First time home buying, need advice!

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mbdav
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First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 7:38 am

My husband and I are 39 yrs. old. Our income is $4800 a month. We have about $230,000 in CDs and saving accounts, and about $30,000 in retirement savings. We've always rented since we had to move a lot for his work. Now the work is permanent with possible pay increase in the years to come. We currently rent($1800 per month) in the city and we do not own a car since my husband bikes to work, and we don't feel the need to own one. We are browsing condos/houses to purchase for the first time. We live in high real state cost area. The one/two bed. condos in the city cost about $300,000 to $450,000 with varying condo fees from $200-$400 per month. On the other hand one or two bed townhouses start around $550,000. We'd prefer nice townhouse in the city. Can we afford it?

bloom2708
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Re: First time home buying, need advice!

Post by bloom2708 » Thu Mar 31, 2016 8:22 am

I would grab two sheets of paper. Write down all your current expenses on one. On the other, start estimating the additional expenses that come with owning a house/condo. Insurance, property taxes, condo association fees, repairs/maintenance, upgrades, new/additional furniture. In a HCOL area you might just fine that renting is the best way to go.

One exercise that may help would be to give every dollar in your current $230k in CDs a purpose. Is this all "House fund"? Is some your Emergency Fund? Do you pay taxes from this money? Vacations? Next car purchase? Or perhaps you have other cash set aside already for these types of near term expenses.

If you decide to buy and can put down a good chunk of the $230k on the place, you might find that renting/buying start to be closer to the same amount. Also look at mortgage payments with insurance and taxes on various mortgage amounts. See where they come in and how your down payment changes the amounts.

If you decide to rent long term, then I think you need to look at "Investing" a portion of the $230k. You are pretty far behind in retirement savings approaching 40. Setting an asset allocation of 60 stocks and 40 bonds and getting your money working for the long term over the next 20 years would be a good goal.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

psystal
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Re: First time home buying, need advice!

Post by psystal » Thu Mar 31, 2016 8:23 am

Is that $4,800 per month income after tax?

stan1
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Re: First time home buying, need advice!

Post by stan1 » Thu Mar 31, 2016 8:30 am

What I would **not** recommend doing is buying a condo that feels like an apartment. There are many, many condos in most cities and they can be hard to sell if there isn't something special like a view, lots of light, great location, very quiet, dedicated parking, well managed complex. Be picky even if it means you have to play the multiple offer game to get a desirable home.

b42
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Re: First time home buying, need advice!

Post by b42 » Thu Mar 31, 2016 8:35 am

I recently purchased a condo and I would recommend that whatever city/state you live in, check online and see if there are any first-time home buyer programs. Most have purchase price and income limits, but these totals go up in higher cost areas. Since I qualified for one of these programs, I was able to put very little down (around 3.5%), avoid PMI, and I get a tax credit based on the amount of mortgage interest I pay (50% of mortgage interest in a calendar year capped at $2,000). I mention this because it could help you either afford a higher priced home, or like in my case make home ownership significantly cheaper than if I had gone and applied for a conventional mortgage

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 8:54 am

psystal wrote:Is that $4,800 per month income after tax?
Yes

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 9:04 am

bloom2708 wrote:I would grab two sheets of paper. Write down all your current expenses on one. On the other, start estimating the additional expenses that come with owning a house/condo. Insurance, property taxes, condo association fees, repairs/maintenance, upgrades, new/additional furniture. In a HCOL area you might just fine that renting is the best way to go.

One exercise that may help would be to give every dollar in your current $230k in CDs a purpose. Is this all "House fund"? Is some your Emergency Fund? Do you pay taxes from this money? Vacations? Next car purchase? Or perhaps you have other cash set aside already for these types of near term expenses.

If you decide to buy and can put down a good chunk of the $230k on the place, you might find that renting/buying start to be closer to the same amount. Also look at mortgage payments with insurance and taxes on various mortgage amounts. See where they come in and how your down payment changes the amounts.

If you decide to rent long term, then I think you need to look at "Investing" a portion of the $230k. You are pretty far behind in retirement savings approaching 40. Setting an asset allocation of 60 stocks and 40 bonds and getting your money working for the long term over the next 20 years would be a good goal.
Thanks for the thorough advice. Our CDs are about $150,000 maturing 2018. From our savings acc. we can put around 90,000 for a down payment if we purchase a home. Would investing our savings be a better financial option than buying a house?

