How much home can we afford?

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Aurora66
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Joined: Wed Nov 29, 2017 11:35 am

How much home can we afford?

Post by Aurora66 » Wed Nov 29, 2017 11:54 am

Hello!

I am new here and I wanted to get some realistic expectations on what we can afford for a home purchase. My husband and I are looking to purchase our first home next year and I’m trying to determine what we should target for a price. Also, I know it’s against forum rules so if you can’t answer this please ignore, I live in a high tax state (NJ) and with pending tax legislation I’m not sure how that will affect affordability or our approach.

Ages: 31, 32
No kids, looking to start in the next 12 months. I would go back to work after maternity.

My income: $57000/yr. usually get a $1500-$2000 additional bonus around Christmas
Husbands income: $115000/yr bonus can be anywhere from $0 - $57,500 depending on his performance and company’s performance. He is new to this job about 6 months ago and isn’t sure what to expect just yet. This is paid out in August.

We have no debt and our assets are as follows:

Cash: $75,000
Taxable accounts: $130,000
Roth IRAs: $100,000 (Looks like his might be the last year we can contribute to these based on our income)
IRAs/401ks: $343,000 (We max out both 401ks at $18,000/yr)
HSA: $2400. (New to us this year, we are putting in $6750)

We also own two cars outright with under 60,000 miles on them (i.e. no need to replace for a while).

I guess my question is what monthly payment should I target? I don’t like the 2x/3x income rule because NJ has very high property taxes. 3x my income in NJ might come with a home with $13,000 in property taxes while 3x income in South Carolina might have $3000 in property taxes. I feel like I can back into the home price if I have a good idea of a monthly payment. I’m also keeping in mind I’ll likely be picking up child care expenses in 18 months or so.

Thanks for everyone’s help!

sco
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Re: How much home can we afford?

Post by sco » Thu Nov 30, 2017 12:15 am

How much are you planning on putting down for this house? How much excess do you have in your monthly budget + the rent you currently pay, do you have to fund this mortgage?

The Mortgage Deduction is often overrated, perhaps not in this case. But it often is..

bluejello
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Re: How much home can we afford?

Post by bluejello » Thu Nov 30, 2017 12:48 am

First of all, great job saving!

Back of the envelope math: gross income $172k (discounting bonuses), subtract $36k for 401k contributions, then assuming 25% federal taxes and 6% NJ taxes leaves you with a take-home of roughly $8k per month. Is that about right?

In which case, I would target spending no more than $3k, $4k absolutely maximum per month on housing (mortgage, property taxes, HOA, insurance). Taking NJ's property taxes into account, that means you're looking at homes roughly in the $500k - $700k range.

With a monthly housing spend of $3k - $4k, that leaves you with a very healthy margin of $4k - $5k per month for other expenses. As you're already aware, once you have kids, you'll likely be spending $1000 to $2000 per month for daycare per kid so be sure to leave room for that in your budget.

If my math is incorrect then you can simply take your current take-home after taxes and retirement contributions, subtract your current monthly expenses outside of housing, and then subtract an additional $2k for childcare. What's left is what you can spend on housing.

brad.clarkston
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Re: How much home can we afford?

Post by brad.clarkston » Thu Nov 30, 2017 1:04 am

It's not about how much house can you afford it's what area you want to be in and the things around it.

We have bought three houses now with at least one more to go and the conversation has never been about how much can we afford it's where and what. The wife has never wanted to hit our maximum amount the bank gives us.

jlcnuke
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Re: How much home can we afford?

Post by jlcnuke » Thu Nov 30, 2017 6:38 am

brad.clarkston wrote:
Thu Nov 30, 2017 1:04 am
It's not about how much house can you afford it's what area you want to be in and the things around it.

We have bought three houses now with at least one more to go and the conversation has never been about how much can we afford it's where and what. The wife has never wanted to hit our maximum amount the bank gives us.
"what area you want to be in and the things around it" can EASILY exceed what a person can actually afford...

