Hello everyone,

I have secured a stable union job and my salary is $45,000 with a guarantee to go up 2.5% each year. I am in the process of planning to move out of my parents house, though I will not rush this because I don't want to bite off more than I could chew and find myself in financial trouble.

I will have my student loans paid off entirely by Christmas of this year. Thereafter I will not have any major liabilities. My plan would be to keep saving so I could put a downpayment of at least 40% for a place of my own. I want to minimize my mortgage as much as possible. The option of having other people live with me is something I want to avoid. I want to have my own place and not have to depend on anyone.

With that said, I am new to the whole buying a new place scheme. What is a typically average price for a condo? Though I know it depends on the area, I will most likely be looking for a condo outside of Chicago in the suburban areas. What price range should I expect? I have seen condos ranging from $40,000 to over $300,000. I want to know what "hidden" expenses I should be made aware of. Buying your own place is not just mortgage, but also paying taxes and other basic upkeep expenses. Insurance is also something I suppose I will need to purchase, but I am not too familiar with the costs for it.

What price range should someone in my situation be able to afford and what absolutes must I consider before buying my own place? I am not planning on this until the next couple of years, that way I can put up a downpayment and still have a healthy case reserve.


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I suggest looking on Zillow for house prices.  I don't know about condos.

I was renting first, so I looked for a house payment that compared to monthly rent.

I don't know where you live.  You may want to look at if a condo or a bungalow is the right option. I mention the bungalow (small starter house) as an idea as condo's tie you into a lot of fees and you have about the same rights as a renter.  A small house lets you do things if you wish to.  Also the prevailing wisdom that I grew up with is that condo's maintain but do not really increase in value vs a house that does increase in value most of the time.

Get the down payment,  expect to pay 10-20k in start up expenses.  That would be painting, maintenance costs, and furnishings for the place.   

I'd assume Chicago has the "city" effect like other citys. The close you are to downtown the more expensive things become. That being said, Location/size/amenities/etc all play into price. Best bet is to find a good agent and actually look at places in various locations. As for zillow, I don't trust it because its never been close to what any of my places are worth. You can use redfin.com to run comps and see what houses are selling for (I believe it works in the chi town area).

Next is actually purchasing the home. Shop around for rates, with every bank and credit union you can. I've never gotten the lowest rate because I tend to stick with banks that 1) will not get bought out or 2) sell my loan. I did that for some investing reasons, but you can use things like lending tree to really shop around. Now, you see a rate on the website... that is normally assuming you have ~20% down. If you have more, of baby its time to negotiate. You said you'll have close to 40%? if so, you could easily get the banks to wipe out any of their fee's, give you cash back (which is normally applied to closing costs) and reduce their rates even further. So don't hesitate to negotiate with them, after all odds are you'll never hear from them again unless you stop paying.

Once you have a contract, a bank, you'll close on the house and you'll have to pay for a home inspection (this is actually part of the contract), Pest inspection (also in the contract) and closing costs. Both the inspections may or may not be included in the closing costs, but a good bet for costs is ~4% of what the homes purchase price (again if you have 40% down, expect to 1/2 that number).

So you just bought a home?! great! Most people have no idea that their "mortgage" payment is really PITI, Principal, Interest, Taxes and Insurance. That's right, your "motgage payment" is just Principal, Interest, but the vast majority of people will pay a little more a month and have that payment cover taxes and your home owners insurance. There are PITI calculators on the internet, and you'll be able to look up the taxes on the home as well as get a quote for insurance before you purchase the home. Past that, there are utility bills and Home Owners Association (HOA) dues (if you are in a HOA/condo, etc). The HOA dues may cover some things, like cutting the grass, your garbage, etc... and for condos it may cover things like water and even cable. So read up on that stuff. My personal opinion are that HOA's do little more than annoy me most of the time.

All of that being said, you may want to look at multi-family houses. I know you said you didn't want roomates, and you still will be able to live on your own. You'll just own the apartment below you that you rent out, when you want. If you can swing it, multi-family's are great ways to get some extra cash. They are usually cheaper ($/sqft) than any other type of home in the area, and 80% of buyers don't want them. If its your first home, you can buy it and when you decide its not for you, simply move out and rent out your old space. I could go on and on about this... and I wish I had done this actually.

As for costs, I agree with the 1/3 of your salary, but you'll likely be told 3x your salary by the bank.

Condo prices in the US range from $40,000 to the millions. Look at zillow and mls and the real estate listings in your area to get a better idea. This is a situations where wood fiber publications can be helpful. There are real estate listings in the newspapers as well as free publications just filled with listings. Find them. Pick them up. Study them.

There are online calculators that will tell you that a mortgage of $x will come out to about $y per month, depending on the interest rate. Harder to find, but still available, are more intricate free online calculators that will give you those numbers, plus how much you'll save in taxes through the mortgage interest deduction. You can also find out how much insurance will be through those calculators. You can also get an insurance quote by pretending to apply online with an insurance company.

On insurance: Most people just buy the insurance required by the mortgage company. This is far less than it will take to make you whole in the event of a complete loss. Example: Say you buy a condo that costs $200,000, putting down 40%, or $80,000. The mortgage company will likely only require insurance to protect its security, or $120,000. And that doesn't cover your furniture, etc. Consider again, same scenario, but before it burns down, you live there for 5 years. During that time, the resale value of the condo goes up to $300,000. In the event of a total loss, you won't have nearly enough to buy a replacement home.

Condos come with home owner's association fees. These can be more than 50% of the mortgage payment and need to be carefully weighed in deciding whether you can afford a property. Also, they can be voted up at just about any time, making condo living about as unpredictable as renting.

The standard rule of thumb is that housing expenses should be 25% of income. On $45,000/year in Illinois, you will take home about $2,900/month, assuming no dependents or retirement contributions. Mortgage+HoA dues+insurance+2% for maintenance should therefore not be more than $725/month. (A less conservative rule of thumb is housing should be 25% of gross income, or about $900/month)While the seller pays most of the transaction costs when a home is sold, expect hundreds to thousands of dollars in title fees, title insurance, escrow fees, etc. when you actually make the purchase.

P.S. I calculated take-home pay by googling "take-home pay calculator." Again, all sorts of basic info really easy to find online.


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