Should I be able to afford real estate?

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d18lover
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Should I be able to afford real estate?

Post by d18lover »

If I have to defend or deflect against one more well-meaning relative about our housing arrangement, I might lose my mind! I am looking for grains of truth in their criticism and have come here to ask for an honest assessment: Married (10 years) 40 year old couple with 3 kids under 9. One is level 1 and one is level 3 autistic, middle child is neuro-typical.

I have a managerial job, reached my pay cap a year ago. $90,100 annual income with insurance. No growth, just COLA. Biggest downside is the 1 hour commute, but hybrid WFH schedule now. My spouse is full time with the kids and we have no family assistance. We are a happy family and I think we do pretty well all things considered; however, every time I visit with my father-in-law, he has the same discussion with me about moving out of our 2br apartment. He will usually follow up asking if I've considered any 2nd jobs. (there is no contracting or OT in my field, so a 2nd job would be something like retail). Similarly, my own father has "joked" with me about calling protective services because we have 3 kids sharing a bedroom. Houses in our area are now $350,000+, but maybe we could move far enough away to find one for $275,000.

Take home $5200 monthly. subtract:
$1355 rent
$400 car
$150 insurance
$350 utilities
$1300 groceries
$300 gasoline :|
$400 medical/copays/speciality
=$900 left.

For sake of discussion - 20% money down would be $55,000. It would take me 4-5 years to do that with no entertainment or vacation spending at all. At todays rates, our payment would be PITI $1760 which we could afford. Alternatively, could put 3.5% down (FHA) or 5% down (conventional) anytime, I have some savings (partially thanks to stimulus money). Payment would be PITI $2200+ and we'd be house poor in that situation. Again, this is assuming we can find a house at $275k, when really our area is $350k. To rent a house or 3br apt is now $2000+ as well. I have applied for kids SSDI and was denied based on my income. "Down the road" my wife may be able to return to work, but that's only tentative as caregiver duties are demanding for the foreseeable future. My job does not allow me to transfer or move to another locale. It's a local government position. We've also paid for some contracting work to add accommodations to our 2br apt, with landlord permission. In the mean time, I catch a lot of pressure and feel guilty for not being further ahead. We had a lot of setbacks, but among our peers, social, and family group we are the only ones who haven't purchased real estate. On the same note, there's guilt anytime I spend money on something I want because of our situation. My FIL has sometimes said things like: "Oh... you got the new iPhone... hmmm". Well, yes I eventually did need a new phone, thanks for noticing!

TLDR: People in my life keep telling me, a person in my position, that I "should be able to afford a house" and all of the other arguments, throwing money away. The implication is that I'm not being frugal or a good steward of the finances. Despite my best efforts, I just don't see how we'll ever get there, thoughts?
stoptothink
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Re: Should I be able to afford real estate?

Post by stoptothink »

I'm certain there are things that could be cut out of your budget (ie. $1300/month for groceries), but IMO you seem to be doing a pretty solid job managing the family finances and a difficult situation overall. If you can never afford to buy a home it isn't that big of a deal, and many many families are in similar positions.

FWIW, I grew up sharing a single room with 4 siblings - 2 bedrooms and 1 bathroom, ~1000sq. ft. for 7 of us. My mother never owned a home until all of us were gone. I had a relatively happy childhood and most of us seem to turn out OK.
onourway
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Re: Should I be able to afford real estate?

Post by onourway »

What is taken out of your pay that your take home is just 69% of gross?

I would start there, and lay it out here in detail if there are any questions.

Do you run a strict budget? For someone in your situation a zero based budget like You Need A Budget might be life-changing.

Hard to say regarding your other costs. Car and fuel/insurance is certainly a big hit. A budget might help pay for the next vehicle up front - hopefully something more efficient. $1300 for groceries seems high-ish. We have the same family size, approximate same ages, are extremely active, don't pay any attention to food prices, and don't have someone in the house full-time that could theoretically prepare meals from scratch regularly - and our budget is closer to $1000/month.
chipperd
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Re: Should I be able to afford real estate?

Post by chipperd »

Agree with above poster.

For your question "Should I be able to afford real estate" (primary residence it is assumed) to get a legitimate answer, a full accounting of where that 90k/year goes, including taxes and insurance, would be necessary.

The loose rule of thumb states you could afford 28% of your pre tax income to go towards housing. So in your case, again not a recommendation, that would be about $2120/month I believe.

I suppose if relatives, jokingly or not, want you or their grandkids in a home, they could pony up the down payment. :moneybag
Last edited by chipperd on Tue Jun 21, 2022 1:09 pm, edited 1 time in total.
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hand
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Re: Should I be able to afford real estate?

Post by hand »

What a great (and depressing) question.

Others will no doubt chime in with specific math, but my quick take is that you seem to understand the numbers which means that your month to month assessment of affordability is likely to be correct.

It is unfortunate that you have to put up with relatives who feel free to opine on what you *should* be able to do especially as they seem to misunderstand the specifics of your financial situation and the big picture structural headwinds you are working against. Hopefully their advice is well meaning as it may have lead to successful outcomes in many timeframes in the past, but it sure doesn't seem terribly enlightened today.

With no disrespect intended, it appears you have had slightly above average career success, but have functionally topped out in terms of career growth unless you take on the risk of a job change and/or risk to work life balance and family happiness. Your approach, especially in a single earner household with three kids, may not be what is venerated on HGTV and may not be the same choice as your relatives have made and measure you against, but it sure seems like a reasonable life choice. In a perfect world, your approach would afford a house with a white picket fence in a good neighborhood. In an era of cheap money and two earner households it the unfortunate reality that your choices marginalize you in the housing market.

