When do you know it's time to "move up" in house? (job, Budget)

[MaseMan]

Sorry if this gets somewhat lengthy, but just something on my mind.

My wife and I are in a sort of toss up situation. Our family is growing, as we just brought home a baby boy a couple weeks ago. We currently live in a 90 year old house that is in decent shape. It's relatively small. It's fine for us right now, but if we have any more children, it's going to be tight (there are only two real bedrooms in the house). Right now we're in an OK neighborhood towards the center of town. I would describe it mainly as a mix of middle to lower-middle class housing. Small city lots, etc. We have spent a decent amount of money replacing things in it over the past 3-4 years (new windows throughout the house put in last winter, new furnace, etc).

My sister (who happens to be a realtor) pointed out a house that just came on the market. It would be a HUGE step up space wise from what we have. The house is only five years old, and in a more upscale type of neighborhood (probably upper middle class mainly). The area is slightly rural, but still very close to town. The house is move-in ready, the basement is completely finished, three car garage, etc. It's priced rather aggressively at about $100/sq ft, as apparently the family has to move for a job promotion in a completely different part of the state. Houses priced closely to this one are generally smaller, or not as finished.

We would be able to scrape together at least a 20% down payment, assuming we can get some money out of the sale of our current home, though our savings would be rather low after doing this. Our monthly mortgage payment would jump up by about 50% though, no joke. We would be able to handle this with our current budget, but barely. My wife is off work right now due to the baby, and is debating whether she'll return to work eventually full time, or try to find something part time in town (she commutes a half hour each way currently).

Anyway, sorry for the long post. Would love to hear thoughts on this topic, as this scenario has just sort of fallen into our lap.

[MrRational]

Originally Posted by MaseMan

When do you know it's time to "move up" in house?
...we just brought home a baby boy a couple weeks ago. <-- Congratulations!
currently live in a 90 year old house... It's relatively small.
OK neighborhood towards the center of town.

There are your signs.
As to which, how, and when? That sir, is a whole other set of discussions.

...house is move-in ready, the basement is completely finished, three car garage, etc... It's priced rather aggressively at about $100/sq ft

On the which continuum... this one sounds like a winner.

...would be able to scrape together at least a 20% down payment
...though our savings would be rather low after doing this.
...mortgage payment would jump up by about 50%

On the how continuum... this one sounds marginal.

...would be able to handle this with our current budget, but barely.
...wife is off work right now due to the baby
...debating whether she'll return to work eventually full time

On the when continuum... this one sounds like you're not ready yet.

hth

[twingles]

50% jump in mortgage and your wife isn't sure if she's going back to work or not?

Here's how it shakes out:

stay where you are and the decision is hers to make.
move and she has no choice.

I'm sure you're looking at all the clutter right now and wondering how you'll survive in your house....trust me - bigger kids take up a lot more room, but in that regard you've got time. In about 9 months most of the clutter will be gone, or put away for baby #2, and you'll be breathing easy in a home you can afford.

[MaseMan]

I appreciate the advice. Some things to think about. Just to clarify a couple things:

- We can make it solely on my income. It will just be tight. We are on a strict written budget, and have no debt (cars are paid, don't use credit cards, etc). I'm self-employed and the business is pretty secure. I anticipate my income will continue to rise in the next year or so.

- She will be working some type of job, just not sure if it will be full time or part time (though we're both leaning toward her going part time) She really wants to work closer to home, and be home with the baby at least part of the day (which I want as well).

[daydreamin71]

Before the recession, I would have said go for it. But after the bust, if it were me, I would have the fear of depleting my savings, and then some big unforeseen expense coming up (unexpected loss in income, big problem with the house, health issue, more children, your wife deciding she doesn't want to work at all, etc), and being stuck in a house I can no longer afford and can't sell easily, due to the bust. I know you feel your income is secure, but in these times I tend to question how secure anything really is. However, I have learned over the last few years to be far more cautious with taking gambles ; so maybe it is my difficult experience coloring this response. Certainly the house you're looking at does sound like a good deal...

[Cleverbeetle98]

I think the big thing comes down to being able to afford it - and will your current house sell.

Obviously your family will be growing so it sounds like you know EVENTUALLY upgrading is a must. Without knowing anything about the 5 yr old house I'll just say this: do you love it? Just because it's at a competitive price shouldn't be the driving factor. You could reasonably wait a year, give your wife time to be with your baby and find work and save up a little more to cushion your savings.

Do you think you'll regret not making an offer on this house? If not, then just wait. It sounds like you are ready to move up, just don't rush it. Also keep in mind - a 5 yr old house will have it's own issues - give it another 5 yrs or so and things will start needing replacing too - roof, appliances, ect - so while you're putting money into your current house, you will in a new one, too.

[fallingwater]

If you need to sell your house first, you may not have a deal if the seller doesnt consider a contingency on selling your home. I know after having a baby things change and you start thinking about room and the quality of the neighborhood but I would wait a year or two. Babies are expensive and the cost of formula, diapers etc adds up quick. I remember being quite stunned at the cost for that first year.

[HokieFan]

You know you're ready when you can sell your home, walk away from closing with a sizable down payment on your next home and can comfortably afford a larger mortgage payment.

[jkwing]

your house payment should NEVER be more than 25% of your take home pay. if this is the case then you should be fine.

[MaseMan]

Thanks for the info, everyone. Just as a quick update:

- We haven't made an offer in the house I was referencing above. We actually found another house at the same price point, but with much higher quality construction. We put in an offer a couple days ago and are waiting to hear back (deadline is midnight tonight). We figure if we get turned down, it just wasn't meant to be. We might revisit the house I referenced in my OP. Our eyes were really opened to the fact that while the first house is really nice, some of the doors and other materials used were somewhat bottom barrel (stuff you would get on the cheap at Menard's, etc). We also figured out that the owners likely finished the basement themselves, and it really shows in some areas.

- Our house should sell. We have done a lot of updates. We intend to price it below tax assessed value and well below the value of the appraisal we had last year when we re-financed (which was also before we put in new windows throughout the whole house).

- If we get the house we made an offer on, payments will be right around 25% of our net income. My wife has decided she is going to return to work after her FML time is up, and finish out the school year (she works in public education). This will give her time to find something closer to home that suits her better. Meanwhile we're going to live on my income solely and save up everything she brings home through next June. We'll have to find daycare part time, but my parents are willing to help out some of the time, so daycare costs won't be too bad.

So I guess we're going ahead with trying to "move up." I feel confident it will work out. The nice thing is that we can take our time if things don't work out with the house we put an offer in on.