Buying house - Very important decision

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prettybogle
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Buying house - Very important decision

Post by prettybogle » Wed Jun 28, 2017 10:57 pm

We are a family of 3, husband, myself and a daughter. We are now paying monthly rent $1300. This may go up atleast 100 for the next year. So i am debating to buy (or not buy) this house in middle tennessee. It is $535000 for 3600 sqft house. Lot size is 0.25 acres. I really appreciate any input, suggestions to help me decide to buy or just keep renting. My husband and I are both 35. Single income 130k. After 20% downpayment, we will be using all the cash we got so no emergency fund. Net worth is 450k.
Last edited by prettybogle on Wed Jun 28, 2017 11:16 pm, edited 1 time in total.

runner3081
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Re: Buying house - Very important decision

Post by runner3081 » Wed Jun 28, 2017 11:12 pm

Not enough information.

Income, mortgage cost, how much are you putting down, net worth, emergency fund, cash savings, etc.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Wed Jun 28, 2017 11:16 pm

runner3081 wrote:Not enough information.

Income, mortgage cost, how much are you putting down, net worth, emergency fund, cash savings, etc.
Updated my original post with this information.

aristotelian
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Re: Buying house - Very important decision

Post by aristotelian » Wed Jun 28, 2017 11:17 pm

Back of the napkin, that is a lot of house compared to your current rent. You will roughly double your monthly payment, and that does not include the occasional new roof or hot water heater. Do you need 3600 ft for a family of three? For what it's worth, we have the same income but we live in a $230K house, and I feel that is too much at times.

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Watty
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Re: Buying house - Very important decision

Post by Watty » Wed Jun 28, 2017 11:22 pm

I didn't even try to crunch the numbers but you can't really afford a $400K+ mortgage on your income even if the lender will loan you that much. In addition to the mortgage payment you will have property taxes, maintenance, and you probably would want to furnish the home too.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Wed Jun 28, 2017 11:25 pm

Watty wrote:I didn't even try to crunch the numbers but you can't really afford a $400K+ mortgage on your income even if the lender will loan you that much. In addition to the mortgage payment you will have property taxes, maintenance, and you probably would want to furnish the home too.
Property taxes in Tennessee are low - < 1%

MoonOrb
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Re: Buying house - Very important decision

Post by MoonOrb » Thu Jun 29, 2017 12:04 am

This internet stranger says that's way too much house for your income and size of your family, especially when you can rent a place to live for way less.

pascal
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Re: Buying house - Very important decision

Post by pascal » Thu Jun 29, 2017 12:15 am

Although you can swing it, I don't find your motivation to purchase a house to be very clear.

Whats the square footage you are currently living with? It seems that - "If you can rent a similar home for less than ... $1,722 PER MONTH ... then renting is better." from the https://www.nytimes.com/interactive/201 ... lator.html rent vs buy calculator.
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sport
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Re: Buying house - Very important decision

Post by sport » Thu Jun 29, 2017 12:18 am

Why such a big expensive house for a small family? We bought our "starter house" when we got married. It was about half the size of the one you are considering. We ended up raising two children and staying in that house for 35 years. We now have a comfortable retirement.

Goal33
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Re: Buying house - Very important decision

Post by Goal33 » Thu Jun 29, 2017 12:25 am

This is a lifestyle decision. The house is much more expensive cash flow wise.
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prudent
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Re: Buying house - Very important decision

Post by prudent » Thu Jun 29, 2017 5:19 am

Topic moved to Personal Consumer Issues.

isuuofi
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Re: Buying house - Very important decision

Post by isuuofi » Thu Jun 29, 2017 6:06 am

No emergency fund is a major problem. What happens if the HVAC system needs replaced, you have a sudden illness, accident, etc.? Is there something special about this specific house?

csm
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Re: Buying house - Very important decision

Post by csm » Thu Jun 29, 2017 6:24 am

Also, I understand from your original post that you have a single income? How stable is that job and what happens if the working spouse loses it? What safety net?

