[quote=Looking2buysoon] I hate paying rent everymonth and feel desperate to try and buy something soon.[/quote]
There’s your answer. If you are “feel[ing] desperate”, you should absolutely not be engaging in any voluntary financial transaction of significance, including the purchase of a home.
I know many people in your age group (in fact, I have kids your age), and many of them also seem very anxious to buy, citing that same complaint about paying rent. Many of them, while aware of the real estate meltdown, seem to only see it from the view of a buyer. In this type of market, where a financial turndown can bring unforeseen opportunities for bargains, a buyer has to look at the transaction from the viewpoint of a seller.
I’m figuring that your mortgage payment (without taxes and insurance) will be around $1800 to $2K per month. Ask yourself this question: what will happen if I lose my job? Unemployment will barely cover food, utilities, and gas. Where will you get the mortgage payment?
Ask yourself how you will feel in 3 years if the house you buy today for $300K can be sold for no more than $230,000. Don’t let anyone tell you that won’t happen. Home prices have been dropping in all major metro areas since 2007, and have never risen during that time. Say you get a great job offer making 35% more. Too bad, you’ve got that house hanging around your neck (and don’t let anyone tell you that the new employer will buy your house. Those days are long gone!)
For many people in the past, there were two major financial reasons for taking the risk of buying a house. One was the mortgage interest tax deduction, the other was the value of the purchase as a financial investment. I don’t recommend that you use either of these as a justification. The tax advantage to you is not outweighed by the risk, and the uncertainty of the housing market does not bode well for its future value as an investment.
Aside from all of the above reasons, you shouldn’t buy a house now because the odds are against you still owning this house in five years. Whether you are making $4500 a month gross or net, you will have an extraordinarily difficult time keeping a $300,000 house. You have $5,000 in unsecured credit card debt (which, in light of your charge-off history, are probably incurring interest at a very rapid rate). Your monthly cell phone and car insurance bills will be joined by those for homeowners insurance, heat, electricity, water/sewer, cable TV/internet, and real estate taxes. And this is before you move in fully and things start to leak, or break down, or malfunction (oops! Can’t call the landlord.)
I do understand your desire for a home of your own (I can remember my own). But do yourself a favor and wait a few years. Pay off your debt and save some money. In the meantime, go to open houses (even ones in which you’re not particularly interested) to acquaint yourself with the differences between properties, and determine what makes a good value and what is really important to you in a home. Do regular searches on the MLS, and, again, spread your search into areas beyond your current interest to see what your money will buy you in one area over another. If you have the time and money, you may even want to take a course and get your real estate license. Take this time to accumulate wealth and to educate yourself about the complexities of real estate. I can guarantee that you will not regret it.
