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Question

I have saved around $20,000. I want to buy me a condo however, do you think is better to rent or own a condo. I am only 23, and make about $32,000 a year. I've been doing some calculations, but if I was to take out a mortgage, I would not be able to afford it because I don;t make enough at my job. Need guidance.

Answer 1

If you ca not afford the mortgage then rent the condo.Rent will be tax deductible,mortgage is not.

Answer 2

I'm experienced in realestate.
No matter how smart you are never ever buy property unless you can get the mortgage, aford to pay the mortgage plus 15% without cramping your lifestyle, and have at least 10% of the value of the property in cash on hand. For regular properties this is for emergency repairs etc. For condos this is "F-you" money so you can sue the condo owners association if they try to screw you. Right now you should rent. There is no such thing as being too young but you are not moneyed enough. I would suggest you bite the bullet and either rent a cheap apartment with a roommate, or buy a small duplex outside town. You could get a duplex fairly cheaply. Go for the lowest down payment you can get even at the higher rate. When you are done you will have a place to live almost for free because the apartment you rent out will pay your mortgage.

Answer 3

Good for you for accumulating that much in savings so far!

As for buying a condo, that is a great goal. I don't know how much condos cost where you live, but I agree with you that you probably don't make enough money (yet) to comfortably afford the housing costs. Remember that condos charge monthly HOA dues that are often hundreds of dollars. You have to pay that in addition to your mortgage, insurance, taxes (can be REALLY high) and P&I insurance (unless you put more than 20% down).

You also want to make sure that you can afford to save for retirement and other goals; you don't want all your paycheck going to housing costs.

Plus, if $20,000 is all you have in savings, you don't want to put all of it into a condo. I would make sure to leave at least $5,000 in savings for emergencies and other expenses. And remember that closing costs will be thousands of dollars (budget 5% of the cost of the home). Plus you will have to pay moving costs and maybe buy new furniture...that $20,000 will be spent run out before you know it, leaving less than you think for a downpayment.

If I were you, I would keep saving for another year or so while continuing to save and perfecting my credit score in the meantime. Plus, your income will probably go up over that time period. So when you buy, you'll be in a better, more comfortable financial position.

Answer 4

On contrary, the mortgage interest is tax deductable. Are you sharing rent with someone now? If you are renting by yourself, you might want to buy! Here's the difference between paying rent and mortgage. With paying rent...you're more than likely paying someone else's mortgage AND setting them up for their retirement. Their property is building equity as you are paying their mortgage. Why not just make it your own?!

Decide what payment you can ACTUALLY afford per month on a mortgage. Then determine what loan amount will give you that monthly payment. I would suggest speaking with a mortgage advisor...better yet, a CERTIFIED MORTGAGE PLANNER! Look through your local phone book or ask you family or friends if they know of someone. You seem like a smart guy....smart enough to be able to save that much money, at your age and income! Be even smarter and seek a CERTIFIED MORTGAGE PLANNER!

Answer 5

If your payment would be more than 30% of your take home pay, you can't afford it - no matter what the mortgage broker or realtor tells you. Also, in some markets, condos are notoriously hard to resell. I urge you to rent as cheaply as you can & still be in a safe neighborhood & continue saving. You are doing such a great job saving money, don't blow it by going into a huge debt for a condo you know in your heart you cannot afford. I have a co-worker whose house note is 50% of her take home. She can't even afford to take her kid to Taco Bell. You don't want to have that tight of a budget. We follow Dave Ramsey's "Total Money Makeover". Even though you seem to be doing well financially, he gives good advice about what to do when you are winning with money, too. If you don't have a bunch of debt to start with, you will probably already be through 2 or 3 of the steps in his book. Yippee!

I wish you all the best.

Btw, condo rent is NOT tax deductible for federal income taxes & I know of NO state in which it is deductible.

Answer 6

Man, you got it made, check it out...

Keep looking until you find a decent, affordable place that doesn't cost a lot, and keep saving your money. Doesn't matter if you rent or own, just make sure you can afford it and have money left over.

Before you know it, you'll have 100,000 or 250,000 in the bank and then you can do anything you want, to include buying a house outright and not be burdened with payments like all the rest of the world (or keep saving and living frugally, up to you).