The good news is that a steady job plus a decent down payment will be more compelling if/when unemployment spikes next and/or housing values crash.
sidesaddle
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Re: Should I be able to afford real estate?

Post by sidesaddle »

I think you are doing great in a difficult situation, and the next time someone ribs you about not owning a home be sure and ask them if they're volunteering to give you the down payment. My only notes for you would be a) check your tax withholding -- you didn't mention whether you have health insurance premiums and/or retirement deducted, but if not, then your withholding is likely a bit high. And b) it can't hurt to look for a job that's closer to home so you don't have the long commute. Now, you have to weight that against job security and a pension since you mentioned it's a government job, but still -- worth considering. You could also price out 3-bedroom apartments to see if there's any that might not be a huge jump in rent -- just keep an eye on Craigslist and other listings in case there's a gem that pops up.

I also have an autistic child, and even in the best of circumstances it is really hard! My last suggestion is checking again, maybe with your state's autism parent support organization, to see if there's any benefits you might qualify for that you haven't applied for. Your two autistic children should qualify for Medicaid despite your income, and there may be additional county services (like respite care) that you could take advantage of.
LittleMaggieMae
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Re: Should I be able to afford real estate?

Post by LittleMaggieMae »

Should I be able to afford real estate?

The real question is DO you want to be able to afford real estate. A house is more of an expense than just the Mortgage (PITI and maybe PMI).

I'm guessing you could afford to buy a house - it seems to take 4 to 5 years to "build up a down payment" for most people. There's some belt tightening during that period.

Have you considered asking for some help from the Grand Parents? I'm guessing if you are 40yo The Grandparents are in their 60's. If they are planning on leaving you an "inheritance" maybe getting some of it now (even 10K from your family, 10K from your wife's) could help out a lot - you could "reserve" 10K for the after purchase money drain and have 10K towards your Down Payment.... (or basically have to save 20K less).

If you are going to embark on the road to home ownership - you and your wife WILL need to review your spending plan/budget. If you aren't already converting your "old we no longer use this stuff" into cash - now is the time to start... every little bit helps.

I'm thinking going thru a review of your spending/savings to spend (for future stuff) may help you out even if you don't buy a house. I'm guessing that at some point you may want to rent a bigger place to live (a 3b maybe 2b) place. Doing that will require a change in spending more in rent (and some saving up for the security deposit, utilites set up, moving van, maybe some additional furniture, etc...) so getting a better handle on your expenses is valuable.

You may need to change what you consider "entertainment" and "vacation" so that your family still gets to go out and do some new (hopefully fun) adventures that perhaps don't require as much money as you spent in the past.
Last edited by LittleMaggieMae on Tue Jun 21, 2022 1:27 pm, edited 1 time in total.
bloom2708
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Re: Should I be able to afford real estate?

Post by bloom2708 »

Keep doing your thing. If everyone is happy/content, then tune out the noise from the father in law.

I'd be blunt. We have made choices (one income, etc) and cannot afford a house from a time or money perspective.

Just add house upkeep and maintenance, repairs to your current list of things to do.

The 1 hour commute would be rough, but doing it sporadically makes it better.

How about renting a 3 bedroom closer to work? I'm of the opinion renting is just completely fine in many circumstances.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
Luke Duke
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Re: Should I be able to afford real estate?

Post by Luke Duke »

If I were in your shoes, I'd tell my FIL that I was waiting on him to die so we could use the inheritance to buy a house.
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celia
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Re: Should I be able to afford real estate?

Post by celia »

Have you considered something much closer to work and further from the relatives (unless they help with child care)? That 1-hour commute is worrisome (timewise).

Have a discussion with your spouse. What do the two of you think? If you want to buy a house eventually, you BOTH have to be working on that goal. It would mean lower food costs, less shopping, turn off the lights when leaving a room and shower in a shorter time, to have more savings. You could both go on a “spending diet” every other month and make it like a game.
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JoeRetire
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Re: Should I be able to afford real estate?

Post by JoeRetire »

d18lover wrote: Tue Jun 21, 2022 12:41 pm For sake of discussion - 20% money down would be $55,000. It would take me 4-5 years to do that with no entertainment or vacation spending at all. At todays rates, our payment would be PITI $1760 which we could afford.
Have you approached your parents or in-laws about helping you with the down payment? (Assuming you actually would want to purchase a house if not for the finances.)
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
cbs2002
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Re: Should I be able to afford real estate?

Post by cbs2002 »

You could find a way but you don't need to. You should not feel badly about renting for life. Other things are more important. Also, it's fine to buy with less than 20% down the first time as long as you keep PITI around 25%.

We also had a lot of medical issues that needed to be addressed with our kids. My spouse stayed home and we were fortunate to be able to do that. I applaud your and your spouse's commitment to giving your children a loving home. That's a lot of work.

We didn't save much for a good 6-7 years.

I'd be able to give better advice if you provided more details. What's your current portfolio? How much are you saving annually? You have three kids, two with special needs, so living in the school district you want to live in and near doctors is critical. Is your location right now optimal for these things? If that's a must-have, then it constrains all your other choices. Without those constraints, I'd live closer to work and drive less while starting to look for a next step in my career.

Make a short list of must-haves and see how the line up to your income and location.
Topic Author
d18lover
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Re: Should I be able to afford real estate?

