Outgrowing starter home, how much house can I afford? (PMI, loan, 401k)
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I know there are mortgage calculators out there; however, just looking for some opinions from you guys on what I should be targeting. I live in a very low cost of living with my wife (upstate NY) where housing is dirt cheap (median household income is ~$35K).
My wife and I are 30 years old and currently live in a starter home that we've owned for about 4 years. Within the next year or two, we'll either relocate elsewhere or move buy a new house in the Central New York area.
Income: $145,000 (likely to grow to $155K in the next year)
Debts: $1,500/mo ($400 car, $1,100 student loans)
Credit: 800
We also have a single child (infant), who attends daycare @ $1,000/mo. Other expenses are minimal -- maybe $400/mo groceries and eat out once per week. We don't really shop except for essentials. Gas is minimal - wife has a hybrid with 10min commute, I have 5min commute. No cable, internet is $70/mo. Trips aren't happening as we have a newborn.
We have a little bit of equity in our current home. I'd like to think we could come up with ~20% to put down on a new home -- depending on how much home we can afford.
Given the data above, what house ballpark should we be looking at? We're looking for a nice area, 4 bedrooms, 2+ baths, with very good schools. I don't want another starter house, yet I also don't want to be house poor.
As a couple with $130K gross combined income, two kids, and similar expenses to you in most regards, we're not looking beyond $275K. We could get approved for over $300K, according to our lender, but we'll be carrying another mortgage until after that house sells (after our move), so we want to be able to afford all of our debts and living expenses comfortably and without worry. We also are not sure what exactly our income will be in five years once we retire from the military and get civilian jobs, although with offers my husband has already gotten and two military pensions we'll be looking at $110K at the very least, and that's if I don't work. So we're having to take into account short term (carrying two mortgages) and long term (career changes) things that you aren't.
Is $145K gross or net income? That will change people's answers on here.
Are you taking potential property taxes into account? I've heard NY is high. Our property taxes in Ohio may be lower for a $275K house than yours might even though Ohio's close to the higher end for property taxes, too, which affects monthly payments.
Hey there, thank you for the response and insight. 145K is gross.
You're absolutely right, property taxes here are on the high end. However, home prices tend to be on the low end. For an example, I currently have a very nice 1800sq ft home that was $129,000. Total taxes are about $3,400/year. PITI ~$1,000/mo on a 30 year mortgage, FHA minimum down payment used 4 years ago. We pay extra and owe about $105,000.
Hey there, thank you for the response and insight. 145K is gross.
You're absolutely right, property taxes here are on the high end. However, home prices tend to be on the low end. For an example, I currently have a very nice 1800sq ft home that was $129,000. Total taxes are about $3,400/year. PITI ~$1,000/mo on a 30 year mortgage, FHA minimum down payment used 4 years ago. We pay extra and owe about $105,000.
You're better off than us on your current mortgage, then. I did wonder how that fit in.
We have $338K left on a $374K VA mortgage right now, also bought four years ago. Maryland is really expensive. That's just a 3/3.5 townhouse. However, we don't have student loans, so our only monthly debts are our mortgage, $2K PITI/taxes/insurance, and car loan, $563. That actually brings our DTI lower than yours, I think, even at $15K less gross income. Maybe use that as you will in your own calculations.
Something else that would be helpful to know: how much savings do you have for down payment if you were to buy right now? If you don't have anything, it wouldn't hurt to start now. We've been putting away $2K a month since August on top of $16K we had saved. It's not going to be 20%, but we'll be using VA loan and putting down 5%, and our lender told us they even offer 5% down conventional (no PMI due to or credit scores). That might be something to look into if you don't have a large down payment and don't think you can squirrel away $2K a month for the next year or two.
And a final thing to consider: if you can come up with 20% but can get a good house with a loan for 10% down and no PMI, you could use the other 10% to continue paying your current mortgage after you close on the new house. That lets you move into the new house and then put yours on the market, which is much less stressful than trying to sell before buying or trying to buy contingent on your house selling. As long as your lender agrees that you are able to carry the two mortgages, you'd be fine. Like I said, we're looking in the $275K range while still owing $338K. We won't be selling until after. And we're comfortable doing that because not only can we afford it monthly, but because we have a few months of payments set aside in other savings just in case we need to pull from that. And if we don't end up using it for that, we can either leave it in savings or spend it on furniture/painting/flooring changes for the new place once the current house sells.
At your current income, your wife and you could contribute $18,000/yr (each, I believe) to your 401ks and $5500/yr each to an IRA. That would leave you with about $7500/yr in discretionary income staying in your starter home.
Any reason why leaving the starter home is more important to you than paying off your outstanding debt? You guys are doing really well at your ages. You have a couple of years before kiddo hits school.
As to your home price target, it's a bit high for my personal comfort due to the property taxes. What happens if one of you gets sick/hurt and is unable to work? Could either of you cover a $220,000 mortgage payment on a single salary?
Is it safe to say that your monthly outgoing cash flow is $3500/mo? What about in months with higher expenses (Christmas time, vacations, car repairs,etc.)? I normally pad my expenses by 10% to cover any unforeseen circumstances. Sweating money is bad. Sweating money with a kid is worse.
