Submitted by [deleted] t3_11ecl9h in personalfinance
[deleted]
Comments
Werewolfdad t1_jad60p6 wrote
>Is this reasonable?
3x income is generally affordable. Your target homes are under that.
Unless you spend all your money on beanie babies and bespoke potatos hung in garages, it should be readily affordable for you
FailingDan t1_jad8k7m wrote
You are likely on the edge if you use the 28% rule (mortgage+taxes+insurance under 28% of gross monthly income). Are the $350k homes livable and of sufficient size for your family? Or are you going to need to put additional money into repairs in the next couple of years? Do they have newer roofs, windows, insulation, HVAC? Each of those things could cost $10-50k dollars easily.
I would suggest putting $2500 in a savings account each month starting now. This will allow you to test if a $3500 payment is doable for you as well as help you save up some more cash for a down payment or to pay off your debt.
It looks like rates are going to continue to climb but hopefully home prices are stabilizing, so you should not be out anything by being slow and methodical about this. When does your lease end?
gagralbo t1_jadb21v wrote
June 30th is the end of the lease. We have been putting an additional $1700/month into saving to start mimicking the cost/increasing the down payment.
clearwaterrev t1_jadhtuw wrote
Closing on a home usually takes around 30-45 days from the time your offer is accepted to when you get keys to your new home. If you want to have keys to your new home a week or two before your lease is up, then you'd need to have an offer accepted no later than early May.
If you are seriously thinking about buying a home, I'd go get pre-approved, talk to some agents, and start looking at houses within the next few weeks.
gagralbo t1_jadl69n wrote
Thank you! This is really helpful advice
JellyDenizen t1_jad6veg wrote
You might want to save more so you can put down 20% and potentially get a better rate, but your income is enough to support houses in your price range.
The_Real_Scrotus t1_jad6w5o wrote
$3300/month on $7500 take home is going to be tight, especially if you have an additional $500/month debt on top of that. But you're only taking home about 50% of your gross pay, so I'm guessing you're contributing a lot toward retirement? You'd always have the option to reduce those contributions if you want to free up additional money each month.
iranisculpable t1_jad70nn wrote
3800 / 7500 = 51 percent dti. No you cannot afford to buy the home you want.
Including retirement savings how much do you save per month?
gagralbo t1_jadb75i wrote
Right now we are both putting 11% of income to retirement and an additional $1700/month into savings
iranisculpable t1_jadfclp wrote
175 * 0.11 / 12 = 1600 a month retirement savings.
1600 + 1700 = $3300.
I suggest
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lowering retirement contributions to the level needed to maximize employer match,
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pay off your debts, and
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then save more toward a down payment to reduce this ratio:
(mortgage payment including insurance and peppery taxes) / (Take home pay + retirement) to 25 percent
Unusual_World2421 t1_jadbm0u wrote
a 200k mortgage on a town home is nearly 300 dollars cheaper than my 400k house with mortgage of 3.5%.
i m though going to buy the town home to rent out for 2k.
the rates are the highest in my adult life time as i have ever seen. i m 37 years old and have owned various properties since 2009.
whynot19734 t1_jadyitr wrote
DTI ratios are generally done using gross income because peoples’ deductions and taxes vary widely depending on their circumstances. Using gross income, his DTI is 26%.
OP, if you have kids requiring expensive childcare, this is not doable. Otherwise, it will be doable but a bit tight. I think the odds are that mortgage rates will come down in the next few years, though, so just be ready to jump on a refinance whenever it makes sense, and that will free up some more room in the budget.
iranisculpable t1_jae0vra wrote
What a lender will accept and what is actually doable are two different things.
I once had a 70,000 household income in HCOL. That is $5800 gross per month.
I borrowed $216,000 at 9 percent. That is $1700 per month. Taxes $250 / month. Insurance $100 / month (earth quake insurance required in those days)
2050 / 5800 = 35 percent debt to gross income.
No kids. No other debt.
The banks and realtors convinced me I could afford this.
5 months into ownership I realize I was being lied to. My cash in the bank account was declining each month and I realized I had 4 months left.
I hustled a new job that brought household gross to $7900 / month.
2050 / 7900 = 26 percent.
After that I everything was better.
kaiyabunga t1_jad8ijq wrote
2006-2007 many have felt hopeless. Almost time
[deleted] OP t1_jad9k7w wrote
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sephiroth3650 t1_jadawiu wrote
It will really come down to your budget. I'd agree with your estimate on a mortgage payment of up to $3300, if you're pushing $450k with the purchase price. You said you have a monthly net income of $7500. So after making a $3300 mortgage payment, you'd have $4200 left. So the question is.....can you cover all your expenses and meet your savings goals with the remaining $4200/month? Without other significant debt, or general spending issues, it seems like you should be able to afford that.
jgomez916 t1_jadz76o wrote
My husband and I have the similar numbers as you in income ($165K) and net ($7,400) and the same savings $60K for house . We only have $20K in student loans ($10K each). We have only been married 24 months and have only been saving for this long about $3K per month. Homes in our city are cheapest $350-$450K as well.
Owning our small condo (bought 2020 with $6K out of pocket at 2.5% interest rate at $150K sales prices) runs us $1,200 per month and we are staying and not buying a single family house for the next 2-4 years until we have our first kid because we want 2 kids back to back and I kids alone will be $2K per month ($1,500 FT day care and $500 for the cheapest family rate health pan among 6 options our jobs offer) 2 kids back to back will be like $3K per month)We both want to be working parents.
Depending on how this year goes we may have to start a fund for fertility treatment and or adoption in the future so we are not buying so we can actually afford a house and kids in the future. Our money is parked in a 5% AYP CD and 3.4% HYSA.
Additional_Cry_2064 t1_jaett1c wrote
It seems so odd that a 175k income cannot afford 350k anymore. Even if it's cuz of the interest rates.
Additional_Cry_2064 t1_jaeu4ii wrote
I'm in similar boat but the cheapest townhomes in my area are minimum 450k and they're all at least a decade old. New ones are 650k or higher.
I have no idea how I'd be able to afford it now, whereas a year ago It'd have been so much easier.
Unusual_World2421 t1_jadcfyd wrote
OP,
your mortgage will be 800-1200 more than a year ago. if possible try to get a spot for less than 300k.
gagralbo t1_jadlh0b wrote
I know :(
There is literally nothing in this area below $300k unfortunately.
jgomez916 t1_jadzxbf wrote
My husband and I (28) just passed over making an offer last month on a 3x1 1200 sq feet house ($364K- remodeled home and one of the lowest priced in our county) with no garage because with a $75K down (which would have required a 401K withdrawal) the payment at 20% down at 6.5% interest would have been $2,300 per month and like $400 in utilities and ou condo I bought pre-marraige runs us $1,200 total. We could not justify $1,500 more a month for 1 more bedroom and a small grass backyard.
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$2K rent is alot but would possibly be a smaller monthly increase than buying in this market.
[deleted] OP t1_jada9he wrote
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alexm2816 t1_jad7aer wrote
Take a look at your budget.
You're looking to spend an additional $2000 / month and then you're on the hook for maintenance and repairs. Does your budget have $2k a month plus utility increase plus maintenance without compromising other goals?
If you can rent a comparable home for $2000 it may make sense to rent vs buy unless you're committed to the area for a long long time.