Can we afford a new house? (stay-at-home parent edition)

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saj
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Can we afford a new house? (stay-at-home parent edition)

Post by saj »

I know there are many of these threads, but really just trying to get some other thoughts on this purchase we're considering.

Summary
  • Growing family, currently 2 kids (infant and toddler), hoping for 1 more. My wife and I are in our mid 30s for what that’s worth.
  • Current home is small/bad layout and would need significant updating. Renovation including kitchen, bathrooms, and new addition would easily be $150-200k because it's very expensive up here in the northeast US. The house is in a good town, good schools, but it's fairly busy with lots of traffic from neighboring areas. Wife is pretty unhappy with the current situation, so delaying the decision to buy or renovate isn't a great option.
  • Looking for new/newer construction with a bit more space, bigger yard, area that’s less busy. Supply is super limited overall.
  • Current home is worth $500k, newer home would be $800-900k. We plan to put $450k down
  • Current home is top 15 school district in our small state. The new home would be top 3. I know these scores seem to follow wealth and this town has plenty of it, but I have also heard great things about the schools. Notably, other towns in the area aren't really cheaper. For instance, a new house in many of the other good districts (top 20) would still be $800-850k. The town we're looking at is only slightly cheaper because it's an extra 15-20 minute commute to job centers (I'm remote).
Income

My income: $288k - $210k base, $78k RSU
Her income: $0-15k (stay at home wife, might go back to 1 day a week)

I’m looking at a promotion in the next 3-6 months that won’t be factored in here, but likely 15% jump in base and RSU. This is tech, so not super recession-proof. I’ve been lucky enough to avoid layoffs in my career so far (10 years). I work in an area that’s generally hard to hire, and where new hires have long ramp up times.

She could go back to making $80k as a nurse, probably closer to $100k with overtime. We value her time as a stay at home mom more. She’s in healthcare so arguably more recession-proof and currently high demand. If she ever went back, daycare would eat into this pay quite a bit.

Assets

401ks: $400k
Roth IRA: $60k
Cash: $300k (we’re planning to buy before selling to avoid contingencies, so this will be the initial downpayment)
Current home equity: $300k (half of this will be used to pay down new house once we sell, other $150k will be available as cash)
Emergency fund: $85k
Taxable: $50k (this was ~$250k, see cash above. Once our house is sold, add $50-100k back here.)
529s: $3k (just started)

Net worth: ~$1.2 million

Expenses (excluding housing)

Car: $700/mo (just purchased 3 row SUV)
Utilities: $750/mo (heat/electric/internet/cable/etc)
Groceries: $1500/mo (need to look at this, feels high)
Misc: $4500/mo (everything else we put on credit cards, paid off each month. Note this is an average for the last year, many baby purchases.)

Total expenses minus housing: $7450/mo

Preschool wouldn’t be a major expense because the new town has public Kindergarten, and preschool is $180/mo for one kid, $270/mo for two. Leaving that out as something that could be covered from savings if needed.

We’ve spent a lot in the last year on baby car seats, strollers, and pretty much everything else you can imagine goes with having kids. I’d like to say I expect this to slow down, but I’m sure there are other things to buy as kids get older.

Can we afford it?

36% rule

Using salary only (no RSUs):

36% rule: $1,163,000
25% rule: $917,000

Everything looks good here even at 25%.

3x rule

I’ve subscribed to this in the past, but it ignores the 50% downpayment entirely. That being said, including my RSUs, we’d still be very close:

$288,000 x 3 = $864,000

Incomes vs. Expenses

Net income per month: $12,000 (assuming maxing out single 401k)

Non-housing expenses: $7,450
900k house mortgage: $4,130

$12,000 - 11,580 = +$420/mo

So, this is cutting it pretty close assuming no income from my wife, no RSUs, and maxing my 401k. But that means that we have all those other knobs to turn if things ever went poorly.

RSUs are paid quarterly, so I’d expect $15k net per quarter that could be saved to bolster emergency fund, fund 529s, save for future needs, etc.

Retirement impact

We'll probably be 55ish by the time our kids are out of school, so we don't have any ambitions of retiring super early. With our current savings, and assuming we only contributed the max to one 401k per year, it looks like we'd be comfortable in retirement at 65 years old. My Wife would be back to work in our early 40s, so that's still quite a bit of time to catch-up if we had any ambitions of stopping work closer to 55-60.

Concerns

1. Moving to a wealthy town might increase pressure to “keep up with the Joneses”. I’m generally pretty resistant to this.
2. I lose my job, my Wife working overtime would still be short on expenses by ~$50k, so emergency fund would hold us over for a couple years
3. Beyond the 15% raise that is likely to happen in 3-6 months, I'm not likely to see other large increases in pay without significant impact to work-life balance. I'm WFH right now, around for the kids all the time, etc.

Final thoughts

What do you think? Did any of you make similar moves where you were a bit out of your comfort zone, but things worked out well once the other spouse got back to work?

By most common metrics things look good. I like that we can afford it on base salary and treat RSU as more of a bonus, but open to feedback about things I might be missing. It definitely leaves us a little bit less comfortable if only living off my salary, but as long as the RSU value holds we should be okay until my Wife gets back to work (~7 years).
JBTX
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by JBTX »

A $900k house on a $210 base seems a bit tight. For the most part you will only be saving what is in your 401k, so maybe 10% of income?

I certainly think it is doable, although there is some modest risk. If you lost your job for more than a few months you would need to be willing to cut back. Based upon your post and described lifestyle it doesn’t seem like that would be easy for you. Having said all that you are certainly in a better situation than most people.

I’d ask this way, would you and wife be willing to cut back on other expenses to move to new house? Which is more important?

I think you’d probably be ok, but personally I would not be comfortable only saving 10% of my income at that stage in life. If I could get to 20% then I’d probably do it.
HomeStretch
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by HomeStretch »

It’s not uncommon for a couple in their 30s with a growing family to take on a more expensive house. Your main risk as a single-income family is job loss or incapacitation. So you have to weigh that risk against the spending/portfolio impact of a more expensive home to see how comfortable you are with the added expense of a new house.

Is there an option for you to completely take over household/childcare responsibilities one day per week so your spouse can work one day a week to increase income and keep her network/job skills up to date?