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 9:05 am

stan1 wrote:What I would **not** recommend doing is buying a condo that feels like an apartment. There are many, many condos in most cities and they can be hard to sell if there isn't something special like a view, lots of light, great location, very quiet, dedicated parking, well managed complex. Be picky even if it means you have to play the multiple offer game to get a desirable home.
Thank you for the insight.

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 9:06 am

b42 wrote:I recently purchased a condo and I would recommend that whatever city/state you live in, check online and see if there are any first-time home buyer programs. Most have purchase price and income limits, but these totals go up in higher cost areas. Since I qualified for one of these programs, I was able to put very little down (around 3.5%), avoid PMI, and I get a tax credit based on the amount of mortgage interest I pay (50% of mortgage interest in a calendar year capped at $2,000). I mention this because it could help you either afford a higher priced home, or like in my case make home ownership significantly cheaper than if I had gone and applied for a conventional mortgage
That is a great tip. Thanks.

bloom2708
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Re: First time home buying, need advice!

Post by bloom2708 » Thu Mar 31, 2016 9:13 am

Now that you are settled in a spot I do think you need to focus on how to get your retirement savings up. Do you have any other debt? This link talks about how to format your information so everyone has the needed information.

viewtopic.php?t=6212

Do you or your husband have a 401k/403b/Thrift Savings plan available? Do you get any match dollars? Any future pensions? If you both work in government jobs and expect pensions, then having a large retirement nest egg may not be as important.

Items that are talked about quite a bit: Utilizing your tax-sheltered investment options, filling your Roth accounts up each year, prioritizing saving over debt repayment or vice versa.

You are in the right place. Read threads, search, follow topics of interest. As you fill in the details, people can give better advice.
Last edited by bloom2708 on Thu Mar 31, 2016 11:12 am, edited 1 time in total.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 9:25 am

bloom2708 wrote:Now that you are settled in a spot I do think you need to focus on how to get your retirement savings up. Do you have any other debt? This link talks about how to format your information so everyone has the needed information.

viewtopic.php?t=6212

Do you or your husband have a 401k/403b/Thrift Savings plan available? Do you get any match dollars? Any future pensions? If you both work in government jobs and expect pensions, then having a large retirement nest egg may not be as important.

Items that are talked about quite a bit: Utilizing your tax-sheltered investment options, filling your Roth accounts up each year, prioritizing saving over debt repayment.

You are in the right place. Read threads, search, follow topics of interest. As you fill in the details, people can give better advice.
Thank you for the advice and link. We have no debt. My husband has Thrift Savings plan from last August. We have about $20,000 in Roth IRA (VTIVX, VFIAX) and $13,000 (VTIVX) in employment plan(from previous employment) in Vanguard.

psystal
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Re: First time home buying, need advice!

Post by psystal » Thu Mar 31, 2016 10:30 am

mbdav wrote:
psystal wrote:Is that $4,800 per month income after tax?
Yes
My answer would be no to the townhouse, and probably no to most of the condos. Of course, I'd also say that $1,800 is way too much to be spending on rent.

The rule of thumb is that you don't want to spend more than 25%-33% of your income on housing. Obviously, the LBYM philosophy would encourage the lower end of that scale. With $4800 of income, that's $1,200-$1584, which equates to a mortgage of somewhere between $225,000 and $325,000, depending on taxes, insurance, etc. However, you're currently well above that range with your rent, and it's likely better to buy than rent right now while rates are so low.

There are a lot more moving parts, but as general advice, I wouldn't get myself into a mortgage any larger than $350,000. As others have said, you want to make sure the remainder of those CDs are invested a bit better, too. That's basically your retirement fund - less the $100,000 or so you'll probably put down on the home.

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 10:52 am

psystal wrote:
mbdav wrote:
psystal wrote:Is that $4,800 per month income after tax?
Yes
My answer would be no to the townhouse, and probably no to most of the condos. Of course, I'd also say that $1,800 is way too much to be spending on rent.

The rule of thumb is that you don't want to spend more than 25%-33% of your income on housing. Obviously, the LBYM philosophy would encourage the lower end of that scale. With $4800 of income, that's $1,200-$1584, which equates to a mortgage of somewhere between $225,000 and $325,000, depending on taxes, insurance, etc. However, you're currently well above that range with your rent, and it's likely better to buy than rent right now while rates are so low.

