Can we afford $600k home?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
anonymoususer
Posts: 14
Joined: Tue Jun 06, 2017 8:36 pm

Can we afford $600k home?

Post by anonymoususer » Tue Jul 23, 2019 2:57 pm

Late 30s. husband, wife, two kids

Assets: Total 385k.
92k in taxable,
25k in HSA,
101k in Roth,
158k in 401k/Reg IRA.

Income: Husband‘s 130k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.

I assume we can get mortgage with no PMI with 10% downpayment. Can we afford $600k home?

I logged in from different ID to be anonymous.

onourway
Posts: 2091
Joined: Thu Dec 08, 2016 3:39 pm

Re: Can we afford $600k home?

Post by onourway » Tue Jul 23, 2019 3:01 pm

Seems an extreme stretch to me. More than 4x income, although this is somewhat "normal" in some HCOL cities today.

Rather than your assets I'd prefer to see a full breakdown of your expenses. If you have this in detail, you should already know what you will need to sacrifice to make the additional payments on a home at this price, but we can help review your thinking if you post them. If you don't have this in detail, I would start by collecting that info.

Flyer24
Moderator
Posts: 1215
Joined: Sun Apr 08, 2018 4:21 pm

Re: Can we afford $600k home?

Post by Flyer24 » Tue Jul 23, 2019 3:02 pm

No way. Absolute max should be 3x your income. My own house is not even 2x my income. I don’t like to stretch it.
Last edited by Flyer24 on Tue Jul 23, 2019 3:04 pm, edited 1 time in total.

Quirkz
Posts: 227
Joined: Mon Jan 14, 2019 5:32 pm

Re: Can we afford $600k home?

Post by Quirkz » Tue Jul 23, 2019 3:02 pm

A mortgage 4x income strikes me as very high. Have you run a sample monthly budget and looked at those numbers? The payments are going to be around half of your take-home, maybe more. That doesn't seem bearable to me.

GuyFromGeorgia
Posts: 139
Joined: Sat Dec 29, 2012 12:16 pm

Re: Can we afford $600k home?

Post by GuyFromGeorgia » Tue Jul 23, 2019 3:19 pm

To make this work, you will likely have to pull back on retirement savings. That means you will need to work more years of your life. How safe is your job/profession? If it requires you to be physically active, that gets harder with age. If you're in a tech industry then there is a chance you might have some sort of age-ism kick you out of your job. Lots of industries have their own issues. And then how much is your wife's earnings potential? If she can realistically get back into the work force in 3-4 years at $100k then this is a different discussion. And for that matter, what's your earnings growth potential? Are you capped out in your job or are there ways up still?

stoptothink
Posts: 6545
Joined: Fri Dec 31, 2010 9:53 am

Re: Can we afford $600k home?

Post by stoptothink » Tue Jul 23, 2019 3:23 pm

FWIW, 3.5yrs ago I (alone) was approved for $650k+ and my income was less than yours (but more assets). You'll likely get approved, but that is a HUGE stretch. Today we have 75% more income and twice the assets and I don't think we could comfortably afford $600k.

bloom2708
Posts: 6976
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Can we afford $600k home?

Post by bloom2708 » Tue Jul 23, 2019 3:25 pm

Where is the $120k + closing costs/taxes/fees coming from? Do you have good equity in your current home to use for the down payment?

I agree, seems like a stretch. I don't think a 10% down with no PMI mortgage exists. Maybe companies are doing those again.

Good luck!
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

Topic Author
anonymoususer
Posts: 14
Joined: Tue Jun 06, 2017 8:36 pm

Re: Can we afford $600k home?

Post by anonymoususer » Tue Jul 23, 2019 3:27 pm

GuyFromGeorgia wrote:
Tue Jul 23, 2019 3:19 pm
To make this work, you will likely have to pull back on retirement savings. That means you will need to work more years of your life. How safe is your job/profession? If it requires you to be physically active, that gets harder with age. If you're in a tech industry then there is a chance you might have some sort of age-ism kick you out of your job. Lots of industries have their own issues. And then how much is your wife's earnings potential? If she can realistically get back into the work force in 3-4 years at $100k then this is a different discussion. And for that matter, what's your earnings growth potential? Are you capped out in your job or are there ways up still?
About job security, I am in tech industry. So it is as safe (or not safe) as normal tech job is.
I prefer not to think about wife future earning.
I am not capped out in my job.

