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Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by MissNM
Honestly, I would never get a mortgage greater than twice my yearly income. That amount, with your down payment, should be your upper limit.
Impossible here, where the older homes start at $450,000 and new $600,000. Median family income is only $125,000. Just takes a big down payment to get a reasonable payment amount.
We moved from the higher-priced San Francisco Bay Area, and boght based on the sale price of our old home to avoid the capital gains tax. Ended up with a home much newer and twice as big for the same
price.
You are in a great position. I would agree with some of the previous post and not go anymore than 2 or 2.5 times your annual salary. You can always buy a decent house and update the finishes as you go. That way you dont have a huge mortgage monthly.
My goal in purchasing a place changed when I realized that I wasn't going to be able to afford my "dream house" here. I also wanted to put down at least 20%. After deciding I wanted to spend less, I looked for places where my mortgage + maintenance costs would be less than my current rent.
Considering how I choose to live, I would go with the cheaper option and make it into something I want, pay it off quickly and then funnel my extra money into other things.
Have you also looked into bigger houses that are cheaper because they do not have the upgrades and nicer finishes? You can always do those yourself, over time, the way you want them to be. Also, do you plan on staying in the house forever? If I didn't think I would necessarily be living in one place forever, I definitely would NOT buy a bigger house. Do you see yourself elsewhere in ten years?
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?
In your situation, I'd say a $400K-$450K house is affordable and would be a wise investment. The way I think about it...you'll be living in the house for quite a while, why NOT buy something you'll be happy with in the long run?
I go by 3X your yearly household income is about the maximum you'd want to spend on a house. If you make $150K/year, I'd have no problems recommending you spend around $400K on a home. I used to sell real estate MANY years ago and many of my clients were in your exact same shoes. They had a very decent income and were looking at spending somewhere between $400K-$500K on their residence.
I was fortunate enough to purchase my current house from my parents a few years ago when they retired and bought a beautiful new home in a different community in Scottsdale. Between the money I received from selling my townhome that I'd been living in since I was 19 and a fair share that I saved up over a few years, I was able to purchase my current residence without a mortgage payment of any kind. Obviously I'm lucky in that regard to have a home WELL over anything I could afford on my $120K salary.
I think it's a balancing act between wants/needs and price. I would also take into account the potential resale value of a better quality home in a desirable neighborhood over a more inexpensive home in a less desirable area.
I've lived in pretty much all sizes of house at this point. When I was little, our house was about 1800 square feet. Then, when I was 12, my parents built a 6000+ square foot house on 3/4 of an acre, with a volleyball pit, pool, basketball pad, etc. I lived there until I went to college, and lived in the dorms. After graduating and getting married, we lived in a 700 sqft apartment for 3 years. My husband and I now live in a 1250 square feet townhouse, and have for 10 years.
What can I tell you from all this? I wasn't any more or less happy in any of them, except for the dorm. (I didn't like sharing a bathroom with everyone else on the floor.)
Here is my advice.
Find your maximum price by figuring what you could afford on one salary. That will allow you to save quite a bit, and if either of you have a layoff, it is a minor setback, not a total calamity. Best financial decision we ever made, and when my hubby got laid off for a year, we got by just fine.
Then figure out if you need more or less house than that to be happy. Since you have some wiggle room built in to the "buy on one salary" plan, if you decide to stretch A LITTLE beyond that, that is ok. But you may not even need as much house as you can afford on one salary. My husband and I are perfectly happy in our $150k 2 bedroom home, but we don't do a lot of entertaining, or have lots of family over for holidays, etc. If you do, you might need something a bit bigger. Think about what you want from the house. If your house is your sanctuary, where you go to get away from everyone, smaller might be fine, but if your house is where everyone congregates, you might need bigger.
The one thing you shouldn't do, is to buy more house than you really want, just because you think you should. Personally, I would hate having to clean and maintain a 2000+ square foot house. Not to mention the bigger mortgage. Personally, I'd rather pay off my mortgage by 40, save as much as I can and retire early. But not everyone has the same goals.
Impossible here, where the older homes start at $450,000 and new $600,000. Median family income is only $125,000. Just takes a big down payment to get a reasonable payment amount.
We moved from the higher-priced San Francisco Bay Area, and boght based on the sale price of our old home to avoid the capital gains tax. Ended up with a home much newer and twice as big for the same
price.
Yes that is a real probelm. I mnay areas one has only to look at houses bought then the owners have basically has no money to maintain the house.My nephew ran into that wnhe he moved to californioa and his company luckily in contract had agreed to one year of housing to give him time to find a house to buy. Basically he said 90% of the houses he loked at had little maintince since bought is why it took so lok to find the one he finally bought.
Change the way you look at a house. This doesn't sound like a "forever" house so think about it like a landlord would. Make a rough guess at how much houses with similar square footage and location rent for and then see if what you are buying it for could generate cash flow. You may never want to be a landlord, but if you keep the landlord equation in mind you will be buying properties which always have a good base price to fall back onto. As rents go up, the house's value should rise as well. When you approach home buying this way you never buy too much house and avoid getting something which won't hold its value well. The improvements you make will be wiser as you will consider how much value they have to the general public, not just to you and your maybe eclectic tastes. Then when the time comes to move on you can decide maybe you want the cash flow and are willing to rent it out and make the cash flow, or you put it on the market and know you made a smart investment along the way.
And if you move to one of the few areas where homes can't cash flow so its cheaper to rent than to buy, go ahead and rent instead.
i determined the amount to spend on a house by figuring out how much is the least i can spend while making my wife happy.
I got a great story on that. When I was 29 I was looking at a few houses. One was a pre-owned small 4 bedroom but with a really nice 3 car garage (all me!). The other was clearly a better house, brand new two story/5 bedroom but only a 2 car garage. They were within view of each other but on two different streets and they were 70K apart in price (smaller house was cheaper). I could pay cash for either home at the time but I didn't have a job (recently sold a business, hadn't found anything else to do). I was thinking that 70K would be a really nice "cushion" if I didn't get back to work right away.
Long story short......I bought the bigger, newer house with the 2 car garage. I figured it would't be worth the 70K in the long run if I had to hear the "I really wanted that house in the distance" speech everytime someone came to visit and despite the 3rd car garage I didn't want to be living out there when my wife kicked me out of the house!
In the end, the bigger house was much more desirable and probably is worth 140K more than the smaller house in today's market. Sometimes the spouses get it right!
I bought the cheapest I could find that met my minimum housing requirements. Whatever it cost dictated how much I spent.
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