Do you have adequate non-employer life insurance and disability insurance?
Topic Author
saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

JBTX wrote: Sun Feb 11, 2024 11:50 am A $900k house on a $210 base seems a bit tight. For the most part you will only be saving what is in your 401k, so maybe 10% of income?

I certainly think it is doable, although there is some modest risk. If you lost your job for more than a few months you would need to be willing to cut back. Based upon your post and described lifestyle it doesn’t seem like that would be easy for you. Having said all that you are certainly in a better situation than most people.

I’d ask this way, would you and wife be willing to cut back on other expenses to move to new house? Which is more important?

I think you’d probably be ok, but personally I would not be comfortable only saving 10% of my income at that stage in life. If I could get to 20% then I’d probably do it.
The “Misc” spending can definitely be cut back. There were a lot of one-time purchases this year like strollers, car seats, furniture, etc.

I think that not having to look at a house that needs a lot of work would be an improvement to my Wife’s happiness. I also think we’d be significantly happier in a less busy town.

I’m trying to downplay the RSUs to be conservative, but it is a publicly traded company, not pre-IPO or anything. It’s not mega corp though. That $78k would mostly be saved, maybe call it $40k after taxes and vacation fund. So, I’m still thinking something like $70k per year in savings, $40k taxable and $30k 401k (including match), which is >20%.
KlangFool
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by KlangFool »

OP,

What is your current annual savings/investment?

What is your current mortgage payment?

KlangFool
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PowderDay9
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by PowderDay9 »

saj wrote: Sun Feb 11, 2024 11:36 am Incomes vs. Expenses

Net income per month: $12,000 (assuming maxing out single 401k)

Non-housing expenses: $7,450
900k house mortgage: $4,130

$12,000 - 11,580 = +$420/mo
I think you're cutting it too close considering you might want a 3rd kid. I'd suggest taking a closer look at your expenses and seeing if you can get them down over the next 6 months. If you can, then I'd go for the new house. The baby stuff you described doesn't have to cost that much, which makes me think that you might not be watching expenses very closely.
Topic Author
saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

HomeStretch wrote: Sun Feb 11, 2024 11:54 am It’s not uncommon for a couple in their 30s with a growing family to take on a more expensive house. Your main risk as a single-income family is job loss or incapacitation. So you have to weigh that risk against the spending/portfolio impact of a more expensive home to see how comfortable you are with the added expense of a new house.

Is there an option for you to completely take over household/childcare responsibilities one day per week so your spouse can work one day a week to increase income and keep her network/job skills up to date?

Do you have adequate non-employer life insurance and disability insurance?
Even better yet, I have my Mother, who before the second child was watching our first kid one day per week. This will resume this once the infant is a little older. It’s a lot of info to add to a post. She could help out more if we were ever in a really bad spot.

I have ~10x salary term life insurance until when the kids would be graduating HS and 2x from work.
Last edited by saj on Mon Feb 12, 2024 5:54 am, edited 1 time in total.
Topic Author
saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

KlangFool wrote: Sun Feb 11, 2024 12:13 pm OP,

What is your current annual savings/investment?

What is your current mortgage payment?

KlangFool
I’d need to dig for exact numbers, but for the last few years we’ve been maxing both of our 401ks (before first kid). On top of that, $50-70k+ a year saved in taxable and other cash savings, before we liquidated for the downpayment. We only started taxable investing in the last few years because before that we were paying down student loans and my Wife was finishing school.

Current mortgage is only $1650/mo.
HereToLearn
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by HereToLearn »

Can you take a close look at the $4500/month on CC to determine how much of these expenses truly are one-offs? Children tend to have recurring 'non-recurring' expenses as they age and adopt new sports & activities, need new clothing, etc.

My first instinct is to say that moving to the larger house in the better school district is worth doing even if money is tight for a while, but I think you need to be realistic about how many other new expenses you will realize in moving: decorating, more furniture, higher utility costs for larger home, unknown maintenance, etc.

As another person commented, it is not unusual to stretch when starting out, but it may require a bit of budgeting for a couple of years.
Topic Author
saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

PowderDay9 wrote: Sun Feb 11, 2024 12:16 pm
saj wrote: Sun Feb 11, 2024 11:36 am Incomes vs. Expenses

Net income per month: $12,000 (assuming maxing out single 401k)

Non-housing expenses: $7,450
900k house mortgage: $4,130

$12,000 - 11,580 = +$420/mo
I think you're cutting it too close considering you might want a 3rd kid. I'd suggest taking a closer look at your expenses and seeing if you can get them down over the next 6 months. If you can, then I'd go for the new house. The baby stuff you described doesn't have to cost that much, which makes me think that you might not be watching expenses very closely.
I agree that we should try to get the expenses down. It’s baby stuff and also home furniture that’d be coming with us. To be fair, it does seem closer to 15% of the total.

Also, I’d never consider this at all if the +$420/mo was based on my total income. That’s completely ignoring RSUs, more to show that any stock price fluctuation wouldn’t change our ability to afford the house. Either way, agree that our goal is to prove we can get the expenses down ahead of moving.
vinhodoporto
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by vinhodoporto »

You can afford it, even with todays high interest rates, no RSUs, and spouse staying home. Many people, including my spouse and I, stretched to buy a house for a growing family in their early 30s.

With a stay at home parent you should be able to cut back some of your discretionary spending. When my spouse was at home full time with kids we spent a lot less on convenience purchases, and had more time to hunt for good deals, and shop around compared to when we were both working outside the home.

Kids will get more expensive as they get older… sports, activities, camps, tutoring, test prep… especially in an affluent town with high achieving parents and kids.it’s not so much a keeping up with the Joneses thing as it is a “all my friends are doing…”
KlangFool
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by KlangFool »

saj wrote: Sun Feb 11, 2024 12:25 pm
KlangFool wrote: Sun Feb 11, 2024 12:13 pm OP,

What is your current annual savings/investment?

What is your current mortgage payment?

KlangFool
I’d need to dig for exact numbers, but for the last few years we’ve been maxing both of our 401ks (before first kid). On top of that, $50-70k+ a year saved in taxable and other cash savings, before we liquidated for the downpayment. We only started taxable investing in the last few years because before that we were paying down student loans and my Wife was finishing school.

Current mortgage is only $1650/mo.
saj,

Would you mind stating what that number is? 47K? Or something else?