Topic Author
anonymoususer
Posts: 14
Joined: Tue Jun 06, 2017 8:36 pm

Re: Can we afford $600k home?

Post by anonymoususer » Tue Jul 23, 2019 3:30 pm

bloom2708 wrote:
Tue Jul 23, 2019 3:25 pm
Where is the $120k + closing costs/taxes/fees coming from? Do you have good equity in your current home to use for the down payment?

I agree, seems like a stretch. I don't think a 10% down with no PMI mortgage exists. Maybe companies are doing those again.

Good luck!
Don't have $120k. Can't do 20% down payment.
Don't have any equity in current home. We are renters.
If 10% down with no PMI mortgage does not exist, answer is clear and it is no.

User avatar
Mlm
Posts: 426
Joined: Sat Apr 09, 2016 6:00 pm

Re: Can we afford $600k home?

Post by Mlm » Tue Jul 23, 2019 3:35 pm

Heck No

jhwkr542
Posts: 52
Joined: Tue Jun 28, 2016 9:51 pm

Re: Can we afford $600k home?

Post by jhwkr542 » Tue Jul 23, 2019 3:36 pm

You'd be house poor. It's not crazy in HCOL areas, but you can get a pretty good house for half that in most other areas (depending on location of the house in these areas).

Aku09
Posts: 37
Joined: Wed Jan 09, 2019 11:29 am

Re: Can we afford $600k home?

Post by Aku09 » Tue Jul 23, 2019 3:42 pm

I don’t believe you can do a traditional mortgage with less than 20% down and no PMI. I did 0% down and no PMI using a VA loan about 3 years ago.

I’d say 600k is too much of a stretch. You will be house poor. What is your rent now? My mortgage is 300k and with escrow for taxes and insurance my payment is around $1700 a month for 30 years at 3.25%. Can you afford $3000+ a month comfortably and save for anything breaking (hvac, water heater, etc). My mortgage is less than double my income and is easily doable. My biggest expense are my student loans at $2300 a month. I could afford a 600k mortgage on my salary, but only after my student loans are paid off. Even then the freedom to travel more and have more money to eat out and pay for someone to come clean once a week outweighs that for me.

User avatar
TxAg
Posts: 1550
Joined: Sat Oct 17, 2009 11:09 am

Re: Can we afford $600k home?

Post by TxAg » Tue Jul 23, 2019 3:54 pm

No way!

rascott
Posts: 1114
Joined: Wed Apr 15, 2015 10:53 am

Re: Can we afford $600k home?

Post by rascott » Tue Jul 23, 2019 3:56 pm

anonymoususer wrote:
Tue Jul 23, 2019 2:57 pm
Late 30s. husband, wife, two kids

Assets: Total 385k.
92k in taxable,
25k in HSA,
101k in Roth,
158k in 401k/Reg IRA.

Income: Husband‘s 130k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.

I assume we can get mortgage with no PMI with 10% downpayment. Can we afford $600k home?

I logged in from different ID to be anonymous.

A lender would approve you, but you'd be house poor. Likely need to be looking in the 350-400k range. Even that's more than I like (which is to stay around 2x income).

Also you can't get a traditional loan with 10% down without paying PMI. No PMI = 20%+ down.

chevca
Posts: 2863
Joined: Wed Jul 26, 2017 11:22 am

Re: Can we afford $600k home?

Post by chevca » Tue Jul 23, 2019 4:07 pm

anonymoususer wrote:
Tue Jul 23, 2019 2:57 pm
Income: Husband‘s 130k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.

I assume we can get mortgage with no PMI with 10% downpayment. Can we afford $600k home?

