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[quote=Anonymous]I generally agree with what you said here with one exception: your comment that "leverage is your friend." I would say that leverage "might be your friend." When you take on debt, you take on risk, and when you take on a lot of debt, you take on a lot of risk. Depending on how the rest of your portfolio is set up, what your tax situation is, what your cash flow situation is, etc., it can make sense to put down a lot more than 20 percent, just as it can make a lot of sense for certain people - especially the super rich - to take out interest-only loans with as little down as possible.

[quote=Anonymous][quote=Anonymous]Would you reccommend purchasing a home or continuing to rent? I am a single mother looking to purchase for @500k, (college is taken care of by ex husband). I wanted to put at least 20% down. Currently paying 3k a month in rent. Thanks for any input. [/quote]

I'm not sure whom you're asking. I'm the poster from 5/9 @13:50, @14:11, and @14:18.

I am hesitant to give advice, since I don't believe I'm well-suited for the task at hand. It is not just a matter of details -- though you have not provided nearly enough to make an informed suggestion; it is also a problem that, even with all desired details, I believe there are other people better equipped to guide your decision.

That said, at the risk of other people lacking such concerns and chiming in anyway, here are some things to think about.

Your rent suggests a good income. Is it stable? Are you currently comfortable paying 3k per month, or are you looking to reduce your payments by buying?

There are multiple reasons for home ownership. Common ones are to lower your monthly payments, begin building equity, or leverage the tax advantages.

Seeing how a 400k mortgage @4.5% would result in an after-tax monthly expense around $2,000 and a 500k mortgage @4.5% would be around $2,500, I'm guessing your binding constraint will be the down payment. (Monthly mortgage expenses include principal, interest, taxes and insurance. Your monthly principal and interest on a 400k mortgage at 4.5% would be $2,027. Taxes and insurance are on top of that. You'd likely get all of your taxes and insurance back on tax day, however. So, while you'd pay around $2,400 each month, you'd get a refund equivalent to $400 per month so that your after-tax payments would be around $2,000.)

Putting 20% down is a sound strategy. It enables you to avoid paying for private mortgage insurance (PMI), which is costly. Putting down more than 20% is not a good investment strategy. Period. Leverage is your friend here.

Make sure you maintain sufficient reserves. You'll probably face around 5k-10k in expenses/repairs almost immediately. Aim to keep 6 months of expenses in the bank after closing. That's probably something like 25k+.

You'll need to bring something like 20k to the table at closing. (This varies, widely, by location, so this is very, very rough.)

How certain are you that your ex will cover college? Is this money being deposited into an account that cannot be touched? What I'm asking is whether you need to be prudent and save, just in case, too.

Finally, what's your time horizon? If you're planning to stay in the area for less than 5 years, I'd say keep renting. If more than 7, it's probably wise to buy.

Note that the areas experiencing greater growth in home values are not necessarily desirable for a single mother. You'll likely be prioritizing other things, like schools, safety, neighborhood amenities and peer effects, so you should not expect double-digit appreciation each year. A home purchase can still make for a great savings vehicle, but the upside will not mirror that of other potential asset purchases (like broad-based index funds, for example). [/quote][/quote]

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