KlangFool
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Topic Author
saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

HereToLearn wrote: Sun Feb 11, 2024 12:26 pm Can you take a close look at the $4500/month on CC to determine how much of these expenses truly are one-offs? Children tend to have recurring 'non-recurring' expenses as they age and adopt new sports & activities, need new clothing, etc.

My first instinct is to say that moving to the larger house in the better school district is worth doing even if money is tight for a while, but I think you need to be realistic about how many other new expenses you will realize in moving: decorating, more furniture, higher utility costs for larger home, unknown maintenance, etc.

As another person commented, it is not unusual to stretch when starting out, but it may require a bit of budgeting for a couple of years.
I will take a closer look at exactly what the money is being spent on. Some things won’t need to be replaced like infant and toddler car seats, strollers, books, toys, etc. I take the point that there will be new toys, new books, etc. as they age. I’m hoping most of the more expensive hobbies would start after the kids are in school and my Wife is back to work.
Nottingham
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Nottingham »

I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

KlangFool wrote: Sun Feb 11, 2024 12:55 pm
saj wrote: Sun Feb 11, 2024 12:25 pm
KlangFool wrote: Sun Feb 11, 2024 12:13 pm OP,

What is your current annual savings/investment?

What is your current mortgage payment?

KlangFool
I’d need to dig for exact numbers, but for the last few years we’ve been maxing both of our 401ks (before first kid). On top of that, $50-70k+ a year saved in taxable and other cash savings, before we liquidated for the downpayment. We only started taxable investing in the last few years because before that we were paying down student loans and my Wife was finishing school.

Current mortgage is only $1650/mo.
saj,

Would you mind stating what that number is? 47K? Or something else?

KlangFool
~$40k because last year my Wife was just short of maxing her 401k because of time off for the baby, but it was still close. The 2-3 years before, we both actually contributed the max allowed employee contribution, plus matches, so in the ballpark of $40-50k.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
To be fair she’s in the house all day and it’s really in need of renovation/repair. Probably not worth getting into because definitions of this are wildly different depending on various factors. She’s fine with staying and fixing things up, I’d prefer to move to a new town, for reasons we’re in agreement on. She’s also not opposed to going back to work at all, if anything I’m more opposed to it. She is enjoying time with the kids, however.
KlangFool
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by KlangFool »

OP,

I would get an exact estimate of your current annual expense before you proceed.

A) As per your current plan of 50% down payment, your portfolio is down a significant amount. What will be the final amount?

B) And, your annual expense is at a range of 150K to 200K.

C) The likelihood of your wife working is contributing amount of income by offsetting child care of 3 kids is low.

D) If you are unemployed in the coming recession and the house and stock drops 50%, your finance could fall apart easily.

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Re: Can we afford a new house? (stay-at-home parent edition)

Post by KlangFool »

saj wrote: Sun Feb 11, 2024 1:11 pm
Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
To be fair she’s in the house all day and it’s really in need of renovation/repair. Probably not worth getting into because definitions of this are wildly different depending on various factors. She’s fine with staying and fixing things up, I’d prefer to move to a new town, for reasons we’re in agreement on. She’s also not opposed to going back to work at all, if anything I’m more opposed to it. She is enjoying time with the kids, however.
saj ,

The problem here is financially she going back to work may not help much financially at all.

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HornedToad
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by HornedToad »

You are either missing a 0 at the end of preschool costs or that’s a weekly cost and not monthly. $200-300/mo for preschool isn’t accurate

I do think you can afford bigger house but there will be sacrifices until in public school and it’s tight
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

KlangFool wrote: Sun Feb 11, 2024 1:17 pm OP,

I would get an exact estimate of your current annual expense before you proceed.

A) As per your current plan of 50% down payment, your portfolio is down a significant amount. What will be the final amount?

B) And, your annual expense is at a range of 150K to 200K.

C) The likelihood of your wife working is contributing amount of income by offsetting child care of 3 kids is low.

D) If you are unemployed in the coming recession and the house and stock drops 50%, your finance could fall apart easily.

KlangFool
Agreed on locking in expenses.

A)

Final picture would be something like:

401ks: $400k
Roth IRA: $60k
Taxable: $150k
Home equity: $450k
Emergency fund: $110k
Cash: $35k (discretionary)

C)

Agree for the most part. She could work 2 days a week, 12 hour shifts, one covered by me on the weekend and another by my Mother, and add about $45k of income. That’d not require daycare at all. Giving up one weekend night a week isn’t ideal, but it’s doable.

D)

Agreed, whether that will happen or not is the million dollar question. We’d have a couple years to figure things out if my Wife could jump into the workforce. Maybe a little over a year from cutting spending and unemployment if not.
Last edited by saj on Sun Feb 11, 2024 2:14 pm, edited 2 times in total.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

HornedToad wrote: Sun Feb 11, 2024 1:30 pm You are either missing a 0 at the end of preschool costs or that’s a weekly cost and not monthly. $200-300/mo for preschool isn’t accurate

I do think you can afford bigger house but there will be sacrifices until in public school and it’s tight
It’s preschool run by the town. $1800/year for 3 half days per week, half the cost for a second child, so $270/month. This isn’t daycare. Another not run by the town is $335/month per kid, so it doesn’t seem wildly wrong if the program is subsidized by the town?

Maybe I’m missing something or we’re talking about two different things? I don’t intend to send the kids to 5 days a week, full day “preschool” aka daycare with a stay at home wife.
JBTX
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by JBTX »

saj wrote: Sun Feb 11, 2024 12:09 pm
JBTX wrote: Sun Feb 11, 2024 11:50 am A $900k house on a $210 base seems a bit tight. For the most part you will only be saving what is in your 401k, so maybe 10% of income?

I certainly think it is doable, although there is some modest risk. If you lost your job for more than a few months you would need to be willing to cut back. Based upon your post and described lifestyle it doesn’t seem like that would be easy for you. Having said all that you are certainly in a better situation than most people.

I’d ask this way, would you and wife be willing to cut back on other expenses to move to new house? Which is more important?

I think you’d probably be ok, but personally I would not be comfortable only saving 10% of my income at that stage in life. If I could get to 20% then I’d probably do it.
The “Misc” spending can definitely be cut back. There were a lot of one-time purchases this year like strollers, car seats, furniture, etc.

I think that not having to look at a house that needs a lot of work would be an improvement to my Wife’s happiness. I also think we’d be significantly happier in a less busy town.

