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I make more than double the OP (original poster) and there's no way I'd pay more than 650K under any circumstances. That means 300-325K at your income level, OP. Also, I don't have much faith in those calculators which tend to exaggerate what you can afford; they were developed by the same greedy banks and mortgage companies that helped get us in the current financial mess. Your one big positive is you have a lot of cash on-hand and that could help get you into a 400K home if, and it's a big if, you expect rapid rises in your income over the next 3-5 years. Otherwise, I'd be careful. Taxes are a wild-card and you will probably want to avoid Bergen and Essex counties if you are trying to stretch your dollar. Can your wife work part-time? That would make a big difference.
Just curious what folks out there who earn $100k year (and not much more) are able to afford in terms of housing, or have any suggestions. I've run the typical calculators online, but am hoping to get some "real" data for a reality check as I (hopefully) look for a SFH...
A few things about my situation:
- I earn almost exactly $100k/yr and am the sole source of income.
- I support a wife and two pre-school kids.
- I am NOT handy in the slightest bit.
Given the property taxes in NJ, the calculators are putting me between 375k to 450k for the price range (monthly payments ranging from 2300-2750). In Central and Northern NJ, that's not getting you very much house. Throw in thing like retirement savings, kids' college savings, etc., and I'm looking further in the upper 300s. Not thrilled with the options.
Thoughts anyone?
-jersey$P!KE
On 100k, I'd try to avoid borrowing more than 300 (so 300 + whatever your down payment is)
the OP never said where he wanted to move. Why do we always assume that everyone is automatically moving to NORTH Jersey? I guess because it's closer to NYC, as if that's a Utopia?
If you look in South Jersey (depending on where you work) there are towns in Atlantic, Gloucester, Salem, Cumberland, Burlington, Ocean and Cape May Counties for 300K and with much lower taxes.
While I agree you shouldnt go crazy with a huge mortgage but where in NJ is he going to find homes for 250 to 300K? I am assuming he wants to live in a decent town with decent people which lead to Good schools. Not to mention a townhouse or condo is out of the question with 2 kids. Where is the OP looking? Towns? Where are the rest of you finding these homes for 250 to 350K? Thanks.
I am buying a house in Haddonfield, NJ. 8th Ranked best high school in the state. Price right around $300k. 4bd 2+bath.
Not brand new but useable while I slowly upgrade it to my taste.
Wow, thanks for all the responses -- truly helpful! Here's a bit more about our situation.
- I'm 30, and my income is steady.
- My wife is a SAHM -- financially it just didn't make sense for her to work to pay for childcare -- her previous profession is naturally low-paying so whatever extra we would have, didn't seem worth it to cover the stress.
- We have zero debt and currently pay about $1500/mo in rent for a two-bedroom condo. That means we're quickly outgrowing our space and infuriating the neighbors who live above and below us.
- We have about $140k in liquid savings now. To help lower the monthly payment, we were thinking of putting as close to $100k down -- however that doesn't leave us much cushion, since we'd probably have to spend another $10k in closing plus the usual amount to fix up things since I'm mechanically handicapped. (Seriously -- basic handyman and car maintenance skills should have been a requirement to graduate high school). Any thoughts here on how much I should put down vs. keep liquid for a cushion? Usually they say you should have about six months to a year of cushion available.
- Both our cars are paid off, but are 10 years old and sedans... so we're likely going to have to upgrade to a used minivan in the next 2-3 years.
So in some sense, I think we're in better shape than most people in our situation since we're lucky enough not to have any debt. Part of the challenge for me is figuring out how best my income should be allocated to important things like retirement savings, life insurance, kids' college, etc. Any thoughts here would be much appreciated as well.
Again, there's lots of stuff the site and books tell you, but I thought it'd be great to reach out to the community here and see what REAL people have experienced and actually do.
Thanks again to all the people who responded -- I truly appreciate your input!