Calculate what the mortgage + property taxes would be on this house, then put the amount over $1300 (your rent) in savings for the next year. If you are *easily* able to do that without financial strain, then you could consider carrying such a high payment -- plus you will have built up a bigger down payment and emergency fund in the meantime.

If you struggle to put aside that much money each month while still renting, then you will get your answer about whether or not you can afford the house. Best to find out this way than after buying.

awval999
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Re: Buying house - Very important decision

Post by awval999 » Thu Jun 29, 2017 6:25 am

This is approximately what I make. Plan to go down to 1 income in the future with children.

Never would I consider a $500k+ mortgage. Never.

runner540
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Re: Buying house - Very important decision

Post by runner540 » Thu Jun 29, 2017 6:34 am

prettybogle, you posted recently about feeling pressured to buy by coworkers. viewtopic.php?f=2&t=221624&p=3418239#p3418239 Based on that thread, I thought you lived in a HCOL area like Seattle. Middle TN (Nashville?) is experiencing rapid growth too, but do NOT buy because prices are going up and your coworkers said so.

Agree with others that this would put your family in too risky of a position (single income, big mortgage payment, no emergency fund).

Ninnie
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Re: Buying house - Very important decision

Post by Ninnie » Thu Jun 29, 2017 7:12 am

No, you cannot afford it. If you decide to buy, you should be looking at no more than $400k.

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Thu Jun 29, 2017 7:15 am

runner540 wrote:prettybogle, you posted recently about feeling pressured to buy by coworkers. viewtopic.php?f=2&t=221624&p=3418239#p3418239 Based on that thread, I thought you lived in a HCOL area like Seattle. Middle TN (Nashville?) is experiencing rapid growth too, but do NOT buy because prices are going up and your coworkers said so.

Agree with others that this would put your family in too risky of a position (single income, big mortgage payment, no emergency fund).
Yes we live in nashville - franklin :oops:

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Thu Jun 29, 2017 7:19 am

Thanks everyone for helpful responses. As you all can see from my recent threads I opened in the forum, We are extremely nervous on home buying decision- scared that house prices may go up even higher and also rents may go up very high too. I agree our rent now is justifying not to buy house but what if rent goes up rapidly ?

runner540
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Re: Buying house - Very important decision

Post by runner540 » Thu Jun 29, 2017 7:28 am

prettybogle wrote:Thanks everyone for helpful responses. As you all can see from my recent threads I opened in the forum, We are extremely nervous on home buying decision- scared that house prices may go up even higher and also rents may go up very high too. I agree our rent now is justifying not to buy house but what if rent goes up rapidly ?
You may be ok to buy a home, just not one that wipes out your emergency fund and burdens you with a $400k mortgage. What can you get for $350k that would meet your needs (not all your wants)?

Dottie57
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Re: Buying house - Very important decision

Post by Dottie57 » Thu Jun 29, 2017 7:48 am

One of the best financial decisions I have made is to limit my housing costs. It has allowed me to have a reasonable life , save a very nice amount for retirement. I can afford most of what I want.


Don't make the mistake of buying too much house. Life will be a struggle.

why3not
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Re: Buying house - Very important decision

Post by why3not » Thu Jun 29, 2017 7:58 am

prettybogle wrote:I agree our rent now is justifying not to buy house but what if rent goes up rapidly ?
Find a different place to rent if that happens.
There is nothing the matter with renting or owning & I don't think anyone is saying you shouldn't own. My takes is if you are paying something like $1300/month you are probably in a <1700 sq ft apartment. Look at houses in this size & get a realistic cost rather than moving to a McMansion.
For perspective, my family is on our 4th house (upgrading along the way), have a income & net worth over 2x yours, 2 kids & a house over 1000 sq ft smaller than the one you are looking at.