There are a lot more moving parts, but as general advice, I wouldn't get myself into a mortgage any larger than $350,000. As others have said, you want to make sure the remainder of those CDs are invested a bit better, too. That's basically your retirement fund - less the $100,000 or so you'll probably put down on the home.
Very thoughtful advice, thank you.

Grt2bOutdoors
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Re: First time home buying, need advice!

Post by Grt2bOutdoors » Thu Mar 31, 2016 11:50 am

mbdav wrote:
psystal wrote:
mbdav wrote:
psystal wrote:Is that $4,800 per month income after tax?
Yes
My answer would be no to the townhouse, and probably no to most of the condos. Of course, I'd also say that $1,800 is way too much to be spending on rent.

The rule of thumb is that you don't want to spend more than 25%-33% of your income on housing. Obviously, the LBYM philosophy would encourage the lower end of that scale. With $4800 of income, that's $1,200-$1584, which equates to a mortgage of somewhere between $225,000 and $325,000, depending on taxes, insurance, etc. However, you're currently well above that range with your rent, and it's likely better to buy than rent right now while rates are so low.

There are a lot more moving parts, but as general advice, I wouldn't get myself into a mortgage any larger than $350,000. As others have said, you want to make sure the remainder of those CDs are invested a bit better, too. That's basically your retirement fund - less the $100,000 or so you'll probably put down on the home.
Very thoughtful advice, thank you.
High cost of living areas also usually mean "high cost of carry". What does "high cost of carry" mean? Large mortgages, high property taxes, cost of upkeep, insurance, etc. When you add up all of those expenses, I can practically guarantee the cost per month will exceed the cost of your rent, at least initially. I say initially, because when/if inflation rears it's ugly head, the chances are the "rent" will rise up to meet it, while the cost of a home may stay lower for longer.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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tinscale
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Re: First time home buying, need advice!

Post by tinscale » Thu Mar 31, 2016 7:06 pm

Would investing our savings be a better financial option than buying a house?
The original post was about buying a house. Now you are asking an investment question. I think most on this forum would say not to buy a house as an investment.

Traveler
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Re: First time home buying, need advice!

Post by Traveler » Thu Mar 31, 2016 7:23 pm

You can't afford a $550K home

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 7:35 pm

tinscale wrote:
Would investing our savings be a better financial option than buying a house?
The original post was about buying a house. Now you are asking an investment question. I think most on this forum would say not to buy a house as an investment.
I see. Thanks.

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu Mar 31, 2016 7:39 pm

Traveler wrote:You can't afford a $550K home
What would be maximum price we could afford? Thanks.

jridger2011
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Re: First time home buying, need advice!

Post by jridger2011 » Thu Mar 31, 2016 7:47 pm

I would say get a condo with elevators so you can stay there for a while and upon any health changes.

blues008
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Re: First time home buying, need advice!

Post by blues008 » Fri Apr 01, 2016 11:30 am

I'd also spend some time reviewing the Buy Vs. Rent Calculator at the New York Times website:

http://www.nytimes.com/interactive/2014 ... .html?_r=0

Good rule of thumb is not to spend more than a third of your after tax income on housing. If you're in a high cost of living area and also plan on being there for more than seven-ten years than I'd say buying makes a lot of sense.

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Wed May 04, 2016 12:09 am

Follow-up: We found a small rowhouse for $400,000 in the city and are about to make a contract. The seller is not using real state agent, so the price is relatively reasonable compared to other properties around. My question is: How much from our savings($240,000 roughly) should we put for the down payment? And what kind of mortgage(years, type) would you recommend?

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kenyan
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Re: First time home buying, need advice!

Post by kenyan » Wed May 04, 2016 9:11 am

mbdav wrote:Follow-up: We found a small rowhouse for $400,000 in the city and are about to make a contract. The seller is not using real state agent, so the price is relatively reasonable compared to other properties around. My question is: How much from our savings($240,000 roughly) should we put for the down payment? And what kind of mortgage(years, type) would you recommend?
You want to make a down payment of a minimum of 20%. Above that, it's really up to your personal preference on debt, liquidity, monthly payments, and such. You're likely not going to get a substantially (if at all) better rate by putting more down, and you're already in conforming mortgage territory.