I logged in from different ID to be anonymous.
So, a $540k mortgage on a $140k salary? And, with kids on the way or here already. I'd have to say no way.

Topic Author
anonymoususer
Posts: 14
Joined: Tue Jun 06, 2017 8:36 pm

Re: Can we afford $600k home?

Post by anonymoususer » Tue Jul 23, 2019 4:30 pm

Aku09 wrote:
Tue Jul 23, 2019 3:42 pm
I don’t believe you can do a traditional mortgage with less than 20% down and no PMI. I did 0% down and no PMI using a VA loan about 3 years ago.

I’d say 600k is too much of a stretch. You will be house poor. What is your rent now? My mortgage is 300k and with escrow for taxes and insurance my payment is around $1700 a month for 30 years at 3.25%. Can you afford $3000+ a month comfortably and save for anything breaking (hvac, water heater, etc). My mortgage is less than double my income and is easily doable. My biggest expense are my student loans at $2300 a month. I could afford a 600k mortgage on my salary, but only after my student loans are paid off. Even then the freedom to travel more and have more money to eat out and pay for someone to come clean once a week outweighs that for me.
Rent is ~2000 right now. I would not like to spend 3000/month for a place to live.
Rent has gone up 60% in 4 years and who knows how many years do we have before it reaches 3000.

chevca
Posts: 2863
Joined: Wed Jul 26, 2017 11:22 am

Re: Can we afford $600k home?

Post by chevca » Tue Jul 23, 2019 4:34 pm

anonymoususer wrote:
Tue Jul 23, 2019 4:30 pm
I would not like to spend 3000/month for a place to live.
Yet, you ask about a $600k house with very little for a down payment?

Topic Author
anonymoususer
Posts: 14
Joined: Tue Jun 06, 2017 8:36 pm

Re: Can we afford $600k home?

Post by anonymoususer » Tue Jul 23, 2019 4:36 pm

jhwkr542 wrote:
Tue Jul 23, 2019 3:36 pm
You'd be house poor. It's not crazy in HCOL areas, but you can get a pretty good house for half that in most other areas (depending on location of the house in these areas).
It would be great if houses were not expensive where we are. When I limit price to 500k on redfin/zillow, I get 0 search results.

GuyFromGeorgia
Posts: 139
Joined: Sat Dec 29, 2012 12:16 pm

Re: Can we afford $600k home?

Post by GuyFromGeorgia » Tue Jul 23, 2019 4:37 pm

anonymoususer wrote:
Tue Jul 23, 2019 3:27 pm
GuyFromGeorgia wrote:
Tue Jul 23, 2019 3:19 pm
To make this work, you will likely have to pull back on retirement savings. That means you will need to work more years of your life. How safe is your job/profession? If it requires you to be physically active, that gets harder with age. If you're in a tech industry then there is a chance you might have some sort of age-ism kick you out of your job. Lots of industries have their own issues. And then how much is your wife's earnings potential? If she can realistically get back into the work force in 3-4 years at $100k then this is a different discussion. And for that matter, what's your earnings growth potential? Are you capped out in your job or are there ways up still?
About job security, I am in tech industry. So it is as safe (or not safe) as normal tech job is.
I prefer not to think about wife future earning.
I am not capped out in my job.
Good additional information. FWIW, I'm also in tech and can feel the desire to sometimes stretch. I'm not opposed to you making the decision to buy the house, but my recommendation would be to wait. A few thoughts:
- Having a stay-at-home wife is a luxury. Your high level of income allows for this to be an option, but you have to account for it in the "haves" column (and have it offset some other luxury).
- The economy is at or near peak. Maybe a month, maybe a few years, eventually it will pull back. When that does tech will be hit hard. Don't be bottom 50% on your team. Don't be located in mid-west when the rest of the team is in the Bay.
- You have income upside, good, but you're likely years from it. When the economy tanks, raises and stock grants will freeze. Even if you stay employed, you will stagnate where we are. That said, lay the ground work to get promoted.
- more expensive homes are also larger in most cases. More furniture, more space to heat and cool, more property taxes, more insurance premium.
- On the flip side, part of this also has to be how you spend you money. We eat out and spend WAY too much and that's our luxury. Literally it could be a mortgage payment. If you are cook-at-home people, or have other lifestyle/money saving personalities then you should be good.
- You didn't mention ages of kids. Just keep in mind that expenses change over time.

