I earn $75K, have $30K in savings, no debt, rent from my parents who are losing their home. Should I buy a home now or save?
The biggest red flag is the fact that your parents may lose their house. There are multiple parts of the decision.  The red flag comes in because you are stretching your finances to the max to afford the house you are interested in. Buying down the interest rate makes some sense depending on how long you plan on staying, but not a a way to afford house X.  Of course a bigger down payment will also influence the size of the house. You are also buying something in case your parents need a place to live. What happens if that never occurs? You now have something bigger than you need. You are mixing investments and housing. There is no guarantee that you will even break-even on the house as a investment. It can take several years to make back the closing costs involved in buying and selling a house, based solely on stable price and your monthly payments. If the price drops you might never make the money back.  You might be better off renting what you need now or waiting until the current house is lost and then renting what you need then. This solution obviously wouldn't work for everyone, and is contingent on the circumstances of your parents' finances with regards to their house, but...  Have you considered buying your parents' house?  This way your parents' desire for you to get a house as an investment would be satisfied, they wouldn't have to worry about losing their home, and you might even be able to work out a financing/rent deal that is beneficial to everyone involved.  There are definitely fewer costs going this route anyway, for instance, your parents won't have any marketing costs associated with selling the house and could pass this savings along to you.  Also, having lived in the house for a large part of your life you will also know what you are getting in to. "For the vast majority, ""buying"" a house via a mortgage is not an investment.  I use quotes around buying because from a technical perspective you don't own anything until you've paid it off; this is often an important point that people forget. It's highly unlikely you'll make more on it than the amount you put into it (interest, repairs, etc).  Even with relatively low interest rates. The people who successfully invest in homes are those that use actual cash (not borrowed) to buy a home at well below market value.  They then clean it up and make enough repairs to make it marketable and sell it shortly there after.  Sometimes these people get hosed if the housing market tumbles to the point that the home is now worth less than the amount they put into it.  This is especially problematic if they used bank loans to get the process going.  They were actually the hardest hit when the housing bubble popped several years ago.  Well, them and the people who bought on interest only loans or had balloon payments. Whereas the people who use a mortgage are essentially treating it like a bank account with a negative interest rate.  For example, $180k loan on a 30 yr fixed at 4% will mean a total payout of around $310k, excluding normal repairs like roofs, carpet, etc.  Due to how mortgage's work, most of the interest is collected during the first half of the loan period.  So selling it within 2 to 5 years is usually problematic unless the local housing market has really skyrocketed. Housing markets move up and down all the time due to a hundred different things completely out of your control.  It might be a regional depression, weather events, failed large businesses, failed city/local governments, etc.  It could go up because businesses moved in, a new highway is built, state/local taxes decline, etc. My point is, homes are not long term investments.  They can be short term ones, but only in limited circumstances and there is a high degree of risk involved.  So don't let that be a driving point of your decision. Instead you need to focus on other factors.  Such as: what is really going on with the house you are currently in?  Why would they lose it?  Can you help out, and, should you help out?  If things are precarious, it might make more sense to sell that home now and everyone move into separate locations, possibly different rentals or apartments.  If they are foreclosed on then they will be in a world of financial hurt for a long time. If we ignore your parents situation, then one piece of advice I would give you is this: Rent the cheapest apartment you can find that is still a ""safe"" place to live in.  Put every dollar you can into some type of savings/investment that will actually grow.  Stay there for 5+ years, then go pay cash for a nice home.  Making $75k a year while single means that you don't need much to live on.  In other words, live extremely cheap now so you can enjoy a fantastic living experience later that is free from financial fear.  You should be able to put $30k+ per year aside going this route. edit: A bit of support data for those that somehow think buying a home on a mortgage is somehow a good investment:   Robert Shiller, who won a Nobel prize in economics and who predicted the bursting of the housing bubble, has shown that a house is not a good investment.  Why?  First, home prices (adjusted for inflation) have been virtually unchanged for the past 100 years.  (link 1, link 2)  Second, after you add in the costs of maintenance alone then those costs plus what you've paid for the home will exceed what you get out of it.  