That decision may go hand-in-hand with the type of mortgage you want to get. Can you afford the payments on a 15-year fixed? $320k at 2.75% gives a payment of $2172, which I'd think would be tough to swing for you in addition to new property tax, maintenance/upkeep, utility, etc. costs. If you use more of your savings, that could change the equation. A 30-year fixed will give you more affordable payments, but will dramatically increase the amount of interest you pay over the life of the mortgage, assuming that you stick to the minimum payment. Adjustable rate mortgages are also an option, but you do have to be wary of rising rates with an ARM.

Essentially - there's no simple answer. You should really try to pin down a number for what you want your monthly payment to be - ensuring that you have included all new housing costs, and work to that number, using your available savings and mortgages as parameters.
Retirement investing is a marathon.

dsmil
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Re: First time home buying, need advice!

Post by dsmil » Wed May 04, 2016 9:36 am

mbdav wrote:Follow-up: We found a small rowhouse for $400,000 in the city and are about to make a contract. The seller is not using real state agent, so the price is relatively reasonable compared to other properties around. My question is: How much from our savings($240,000 roughly) should we put for the down payment? And what kind of mortgage(years, type) would you recommend?
The problem is that your income is low for the home price that you are looking at, so you'd possibly have to drain most of your savings in order to put enough down to make this affordable. If you are on track with retirement, than it could be ok, but you are light on retirement savings. At age 40, you might need to start putting away 25% of gross income from now until retirement. Is there a housing payment that allows you to save 25% of gross income for retirement?

auggiedoggies
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Re: First time home buying, need advice!

Post by auggiedoggies » Wed May 04, 2016 10:47 am

mbdav wrote:Follow-up: We found a small rowhouse for $400,000 in the city and are about to make a contract. The seller is not using real state agent, so the price is relatively reasonable compared to other properties around. My question is: How much from our savings($240,000 roughly) should we put for the down payment? And what kind of mortgage(years, type) would you recommend?
I would put down 20% and save the rest. Frankly, the cost of the house is rather high relative to your income (maybe 80k gross?) so I would want to hold onto a decent sized emergency fund.

Also, it's probably time to start investing seriously for retirement. You've got a bit of catching up to do there.

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reriodan
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Re: First time home buying, need advice!

Post by reriodan » Wed May 04, 2016 11:08 am

Why in the world do you have so much money in cds and savings and practically nothing in retirement? :confused

SamB
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Re: First time home buying, need advice!

Post by SamB » Wed May 04, 2016 11:34 am

I am not going to bother with the monthly cash flow analysis. I have been at this for 38 years and my increase in wealth over that time did not come from real estate. It came from saving and investment in the equity market, and that investment pretty much followed the approach on this forum way before it was fashionable.

The only reason I would buy a home is because it is a consumption that I want to make. I have never treated it as an investment. In your case it would amount to a huge concentration of wealth in one asset and that is a bad move. You do not have to look very far to view real estate purchases in various cities and towns around the country that were worthless thirty years later and they remain so.

Based on the information you present my view is that you should not take on this risk. I have lived through real estate booms and busts, and depending on the location they can be short term and long term, and the long term can be longer than your lifespan. I have never seen a total stock market blowout to last as long as a local real estate blowout. And the prevailing attitude is that real estate is not as risky as the stock market.

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Re: First time home buying, need advice!

Post by Jags4186 » Wed May 04, 2016 12:00 pm

mbdav wrote:My husband and I are 39 yrs. old. Our income is $4800 a month. We have about $230,000 in CDs and saving accounts, and about $30,000 in retirement savings. We've always rented since we had to move a lot for his work. Now the work is permanent with possible pay increase in the years to come. We currently rent($1800 per month) in the city and we do not own a car since my husband bikes to work, and we don't feel the need to own one. We are browsing condos/houses to purchase for the first time. We live in high real state cost area. The one/two bed. condos in the city cost about $300,000 to $450,000 with varying condo fees from $200-$400 per month. On the other hand one or two bed townhouses start around $550,000. We'd prefer nice townhouse in the city. Can we afford it?
Hi mbdav,

I think what would be extremely helpful is if you could tell us:

Monthly gross income for each of you if you're both working
Monthly net income for each of you ($4800 for 1 working spouse or are both of you combined making $4800 net?)
Percent being saved into your 401k
Current average monthly expenses
Any future plans that would require either an increase in spending or a decrease in earnings (not sure if you have children, or if you're planning on, I know you guys are pretty much at the end of child bearing years.) If you already have children, are you saving for college? If you plan on having children is one of you going to stop working or are you going to pay for day care?
How confident are you in pay increases, what type of pay increases are we talking?
Property taxes in the area.

