Is this housing budget reasonable?

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BaseballOnTheRadio
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Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 12:55 pm

Greetings everyone. Many of you were kind enough to weigh in on a tax question I asked not long ago, and I was hoping to get your collective wisdom on a related matter.

We are on the precipice of purchasing a home. The intention is to rent it to someone for 6 to 18 months before we move out and live in it ourselves. Home price is right around 390K. Down payment will be somewhere in the vicinity of 120 to 130K. Basically I am looking to have a PITI+HOA of under 1,600...closer to 1,500 would be preferable.

When we move, I would anticipate finding a job paying around 80K per year. My wife works part time, but we would move before she found employment. I would expect her to make around 20K to 30K once she finds a job, though it might take a little bit to find her the right employer.

We are a family of 5 (kids 6,3,1).

Our only other debt are two car payments that total 525/mo, though I may be able to knock one out before we move, and the remaining one would just total 275/mo.

Any impressions of our housing expense relative to our income and family characteristics?

Many thanks!

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: Is this housing budget reasonable?

Post by KlangFool » Wed Oct 04, 2017 1:04 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 12:55 pm
Greetings everyone. Many of you were kind enough to weigh in on a tax question I asked not long ago, and I was hoping to get your collective wisdom on a related matter.

We are on the precipice of purchasing a home. The intention is to rent it to someone for 6 to 18 months before we move out and live in it ourselves. Home price is right around 390K. Down payment will be somewhere in the vicinity of 120 to 130K. Basically I am looking to have a PITI+HOA of under 1,600...closer to 1,500 would be preferable.

When we move, I would anticipate finding a job paying around 80K per year. My wife works part time, but we would move before she found employment. I would expect her to make around 20K to 30K once she finds a job, though it might take a little bit to find her the right employer.

We are a family of 5 (kids 6,3,1).

Our only other debt are two car payments that total 525/mo, though I may be able to knock one out before we move, and the remaining one would just total 275/mo.

Any impressions of our housing expense relative to our income and family characteristics?

Many thanks!
OP,

1) You are spending too much on housing as compared to your future optimistic forecasted income (110K).

2) Unless your net worth is 800K or more excluding the 120K to 130K down payment, it is too much house as compared to your net worth too.

KlangFool

delamer
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Re: Is this housing budget reasonable?

Post by delamer » Wed Oct 04, 2017 1:11 pm

Your post is confusing. Are you buying the house to use as a rental in the short-run? Is it not in the area where you currently live? If the answer is yes to both, then you are buying an investment property which is different than buying your home.

BaseballOnTheRadio
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Re: Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 1:15 pm

delamer wrote:
Wed Oct 04, 2017 1:11 pm
Your post is confusing. Are you buying the house to use as a rental in the short-run? Is it not in the area where you currently live? If the answer is yes to both, then you are buying an investment property which is different than buying your home.
It will be a short-run rental, yes (before we move into it). It will probably rent for 2,300. It is not where we currently live. We're okay with all the underwriting/mortgage stuff.

EDIT TO ADD: I recognize that it is classified as such since it isn't owner occupied immediately. Currently, we have no housing expense where we live, so financially this would be the only home we're paying for.

delamer
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Re: Is this housing budget reasonable?

Post by delamer » Wed Oct 04, 2017 1:27 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:15 pm
delamer wrote:
Wed Oct 04, 2017 1:11 pm
Your post is confusing. Are you buying the house to use as a rental in the short-run? Is it not in the area where you currently live? If the answer is yes to both, then you are buying an investment property which is different than buying your home.
It will be a short-run rental, yes (before we move into it). It will probably rent for 2,300. It is not where we currently live. We're okay with all the underwriting/mortgage stuff.

EDIT TO ADD: I recognize that it is classified as such since it isn't owner occupied immediately. Currently, we have no housing expense where we live, so financially this would be the only home we're paying for.
So why are you buying well in advance and before you have jobs in the area?

BaseballOnTheRadio
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Re: Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 1:40 pm

delamer wrote:
Wed Oct 04, 2017 1:27 pm
BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:15 pm
delamer wrote:
Wed Oct 04, 2017 1:11 pm
Your post is confusing. Are you buying the house to use as a rental in the short-run? Is it not in the area where you currently live? If the answer is yes to both, then you are buying an investment property which is different than buying your home.
It will be a short-run rental, yes (before we move into it). It will probably rent for 2,300. It is not where we currently live. We're okay with all the underwriting/mortgage stuff.