Topic Author
anonymoususer
Posts: 14
Joined: Tue Jun 06, 2017 8:36 pm

Re: Can we afford $600k home?

Post by anonymoususer » Tue Jul 23, 2019 4:42 pm

chevca wrote:
Tue Jul 23, 2019 4:34 pm
anonymoususer wrote:
Tue Jul 23, 2019 4:30 pm
I would not like to spend 3000/month for a place to live.
Yet, you ask about a $600k house with very little for a down payment?
Yes. We are paying 2000 right now and rent went up 60% in last 4 years. Who knows how many years we have before it reaches 3000.
600k house because thats the starting price for a house.

Very little down payment, because thats where we stand right now.

User avatar
JoeRetire
Posts: 3950
Joined: Tue Jan 16, 2018 2:44 pm

Re: Can we afford $600k home?

Post by JoeRetire » Tue Jul 23, 2019 4:46 pm

anonymoususer wrote:
Tue Jul 23, 2019 2:57 pm

Income: Husband‘s 130k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.

I assume we can get mortgage with no PMI with 10% downpayment. Can we afford $600k home?
Those aren't numbers I'd be comfortable with. Even more so on just one income.

In general, if you can't afford a 20% down payment, you can't afford the house, IMHO.

What rate could you get for 10% down with no PMI? What would your payments be? How much of that $130-140k are you able to save each year?
Don't be a lemming.

chevca
Posts: 2863
Joined: Wed Jul 26, 2017 11:22 am

Re: Can we afford $600k home?

Post by chevca » Tue Jul 23, 2019 4:54 pm

anonymoususer wrote:
Tue Jul 23, 2019 4:42 pm
chevca wrote:
Tue Jul 23, 2019 4:34 pm
anonymoususer wrote:
Tue Jul 23, 2019 4:30 pm
I would not like to spend 3000/month for a place to live.
Yet, you ask about a $600k house with very little for a down payment?
Yes. We are paying 2000 right now and rent went up 60% in last 4 years. Who knows how many years we have before it reaches 3000.
600k house because thats the starting price for a house.

Very little down payment, because thats where we stand right now.
Then you likely can't or shouldn't buy a house in that area.

You need more income of more of a down payment to make it work, IMO.

Jags4186
Posts: 3917
Joined: Wed Jun 18, 2014 7:12 pm

Re: Can we afford $600k home?

Post by Jags4186 » Tue Jul 23, 2019 4:59 pm

anonymoususer wrote:
Tue Jul 23, 2019 4:36 pm
jhwkr542 wrote:
Tue Jul 23, 2019 3:36 pm
You'd be house poor. It's not crazy in HCOL areas, but you can get a pretty good house for half that in most other areas (depending on location of the house in these areas).
It would be great if houses were not expensive where we are. When I limit price to 500k on redfin/zillow, I get 0 search results.
This means you can’t afford to buy where you live.

Topic Author
anonymoususer
Posts: 14
Joined: Tue Jun 06, 2017 8:36 pm

Re: Can we afford $600k home?

Post by anonymoususer » Tue Jul 23, 2019 5:05 pm

JoeRetire wrote:
Tue Jul 23, 2019 4:46 pm
anonymoususer wrote:
Tue Jul 23, 2019 2:57 pm

Income: Husband‘s 130k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.

I assume we can get mortgage with no PMI with 10% downpayment. Can we afford $600k home?
Those aren't numbers I'd be comfortable with. Even more so on just one income.

In general, if you can't afford a 20% down payment, you can't afford the house, IMHO.