Aurora66
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Joined: Wed Nov 29, 2017 11:35 am

Re: How much home can we afford?

Post by Aurora66 » Thu Nov 30, 2017 7:05 am

sco wrote:
Thu Nov 30, 2017 12:15 am
How much are you planning on putting down for this house? How much excess do you have in your monthly budget + the rent you currently pay, do you have to fund this mortgage?

The Mortgage Deduction is often overrated, perhaps not in this case. But it often is..
I was thinking of putting roughly $125,000 down on the house. Mortgage deduction by itself is overrated but mortgage interest + high NJ property taxes + state taxes all add up to a lot. That's why I'm worried about doing anything until I see where the tax plan falls. The way things currently I think we would increase our take-home pay around $300 a month by buying a home. But if all the deductions go away the advantages go away.

We currently spend $1565 on rent and we save between $3500-$6000 after tax a month depending on how paychecks fall. This year we've spent about $50000 through 11 months.
Last edited by Aurora66 on Thu Nov 30, 2017 7:10 am, edited 2 times in total.

Aurora66
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Re: How much home can we afford?

Post by Aurora66 » Thu Nov 30, 2017 7:06 am

bluejello wrote:
Thu Nov 30, 2017 12:48 am
First of all, great job saving!

Back of the envelope math: gross income $172k (discounting bonuses), subtract $36k for 401k contributions, then assuming 25% federal taxes and 6% NJ taxes leaves you with a take-home of roughly $8k per month. Is that about right?

In which case, I would target spending no more than $3k, $4k absolutely maximum per month on housing (mortgage, property taxes, HOA, insurance). Taking NJ's property taxes into account, that means you're looking at homes roughly in the $500k - $700k range.

With a monthly housing spend of $3k - $4k, that leaves you with a very healthy margin of $4k - $5k per month for other expenses. As you're already aware, once you have kids, you'll likely be spending $1000 to $2000 per month for daycare per kid so be sure to leave room for that in your budget.

If my math is incorrect then you can simply take your current take-home after taxes and retirement contributions, subtract your current monthly expenses outside of housing, and then subtract an additional $2k for childcare. What's left is what you can spend on housing.
Yes, take home pay is about $8000/mo. $3k is about what I was thinking as well.

Aurora66
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Re: How much home can we afford?

Post by Aurora66 » Thu Nov 30, 2017 7:09 am

jlcnuke wrote:
Thu Nov 30, 2017 6:38 am
brad.clarkston wrote:
Thu Nov 30, 2017 1:04 am
It's not about how much house can you afford it's what area you want to be in and the things around it.

We have bought three houses now with at least one more to go and the conversation has never been about how much can we afford it's where and what. The wife has never wanted to hit our maximum amount the bank gives us.
"what area you want to be in and the things around it" can EASILY exceed what a person can actually afford...
I agree... I think we're in the $500k range but honestly $500k doesn't really get you very much :|

snowox
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Re: How much home can we afford?

Post by snowox » Thu Nov 30, 2017 7:10 am

^ I see you responded while i was typing so for what its worth....


Perhaps the OP is asking for the math so they can determine an area that they can live in? and or if they like an area what they could get for those dollars if anything in there preferred area. So looking at it that way first let me say this,

Congrats on your accumulation and deciding to have a child and buy a house. Because of those two wants being a year away I would personally wait till you have the child and see how that all plays out if you can do that where your living now. For some that's taking on a lot of stress. In addition getting use to a lot of the costs associated with having the child. Having said that with napkin math I would not feel comfortable spending 5-700k on a house leaving 4-5k for other expenses. While I am not familiar with the NJ real-estate market and or what your looking for, spend sometime learning the market, what you want to buy with a child, and continue building your stash for a couple more years.

Olemiss540
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Re: How much home can we afford?

Post by Olemiss540 » Thu Nov 30, 2017 8:03 am

I think for now that you are best planning using the 3x rule based solely on your spouse's income. An explanation of why:

You are doing AWESOME on accumulation for your age, so you have afforded some flexibility on your options in the next year or two

You need to feel out how the bonus structure is going to affect monthly income. Can your husband ask around to coworkers to get a feel for historical bonuses? Do they usually pay somewhere in the middle or is it often all or nothing?

