Btc wrote:You have been offered 10y Arm , 2.75%, interest only, 100% financing (401k and stocks are with same bank, and combined value is more than 35% of proposed loan value) how much home would you be comfortable buying?
That mortgage makes it sound like you can't afford to buy a home at all.
How much down payment do you have? Can you afford a home that suits your needs on a 15-year-fix or 30-year-fixed mortgage? If not, then you need to keep saving.
FWIW - we are 33 and 34 with three kids and our home is 1:1 with our annual income and 1:2 home value to retirement and 1:3 home value to net worth (ie our net worth is 3x the value of our home).
After reading your comments and seeing your ratios I feel like I need to clarify. If you are 33/34 and assuming you make combined 200k, u live in 200k home, your retirement is 400k and you have a total net worth of 600k. So you choose not to have a mortgage to take advantage of tax deductions, interest and property tax?
I chose to have a mortgage for tax reasons and use my cash for other investments. I think that average Americans often buy homes that often exceed their net worths. Someone that makes 80k year at age 30 could probably get a 200k mortgage, but based on this persons age, salary, his net worth may not be 50k.... If he feels confident that he will be making more money soon and the house at 200k is a opportunity, why should he not try to take advantage of low interest rates? In this example the person would be buying a home 4x-5x his net worth.
Anyway, going back to the original scenario, the person with a net worth of 1mm, 25% in 401k, could liquidate real estate, cash in stocks and bonds and buy a 750k home cash... Wouldnt be very smart not having any emergency fund etc... Losing out on yields by bonds and stocks. Etc.... he could cash in some investments to come up with a down payment of 150k and finance 600k. If he qualifies, he could also do 100% financing.....That house purchase would be 75% of the persons net worth.... What if his income qualifies him to get a 100% financing for a mortgage for 900k, 1mm, 1.1mm or even 1.2mm.
Question is' what would you be comfortable with?
I feel like I need to clarify