should i buy this house

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radioactive21
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should i buy this house

Post by radioactive21 » Tue Aug 02, 2016 7:46 pm

my wife and I combined income will be about 600k before taxes. We really like this house in the right neighbourhood and great schools near by but the problem....It costs 1.2 mil (brand new construction with 10 year builder warranty)

My mortgage payments with home insurance will be about 7k/month.
I have no other debts. Is this an unhealthy amount of money for a house? We really want to be in this town so that's a serious factor for us. can we afford this. We spend about 5-8 k on monthly expenses. our state tax about 10%

no other investments apart from 401k

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Pajamas
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Re: should i buy this house

Post by Pajamas » Tue Aug 02, 2016 7:53 pm

no you should not

Daryl
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Re: should i buy this house

Post by Daryl » Tue Aug 02, 2016 7:54 pm

There isn't a lot of detail in your post, but buying a home that is 2X your gross annual income doesn't seem unreasonable. Do both you and your wife plan on working for a couple years? Do you have any money for a down payment? How long would you stay in this house?

Daryl
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Location: Malvern, PA (I like to sleep near my money!)

Re: should i buy this house

Post by Daryl » Tue Aug 02, 2016 7:57 pm

Hmm... I'm really bad at math, so I'm going to round your monthly expenses up to 10K, or $120K annually. On a combined income of $600K, what are you doing with the other 480K?

hcj
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Re: should i buy this house

Post by hcj » Tue Aug 02, 2016 8:09 pm

Daryl wrote:Hmm... I'm really bad at math, so I'm going to round your monthly expenses up to 10K, or $120K annually. On a combined income of $600K, what are you doing with the other 480K?


OP said 5-8k in other expenses, so that plus 7k mortgage = 15k? (Plus property tax?)

Of the 600k... 250k to IRS?

Kencufc
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Re: should i buy this house

Post by Kencufc » Tue Aug 02, 2016 8:20 pm

Even in a newly built house, there are so many surprise expenses that will pop up. 600k is a lot of money, but the expense of owning a house like that will increase yearly expenses such that your retirement nest egg will need to be significantly increased. Where is this? In my housing market, this would be a mistake.

Daryl
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Location: Malvern, PA (I like to sleep near my money!)

Re: should i buy this house

Post by Daryl » Tue Aug 02, 2016 8:25 pm

hcj wrote:OP said 5-8k in other expenses, so that plus 7k mortgage = 15k? (Plus property tax?)

Of the 600k... 250k to IRS?

Even $15K * 12 months = $180K Annual Spending. OP may live in area with a high tax burden, but I very much doubt that his effective tax rate is >53% (Federal + State + Local + Anything else)

Ron Ronnerson
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Re: should i buy this house

Post by Ron Ronnerson » Tue Aug 02, 2016 8:52 pm

You should provide some more details. How much do you have saved/invested already? How much do you expect to save/invest each year going forward? How old are you? Is your income stable? When do you expect to retire? Roughly how much do you expect to pay in taxes? Do you have debt? If so, how much and at what rates? Depending on your answers, you can either afford this house easily, no way at all, or somewhere in between.

young-ish
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Re: should i buy this house

Post by young-ish » Tue Aug 02, 2016 9:08 pm

What is the price-to-rent ratio on the house?

If you aren't sure then read this detailed post by Paula Pant at Afford Anything... http://affordanything.com/2015/11/24/is ... nt-or-buy/

EXH
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Re: should i buy this house

Post by EXH » Tue Aug 02, 2016 10:22 pm

Based on the limited information it sounds pretty reasonable. Agree more info on ages, debt, savings, etc would be helpful. Are property taxes included? That would add 20k where I am! Most people I know buying 1.2m houses make less than 600k though.

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Watty
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Re: should i buy this house

Post by Watty » Tue Aug 02, 2016 10:45 pm

radioactive21 wrote:no other investments apart from 401k


I would suspect that there is more going on then you mentioned in your post. Even after taxes, the spending you mentioned, and the 401k contributions you should be still have a large amount of your income left over each month.

You mentioned your income but is your net worth well over a million dollars?

southbay
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Re: should i buy this house

Post by southbay » Tue Aug 02, 2016 11:40 pm

Daryl wrote:Hmm... I'm really bad at math, so I'm going to round your monthly expenses up to 10K, or $120K annually. On a combined income of $600K, what are you doing with the other 480K?


OP said $600k before taxes.

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Pajamas
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Re: should i buy this house

Post by Pajamas » Thu Aug 04, 2016 12:55 am

The OP had three posts prior to making this one. If you look at them, it seems pretty obvious that he should not buy that house.

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TxAg
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Re: should i buy this house

Post by TxAg » Thu Aug 04, 2016 5:30 am

Pajamas wrote:The OP had three posts prior to making this one. If you look at them, it seems pretty obvious that he should not buy that house.


+1

Jags4186
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Re: should i buy this house

Post by Jags4186 » Thu Aug 04, 2016 6:10 am

Do you have 20% downpayment saved? Do you have an additional $60k-$100k saved as cash reserves? If one or both of you lost your job, would you be able to get replacement work at similar wages? I'm guessing you're both doctors so hopefully that answer is yes.

If you're making $600k--you're probably clearing $350,000/yr or so. A $7000 mortgage payment plus $10,000 in monthly expenses means you should be saving roughly $150,000/yr. You need at minimum IMO $300k to buy this house.

I think it's important to have all this money saved up front. Not because it helps eliminate PMI or you have cash for emergencies (all important btw) but because if you're able to save it, it means you're not spending it and it means you won't be overextending yourself when you make the purchase. Save $150k for 2 years, then buy your $1.2 million house. There will always be million dollar+ homes for sale and you know what--they almost all are universally nice and in nice neighborhoods.

edge
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Location: Great Falls VA

Re: should i buy this house

Post by edge » Thu Aug 04, 2016 6:38 am

Did your income go up by 100k and you paid off your student debt since the last time you posted?

radioactive21 wrote:my wife and I combined income will be about 600k before taxes. We really like this house in the right neighbourhood and great schools near by but the problem....It costs 1.2 mil (brand new construction with 10 year builder warranty)

My mortgage payments with home insurance will be about 7k/month.
I have no other debts. Is this an unhealthy amount of money for a house? We really want to be in this town so that's a serious factor for us. can we afford this. We spend about 5-8 k on monthly expenses. our state tax about 10%

no other investments apart from 401k

researcher
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Joined: Thu Mar 12, 2015 7:05 pm

Re: should i buy this house

Post by researcher » Thu Aug 04, 2016 7:28 am

You posted this on May 30, 2016...
radioactive21 wrote:income about 500k
emergency fund: pretty much 0, sorry to say.
expenses coming down the pipe: a house (likely in the 800k range)
Total Student loans after payments 165k
these are mostly unsubsidized student loans

So in the last 2 months:
- Your annual household income has increased by $100K
- $165K in student loans has been paid off
- The budget for a new house has increased by $400K

Do you still have $0 in your emergency fund?

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