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VorlonConsu t1_iy8y4rx wrote

I’m pretty conservative with money and I think your combined salary is too low to afford a house at $400k with an interest rate a 7%. Your mortgage shouldn’t be more than 2 (ideally) to 3 (HCOL) times your annual salary.

You’re not saving enough for retirement now and if you have kids you will have expenses for childcare, supplies, 529, etc. Also, you have to budget for necessary home repairs. I spent over $30k on necessary repairs my first year of home ownership.

You need more money saved to buy a house. Even if you only put 5% down, you’ll need money for closing costs and money for repairs/emergency fund. Having only 10% of the purchase price to cover that is not enough. I’d save for longer and hope the housing market continues to head down before buying.

I’d agree with this analysis I just saw today:

https://finance.yahoo.com/amphtml/news/much-money-earn-annually-comfortably-181013084.html

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MightyPinz t1_iyagxev wrote

TLDR: per the yahoo article- a household will need to bring in between 165-195k a year to afford a 400k loan on a home at current interest rates.

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ProspectiveHomeBuye OP t1_iy9fcf3 wrote

I appreciate the response, and thanks for sharing that article. We have used multiple house affordability calculators from places like nerdwallet, Freddie Mac, and various banks, and the range we have seen is from around 375-440k with a monthly payment of 2800-3300. I’m curious as to why these are so far off from the analysis in this article? Also, how much should we be saving for retirement? There is a tool in my Transamerica account that estimates how much income we will have once we retire and with my current rate and our current Roth balances/rates it shows our projected income being well above what we currently make. I had understood that you want to save 20% of your gross, and currently we are putting about 10% into retirement and about 14% into savings.

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MissMazelTov t1_iy9krkl wrote

You are not taking into account the expense of kids in daycare or any kind of emergency or home maintenance. It's not every month but houses need regular maintenance and it's usually not on your personal savings schedule. Our water heater just needed replacement, that's $1500 right there. Fridge crapped out, that's $2000. That's not even getting into the really expensive stuff like HVAC, roof replacement, etc. That combined with the costs of kids is going to eat up that extra $1300-1800 real quick.

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ProspectiveHomeBuye OP t1_iy9gdvk wrote

I also want to add that we are concerned about being priced out of the market and never being able to buy. We live in a desirable area and house prices have dropped a little bit, but based on demand it does not seem like they will ever drop below the levels they were a few years ago. We also have roots here and are not considering moving to a lower COL area, as it would require both of us to quit our jobs and leave our families and friends.

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tyler289 t1_iy9r6c1 wrote

There's the conventional wisdom/ideal scenarios for home-buying and then there's real life. Worrying about being priced out is a real concern, but FOMO is never a good driver for decision-making. It's all a balance. Some people here will tell you to forget it, others will say it's OK.

I'm in a fairly similar situation as you (combined income is about $8900 a month). I bought a home ($385k) in 2020 while engaged and if you went off of "convetional wisdom," we would have been told not to buy because our income was about at your level, but we had my now-wife's apartment to finish paying for (4 more months, couldn't break the lease) and a new car and wedding to pay for. We were tight for a bit but made it through. Friends in the same range have recently done the same thing, and it's tough at times but they adjusted well.

Now we've increased our income and have plans to try for a kid in the next calendar year, which would tighten our budget quite a bit, causing us to re-think our location to move closer to family. Because you have family nearby, that will decrease child care substantially for a lot of factors.

By budgeting and doing all of these calculations, you are already ahead of a lot of people in similar scenarios. My advice to you is to look at homes, but don't rush into home-buying. Try budgeting for a few months with what a mortgage would be like ($3k or so). Homes are expensive and kids even more so, though that's a problem for later on. Because you have no interest in moving, maybe look at more "forever" type homes than starter homes, even if it takes you another year or two to find the right one. Fixed rent is fine, homes can become a financial drain extremely quickly. You're fortunate that you can focus simply on your current city and find the exact location and home type you want.

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