If I were in your situation, I wouldn't want to take any more than a 20 year fixed loan. Reason being I would want the house paid off before I was retired. I sure wouldn't want to be 69 years old and still making mortgage payments.

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Wed May 04, 2016 12:39 pm

Monthly gross income: $8000 (yearly gross income $96000 divided by 12) we have one income from my husband.
Monthly net income for each of you: $4800 for both
Percent being saved into your 401k: my husband has thrift savings plan from last August. I will check the percentage.(we are not fluent with finance.) we have about $30,000 in vanguard from previous employment.
Current average monthly expenses: $1800 rent $650 (food) $100(electricity, Internet, phone) we save about $2000 a month average.
Any future plans that would require either an increase in spending/salary: no plan for kids, we are modest in our spending.
How confident are you in pay increases, what type of pay increases are we talking? In a year or two to $110,000
Property taxes in the area: 0.85%

Thanks for all the responses. All really helpful. As you can see we have very little knowledge about managing money. We thought of buying the house because 1)my husband got a permanent job last year, 2) to not waste money on rent, 3) we like the environment where we live now. Also the real state agents & mortgage lenders give us completely different response- they qualify us for $400,000 loan, and showing $500,000-600,000 homes. So we get confused. :?

dsmil
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Re: First time home buying, need advice!

Post by dsmil » Wed May 04, 2016 1:34 pm

mbdav wrote:Monthly gross income: $8000 (yearly gross income $96000 divided by 12) we have one income from my husband.
Monthly net income for each of you: $4800 for both
Percent being saved into your 401k: my husband has thrift savings plan from last August. I will check the percentage.(we are not fluent with finance.) we have about $30,000 in vanguard from previous employment.
Current average monthly expenses: $1800 rent $650 (food) $100(electricity, Internet, phone) we save about $2000 a month average.
Any future plans that would require either an increase in spending/salary: no plan for kids, we are modest in our spending.
How confident are you in pay increases, what type of pay increases are we talking? In a year or two to $110,000
Property taxes in the area: 0.85%
I'm not sure how $8,000 gross per month turns into $4,800, unless you are doing some serious saving into the thrift plan. I have a similar gross income and take home another $1k than you do. I'd put 20% down ($80k) to avoid PMI, keep a 6 month emergency fund in savings ($25k?) and use the remaining $125k for retirement. If you can do this and save 20% of gross for retirement going forward, you should be ok.

EXH
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Re: First time home buying, need advice!

Post by EXH » Wed May 04, 2016 8:14 pm

You need to know what you are putting into retirement now before being able to make this decision - you need to know whether you can save 20% at least for retirement. It seems like a bit of a stretch on your income once you factor in maintenance costs, but doable especially if job is very secure and it is important to you. Agree with putting 20% down, emergency fund, and using the bulk of the rest for retirement.
Of course the lenders will be happy to lend more - they make money off of you, and don't care if you have money to retire or not. Ours kept telling us to buy a bigger house too - this is not what you should be using to decide how much to spend.

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jharkin
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Re: First time home buying, need advice!

Post by jharkin » Thu May 05, 2016 2:17 pm

YOu can use a calculator such as this one to find out what numbers you are comfortable with:

http://dinkytown.net/java/MortgageQualifier.html


On the face of it, no, you cannot afford a 550k home unless you basically liquidate your entire savings to put a huge down payment on it. Banks set limits on what % of your gross income they will allow your monthly payment on the loan to be... typically the cap is something like 28% of gross for the mortgage PITI, and maybe 33% max for all debt (mortgage + student, auto and CC's).

Running some numbers in the calc above, assuming a 3.5% 30 year loan, possibly optomistic estiamtes property taxes and homeowner insurance I get about $350k as the largest loan you are likely going to be approved for.


But consider that to swing that you are taking on $2200 a month in payments in addition to draining your savings for the down payment. Are you comfortable with that? How stable is your employment?

IMHO borrowing right up to the bank limit leaves you in a very precarious position if you dont have significant cash reserves and very stable income. I have about twice the income and bought a house at the very bottom end of the range you are looking at and I wouldn't want to be leveraged much more than that.

ponyboy
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Re: First time home buying, need advice!

Post by ponyboy » Thu May 05, 2016 2:36 pm

$400k is way too much given how much you guys bring in.