Post by d18lover »

cbs2002 wrote: Tue Jun 21, 2022 2:00 pm You could find a way but you don't need to. You should not feel badly about renting for life. Other things are more important. Also, it's fine to buy with less than 20% down the first time as long as you keep PITI around 25%.

We also had a lot of medical issues that needed to be addressed with our kids. My spouse stayed home and we were fortunate to be able to do that. I applaud your and your spouse's commitment to giving your children a loving home. That's a lot of work.

We didn't save much for a good 6-7 years.

I'd be able to give better advice if you provided more details. What's your current portfolio? How much are you saving annually? You have three kids, two with special needs, so living in the school district you want to live in and near doctors is critical. Is your location right now optimal for these things? If that's a must-have, then it constrains all your other choices. Without those constraints, I'd live closer to work and drive less while starting to look for a next step in my career.

Make a short list of must-haves and see how the line up to your income and location.
I'm in a Target Date Retirement Fund through Voya. $50,000 balance. I save 3% and the agency does 7%. I've had it higher but never lower than that to get the match. We are indeed in a good area. Close to a top 10 research hospital and even closer to therapy providers.

I'm a manager level in a prison system, no advanced degree but I do hold a 4 year bachelors. Next step up? I am not in the line of nepotism succession. I was very fortunate to have a friend who brought me up to my current level, and that does seem to be the way it's done. He may move up again in some time, but there are no guarantees. He may retire before he gets the big chair. I do take him to lunch a couple times a year! I owe him a lot.

Others asked for a more detailed accounting of the finances. The $5200 take home is 10 months out of the year, there are 2 months with an extra pay check. I could average it out to $5633/month, but it's easier to plan for the typical months and try to save that 3rd check for a rainy day the other 2 months. I withhold almost nothing to federal taxes and generally get a small refund, though stimulus did cause us to owe last year. The $1000 grocery bill includes restaurant expenses which are usually around $200 a month for pizza or drive thru. Otherwise we are blessed with kids that really do love fresh fruit and vegetables. It's exorbitant! I have some "sinking funds" for the inevitable braces and other expenses on the road map.

To buy now would wipe us out entirely and we'd be spending an extra $1000/month on housing, not to mention maintenance and repairs. I feel like we'd be perpetually behind under that budget or worried about things like "can we afford fruit/a pizza this week?" for the first time.
rascott
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Re: Should I be able to afford real estate?

Post by rascott »

No I don't think you can afford a $350k house at your income and with a household of 5.

You are sure there is nothing under $350k? What area of the country?
sailaway
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Re: Should I be able to afford real estate?

Post by sailaway »

Judgemental folks going to be judgemental.

We choose to rent, and for several years we chose to have a roommate. When we aren't renting, we are living on our boat. Everyone has an opinion when you do things outside of the norm. Best thing to do is realize that it reflects on them. FIL may have expected something different for his child. I know my FIL did/does. Doesn't mean they would be happier living their parents ' dreams.
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Lee_WSP
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Re: Should I be able to afford real estate?

Post by Lee_WSP »

I don’t have actual statistics on this, but my best educated guess is that 60-90% of Americans are quite simply house poor. They are or were willing to eek out the absolute maximum loan the bank will give them. Then they either don’t move and their salary increases and the payments become manageable, or they rinse and repeat.

You on the other hand, recognize the fact that there are other investments than a house. However, for the vast majority of Americans (pretty close to 100%), the single biggest asset they own is the house. Bogleheads bucks the trend. I’d say it’s a complete 180 whereby at most only 1% (but I’d probably put this at near zero) of BH membership has more home equity than securities.

I think you have the best grasp on your own numbers. Unless they’re going to gift you the 20% down payment, they have no idea what they’re talking about. They’re just house poor and want you to be too.

But, based on the numbers, you should be able to afford that $275k house. You just need that down payment.
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d18lover
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Re: Should I be able to afford real estate?

Post by d18lover »

rascott wrote: Tue Jun 21, 2022 2:43 pm No I don't think you can afford a $350k house at your income and with a household of 5.

You are sure there is nothing under $350k? What area of the country?
I did a 30 minute radius on Zillow, which encompasses everything from the border of our major city out to the "boonies."

The cheapest 3 bedroom is $275,000 right now. There are some 2 bedroom houses for $220k. To move into the city border directly would at least triple our car insurance and I'd be paying city income tax. Those houses are in the $150k range and are plentiful for sale for a reason. It's extremely poor in terms of schools and quality of living. Urban food desert situation, everyone has to drive out to the suburbs to shop. You couldn't give those houses away a few years ago, I am astonished that anyone would pay $150k to live there.

I did a similar search around the radius of my office, which is almost an hour away on the polar opposite side of town from our city. The results were almost exactly the same
rascott
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Re: Should I be able to afford real estate?

Post by rascott »

d18lover wrote: Tue Jun 21, 2022 2:56 pm
rascott wrote: Tue Jun 21, 2022 2:43 pm No I don't think you can afford a $350k house at your income and with a household of 5.

You are sure there is nothing under $350k? What area of the country?
I did a 30 minute radius on Zillow, which encompasses everything from the border of our major city out to the "boonies."

The cheapest 3 bedroom is $275,000 right now. There are some 2 bedroom houses for $220k. To move into the city border directly would at least triple our car insurance and I'd be paying city income tax. Those houses are in the $150k range and are plentiful for sale for a reason. It's extremely poor in terms of schools and quality of living. Urban food desert situation, everyone has to drive out to the suburbs to shop. You couldn't give those houses away a few years ago, I am astonished that anyone would pay $150k to live there.