Adding in the cost of a mortgage could easily double or even triple the price you paid which makes things even worse.  Maintenance costs include things like a new roof, carpet/flooring, water heater, appliances, etc. Yes, a home might cost you $100k and you might sell it for $200k after 15 years.  However during that time you'll likely replace the roof ($10k to $20k), replace appliances ($2k to $5k), water heater ($1k), carpet/flooring ($5k to $20k), paint ($3k to $6k), and mortgage related costs (~$60k - assuming 30 yr fixed @4%).  So your ""costs"" are between $180k and $200k just on those items.  There are many more that could easily escalate the costs further.  Like a fence ($5k+), air conditioner ($5k+), windows, etc. The above is assuming the home actually appreciates in value faster than inflation: which they historically haven't over the long term.   So you have to consider all of the costs ultimately paid to purchase and maintain the home vs the costs of renting during the same time period.   Point is: do your research and be realistic about it.  Buying a home is a huge financial risk." If you think that your parents' home is in danger, you might want to check what it would take to make sure their house is safe, and what the financial situation actually is. You are paying rent, there are brothers who may or may not be paying rent. We don't have the information, you have. Saving that house might be a worthwhile investment.  I assume that if you moved out, either rented or by buying a house, they wouldn't get any rent from you anymore and whatever the situation is, it would be much worse. House as investment is not a good idea. Besides the obvious calculations don't forget the property tax, home maintenance costs and time, insurance costs, etc. There are a lot of hidden drains on the investment value of the house; most especially the time that you have to invest in maintaining it. On the other hand, if you plan on staying in the area, having children, pets or like do home improvements, landscaping, gardening, auto repair, wood/metal shopping then a house might be useful to you. Also consider the housing market where you are. This gets a bit more difficult to calculate but if you have a high-demand rental market then the house might make sense as an investment if you can rent it out for more than your monthly cost (including all of those factors above). But being a landlord is not for everyone. Again more of your time invested into the house, you have to be prepared to go months without renting it, you may have to deal with crazy people that will totally trash your house and threaten you if you complain, and you may need to part with some of the rent to a management company if you need their skills or time. It sounds like you are just not that interested right now. That's fine. Don't rush. Invest your money some other way (i.e.: the stock market). More than likely when you are ready for a house, or to bail your family out of trouble (if that's what you choose to do), you'll have even more assets to do either with. Plus, there's the feeling my parents want me to have a house in case   we can't save the one we (my mom and brothers) all live in. First, you should not be forced to buy a home because your parents are telling you to. You should have your own life. Period. That said, while you are doing well from a salary perspective, your savings are somewhat borderline for a purchase if you ask me. Meaning your savings would essentially be the full downpayment & then your whole paycheck basically becomes payments on the mortgage. Not a good situation to be in. My advice would be that if you can invest in something smaller—like a small apartment for yourself—that is what you should purchase.  That would allow you to invest in something but not be completely financially drained by the prospect. And then in a few years, you can sell that apartment & move onto something else.  Perhaps a house at that stage? But right now, a full home purchase would be a fairly massive risk. "Real Estate has historically been the most sound investment of all times. Not only does property consistant increase in value (which is what you want every investment to do), it does so at the highest rate with the lowest risk. Most return on investment (like a stock in the market) the potential rate of gain is proportionat to the potential loss. The more secure an investment, the lower the potential gain. But, with Real Estate, property typically doubles in value every 10 years. Our overall R.E. economy is on an upward turn, recovering from a time  where values tanked. to jump in now, is probably better than waiting for any amount of time, be it 1 month, or 1 year. You concern about being ""tied in"" to this investment is a valid concern, however, since the market is in an upward turn, you should be more and more able to turn around and sell it later on. The best thing that you could potentially do would be to invest in a rental property where your cost of investment (your mortgage note) is paid by the renters. However, being a landlord is always a risky business (hence, the higher rate of return, which considering your investment is ultimately zero, the return rate is huge :-)   The trick would be to take the reters payments to you and keep it in an account that you use to pay for any repairs, upgrades, or marketing in between when the unit is