Who knows what you will decide to do once that baby is here with regards to going back to work. You have a great nest egg, and you may well end up (or your spouse) going part time or staying home full time once the baby is delivered. Hard to preplan your emotions when such a wonderful life changing event happens.

You can really buckle down for the next 18 months and ratchet up your savings in preperation for a LARGE downpayment. Maybe cut back on retirement savings for a short while to get where you need to be. If you could build the taxable and cash account up another 125k before the purchase it will allow you to really stretch for a nicer home.

With sooo much going on, it may be best if you can rent while you go through this process. Maybe it takes longer to conceive than you planned, or maybe you decide to stay at home. Renting a 2 br and moving once you have settled in with the baby and life has stabilized may be the most financially prudent option. Babies really don't take up much space, so an option to consider so you don't make any big mistakes through this process. Sorry for the rambling, but great job LBYM and doing such a great job saving! You really have a multitude of options depending on what your young family decides!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

brad.clarkston
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Re: How much home can we afford?

Post by brad.clarkston » Thu Nov 30, 2017 10:27 am

jlcnuke wrote:
Thu Nov 30, 2017 6:38 am
brad.clarkston wrote:
Thu Nov 30, 2017 1:04 am
It's not about how much house can you afford it's what area you want to be in and the things around it.

We have bought three houses now with at least one more to go and the conversation has never been about how much can we afford it's where and what. The wife has never wanted to hit our maximum amount the bank gives us.
"what area you want to be in and the things around it" can EASILY exceed what a person can actually afford...
Now go back and put the part you highlighted into context with the first part and re-read it. Or you know read the entire thing before cherry picking.

jlcnuke
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Re: How much home can we afford?

Post by jlcnuke » Thu Nov 30, 2017 10:33 am

brad.clarkston wrote:
Thu Nov 30, 2017 10:27 am
jlcnuke wrote:
Thu Nov 30, 2017 6:38 am
brad.clarkston wrote:
Thu Nov 30, 2017 1:04 am
It's not about how much house can you afford it's what area you want to be in and the things around it.

We have bought three houses now with at least one more to go and the conversation has never been about how much can we afford it's where and what. The wife has never wanted to hit our maximum amount the bank gives us.
"what area you want to be in and the things around it" can EASILY exceed what a person can actually afford...
Now go back and put the part you highlighted into context with the first part and re-read it. Or you know read the entire thing before cherry picking.
I read the entire thing the first time, it still makes no sense to say buying a house isn't about what you can afford. What you can afford is the 1st consideration. What you "want" in that range is how you narrow it down from there". That you, personally, never wanted to hit the maximum a bank would loan you is irrelevant (and quite frankly, for many people what the bank will/would give them is more than they can/could afford). In context, that sentence doesn't change at all and no context provides any kind of clarification saying that you shouldn't exceed what you can afford when looked at objectively.

Maybe it's not what you were "trying to say", but it IS what you said.

onourway
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Re: How much home can we afford?

Post by onourway » Thu Nov 30, 2017 10:49 am

Between property taxes and budgeting 2% annually for maintenance, you are looking at needing close to another $2k/month on top of the mortgage payment. In that case $500k would be the top of the market, IMO. A $400k mortgage will run you close to $2k/month on its own. That puts you close to $4k/month before you've paid insurance, done any upgrades, furnished the place or anything. I'm also a fan of owning a home that can be paid for on one income. It's really easy to get approved for a huge mortgage and have the costs be a consistent drag on your finances and the whole experience of home ownership be a major stress.

Child care expenses can easily exceed $1000/month. If you get into $4k of housing cost, $1k of childcare, suddenly your budget is going to be really, really tight. You've done great so far with saving. You're in a great position to buy, but proceed cautiously!

Isabelle77
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Re: How much home can we afford?