What rate could you get for 10% down with no PMI? What would your payments be? How much of that $130-140k are you able to save each year?
I haven't approached any lander to get rate for 10% down with no PMI. I remember reading thread about lots of people getting regular rate with 10% down and no PMI.
We are able to save $15k-20k post tax a year out of that $130-140k. (assuming we did not save for retirement)

chevca
Posts: 2863
Joined: Wed Jul 26, 2017 11:22 am

Re: Can we afford $600k home?

Post by chevca » Tue Jul 23, 2019 5:05 pm

anonymoususer wrote:
Tue Jul 23, 2019 4:42 pm
chevca wrote:
Tue Jul 23, 2019 4:34 pm
anonymoususer wrote:
Tue Jul 23, 2019 4:30 pm
I would not like to spend 3000/month for a place to live.
Yet, you ask about a $600k house with very little for a down payment?
Yes. We are paying 2000 right now and rent went up 60% in last 4 years. Who knows how many years we have before it reaches 3000.
600k house because thats the starting price for a house.

Very little down payment, because thats where we stand right now.
No idea about taxes and insurance where you're at. But, the P&I alone on the mortgage you're asking about at let's say 3.75% will be about $2500/month.

User avatar
Sandtrap
Posts: 8496
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Can we afford $600k home?

Post by Sandtrap » Tue Jul 23, 2019 5:13 pm

Considerations:
1
Different area with cheaper homes.
2
Continue renting, for now. Wait until increase in income and savings for down payment.
3
Different area with lower rent.
Wiki Bogleheads Wiki: Everything You Need to Know

Aku09
Posts: 37
Joined: Wed Jan 09, 2019 11:29 am

Re: Can we afford $600k home?

Post by Aku09 » Tue Jul 23, 2019 5:15 pm

anonymoususer wrote:
Tue Jul 23, 2019 5:05 pm
JoeRetire wrote:
Tue Jul 23, 2019 4:46 pm
anonymoususer wrote:
Tue Jul 23, 2019 2:57 pm

Income: Husband‘s 130k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.

I assume we can get mortgage with no PMI with 10% downpayment. Can we afford $600k home?
Those aren't numbers I'd be comfortable with. Even more so on just one income.

In general, if you can't afford a 20% down payment, you can't afford the house, IMHO.

What rate could you get for 10% down with no PMI? What would your payments be? How much of that $130-140k are you able to save each year?
I haven't approached any lander to get rate for 10% down with no PMI. I remember reading thread about lots of people getting regular rate with 10% down and no PMI.
We are able to save $15k-20k post tax a year out of that $130-140k. (assuming we did not save for retirement)
I really feel you would be doing yourself a disservice by buying the house. You would have to stop retirement contributions to be able to afford it. Especially if you are having kids there will be all sorts of unexpected expenses.

Have you tried expanding your radius on home searches? Maybe 30 minutes commute time to see if anything is more affordable? I much prefer owning a home, but in your situation I would probably rent.

User avatar
Wiggums
Posts: 1961
Joined: Thu Jan 31, 2019 8:02 am

Re: Can we afford $600k home?

Post by Wiggums » Tue Jul 23, 2019 5:38 pm

You didn’t mention the age of the new home, but I’d be concerned about the maintenance costs if this is an older home and property taxes.

With only 10% down, the lender might give you a higher interest rate. Personally, this would be too much of a stretch for my family.

stocknoob4111
Posts: 839
Joined: Sun Jan 07, 2018 12:52 pm

Re: Can we afford $600k home?

Post by stocknoob4111 » Tue Jul 23, 2019 5:55 pm

you can't afford it.. not even close especially with kids. With that said I know way too many people here in SoCal buying $800k or even $900k homes with 20% down and similar incomes to you. The 20% usually is all their life savings over the years. They are very much on the edge and save nothing for retirement because they view their home as their retirement asset which in my view is downright ridiculous.

A lot of it is societal pressure.. renting has a stigma of not owning any asset or building wealth. Nothing could be further from the truth. Buying a home that you cannot afford is a path to financial ruin in my opinion.

WS1
Posts: 90
Joined: Wed Jan 07, 2015 3:45 pm

Re: Can we afford $600k home?