EDIT TO ADD: I recognize that it is classified as such since it isn't owner occupied immediately. Currently, we have no housing expense where we live, so financially this would be the only home we're paying for.
So why are you buying well in advance and before you have jobs in the area?
I had a job offer out there earlier in the year, we almost bought a house at that time, and we pulled back and opted to do it this way for a few different reasons. We wanted particular elementary schools, a particular floor plan, and at that time (early summer) houses were staying on the market for a day or two at most and most were getting bid up above asking price. It's a very kid centric area and early summer seemed like the absolute worst time to be a buyer. We only wanted to relocate over the summer, so we wouldn't disrupt my oldest's school year. We knew anticipated rent would cover our mortgage and provide a little cushion. Vacancy rates in the area are quite low. The homes there are relatively new, and while you never know exactly what could happen to a property, catastrophic maintenance/repair seemed to have a relatively low probability.

Separating the home search from the job search allowed us to make a potential move less stressful. We wouldn't have to deal with the whirlwind of job hunting and house hunting simultaneously (especially house hunting during the crazy period right when the school year ends). The plan would be to have the lease expire during the summer, when the moving window opens up, job hunt during that time, and if a good job pops up, then move out there. If no good job arises, lease it out again for a year and search again the following summer.

KlangFool
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Re: Is this housing budget reasonable?

Post by KlangFool » Wed Oct 04, 2017 1:44 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:40 pm
delamer wrote:
Wed Oct 04, 2017 1:27 pm
BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:15 pm
delamer wrote:
Wed Oct 04, 2017 1:11 pm
Your post is confusing. Are you buying the house to use as a rental in the short-run? Is it not in the area where you currently live? If the answer is yes to both, then you are buying an investment property which is different than buying your home.
It will be a short-run rental, yes (before we move into it). It will probably rent for 2,300. It is not where we currently live. We're okay with all the underwriting/mortgage stuff.

EDIT TO ADD: I recognize that it is classified as such since it isn't owner occupied immediately. Currently, we have no housing expense where we live, so financially this would be the only home we're paying for.
So why are you buying well in advance and before you have jobs in the area?
I had a job offer out there earlier in the year, we almost bought a house at that time, and we pulled back and opted to do it this way for a few different reasons. We wanted particular elementary schools, a particular floor plan, and at that time (early summer) houses were staying on the market for a day or two at most and most were getting bid up above asking price. It's a very kid centric area and early summer seemed like the absolute worst time to be a buyer. We only wanted to relocate over the summer, so we wouldn't disrupt my oldest's school year. We knew anticipated rent would cover our mortgage and provide a little cushion. Vacancy rates in the area are quite low. The homes there are relatively new, and while you never know exactly what could happen to a property, catastrophic maintenance/repair seemed to have a relatively low probability.

Separating the home search from the job search allowed us to make a potential move less stressful. We wouldn't have to deal with the whirlwind of job hunting and house hunting simultaneously (especially house hunting during the crazy period right when the school year ends). The plan would be to have the lease expire during the summer, when the moving window opens up, job hunt during that time, and if a good job pops up, then move out there. If no good job arises, lease it out again for a year and search again the following summer.
BaseballOnTheRadio,

How do you plan to financially support the 390K house with 100K to 110K income?

KlangFool

runner540
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Re: Is this housing budget reasonable?

Post by runner540 » Wed Oct 04, 2017 1:52 pm

Do not buy until you actually move and get a job. Too risky. When you do buy, I would look for something less expensive.

What is your emergency fund, debts and retirement savings situation?

BaseballOnTheRadio
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Re: Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 1:54 pm

Well, when I assume 100k in income, I'm thinking monthly take home in the vicinity of 6,200.

The 1,600 PITI payment would be 25.8% of the monthly budget, which I thought most budget calculators said was doable--though maybe I am way off base here?

BaseballOnTheRadio
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Re: Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 1:59 pm

runner540 wrote:
Wed Oct 04, 2017 1:52 pm
Do not buy until you actually move and get a job. Too risky. When you do buy, I would look for something less expensive.