Post by Isabelle77 » Thu Nov 30, 2017 2:10 pm

You guys are doing a fantastic job! If you already had kids and had figured out childcare, I would say 500-600K for a house. BUT, I would wait until after you've had children.

My cautionary tale is uncommon but not particularly unheard of either, I have several friends who have been through similar experiences. We decided to start a family when we were 28yrs old, had unexpected fertility issues (my siblings and mother had no problems), wound up spending a fortune on two adoptions and we decided that I needed to be home with our children longer than we initially thought. We have friends that spent a ton on fertility treatments and some friends whose children needed medical attention in their first years of life.

Chances are NONE of these things will happen to you, but I wouldn't drop most of my savings on a house until after you have children.

All the best!

onourway
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Re: How much home can we afford?

Post by onourway » Thu Nov 30, 2017 2:13 pm

In that same vein, you might also be blessed with twins. Happened to us! In that case your child-care costs nearly double. We ended up with a nanny rather than paying for two in daycare, but it was a huge expense.

John Laurens
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Re: How much home can we afford?

Post by John Laurens » Thu Nov 30, 2017 2:21 pm

How about a $205,000 home? You know you can afford that because you can pay cash and not have a mortgage.

Regards,
John

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Smorgasbord
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Re: How much home can we afford?

Post by Smorgasbord » Thu Nov 30, 2017 2:35 pm

onourway wrote:
Thu Nov 30, 2017 10:49 am
Between property taxes and budgeting 2% annually for maintenance, you are looking at needing close to another $2k/month on top of the mortgage payment.
2% annual maintenance on a house in the $500k range where the land makes up most of the value of the house? That seems a bit steep unless they are planning on hiring Feng Shui certified landscapers, or union electricians when their light bulbs need replacing.

onourway
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Re: How much home can we afford?

Post by onourway » Thu Nov 30, 2017 2:47 pm

Smorgasbord wrote:
Thu Nov 30, 2017 2:35 pm
2% annual maintenance on a house in the $500k range where the land makes up most of the value of the house? That seems a bit steep unless they are planning on hiring Feng Shui certified landscapers, or union electricians when their light bulbs need replacing.
In my experience in this region housing repairs are extraordinarily expensive. It won't be 2% every year, but over time it will probably be close to that. Roofing, painting, driveways, plumbing and electrical, landscaping, tree maintenance, yard maintenance, heating and AC, etc. etc. I'd rather plan on 2% and have it be 1% than the other way around.

iasw
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Re: How much home can we afford?

Post by iasw » Thu Nov 30, 2017 2:57 pm

You are doing great!

Can you share your current rent to help us have an idea of rent vs buy in your area? Do you like your rental/could it work with a baby for awhile? In-unit laundry facilities and such? I moved from an apartment with basement laundry when my baby was 6m old. Moving sucks, but our laundry situation alone made it worth it. Oy.

I think it makes sense to wait on a house until after you've had your baby and have gone back to work.

bloom2708
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Re: How much home can we afford?

Post by bloom2708 » Thu Nov 30, 2017 3:03 pm

Aurora66 wrote:
Thu Nov 30, 2017 7:05 am
We currently spend $1565 on rent..
How about upping the rent budget by $1,000? What does that get you for space and newness?

That keeps you flexible and keeps your savings goals in tact. A $500k+ house with $13k in property taxes is going to eat a lot of budget. Expected and unexpected.
Where to spend your time: | 1. You completely control <--spend your time here! | 2. You partially control <--spend very little time here! | 3. You have no control <--spend no time here

Pacman
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Re: How much home can we afford?

Post by Pacman » Thu Nov 30, 2017 3:07 pm

I'm about the same age as you, and don't think you need a house immediately upon having a baby. You have a few years until you need to move into a school district. It also seems that you have had a high savings rate in your renting situation. Secondly, the premise of the question seems to imply that you should buy the maximum house you can afford. From a wealth building perspective, I personally don't think this is a good move. I would just buy what you need in order to be in the school district that you want to be in and wherever makes sense from a commuting standpoint. Good luck.

nolesrule
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Re: How much home can we afford?

