Can I afford a 500k house? (rental, how much, buying a house)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I'm trying to figure out if I'm in over my head here.
Taxes are also 11k/year
Currently, my wife and I are living on just my income. She will be done school in less than a year and will start out making around 60k. We want to buy a home that we can settle into, start a family, and not move for at least 10-15 years. At 300k-400k, you really do not get much in central-north Jersey. We don't want to buy a home only to move when she starts working. I also want to take advantage of the low mortgage rates.
Here are some pertinent information about me:
-I'm 26
-I make 100k gross. I expect my salary to increase 3%-5%/yr over the next few years
-Preapproved for 480k house at 3.1%(assuming 20%down)
-I have 150k cash
-I have 40k in my 401k
-I have no debts but I will be getting a car soon
-I have monthly bills of around $800
With taxes my monthly payment would b around $2700
My biggest worry is if I lose my job in the next year. My wife won't be working yet and I will only have funds to last a few months.
If all goes well. With both our incomes we would try to pay this off in 7-10 years(or should we not with such a low rate?).
This is a HUGE decision for us. Please provide any advice you can and thanks in advance.
i never trust the pre approval amounts. i was pre approved with my wife for $800,000, and i really can't afford that. i purchased a house for approximately $450,000, with 10% down.
don't assume 3-5% raises. you'll have good years and bad, depending on your field, but try and work your budget based on what you make, not what you expect to make. it sounds like you're in a good position, and i would say with $160,000 household income, and no debts other than maybe a modest car payment, you'd be fine with a mortgage between $400-$500 thousand.
i would hesitate on paying it off in 7-10 years personally, with interest rates this low. but if you have no other debt, then why not?
i think you could do it and still have a nice emergency fund that would equal around $50,000 in cash, right?
or, just wait a year til the wife is working, and do it then. live someplace very modestly for that year to continue socking away cash
All i can say is damn,160,000 is a lot of money in other parts of the country.
To me it is too. No wonder the middle class are priced out of Nj.
i keep telling people on other boards that its unreasonable to expect to buy a home in Nj for 100,000(and thats safe). No wonder people making 60,000 in Nj can't live the middle class lifestyle and are struggling.
But they insist that i dont know how to manage money.
Life has a way of throwing you curveballs. One example for us was having children. We bought a home 2xs income, and 6 yrs later we were making much more than when we bought when we were expecting. Surprise! Twins! Daycare was about $1400 a month - and this was 14 years ago. If we bought at the top of our budget we would've been in deep doo. We too had little debt (actually just mortgage) but a home can be a big money sucker over and above your mortgage.
Listen, I've been told on this board I'm way too conservative on housing and what people can afford. As I sit here in my home with a mortgage less than 1xs salary, at this point in my life I'm glad. Unexpected sh** doesn't throw us into a tailspin and the comfort in that is immeasurable.
You had your mind made up before you posted so good luck!!
i think you're only slightly too conservative on this. the reality is, the OP can afford this payment, in theory. but i think everyone has pointed out in some way or another that the OP would be pushing his limits, even after his wife gets her job.
OP - also remember, when you have a house, you will now be furnishing a house. dining room table + chairs can cost a small fortune, even for "cheap" furniture.
I think it would be prudent to rent modestly until your wife gets a job, and keep socking away cash. maybe put 30% down and get a 15 yr mortgage a year from now, and have close to the same payment as if you purchased now?
When I got married we did it similar to the way you are thinking but we were a "little" better off. $1750k/year combined for $500k house with 120k downpayment and over 100k in investments.
We were able to manage ok but there was not much left over for FUN on a regular basis. Going away on a spur of the moment weekend trip was not a possibility but we did try to go on some sort of vacation once a year. Home ownership comes with alot of little things that add up, insurance, upkeep, lawn/gutter maintenance (like others have said), decorating, upgrading, if you are a tinker-er like me then tools and supplies and such and it adds up quick without you realizing. A simple plumbing issue can easily hit $900+. At some point we were spending over $6k/month on bills and groceries with no CC debt and only one car payment of $450/month.