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Re: Buying house - Very important decision

Post by Jack FFR1846 » Thu Jun 29, 2017 8:02 am

I don't think buying would be a mistake. I think buying such a mansion would be a mistake, though. Find something half the size and half the price. 1800 square feet is fine for a family of 3 (or 4 or 5). Our first 2 houses were each 800 square feet and more than enough.
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lthenderson
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Re: Buying house - Very important decision

Post by lthenderson » Thu Jun 29, 2017 8:07 am

prettybogle wrote:Thanks everyone for helpful responses. As you all can see from my recent threads I opened in the forum, We are extremely nervous on home buying decision- scared that house prices may go up even higher and also rents may go up very high too. I agree our rent now is justifying not to buy house but what if rent goes up rapidly ?
I don't think anyone would be against you buying a house. They are against you buying SO MUCH house when you wouldn't have any emergency savings and are on a single income. It would be putting you in an incredibly risky financial situation compared to a stable one you have now.

Also for what it is worth, we are a family of five that live in a house that is less than half the size, less than half the price and we have a higher income.

squirm
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Re: Buying house - Very important decision

Post by squirm » Thu Jun 29, 2017 8:14 am

That's a big house.... We're a family of three in a 2400sq ft and before that 1500.... Why not look for something more affordable. Single income puts you at further risk.

fishmonger
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Re: Buying house - Very important decision

Post by fishmonger » Thu Jun 29, 2017 8:17 am

Agree with others, way too much mortgage for your income. My wife and I gross $125k and have a $225k mortgage (just bought in December)

wfrobinette
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Re: Buying house - Very important decision

Post by wfrobinette » Thu Jun 29, 2017 8:19 am

lthenderson wrote:
prettybogle wrote:Thanks everyone for helpful responses. As you all can see from my recent threads I opened in the forum, We are extremely nervous on home buying decision- scared that house prices may go up even higher and also rents may go up very high too. I agree our rent now is justifying not to buy house but what if rent goes up rapidly ?
I don't think anyone would be against you buying a house. They are against you buying SO MUCH house when you wouldn't have any emergency savings and are on a single income. It would be putting you in an incredibly risky financial situation compared to a stable one you have now.

Also for what it is worth, we are a family of five that live in a house that is less than half the size, less than half the price and we have a higher income.
Home price should be no more than 2 to 3x your income. Find one that's 350k or less. That should get you 2100-2400 sq feet. which is more than enough for a family of 3.

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yukonjack
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Re: Buying house - Very important decision

Post by yukonjack » Thu Jun 29, 2017 8:23 am

From what I have read the Nashville area is quite affordable so I would imagine that you have a large price range to pick from. Now if you lived on either coast you might have to "overspend " for a house. Best of luck as this is a tricky time to be a buyer.

isuuofi
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Re: Buying house - Very important decision

Post by isuuofi » Thu Jun 29, 2017 8:46 am

Would Spring Hill be too far out? It is also growing, but much more affordable than Brentwood/Franklin.

researcher
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Re: Buying house - Very important decision

Post by researcher » Thu Jun 29, 2017 8:51 am

prettybogle wrote:We are a family of 3, husband, myself and a daughter. We are now paying monthly rent $1300. So i am debating to buy (or not buy) this house in middle tennessee. It is $535000 for 3600 sqft house. Lot size is 0.25 acres.
My husband and I are both 35. Single income 130k. After 20% downpayment, we will be using all the cash we got so no emergency fund. Net worth is 450k.
My household and financial makeup is similar to yours, and we purchased a house for well under $200,000.
I can't even fathom spending the amount of money you are considering.

Can you explain why you want/need to spend over a HALF MILLION dollars on a house?
And why do you need 3600 sq. ft. for a family of three?

I don't know anything about the Franklin TN housing market, but there are currently 57 houses for sale between $200K-$300K. Most of them look quite nice. Is there a reason one of these wouldn't work for your family?
http://www.nashvillesmls.com/franklin-t ... 00-300000/

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JDCarpenter
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Re: Buying house - Very important decision

Post by JDCarpenter » Thu Jun 29, 2017 8:53 am

prettybogle wrote:...
Yes we live in nashville - franklin :oops:
Unless you are working standard hours south of 440 or 100 Oaks, take a look at Wilson County/Mt. Juliet. Public Schools comparable to Williamson, but even with recent upturn, it is still a lot cheaper than Franklin. As you know, you are looking in the most expensive submarket for the area. (Springhill, suggested by another post, is too far from downtown and the airport for my tastes; but I work[ed] downtown and we will continue to enjoy <15 minute airport access in retirement....)