Post by nolesrule » Thu Nov 30, 2017 3:28 pm

Aurora66 wrote:
Thu Nov 30, 2017 7:09 am
jlcnuke wrote:
Thu Nov 30, 2017 6:38 am
brad.clarkston wrote:
Thu Nov 30, 2017 1:04 am
It's not about how much house can you afford it's what area you want to be in and the things around it.

We have bought three houses now with at least one more to go and the conversation has never been about how much can we afford it's where and what. The wife has never wanted to hit our maximum amount the bank gives us.
"what area you want to be in and the things around it" can EASILY exceed what a person can actually afford...
I agree... I think we're in the $500k range but honestly $500k doesn't really get you very much :|
Depends on where in NJ. We have two kids and we're happy with out 1900 sq ft home (+ unfinished basement/garage) on a smallish lot for $320k and PITIH of about $2250 on a 20 year mortgage. But we're also almost an hour west of the GWB. Fortunately we don't have to go that close to the city for work.

Aurora66
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Re: How much home can we afford?

Post by Aurora66 » Thu Nov 30, 2017 3:29 pm

Pacman wrote:
Thu Nov 30, 2017 3:07 pm
I'm about the same age as you, and don't think you need a house immediately upon having a baby. You have a few years until you need to move into a school district. It also seems that you have had a high savings rate in your renting situation. Secondly, the premise of the question seems to imply that you should buy the maximum house you can afford. From a wealth building perspective, I personally don't think this is a good move. I would just buy what you need in order to be in the school district that you want to be in and wherever makes sense from a commuting standpoint. Good luck.
I was more thinking of having the house then having the baby :D

The premise of the question isn't that I want to buy the maximum house I can afford. That's an easy question--go to the mortgage lender find out how much they'll give us and go spend it. I'm looking for a reasonable amount to spend that still allows us to save, spend, and live. Right now we're saving about 50% of our gross incomes. I love that, but we also live in a tiny 1 br apartment which has 1 washer and 1 dryer in the hall thats shared between 12 units and no closet space. I hate that. The reality is that where we live homes are expensive. Getting a 1500sqft 3br 2ba home can in a nice town can cost $450k+ and carries property taxes of $10k.

I just don't see going and renting a 2br place for $2500/mo when I could own a home for $400 or so more. Maybe I'm just not thinking this through/have house fever? Someone above mentioned 2% maintenance...I don't see spending $10,000/yr maintaining a relatively small house. I've asked my parents and in laws who live in the area and they say they don't spend anywhere near that much on maintaining their house. But I might have blinders on thats why I come here to ask!

Aurora66
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Re: How much home can we afford?

Post by Aurora66 » Thu Nov 30, 2017 3:30 pm

nolesrule wrote:
Thu Nov 30, 2017 3:28 pm
Aurora66 wrote:
Thu Nov 30, 2017 7:09 am
jlcnuke wrote:
Thu Nov 30, 2017 6:38 am
brad.clarkston wrote:
Thu Nov 30, 2017 1:04 am
It's not about how much house can you afford it's what area you want to be in and the things around it.

We have bought three houses now with at least one more to go and the conversation has never been about how much can we afford it's where and what. The wife has never wanted to hit our maximum amount the bank gives us.
"what area you want to be in and the things around it" can EASILY exceed what a person can actually afford...
I agree... I think we're in the $500k range but honestly $500k doesn't really get you very much :|
Depends on where in NJ. We have two kids and we're happy with out 1900 sq ft home (+ unfinished basement/garage) on a smallish lot for $320k and PITIH of about $2250 on a 20 year mortgage. But we're also almost an hour west of the GWB. Fortunately we don't have to go that close to the city for work.
We're looking to be in Essex/Bergen counties for proximity to work/family.

onourway
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Re: How much home can we afford?

