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Old 08-20-2012, 10:51 AM
 
51 posts, read 5,242 times
Reputation: 20
Quote:
Originally Posted by Lacerta View Post
While I don't agree, at all, with those who think you should drain your retirement accounts to pay cash for you house, I do think you were drastically overreaching, so I'm glad to hear you are backing off.

The general rule is to buy a house for no more than 2.5x (maybe 3x, if you have no other debt, but you have a car payment, so stick closer to the 2.5x range) your annual gross income. Instead, you were looking more like 5x. That is FAR too much.

Look for something more in the $250k-$275k range instead. That will give you enough savings for 20% down, while still leaving an emergency fund in the bank, and a mortgage you can live with.

Understand that "retirement" is like saying "heaven"... its something that doesnt really exist... its a myth.

Imagine yourself at 77 'retired'. Will you be enjoying life? Or half-dead?

You want to be in your convertible NOW while you're young -- most people get to this magical retirement time and realize: ITS TOO LATE. Time is the stuff life is made of, 'retire' NOW - I own (cash no debt) am in my 30s, enjoy sunbathing and open air motoring -- do it while you're young -- its sad to see 'retired folks' in their 70s and 80s in a convertible like me... they look as if they are in pain... me im enjoying it cause im young --
dont wait

live now
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Old 08-20-2012, 12:14 PM
 
1,522 posts, read 1,107,696 times
Reputation: 778
Quote:
Originally Posted by Rolling_Rock
My advice for you is that if you have 165k saved between savings and 401K, why not BUY your house with CASH and be DONE WITH IT.
Quote:
Originally Posted by Rolling_Rock View Post
Just keep your LIFE in mind. You only live ONCE - you can live FREE in a SMALL, *PAID* house and work on your sun tan and retire in your 40s. OR you can live in a $500,000 McMansion and slave a 9-5 until you are 77...

dont get caught up in the American dream myth - live in REALITY and value your REAL LIFE - cause you wont get another one!
I understanding your concerns about over-leveraging, but you do realize that not all locations are created equal, right? There are many places in this country where 500,000 does not get you a McMansion - it gets you a 2,000 sqft. house from the 1970's.

And 165,000 will only get you a 1 bedroom crappy condo.

Maybe some people don't want to live in a tiny 1-bed condo for 40 years while they work - they wouldn't exactly be "enjoying life" that way.


Also, I think you're swinging the pendulum wayyy too far the other direction suggesting people should cash out their 401k's just to buy property.
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Old 08-20-2012, 12:38 PM
 
Location: New York
1,047 posts, read 1,885,040 times
Reputation: 644
.

I commend your high credit score, this shows you are a responsible person who has made to right choices. I would say go for it! I really like that your employer is paying your closing costs.

I live in Long Island New York - $500,000 selling price is advantage around large metropolitan city, it is not a mansion.

Back in the late 1980's - I had situation similar, was a DCAS Gov source inspector - traveling around the country, living out of a suitcase. It was great money, saw a lot of the country. My job was to inspect electric components before shipment to the next stage of manufacturing. At a company here in L.I., shut down their product line and recommended corrective action. That afternoon the VP called my into his office and said name your price. Accepted a position and they paid for my moving expenses and 6 months of rent till I found place to live. The was 24 years ago...

At $95,000 yearly income, an affordable payment would be around $2450 per month.
$500,000-20% ($100,000 down payment) = $400,000 x 5% = $20,000 (closing costs - paid by the employer)
A $400,000 x 3.75% x 360mth = $1853 (P/I) As long as your yearly escrows are not more than $7165, you can get an comfortable affordable mortgage right now......

My point of view in today's economy - real estate would be a good long term investment - 1) value is low and starting to climb. 2) The interest rates to borrower the money, are the lowest I have every seen.

I understand your concern how much you pay over the life the of the mortgage. I brought my home in 1992 - paid my 30 yr loan off in 12.5 years sending extra into the principle. Thus saving $10,000's on the interest. You can do the same thing - one extra payment a year knocks 7.5 years off a 30yrs mortgage.

PM my if you need help....

Good Luck...
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Old 08-20-2012, 12:46 PM
 
3 posts, read 17,023 times
Reputation: 11
Once again, thanks everyone.
I forgot to mention that my spouse make about $150,000 per yr, but not so great credit because of previous marriage.
I was more concerned about the loan approval only using my credit/income, not the monthly payment.
And it is Portland OR where I am at now.
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Old 08-20-2012, 01:29 PM
 
1,522 posts, read 1,107,696 times
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Quote:
Originally Posted by nadoo1004 View Post
Once again, thanks everyone.
I forgot to mention that my spouse make about $150,000 per yr, but not so great credit because of previous marriage.
I was more concerned about the loan approval only using my credit/income, not the monthly payment.
And it is Portland OR where I am at now.
I think it's great if you're trying to base your house off of 1 income, even if your wife makes a substantial amount. If you're doing a 500K house off 95K salary (with hers as backup / savings), you're stretching, but if you based it off her 150K and count yours solely towards backup/savings, I think you'd be OK.

You really want to have the combination of income + assets to keep things going if one of you lost your jobs, and thus aren't dependent on having both incomes to maintain your house.
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Old 08-20-2012, 01:30 PM
 
1,522 posts, read 1,107,696 times
Reputation: 778
Quote:
Originally Posted by Modification Specialist View Post
.
You can do the same thing - one extra payment a year knocks 7.5 years off a 30yrs mortgage.
I think I pointed this out in another thread, but that "7.5 years" number is deceiving, because it isn't true anymore today (probably was in the 1980's).

