yet another inquiry or home mortgage affordability (renting, insurance)

[newjersied]

I generally consider myself relatively conservative. Though with inflation concerns and taking into consideration how low interest rates are, it almost seems ridiculous to not to consider a nicer home here the rough financials:

375k purchase price
75k down
-------------------------------
300k mortg @ 3.5%

Taxes are 9k annually ($750 a month)

Approx 50k in cash reserves (not 401k and including closing costs).

I make a little more than 110k, and with maxing out 401k and taking advantage of stock purchase plans, I see a very modest $4300 net a month (on purpose). I have 2 kids and married, and I only claim 2 on my state/federal W4. Wife does not work

Additionally, I have 2 investment properties throwing off over 1650 net a month (after expenses including maint and taxes, and insurance), but with an ultra conservative vacancy rate of 50%, I want to rely on/use about $500 on a consistent basis towards my home expenses.

With taxes insurance and morgagage im looking at $2191.13. Additionally, I have a very small CC and student loan debt that is about 200 a month, that I could pay off but dont and no other debt.

So my question to the community is whether or not I should be OK and if I am, what is the absolute minimum salary (god forbid), that I would need in order to keep my head above water and swim a while before things make a turn for the better given my situation.

[nybbler]

You're fine. Though if your student loan debt is at a high rate you're probably best off paying it off; you should certainly pay off your credit card in full each month.

You should probably increase your W4 deductions to 3 or 4 immediately (you'd have to do the math); there's no point in loaning the IRS money -- better to use it to pay off the student loan, or even just to put in the bank where it's available to you. Once you buy the house (assuming you're renting now) you'll be able to increase deductions by one more at least, without owing the IRS at the end of the year.

If the stuff starts hitting the fan (e.g. vacancies at your investment properties), you can cut your 401K contributions and stock purchases.

[GiantRutgersfan]

I would do it. Especially so if the wife is going to be working again at some point.

[newjersied]

thanks, i think the only part of the equation that has me nervous is the property tax bit. I saw PT jump almost 3k in 4 years for this property. I don't know whether or not a similar increase will occur down the line, but at some point I'm not sure if I'll be able to sustain the increases. Is anyone in the same boat about their property taxes? What can you do short of saying your nightly prayers

[joe moving]

Your take home is very small compared to your incomel. It should go up a lot when you have the mortgage interest deduction and property tax deduction to over $6000.

[elflord1973]

Originally Posted by newjersied

I generally consider myself relatively conservative. Though with inflation concerns and taking into consideration how low interest rates are, it almost seems ridiculous to not to consider a nicer home here the rough financials:

375k purchase price
75k down
-------------------------------
300k mortg @ 3.5%

Taxes are 9k annually ($750 a month)

Approx 50k in cash reserves (not 401k and including closing costs).

I make a little more than 110k, and with maxing out 401k and taking advantage of stock purchase plans, I see a very modest $4300 net a month (on purpose). I have 2 kids and married, and I only claim 2 on my state/federal W4. Wife does not work

Additionally, I have 2 investment properties throwing off over 1650 net a month (after expenses including maint and taxes, and insurance), but with an ultra conservative vacancy rate of 50%, I want to rely on/use about $500 on a consistent basis towards my home expenses.

With taxes insurance and morgagage im looking at $2191.13. Additionally, I have a very small CC and student loan debt that is about 200 a month, that I could pay off but dont and no other debt.

So my question to the community is whether or not I should be OK and if I am, what is the absolute minimum salary (god forbid), that I would need in order to keep my head above water and swim a while before things make a turn for the better given my situation.

That seems like a steep property tax bill for a 375k property -- but then again I havne't looked in NJ for a while, and since then prices have probably gone down while taxes went up some more. Where is it located ? High property taxes are a killer for your finances in the long run, because while your mortgage payments stay constant, the same isn't true of property taxes.

I think you can probably afford that. If you stop maxing out your 401k (or stop contributing to it at all), you can obviously afford more still, but that might not be ideal. A lender will probably tell you that you can afford about 600 or so but I wouldn't be inclined to believe them -- anything over 500k would be really pushing it.

You should pay off your student loan as quickly as possible -- always hit the high interest debts first. If you can borrow more against the house at a lower rate than the student loan, it makes sense to do that.

Is that 3.5% rate for a 30 year fixed ? Maybe I should be asking you for advice !

[nybbler]

Originally Posted by elflord1973

That seems like a steep property tax bill for a 375k property

No, alas.

[newjersied]

I had originally planned to 35-40% down, however based on some interesting chart comparisons that my accountant showed me, it was worth while to keep a chunk of cash in reserves, call it ***** hitting the fan money so to speak. And that is 3.5% for a 30 year fixed, which is why I decided to put on 20% down, because the cost of borrowing was is so cheap...figure we deserved some kinda end of the light after waiting it out all those years when prices soared....now only for these blasted property taxes!