I’m trying to downplay the RSUs to be conservative, but it is a publicly traded company, not pre-IPO or anything. It’s not mega corp though. That $78k would mostly be saved, maybe call it $40k after taxes and vacation fund. So, I’m still thinking something like $70k per year in savings, $40k taxable and $30k 401k (including match), which is >20%.
Here are my random thoughts - qualifying they are only based upon your posts and I don’t know you or your entire situation

- upgrading the house makes sense - you get to better house, avoid remodels, save a bit on child care, better schools. For $400k more house price that seems win/win

- my concern would be all of the other expenditures. Often when people go to new house, they decide they need new furniture, new decorations new this that and everything else. Your house retains value. All that other stuff doesn’t.

- You mention DW-SAHM isn’t happy here, and the solution seems to be more creature comforts. I’ve seen quite a few instances among our friends where SAHM in order to keep busy and stimulated always needs a project, and that often involves money. IMHO if you are going to go SAHM route that means you should be more frugal than average. For that reason my wife decided not to be SAHM, and in her case her income has been comparable to mine. Most of our friends I assume will be fine, although I don’t know there finances. The primary earners seem to all have been successful with significant earnings growth, enough to fund SAHM and whatever they decided they needed. They could be multi millionaires or have $100k in savings. I have no clue.

- Scaling back lifestyle is hard, especially when a spouse is involved and there is lukewarm buy in.
HereToLearn
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by HereToLearn »

saj wrote: Sun Feb 11, 2024 1:48 pm
HornedToad wrote: Sun Feb 11, 2024 1:30 pm You are either missing a 0 at the end of preschool costs or that’s a weekly cost and not monthly. $200-300/mo for preschool isn’t accurate

I do think you can afford bigger house but there will be sacrifices until in public school and it’s tight
It’s preschool run by the town. $1800/year for 3 half days per week, half the cost for a second child, so $270/month. This isn’t daycare. Another not run by the town is $335/month per kid, so it doesn’t seem wildly wrong if the program is subsidized by the town?

Maybe I’m missing something or we’re talking about two different things? I don’t intend to send the kids to 5 days a week, full day “preschool” aka daycare with a stay at home wife.
Would these programs still be available to you if you move to the new house in another town?

Our local nursery schools charge $6300/year for three half days for three year olds (two hours + 45 minutes) and $8300 for three half days (two & a half hours) for two year olds. These are not day care programs but church & YMCA. Private non-church schools are even more expensive.
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SB1234
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by SB1234 »

Main risk is job loss and extended period to find another. During this time healthcare can become expensive.
Don't get me wrong, you're in a good position, but I wouldn't do it until you have the promotion in hand or have a second income.
Companies, especially TECH in US, make changes that seem to come out of the left field all the time.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

JBTX wrote: Sun Feb 11, 2024 2:43 pm
saj wrote: Sun Feb 11, 2024 12:09 pm
JBTX wrote: Sun Feb 11, 2024 11:50 am A $900k house on a $210 base seems a bit tight. For the most part you will only be saving what is in your 401k, so maybe 10% of income?

I certainly think it is doable, although there is some modest risk. If you lost your job for more than a few months you would need to be willing to cut back. Based upon your post and described lifestyle it doesn’t seem like that would be easy for you. Having said all that you are certainly in a better situation than most people.

I’d ask this way, would you and wife be willing to cut back on other expenses to move to new house? Which is more important?

I think you’d probably be ok, but personally I would not be comfortable only saving 10% of my income at that stage in life. If I could get to 20% then I’d probably do it.
The “Misc” spending can definitely be cut back. There were a lot of one-time purchases this year like strollers, car seats, furniture, etc.

I think that not having to look at a house that needs a lot of work would be an improvement to my Wife’s happiness. I also think we’d be significantly happier in a less busy town.

I’m trying to downplay the RSUs to be conservative, but it is a publicly traded company, not pre-IPO or anything. It’s not mega corp though. That $78k would mostly be saved, maybe call it $40k after taxes and vacation fund. So, I’m still thinking something like $70k per year in savings, $40k taxable and $30k 401k (including match), which is >20%.
Here are my random thoughts - qualifying they are only based upon your posts and I don’t know you or your entire situation

- upgrading the house makes sense - you get to better house, avoid remodels, save a bit on child care, better schools. For $400k more house price that seems win/win

- my concern would be all of the other expenditures. Often when people go to new house, they decide they need new furniture, new decorations new this that and everything else. Your house retains value. All that other stuff doesn’t.

- You mention DW-SAHM isn’t happy here, and the solution seems to be more creature comforts. I’ve seen quite a few instances among our friends where SAHM in order to keep busy and stimulated always needs a project, and that often involves money. IMHO if you are going to go SAHM route that means you should be more frugal than average. For that reason my wife decided not to be SAHM, and in her case her income has been comparable to mine. Most of our friends I assume will be fine, although I don’t know there finances. The primary earners seem to all have been successful with significant earnings growth, enough to fund SAHM and whatever they decided they needed. They could be multi millionaires or have $100k in savings. I have no clue.

- Scaling back lifestyle is hard, especially when a spouse is involved and there is lukewarm buy in.
I appreciate the feedback! I’m fully expecting some initial purchases to fill the bigger house and have cash set aside for that. I can see what you’re saying about SAHM and wanting projects to do. That’s something that we’ll have to discuss as part of a larger budget discussion if we were to move to the new house.

It definitely gives me more to think about, so thank you again!
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

HereToLearn wrote: Sun Feb 11, 2024 2:51 pm
saj wrote: Sun Feb 11, 2024 1:48 pm
HornedToad wrote: Sun Feb 11, 2024 1:30 pm You are either missing a 0 at the end of preschool costs or that’s a weekly cost and not monthly. $200-300/mo for preschool isn’t accurate

I do think you can afford bigger house but there will be sacrifices until in public school and it’s tight
It’s preschool run by the town. $1800/year for 3 half days per week, half the cost for a second child, so $270/month. This isn’t daycare. Another not run by the town is $335/month per kid, so it doesn’t seem wildly wrong if the program is subsidized by the town?

Maybe I’m missing something or we’re talking about two different things? I don’t intend to send the kids to 5 days a week, full day “preschool” aka daycare with a stay at home wife.
Would these programs still be available to you if you move to the new house in another town?

