What would you think about trading in your Tacoma for a down payment on a house?

You're in your 20s...?

I'd sell the Tacoma and buy the house.

Equity is key...we bought our home in 2006 with an 80/20 split Mortgage...I was still active duty and at 20 years Time In Service. (I was 19 when I joined USAF)

Fast forward to 2021 and we did a Refi/Cash-out with a 2.87% interest rate. We had a great appraisal that produced almost $80K in Equity.

This after Closing costs and other fees. No downpayment...and we did a 15yr Mortgage.

We removed Property Taxes/Escrow so we pay it all in one go next month/Fall every year.

 

I never would have thought to do that and it would make for a pretty cool memory, thanks for the advice

 

Taking financial advice from a truck forum = no bueno

No one on here knows you’re entire financial picture, one decision can impact other areas of your life, so these decisions can’t be made in a vacuum, so the fact people are still giving you advice on this says it all.

Seek a professional’s help (i.e. a CFP)

 

^^

That's good advice.

There are TW members who have experience in many aspects of life...and give testimonials.

People have the distinct quality to gather information and move forward with a plan...based on their financial situation.

 

I’ve gotten pretty good advice from some guys on this forum especially the (more wiser than I) grey beards in all different aspects of life. Not that I take it all as law, but it’s helpful.

i mean they bought the best truck money can buy, so they must be some pretty intelligent folk if you ask me

 

Homes appreciate, vehicles depreciate. Financially it’s a good move. While we like our trucks, a beater that gets you to work, grocery store, doctor, etc. works just fine. If the beater blows up, there are other beaters much less than a new truck payment. Heck an old Tacoma beater might work and give you many low cost miles.

 

Best price for a truck now - yep. best price for a home now - nope. If you really wanted to go through with this, sell your truck now. Stash the cash in savings and wait out this housing bubble as there may be a crash coming down the line...

 

@Tacomanchild
Location, location, location, and capacity to pay mortgage and still have a comfortable life.

Having a career in an area that is expected to continue to attract other people is also key.

I never thought I would live where I do but it has worked out quite nicely, however if I were to lose my job for whatever reason I would be S.O.L. as far as having any job where I am close to my current salary. This is a gamble that my family is willing to take because we have so much equity in our home AND we are frugal, a similar job in my area would earn me about 5/8ths of the salary I currently have. The sting of financial hardship has stuck with me throughout my life and so I really work hard to make good (or perceived at the time) financial decisions. Buying a home where you will live for a few years or a lifetime is a good investment if you are handy and on top of things, repair and improvement wise. If you have to go into debt to repair things along the way then that could be a huge burden. In my teens through my early thirties I did all my own home repair with friends and family helping along the way. It was a great way to learn grow friendships and skills. Now I will pay to have things done that I don't care to do anymore because I have spent my sweat already doing the tough things. I will no longer replace roofs for example. I also worked two or three jobs in my twenties and early thirties to have as much incoming cash as I could so that I could always pay every bill each month and put money into savings for future projects.

My rule of thumb has been don't buy a home more than 3-4X your salary debt modified ratio. I drew up a quick table. Note that the gray 4x column has a lot more TRUEs, this is what banks and people will tell you, you can afford, however it will be tight (so in my opinion this is a gray area). My first house was purchased under the last rows conditions, take this with a grain of salt.

 

@Toyko Joe Valuable information, for sure!

I established an Excel spreadsheet but not as detailed as yours...Wow!

I relied on my Military Salary & entitlements that came with it...BAS/BAH/COLA (Basic Allowance for Subsistence/Housing/Cost Of Living Allowance).

When I had a line number for E7 in 2006, my family & I were returning from an Overseas assignment in Germany.

I had 3 choices on my USAF EQUAL List (Dream sheet): #1 Nellis, #2 Scott, #3 Dover.

Needless to say, the US Air Force sent us to my 3rd choice...Dover AFB, Delaware.

I'm glad we didn't go to Nellis AFB, NV or Scott AFB, IL...neither is close to a beach! lol

Once I retired from 25 years of active duty service and left Aviano AB, Italy in 2011, we returned home to Dover.

We had a property manager who had rented out our home to two different families.

Keeping our property for 15+ years paid off in 2021 once we became credit card debt-free/wife paying off her car loan.

Our family has been through quite a bit of movement and resettlement so when the process of refinancing our mortgage came to pass (Mar/Apr), the market was calm.

My wife got what she always wanted in our home...wood floors throughout the house and a new kitchen. So, the Refi/Cash-out was well-deserved.