Post by WS1 » Tue Jul 23, 2019 6:10 pm

I have yet to put my money where my mouth is. Don't listen to me. I can only layout my research and thought experiments

Family, saving to purchase in HCOL with good rental stock. Haven't bought yet because we aren't sure where we want to settle and our finances haven't been settled enough to decide on a comfortable payment.

It starts with looking at your budget and deciding how much you can spend on housing and still meet your other goals..unfortunately this means having a slightly better than fuzzy understanding of your other savings goals. Then see what kind of home that payment (PITI + utilities + repairs upgrades set aside) will buy.

As they say, this is where my heads at
PMI isn't bad it's just a complication that requires you to take real mortgage quotes and run the numbers because there is no standard scenario. This is what I've seen- Fannie/Freddie loan with standard PMI that falls off when the loan balance falls below a certain amount or reappraisal, Fannie/Freddie with a lower PMI that only falls off after x # of payments, credit union offering 5% down no PMI but with an interest rate a little higher than Fannie/Freddie, and credit union offering 5% no PMI with same interest rate but higher closing costs
A superficial comparison is impossible.

Why do I care about any rules of thumb if I'm meeting my savings goals, living a decent life, and with unemployment insurance I can make it 24 months on cash + safe assets?
Last edited by WS1 on Tue Jul 23, 2019 6:36 pm, edited 1 time in total.

User avatar
Nestegg_User
Posts: 1357
Joined: Wed Aug 05, 2009 1:26 pm

Re: Can we afford $600k home?

Post by Nestegg_User » Tue Jul 23, 2019 6:19 pm

I'll pile on: "DENIED"


Also, your current savings is already TOO LOW, since you've said you are late 30's, so I assume in range of 37-38
The ultra-high payments relative to income, along with funds needed for care of the kids, mean you won't be able to even maintain whatever savings rate you had, much less catch up to where you need to be.
Remember Klangfool says to be "FI" by early 50's..... you are nowhere near that.... and you are in tech, which could be punished in any market downturn. The forties is also the beginning of the timeframe of age discrimination in tech, the ability to be "flexible" and not tied down to a house might be needed if you do have to relocate.

chevca
Posts: 2863
Joined: Wed Jul 26, 2017 11:22 am

Re: Can we afford $600k home?

Post by chevca » Tue Jul 23, 2019 6:20 pm

WS1 wrote:
Tue Jul 23, 2019 6:10 pm
Why do I care about any rules of thumb if I'm meeting my savings goals, living a decent life, and with unemployment can make it 24 months on cash + safe assets?
You wouldn't need to care, as you could afford to buy. :happy

User avatar
StormShadow
Posts: 753
Joined: Thu Feb 09, 2012 6:20 pm

Re: Can we afford $600k home?

Post by StormShadow » Tue Jul 23, 2019 6:56 pm

Don’t recommend it.

Being house poor really stinks. Outside of the high monthly mortgage, fixing up a house is expensive and a pain in the rear.

Also, with the current tax law... the standard deduction makes it tough to get much benefit from home ownership.

I’d much rather have that extra money in the stock market.

unstartable
Posts: 126
Joined: Thu Aug 10, 2017 12:19 pm

Re: Can we afford $600k home?

Post by unstartable » Tue Jul 23, 2019 7:03 pm

Where I live the tax on that home would be over $1000/month. That alone would pay quite a bit toward a decent apartment.

Edit: Typo

Trader Joe
Posts: 1289
Joined: Fri Apr 25, 2014 6:38 pm

Re: Can we afford $600k home?

Post by Trader Joe » Tue Jul 23, 2019 7:15 pm

anonymoususer wrote:
Tue Jul 23, 2019 2:57 pm
Late 30s. husband, wife, two kids

Assets: Total 385k.
92k in taxable,
25k in HSA,
101k in Roth,
158k in 401k/Reg IRA.

Income: Husband‘s 130k-140k, not considering wife’s as wife is working part time and probably will raise kids full time for few years.

I assume we can get mortgage with no PMI with 10% downpayment. Can we afford $600k home?