-jersey$p!ke
Just put 20% down. It will be helpful to have that extra cushion in savings. You never know what you're going to need the extra $ for. (My wife just called to tell me that the corner of our son's room is "all wet" and the wall is soaked. The joy of home ownership! Not sure what that's going to cost me but things like this happen and you need to make sure you have extra $ at the ready). Plus you'll do better with your tax refund at the end of the year with a larger mortgage.
Just don't get more than you can afford. At this point, if I were you, I would go out and start looking at houses. You have a good sense of the price range you can afford, so look at houses in that range and slightly above in the towns you want to live in. Then for the ones you really like, crunch the #'s and see if you can do it. What drove me crazy about buying a house is that there's no exact science--you don't know exactly how much your closing costs will be, you don't know exactly what your monthly payment will be, you don't know what will come out of the inspection...there's so much mystery behind it and it is by far the biggest purchase of your life. It's kind of strange.
Anyway, good luck! It's a shame housing is so expensive here!
Just put 20% down. It will be helpful to have that extra cushion in savings. You never know what you're going to need the extra $ for. (My wife just called to tell me that the corner of our son's room is "all wet" and the wall is soaked. The joy of home ownership! Not sure what that's going to cost me but things like this happen and you need to make sure you have extra $ at the ready). Plus you'll do better with your tax refund at the end of the year with a larger mortgage.
Just don't get more than you can afford. At this point, if I were you, I would go out and start looking at houses. You have a good sense of the price range you can afford, so look at houses in that range and slightly above in the towns you want to live in. Then for the ones you really like, crunch the #'s and see if you can do it. What drove me crazy about buying a house is that there's no exact science--you don't know exactly how much your closing costs will be, you don't know exactly what your monthly payment will be, you don't know what will come out of the inspection...there's so much mystery behind it and it is by far the biggest purchase of your life. It's kind of strange.
Anyway, good luck! It's a shame housing is so expensive here!
I'd encourage the OP to go FHA and 3.5% down... in this housing and job market you want to put down as little as possible... why? Simple... lets say you need to relocate in the next few years or lose your jobs and have a home going into foreclosure... in these times, there's no gaurantee your home will be worth more now than what you paid... do you want that decrease eatting up the equity you invested through your downpayment or do you want it on the bank's head in the case of a foreclosure or going through a shortsale? I say give it to the bank. I've got to imagine these people who put $60 or 100k down on their homes and are still doing shortsales are just sick at the loss of money... I put $11k down to get into my home 2 weeks ago.
Beyond that, at today's interest rates, why wouldn't you want to borrow as much money as possible? You're paying 5% on an FHA... getting 27% (probably) back through federal tax savings so you're only paying net 3.75% interest... take whatever more you were going to pay in a downpayment and find a nice savings bond or even the stock market... in the long run you're going to get a better return than the 3.75% interest you're paying on the extra principle.
Large downpayments are a TERRIBLE idea... they make no long term financial sense and in the short term create a great deal of financial risk for you.
Are you saying mortgaging 300k? If so where is this guy going to find a nice house in NJ with at least 3 Bedrooms for a growing family? Thanks.
no, i am saying a house of 300k and a mortgage of 240k. in my opinion, not everyone with a growing family is entitled to a 3BR house. one should buy only as much as they can afford. prioritize what you really need - a bigger 3br house in an average or below average school district with longer commute or a 2br in a good school district and shorter commute.
- We have about $140k in liquid savings now. To help lower the monthly payment, we were thinking of putting as close to $100k down -- however that doesn't leave us much cushion, since we'd probably have to spend another $10k in closing plus the usual amount to fix up things since I'm mechanically handicapped. (Seriously -- basic handyman and car maintenance skills should have been a requirement to graduate high school). Any thoughts here on how much I should put down vs. keep liquid for a cushion? Usually they say you should have about six months to a year of cushion available.