I did a similar search around the radius of my office, which is almost an hour away on the polar opposite side of town from our city. The results were almost exactly the same

Inventory is extremely tight in most areas for what you are looking for (entry-level 3BR+ suburban home). Maybe wait a year or so and see if that improves.

People live in the $150k houses in the city for the same reasons you are facing. It's too expensive to live in the nice suburbs.

If you are happy and content where you are.... then that's all that matters. Unless the grandparents are going to help you out financially, they need to mind their own business
pharming2017
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Re: Should I be able to afford real estate?

Post by pharming2017 »

d18lover wrote: Tue Jun 21, 2022 12:41 pm If I have to defend or deflect against one more well-meaning relative about our housing arrangement, I might lose my mind! I am looking for grains of truth in their criticism and have come here to ask for an honest assessment: Married (10 years) 40 year old couple with 3 kids under 9. One is level 1 and one is level 3 autistic, middle child is neuro-typical.

I have a managerial job, reached my pay cap a year ago. $90,100 annual income with insurance. No growth, just COLA. Biggest downside is the 1 hour commute, but hybrid WFH schedule now. My spouse is full time with the kids and we have no family assistance. We are a happy family and I think we do pretty well all things considered; however, every time I visit with my father-in-law, he has the same discussion with me about moving out of our 2br apartment. He will usually follow up asking if I've considered any 2nd jobs. (there is no contracting or OT in my field, so a 2nd job would be something like retail). Similarly, my own father has "joked" with me about calling protective services because we have 3 kids sharing a bedroom. Houses in our area are now $350,000+, but maybe we could move far enough away to find one for $275,000.

Take home $5200 monthly. subtract:
$1355 rent
$400 car
$150 insurance
$350 utilities
$1300 groceries
$300 gasoline :|
$400 medical/copays/speciality
=$900 left.

For sake of discussion - 20% money down would be $55,000. It would take me 4-5 years to do that with no entertainment or vacation spending at all. At todays rates, our payment would be PITI $1760 which we could afford. Alternatively, could put 3.5% down (FHA) or 5% down (conventional) anytime, I have some savings (partially thanks to stimulus money). Payment would be PITI $2200+ and we'd be house poor in that situation. Again, this is assuming we can find a house at $275k, when really our area is $350k. To rent a house or 3br apt is now $2000+ as well. I have applied for kids SSDI and was denied based on my income. "Down the road" my wife may be able to return to work, but that's only tentative as caregiver duties are demanding for the foreseeable future. My job does not allow me to transfer or move to another locale. It's a local government position. We've also paid for some contracting work to add accommodations to our 2br apt, with landlord permission. In the mean time, I catch a lot of pressure and feel guilty for not being further ahead. We had a lot of setbacks, but among our peers, social, and family group we are the only ones who haven't purchased real estate. On the same note, there's guilt anytime I spend money on something I want because of our situation. My FIL has sometimes said things like: "Oh... you got the new iPhone... hmmm". Well, yes I eventually did need a new phone, thanks for noticing!

TLDR: People in my life keep telling me, a person in my position, that I "should be able to afford a house" and all of the other arguments, throwing money away. The implication is that I'm not being frugal or a good steward of the finances. Despite my best efforts, I just don't see how we'll ever get there, thoughts?
Grew up with 4 siblings sharing 1 room, and we were as happy as could be. The only thing you should be focused on is your families happiness (wife and kids). Don’t strain yourself to buy a house if you aren’t comfortable with it. You can buy a house but you can’t buy a home.
runninginvestor
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Re: Should I be able to afford real estate?

Post by runninginvestor »

If you are fine where you are, and it's more expensive to buy, then I don't see a reason to buy. Especially not $350k on $90k income w/out much ability to increase. I would focus on trying to save now though as the kids will grow fast and another bedroom may be needed. If not, then you'll have a nice vacation fund.

I heuristically compare the ITRI+M portion of PITI + Maintenance vs rent. If I could afford the PITI+M then really it's just comparing the expense portions of Interest/Taxes/Insurance/Maintenance vs Rent and assuming that the Principal is a form of savings via home equity or savings account (if renting). Lived mostly in rural markets where home appreciation isn't big enough that the heuristic doesn't breakdown (home values are low enough that mortgage interest deduction doesn't come into play; and the leveraged home appreciation vs normal savings return doesn't run out ahead very quickly).
cbs2002
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Re: Should I be able to afford real estate?

Post by cbs2002 »

d18lover wrote: Tue Jun 21, 2022 2:21 pm
To buy now would wipe us out entirely and we'd be spending an extra $1000/month on housing, not to mention maintenance and repairs. I feel like we'd be perpetually behind under that budget or worried about things like "can we afford fruit/a pizza this week?" for the first time.
Then don't do it. But DO create an investment and spending plan that accounts for every dollar you make, rather than just "try to save that 3rd check for a rainy day the other 2 months". It's your money, own it. No reason to even contemplate not being able to buy fruit or a pizza in your situation.

I think you're just being smart about it all. Current schools, medical care and a non-working spouse have value to you. They'd have a lot of value to me if I was you. These are your must haves, not owning a house. There may be other places to live in your area, still renting, and still get those things. I don't know.

I don't totally understand where all your money is going. You said you take home $67,596 but make 90,100. 3% retirement contribution is 2700. You can't be paying 20K in taxes on a 90K salary, I don't think. Do you have a mandatory pension contribution? Pre-tax insurance?