I logged in from different ID to be anonymous.
No, you cannot afford a $600,000 home. Best of luck.

Bobby206
Posts: 156
Joined: Fri Oct 05, 2018 4:01 pm

Re: Can we afford $600k home?

Post by Bobby206 » Tue Jul 23, 2019 7:19 pm

I wouldn't do it as I wouldn't want to be so cash poor UNLESS I had a really strong belief my income was going up in the next couple years by at least 20%. Still a stretch but not the worst I have seen. Also, are you buying at a peak in the housing market? I realize interest rates are low so that could nullify the "buying at the peak" concern. Good luck to you.

stoptothink
Posts: 6545
Joined: Fri Dec 31, 2010 9:53 am

Re: Can we afford $600k home?

Post by stoptothink » Tue Jul 23, 2019 7:24 pm

anonymoususer wrote:
Tue Jul 23, 2019 5:05 pm

We are able to save $15k-20k post tax a year out of that $130-140k. (assuming we did not save for retirement)
Just making sure I am reading this correctly: you can save $15-20k post a tax a year if you didn't save anything for retirement and you are wanting to lock in increased basic housing costs? No matter how you spin it, with current spending, you can't afford to buy a home in your desired area.

nexesn
Posts: 134
Joined: Mon Jan 01, 2018 9:15 pm

Re: Can we afford $600k home?

Post by nexesn » Tue Jul 23, 2019 7:28 pm

My suggestion is keep renting. That is, unless all your entertainment needs will be met by living in your house. We debated buying (and keep going back and forth on the matter) but have realized from a financial standpoint, it makes a lot more sense to rent right now (we also are paying substantially more than $2000 a month for rent- I know if feels like throwing money away.... but, many times that isn't the case). Be happy that you aren't locked into something and continue renting- the market has also seemed to have finally leveled out a bit.

majiaknight
Posts: 114
Joined: Tue Jan 26, 2016 2:55 pm

Re: Can we afford $600k home?

Post by majiaknight » Tue Jul 23, 2019 7:32 pm

You didn't mention the monthly expenses and savings, and the projected PITI vs. current rent which may help us provide more accurate advice. The two kids could become very expensive.

wilked
Posts: 1627
Joined: Thu Mar 24, 2011 1:50 pm

Re: Can we afford $600k home?

Post by wilked » Tue Jul 23, 2019 7:40 pm

Not mentioned but...if you get zero returns for $500k houses than the $600k house is likely to need a lot of work. Another reason you can’t afford it

User avatar
JoeRetire
Posts: 3950
Joined: Tue Jan 16, 2018 2:44 pm

Re: Can we afford $600k home?

Post by JoeRetire » Tue Jul 23, 2019 8:02 pm

anonymoususer wrote:
Tue Jul 23, 2019 5:05 pm
I haven't approached any lander to get rate for 10% down with no PMI. I remember reading thread about lots of people getting regular rate with 10% down and no PMI.
We are able to save $15k-20k post tax a year out of that $130-140k. (assuming we did not save for retirement)
Maybe you could find a lender who would give you a mortgage with only 10% down.
And maybe you would get a reasonable rate.
And maybe you could find the money to furnish the home.
And maybe the associated taxes, maintenance, and other costs wouldn't be too burdensome.
And maybe you'd be okay not being able to save anything, and living on just one income.
And maybe your job is completely safe.

It's not something I'd ever recommend.

I had a good friend who worked with me years ago. He and his wife had 3 children, and felt they needed a larger home. They bought a McMansion above the top end of their budget. It was a stretch, but they felt they could afford it, since he worked in IT and she had a good job in accounting.

Within two years, she was pregnant, he got laid off. They were far under water with their mortgage. They declared bankruptcy and divorced. She took the kids and moved in with her parents. He moved into a tiny apartment.

Don't be house poor.
Don't be a lemming.

Grt2bOutdoors
Posts: 21501
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Can we afford $600k home?