So in some sense, I think we're in better shape than most people in our situation since we're lucky enough not to have any debt. Part of the challenge for me is figuring out how best my income should be allocated to important things like retirement savings, life insurance, kids' college, etc. Any thoughts here would be much appreciated as well.
Again, there's lots of stuff the site and books tell you, but I thought it'd be great to reach out to the community here and see what REAL people have experienced and actually do.
Thanks again to all the people who responded -- I truly appreciate your input!
-jersey$p!ke
you must calculate it backwards to see how much you can put down for the house.
you must have at least 8-10 months of your total expense in liquid savings after you pay the down payment and closing. also make sure you account for the intial setup expense (carpets, paint, furniture, appliances, etc). assuming you need 5k per month (mortgage, taxes, groceries, supplies, utilities, commute, life insurance, kid's college fund, etc) you need at least 45-50k in liquid savings after your home purchase and initial setup. if you have 140k in liquid assets right now, that leaves you with 90k to spend on a down payment, closing & the initial setup expenses.
you must also consider what would be your monthly income & expense after home purchase. how much would you be able to save monthly/yearly. if your home purchase leaves you with minimal savings, you must leave a somewhat higher cushion (let's say 60-70k) instead of the 50k.
I'd encourage the OP to go FHA and 3.5% down... in this housing and job market you want to put down as little as possible... why? Simple... lets say you need to relocate in the next few years or lose your jobs and have a home going into foreclosure... in these times, there's no gaurantee your home will be worth more now than what you paid... do you want that decrease eatting up the equity you invested through your downpayment or do you want it on the bank's head in the case of a foreclosure or going through a shortsale? I say give it to the bank. I've got to imagine these people who put $60 or 100k down on their homes and are still doing shortsales are just sick at the loss of money... I put $11k down to get into my home 2 weeks ago.
Beyond that, at today's interest rates, why wouldn't you want to borrow as much money as possible? You're paying 5% on an FHA... getting 27% (probably) back through federal tax savings so you're only paying net 3.75% interest... take whatever more you were going to pay in a downpayment and find a nice savings bond or even the stock market... in the long run you're going to get a better return than the 3.75% interest you're paying on the extra principle.
Large downpayments are a TERRIBLE idea... they make no long term financial sense and in the short term create a great deal of financial risk for you.
I see your logic here but there is a cost associated with dealing with a shortsale/foreclosure if that ends up happening. Sure it may save some of your cash savings for downpayment but ends up costing you in "higher interest rate, higher closing costs, and the foreclosure will cost you for a few years down the road in higher rates, etc..."
If you are that uneasy about job, life changes, etc... Then I would suggest not buying.
"They make no long term financial sense"?
$300k home purchase
Loan 1 - 4.875% with 20% down. total cost 464857.20 (1291 monthly)
Loan 2 - 5.5% FHA with 3.5% down. total cost 582552.00 (1618 monthly)
I see your logic here but there is a cost associated with dealing with a shortsale/foreclosure if that ends up happening. Sure it may save some of your cash savings for downpayment but ends up costing you in "higher interest rate, higher closing costs, and the foreclosure will cost you for a few years down the road in higher rates, etc..."
If you are that uneasy about job, life changes, etc... Then I would suggest not buying.
"They make no long term financial sense"?
$300k home purchase
Loan 1 - 4.875% with 20% down. total cost 464857.20 (1291 monthly)
Loan 2 - 5.5% FHA with 3.5% down. total cost 582552.00 (1618 monthly)
$118000 difference over 30 years. Not peanuts...
That's a very good point NatasNJ. Electing to go with FHA over conv. 20% down is not as clear cut when OP has enough for 20% down and has good credit. If a buyer has trouble getting the 20% down or credit score below 700, it's a no brainer to go with FHA.
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the OP never said where he wanted to move. Why do we always assume that everyone is automatically moving to NORTH Jersey? I guess because it's closer to NYC, as if that's a Utopia?