If I was you AND there was a path where my spouse could go back to work in a few years, I'd put together a plan for maybe buying a place in 5+ years with two working parents.
Mike Scott
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Re: Should I be able to afford real estate?

Post by Mike Scott »

It does not sound like buying is a high priority for you now. That's OK. Family relations can be more complicated than that though.
chipperd
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Re: Should I be able to afford real estate?

Post by chipperd »

[/quote]


To buy now would wipe us out entirely and we'd be spending an extra $1000/month on housing, not to mention maintenance and repairs. I feel like we'd be perpetually behind under that budget or worried about things like "can we afford fruit/a pizza this week?" for the first time.
[/quote]

Then don't buy a home as it would own you rather than the other way around.
No one needs that stress on top of raising kids.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
Topic Author
d18lover
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Re: Should I be able to afford real estate?

Post by d18lover »

cbs2002 wrote: Tue Jun 21, 2022 3:20 pm
d18lover wrote: Tue Jun 21, 2022 2:21 pm
To buy now would wipe us out entirely and we'd be spending an extra $1000/month on housing, not to mention maintenance and repairs. I feel like we'd be perpetually behind under that budget or worried about things like "can we afford fruit/a pizza this week?" for the first time.
Then don't do it. But DO create an investment and spending plan that accounts for every dollar you make, rather than just "try to save that 3rd check for a rainy day the other 2 months". It's your money, own it. No reason to even contemplate not being able to buy fruit or a pizza in your situation.

I think you're just being smart about it all. Current schools, medical care and a non-working spouse have value to you. They'd have a lot of value to me if I was you. These are your must haves, not owning a house. There may be other places to live in your area, still renting, and still get those things. I don't know.

I don't totally understand where all your money is going. You said you take home $67,596 but make 90,100. 3% retirement contribution is 2700. You can't be paying 20K in taxes on a 90K salary, I don't think. Do you have a mandatory pension contribution? Pre-tax insurance?

If I was you AND there was a path where my spouse could go back to work in a few years, I'd put together a plan for maybe buying a place in 5+ years with two working parents.
I pulled out my check stub. Pretax HMO healthcare is $300 per pay check or $7800 per year. We paid $0 10 years ago and it has become a political football in our state, every raise we get is met with an insurance increase for the last few years.

FSA is almost $3000.
SS, State, Fed, and Medicare $416 in taxes withheld per paycheck works out to $10816/year.
I also have an TLD premium of like $25 a paycheck, and $19 in life insurance.

Does this add up?
KlangFool
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Re: Should I be able to afford real estate?

Post by KlangFool »

OP,

Feeding your family is at a higher priority that feeding your father-in-law's opinion. Your FIL could always bought you the house if he so desire. Or else, he should not tell you how you should spend your money.

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Flyer24
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Re: Should I be able to afford real estate?

Post by Flyer24 »

Let’s stay focused on finance topics and not get into family relationship issues.
delamer
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Re: Should I be able to afford real estate?

Post by delamer »

I’m posting to say two contradictory things:

1) Unsolicited financial advice is one of my few “see red” situations. So I completely sympathize with your reaction to your relatives’ comments and suggestions.

2) Please be sure that you have adequate disability and life insurance, given that you are the sole earner in your household.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
letahl
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Re: Should I be able to afford real estate?

Post by letahl »

Most people I know, myself included, did a first time homebuyers loan for that first place, and then piggybacked off that equity on up doing trade ins. I am not sure you are comparing apples to apples though because you are renting something less expensive than you would buy. (Ie the mortgage on your current apartment would be comparable to rent which you can afford.) So maybe the question is more about moving up in housing style/expenditure than renting versus buying.
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Elsebet
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Re: Should I be able to afford real estate?

Post by Elsebet »

Comparison is the thief of joy.

I grew up in a 3 bedroom, 1 bathroom house with the same household size (3 kids, 2 parents). I was the youngest girl and didn't get my own room until I was 11. My Aunt died, she was single with no kids, and we moved into her former house that had 4 bedrooms. My bed was in my parent's room until then, which as an adult I now find very awkward and I try not to think about it too much. :)

However I ended up okay and now I have a fun story to tell. I also appreciate the fact that I have a nice big house and my own huge office all by myself (just husband, no kids).

I will say that to buy my first house was a financial stretch even though it was only $67k at the time. I didn't have a down payment so I took out an 80/20 loan, not even sure they even do those anymore (this was 1998).
"...the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man..." ~Seneca
onourway
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Re: Should I be able to afford real estate?

Post by onourway »

d18lover wrote: Tue Jun 21, 2022 3:49 pm
I pulled out my check stub. Pretax HMO healthcare is $300 per pay check or $7800 per year. We paid $0 10 years ago and it has become a political football in our state, every raise we get is met with an insurance increase for the last few years.

FSA is almost $3000.
SS, State, Fed, and Medicare $416 in taxes withheld per paycheck works out to $10816/year.
I also have an TLD premium of like $25 a paycheck, and $19 in life insurance.

Does this add up?
Those are some hefty costs taken out of that salary. I would give some serious consideration to looking for another job while the market is still good.

That said, regarding the house, there is nothing inherently wrong with renting forever. If owning a home is not a priority for you or your family, that’s ok, and you should be clear about that with your extended family. Set a clear boundary and be confident in it.

If owning a home IS something you would like - or think you would like - I do think it’s not out of the realm of possibility. You will need to scrimp and save in a few places, but it should be doable. A complete, zero based budget will go a long way towards showing you whether this is possible for you or not.
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Gray
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Re: Should I be able to afford real estate?