E.T.A.--didn't notice it mentioned above, although probably just missed it. The 130K job--is it permanent (as much as anything)? Or, is the family likely to move in pursuit of the career? If the latter, even more reason not to sink more than your net worth into a house in your mid-30s....

E.T.A. #2: This subdivision, brand new, with pool, etc. is approx. 25 minutes from State capital (albeit leaving before 6:10 a.m.; or you can take the train in if you work normal hours): http://www.nashvillesmls.com/mt-juliet/kelsey-glen.php
Last edited by JDCarpenter on Thu Jun 29, 2017 9:04 am, edited 2 times in total.
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lightheir
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Re: Buying house - Very important decision

Post by lightheir » Thu Jun 29, 2017 9:01 am

I in definitely agree with the posters above about the house being expensive relative to income, but I will differ in that I do think you can make it work if you want it badly enough. A $535k house on a $130k income is not outrageous when you're used to living in California where multiples upwards up of 5x annual income are almost the norm. It's a stretch, but people make it work.

I do still agree with the folks above though - in Tennessee, there's no real reason to put yourself in such a cash-strapped situation when the housing market is reasonable enough there that you can get a 2000+ft square house on its own lot for less than $500k.

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jharkin
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Re: Buying house - Very important decision

Post by jharkin » Thu Jun 29, 2017 9:04 am

Waaay to much house on 130k income for my taste. The bank may approve you (barely) but you will have no margin for error on that monthly note. You are looking at something around $3000 per month assuming around $2500 PI plus property taxes and homeowners insurance. That's almost 3x what you are paying now on housing and we haven't even considered the increased utilites, all the maintenance costs and upkeep. lawn mowing. and so on. What if the roof leaks, what if the furnace breaks, etc.

What do you do if you loose your job? How stable is your career?

Also, from a practical standpoint, a $1300 rent implies you are living in a small apartment. Do you really need 3600 square feet for 3 people? I know folks with 2-3 kids who live in houses that big and they often have multiple rooms that are just empty because its more space than they can actually use.

Wakefield1
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Re: Buying house - Very important decision

Post by Wakefield1 » Thu Jun 29, 2017 9:22 am

Is a smaller house on a bigger lot (with some sunny gardenable area) available for a lower price than that mansion?

tampaite
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Re: Buying house - Very important decision

Post by tampaite » Thu Jun 29, 2017 9:47 am

prettybogle wrote:We are a family of 3, husband, myself and a daughter. We are now paying monthly rent $1300. This may go up atleast 100 for the next year. So i am debating to buy (or not buy) this house in middle tennessee. It is $535000 for 3600 sqft house. Lot size is 0.25 acres. I really appreciate any input, suggestions to help me decide to buy or just keep renting. My husband and I are both 35. Single income 130k. After 20% downpayment, we will be using all the cash we got so no emergency fund. Net worth is 450k.
Given that you are putting down 20%:

1. Will this be your *forever* home? meaning for next 20-30 years if so, go for it.
2. Is the $130K income stable? I mean secure for the next 5-10 years without any major potential for layoff? if so, go with it.

You both are 35 and house is big enough for 3 of you plus any more additions to family.

stoptothink
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Re: Buying house - Very important decision

Post by stoptothink » Thu Jun 29, 2017 10:03 am

researcher wrote:
prettybogle wrote:We are a family of 3, husband, myself and a daughter. We are now paying monthly rent $1300. So i am debating to buy (or not buy) this house in middle tennessee. It is $535000 for 3600 sqft house. Lot size is 0.25 acres.
My husband and I are both 35. Single income 130k. After 20% downpayment, we will be using all the cash we got so no emergency fund. Net worth is 450k.
My household and financial makeup is similar to yours, and we purchased a house for well under $200,000.
I can't even fathom spending the amount of money you are considering.

Can you explain why you want/need to spend over a HALF MILLION dollars on a house?
And why do you need 3600 sq. ft. for a family of three?