Our local nursery schools charge $6300/year for three half days for three year olds (two hours + 45 minutes) and $8300 for three half days (two & a half hours) for two year olds. These are not day care programs but church & YMCA. Private non-church schools are even more expensive.
I’m crossing some wires here, but the $1800/yr option would be in the new town. Our current town offers $200/mo per kid without a discount for additional children. So, they’re both very comparable. The private preschool that is $335/mo would be available regardless of where we end up, but the new town might have some other comparable options that’d be a shorter drive.

I can confirm that the local Catholic preschool option would be significantly more expensive at $5,500/year, but is 4.25 hours a day. I also see other private options that are closer to $5-6k a year.

My Wife is enjoying teaching the toddler and he seems ahead at 18 months with identifying colors, shapes, counting to 10, etc. This is all to say that we’re looking to preschool more for the social aspects. Maybe it’s my ignorance, but I don’t know what they’d get from the private preschool that they wouldn’t at the public preschool.

You’ve convinced me to at least double-check that curriculum is similar, that I’m not misunderstanding the tuition packets, etc. Preschool costing 2-3x or more what I’m expecting would be less than ideal.
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Watty
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Watty »

saj wrote: Sun Feb 11, 2024 11:36 am Current home is worth $500k, newer home would be $800-900k. We plan to put $450k down
......

My income: $288k - $210k base, $78k RSU
You may be overthinking it.

It basically sounds like you are asking if you can afford a $350-$450K mortgage on your income instead of your current $200K mortgage.

I might have missed what your current mortgage payment is but how much more would that be(including property taxes, insurance, HOA fees, etc) than you are paying now?

A key number is what the difference in your monthly expenses would be if you buy the new house.

If that would be an extra $1,500(???) a month then another way to look at the question is if you can afford the difference in the monthly payments.
saj wrote: Sun Feb 11, 2024 11:36 am I’m looking at a promotion in the next 3-6 months that won’t be factored in here, but likely 15% jump in base and RSU.
A simple solution is to put buying the house on the back burner for another 3-6 months and if you get the expected promotion then that would more or less cover the increased monthly expenses.
saj wrote: Sun Feb 11, 2024 11:36 am Cash: $300k (we’re planning to buy before selling to avoid contingencies, so this will be the initial downpayment)
One thing to look into is if buying before you sell your current house is even possible. A problem is that you may not have enough income to qualify for two mortgages at once even if you get the raise.

There is also a risk that you could own two homes when some big event disrupts the housing markets or interest rates which could make it a lot harder than planned to sell your existing house. During both 9/11 and the 2008 financial collapse people who were in the middle of selling and buying houses ended up quickly having home deals fall apart and their local housing market changing. Politics is off topic for this board but there are a lot of things going on which could suddenly be disruptive.

Once you move out of your current house you then are obviously a motivated seller and it will be harder to get a good price for your house. Between mortgage payments, utilities, insurance, etc it can cost thousands of dollars a month to keep an empty house.

Even in a tight housing market you can often figure out a way to move from one house to another with a minimal gap especially since you could come up with a 20% down payment on the net house even if you are not able to sell your current house for some reason.

There is a lot to be said for staying in some sort of extended stay hotel for a few months between houses. The company you work for may have a corporate agreement with some of them so ask about that.

There are lots and lots of creative ways to juggle housing so that you do not need to own two houses at once. Think outside the box. I once heard of someone temporarily moving to their retired in-laws house with a large family. The house was not large enough for everyone so they rented a condo in some place like Florida or Hawaii for the in-laws to live in for a couple of months and the inlaws got a paid vacation to snowbird there so it was a win/win situation.

One advantage of having a house built is that you can predict when it will be available to close and move into especially a few months before the construction is completed. You can then try to time the sale of your current house to be at about the same time.

When you interview real estate agents ask then how to handle selling then buying. They deal with this all the time and there are lots of ways to work it out.

You should really try to not own two houses at once. It will usually work out OK but there can be Murphy's Law situations which can cause big problems.
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by snowday2022 »

Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
Being a SAHM to two small kids is a lot of work.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

Thank you all for the feedback. Lots to think about. Going to start for now with seeing what we can optimize for expenses, and go from there. That’d also allow time for the promotion to go through as mentioned by SB1234.

The house prices are crazy, but they’ve felt crazy for basically my whole working life. We could have gotten our dream home 8 years ago when we bought our current house for $400k. I bought the house for $270k to obey the 2x rule. It’s been painful to watch that become $800-900k. Even though we have a house that has appreciated, it hasn’t quite kept up due to the price difference and demand for newer construction. Even in the last two years, we always seem to be $100k away from what we want due to the continued increase in home prices since COVID. If we had increased our budget just outside of our comfort range 2 years ago, we’d have our $900k house for closer to $750k. This definitely contributes to the concern of whether I’m being too cautious. And we all know there’s no real way to know where we are in the market cycle.

Sadly, I’m not sure when this will change. The housing supply is terrible and new homes are being built very infrequently. Existing home supply isn’t much better. I’m crossing my fingers that this home isn’t $1+ million next year and still just out of reach.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

Watty wrote: Sun Feb 11, 2024 3:43 pm
saj wrote: Sun Feb 11, 2024 11:36 am Current home is worth $500k, newer home would be $800-900k. We plan to put $450k down
......

My income: $288k - $210k base, $78k RSU
You may be overthinking it.

It basically sounds like you are asking if you can afford a $350-$450K mortgage on your income instead of your current $200K mortgage.

I might have missed what your current mortgage payment is but how much more would that be(including property taxes, insurance, HOA fees, etc) than you are paying now?

A key number is what the difference in your monthly expenses would be if you buy the new house.

If that would be an extra $1,500(???) a month then another way to look at the question is if you can afford the difference in the monthly payments.
saj wrote: Sun Feb 11, 2024 11:36 am I’m looking at a promotion in the next 3-6 months that won’t be factored in here, but likely 15% jump in base and RSU.
A simple solution is to put buying the house on the back burner for another 3-6 months and if you get the expected promotion then that would more or less cover the increased monthly expenses.
saj wrote: Sun Feb 11, 2024 11:36 am Cash: $300k (we’re planning to buy before selling to avoid contingencies, so this will be the initial downpayment)
One thing to look into is if buying before you sell your current house is even possible. A problem is that you may not have enough income to qualify for two mortgages at once even if you get the raise.