What is your emergency fund, debts and retirement savings situation?
Hm, I do appreciate your perspective. The part of the equation where I buy before I move is actually the least worrisome to me. We have 115K in annual salary where we are now, we have no current housing expenses, and we expect rent to exceed mortgage expense by 43%, with a management company taking an 8% cut. If, hypothetically, I just didn't find a job, it could exist as a rental property indefinitely without financial strain on us.

Emergency fund is 25k. Only debt is 11k on car. Total retirement/savings nest egg would probably be around 275k after the home purchase. We're in our late 30s.

dsmil
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Re: Is this housing budget reasonable?

Post by dsmil » Wed Oct 04, 2017 2:05 pm

With that large down payment, the mortgage seems pretty reasonable, but it really just depends on how it fits in with the rest of your budget. The car payment is large and I'm guessing that you have daycare costs as well, so just plug it into your budget and see how it looks.

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Pajamas
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Re: Is this housing budget reasonable?

Post by Pajamas » Wed Oct 04, 2017 2:07 pm

Why not get a job and then move and then buy a house? It is taking unnecessary risk to do it in the reverse order and the one year delay and the two jobs involved increase the risk even more. It also seems a lot of trouble and risk to become a landlord temporarily for no good reason. Your plan also sounds like a lot more effort. If you are worried about looking for a job and buying a house at the same time, rent a place until you find something that is really suited for you to buy and you can get it ready to move in.

delamer
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Re: Is this housing budget reasonable?

Post by delamer » Wed Oct 04, 2017 2:09 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:40 pm
delamer wrote:
Wed Oct 04, 2017 1:27 pm
BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:15 pm
delamer wrote:
Wed Oct 04, 2017 1:11 pm
Your post is confusing. Are you buying the house to use as a rental in the short-run? Is it not in the area where you currently live? If the answer is yes to both, then you are buying an investment property which is different than buying your home.
It will be a short-run rental, yes (before we move into it). It will probably rent for 2,300. It is not where we currently live. We're okay with all the underwriting/mortgage stuff.

EDIT TO ADD: I recognize that it is classified as such since it isn't owner occupied immediately. Currently, we have no housing expense where we live, so financially this would be the only home we're paying for.
So why are you buying well in advance and before you have jobs in the area?
I had a job offer out there earlier in the year, we almost bought a house at that time, and we pulled back and opted to do it this way for a few different reasons. We wanted particular elementary schools, a particular floor plan, and at that time (early summer) houses were staying on the market for a day or two at most and most were getting bid up above asking price. It's a very kid centric area and early summer seemed like the absolute worst time to be a buyer. We only wanted to relocate over the summer, so we wouldn't disrupt my oldest's school year. We knew anticipated rent would cover our mortgage and provide a little cushion. Vacancy rates in the area are quite low. The homes there are relatively new, and while you never know exactly what could happen to a property, catastrophic maintenance/repair seemed to have a relatively low probability.

Separating the home search from the job search allowed us to make a potential move less stressful. We wouldn't have to deal with the whirlwind of job hunting and house hunting simultaneously (especially house hunting during the crazy period right when the school year ends). The plan would be to have the lease expire during the summer, when the moving window opens up, job hunt during that time, and if a good job pops up, then move out there. If no good job arises, lease it out again for a year and search again the following summer.
Thanks for the explanation. Your housing as a percent of your expected income is reasonable, about 23%, and you have a substantial downpayment. In your situation, these are the questions I'd be asking:

Given that we are basically a one-income family, how many months of expenses will our emergency fund cover in the event of job loss or illness?
How stable is my profession? Are layoffs common?
Will we be able to meet our retirement and other savings goals (like college) with one income if wife can't find a suitable job?

runner540
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Re: Is this housing budget reasonable?

Post by runner540 » Wed Oct 04, 2017 2:10 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:54 pm
Well, when I assume 100k in income, I'm thinking monthly take home in the vicinity of 6,200.

The 1,600 PITI payment would be 25.8% of the monthly budget, which I thought most budget calculators said was doable--though maybe I am way off base here?
You are citing a common rule of thumb. The Issue is that It may not leave enough room for adequate savings.

If you can provide more info that shows a (i) healthy emergency fund, (ii) well funded retirement accounts, (iii) minimal or no other debt, and (iv) a monthly budget that allows for the $1600 PITI, all regular and irregular expenses, and continued savings, you can convince me.

Posters are also reacting to the fact that you have $0 income in the new area right now.