Also...like others said...your retirement is really really low for your age. You should have been investing a portion of your savings/cd money all these years. I would personally continue to rent and start upping your retirement as much as possible.

mbdav
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Re: First time home buying, need advice!

Post by mbdav » Thu May 05, 2016 8:10 pm

So, my calculation about the monthly income was a bit off. The pay is around $2400 every 14 days, not by-weekly, so it's about $5200 per month. We checked our TSP contribution, and it's 3%.(should we increase?) The gross yearly income is about $98,000.

After reading all the thoughtful comments we decided not to proceed with the contract for the house for $400,000. It seems that better options for us would be either to rent lower priced apt in the city, or buy a more affordable house outside the city(which means car commute).

searhapsody
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Re: First time home buying, need advice!

Post by searhapsody » Fri May 06, 2016 6:42 pm

mbdav wrote:So, my calculation about the monthly income was a bit off. The pay is around $2400 every 14 days, not by-weekly, so it's about $5200 per month. We checked our TSP contribution, and it's 3%.(should we increase?)
Yes! You should increase it ASAP. At 3% you aren't even getting the full match which is basically free money for your retirement.

More info on matching here: https://www.tsp.gov/PlanParticipation/E ... tions.html

Plus he needs to fund the retirement for both of you. 3% of your income is definitely not enough

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Re: First time home buying, need advice!

Post by namenloseblonde » Fri May 06, 2016 7:39 pm

My husband and I are in the same boat as you - we're 39 and 42, in a HCOLA, and looking to move from an apartment that costs us $1150 a month to a home that will end up in the $500K-550K range. However, we make around $170K a year as opposed to your $98K, and we are still FREAKING out about spending $500K on a house. Even if you are modest in your spending, I would not recommend buying a $500K place on your income. Even $400K is on the high side for your income, depending on how much the property taxes and other monthly fees are, but I do understand that people in HCOLAs sometimes just have to spend more for housing.

The fact that you can currently save a couple thousand dollars a month is great. If you really want to buy a house, I would suggest looking at the price range that will result in a PITI (mortgage+taxes+insurance) payment that is no more than your current rent. That way, the $2K that you're saving each month can be used for maintenance and/or redirected to retirement saving. You are WAY behind on retirement for your age. If the max on your husband's TSP is $18K a year, that's $1500 a month - IMO, you should shoot for that. It will reduce your tax bill as well, so you wouldn't lose the full $1500 from your paycheck; instead, your paychecks might go down by $1100-1200. That would leave you with $800-900 to play with - this money could be directed to Roth IRAs for you both or saved for future large purchases (like a car, home improvements, new roof, etc.).

You have a good amount of cash on hand, which is good, but the money in CDs is locked up until 2018, which makes things a bit tricky unless you're willing to break a CD (which I wouldn't do). Depending on closing costs, you only have maybe $75-80K to put down 20% and still have enough cash to close (there are ways to get around the 20% down rule but they may not be available to you, or they may not work for condo financing, so I wouldn't count on it). Quickly looking at the numbers, a $350K condo with 20% down would give you a mortgage around $1400. Add $400 for the monthly fee and insurance, and you're right at $1800. The $400K townhome with 20% down would be more like $1500, so depending on the monthly fee that may work out, if you can afford the closing costs.

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jharkin
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Re: First time home buying, need advice!

Post by jharkin » Sat May 07, 2016 8:04 am

searhapsody wrote: Yes! You should increase it ASAP. At 3% you aren't even getting the full match which is basically free money for your retirement.

More info on matching here: https://www.tsp.gov/PlanParticipation/E ... tions.html

Plus he needs to fund the retirement for both of you. 3% of your income is definitely not enough

+1000

The old "rule of thumb" was that to fund a comfortable retirement of the same standard of living you are used to in your working years you need to be contributing around 15% a year your entire working career, starting in your 20s. And that rule may be low if expectations of slower growth in the future turn out to be true ( I personally expect so). Unless you have pensions or other expect sources of retirement income we dont know you have a lot of catching up to do.

There is no way to sugar coat it - you are pretty far behind on retirement and really need to think hard about maxing out your allowable contributions as soon as financially able. On the plus side, I looked at the TSP doc and government matching contributions are FAR more generous than most of us in the private sector get (I have to put in 6% for a 3% match, you can get 5% on 5%, basically doubling your money!!) so you really should jump at it.

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