 

I have to throw in my 2 bits on PMI. I saved up for many years to hit that golden 20% number. But unfortunately my income & saving couldn't keep up with the runaway housing market so that 20% figure was always just out of reach for about 6ish years. I finally decided to give up on a single family home & buy a condo. Yuck, but at least I could hit that 20% figure & still have 40k (ish) for improvements & rainy day savings. Well with the runaway Covid market I had to waive my appraisal contingency (like 99% of home sales during C19) and of course my appraisal came up way short so I had to bring a big stack of cash to closing. My lender ran the numbers & turns out dropping from 20% to 10% down would let me keep $45k in my savings account and PMI would only cost me $52 a month. You tell me where you can get a 45k loan for $50?! That $45k covered my 2 bathroom remodels (DIY gut jobs), all my new furniture, and my unexpected supplemental tax assessment. I refi'd after 11 months and dropped PMI, also dropped a quarter point off my APR.

The takeaway of this is that less than $600 in PMI fees allowed me to keep $45k liquid. I kick myself every day for not looking into PMI sooner. If my goal all along was only 10% down I could've bought many years sooner, at a lower price, and have a SFH instead of a condo.

OP: sell the truck if it gets you closer to home ownership. The only thing you may need the bed for is hauling sheets of drywall or plywood. I use my Chevy Volt for 99% of my driving, including *gasp* trips to Home Depot. And guess what? Rental trucks are less than $100 for an entire day. Don't listen to people who want you to keep a depreciating asset parked in your driveway for the once a year use, probably less often if you're not going to do a full gut job remodel.

 

Idk where you are but you cannot find a home for a 150k around here.....well maybe but it'd be a major fixer upper.

 

There are plenty of regions in the US that have homes in the $150k range fixer uppers; sure, 'bad neighborhoods'; yup, or regular move in family homes. I just bought another 2/1 rental earlier this year for $140k all I did was put a roof ($3,600) on it and it's rented out for $1300/ month.

My wife and I once lived in a part of town with bullet holes in the house, we bought that house for $22,500 yes $22.5K it was a 3/1 craftsman bungalow that needed work but it had all the pieces, we put a lot of sweat equity into that home it was a beautiful home. We decided to live there without a mortgage to save up before we had kids, we wanted a 3/2 home in a different city. We had zero debt for those few years and so savings piled up really quickly because we had a goal and made sacrifices. Our next down payment on a home was $115k, it sure was nice to have a beautiful home in a nice neighborhood that was 2/5ths paid off. Shoot a quick search on zillow turned up tons of homes!

 

@dumontrider, Sorry that happened to you. But good deal that you got out of it so quickly. Honestly, my advice is just speaking in generalities. Its also somewhat outdated. PMI was a huge issue when I first bought 20 years ago. Its good to hear there are now ways around it or make it work for you. Things are different now I know, but its been quite awhile since Ive had to deal with any of it.
FWIW, come live in the midwest sticks like me and you could probly get a mansion for what you paid for your condo in CA....
LOL...just pickin on you man...but I heard its gotten crazy out there from a few friends who live in the bay area.

 

Can relate, my house was built in the 1930s and we moved here in 2004. No insulation in most of the walls, wooden windows that were ancient, no shingles on the back side of the house...I still cringe. Anything in our range was going to need a lot but we bought from family so at least got a little break and knew some of the honest history. Let's just say I can see why people who can afford a new house go that route.

The Banker's Secret as I've heard it called, one extra payment every 12 months on a 30 year gets it to 23. Even in the early lean years we did that, as we've built up some more savings and gotten raises at work we try to pay 4 extra per year. Especially huge as we are older.

A very good summary re PMI and timing in general to refi. As an aside, condo living is great for some people..my friend just bought a condo in Florida, she's the type that wants to relax or hit the beach on the weekend instead of mow the lawn, paint, etc. Perfect situation

 

Some say buying a home is one of the worst investments you can make…

 

I've said many times, best and worst move all rolled into one. But buying a house or condo (depending on your wishes) has advantages versus renting.

 

What do you want to do with your life?

mow grass, shovel snow, mulch, clean gutters, pay property taxes, replace garbage disposals, worry about getting jacked when you want to travel, etc…

 

I don't know man! I paid 79K for my place in the northern burbs of Atlanta back in 1992 and the last time I checked it was worth well over 400K. Even with the typical upkeep stuff that goes along with home ownership, thats a decent ROI.

 

It’s great that you’re considering this at such a young age but I’m with those advising you to seek advice from a CFP. Independent, preferably.

Buying a house can be one of the best decisions you make but there are a lot of factors to consider before getting into home ownership, both with respect to finances as well as quality of life. A mortgage (and by extension, a house) can be a significant burden and there are many other things to do with your money before you even think about home ownership.

Good luck.

 

I WANNA ROCK!!!!!