vacant. But, with your parents losing their house, this may not be possible - unless you take their home and then keep the living arrangments the same as they are now. One possibility to help you get your foot in the door of being a property owner (not necessarily ""investor"") and help your parents keep their house (if that is what they would like to do) is re-finance with them... if you can't afford the entire mortgage, but they are capable of filling the gap between what you can afford and what their property costs, then you become partnered with them, and when/if their circumstances change, they can always buy you out." To be honest, if it's a home all of you share you should try and save the home for your parents. your 26, you will have plenty of time to make 30k again. Having a home headquarters will bring some security to the family. Not only that your parents are old now, it could be hard for them to get another home. They have sacrificed for you, so maybe you should sacrifice for them? Thank god i have no family. You earn $75,000 yearly and saved $30,000 while living at home, for two years, rent-free. I am assuming you have been making good money for at least 2 years. How is it possible you only put away $30,000 on $150,000 of income? Were you giving something to your parents each week as rent, so they don't lose their home? Second, if you're not sure if you will be relocated in a year or two it makes no sense to buy. House prices won't spike like they have in the past any time soon. In one year, you can save another $30,000 without suffering since you live rent free. Many couples don't even make $75,000 and they got a mortgage, 2 kids and car payments.
The main point to consider is that your payments toward your own home replace your rent. Any house or apartment you buy will have changes in value; the value is generally going slowly up, but there is a lot of noise, and you may be in a low phase at any time, and for a long time. So seeing it as an investment is not any better than buying share or funds, and it has a much worse liquidity (= you cannot as easily make it to cash when you want to), and not in parts either. However, if you buy for example a one-room apartment for 80000 with a 2% mortgage, and pay 2% interest = 1600 plus 1% principal = 800, for a total of 2400 per year = 200 per month, you are paying less than your current rent, plus you own it after 30 years. Even if it would be worth nothing after 30 years, you made a lot of money by paying half only every month, and it probably is not worthless. You need to be careful not to compare apples with oranges - if you buy a house for 200000 instead, your payments would be higher than your rent was, but you would be living in your house, not in a room. For most people, that is worth a lot. You need to put your own value to that; if you don't care to have a lot more space and freedom, the extra value is zero; if you like it, put a price to it. With current interest rates, it is probably a good idea for most people to buy a house that they can easily afford instead of paying rent. The usual rules should be considered - don't overstretch yourself, leave some security, etc. Generally, it is rather difficult to buy an affordable house instead of renting today and not saving a lot of money in the process, so I would say go for it. Paying down your mortgage now will decrease the total cost of your home loan and the time period for which your loan lasts. Even if you trade up in that time period, you will be that much closer to being free of house payments. Owning your home outright gives you a significant amount of freedom to consider less lucrative and more personally fulfilling career options- especially if your work environment becomes unpleasant. It can also help you weather the storm of a job loss more easily (though you should also build an emergency fund). Homes are depreciating, illiquid assets with significant transaction fees. It is wise to get a starter home that meets your current needs and move up to a home that better meets your needs as you mature. However, getting on the status treadmill and buying large showy homes that generally exceed the utility that you get out of them is expensive, a poor investment, and often impairs the ability to generate long term wealth. Do you want a house?  Sounds like you do.  Did you think about what it will take to own a run a house?  I am betting you have.  Buying a home shouldn't be about an investment in anything other than you happiness and you sure seem conscientious and ready. Your worries are good ones, but don't forget about unemployment insurance, that as responsible people you can get another job.  Do you have a life insurance policy?  If you really really can't afford your payments, you can try to sell the house because you should have plenty of equity per your plans. Furthermore, chances are you will earn more in your paychecks over your lifetime.   Think about what features you want, shop the market hard, take time and buy a house on reason rather than love.  Don't you dare love the house until you buy it. "The mix how how you present this feels contradictory. You would pull a 'major' portion from the emergency fund (EF), but at the same time, you'll replace it in a month.  