House Purchase - Sanity Check On Financials

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MindTheGAAP
Posts: 244
Joined: Fri Jan 31, 2014 12:44 am

Re: House Purchase - Sanity Check On Financials

Post by MindTheGAAP » Tue Mar 27, 2018 2:07 pm

FlyAF wrote:
Tue Mar 27, 2018 1:55 pm
MindTheGAAP wrote:
Tue Mar 27, 2018 1:31 pm
Already live in Allen so not like it would be any further than what I'm used to. Current work areas are Addison and Richardson. Client in Richardson has offered me a similar paying job to try to get me in the door there - would include some RSUs in that amount but I'd get there on money. And as I'm an equity owner in the Co., I'm not overly concerned about being replaced for a lower cost - I'm one of two owners (though minority).
How long have you been doing the Allen to Addison commute? I have to think that is not a lot of fun in rush hour. Any chance you could burn out on that? I absolutely hate commuting (from my time living in LA) and when we moved back to TX, built where our commutes were less than 15 minutes and it has been one of the best things we ever did. I don't have kids or a stay at home wife, but I know myself well enough that if I was spending 2 hours a day commuting on top of being at work all day, I'd start to resent my wife as the years went by.
I did it for 18 months and I've done a year over to Las Colinas which was terrible. The thing with my job is that I could be anywhere in the metroplex/ where my client is. So while I could move to a better area for commute (which unless it's HP would not offer same schools, and other issues in and of itself) - or at least better my chances of a commute, it isn't guaranteed by any means. Additionally, we have family (inlaws) in the Allen area that can help my wife out if I have to travel a lot in the future - which is obviously just part of the gig.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

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Meg77
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Re: House Purchase - Sanity Check On Financials

Post by Meg77 » Tue Mar 27, 2018 2:15 pm

AZAttorney11 wrote:
Mon Mar 26, 2018 8:57 pm
wilked wrote:
Mon Mar 26, 2018 8:27 pm
lvrpl wrote:
Mon Mar 26, 2018 8:13 pm
Pajamas wrote:
Mon Mar 26, 2018 5:53 pm
lvrpl wrote:
Mon Mar 26, 2018 5:26 pm
I am a little surprised with the majority saying this can't be afforded. It certainly is pushing it, but OP is still talking about a mortgage that would be ~2.5x his gross income. I realize many here like that number to be closer to 2.0x income, but this isn't that crazy, is it?
It's not the mortgage vs. income so much as value of house vs. net worth.
But really, why should that matter much? If the OP's net worth was $400k vs what it is now, would that make the answer different? I guess I'm just thinking that if he can afford the mortgage from a monthly perspective and overall debt load perspective, isn't the primary relevant fact whether the income is relatively stable?
It makes a huge difference

OP needs to play a little “catch up” on his/her retirement savings. Hard to do that when 1/3 of your take home goes to PITI

Alternatively, if he/she had a higher jump on retirement savings it becomes less critical to max retirement funds, and easier to allocate $$ to PITI
Agreed. And still no mention of the 529 accounts. Not sure how OP is going to pay for college for three kids (assuming he is going to pay). After all, school choice is very important to OP and his spouse is a teacher, so college almost certainly is going to be a thing for his kids. Perhaps his spouse will return to work and they'll dedicate that income to cash flowing college, or perhaps there are wealthy grandparents in the picture. OP is projecting 2018 income as $250k to $275k (I think he edited his original post, I believe the income for 2017 was $300k+). While it may be mathematically okay to buy a $700,000 or $800,000 house with that income, I don't think it is prudent.
Geez you guys - OP isn't even thirty years old yet!! Let's keep that in perspective when evaluating net worth and 529s, etc. Anybody who is making that kind of money by age 30 should continue to see earnings increase through his/her career as well. (Obviously not a given, but as sure a bet as you can make with these things.) Plus having a non-working spouse actually is a positive since she could go back to work if needed if things were to somehow go south with his income for a period.

You will have $70k left in cash reserves after putting 20% down on the proposed new home. Your income ratios look fine, and even though it's a slight stretch financially, you're at the age where I would make it since one can reasonably predict your income will continue to rise (versus if you were 48 and likely near peak earnings). You've also got a good start on retirement and should be ok there as long as you continue to prioritize it.

THAT SAID, I live in Dallas and thought all this was reasonable when I assumed you were trying to get into certain good school districts in the inner circle in Dallas itself. But you live in Allen!! And are considering moving to another exurb! You must be considering a ginormous new construction McMansion to be paying that much so far out. You can DEFINITELY spend a lot less and still get a nice 4 bedroom house with a media room and a backyard in a great school district (which you already happen to live in, tiny qualms that only an ex-teacher would notice aside).
"An investment in knowledge pays the best interest." - Benjamin Franklin

MindTheGAAP
Posts: 244
Joined: Fri Jan 31, 2014 12:44 am

Re: House Purchase - Sanity Check On Financials

Post by MindTheGAAP » Tue Mar 27, 2018 3:03 pm

Meg77 wrote:
Tue Mar 27, 2018 2:15 pm
AZAttorney11 wrote:
Mon Mar 26, 2018 8:57 pm
wilked wrote:
Mon Mar 26, 2018 8:27 pm
lvrpl wrote:
Mon Mar 26, 2018 8:13 pm
Pajamas wrote:
Mon Mar 26, 2018 5:53 pm


It's not the mortgage vs. income so much as value of house vs. net worth.
But really, why should that matter much? If the OP's net worth was $400k vs what it is now, would that make the answer different? I guess I'm just thinking that if he can afford the mortgage from a monthly perspective and overall debt load perspective, isn't the primary relevant fact whether the income is relatively stable?
It makes a huge difference

