It's not a "law." I think it's just that most banks won't finance it.

Baba Ganoush said:

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Buy a starter home around $250k. $300 max.
30 year note for payment flexibility.
Live there for 3-5 years.
When wife simultaneously has second child, stops working and wants a bigger home, upgrade (reasonably) and turn current home into rental.

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This is probably what we will end up doing. I can find semi-fixer uppers in my area on a acre in the mid to high 200's. They're livable, but need some work to make them what we want.

I think this is the route I will end up going. I am 23 and have built 13 homes for Grand in the DFW metroplex and currently work for a large commercial GC. I will just cash flow the renovations as needed.

MAS444 said:

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It's not a "law." I think it's just that most banks won't finance it.

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It's a conflict of interest

For financing banks will require a builder of record different from the homeowner

I have heard of some instances where you can build a "spec" house and then purchase it in the end but it depends on your relationship with the bank

A budget and a spreadsheet is your friend and can answer most of your financial questions.

A couple of other points that have been made already COVID will bring uncertainty. Do not be scared, but it wouldn't hurt any of us to increase the amount we are saving. Be realistic about your freetime. You may be off work but will you really want to or be able to build something.

Make a budget in a spreadsheet that uses your net (take home) pay.

Include everything -- from entertainment, grocery's, saving for a vacation, etc.

Estimate things such as utilities or any services (lawn care - etc) you may have at your new home.

Then go into a mortgage calculator and determine your monthly payment. Do not forget to add in insurance and property tax.

That will tell you exactly how much you can afford and how much you actually want to spend. Start your budget now and refine it each month as you pay bills and go through your bank statements. All those little swipes in vending machines, eating out, car washes, and so on add up. You budget will help you determine what stays and what gets cut.

SquanchyAg said:

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Baba Ganoush said:

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Buy a starter home around $250k. $300 max.
30 year note for payment flexibility.
Live there for 3-5 years.

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I'm definitely in the wrong line of work if a "starter" home is 250k-300k.

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My thoughts exactly. Our "starter" home was 165k, and that was more than we wanted to spend. For us, 250-300 is our second home, where we plan to be for quite a long time (may eventually even just build new on our property down the road)

histag10 said:

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SquanchyAg said:

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Baba Ganoush said:

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Buy a starter home around $250k. $300 max.
30 year note for payment flexibility.
Live there for 3-5 years.

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I'm definitely in the wrong line of work if a "starter" home is 250k-300k.

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My thoughts exactly. Our "starter" home was 165k, and that was more than we wanted to spend. For us, 250-300 is our second home, where we plan to be for quite a long time (may eventually even just build new on our property down the road)

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I hear you. I want to sell mine and go back to a 100k house.

Use a 15 year amortization to establish your budget number. That should keep you from stretching too thin. Also include taxes and insurance.

CaptnCarl said:

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Op, as someone in my 30s in my first home, PUMP. THE. BRAKES.

Using logic of 'it will be tough for a few years then be better' and 'our income will only go up' are sure signs you are about to be in way over your head.

You expenses only go up. Expenses start popping up that you don't even think about.

Go as modest as possible, then reconsider in 4-7 years. A lot of sh*t will happen between now and then

Managing a home build is way more work than you can imagine, even if you have a GC.

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Blue parachute for you. Had we had the mentality of "it will be tough, but then we will be making more money in a few years", we would have been screwed. We were able to afford our house during several oil downturns, and years of wage and hiring freezes with cut hours. And then now with the pandemic and oil crisis... had we overspent on our first or second house, we would be staring down foreclosure and homelessness. Dont bank on making more money in a few years, or the economy being great. Plan on if you will be able to continue to afford your living situation if **** hits the fan (because that is how much you can afford, imo).

We bought our first home at 23 for $71k, working low paying ag jobs necessitated it. 1100 sq ft with the plan to upgrade in a couple years once things got better. Things got better but we were happy with the house and the ridiculously low payment, although a little tight with 2 kids, but decided to put money away and forego a bigger house. 31 now and 3 weeks from completion on our "forever" home, we spent half of what the online calculators said we could afford, but it's still more than I ever imagined having and we will not have to stress about the mortgage.

Not buying the biggest 1st home we could afford and skipping the stepping-stone young family home worked great for us. At 23 with a young kid you have no idea with what the next few years hold. Buy a house where the mortgage is an afterthought, and focus on what you can do to benefit your new family and career. Good luck!

I'd rent until you get certainty about the wife. And as familiar with construction as you may be, I still tend to think it's a bad idea for a first house. You chew up $$$ on new house premium, and I think that first house is a good one to truly figure out what features you like and hate as a family. We all think we know, but living in a house as a couple with kids brings a new perspective on things. Take those learnings for the next one.

I get what you're saying but what year did you buy that home?

agdaddy04 said:

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I get what you're saying but what year did you buy that home?

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2013. We bought our second home last year with acreage under 250k in the BCS area (this was a complete anomoly. The sellers needed out asap and priced way under market, and we caught the listing right as it posted)

And make sure you get the taxes, insurance, and any other utilities you haven't been having to pay as a renter built in

SquanchyAg said:

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Baba Ganoush said:

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Buy a starter home around $250k. $300 max.
30 year note for payment flexibility.
Live there for 3-5 years.

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I'm definitely in the wrong line of work if a "starter" home is 250k-300k.

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Ha. Sorry. Take starter home with a grain of salt. OP was looking at a $470k first home and I was pointing him towards something more in his range.