There is also a risk that you could own two homes when some big event disrupts the housing markets or interest rates which could make it a lot harder than planned to sell your existing house. During both 9/11 and the 2008 financial collapse people who were in the middle of selling and buying houses ended up quickly having home deals fall apart and their local housing market changing. Politics is off topic for this board but there are a lot of things going on which could suddenly be disruptive.

Once you move out of your current house you then are obviously a motivated seller and it will be harder to get a good price for your house. Between mortgage payments, utilities, insurance, etc it can cost thousands of dollars a month to keep an empty house.

Even in a tight housing market you can often figure out a way to move from one house to another with a minimal gap especially since you could come up with a 20% down payment on the net house even if you are not able to sell your current house for some reason.

There is a lot to be said for staying in some sort of extended stay hotel for a few months between houses. The company you work for may have a corporate agreement with some of them so ask about that.

There are lots and lots of creative ways to juggle housing so that you do not need to own two houses at once. Think outside the box. I once heard of someone temporarily moving to their retired in-laws house with a large family. The house was not large enough for everyone so they rented a condo in some place like Florida or Hawaii for the in-laws to live in for a couple of months and the inlaws got a paid vacation to snowbird there so it was a win/win situation.

One advantage of having a house built is that you can predict when it will be available to close and move into especially a few months before the construction is completed. You can then try to time the sale of your current house to be at about the same time.

When you interview real estate agents ask then how to handle selling then buying. They deal with this all the time and there are lots of ways to work it out.

You should really try to not own two houses at once. It will usually work out OK but there can be Murphy's Law situations which can cause big problems.
The difference in PITI would be $2,450/mo. I’m not sure I’ll find a great comparison for utilities. Our home is 70’s construction with an older furnace. New home would be 50% bigger, but better insulated, higher efficiency furnace, etc.

My promotion would be worth ~$43k or around $2,800/mo after taxes. So, to your point, the promotion would cover the obvious increases in expenses.

I’ll think more about holding both houses at the same time. It is something that I’ve had some concern with, but I’ve also heard of various builders not wanting to work with current home sale contingencies with there being so many new buyers out there. I will talk to agents about interesting ways around this. I thought about moving out into an temporary accommodation, but moving twice with two kids wouldn’t be the greatest experience.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

snowday2022 wrote: Sun Feb 11, 2024 3:48 pm
Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
Being a SAHM to two small kids is a lot of work.
Yeah, you either get it or you don’t. I’ve had a chance to see both sides while on paternity leave, and my job is much easier than caring for two young children.
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Watty
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Watty »

saj wrote: Sun Feb 11, 2024 4:24 pm I’ll think more about holding both houses at the same time. It is something that I’ve had some concern with, but I’ve also heard of various builders not wanting to work with current home sale contingencies with there being so many new buyers out there.
As long as you can qualify for both mortgages at the same time and have the down payment you would not need a contingency since you could still close on the next house if you were not able to get your current house sold. I don't know what the odds might be but you could be in a situation where the timing might work out 90% of the time and 10% of the time you would need to have two mortgages.

I have not used one but a mortgage broker might be able to help you figure out the financing. There may be some sort of bridge loan available so you would not need to pay the all then mortgage origination costs for a larger loan which you will quickly pay down.
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Olemiss540 »

snowday2022 wrote: Sun Feb 11, 2024 3:48 pm
Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
Being a SAHM to two small kids is a lot of work.
Agreed, it also doesn't pay very well.

OP,

How many years has your spouse been out of school?

You can afford it, you are just constantly treading water with your choices instead of truly getting ahead of the game.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
Nottingham
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Nottingham »

saj wrote: Sun Feb 11, 2024 1:11 pm
Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
To be fair she’s in the house all day and it’s really in need of renovation/repair. Probably not worth getting into because definitions of this are wildly different depending on various factors. She’s fine with staying and fixing things up, I’d prefer to move to a new town, for reasons we’re in agreement on. She’s also not opposed to going back to work at all, if anything I’m more opposed to it. She is enjoying time with the kids, however.
You are rationalizing. Think outside of the box. You make $300k and your stay at home wife is (quote): "Wife is pretty unhappy with the current situation, so delaying the decision to buy or renovate isn't a great option."
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Nottingham »

snowday2022 wrote: Sun Feb 11, 2024 3:48 pm
Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
Being a SAHM to two small kids is a lot of work.
More work than pulling $300k? OP is remote, I'm sure he spends at least half of his time changing diapers.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

Olemiss540 wrote: Sun Feb 11, 2024 6:31 pm
snowday2022 wrote: Sun Feb 11, 2024 3:48 pm
Nottingham wrote: Sun Feb 11, 2024 1:04 pm I find it silly that unemployed wife is unhappy with the situation. Maybe suggest her to get a job and help with the move?
Being a SAHM to two small kids is a lot of work.
Agreed, it also doesn't pay very well.

OP,

How many years has your spouse been out of school?

You can afford it, you are just constantly treading water with your choices instead of truly getting ahead of the game.
She’s been out for 4-5 years. She worked before that for 6-7 years, she just went back to school to become a RN.

I’m honestly mixed on how much we’ll be struggling. In big cities there is no way that people aren’t factoring RSUs into financial decisions. A lot of companies in tech historically have low salary relative to RSUs. Weekly paychecks won’t leave extra cash, but every quarter would be $15,000 RSU disbursements after tax. Stock falls 50%? Still +$30k a year. It’s also possible the stock goes up more and it’s more than $60k a year of savings (on top of 401k). I think the job loss and larger recession risk is definitely what scares me the most.
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by legalwriter1 »

It might be considered blaspheme here but you could consider reducing your 401k contributions on a temporary basis. That might help with cash flow for a time if you buy the home. We put a lot of value in our home. I am sole income provider for my family and my wife is a stay at home mom with 4 children. We don't spend a lot on cars, trips, or entertainment. But we have a nice home.

Consider a more detailed budget and do a better job of tracking expenses. Having a "misc" budget category of $4,500 per month is not optimal. You can probably trim expenses and put more value in your home.

Besides principal/interest, make sure your budget includes increase in property taxes, insurance, utilities, and maintenance for a bigger home. It might be tight for a few years or until you sell the other house.