The first bit scares me, this is not the purpose of that fund, and the issue is the aspect of money that's psychological. Money is a habit, if you justify this use of the EF now, it gets progressively easier for this purchase or that, and the fund loses its intended purpose. If the second half is accurate, that your income would replace that money in a month, i'd say the fund wasn't fully funded to its proper level, 6-9 months of all expenses to get you though issues as bad as a job loss.  The great thing I see in your question is what's missing. You're not looking to buy a car with a loan. That puts you in a good situation, and should push those answering to cut you some slack on the one month ""bridge loan"" from your own savings.  Edit - OP add 2 key points, His EF is 3 years expenses (wow, kudos to him!), but he's living like a student (i.e. with parents, which keeps his costs low). If this latter observation seems judgmental, I'll re-edit. The finances of everyone would be far better off if we adopted multigenerational living. The young could save as Fahad is doing, and when parents retire, they can know they are cared for. In the US, I'd say ""when you move out, your expenses will go up drastically,"" but in this case, that may not happen, or not soon. This is my observation the world is a big place and our answers need to fit the OP's situation, not assume our own standards apply to all.  Buy the better car. You saved. You earned it." The problem is, you are trying to qualify for a loan that has a 25% down payment using money you don't have, which defeats the purpose of having a down payment. The best thing to do is have your parents buy the house for you. You then rent the house from them where your rent is equal to the mortgage + x. Your parents then put x into savings account for you and then once you have 25% in that account, they gift it to you and you purchase the house from them using that 25% as the downpayment for the mortgage. I'm going to take a different path than the other answers: Given how low interest rates are (depending on your credit), buying a house may be a great strategy.  However, I would not put more than 20% down.  Putting more than 20% down unnecessarily ties up cash that could be used more productively elsewhere. You need to figure out your cash flow situation both for the near term, and for the long term. For the short term, you probably won't need to help your kids with tuition.  They will likely be able to get a combination of grants, scholarships, and loans that will cover the cost.  However, the loans are generally not low interest, and that is a huge amount of debt for someone so young.  If you want to help pay your kids tuition, you should at least guestimate/budget that amount now. For the long term, without any retirement savings, you may be hurting in a couple decades.  Since you also don't have a home, your living situation may be a problem.  Buying a home today may be the prudent move, because that will hopefully be an appreciating asset, and, with a 30 year mortgage, you'll own it outright by 75, which takes a big strain off of retirement costs. $1400 a month in bills (apart from rent/mortgage) with no kids in the house (is this correct?) sounds high.  I would also recommend looking at your basic expenses and seeing what you can do without if you are cash strapped. You are very young, you make a huge amount of money, and you have (from what information you provide) very little debt. If you simply want to buy a house for whatever reason, sure, but be honest with yourself about why you want to buy it. I see a lot of people who think they're doing it for smart financial reasons, but then when I ask them about their pension savings and credit card debts and so on, there is no evidence that they are actually the kind of person who makes decisions for smart financial reasons. If you want a house because that seems like the thing that people do, maybe you could think more about what you actually want. If your concern is putting your money to work for you (you seem to dislike that you pay rent each month and after that month you don't have anything to show for your money, except of course that you didn't spent the last month living on the streets), you can do a lot better than getting a mortgage. For example, living frugally you should be able to dump 50k a year into investments; if you did that for a few years, you could reasonably expect the return to cover your rent and bills in a surprisingly small number of years (a lot less than a 25 year mortgage). Your question seems to be starting from the position that you should buy a house. You're asking if you should buy it now, or wait. You are rich enough now (and if your earnings keep going up, will be even more rich in a few years) that you should perhaps question your need to buy a house. With your kind of money, at this stage of your life, you can do a lot better. I think the consensus is that you can't afford a home now and need to build more of a down payment (20% is benchmark, you may also need to pay mortgage insurance if you are below that) and all considered, it takes up too much of your monthly budget. You didn't do anything wrong but as mentioned by Ben, you are missing some monthly and yearly costs with home ownership.  I suggest visiting a bank or somewhere like coldwell banker to discuss accurate costs and regulations in your area. I know the feeling of considering paying more now for the very attractive thought of owning a home... in 30 years. After interest, you need to consider that you are paying almost double the initial principle so don't rush for something you can do a year or two down the line as a major commitment.  