Post # 1
SO and I are currently living at home; I stay at his parent’s place quite a few days out of the week (about 4 or 5 nights, if not every night) since it is closer to school. I work, he works, and I’m beginning to go a little crazy living in such small quarters with so many other people.
I don’t like the idea of renting since you can’t “sell” the property once you’re finished; the money we would have put into the apartment will be gone forever, and I can’t stomach the thought. So, we considered moving in with his best friend and his best friend’s girlfriend, and possibly get a house.
What are the logistics of having a mortgage with several people, though? Would one or two people have to “own” the home and technically rent out the rooms to the other inhabitants?
I’m not entirely set on the idea yet since I don’t understand all the implications of buying a home (especially in this kind of situation), so any input would be greatly appreciated.
We are all between the ages of 20 of 21. My BF and I have credit scores over 700; he has a car payment each month and I have a few small school loans as well as a car payment. (Not sure if the amount of current debt is relevant or not.) I only make between 12-15k a year since I work part-time, SO makes between 15-17k a year; I’m not certain what the other couple is making, though I know his best friend has been looking for a house for a few months and seems to be able to afford it.
Post # 3
This sounds like a terrible idea. You need to live in a house for at least 2 years to even get back your closing costs. It doesn’t make financial sense if you live there less than 2 years. I wouldn’t count on both of the two couples sticking together for that amount of time. Anything could happen. I would also never get into a financial commitment like buying a house without being married to that person. So, I sure wouldn’t do it with just friends. It also can be difficult to sell a house right now. You could all get stuck with it. I also don’t think you’ll be approved to buy a house. If somehow you were approved for the loan, then it would be different if one of you was on the mortgage and everyone else paid rent. But I also would never buy a house that I couldn’t afford by myself. If the other people decide to move out you could be stuck paying the whole mortgage. If you can’t afford that then your house could be repossessed and your credit ruined. Also, renting isn’t throwing your money away, it’s paying for a place to live.
Post # 4
Don’t do it. The ONLY way I could see this working is if one person bought the house, and then rented it out to everyone else. I would highly recommend not putting your name on any type of joint purchase. You guys are all very young and you never know what will happen in the future.
Post # 5
@Tomato22: I agree with everything you said.
Rent a place that’s not too expensive. That’s what we did. We found an appartment we liked, and it doesn’t cost us too much. Yes it’s a few hundred bucks that we’ll never see again, but it half the price we’d pay for mortgage. For now, it allows us to pay our debts (student loans), not to deprive from anything (groceries with extra such as wine and fine cheeses every once in a while ; restaurant). We could not afford all that with a mortgage that would be twice that amount. It’s temporary. In the long run, it will have allowed us
a) years of living comfortably
b) years paying off our debts
c) years saving money for a house we can afford.
Post # 6
- Wedding: June 2014 - Excalibur
The best option would be too have one person own it and then rent to the others. just imagine how ugly it would get if everyone’s name was on the house and mortgage and you guys ended your friendship. while you’re credit scores are good, the bank takes into account your income and with you’re guys’ income, I don’tthink you’d qualify for a home loan.
Post # 7
Do you have money to put a downpayment on the house? With your age and income, I think you would have a really hard time finding a lender, particularly if you can’t put ~20% down. Owning a home seems easy, but what a lot of people don’t think about are the hidden costs.
You’re putting down a downpayment, paying for the inspection, paying realtor fees, paying closing costs to the bank. Then on top of that, you have monthly homeowners insurance, depending on where you choose to buy, you may have monthly homeowners association fees which can be a substantial amount of money. If something breaks, you’re responsible for it. There’s no landlord to call when the toilet stops working or the refrigerator breaks, or the water heater needs to be replaced, or the house needs a new roof. Then when you want to sell the place, you have listing fees, more realtor fees (which are a percentage of the sale, usually between 6 and 8%), you hope the place sells quickly, etc. It’s not the bargain a lot of people make it out to be.