Post by Gray »

I don’t know where you’re located, but there are many State, Federal, and University administration jobs that pay similarly well, but may have better health benefits, child care, or flexibility regarding your children’s care needs. In other words, get a position where you’re not topped out with better benefits and flexibility, and then worry about a house. Just a thought.
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d18lover
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Re: Should I be able to afford real estate?

Post by d18lover »

Gray wrote: Tue Jun 21, 2022 4:56 pm I don’t know where you’re located, but there are many State, Federal, and University administration jobs that pay similarly well, but may have better health benefits, child care, or flexibility regarding your children’s care needs. In other words, get a position where you’re not topped out with better benefits and flexibility, and then worry about a house. Just a thought.
I'd relocate if it was a step up, but I'm not sure that a bachelors degree and criminal justice background are desired. I'm inside of a prison system right now. I have interesting experience, and leadership experience, but does that resume land 6+ figures anywhere in the country? I've had interviews within my own department for positions that pay up to $119,000 and everywhere in between that and my salary. I went through a phase of looking at federal jobs or other states, and even applying, but only found pay cuts. I did not feel qualified for most and usually did not get interviews where I did apply. USA Jobs seems to strongly prefer advanced degrees.

My feedback from my employer has been that I interview well, but they chose another candidate. This may be politically incorrect and I apologize in advance if it requires a moderator edit, but they have solely promoted people who are not my gender/race for the past few years. In my area, I am the only one of my gender and race left on a very large management team. It was 50/50 about 4 years ago. There was an opening where I was very qualified to run a department in the home office. I had unique experience and the interview was a slam dunk. They promoted an entry staff below me to fill the role above me, skipping my step altogether (previously unheard of). I'm sure she's great, but it was a little bit of a blow to morale for me. If you do have practical advice on the types of positions or where to look for them, I'd welcome a PM. Thank you for the reply!
iamlucky13
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Re: Should I be able to afford real estate?

Post by iamlucky13 »

The budget could be made to work with home ownership, but it would not leave much margin and would mean some belt tightening. It doesn't sound like the housing arrangement you have now makes your family unhappy, and giving up what you would have to in order to make home ownership work might result in a net decrease in life satisfaction.

I'm also not very keen on the current housing market (prices have not adjusted to the changes in mortgage rates). I try not to think of this from a market timing standpoint, but as re-assurance that your concerns are legitimate: it's a difficult time to buy in general.

Personally, I'd try to work on slowly building up a down payment savings in order to have the option later if your priorities change, and because it has value as an increased emergency fund / car replacement fund / additional retirement savings even if you never do buy a home, but don't be pressured into actually purchasing by others.

And in the meantime, practice not worrying about what the relatives think, especially if you and your wife are in agreement on your budget.
onourway wrote: Tue Jun 21, 2022 1:01 pm$1300 for groceries seems high-ish. We have the same family size, approximate same ages, are extremely active, don't pay any attention to food prices, and don't have someone in the house full-time that could theoretically prepare meals from scratch regularly - and our budget is closer to $1000/month.
I noticed the groceries category, too, since it is a significant expense, but it ends up in between the USDA low and moderate cost food plans. It is possible to reduce that cost with some effort (and the amount of time the OP and their spouse spends caring for the kids affects how achievable that effort is), but it's a very typical level of food cost.

The $650 per month for the HMO plan with another $400 per month for medical co-pays and specialty care are the real pain points in the budget, and I assume there isn't much flexibility there.

And while I don't personally have anywhere near the topic author's extravagant (as apparently implied by relatives) taste in phones, that roughly $5 per month premium over the average new phone cost (assuming 4 year useful life) isn't what is making housing prices daunting to them, regardless of what the in-laws think
getthatmarshmallow
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Re: Should I be able to afford real estate?

Post by getthatmarshmallow »

Oof. Sorry about the relatives. I would expect some downward pressure on 3/2 "starter" homes soon - interest rates are slowing the ride, and a market that allows people in starter homes to upgrade (not having to beat a cash offer) will likely follow, freeing up some inventory. If you want a house, saving for the down payment probably works in your favor in a cooling market. If you don't, don't buy one! Kids will be fine.

You're stuck in a position a lot of people are - things are fine, but there's not enough room to jump to buying a house. The iPhone doesn't move the needle much, and neither does the proverbial avocado toast. But it might be worth budgeting to see if you can get that "five years to down payment" down to two or three.

Thought: are the meddling fathers offering to give a down payment? Are they passing on what they're hearing from your wife? If not - then thank them for their advice and keep on keeping on.
Olemiss540
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Re: Should I be able to afford real estate?

Post by Olemiss540 »

d18lover wrote: Tue Jun 21, 2022 6:27 pm
Gray wrote: Tue Jun 21, 2022 4:56 pm I don’t know where you’re located, but there are many State, Federal, and University administration jobs that pay similarly well, but may have better health benefits, child care, or flexibility regarding your children’s care needs. In other words, get a position where you’re not topped out with better benefits and flexibility, and then worry about a house. Just a thought.
I'd relocate if it was a step up, but I'm not sure that a bachelors degree and criminal justice background are desired. I'm inside of a prison system right now. I have interesting experience, and leadership experience, but does that resume land 6+ figures anywhere in the country? I've had interviews within my own department for positions that pay up to $119,000 and everywhere in between that and my salary. I went through a phase of looking at federal jobs or other states, and even applying, but only found pay cuts. I did not feel qualified for most and usually did not get interviews where I did apply. USA Jobs seems to strongly prefer advanced degrees.