Post by Grt2bOutdoors » Tue Jul 23, 2019 8:17 pm

No. Keep renting. Yes rent can increase but so does taxes, maintenance, insurance. 2-3x gross income is max I’d recommend to borrow. No lender will give you a mortgage of 90% without PMI. There’s too much risk for them and too much risk for you.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

WS1
Posts: 90
Joined: Wed Jan 07, 2015 3:45 pm

Re: Can we afford $600k home?

Post by WS1 » Tue Jul 23, 2019 8:51 pm

Grt2bOutdoors wrote:
Tue Jul 23, 2019 8:17 pm
.... No lender will give you a mortgage of 90% without PMI. There’s too much risk for them and too much risk for you.
Sure they will. The rate might just be higher. Lot’s of moving pieces, just like a car lease.

Arlington2019
Posts: 67
Joined: Thu Jun 27, 2019 2:29 pm
Location: Snohomish County, Washington, USA

Re: Can we afford $600k home?

Post by Arlington2019 » Tue Jul 23, 2019 8:52 pm

In regards to the OP, people in his financial position buy houses all the time in the Seattle area. The lenders are pretty familiar with this scenario. And yes, it is a stretch, but that is what people have to do to buy a house within a reasonable distance of Seattle and start working their way up the housing ladder. I don't know if the OP is in Seattle, but his story sounds familiar.

Grt2bOutdoors
Posts: 21501
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Can we afford $600k home?

Post by Grt2bOutdoors » Tue Jul 23, 2019 9:15 pm

WS1 wrote:
Tue Jul 23, 2019 8:51 pm
Grt2bOutdoors wrote:
Tue Jul 23, 2019 8:17 pm
.... No lender will give you a mortgage of 90% without PMI. There’s too much risk for them and too much risk for you.
Sure they will. The rate might just be higher. Lot’s of moving pieces, just like a car lease.
You're right! I stand corrected. Here's a lender which claims they can do an LTV of 95% with no PMI: https://www.americanloans.com/benefits/ ... insurance/
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

NoFred
Posts: 41
Joined: Thu Jul 11, 2019 8:29 pm

Re: Can we afford $600k home?

Post by NoFred » Tue Jul 23, 2019 10:15 pm

Enjoy the flexibility of renting, even with kids. I don’t think you’ll regret continuing your accumulation in savings.
-NoFred

tim1999
Posts: 3630
Joined: Tue Dec 16, 2008 7:16 am

Re: Can we afford $600k home?

Post by tim1999 » Tue Jul 23, 2019 10:31 pm

Even with no kids and 20% down, no way would I buy a 600k house on that income unless we were committed to eating rice and beans, driving old cars, and having cheap hobbies.

I know KlangFool will have some good comments for the OP.

Goal33
Posts: 1032
Joined: Sun Apr 12, 2015 12:30 pm

Re: Can we afford $600k home?

Post by Goal33 » Tue Jul 23, 2019 10:50 pm

OP, how long will it take you to save another 30-40k to use towards downpayment?
A man with one watch always knows what time it is; a man with two watches is never sure.

bstewie
Posts: 150
Joined: Wed Oct 04, 2017 8:16 pm

Re: Can we afford $600k home?

Post by bstewie » Tue Jul 23, 2019 11:02 pm

OP, down payment size aside, I think you should really crunch the numbers here. I make more than you and bought less than you. I had a second earner going into the purchase and lost my second earner for unfortunately necessary reasons. Housings costs were ~2x in combined income and now ~3x on single income. If you want to save for retirement and have enough cash flow for the random short term needs >3x is hoping for a home run. Short term cash needs become more - not less - when purchasing a home. These comments come from someone who will sacrifice arbitrary spend to maintain retirement savings (e.g. max 401k and Roth IRA).

stochastic
Posts: 49
Joined: Sun Sep 06, 2015 5:09 pm

Re: Can we afford $600k home?

Post by stochastic » Tue Jul 23, 2019 11:47 pm

In your thread two years ago you had $175k in taxable, what happened there? Your overall assets are up only 20k is there some missing information? What is your rate of saving at the moment? To afford a house at a 4x multiple of your income you would want to have a healthy saving rate to begin with.

Post Reply