2 x ~65k, bringing home about ~95k/yr after tax

imo i would not spring for a 500k house -- would make for saving any money incredibly difficult

TXTransplant said:

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Diggity said:

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Yep. Low interest rates increase buying power, which bumps up the price of housing stock.

Rising prices are a double whammy in TX, where a lot of folks end up paying 3%+ in property taxes, based on these inflated values.

I'm continually amazed at what builders are getting out in the sticks for new construction.

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I've been wondering the same for the last few years. And I'm not even in the sticks.

I live in a subdivision that has houses from 2007 up to new construction. Most of the houses were built in the last 7 years, though.

Around 2014-2015 new construction prices jumped from about $130-$150/sq ft to $200/sq ft. No noticeable change in construction (in fact, some of the 2012-2013 homes are nicer, IMO, than the brand new homes).

But the newer homes are stuck at $180-$200/sq ft (even on resales), while houses that are maybe just a year or two older are lucky to get $130-$140. And these houses are practically right across the street from each other. Some are closer to the "park" and/or have rear-entry garages, but curb appeal alone can't justify that kind of price difference. No significant difference in lot size (if anything, the newer homes are on even smaller lots). Just white cabinets instead of stained wood, and gray walls instead of tan. Appraisals don't seem to be an issue, though.

I know construction and material costs have increased substantially, but new construction just seems like a huge scam right now.

Edited to add: latest new construction listing is $250/sq ft.

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Northlake and Aledo areas are notorious for this. Parts of Aledo under the MUD/COFW pay 3.5% in taxes. I felt very out of place when I started laughing at the tax amount in front of the new build companies on top of $200/sq ft for a nice brand name home on literally no land out in the middle of nowhere. They kept shoveling it in my face that 3.5% is low for taxes. We walked right out and didn't look back.

Ended up with a 2018 home owned by an old lady that is retiring out of town. Got the home at $140.50/sq ft, which is what you are describing to the letter. We had the home value knocked down little over 10% as everyone way overestimated the value and still landed it.

Ya, it's not illegal; just hard to secure the loan if you don't have a strong background in GC.

A buddy who was a COSI guy and works for Zachary, I believe was his own GC on his build. So it can be done, most of the time though, the build is the owner of record and the first loan/mortgage holder, then they sell it to you. If you can't make with the money, they sell it to someone else and your out a hefty payment that you've been paying him during construction.

Baba Ganoush said:

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SquanchyAg said:

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Baba Ganoush said:

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Buy a starter home around $250k. $300 max.
30 year note for payment flexibility.
Live there for 3-5 years.

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I'm definitely in the wrong line of work if a "starter" home is 250k-300k.

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Ha. Sorry. Take starter home with a grain of salt. OP was looking at a $470k first home and I was pointing him towards something more in his range.

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no need to apologize. i'm the lol poor, not you.

Quinn said:

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Diggity said:

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Housing prices do go up you know. Anyone speaking about what they paid for their home in 1998 is kind of missing the point. Unless you live way outside a major city, $250K is absolutely a fair estimate for a "starter home".

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Seriously - I'm not even sure where people are finding desirable homes for $250K in a metro area.

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I doubt there are any desirable homes for $250K in a metro area. but then again, I have no clue why anyone would want to live in a metro area, so I guess I'm not a good person to respond to this thread.

JP76 said:

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Based on 65,000 income


~ $250,000 house


If you want to build then you will need 20% down for conventional financing

Also in Texas technically the owner can not be the general contractor

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I just want to chime in on this;
Suggesting a home price doesn't make any sense here. Makes more sense to suggest a monthly payment.

You have down payment, interest rate, term length, property tax rate, hazard insurance premiums.... All of these things change the monthly cost of a $250k house dramatically.

Op, start from a monthly payment that is comfortable for you. Work up to a home value from there.

Diggity said:

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Housing prices do go up you know. Anyone speaking about what they paid for their home in 1998 is kind of missing the point. Unless you live way outside a major city, $250K is absolutely a fair estimate for a "starter home".

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This - our first home was purchased in 2005 for 155. We sold it 3 years later for 170. Just checked and the homes in that neighborhood start at over twice our purchase price.

How does the whole housing increase (bubble pt 2?) thing work for all of you in Texas? Property taxes were high enough when I lived in a nice part of San Antonio, about $8,800 when I moved IIRC. Are a lot of you paying 5 figures in taxes now?

Where I live you can absolutely get a nice starter home in the metro area for $250k. 2000+ sq with updated kitchen / bathrooms and in a very good part of town. But I also live in El Paso where prices are probably 30% less than DFW.

What people spend on houses, especially to live in a big city, much less California, blows my mind. I have no idea how people afford many of these homes I see.

When we left last year we were paying $12k. House in Colorado cost almost double but property taxes less than 1/3.

Quote:

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What people spend on houses, especially to live in a big city, much less California, blows my mind. I have no idea how people afford many of these homes I see.

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Salaries are higher in bigger cities and certain states compared to el paso, that's how.

Engineers out of college working for facebook or google can start at $150k+, and have free transportation to and from work if you live in the valley, 3 free meals at work, free gym, etc..

Granted, you still aren't getting a dallas suburb McMansion, but a lot of people don't want all that space.

agdaddy04 said:

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When we left last year we were paying $12k. House in Colorado cost almost double but property taxes less than 1/3.

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this is the main factor in my comment above, where the guy said you can afford a $250k house.

Even across TX, prop tax can vary quite a bit (we were paying $4800 on a $120k house in Tomball 10 years ago)

Then move across state lines and everything changes.

Always start with a monthly budget, then work your towards a purchase price.

you're right, they much prefer to spend a million plus on a two BR condo.