My feedback from my employer has been that I interview well, but they chose another candidate. This may be politically incorrect and I apologize in advance if it requires a moderator edit, but they have solely promoted people who are not my gender/race for the past few years. In my area, I am the only one of my gender and race left on a very large management team. It was 50/50 about 4 years ago. There was an opening where I was very qualified to run a department in the home office. I had unique experience and the interview was a slam dunk. They promoted an entry staff below me to fill the role above me, skipping my step altogether (previously unheard of). I'm sure she's great, but it was a little bit of a blow to morale for me. If you do have practical advice on the types of positions or where to look for them, I'd welcome a PM. Thank you for the reply!
You don't need a step up in salary, you need a step down in COL. There are PLENTY of places near prison systems that feature good housing options below your comfortable budget range.

Worth shipping around is all of the housing situation really becomes untenable.

Does your job have a pension?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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Beensabu
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Re: Should I be able to afford real estate?

Post by Beensabu »

d18lover wrote: Tue Jun 21, 2022 12:41 pm an honest assessment
You have a stable job that allows your family to comfortably afford your current lifestyle, which appears to be a happy one.

"It's working for us, and we're happy" is all you ever need to say, every single time. Is it true? It sounds like it is.

Rather than saving for a down payment, maybe do so to ensure you continue being able to afford your lifestyle should you need to find a different place to live for reasons outside your control.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Topic Author
d18lover
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Re: Should I be able to afford real estate?

Post by d18lover »

Olemiss540 wrote: Tue Jun 21, 2022 8:49 pm
d18lover wrote: Tue Jun 21, 2022 6:27 pm
Gray wrote: Tue Jun 21, 2022 4:56 pm I don’t know where you’re located, but there are many State, Federal, and University administration jobs that pay similarly well, but may have better health benefits, child care, or flexibility regarding your children’s care needs. In other words, get a position where you’re not topped out with better benefits and flexibility, and then worry about a house. Just a thought.
I'd relocate if it was a step up, but I'm not sure that a bachelors degree and criminal justice background are desired. I'm inside of a prison system right now. I have interesting experience, and leadership experience, but does that resume land 6+ figures anywhere in the country? I've had interviews within my own department for positions that pay up to $119,000 and everywhere in between that and my salary. I went through a phase of looking at federal jobs or other states, and even applying, but only found pay cuts. I did not feel qualified for most and usually did not get interviews where I did apply. USA Jobs seems to strongly prefer advanced degrees.

My feedback from my employer has been that I interview well, but they chose another candidate. This may be politically incorrect and I apologize in advance if it requires a moderator edit, but they have solely promoted people who are not my gender/race for the past few years. In my area, I am the only one of my gender and race left on a very large management team. It was 50/50 about 4 years ago. There was an opening where I was very qualified to run a department in the home office. I had unique experience and the interview was a slam dunk. They promoted an entry staff below me to fill the role above me, skipping my step altogether (previously unheard of). I'm sure she's great, but it was a little bit of a blow to morale for me. If you do have practical advice on the types of positions or where to look for them, I'd welcome a PM. Thank you for the reply!
You don't need a step up in salary, you need a step down in COL. There are PLENTY of places near prison systems that feature good housing options below your comfortable budget range.

Worth shipping around is all of the housing situation really becomes untenable.

Does your job have a pension?
No pension, retiree healthcare I am vested in though full coverage. 401k/457 is fully portable at $50k.

In the world of government/corrections, one hires in as a grunt anywhere they go. My leadership role would mean nothing the next state over other than a good chance at hiring in at entry level pay and position. Same within my state. I could not become the manager of the great northern woods division when it opens, a grunt has been working there patiently for years and will take that spot. I could eventually become a grunt in the great northern woods, but I'd have a very long road to promote again and have to walk up the step increases from base manager pay. So I'd be at $68,000 all over again. The kicker for me is that going into the country too far and we're driving an hour (or more) an hour daily for ABA, Speech, and OT therapy. There's a huge deficit in rural autism resources. The good stuff is where the most people can benefit from it. We live a short drive from a major research hospital/university (top 10) and have benefited greatly from their proximity. A surgery is scheduled later this month for our youngest. We also had choice of several providers for outpatient.
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warowits
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Re: Should I be able to afford real estate?

Post by warowits »

A person with a 90k a year job absolutely can afford a 350k house. Do you want the trade offs you will have to make to get it? Only you can answer.

In laws can be tricky. You very well could buy a house and then have to deal with them judging you for the sacrifices you have to make to get in a house.
KESP
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Re: Should I be able to afford real estate?

Post by KESP »

My daughter and son-in-law just bought a $320,000 house and their income is $120,000 gross. They could just barely scrape up enough money to do so. I would think it would be hard on your salary to buy a house without a large down payment. Throw in the fact you have 3 children, 2 requiring additional care, and I’m not sure you need the stress. Is your wife on the same page as you? I hope she talks to her father and tells him to back off unless he’s willing to fork over some money. Don’t take the comments to heart. You are doing well to provide for your family and allowing your wife to be a SAHM.
ScubaHogg
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Re: Should I be able to afford real estate?

Post by ScubaHogg »

I’d say two things

- renting is grossly underrated and home ownership is grossly overrated (I currently own and have rented a lot). Not to say always do one or the other, but analyze the specifics and make a decision. You seem to have done that wisely in this case

- I haven’t seen this mentioned, but one of the family complaints seems to be the number of bedrooms. But so far the discussion has been “buy” or “rent a 2 bedroom.” Is renting a slightly larger place just out of the question?