Post by onourway » Thu Nov 30, 2017 3:37 pm

Aurora66 wrote:
Thu Nov 30, 2017 3:29 pm
I was more thinking of having the house then having the baby :D

The premise of the question isn't that I want to buy the maximum house I can afford. That's an easy question--go to the mortgage lender find out how much they'll give us and go spend it. I'm looking for a reasonable amount to spend that still allows us to save, spend, and live. Right now we're saving about 50% of our gross incomes. I love that, but we also live in a tiny 1 br apartment which has 1 washer and 1 dryer in the hall thats shared between 12 units and no closet space. I hate that. The reality is that where we live homes are expensive. Getting a 1500sqft 3br 2ba home can in a nice town can cost $450k+ and carries property taxes of $10k.

I just don't see going and renting a 2br place for $2500/mo when I could own a home for $400 or so more. Maybe I'm just not thinking this through/have house fever? Someone above mentioned 2% maintenance...I don't see spending $10,000/yr maintaining a relatively small house. I've asked my parents and in laws who live in the area and they say they don't spend anywhere near that much on maintaining their house. But I might have blinders on thats why I come here to ask!
The rule of thumb is often quoted at 1-2%. It's extremely variable. A $100k house in a LCOL area might be 3%. It's also not intended to mean that you will spend that every year, but that over time it will be something like that. A roof might cost $10k, but you only need one every 30 years. A paint job might be $10-25k but you need one every 10 years. A new furnace can run the same. I bet my neighbor thought her house had no maintenance costs when she bought it 7 years ago and proceeded to do nothing (barely even mow the grass) for the next 5 years. In the past two years she's needed to remedy a leaking roof, a new paint job, an expensive basement sump pump system, and when that still didn't fix things, a professional to come in and install a complete french drain trenched across the property to tie into the municipal drainage system, and who knows how much work of waterproofing and repair inside the basement. She still has barely touched the lawn, the landscaping, and neglected the trees and hedge lines for years, some of which I end up maintaining on her behalf.

bloom2708
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Re: How much home can we afford?

Post by bloom2708 » Thu Nov 30, 2017 3:50 pm

Aurora66 wrote:
Thu Nov 30, 2017 3:29 pm
I just don't see going and renting a 2br place for $2500/mo when I could own a home for $400 or so more. Maybe I'm just not thinking this through/have house fever?
This is the house "trap". Your property taxes alone might be $900/month. That is on top of the mortgage payment. Insurance is $1,500/year instead of $79 for renters insurance.

Then you have extra utility bills, assessments, repairs, filling it with furniture, painting, replacing floor coverings, upgrading fixtures, faucets, cabinets, countertops, lawn care, snow removal, trees, shrubs. I have 3 silver maples that cost me $400 per year to have them treated for chlorosis. They were $40 trees.

Not trying to scare you. Home ownership can be very rewarding. Just go in with some "I don't know what I don't know" budgets. Renting is $2,500 and ownership is $3,000 just doesn't work.

Here is a list of things we have done to our house in 12 years:

1. two sets of appliances
2. Landscaping, curbed edging
3. Sprinkler system
4. 10 x 12" garden shed
5. New Furnace and AC
6. New kitchen countertops
7. Redone master bathroom
8. Carpets for the whole house
9. Roof replaced after a hail storm
10. New lawnmower after 7 years
11. Bigger snowblower
12. I'm sure I'm forgetting a ton of things

When you are house shopping, check for condensation between the window panes if you have double/triple windows. When those start to go, it is not cheap.

Lots of good information. Also, use the search and browse other "afford house" threads. So much good content over the years on this topic.

Good luck and happy house hunting.
Where to spend your time: | 1. You completely control <--spend your time here! | 2. You partially control <--spend very little time here! | 3. You have no control <--spend no time here

Aurora66
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Re: How much home can we afford?

Post by Aurora66 » Thu Nov 30, 2017 4:11 pm

John Laurens wrote:
Thu Nov 30, 2017 2:21 pm
How about a $205,000 home? You know you can afford that because you can pay cash and not have a mortgage.

Regards,
John
I’d like to live somewhere where window bars don’t need to be a budgeted item. Thanks for the suggestion though. :happy

iasw
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Re: How much home can we afford?

