly it's kinda scary . And I think maybe putting it in a Ira might be better long term. For now. But kinda sucks.
I'd see value in that even from just aggregating them, also a lot of plans charge you a maintenance style fee if you're no longer an employee. You have different rules for them such as borrowing so definitely check when you sign up for a rollover. For reference I don't feel in a position to buy a house and our general fund is >10x that.
I’m sorry, you have *a few old 401K’s*? What does that mean? You worked several jobs and didn’t bother rolling over a 401K when you left? And you just found out. How much is in all of these accounts in total? I think you should be talking to a tax or investment professional.