Ok a third thing

- I throw my lot in with looking around the country for another job. Lots of local governments are struggling to find experienced people in a variety of positions. Especially “unsexy” locales. I’d bet you could find an area with better medical support and a lower col for similar pay. Anchorage for instance is advertising in the anchorage airport for people to work in the prison system. That tells me they are kinda desperate.
“Inflation is always and everywhere a monetary phenomenon.” - Milton Friedman
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BrooklynInvest
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Re: Should I be able to afford real estate?

Post by BrooklynInvest »

Sorry for your worries OP. Family can be a pain.

Me, you're doing fine as is it seems. A second job would take you away from the kids and it doesn't seem you need to in order to keep a roof over everyone's heads. So it's a rented roof? Big whup. Ditto three kids in a room. Not ideal I guess but if you've got 3 happy kids in a room then I'd take the win!

Of course they're gonna need some more space as they get older. Three teenagers in a room may be a different kettle of... teenagers. And you are susceptible to rent inflation but if you're getting COLAs in your salary you'll be OK.

Me, I'd start to build that "down payment fund" with some of what's left at the end of the month but with a little more flexibility. Taking the kids for pizza once in a while? Yeah, take the kids for pizza once in a while.

Good luck OP!
CPA without a cause
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Re: Should I be able to afford real estate?

Post by CPA without a cause »

OP, sorry about your situation. if in-laws keep asking when your gonna buy a house, i would counter "when are you going to give me the cash for a down payment?"

based on all your replies i think your doing the best you can.

i appreciate reading stories like yours, it is the best form of birth control available. I say this seriously; couples should not consider having children unless they are ok with being in a situation like yours. maybe its not the most likely scenario, but it is a possibility.
rockstar
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Re: Should I be able to afford real estate?

Post by rockstar »

I've never put down more than 5% for a home purchase. I put down 2.5% on this one because of the appraisal.

You make good money. I have a lot of friends that make far less. But the reality is that you have kids and wife to feed and shelter. In the 80s my mom had to start to working, so that we could keep up with increasing costs. Another option is moonlighting another gig.

But I think it's more than possible to save 5% plus fees to buy a home. However, once you own a home, you have the added cost of maintenance. Right now is probably the worse time to buy a home between higher mortgage rates and low supply. And it's not a great time to be a renter because of rent increases.

I wish you the best of luck. You should be able to get this to work.
SantaClaraSurfer
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Re: Should I be able to afford real estate?

Post by SantaClaraSurfer »

I hear you and sympathize!

We are in a different situation, but are also renters and struggle with the reality of social pressure to own a residence.

1. Our standard first question to ourselves is: how much is our current rent relative to our gross income? Is it affordable?
2. Our standard second question to ourselves is: if you took our available and ready reserves (cash/bonds/equities/etc.) and sold the maximum we'd be comfortable with rolling into a residence to come up with a 30% down payment, what kind of house/housing could we afford in our market?

If the answer to Question 1 gets us a rent payment that we can manage for our budget and a place to live that we like, and the answer to Question 2 gets us either a big change in our location or a much worse living situation, then the choice is clear. If we have to twist ourselves into pretzels to justify using tricks to borrow more to make Question 2 work (or ignore all sorts of added costs and fees and taxes) then we already know the answer ourselves, even if we can't really share the base numbers with our friends and relatives without getting into our private finances.

Regarding family and outsiders, having been through our own financial journey over the years, I would note that there's no one outside our household who knows just how much we've overcome to pay off our burdensome debts and get to a solid footing of budgeting, investing and saving, so I don't think we're going to rush to overweight anyone else's feedback on going into additional debt to purchase a home in a HCOL area, esp. with a less than sufficient down payment.

Fwiw, I keep a tracker in my investing spreadsheet that creates a rolling Dollar Amount of the house we can afford based on our available down payment. It's sobering! And grounding! (Esp. with the current market decline!) But it's also very real, and personal.

Someday that figure will hit the magic number, and we may well become homeowners of some sort.

But not now.

When that day comes, it will be on our terms and work for us. Fact is, there's no one else lining up to make that mortgage payment.
pasadena
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Re: Should I be able to afford real estate?

Post by pasadena »

Look, you're a family of 5, with 2 special needs kids, and one income.

Could you super-optimize your budget? Probably. Should you? Meh. I'd tackle the car payment before the food budget.

Owning real estate isn't the end all of life. Once the kids grow up enough, maybe you'll look at renting a 3-bedrooms. Or maybe not. This is your life, your choices, don't let judgmental people drag you down when they're not walking in your shoes and not helping (whether they could or not).

Now, you say it would take you too long to save. So what? Save. One day, you'll have money and you'll be able to decide what you want to do with it. For years I saved nothing because it seemed like it was useless, the goal was too high. Then I started saving anyway, what I could, and now I'm glad I did (and no, I didn't end up buying a home, I'm still happily renting).

I think it's more important that you (1) are a happy family and (2) save for retirement. Don't try to keep up with the Joneses and don't ever make decisions based on your extended family's judgments.
AlwaysLearningMore
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Re: Should I be able to afford real estate?

Post by AlwaysLearningMore »

If you're happy where you are, then don't purchase a home to make them happy.

The next time it comes up in conversation, have you considered something along the lines of "you know, we're content where we are for now, and I really don't want to keep rehashing this, OK?"
Retirement is best when you have a lot to live on, and a lot to live for.
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