KlangFool
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Re: Is this housing budget reasonable?

Post by KlangFool » Wed Oct 04, 2017 2:12 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:59 pm
runner540 wrote:
Wed Oct 04, 2017 1:52 pm
Do not buy until you actually move and get a job. Too risky. When you do buy, I would look for something less expensive.

What is your emergency fund, debts and retirement savings situation?
Hm, I do appreciate your perspective. The part of the equation where I buy before I move is actually the least worrisome to me. We have 115K in annual salary where we are now, we have no current housing expenses, and we expect rent to exceed mortgage expense by 43%, with a management company taking an 8% cut. If, hypothetically, I just didn't find a job, it could exist as a rental property indefinitely without financial strain on us.

Emergency fund is 25k. Only debt is 11k on car. Total retirement/savings nest egg would probably be around 275k after the home purchase. We're in our late 30s.
BaseballOnTheRadio,

You have 120K to 130K tied up with the house. Assuming a conservative 6% return, that is $7,200 to $7,800 per year. Take that into account, how much actually are you making from the house?

Rental = $2,300
PITI = $1,600
Gross = $8,400 per year

Less opportunity cost of 120K ($7,200)

Net = $1,200 per year without property management.

It is a lousy real estate rental investment. This is assuming 100% occupancy.

Assuming that you live in this house with 120K down payment, your housing expense is at least $1,600 PITI and (120K down payment) $600 opportunity cost = $2,200 per month.

How could you afford the house?

KlangFool
Last edited by KlangFool on Wed Oct 04, 2017 2:15 pm, edited 1 time in total.

nelson1015
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Re: Is this housing budget reasonable?

Post by nelson1015 » Wed Oct 04, 2017 2:14 pm

I make around 110-115k a year and my rent is over $1800 a month for a very average two bedroom apartment (have a child). What are you supposed to do if you live in a higher cost of living area?

I ask this because I could barely buy something decent for 390k just like the original poster where I live. There aren't really any options for houses less than that amount. So either you buy something pricey or you pay a lot for rent. There aren't always cheap options.

furikake
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Re: Is this housing budget reasonable?

Post by furikake » Wed Oct 04, 2017 2:16 pm

Are you okay if the house sits empty and you can't find a tenant you like for like 6 months? Are you okay losing the whole house including the down payment if you lose your job and don't have a renter and you can't pay the mortgage?

If you're ok with the above, then go for it. Otherwise it's too risky.

BaseballOnTheRadio
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Re: Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 2:23 pm

KlangFool wrote:
Wed Oct 04, 2017 2:12 pm
BaseballOnTheRadio wrote:
Wed Oct 04, 2017 1:59 pm
runner540 wrote:
Wed Oct 04, 2017 1:52 pm
Do not buy until you actually move and get a job. Too risky. When you do buy, I would look for something less expensive.

What is your emergency fund, debts and retirement savings situation?
Hm, I do appreciate your perspective. The part of the equation where I buy before I move is actually the least worrisome to me. We have 115K in annual salary where we are now, we have no current housing expenses, and we expect rent to exceed mortgage expense by 43%, with a management company taking an 8% cut. If, hypothetically, I just didn't find a job, it could exist as a rental property indefinitely without financial strain on us.

Emergency fund is 25k. Only debt is 11k on car. Total retirement/savings nest egg would probably be around 275k after the home purchase. We're in our late 30s.
BaseballOnTheRadio,

You have 120K to 130K tied up with the house. Assuming a conservative 6% return, that is $7,200 to $7,800 per year. Take that into account, how much actually are you making from the house?

Rental = $2,300
PITI = $1,600
Gross = $8,400 per year

Less opportunity cost of 120K ($7,200)

Net = $1,200 per year without property management.

It is a lousy real estate rental investment. This is assuming 100% occupancy.

Assuming that you live in this house with 120K down payment, your housing expense is at least $1,600 PITI and (120K down payment) $600 opportunity cost = $2,200 per month.

How could you afford the house?

KlangFool
Oh I do agree that if you just calculate out the rate of return, you'd do better just sticking the 120K in the market. I don't really view the house as a wealth building vehicle. I view it as an opportunity to live in a place that's good for the family at a price I can (hopefully) manage, on terms that are unlikely to lose me money. And I like your analysis, though in fairness it is absent the appreciation variable.