One major point that isn't emphasized in the current answers. You have a large family: Two children, a dog, and a cat.  I don't know the kid's ages but given you are in your early twenties and your estimated monthly costs, they are probably very young before the point they really put any stress financially but you need to budget them in exponentially. Some quick figures from experience. Closing costs including inspections, mortgage origination fee, lawyer fees, checking the history of the home for liens, etc, which will set you back minimum 5% depending on the type of purchase (short sales, foreclosures are more expensive because they take longer) Insurance (home and flood) will depend on your zoning but you can expect anywhere between $100-300 a month. For many zones it is mandatory.  Also depending on if it's a coop ($800+), condo($500+) or a townhouse-type you will need to pay different levels of monthly maintenance for the groundskeeping as a cooperative fee.  at an estimate of a 250K home, all your savings will not be able to cover your closing costs and all 250k will need to be part of your base mortgage. so your base monthly mortgage payment at around 4% will be $1,200 a month. it's too tight.  If it was a friend, I would highly suggest against buying in this case to preserve financial flexibility and sanity at such a young age. Lets consider what would happen if you invested $1500/mo plus $10k down in a property, or did the same in a low-cost index fund over the 30 year term that most mortgages take.  The returns of either scenarios cannot be guaranteed, but there are long term analyses that shows the stock market can be expected to return about 7%, compounded yearly. This doesn't mean each year will return 7%, some years will be negative, and some will be much higher, but that over a long span, the average will reach 7%.  Using a Time-Value-of-Money calculator, that down payment, monthly additions of $1,500, and a 7% annual return would be worth about $1.8M in 30 years. If 1.8M were invested, you could safely withdraw $6000/mo for the rest of your life. Do consider 30years of inflation makes this less than today's dollar.  There are long term analyses that show real estate more-or-less keeps track with inflation at 2-4% annual returns. This doesn't consider real estate taxes, maintenance, insurance and the very individual and localized issues with your market and your particular house. Is land limited where you are, increasing your price? Will new development drive down your price?  In 30 years, you'll own the house outright. You'll still need to pay property tax and insurance on it, and you'll be getting rental income. Over those 30 years, you can expect to replace a roof, 2-3 hot water heaters, concrete work, several trees, decades of snow shoveling, mowing grass and weeding, your HVAC system, windows and doors, and probably a kitchen and bathroom overhauls. You will have paid about 1.5x the initial price of the mortgage in interest along the way.  So you'll have whatever the rental price for your house, monthly (probably almost impossible to predict for a single-family home) plus the market price of your house. (again, very difficult to predict, but could safely say it keeps pace with inflation) minus your expenses.  There are scenarios where you could beat the stock market. There are ways to reduce the lifestyle burden of being a landlord.  Along the way, should you want to purchase a house for yourself to live in, you'll have to prove the rental income is steady, to qualify for a loan. Having equity in a mortgage gives you something to borrow against, in a HELOC. Of course, you could easily end up owing more than your house is worth in that situation.  Personally, I'd stick to investing that money in low-fee index funds. "Congratulations, you are in great shape financially at a very young age.  Great income, nice equity in a home, and mostly debt free.   It seems like you are looking at taking out a loan of 400K, and to do so you will have to put your own home at risk as you do not have the 80K cash for a down payment.  Correct?  It also looks like after 2.1K per year without regard to taxes, maintenance, bad tenants, or vacancies.  As such this will likely be a negative cash flow situation.  I would say you should plan on a 912/month cost.  Are you okay with that?  While your income can probably cover this, no problem, is that your objective to have this property have a negative return for the next 10-15 years or so? For me, this is a no.  Way too much risk for a negative cash flow. It is hard to talk to the upside as you did not give any profit predictions and I am unsure of the market.   Why would you risk jeopardizing your great financial situation with a ""hail mary"" attempt to make money?  Slow down, you will get there.  Save for a few years so there is no need to tap your home's equity to make a down payment.  It would really bother me to owe 600K on a 121K salary (75K+20K+26K)." When I bought my own place, mortgage lenders worked on 3 x salary basis.  Admittedly that was joint salary - eg you and spouse could sum your salaries.   Relaxing this ratio is one of the reasons we are in the mess we are now. You are shrewd (my view) to realise that buying is better than renting.  But you also should consider the short term likely movement in house prices.  I think this could be down.  