OP needs to play a little “catch up” on his/her retirement savings. Hard to do that when 1/3 of your take home goes to PITI

Alternatively, if he/she had a higher jump on retirement savings it becomes less critical to max retirement funds, and easier to allocate $$ to PITI
Agreed. And still no mention of the 529 accounts. Not sure how OP is going to pay for college for three kids (assuming he is going to pay). After all, school choice is very important to OP and his spouse is a teacher, so college almost certainly is going to be a thing for his kids. Perhaps his spouse will return to work and they'll dedicate that income to cash flowing college, or perhaps there are wealthy grandparents in the picture. OP is projecting 2018 income as $250k to $275k (I think he edited his original post, I believe the income for 2017 was $300k+). While it may be mathematically okay to buy a $700,000 or $800,000 house with that income, I don't think it is prudent.
Geez you guys - OP isn't even thirty years old yet!! Let's keep that in perspective when evaluating net worth and 529s, etc. Anybody who is making that kind of money by age 30 should continue to see earnings increase through his/her career as well. (Obviously not a given, but as sure a bet as you can make with these things.) Plus having a non-working spouse actually is a positive since she could go back to work if needed if things were to somehow go south with his income for a period.

You will have $70k left in cash reserves after putting 20% down on the proposed new home. Your income ratios look fine, and even though it's a slight stretch financially, you're at the age where I would make it since one can reasonably predict your income will continue to rise (versus if you were 48 and likely near peak earnings). You've also got a good start on retirement and should be ok there as long as you continue to prioritize it.

THAT SAID, I live in Dallas and thought all this was reasonable when I assumed you were trying to get into certain good school districts in the inner circle in Dallas itself. But you live in Allen!! And are considering moving to another exurb! You must be considering a ginormous new construction McMansion to be paying that much so far out. You can DEFINITELY spend a lot less and still get a nice 4 bedroom house with a media room and a backyard in a great school district (which you already happen to live in, tiny qualms that only an ex-teacher would notice aside).
In all honesty, we're not looking at new construction at all - quite the opposite. We've been looking at houses from the 80s - it is more that the area is very well established with mature trees - the downside is the lack of diversity.

Allen is fine - and has some positives like the vocational options - but also easy to get lost in that size system. And if you really want a decent school district in Dallas proper, you're shelling out equally significant money.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

gotester2000
Posts: 580
Joined: Sun Nov 12, 2017 1:59 am

Re: House Purchase - Sanity Check On Financials

Post by gotester2000 » Tue Mar 27, 2018 3:15 pm

Meg77 wrote:
Tue Mar 27, 2018 2:15 pm
AZAttorney11 wrote:
Mon Mar 26, 2018 8:57 pm
wilked wrote:
Mon Mar 26, 2018 8:27 pm
lvrpl wrote:
Mon Mar 26, 2018 8:13 pm
Pajamas wrote:
Mon Mar 26, 2018 5:53 pm


It's not the mortgage vs. income so much as value of house vs. net worth.
But really, why should that matter much? If the OP's net worth was $400k vs what it is now, would that make the answer different? I guess I'm just thinking that if he can afford the mortgage from a monthly perspective and overall debt load perspective, isn't the primary relevant fact whether the income is relatively stable?
It makes a huge difference

OP needs to play a little “catch up” on his/her retirement savings. Hard to do that when 1/3 of your take home goes to PITI

Alternatively, if he/she had a higher jump on retirement savings it becomes less critical to max retirement funds, and easier to allocate $$ to PITI
Agreed. And still no mention of the 529 accounts. Not sure how OP is going to pay for college for three kids (assuming he is going to pay). After all, school choice is very important to OP and his spouse is a teacher, so college almost certainly is going to be a thing for his kids. Perhaps his spouse will return to work and they'll dedicate that income to cash flowing college, or perhaps there are wealthy grandparents in the picture. OP is projecting 2018 income as $250k to $275k (I think he edited his original post, I believe the income for 2017 was $300k+). While it may be mathematically okay to buy a $700,000 or $800,000 house with that income, I don't think it is prudent.
Geez you guys - OP isn't even thirty years old yet!! Let's keep that in perspective when evaluating net worth and 529s, etc. Anybody who is making that kind of money by age 30 should continue to see earnings increase through his/her career as well. (Obviously not a given, but as sure a bet as you can make with these things.) Plus having a non-working spouse actually is a positive since she could go back to work if needed if things were to somehow go south with his income for a period.

You will have $70k left in cash reserves after putting 20% down on the proposed new home. Your income ratios look fine, and even though it's a slight stretch financially, you're at the age where I would make it since one can reasonably predict your income will continue to rise (versus if you were 48 and likely near peak earnings). You've also got a good start on retirement and should be ok there as long as you continue to prioritize it.

THAT SAID, I live in Dallas and thought all this was reasonable when I assumed you were trying to get into certain good school districts in the inner circle in Dallas itself. But you live in Allen!! And are considering moving to another exurb! You must be considering a ginormous new construction McMansion to be paying that much so far out. You can DEFINITELY spend a lot less and still get a nice 4 bedroom house with a media room and a backyard in a great school district (which you already happen to live in, tiny qualms that only an ex-teacher would notice aside).
Many of the forum have exposure to corporate world and understand the risk of single client exposure. To give an example one of my workplaces soon closed after losing a client account that was bringing about 60% of total revenue - for 10 years - just could not replace the account.
The risks are obvious.

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