It was a stretch when we bought our house. But I'm really glad we bought our home when we did. My income has subsequently increased and the house value has increased. PITI is now only 11% of my income. We could pay off the mortgage but our rate is 2.1% so there is no incentive to do so.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

vinhodoporto wrote: Sun Feb 11, 2024 12:52 pm You can afford it, even with todays high interest rates, no RSUs, and spouse staying home. Many people, including my spouse and I, stretched to buy a house for a growing family in their early 30s.

With a stay at home parent you should be able to cut back some of your discretionary spending. When my spouse was at home full time with kids we spent a lot less on convenience purchases, and had more time to hunt for good deals, and shop around compared to when we were both working outside the home.

Kids will get more expensive as they get older… sports, activities, camps, tutoring, test prep… especially in an affluent town with high achieving parents and kids.it’s not so much a keeping up with the Joneses thing as it is a “all my friends are doing…”
The interest rate is another good point. I’m not trying to plan around it, but if rates get back around 5%, that’d shave another $500 off our payment.

We started looking through expenses yesterday. I wouldn’t say there’s a lot of egregious spending, but to your point we already identified some opportunities where ordering from other stores, or in bulk, could save $50 here, or $100 here. I don’t want to be “house poor” to the point where we’re counting pennies, but if we can shave $500/mo for changes that are quick and painless, it’ll help.

I’m expecting everything to get more expensive when they get older, but luckily by then my Wife would be back to work.
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saj
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

legalwriter1 wrote: Sun Feb 11, 2024 7:51 pm It might be considered blaspheme here but you could consider reducing your 401k contributions on a temporary basis. That might help with cash flow for a time if you buy the home. We put a lot of value in our home. I am sole income provider for my family and my wife is a stay at home mom with 4 children. We don't spend a lot on cars, trips, or entertainment. But we have a nice home.

Consider a more detailed budget and do a better job of tracking expenses. Having a "misc" budget category of $4,500 per month is not optimal. You can probably trim expenses and put more value in your home.

Besides principal/interest, make sure your budget includes increase in property taxes, insurance, utilities, and maintenance for a bigger home. It might be tight for a few years or until you sell the other house.

It was a stretch when we bought our house. But I'm really glad we bought our home when we did. My income has subsequently increased and the house value has increased. PITI is now only 11% of my income. We could pay off the mortgage but our rate is 2.1% so there is no incentive to do so.
Agreed that at least reducing 401k contributions could be a temporary option. I wouldn’t see why I’d need to do that at present, unless I lost my job and took a lower paying job. Even if we never contributed another dollar to retirement, we’d be looking at $4.7 million at 65 years old assuming 7% average return. That’s not the plan, but it puts things into perspective a bit. We’d also have the option to downsize and with any luck sell the house for a significant gain.

I think getting back to a categorized budget to drive purchase decisions makes sense as others have pointed out too.

Thank you for sharing your experience!
Last edited by saj on Mon Feb 12, 2024 7:19 am, edited 1 time in total.
Carl53
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Carl53 »

legalwriter1 wrote: Sun Feb 11, 2024 7:51 pm It might be considered blaspheme here but you could consider reducing your 401k contributions on a temporary basis. That might help with cash flow for a time if you buy the home. We put a lot of value in our home. I am sole income provider for my family and my wife is a stay at home mom with 4 children. We don't spend a lot on cars, trips, or entertainment. But we have a nice home.

Consider a more detailed budget and do a better job of tracking expenses. Having a "misc" budget category of $4,500 per month is not optimal. You can probably trim expenses and put more value in your home.

Besides principal/interest, make sure your budget includes increase in property taxes, insurance, utilities, and maintenance for a bigger home. It might be tight for a few years or until you sell the other house.

It was a stretch when we bought our house. But I'm really glad we bought our home when we did. My income has subsequently increased and the house value has increased. PITI is now only 11% of my income. We could pay off the mortgage but our rate is 2.1% so there is no incentive to do so.
Most years my spouse was a stay at home mom with a hobby business and occasional work. A lot of years we would forgo TIRA contributions prior to Roths being available to us. Similarly I would cut back on 401k contributions when necessary, but never would forgo the employer match. Full disclosure, I did have the promise of a future non-COLA adjusted DB pension too which to my surprise and delight continues to this day.
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by KlangFool »

legalwriter1 wrote: Sun Feb 11, 2024 7:51 pm It might be considered blaspheme here but you could consider reducing your 401k contributions on a temporary basis. That might help with cash flow for a time if you buy the home.

How does this makes any sense for OP? He has substantial Taxable investment. He can continue contributing to 401K and spend down his taxable investment.

This is another reason not to put too much into the house.

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Re: Can we afford a new house? (stay-at-home parent edition)

Post by KlangFool »

saj wrote: Mon Feb 12, 2024 6:21 am
legalwriter1 wrote: Sun Feb 11, 2024 7:51 pm It might be considered blaspheme here but you could consider reducing your 401k contributions on a temporary basis. That might help with cash flow for a time if you buy the home. We put a lot of value in our home. I am sole income provider for my family and my wife is a stay at home mom with 4 children. We don't spend a lot on cars, trips, or entertainment. But we have a nice home.

Consider a more detailed budget and do a better job of tracking expenses. Having a "misc" budget category of $4,500 per month is not optimal. You can probably trim expenses and put more value in your home.

Besides principal/interest, make sure your budget includes increase in property taxes, insurance, utilities, and maintenance for a bigger home. It might be tight for a few years or until you sell the other house.

It was a stretch when we bought our house. But I'm really glad we bought our home when we did. My income has subsequently increased and the house value has increased. PITI is now only 11% of my income. We could pay off the mortgage but our rate is 2.1% so there is no incentive to do so.
Agreed that at least reducing 401k contributions could be a temporary option. I wouldn’t see why I’d need to do that at present, unless I lost my job and took a lower paying job. Even if we never contributed another dollar to retirement, we’d be looking at $4.7 million at 60 years old assuming 7% average return. That’s not the plan, but it puts things into perspective a bit. We’d also have the option to downsize and with any luck sell the house for a significant gain.

I think getting back to a categorized budget to drive purchase decisions makes sense as others have pointed out too.

Thank you for sharing your experience!
Your statement is false. If you take a lowered paying job, you will be spending down your investment. Your annual expense will be too high to be sustainable by a lowered paying job. The cost of the house is the lack of financial flexibility.

