Fiancee and I stretching to buy a house. OK in our situation? (Boston: rental, condo)

[GeoffD]

Of that 36%, how much of it is cars and consumer debt?

You'll have a $432K mortgage. $2,062 per month mortgage payment. What is the mil rate of the town or what town? I'll say $20 per thousand on full $540K assessment for property taxes until I have better information. $10,800 in property taxes. Do you have a quote for homeowners insurance? I'd pencil in $2,000 until I had one.

I get housing cost of $35,544. That's 29.62% of your gross. The old school lending criteria was 28% for housing and 33% total. It's a really bad idea to exceed either of those.

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Edited

I just saw that the OP says Milton. The mil rate is $13.56. Assuming $34K for mortgage, taxes, and insurance, I get 28.4% of gross income for housing. For a first time home buyer where you'd expect their income to rise, that's not bad unless it's a wreck of a house.

[canwedoit]

We currently are debt free. We will probably decline the offer and wait until something cheaper comes along that has equally good schools and less than an hour commute to most parts of Boston proper.

[BostonMike7]

Originally Posted by canwedoit

wait until something cheaper comes along that has equally good schools and less than an hour commute to most parts of Boston proper.

You want what everyone else who lives in MA wants. Good schools, short commute. Unfortunately, that comes with a price and it ain't cheap.

[chicagoliz]

First and foremost, you should be buying a house in the area where you really want to live. The speculation about whether it will be "hot" in the future should not be the deciding factor.

[canwedoit]

For what it's worth, the house is in pretty immaculate condition. the main reason we want to buy is because we're definitely going to be here for at least 7 more years. paying rent knowing that seems silly.

[3cents]

if(no_kids):
continue_renting at low $1000 && invest elsewhere
else if(kid < 2 years):
buy (condo || townhouse) near workplace # single family too much work and more expensive
else:
buy (condo || townhouse || single-family) in good school district

[495neighbor]

I believe you have to report income from renters and pay taxes on it on your returns. Keep that in mind regarding balance sheet.

[bugelrex]

canwedoit,

A few comments, if you have a CS degree then you definitely have potential to increase your salary if you keep up to date. A warning though, offshoring is real and stable, lower paid software jobs are exactly the type that get offshored first because the skills are easily found overseas for 2/10th of the cost.

It doesn't matter that your are "only" earning 70k as a software engineer, when the same job can be done for 14k in India. Its the higher paid software jobs with require skills set X,Y,Z and kept up to date which are harder to find replacements...

[chicagoliz]

Originally Posted by canwedoit

For what it's worth, the house is in pretty immaculate condition. the main reason we want to buy is because we're definitely going to be here for at least 7 more years. paying rent knowing that seems silly.

Again, you have to decide for yourself. If the mortgage payment is comparable to the rental payment, I'd probably do it.

[NewfieMama]

Originally Posted by canwedoit

We currently are debt free. We will probably decline the offer and wait until something cheaper comes along that has equally good schools and less than an hour commute to most parts of Boston proper.

I think this is a great idea.

Honestly, when I first read your post my heart rate increased slightly thinking about taking out a mortgage like that on a $120K income. But it's obvious that you're not reckless with money. It's great that you are debt-free, that you've saved six figures to put down on a house. It sounds like the savings plan you have now is working well for you, so I would keep at it until you find a less expensive house or until you have more of a cushion (putting your entire savings down on a house is too risky). I completely understand--it took my husband and I years to save for our downpayment and at times I wanted to jump on a property I loved, but being patient paid off and when we did buy our house, it was so much less stressful knowing we weren't stretching.

Two quick things:
1. if you love your job, I wouldn't jump into something more competitive for the higher pay. Again, it sounds like you both are able to save right now, so don't risk being unhappy in your job for a house.
2. even if the house is in immaculate condition, I still think it's too risky to put ALL of your savings down on a house. Two weeks before we closed our dog got sick and needed a $10K surgery. I was so thankful that it didn't throw a wrench in our plans or cause a great deal of stress over the house (since I needed to put all of my energy into helping him). Life happens, you want a financial cushion! Our emergency fund was always separate from our house savings account.