If prices continue to fall, buying gets easier the longer you wait. When house prices do hit rock bottom, and you are sure they have, then you can afford to take a gamble.  Lets face it, if prices are moving up, even if you lose your job and cannot pay, you can sell and you have potentially gained the increase in the period when it went up. Also remember that getting the mortgage is the easy bit.  Paying in the longer term is the really hard part of the deal. "The suggestions towards retirement and emergency savings outlined by the other posters are absolute must-dos.  The donations towards charitable causes are also extremely valuable considerations. If you are concerned about your savings, consider making some goals.  If you plan on staying in an area long term (at least five years), consider beginning to save for a down payment to own a home.  A rent-versus-buy calculator can help you figure out how long you'd need to stay in an area to make owning a home cost effective, but five years is usually a minimum to cover closing costs and such compared to rending. Other goals that might be worthwhile are a fully funded new car fund for when you need new wheels, the ability to take a longer or nicer vacation, a future wedding if you'd like to get married some day, and so on.  Think of your savings not as a slush fund of money sitting around doing nothing, but as the seed of something worthwhile. Yes, you will only be young once.  However being young does not mean you have to be Carrie from Sex in the City buying extremely expensive designer shoes or live like a rapper on Cribs.  Dave Ramsey is attributed as saying something like, ""Live like no one else so that you can live like no one else.""  Many people in their 30s and 40s are struggling under mortgages, perhaps long-left-over student loan debt, credit card debt, auto loans, and not enough retirement savings because they had ""fun"" while they were young.  Do you have any remaining debt?  Pay it off early instead of saving so much. Perhaps you'll find that you prefer to hit that age with a fully paid off home and car, savings for your future goals (kids' college tuitions, early retirement, etc.).  Maybe you want to be able to afford some land or a place in a very high cost of living city. In other words - now is the time to set your dreams and allocate your spare cash towards them.  Life's only going to get more expensive if you choose to have a family, so save what you can as early as possible." Having someone else paying you rent is always going to be the better deal financially. The question is, what does $450k buy in the neighborhood in which you want to live, vs $800k? I'm going to assume you can afford either option (buying a $450k home and not selling, or an $800k home and selling your current one) whether someone's paying you rent or not. Let's make up some numbers here; a $450k home, financed 80/20 (360k principal) at 4% for 30 years will cost you about $1720 in P&I payments per year (plus escrows such as RE taxes, PMI, and homeowners insurance where applicable). An $800k home financed 80/20 (640k principal) at 4% for 30yr will give you payments of about $3,055/mo before taxes and insurance. So, the worst case overall is that you buy a 450k home in the new neighborhood and are not, at any given time, collecting rent on the old property. That would (assuming the mortgage terms on both home loans were comparable) cost you $3440/mo and you'd be living in a $450k home in a neighborhood where 450k may not buy a home as nice as the one you moved out of. The question as I stated above is this; assuming you had a reliable tenant in your home for the entire remaining life of the loan on your current home, which is more acceptable to you: buying $450k of home (which might be a downgrade in sqft or amenities) and paying $2020 in P&I, or paying about a grand more ($3055/mo) for a much nicer home in the new location? Strictly from a money perspective, the renter is going to be the best option, IF you get reliable tenancy for the entire life of the mortgage on that house; you'll be paying $2020/mo for 30 years, which is $727,200, to end up with $950k of total home value (plus adjustments for actual home value appreciation/depreciation). That's the only way you'll come out ahead on any mortgage; have someone else pay most of it for you. If you don't rent, the $800k home will cost you $1,099,800, while two $450k homes will cost you $1,454,400. The percentage of home value over total payments for the 800k home would be 72% (you will have paid 137% of the value of the home), while you will have paid 153% of the value of two 450k homes. You could use the money to buy a couple of other (smaller) properties. Part of the rent of these properties would be used to cover the mortgage and the rest is income. Assuming you plan to buy a whole number of shares and have a maximum dollar value you intend to invest, it may be better to wait for the split if the figures don't quite work out nicely. For example, if you are going to invest $1,000 and the stock pre-split is $400 and the split is 2 for 1, then you'd buy 2 shares before the split unless you have an extra $200 to add. Meanwhile, after the split you could buy 5 shares at $200 so that you invest all that you intend. Aside from that case, it doesn't really make a difference since the split is similar to getting 2 nickels for a dime which in each case is still a total value of 10 cents.