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Re: Can we afford a new house? (stay-at-home parent edition)

Post by Tom_T »

My concern is that reducing 401K contributions "temporarily" can easily shift to "permanently" when you become accustomed to the monthly cash flow.

Also, moving to a possibly larger house in a "better" town could mean more expenses (e.g. house maintenance, higher property taxes.)
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Re: Can we afford a new house? (stay-at-home parent edition)

Post by KlangFool »

Tom_T wrote: Mon Feb 12, 2024 6:56 am My concern is that reducing 401K contributions "temporarily" can easily shift to "permanently" when you become accustomed to the monthly cash flow.

Also, moving to a possibly larger house in a "better" town could mean more expenses (e.g. house maintenance, higher property taxes.)
Reducing contributions to 401K means that you pay more taxes. IRS is not going to refund your tax money. Hence, there is nothing temporary about that.

KlangFool
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invest4
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Joined: Wed Apr 24, 2019 2:19 am

Re: Can we afford a new house? (stay-at-home parent edition)

Post by invest4 »

My two cents:

* Would not spend more than 3x income on a house

* Do not lose sight of your longer term financial goals and compromise them by taking a significant amount away from those goals to buy a more expensive house which naturally comes with higher ongoing expenses…property tax, insurance, utilities, upkeep, etc.

* You take on increased risk as a single income earner by buying more home than your income can readily support. I saw quite a few friends / neighbors get hammered during the financial crisis in part because they underestimated the severity of such a financial calamity. Not buying too much home helps mitigate risk.

* if you remain firm on the purchase, consider how much to mortgage as there are real benefits:

- Liquidity

- Hedge against inflation

- Leverage to invest more toward long term goals



More personally, I think it is a fantastic privilege to have a parent stay home with the kids (we fortunately were able to do same for our family of 6).

Of course, this also increases financial risk. To that extent, this also influenced our decisions as we juggled long term goals, lifestyle inflation, increasing expensive children (and everything else) along the way. Best wishes to you and family as you navigate the same.
vinhodoporto
Posts: 281
Joined: Tue Dec 24, 2019 9:14 am

Re: Can we afford a new house? (stay-at-home parent edition)

Post by vinhodoporto »

I really don’t see any issue here.

Mortgage will be ~1.5x OPs (single) income. And the monthly payment will be less than 25%, and that’s excluding their substantial quarterly RSUs.

Even after this house purchase they’ll have more than 2x income in savings.

Sure, it would be rough if they lost their job right after making the purchase but they’re still probably in a better situation than 99% of 30 somethings.
- Unlike many at home spouses, their spouse could easily go back to work as a nurse making enough to cover a good chunk of their expenses.
- They have a lot of other savings they could ride for a long time unemployed, even without drastic expense cuts.
- They’re not at the point in their career where age discrimination will likely be an issue, or where they’re getting paid above market for their skill set. So they should be able to find similar paying employment even if they lose this job.
- And with that big down payment they could likely sell or rent out the house if things got really bad.

If this family can’t afford it, no one early to mid career can.
Topic Author
saj
Posts: 64
Joined: Sun Oct 04, 2015 12:57 pm

Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

invest4 wrote: Mon Feb 12, 2024 11:50 am My two cents:

* Would not spend more than 3x income on a house

* Do not lose sight of your longer term financial goals and compromise them by taking a significant amount away from those goals to buy a more expensive house which naturally comes with higher ongoing expenses…property tax, insurance, utilities, upkeep, etc.

* You take on increased risk as a single income earner by buying more home than your income can readily support. I saw quite a few friends / neighbors get hammered during the financial crisis in part because they underestimated the severity of such a financial calamity. Not buying too much home helps mitigate risk.

* if you remain firm on the purchase, consider how much to mortgage as there are real benefits:

- Liquidity

- Hedge against inflation

- Leverage to invest more toward long term goals



More personally, I think it is a fantastic privilege to have a parent stay home with the kids (we fortunately were able to do same for our family of 6).

Of course, this also increases financial risk. To that extent, this also influenced our decisions as we juggled long term goals, lifestyle inflation, increasing expensive children (and everything else) along the way. Best wishes to you and family as you navigate the same.
Thank you for the feedback!

The reality for us at the moment is that our long-term goals would be the best education and life for our children while balancing a comfortable retirement for us. Without any additional investment, our $610k in retirement/taxable would still turn into a pretty reasonable sum of money in 30 years. That’s the worst-case scenario that is very unlikely.

I agree with the privilege to have a stay at home parent. The trade-offs are definitely something we’ll have to keep in mind moving forward.
Topic Author
saj
Posts: 64
Joined: Sun Oct 04, 2015 12:57 pm

Re: Can we afford a new house? (stay-at-home parent edition)

Post by saj »

vinhodoporto wrote: Mon Feb 12, 2024 10:31 pm I really don’t see any issue here.

Mortgage will be ~1.5x OPs (single) income. And the monthly payment will be less than 25%, and that’s excluding their substantial quarterly RSUs.

Even after this house purchase they’ll have more than 2x income in savings.

Sure, it would be rough if they lost their job right after making the purchase but they’re still probably in a better situation than 99% of 30 somethings.
- Unlike many at home spouses, their spouse could easily go back to work as a nurse making enough to cover a good chunk of their expenses.
- They have a lot of other savings they could ride for a long time unemployed, even without drastic expense cuts.
- They’re not at the point in their career where age discrimination will likely be an issue, or where they’re getting paid above market for their skill set. So they should be able to find similar paying employment even if they lose this job.
- And with that big down payment they could likely sell or rent out the house if things got really bad.

If this family can’t afford it, no one early to mid career can.
Thank you for the feedback!

I can see where a lot of the posters are coming from, but like you, I also feel that by most metrics the purchase doesn’t seem that bad. As long as I keep maxing the 401k and save half my RSUs, that’s still $60k/year in savings, or $4.8 million by the time we’re 55, or $7.1 million at 60 (assuming 7% return). We’ll have to see what our expenses look like in the future, but those figures are definitely in the ballpark of what we need to retire. It’s also very likely my Wife goes back to work 1 day per week, so that would help a little bit with building up savings too.

I still have some thinking to do. I think there have been some takeaways around getting back to budgeting a bit better and ensuring the new home won’t come with too many additional expenses. There have also been several things I hadn’t thought about, as well as great tips from others who have been through this as well. I appreciate all of the feedback!
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