KlangFool
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Re: Is this housing budget reasonable?

Post by KlangFool » Wed Oct 04, 2017 2:24 pm

OP,

In my neighborhood, the annual median household income is 150K and the median house price is around 500K to 600K. It is the same ratio that you are targeting. My peers drive used cars and packed their lunches to work and they cannot save any money. If they are lucky and survive long enough without any major laid off, their children go to college with student loan and they keep their houses. But, many of my peers lost their job during 2008/2009.

KlangFool

BaseballOnTheRadio
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Re: Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 2:30 pm

furikake wrote:
Wed Oct 04, 2017 2:16 pm
Are you okay if the house sits empty and you can't find a tenant you like for like 6 months? Are you okay losing the whole house including the down payment if you lose your job and don't have a renter and you can't pay the mortgage?

If you're ok with the above, then go for it. Otherwise it's too risky.
Median time on market to find a renter is 21 days. Obviously it would stink if it just sat empty, but I would be fine making the mortgage payment as is. It'd be basically the same financial situation as it would be if we were living in it (actually a little cushier).

With your second question, are you talking about foreclosure? Yeah, that would be horrible, but I've got enough cash that I could pay the mortgage for a long time before I'd ever get in arrears. And my present employment is pretty solid, so I'm not too worried about that scenario. My main worry is just the budget tightness, particularly in the period before my wife finds something part time.

KlangFool
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Re: Is this housing budget reasonable?

Post by KlangFool » Wed Oct 04, 2017 2:33 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 2:23 pm

Oh I do agree that if you just calculate out the rate of return, you'd do better just sticking the 120K in the market. I don't really view the house as a wealth building vehicle. I view it as an opportunity to live in a place that's good for the family at a price I can (hopefully) manage, on terms that are unlikely to lose me money. And I like your analysis, though in fairness it is absent the appreciation variable.
BaseballOnTheRadio,

Which is meaningless for a house that you live in.

1) The price only matters when you sell.

2) While you live in the house, if the price of the house goes up, you pay more property tax.

The house's price in my area had gone up significantly since 2008/2009. But, it is below 2004/2005 level. So, what appreciation value do you want to use in this case?

Is the house more important than your kid's college education? Basically, with the house, there will be more student loan for your children.

<<Oh I do agree that if you just calculate out the rate of return, you'd do better just sticking the 120K in the market. >>

But, if you rent, you get the return of the 120K to 130K. That will offset the cost of renting. So, it needs to be included as part of rent versus by calculation.

KlangFool

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Meg77
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Re: Is this housing budget reasonable?

Post by Meg77 » Wed Oct 04, 2017 2:54 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 2:30 pm
furikake wrote:
Wed Oct 04, 2017 2:16 pm
Are you okay if the house sits empty and you can't find a tenant you like for like 6 months? Are you okay losing the whole house including the down payment if you lose your job and don't have a renter and you can't pay the mortgage?

If you're ok with the above, then go for it. Otherwise it's too risky.
Median time on market to find a renter is 21 days. Obviously it would stink if it just sat empty, but I would be fine making the mortgage payment as is. It'd be basically the same financial situation as it would be if we were living in it (actually a little cushier).

With your second question, are you talking about foreclosure? Yeah, that would be horrible, but I've got enough cash that I could pay the mortgage for a long time before I'd ever get in arrears. And my present employment is pretty solid, so I'm not too worried about that scenario. My main worry is just the budget tightness, particularly in the period before my wife finds something part time.
What you are proposing makes sense to me. It's complicated though. Taxes will be a hassle with a rental and also when you convert the rental to a homestead later - you'll need a professional to make sure you do it right. And long distance landlording is no cinch. You'll want to pay for a property manager (they'll lease it up for you too). It'll probably not cash flow, but since you appear to be living for free I'm sure you can absorb that cost. And of course the mortgage you get will be more expensive since it won't be for a homestead. Then again rates may rise by the time you actually move in so that may not make a difference.

One thing you may not have considered is that it may be hard for you to qualify for a mortgage if you wait and buy once you get a new job in that area. Lenders like to see continuity of income before they will approve you. You'll need to have been in the new job for 60 days (or have an employment contract) plus have worked in the same industry prior to that for a year or so in order for your new income to count. Then again mortgages for rental properties are harder to get in general - they'll also scrutinize your income sources carefully and wont' count any rental income unless you have a signed lease (even then they usually discount it by 30% or so).