I don't know anything about the Franklin TN housing market, but there are currently 57 houses for sale between $200K-$300K. Most of them look quite nice. Is there a reason one of these wouldn't work for your family?
http://www.nashvillesmls.com/franklin-t ... 00-300000/
Locale is extremely important. If OP lived in California this would absolutely be something to consider, but IMO there is no reason to spend anywhere near that much in Franklin, TN. As a recent homebuyer, with a family of 4 (and about 50% more income) in an area which seems to have slightly higher real estate prices, we didn't even consider spending half of what OP is. 3600 sq. ft. is a whole lot of home for 3 people; it's also a whole lot to clean and heat/cool. IMO, the financial stress and hassle of maintaining that much house will quickly overwhelm the pride that comes with being owners of that shiny new McMansion.

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Re: Buying house - Very important decision

Post by bloom2708 » Thu Jun 29, 2017 10:08 am

Dottie57 wrote:One of the best financial decisions I have made is to limit my housing costs. It has allowed me to have a reasonable life , save a very nice amount for retirement. I can afford most of what I want.


Don't make the mistake of buying too much house. Life will be a struggle.
+1

If you can't find something you like in the $300k to $350k range (max max of $350k), then rent. $1,300 or $1,400 is very reasonable rent if you like what you are renting.

Insurance, property taxes, additional utilities, upgrades, maintenance, repairs, furniture, yard equipment. It adds up fast. Set aside a true Emergency Fund. Separate it from your other money. It can't be both a down payment and an Emergency Fund.

Good luck!
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead | | Want to buy something? Watch this first: https://vimeo.com/41152287

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DaftInvestor
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Re: Buying house - Very important decision

Post by DaftInvestor » Thu Jun 29, 2017 10:13 am

How many square feet do you have now and why do you need 3600?
Don't buy a 3600sq-ft house just because your co-workers do. They could all be house-poor or can't afford to live on a single income (e.g. having a stay-at-home parent is not an option for them) - buy a house half that size which is perfectly suitable for a family of 3 and more suitable for your income.

new2bogle
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Re: Buying house - Very important decision

Post by new2bogle » Thu Jun 29, 2017 10:25 am

Dottie57 wrote:One of the best financial decisions I have made is to limit my housing costs. It has allowed me to have a reasonable life , save a very nice amount for retirement. I can afford most of what I want.


Don't make the mistake of buying too much house. Life will be a struggle.
This post is spot on. Please think about this a lot before making any decision.

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Re: Buying house - Very important decision

Post by Gufomel » Thu Jun 29, 2017 10:25 am

I'm quite confused by the two options here:

1) Rent for $1300
2) Buy a house for $535k

If you're currently renting for $1300 around Franklin, TN, this must be a modest size 2 bedroom apartment of average quality. Possibly a 3 bedroom, but I doubt it. I can't imagine it's more than 1500 square feet. So you don't seem to require up-scale living.

Your concern seems to be potential rising rent/housing costs.

Obviously if you're going to buy a house, it's a more long-term decision than renting and you may be planning for a growing family, so you do want to get something bigger than a 2 bedroom 1500 square foot place. But moving up to a 3600 sq ft house makes no sense based on the information you've provided. Yes, house prices in the Franklin area have increased significantly, but $535k is still an extremely nice house in that area.

If you buy this house, your mortgage is going to about $2000 per month. Property taxes are pretty low, but they're still something ~$200 per month. Regardless of how nice/new the house is, there's going to be at least some maintenance/repairs over the life of your ownership. At least ~$200 per month. Insurance ~$100-$200 per month. HOA fee $50-100 per month? You're talking AT LEAST $2500 all-in per month. I expect it will actually be closer to $3000.

You're doing this to protect against the risk of your $1300 monthly rent increasing?

Something is really off here.

I'm certainly not going to be able to pick your house for you, but I think this kind of house is in line with what most people here are recommending:

https://www.zillow.com/homedetails/3224 ... 5533_zpid/

Listed at $375k, 4 bed 3 bath, 2400 sqft. A little bit smaller lot than the one you're looking at, but still looks like a private backyard.
Last edited by Gufomel on Thu Jun 29, 2017 10:40 am, edited 1 time in total.

fishmonger
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Re: Buying house - Very important decision

Post by fishmonger » Thu Jun 29, 2017 10:34 am

Gufomel wrote:
You're doing this to protect against the risk of your $1300 monthly rent increasing?