At 3.75%, an extra yearly payment (equal to your monthly amount) takes just under 4 years off your loan.

You would need an interest rate of 8.6% (!) to knock 7.5 years off.
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Old 08-20-2012, 01:31 PM
 
477 posts, read 373,764 times
Reputation: 490
Quote:
Originally Posted by snowdenscold View Post
I understanding your concerns about over-leveraging, but you do realize that not all locations are created equal, right? There are many places in this country where 500,000 does not get you a McMansion - it gets you a 2,000 sqft. house from the 1970's.

And 165,000 will only get you a 1 bedroom crappy condo.

Maybe some people don't want to live in a tiny 1-bed condo for 40 years while they work - they wouldn't exactly be "enjoying life" that way.


Also, I think you're swinging the pendulum wayyy too far the other direction suggesting people should cash out their 401k's just to buy property.
Careful though in many of those areas where over $500k still doesn't get you much, housing is still vastly overpriced IMO. For many of the higher priced areas that haven't fallen as much from the bubble like other parts of the country, they may just be the last to fall.

How are Portland prices compared to historic prices, how about relative to rents? Are prices still in bubble territory?

Quote:
Originally Posted by Lacerta View Post
While I don't agree, at all, with those who think you should drain your retirement accounts to pay cash for you house, I do think you were drastically overreaching, so I'm glad to hear you are backing off.

The general rule is to buy a house for no more than 2.5x (maybe 3x, if you have no other debt, but you have a car payment, so stick closer to the 2.5x range) your annual gross income. Instead, you were looking more like 5x. That is FAR too much.

Look for something more in the $250k-$275k range instead. That will give you enough savings for 20% down, while still leaving an emergency fund in the bank, and a mortgage you can live with.
Agreed. I would knock out the car payment as fast as possible, and then look at buying.
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Old 08-20-2012, 04:15 PM
 
Location: None of your business
5,467 posts, read 1,452,775 times
Reputation: 1163
Trying to work off one income is great. Don't forget, banks also look for (I think) it is 3 months of emergency money in your bank account. I say build your emergency fund larger. When you first move in you are going to need to buy a lot of things. When we moved we had to buy a riding lawnmower (3 acres), snowblower, it seemed our needs didn't end. If you save money for emergency plus save money for unexpected needs you should be good.

Also remember when making your decision, there is nothing more stressful and will kill a relationship faster than money problems. No possession is worth giving up peace of mind.

PS, enjoy your new home when you find it.
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Old 08-25-2012, 09:30 AM
 
Location: Long Island, NY
1,374 posts, read 1,348,199 times
Reputation: 1303
I am in a similar position as OP. my husband and I earn about $200K combined (my income as an attorney is the higher one), and we are looking to move into a slightly larger house in 2-3 years (we live in a very tiny 990sq ft 2 bedroom now). The decent homes in my area (Nassau county/Long Island NY) are at least $ 400-500K with $10-16K taxes a year on top (good school district areas are expensive). I get anxious at the idea of a $500K mortgage...there's no way I could sleep at night knowing our monthly payment is $2800+ so the plan right now is for

(1) me to sell my condo (bought in 2006 before I met my husband) and try to break even at the closing table (I am underwater on it- it is a 35K difference between the appraisal price and mortgage balance- I am making double payments to get the mortgage balance down to appraisal price by July 2013 (my current tenants lease expires then)

2) put my husbands house on the market for sale (he owes less than $150K mortgage and the home would sell for around $250-299K in the current market)

3) save at least 30% toward DP and closing costs. Husband plans to put down at least 50K from savings and the rest comes from proceeds of sale of current home (at least $100K) [therefore a total of $150K he can write a check for at the closing table.]

To that end, I figure we buy a $450K home, put down 150K at the closng table (minimum, if I have more saved by end of 2013, then we can put down more)for a mortgage balance of $300K....do-able? I hope so.
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Old 08-25-2012, 10:06 AM
 
Location: Huntington, NY
7,459 posts, read 9,625,256 times
Reputation: 3232
Quote:
Originally Posted by LegalDiva View Post
I am in a similar position as OP. my husband and I earn about $200K combined (my income as an attorney is the higher one), and we are looking to move into a slightly larger house in 2-3 years (we live in a very tiny 990sq ft 2 bedroom now). The decent homes in my area (Nassau county/Long Island NY) are at least $ 400-500K with $10-16K taxes a year on top (good school district areas are expensive). I get anxious at the idea of a $500K mortgage...there's no way I could sleep at night knowing our monthly payment is $2800+ so the plan right now is for

(1) me to sell my condo (bought in 2006 before I met my husband) and try to break even at the closing table (I am underwater on it- it is a 35K difference between the appraisal price and mortgage balance- I am making double payments to get the mortgage balance down to appraisal price by July 2013 (my current tenants lease expires then)

2) put my husbands house on the market for sale (he owes less than $150K mortgage and the home would sell for around $250-299K in the current market)

3) save at least 30% toward DP and closing costs. Husband plans to put down at least 50K from savings and the rest comes from proceeds of sale of current home (at least $100K) [therefore a total of $150K he can write a check for at the closing table.]

To that end, I figure we buy a $450K home, put down 150K at the closng table (minimum, if I have more saved by end of 2013, then we can put down more)for a mortgage balance of $300K....do-able? I hope so.

Don't see why not!

At 4%, a $300,000 mortgage is $1,432/mo, plus HO insurance, plus RE taxes.
At 3.75% mortgage is $1,389/mo plus HO insurance and RE taxes.

Lower interest rates make a purchase more affordable
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