Regarding your question about the budget though, it does make sense to aim to spend about 25% of your net pay on fixed housing costs. But the rest of your budget matters too. High debt payments or a child with special needs or any number of other circumstances can make even that 25% expense untenable. Also remember that costs like utilities and maintenance can really add a lot to that, especially in an older or higher maintenance home. Many apartment dwellers are shocked when they buy their first home and see their utility bills double or even quadruple. And you could be the unlucky ones who have to replace the HVAC and water heater within the first year or so. I don't say this to scare you, just to point out that you really should make sure you have a good emergency fund in place before pulling the trigger. All things considered you can probably afford it though.
"An investment in knowledge pays the best interest." - Benjamin Franklin

mnnice
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Re: Is this housing budget reasonable?

Post by mnnice » Wed Oct 04, 2017 3:14 pm

I personally would find a job in the new place. Then either rent or find a house you can afford on one salary. I would not worry about the disruption of school for a first grader in normal circumstances. I suspect you are making it harder than you need too. I just didn’t see the point of buying the house first.

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Artful Dodger
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Re: Is this housing budget reasonable?

Post by Artful Dodger » Wed Oct 04, 2017 4:10 pm

To your original question, I think the house payment is affordable based on your income. One thing you might consider is backing off the down payment some, and leaving that money in your emergency fund, maybe an additional $25000. Based on your estimate, that should still leave the payment in the $1700 range. If you got into trouble, the additional EF would provide more of a cushion.

Klangfool brings up a good point. Your budget should include something for saving. Try to build in 5% at a minimum, or whatever will garner the max employer match. Then, increase as your salary increases, or when life events provide more cash. (Ie. children age out of daycare to school, or wife goes back to more full time work.)

Having moved when I was young, and having moved children when they were young, I don't think you have to worry much in the early grade school years about mid term moves, should that be necessary.

KlangFool
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Re: Is this housing budget reasonable?

Post by KlangFool » Wed Oct 04, 2017 4:48 pm

Artful Dodger wrote:
Wed Oct 04, 2017 4:10 pm
To your original question, I think the house payment is affordable based on your income. One thing you might consider is backing off the down payment some, and leaving that money in your emergency fund, maybe an additional $25000. Based on your estimate, that should still leave the payment in the $1700 range. If you got into trouble, the additional EF would provide more of a cushion.

Klangfool brings up a good point. Your budget should include something for saving. Try to build in 5% at a minimum, or whatever will garner the max employer match. Then, increase as your salary increases, or when life events provide more cash. (Ie. children age out of daycare to school, or wife goes back to more full time work.)

Having moved when I was young, and having moved children when they were young, I don't think you have to worry much in the early grade school years about mid term moves, should that be necessary.
Artful Dodger,

Please note that this is forecasted income at the new location.

<<When we move, I would anticipate finding a job paying around 80K per year. My wife works part time, but we would move before she found employment. I would expect her to make around 20K to 30K once she finds a job, though it might take a little bit to find her the right employer.>>

KlangFool

BaseballOnTheRadio
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Re: Is this housing budget reasonable?

Post by BaseballOnTheRadio » Wed Oct 04, 2017 5:03 pm

KlangFool wrote:
Wed Oct 04, 2017 4:48 pm
Artful Dodger wrote:
Wed Oct 04, 2017 4:10 pm
To your original question, I think the house payment is affordable based on your income. One thing you might consider is backing off the down payment some, and leaving that money in your emergency fund, maybe an additional $25000. Based on your estimate, that should still leave the payment in the $1700 range. If you got into trouble, the additional EF would provide more of a cushion.

Klangfool brings up a good point. Your budget should include something for saving. Try to build in 5% at a minimum, or whatever will garner the max employer match. Then, increase as your salary increases, or when life events provide more cash. (Ie. children age out of daycare to school, or wife goes back to more full time work.)

Having moved when I was young, and having moved children when they were young, I don't think you have to worry much in the early grade school years about mid term moves, should that be necessary.
Artful Dodger,

Please note that this is forecasted income at the new location.

<<When we move, I would anticipate finding a job paying around 80K per year. My wife works part time, but we would move before she found employment. I would expect her to make around 20K to 30K once she finds a job, though it might take a little bit to find her the right employer.>>

KlangFool
I should clarify, we're not moving unless I find a job at that salary or higher. The one I turned down was a touch higher than that. 80k would be the floor. So if no job comes around that is paying that much, we stay where we are and I keep my current job.