Something is really off here.
Agreed. I'm hoping this was a spur of the moment decision that will be put aside after some time to reflect.

OP said their monthly rent might go up from $1300 to $1400 and their counter is to buy a $535k house and drain their emergency fund in the process?

rocket354
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Re: Buying house - Very important decision

Post by rocket354 » Thu Jun 29, 2017 10:50 am

My first reaction to this post was it was a troll post.

I live in Nashville. Since I'm preparing to buy in the next year or so, recently I've been doing a lot of window shopping in the Franklin-Nashville area. You can find plenty of nice houses in the area for well under $500k that would fit your purposes (schools, size, yard, neighborhood). I see houses every day in Franklin that come on the market for under $400k and are plenty big with nice yards in good school zones, and that's the most expensive area. You should strongly consider any of those options before laying out $500k+ for a house and saddling yourself with that burden. For what I know you can get in the area for $1300/mo rent, any of those $300-400k houses will be a massive upgrade in all areas from what you're used to.

sketchy9
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Re: Buying house - Very important decision

Post by sketchy9 » Thu Jun 29, 2017 11:26 am

lightheir wrote:I in definitely agree with the posters above about the house being expensive relative to income, but I will differ in that I do think you can make it work if you want it badly enough. A $535k house on a $130k income is not outrageous when you're used to living in California where multiples upwards up of 5x annual income are almost the norm. It's a stretch, but people make it work.

I do still agree with the folks above though - in Tennessee, there's no real reason to put yourself in such a cash-strapped situation when the housing market is reasonable enough there that you can get a 2000+ft square house on its own lot for less than $500k.
Yeah the blanket "house should cost <= 3x income" just doesn't fly in HCOL areas. FWIW I make the around the same as OP and bought a condo (not house) for $750k. I had to put 40% down to get the monthly payment reasonable, which I was able to do without compromising my EF or other investments. But that still left me with a mortgage of $450k on an income of ~ $130k. It's doable (and being single is certainly in my favor in my case compared to OP).

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Thu Jun 29, 2017 3:08 pm

rocket354 wrote:My first reaction to this post was it was a troll post.

I live in Nashville. Since I'm preparing to buy in the next year or so, recently I've been doing a lot of window shopping in the Franklin-Nashville area. You can find plenty of nice houses in the area for well under $500k that would fit your purposes (schools, size, yard, neighborhood). I see houses every day in Franklin that come on the market for under $400k and are plenty big with nice yards in good school zones, and that's the most expensive area. You should strongly consider any of those options before laying out $500k+ for a house and saddling yourself with that burden. For what I know you can get in the area for $1300/mo rent, any of those $300-400k houses will be a massive upgrade in all areas from what you're used to.
That is very good information if it is still true. Just to make sure, can you post a link from like zillow ?

prettybogle
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Re: Buying house - Very important decision

Post by prettybogle » Thu Jun 29, 2017 3:12 pm

fishmonger wrote:
Gufomel wrote:
You're doing this to protect against the risk of your $1300 monthly rent increasing?

Something is really off here.
Agreed. I'm hoping this was a spur of the moment decision that will be put aside after some time to reflect.

OP said their monthly rent might go up from $1300 to $1400 and their counter is to buy a $535k house and drain their emergency fund in the process?
Yes, our worry is rent will go up to atleast 1400+ this year and even higher every year after that. Frankly, this is our top #1 biggest reason as we do not intend to have any additions to our family of 3. The house prices keep going up last few years here so our top #2 reason is they will go up even higher to the point that we will be priced out of the housing market :(

Gufomel
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Re: Buying house - Very important decision

Post by Gufomel » Thu Jun 29, 2017 3:16 pm

prettybogle wrote:
fishmonger wrote:
Gufomel wrote:
You're doing this to protect against the risk of your $1300 monthly rent increasing?

