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Location: Chapel Hill, NC, formerly NoVA and Phila
9,778 posts, read 15,788,843 times
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I think for your current situation it sounds fine, assuming you already have a 1-year emergency fund saved up, along with 15% annual saving for your retirement. But what will your expenses be down the road. And since you said you plan to have kids, the big question is, as other people have asked, what are your plans for when you have them? If your spouse takes home $6000 and you take home $3000 and decide you want to quit your job when you have kids then $3100 is too high of a mortgage payment. If you both keep your jobs and put your child in daycare or with a nanny then you need to subtract $1000 or so per month for daycare per kid, then it's probably too high.
Before you do anything, write up a budget. If you want to put it on here, then people can evaluate it. For children in their younger years, the biggest expenses are childcare whether you quit working or hire someone. That is assuming your child is healthy and has no special needs (not something to be taken for granted, of course). Your helath insurance will likey go up, too if you each have an individual plan at work, you will need to move up to individual plus 1 or family plan. The next biggest expenses are diapers if you use disposable and formula if you don't nurse.
As the child grows, food becomes an additional expense - usually not by too much until he is older. Then you start getting lots of activities expenses (that you don't have to do, but if you want to). Soccer $150 per season, swim team $125 per season, an art class in the summer - $125 for a week, summer camp $250 per week, etc. You might need to buy a bigger car - like a minivan (not cheap), want to take the kids to DisneyWorld ($$$), etc.
So my bottom line is, make sure you think about future expenses that you may have. Of course, you may be the type who sew all your clothes, nurses, grows a garden for food and take hikes for fun, so your expenses can be a lot less. Regardless, you need to sit down and try to figure out what your expenses will be in the future, and whether one of you will stay home or not. It would also be helpful to talk to someone in your area who has children to get a handle on realistic expenses.
way more than I would plan to spend on a house, especially if I didn't have kids yet but planned to have kids in the future. My wife and I have around $8600 net monthly income right now (after maxing out 401ks, taxes, health insurance etc.) and our mortgage payment each month (Principal, interest, taxes, insurance) is $1100.
Maybe it's just me, but at $9500 net, I wouldn't want to go above $2k. Personally, even if we did net $9500 I would still buy the house we have now because I think you should ideally go with the cheapest house that checks the majority of your needs. More of a buy-what-you-need vs buy-what-you-want. $3100/month adds up fast and you never know what your future holds. Being conservative and frugal when buying a house can pay off in the long run for you.
Actually, we're under 30 and both have very secured and stable jobs (Oil and Gas, and Healthcare, working for very large companies with great healthcare benefits and both have 401k match plus pension plans). As for income, we expect it to exceed $200k soon as we also invest in side businesses with family where we currently generate $1500/mo (that's part of the 14,750 gross).
With this in mind, keeping my monthly payments locked in at $3100 while our income increases didn't sound too unreasonable. However, with most of you folks saying it might be too much of a stretch, we might go for cheaper. However, I was calculating the $3100 payment based on a 5% down and save the other 15% for forthcoming business investment opportunities. Paying 4% on the mortgage loan and receiving a 20% ROI on our investments sounds like it's better for us to pay as little down as possible.
If we were to pay 20% down (we do have this) our payments would be closer to $2775. How does that sound folks?
if i had a guaranteed 20% return on investment i would borrow as much as possible on the house. if you are very confident in your financial future and run the numbers (including any savings you may wish to have) and you are comfortable with them; then do it if you really want to. kids do increase expenses but they dont have to increase them by a lot. once you get past your household bills and transportation; a lot of spending becomes a choice either to not spend on or maybe to spend less.
As your professional situations and current and future salaries seem to be both more and more secure than most people's, I would say that you're in terrific shape. Even with your current financials, you have room to go quite a bit beyond $3100 a month if you want to. Prices and interest rates will not always be as buyer-friendly as they are today, so there may be some point to buying more house rather than less. Having a side-business or other such source of income will prove to be a boon, especially if it's mostly your money that's at work out there, not your hands and feet and knees and back. Don't be too alarmed by the warnings from Aunt Polly's quilting bee types that you may hear from around here. The real world does not necessarily resemble what they describe.
Yes, we estimated that even if we ended up spending $7k each month on all expenses, we'd save about $2500/mo and easily build up even more funds for emergency. Then, we can focus more on side businesses and retirement savings. We'd like to get a home purchase knocked out soon though, as interest rates are still at historical lows.
Yes, we estimated that even if we ended up spending $7k each month on all expenses, we'd save about $2500/mo and easily build up even more funds for emergency. Then, we can focus more on side businesses and retirement savings. We'd like to get a home purchase knocked out soon though, as interest rates are still at historical lows.
my PITI is a little higher than yours. i have my expenses categorized in mint. so for the past 12 months, i have $5506 monthly avg spend on my home + bills & utilities. so its important to factor everything in when budgeting, not just PITI. i see that as a number that i cant really reduce by much. that would leave $4k for you for other stuff (a lot of stuff) but you have more ability to reduce that other stuff depending on how you choose to live.
Last edited by CaptainNJ; 06-12-2013 at 01:17 PM..
CaptainNJ, I agree with you. I also use Mint to check my monthly expenditures (take the year's total expenses and divide by 12) and see that we average a total of $5000/mo for everything (our current rent included). However, this average includes our vacations and everything else, so I've calculated that moving to a house, we'd like to spend no more than $7k/mo on all expenses. Hopefully as your income rises, we can still continue to save more, or divert to having/raising kids.
Oil and Gas is very cyclical and has been booming for awhile. Things can go south quickly in that industry. How would your housing situation be if Oil and Gas had massive layoffs that caused one of you to lose your job and also caused the metro area where you live to have an economic downturn, so that you couldn't easily sell your home like you could during the 'boom days'.
Hopefully this won't happen soon, but think about how you would handle this financially if it did occur. These booms and busts do occur in cycles and TX was hit hard awhile back due to this.
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