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

[blueniteflower]

Originally Posted by bugelrex

Do you have a really high debt load? A 400k loan would $1900, with taxes it's probably $2600
After tax deduction gets you to $2000

Any decent 2Br rental would be least 2000, so your mortgage becomes fixed for 30 years at the same rate as today's rent. You making 10k a month AFTER taxes assuming 50% tax rate, this would seem quite comfortable unless one of you plan on leaving the work force

If you are in your 50's I can understand the hestitation but not if you were in your 30's

We're in our 30's but very aggressively putting away money for retirement...

Also, you're leaving out utilities, insurance, etc. It's not that cheap to live in a $540K house.

[ECPCVC]

Originally Posted by blueniteflower

That's definitely stretching yourself. I own a condo free and clear, co-own another with my mother (I make no mortgage payments on that). My husband and my income are nearly twice what you've listed, and we're looking at homes and we're not comfortable going over $460, ideally would like to be less than $425K. We feel $460 is stretching us...Can't even imagine a home that is $540, we'd be house poor.

???

I feel like alot of people respond to these types of posts to humble brag. I'm sorry, but you wouldn't be house poor buying a $540K home making $240K/year. House poor means all your money basically goes to your house/necessities with no discretionary income left.

[blueniteflower]

When we asked for a loan from our bank, here is what they said:

Loan Amount $529,000
Principal and Interest $2,568.30
Real Estate Taxes $1,100.00 (Longmeadow, MA since it's the most expensive city in the area we are moving to)
Homeowner's Insurance $175.00
Mortgage Insurance (if applicable) $132.00
Total Mortgage Payment $3975.30

Then you have student loans, car loans, utilities/gas/phone/etc, and groceries. You also want to make sure you have either a HELOC or healthy savings for house issues (new roof, or like what happened to us last year and our sump pump died and flooded our basement) etc. At the end of the day, we'd rather pay less for a house and have more discretionary funds. We have weddings in various places to attend, eating out 1 a week or going to the movies, etc. We don't feel comfortable doing that if we were to buy a house at our higher limit. Plus, it is just my husband and I right now, so we don't need a gigantic house.

[Partial Observer]

Originally Posted by blueniteflower

When we asked for a loan from our bank, here is what they said:

Loan Amount $529,000
Principal and Interest $2,568.30
Real Estate Taxes $1,100.00 (Longmeadow, MA since it's the most expensive city in the area we are moving to)
Homeowner's Insurance $175.00
Mortgage Insurance (if applicable) $132.00
Total Mortgage Payment $3975.30

Then you have student loans, car loans, utilities/gas/phone/etc, and groceries. You also want to make sure you have either a HELOC or healthy savings for house issues (new roof, or like what happened to us last year and our sump pump died and flooded our basement) etc. At the end of the day, we'd rather pay less for a house and have more discretionary funds. We have weddings in various places to attend, eating out 1 a week or going to the movies, etc. We don't feel comfortable doing that if we were to buy a house at our higher limit. Plus, it is just my husband and I right now, so we don't need a gigantic house.

So you own a condo outright, co-own another without payments, make around $240K/year, and are using the above calculations as an argument against a $529K loan? Just how many yachts do you think you'll need in retirement?


If your federal tax rate were 33% (it's more likely 28%, but I'll overestimate here), then you'd take home somewhere around $148K, and that's without taking into account any deductions or other special circumstances that would lower your effective rate.


Take away $48K for the mortgage, and that still leaves you $100K (or over 8k/month) in after-tax dollars. Want to set aside $40K for retirement? Great. That still leaves $60K for student loans, cars, utilities, food, and entertainment. As long as you don't drive two Italian sports cars, you could probably even afford a college fund.


I don't think "house poor" means what you think it means.

[canwedoit]

So we declined and seller came back with 20K under and offerred to pay closing. Apparently the people who live in the house want to retire and go leave the country so they wanted a quick sale. We ended up agreeing to this. I'm pretty nervous, but at the same time, excited. We're to do some freelancing/part-time jobs to quickly save up 12 months mortgage + 2.5% the house for emergency repairs.

wish us luck :X. inspection will be this weekend.

[Hollytree]

I think you should buy the house but I think you need to think long and hard about roomers.

Your mortgage will be approved as a single family owner occupied so if you rent part of it out it will violate the terms of your mortgage and if they find out, you could be in a bad legal situation. Ditto with the IRS and the insurance company. If any of your tenants sue you and you do not carry a landlord policy, you are in big trouble. If you have to evict a tenant, you will be outed and will have no legal leg to stand on. And, if your neighbors complain to the authorities that you are running an illegal boarding house in a single family zone........ get the picture?

[blueniteflower]

Originally Posted by Partial Observer

So you own a condo outright, co-own another without payments, make around $240K/year, and are using the above calculations as an argument against a $529K loan? Just how many yachts do you think you'll need in retirement?


If your federal tax rate were 33% (it's more likely 28%, but I'll overestimate here), then you'd take home somewhere around $148K, and that's without taking into account any deductions or other special circumstances that would lower your effective rate.


Take away $48K for the mortgage, and that still leaves you $100K (or over 8k/month) in after-tax dollars. Want to set aside $40K for retirement? Great. That still leaves $60K for student loans, cars, utilities, food, and entertainment. As long as you don't drive two Italian sports cars, you could probably even afford a college fund.


I don't think "house poor" means what you think it means.

1) As people in our 30's and considering children sooner than later, one of us will likely become part-time or stay-at-home for several years, thus a reduction in income. We are factoring that into our decision making when buying a house.
2) Maybe in 5 years we will feel comfortable with buying a house for $529K loan, when we don't have a lot of debt, but right now, we'd rather pay down our student loans and car loan as quickly as possible. Also, we have HOA dues, property tax, and maintenance/repairs on the condo which came out to about $10K last year after replacing the HVAC.

We have 20% downpayment but like the OP, we'd deplete it very quickly after buying a house. It makes us nervous to have close to nothing in our bank account. We only started making this income this year after a long time in school. You are probably right in that we'll be okay, but after witnessing the economy fluctuate in the past 15 years, it just makes us very nervous to buy a house at the limit of what our bank says we can afford.

The reason I'm posting in this thread is it seems like the OP and my situation are very similar in terms of our ages/future/etc (condo versus renting a room, dual income, no kids yet, etc). The future isn't a sure thing for any of us as we've all learned, we don't want to end up in a situation where we end up with a foreclosure on our hands.

[SalamanderSmile]

Originally Posted by canwedoit

So we declined and seller came back with 20K under and offerred to pay closing. Apparently the people who live in the house want to retire and go leave the country so they wanted a quick sale. We ended up agreeing to this. I'm pretty nervous, but at the same time, excited. We're to do some freelancing/part-time jobs to quickly save up 12 months mortgage + 2.5% the house for emergency repairs.

wish us luck :X. inspection will be this weekend.

I think this is a sound decision. You are literally earning the least you can expect to earn, so it will only get less tight. Also, realistically, the Boston market is not going to tank anytime soon so the sooner you get in the better off you will be. I'd still like to see you in a two family to start so that you have legal rent offsetting your purchase and then later when you want a sfh you can leverage the two family which will continue to support itself.

[BostonMike7]

Good luck to you

[xo_kizzy_xo]

Just an FYI to the OP: We had housemates a couple of years ago living in our spare bedroom. By law I couldn't charge them rent or else I would've violated town bylaws as to what constitutes a SFH. I'm sure people get around this, but neighbors do talk and things have a way of getting back to Town Hall...