On top of all that, I would never buy a property with another couple. I personally would not buy a property with someone I wasn’t married to either, but plenty of people do that. When you get into property ownership, things get complicated. I can’t see any lender giving a mortgage to four young, unmarried people with limited incomes — one of you would need to hold the mortgage I think, and the others would make payments to that person.
Post # 8
Really bad idea…it will most likely ruin your friendship forever. Money with friends and family is not a good mix.
Post # 9
I would never consider your idea. Too many variables can go wrong. What if you lost your job and couldn’t make payments? Or one of the other people did and you lost the house? How will you sell and divide the money without fights? You’d need one hell of a lawyer to set up a contract between the 4 of you to make it work and protect your assets
Post # 10
Do not do this. DH owns a condo with his best friend that they bought together in their late 20s. It is in both their names. We have both since purchased homes and rent the property out. We have been so lucky that everyone is employed and can contribute when we need to do maintenance but it is a constant source of stress on our relationship with eachother and with them.
Post # 11
@Meglin: You need to understand how a mortgage works.
Most of the money you are paying to a new mortgage does NOT go to principle. In other words, you are NOT building up equity at the rate of $1,100/month or whatever your rent is.
In the first 3 -4 years of a new conventional mortgage most all of the money you pay is “gone forever” as though you are paying rent.
Really, go online and find an amortization table that shows the real amount of equity you build up.
For instance, on a $165,000 house, after the first year of making payments totaling around $13,000 you’ve got only $1,400 that isn’t “gone forever.” The rest of it, $11,600, went to the bank as their profit.
There are good financial reasons to pay rent. Buying a house can be a financial liability. You can LOOSE money on it, and many people have.
Post # 12
If you decide to go this route, you will need to have a lawyer draw up a contract that lays out all the specific terms, and what will happen if every unthinkable situation were to occur.
In a strictly financial calculation, renting often comes out as better then buying. You may think it is throwing money away, but there are a lot of hidden costs to buying and owning.
Honestly you both earn very little money. If you were to partner up with a couple in around the same situation, you will still be quite low, unless you live in an area where houses are less then 100,000.
Renting is a way of life. Most young people rent, then buy. There is a real push in North American culture for people to get a home and a dream house right away. I think this is nuts.
Renting is also paying for the privilidge of not having to worry about the roof blowing off, or the toilet getting clogged, or having to have the savings to pay property tax, and property insurance.
Post # 13
- Wedding: September 2015 - Ketchum, ID
@Meglin: You really should either buy a house by yourself, or get over the not wanting to rent thing. I understand that renting is basically throwing away money (I’m doing it right now), but sometimes you just have to do it. You’ll be throwing away more money by trying to buy a house for only a few years. That’s just a horrible idea.
Post # 14
Buying a home with another couple sounds like a recipe for disaster. Besides no one in the scenario is even married so that just multiplies the potential disaster exponentially. Your best bet to is rent an affordable apartment/house with your SO.
Post # 15
@Meglin: I agree with what PPs have said. This is not a good idea and you should really look into how mortgages work.
Though renting may feel like throwing away money, it’s not. It allows you to live in your own place, establish yourself and not have the “burden” (yes, burden) of paying for costly expenses. If the water heater goes out or the roof leaks, guess what, you don’t have to pay anything. There are pros and cons to renting and owning.
Owning is a privilege once you have the income and the savings to make the investment. Unfortunately, I don’t think you and your SO are at that point. However, you could be in the near future if you start doing your research and saving up the money.
At this point, I would suggest renting a small, affordable place, renting with the other couple if they buy or staying with your parents (if that is still an option).
Post # 16
no no no no no no no.
i used to think there was no point in renting, but now I’ve rented for 4 years + I honestly don’t see the huge rush to buy a house. especially if you can’t afford what you want.
save as much as you can and buy when you’re ready.