Hopefully it wont happen to you but we got bitten hard and eventually had to sell when my wife lost her job. Lost over $100k on the sale too. Looking back, I would make sure the mortgage can always be paid with only one income with some wiggle room just in case. Besides the unknown of losing a job, you also need to think about the future and continue to save and invest for retirement. I know at 26, retirement is a long way away but it comes faster than you think.
500k seems too much for 100k salary with 20% down.
3.0% APY for a 30 year mortgage---is that realistic?
Even still.. Don't forget general home maintenance (broken furnace kind of stuff), gas, electric, insurance, lawn mowing and snow plowing, etc.
I think you could wing it, but you'd be right on the edge there. I wouldn't do it if you're talking about a $300/month car payment on that new car you're buying.
Here are some made up numbers... not broken down very well but I think they are fair, if even conservative for NNJ:
take home $6200
mortgage+taxes+ins -$2,800.00
cell phone -$85.00
gasoline -$200.00
food, clothes, eating out, entertainment etc -$1,000.00
maintenance, other insurances (life insurance, car insurance) -$600.00
electric -$120.00
heat -$120.00
internet/tv -$70.00
retirement -$800.00
There's about 400 bucks left over/month there.
Got a kid going to college?
Car payment?
Lawn guys? Snow plowers?
Vet bill?
Vacation?
Christmas shopping?
OP is still young, no need to rush into buying a first house that stretches the financial limit.
I agree with everyone who said to save up more money and wait till the wife gets the job. That will open up more flexibility. Meanwhile, OP should go to as many open houses as possible, the more you see, the better you know the market and what you do/do not like.
We bought our house in August and we looked for over 3+ years (2 in the town we ended up buying). We probably saw over 50 houses during that time and as soon as we saw "the one", we knew that was it and have been very happy since.
i think you're only slightly too conservative on this. the reality is, the OP can afford this payment, in theory. but i think everyone has pointed out in some way or another that the OP would be pushing his limits, even after his wife gets her job.
OP - also remember, when you have a house, you will now be furnishing a house. dining room table + chairs can cost a small fortune, even for "cheap" furniture.
I think it would be prudent to rent modestly until your wife gets a job, and keep socking away cash. maybe put 30% down and get a 15 yr mortgage a year from now, and have close to the same payment as if you purchased now?
i've been called worse. it's worked well for me for 20 years, so i'm not all that crazy. we were 24 when we bought our first house and i would've liked something twice as much, but the reality is it would've been irresponsible. OP is in a WANT mode right now, not a NEED. At 26, I think he needs to scale down expectations.
very true. i'm content that we're in a house that we bought when i was 28, she 29. not including bonuses, we're right around 2x salary. the kicker in NJ of course is the property taxes which is like adding a $100-$150,000 to you mortgage payment depending on rates.
anyways - we're comfortable with our payment, and will be far more comfortable in a few years when our student loan payment is done. 1 car payment, student loan payment, and a NJ mortgage. fun stuff.
As I said earlier, he'd be nuts to do this. Not having to worry about money is an amazing feeling. The other day, I was kind of thinking out loud with some friends/coworkers and honestly couldnt remember if I was getting paid that Friday or not. I honestly, did not know. A person who overheard me remarked, "that must be nice". People think they make X amount, they have to spend X amount. When you do that, you get caught in the rat race, and the things you own end up owning you.
But what do I know, OP may have rich family to provide a parachute should **** hit the fan. If thats the case, as was mentioned earlier, he has already made his mind.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
it's worked well for me for 20 years, so i'm not all that crazy. 
we were 24 when we bought our first house and i would've liked something twice as much, but the reality is it would've been irresponsible. OP is in a WANT mode right now, not a NEED. At 26, I think he needs to scale down expectations.