Something is really off here.
Agreed. I'm hoping this was a spur of the moment decision that will be put aside after some time to reflect.

OP said their monthly rent might go up from $1300 to $1400 and their counter is to buy a $535k house and drain their emergency fund in the process?
Yes, our worry is rent will go up to atleast 1400+ this year and even higher every year after that. Frankly, this is our top #1 biggest reason as we do not intend to have any additions to our family of 3. The house prices keep going up last few years here so our top #2 reason is they will go up even higher to the point that we will be priced out of the housing market :(
I don't think many people are arguing with you buying a house. We're still wondering why you're wanting to buy a 3600 sqft house for $535k that will cost you $2500-3000 per month all-in in order to avoid your $1300/month rent increasing.

prettybogle
Posts: 209
Joined: Sun Mar 01, 2015 10:44 am

Re: Buying house - Very important decision

Post by prettybogle » Thu Jun 29, 2017 3:22 pm

Gufomel wrote:
prettybogle wrote:
fishmonger wrote:
Gufomel wrote:
You're doing this to protect against the risk of your $1300 monthly rent increasing?

Something is really off here.
Agreed. I'm hoping this was a spur of the moment decision that will be put aside after some time to reflect.

OP said their monthly rent might go up from $1300 to $1400 and their counter is to buy a $535k house and drain their emergency fund in the process?
Yes, our worry is rent will go up to atleast 1400+ this year and even higher every year after that. Frankly, this is our top #1 biggest reason as we do not intend to have any additions to our family of 3. The house prices keep going up last few years here so our top #2 reason is they will go up even higher to the point that we will be priced out of the housing market :(
I don't think many people are arguing with you buying a house. We're still wondering why you're wanting to buy a 3600 sqft house for $535k that will cost you $2500-3000 per month all-in in order to avoid your $1300/month rent increasing.
It seems average decent house in this area is $450k. Our thinking behind 535k is it is "only" 80k higher than that and we get brand new house.

User avatar
Devil's Advocate
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Joined: Thu Feb 16, 2012 5:18 pm

Re: Buying house - Very important decision

Post by Devil's Advocate » Thu Jun 29, 2017 3:46 pm

No
Just no.
:oops:
DA

runner540
Posts: 287
Joined: Sun Feb 26, 2017 5:43 pm

Re: Buying house - Very important decision

Post by runner540 » Thu Jun 29, 2017 3:48 pm

Prettybogle, to help us understand your market and what you "need" versus want, here are a few questions:
How many open houses have you been to in the last year?
What made you hone in on an area where $450k is the minimim to get you a "decent" house? Other posters more familiar with the region have said there are cheaper areas that might meet your needs.
What are the differences between a $300-350k house and the $535k house?
What is your plan/budget to rebuild emergency savings and keep saving for retirement?

One topic not raised here is that if your are stretching for the house (which you are), you probably can't keep up with your neighbors in terms of cars, vacations, etc. You and your spouse have to be ok with this.

Gufomel
Posts: 195
Joined: Sat Feb 14, 2015 9:52 pm

Re: Buying house - Very important decision

Post by Gufomel » Thu Jun 29, 2017 3:52 pm

There's no new houses being built that are less than 3600 sqft?

Here's the numbers.

On a 130k salary, your take home pay after 30% for taxes and retirement contributions is $91,000. This is assuming a 20% effective tax rate for federal, SS, and Medicare and 10% for retirement (pretty low). Health insurance premiums plus medical expenses is likely roughly $500 per month or $6k per year. This brings you to $86k annual take home pay or $7167 per month.

Your expenses on this $535k home will be:
$2000 mortgage
$200 prop taxes
$200 home insurance
$50 HOA fee
$200 utilities
$200 maintenance/repairs
$2850 total

I suspect you will also want to furnish these 3600 sqft.

This is approaching 50% of your take home pay. It leaves you about $3350 per month for EVERYTHING else. If those numbers work, then great, go for it. I suspect they don't. And I suspect you can find something smaller than 3600 sqft.

$535k for 3600 sqft is $150/sqft. A comparable 2500 sqft house would be around $375-400k and not load you down with an extraordinary mortgage.


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