I know there are mortgage calculators out there; however, just looking for some opinions from you guys on what I should be targeting. I live in a very low cost of living with my wife (upstate NY) where housing is dirt cheap (median household income is ~$35K).
My wife and I are 30 years old and currently live in a starter home that we've owned for about 4 years. Within the next year or two, we'll either relocate elsewhere or move buy a new house in the Central New York area.
Income: $145,000 (likely to grow to $155K in the next year)
Debts: $1,500/mo ($400 car, $1,100 student loans)
Credit: 800
We also have a single child (infant), who attends daycare @ $1,000/mo. Other expenses are minimal -- maybe $400/mo groceries and eat out once per week. We don't really shop except for essentials. Gas is minimal - wife has a hybrid with 10min commute, I have 5min commute. No cable, internet is $70/mo. Trips aren't happening as we have a newborn.
We have a little bit of equity in our current home. I'd like to think we could come up with ~20% to put down on a new home -- depending on how much home we can afford.
Given the data above, what house ballpark should we be looking at? We're looking for a nice area, 4 bedrooms, 2+ baths, with very good schools. I don't want another starter house, yet I also don't want to be house poor.
Thanks in advance!
In general 2.5 to 3 x your yearly income so up to about $450K but you have to take PITI into consideration, and your debt to income ratio. Your daycare costs are not considered into your ratio, that's for you to cover with your remaining amount left over after the mortgage payment.
I know there are mortgage calculators out there; however, just looking for some opinions from you guys on what I should be targeting. I live in a very low cost of living with my wife (upstate NY) where housing is dirt cheap (median household income is ~$35K).
My wife and I are 30 years old and currently live in a starter home that we've owned for about 4 years. Within the next year or two, we'll either relocate elsewhere or move buy a new house in the Central New York area.
Income: $145,000 (likely to grow to $155K in the next year)
Debts: $1,500/mo ($400 car, $1,100 student loans)
Credit: 800
We also have a single child (infant), who attends daycare @ $1,000/mo. Other expenses are minimal -- maybe $400/mo groceries and eat out once per week. We don't really shop except for essentials. Gas is minimal - wife has a hybrid with 10min commute, I have 5min commute. No cable, internet is $70/mo. Trips aren't happening as we have a newborn.
We have a little bit of equity in our current home. I'd like to think we could come up with ~20% to put down on a new home -- depending on how much home we can afford.
Given the data above, what house ballpark should we be looking at? We're looking for a nice area, 4 bedrooms, 2+ baths, with very good schools. I don't want another starter house, yet I also don't want to be house poor.
Thanks in advance!
$145k / 12 x .45 - 1,500 = $3,937 max house payment, so your comfort zone is going to drive terms. You can put as little as 3% down (Conventional).
Define what House Poor means to you. Talk about your personal comfort zone as far as a max house payment goes.
Wife and I are 33/34 - 3 kids under 9, gross income of 115K - We have 0 debt (no car, no CC etc...) we purchased a 360K (loan amount of 336K) home, 5 percent down.
My Mortgage, taxes and insurance on a 30 year is around $1600. I make less than you by quite a bit. It is pretty comfortable.
I think low $2000/month would be fine for you.
How much does a house that you want cost? That is a factor of course.
IMO the budget decision really needs to be a big picture thing. Can you put away 18k+ or more a year for retirement and 5K+ for college for your child? How does that affect your ability to pay 2000 a month for a house. I also put away 1% of value of house for maintenance . Term life insurance, time to get it if you don't have it. Get the wife some too.
I Would take your estimated net pay (will go up slightly with a more expensive house due to tax deductions but probably negligible), deduct ALL known expenses monthly and yearly (cell phones, internet, food/spending, garbage pickup?, car insurance, life insurance, house insurance, utils, car payment, gas, food, child care, college debt, charity, etc. ) and savings (retirement, college, house fund, emergency fund, etc.) and see what is leftover for mortgage and property tax and some wiggle room.
$3937 house payment would be insane for $145k salary IMO.
I am surprise you say your 1800 sq ft home is a starter home. We built our forever home and it's 1800 sq ft (not including basement).
Last edited by joe moving; 03-29-2017 at 05:06 PM..
IMO the budget decision really needs to be a big picture thing. Can you put away 18k+ or more a year for retirement and 5K+ for college for your child? How does that affect your ability to pay 2000 a month for a house. I also put away 1% of value of house for maintenance . Term life insurance, time to get it if you don't have it. Get the wife some too.
I Would take your estimated net pay (will go up slightly with a more expensive house due to tax deductions but probably negligible), deduct ALL known expenses monthly and yearly (cell phones, internet, food/spending, garbage pickup?, car insurance, life insurance, house insurance, utils, car payment, gas, food, child care, college debt, charity, etc. ) and savings (retirement, college, house fund, emergency fund, etc.) and see what is leftover for mortgage and property tax and some wiggle room.
$3937 house payment would be insane for $145k salary IMO.
Yeah, I totally agree that 4K for housing on 145 is kinda crazy. Daycare expenses (if they change) can be nearly 20K/ annually. Life insurance, care insurance, flat tires, etc etc etc!
Things add up quickly. At 145K a year, I'd stay below 3K/ month, even closer to 2500 if possible.
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