KlangFool
Posts: 6761
Joined: Sat Oct 11, 2008 12:35 pm

Re: Is this housing budget reasonable?

Post by KlangFool » Wed Oct 04, 2017 5:08 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 5:03 pm
KlangFool wrote:
Wed Oct 04, 2017 4:48 pm
Artful Dodger wrote:
Wed Oct 04, 2017 4:10 pm
To your original question, I think the house payment is affordable based on your income. One thing you might consider is backing off the down payment some, and leaving that money in your emergency fund, maybe an additional $25000. Based on your estimate, that should still leave the payment in the $1700 range. If you got into trouble, the additional EF would provide more of a cushion.

Klangfool brings up a good point. Your budget should include something for saving. Try to build in 5% at a minimum, or whatever will garner the max employer match. Then, increase as your salary increases, or when life events provide more cash. (Ie. children age out of daycare to school, or wife goes back to more full time work.)

Having moved when I was young, and having moved children when they were young, I don't think you have to worry much in the early grade school years about mid term moves, should that be necessary.
Artful Dodger,

Please note that this is forecasted income at the new location.

<<When we move, I would anticipate finding a job paying around 80K per year. My wife works part time, but we would move before she found employment. I would expect her to make around 20K to 30K once she finds a job, though it might take a little bit to find her the right employer.>>

KlangFool
I should clarify, we're not moving unless I find a job at that salary or higher. The one I turned down was a touch higher than that. 80k would be the floor. So if no job comes around that is paying that much, we stay where we are and I keep my current job.
BaseballOnTheRadio,

So, you believe that you can financially support a 390K house with 80K annual salary?

1) How much do you save per year at 115K annual salary with no housing expense?

2) Is that one income or two?

3) How much is the child care expense for 3 kids at the new location?

KlangFool

Dottie57
Posts: 2127
Joined: Thu May 19, 2016 5:43 pm

Re: Is this housing budget reasonable?

Post by Dottie57 » Wed Oct 04, 2017 6:26 pm

BaseballOnTheRadio wrote:
Wed Oct 04, 2017 5:03 pm
KlangFool wrote:
Wed Oct 04, 2017 4:48 pm
Artful Dodger wrote:
Wed Oct 04, 2017 4:10 pm
To your original question, I think the house payment is affordable based on your income. One thing you might consider is backing off the down payment some, and leaving that money in your emergency fund, maybe an additional $25000. Based on your estimate, that should still leave the payment in the $1700 range. If you got into trouble, the additional EF would provide more of a cushion.

Klangfool brings up a good point. Your budget should include something for saving. Try to build in 5% at a minimum, or whatever will garner the max employer match. Then, increase as your salary increases, or when life events provide more cash. (Ie. children age out of daycare to school, or wife goes back to more full time work.)

Having moved when I was young, and having moved children when they were young, I don't think you have to worry much in the early grade school years about mid term moves, should that be necessary.
Artful Dodger,

Please note that this is forecasted income at the new location.

<<When we move, I would anticipate finding a job paying around 80K per year. My wife works part time, but we would move before she found employment. I would expect her to make around 20K to 30K once she finds a job, though it might take a little bit to find her the right employer.>>

KlangFool
I should clarify, we're not moving unless I find a job at that salary or higher. The one I turned down was a touch higher than that. 80k would be the floor. So if no job comes around that is paying that much, we stay where we are and I keep my current job.
Don't buy a house in a location you are not committed to.

mesaverde
Posts: 405
Joined: Wed May 02, 2007 4:14 pm

Re: Is this housing budget reasonable?

Post by mesaverde » Wed Oct 04, 2017 7:27 pm

To the OP:
Do you realize that when you buy a property with a mortgage, you either buy it financed as a primary residence or investment property?
You will pay a (often significantly) higher interest rate on an investment property, even if you make a substantial down payment.

If you are thinking of going the primary residence route, realize that you would need to sign a statement to the effect that you will move into the property within 2 months of purchase. This is a standard thing on mortgage loans. If you sign that statement, then rent it out, you would be commiting fraud and they can call the loan.
"Learn from the past, live in the present, plan for the future"

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