Buying a house would be cheaper than renting, but would cut into our emergency fund. Not sure what to do. personalfinance

Income: my wife and I are 24. Our combined income is just over $60k/year. However, my wife is going to leave her teaching job in May, and will be going back to school for her Master's degree, assuming she can find a full-time job to help offset these costs (expected combined salary: ~$50k/year). Yes, yes, I know I shouldn't assume what our salary will be, but if she doesn't find a job that pays well enough, she won't go back to school.

Assets: I have $7k in a Roth IRA, and we have about $30k between our checking account and a high-yield savings account. We're able to save about $1k/month, and I'm expecting about $2-3k for our tax return. So, by the time we're ready to move, we should have about $40k in total assets (not counting Roth IRA, since that's a retirement account).

Expenses: Our monthly expenses (not counting rent) are about $2000.

Rent: We're looking at renting a house starting in a few months. Rent for most houses we're looking at is about $1250/month.

Math: There's pretty nice looking homes around here that are selling for $125-140k. Assuming a 4.5% mortgage, a 10% down payment, 1.25% property tax, $2000/year home insurance, $3000/year home maintenance, and a 1% annual PMI on the loan principal, I'm getting a total monthly (averaged) cost of $1225/month. However, about $150-200 of that is going toward principal, so it should come out to $1050/month that is going toward interest/PMI/maintenance/insurance/property taxes. So, it looks like it would be about $200-250/month cheaper (in the end) to buy as opposed to renting.

Concerns: With a $14k down payment (for example), $3k closing costs, and $3k moving costs + miscellaneous (buying a refrigerator/washer/dryer/lawnmower), this would leave us with $20k (roughly) in assets, which would be about a 6-month emergency fund. However, if my wife goes back to school, we probably won't be able to save much (if any) every month, so we would be stuck at about a 6-month emergency fund for the next 2-3 years, with no way to replenish it if we have to dip into it. But, on the other hand, we would come out about $10k ahead when we move out (in about 3 years), assuming the home price doesn't change.

TL;DR: Two options: A) Have a 12-month emergency fund for the next 2-3 years. B) Have a 6-month emergency fund for the next 2-3 years, but end up "making" about $10k when we move in ~3 years.

Submitted January 01, 2017 at 03:42AM by utb040713 http://ift.tt/2iRxLFw personalfinance