Post by iasw » Thu Nov 30, 2017 4:22 pm

The lender will approve you for way more than you need. Don't use them as a rule of thumb. It isn't a good idea to stretch that hard.

My house was built in 2000, lived here since 2011 and we've painted the exterior $2500, had a new $6k roof (paid for by insurance company due to hail), crawl space improvements for moisture and drainage $4500, carpet in the living room $1000, kitchen overhaul $12000, new dishwasher and w/d like $2000.

All that crap adds up. There are other things I probably need to do and especially if I wanted to sell fast.

I still think baby before house makes more sense. It can give you more flexibility and options if your plans change. Or if you insist on house before baby, take a friend with a toddler with you to house hunt so she can point out good features and annoying features in houses with small kids. Everything from bedroom placement, stairs, storage space, general layout, yard...some setups are better than others with kids.

Olemiss540
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Re: How much home can we afford?

Post by Olemiss540 » Thu Nov 30, 2017 5:31 pm

Aurora66 wrote:
Thu Nov 30, 2017 3:29 pm
Pacman wrote:
Thu Nov 30, 2017 3:07 pm
I'm about the same age as you, and don't think you need a house immediately upon having a baby. You have a few years until you need to move into a school district. It also seems that you have had a high savings rate in your renting situation. Secondly, the premise of the question seems to imply that you should buy the maximum house you can afford. From a wealth building perspective, I personally don't think this is a good move. I would just buy what you need in order to be in the school district that you want to be in and wherever makes sense from a commuting standpoint. Good luck.
I was more thinking of having the house then having the baby :D

The premise of the question isn't that I want to buy the maximum house I can afford. That's an easy question--go to the mortgage lender find out how much they'll give us and go spend it. I'm looking for a reasonable amount to spend that still allows us to save, spend, and live. Right now we're saving about 50% of our gross incomes. I love that, but we also live in a tiny 1 br apartment which has 1 washer and 1 dryer in the hall thats shared between 12 units and no closet space. I hate that. The reality is that where we live homes are expensive. Getting a 1500sqft 3br 2ba home can in a nice town can cost $450k+ and carries property taxes of $10k.

I just don't see going and renting a 2br place for $2500/mo when I could own a home for $400 or so more. Maybe I'm just not thinking this through/have house fever? Someone above mentioned 2% maintenance...I don't see spending $10,000/yr maintaining a relatively small house. I've asked my parents and in laws who live in the area and they say they don't spend anywhere near that much on maintaining their house. But I might have blinders on thats why I come here to ask!
What you're missing with renting a 2br is that you can upgrade space, amenities, etc and buy some time for settling down with the baby. It's not that it's a better decision than buying a house, but that it buys you flexibility while you need it financially, emotionally, and mentally. Then start house shopping and get the dreamhouse, even if you need to stretch a bit. Atleast your future with regards to childcare expenses, income (if you come back to work or take a longer leave), health (baby/momma doesn't need a long stay at the hospital).

Good luck with whichever you choose, we are just giving you some alternative considerations. No need to argue each point, just take it into consideration and make a decision based on what's best for you. This is not the most liberal (financially speaking) place to be posing this question, so I assume you had some idea of the answers you would recieve!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

John Laurens
Posts: 384
Joined: Mon Nov 14, 2016 7:31 pm

Re: How much home can we afford?

Post by John Laurens » Thu Nov 30, 2017 5:55 pm

Aurora66 wrote:
Thu Nov 30, 2017 4:11 pm
John Laurens wrote:
Thu Nov 30, 2017 2:21 pm
How about a $205,000 home? You know you can afford that because you can pay cash and not have a mortgage.

Regards,
John
I’d like to live somewhere where window bars don’t need to be a budgeted item. Thanks for the suggestion though. :happy
Lol. 205k buys a nice home where I live. I would then encourage you to base your budget on your huband’s income only. You can’t guarantee that you or yet to be born children will be healthy.

Regards,
John

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