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For OP:
Would you rather have a bigger house with room for projects at home, or do you enjoy spending your extra time vacationing elsewhere?
Would you rather have a "nicer" house or more money in the bank?
Do you have retirement plans? Would you like to retire early?
Have you considered the expense of furnishing the house? If you have the bigger house in the more impressive neighborhood, will you want it furnished with more expensive things?
Better question is, what's the Maximum to spend on housing? Because a minimum simply doesn't exist.
I've taken a new job, wife quit her job and we're cutting income in half but with historically low mortgage rates (30 yr fixed pushing 3%), we're still going to get a $600K house on total comp of about $130K. We've got over $1M in investments, about 40% of that liquid.
It was based on how much cash DH & I were able to save over the course of a little under 2 years. We were determined to buy a house just before he got out of the Marine Corps and wanted to be mortgage free. We succeeded
Relocated to a new area for work about a year ago, and it's time to buy a house. Trying to determine how much to spend. We are a couple in our mid 30's, no kids or plans for kids right now. 1 dog. Household income $150k. No debt. We have $100k for a down payment. Trying to figure how much is reasonable to spend on a house.
We've seen a few houses in nice areas that will meet our minimum requirements, in the $125k to $150K range. Obviously with this route, it could be payed off in a few years, and extra money could go to investments, etc. Freedom from a mortgage requirement is a huge plus, but we would be "settling" for less house.
We've also seen some nice houses in the $400k range. Of course we like these better. Typically larger than what we need, and nicer finishes. Often some usefull space, like an extra garage. Fancier neighborhoods as you would expect. With 20% down and current rates at 3.5% or so, looking at a payment around $2k PITI. This is around 20% of take home pay, which would still be very comfortable. Downside is longer mortgage commitment, upside is much nicer living standard.
How would/did you handle this situation?
Meh.
It's so hard to say without knowing what kind of lifestyle you have or want.
Something people do is buy house they can afford...but then they become 'house poor,' and find they have little leftover income to do other fun things (travel, etc).
I you really can find a cheaper house that makes you happy, I'd go for that.
Relocated to a new area for work about a year ago, and it's time to buy a house. Trying to determine how much to spend. We are a couple in our mid 30's, no kids or plans for kids right now. 1 dog. Household income $150k. No debt. We have $100k for a down payment. Trying to figure how much is reasonable to spend on a house.
We've seen a few houses in nice areas that will meet our minimum requirements, in the $125k to $150K range. Obviously with this route, it could be payed off in a few years, and extra money could go to investments, etc. Freedom from a mortgage requirement is a huge plus, but we would be "settling" for less house.
We've also seen some nice houses in the $400k range. Of course we like these better. Typically larger than what we need, and nicer finishes. Often some usefull space, like an extra garage. Fancier neighborhoods as you would expect. With 20% down and current rates at 3.5% or so, looking at a payment around $2k PITI. This is around 20% of take home pay, which would still be very comfortable. Downside is longer mortgage commitment, upside is much nicer living standard.
How would/did you handle this situation?
How stable are your jobs?
If you have stable jobs, go for a short commute and a modest house (200k ish give or take). This way your housing and transportation costs are low, you can do something fun on the weekend other than maintaining an over-sized house, and you won't have to leave so early in the morning just in case traffic is bad. Low housing and transport costs mean you have more to save and invest.
If you have unstable jobs, continue renting or get a really tiny house and buy outright. Nothing worse than losing a job and then the house because you can't pay the mortgage.
Location: Prescott Valley,az summer/east valley Az winter
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something noone seems to be mentioning in this post~ my mortgage payments go up as taxes and insurance costs rise.
monthly payments started at $862/ month....2 years later my mortgage payments are at $922. If you are on any sort of fixed income you may want to take that into account.
something noone seems to be mentioning in this post~ my mortgage payments go up as taxes and insurance costs rise.
monthly payments started at $862/ month....2 years later my mortgage payments are at $922. If you are on any sort of fixed income you may want to take that into account.
That is a large increase. My payments started at $775/month, then immediately dropped to $725/month (they overestimated escrow, which happens a lot on new construction). In the 10 years I have owned my home, my payment has varied by a few dollars a year, and is currently just under $750/month, and has been for several years. So in 10 years, my payment has only gone up by $25 from it's lowest point.
I guess my point is to expand on deckdoc's post and say to familiarize yourself with tax and insurance rates. I only pay about $100 in escrow each month, but I know some areas pay as much or more in taxes and insurance as they do on P&I.
We made sure we could afford the payments easily and that it would not be too expensive to maintain. A 500K home even at reduced price or made more managable with larger down payment is still a 500K house to maintain.I have seen alot of houses the people could buy but couldn't afford to maintain in my years.Have a person I know who was goig to buy a redcued house until they found that the house to have repalcement covrage needed 40% increase over what they would pay in coverage.
That depends on where the money is. A large house in exurbia is going to have a lot more depreciating building components than an expensive location with a high value ground rent all things being equal. Older house can of course have expensive problems like sewer systems and foundation problems.
You are not buying a "home". You are buying two things. One is a building and the other is a plot of land. That ratio matters a great deal. The smart move is to get a large relative lot size and a small house.
What they should do is make it expandable. When you are young and single you buy a plot and live in small space and then expand as needed. Call it "just in time housing".
I'd try to be as conservative as possible but still recognizant of the lifestyle you want to live. 10 years ago we bought a home for exactly our combined incomes at the time. Good neighborhood, stable resale value (and still is). We could've been approved for and handled something considerably more expensive. It fit our needs for entertaining and having extended family visits at the time.
Four years later one of us is now consulting out of town as a 1099, no health benefits, the other is laid off. Family has mostly passed. Despite the gains we'd make from a sale, we're told we cannot be approved for another mortgage w/o steady jobs.
So we used equity to start a small business which we sold several years later. Still getting by with much smaller jobs (25% of our former income), but no savings to speak of and it's been too much house for awhile. We would've been better off buying even further under our means than we did.
Point is, things change. Better to be prepared than not.
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