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So we're going to be buying our first home within this year.
So, being the first home - people always say - don't expect this to be the final home, don't expect this to be the "forever" home. I don't know but I'm thinking this is the best time to do a "forever" home... especially with the rates and the availability of cheaper homes.
Now, the mind says:
- Buy a cheaper, more modest house now and buy a bigger house when the kids arrive in a few years.
- Save money from a smaller mortgage in the meantime.
Now, the heart says:
- Buy your dream house now. You deserve it.
- Just don't overstretch yourself.
The thing is, buying the dream house will stretch the budget a little, but I'll still be saving money each month - but obviously I'll be saving whatever I don't spend on a dream home mortgage (in addition) by going with a more modest home.
For us, we bought mind first and heart second. But, we nearly bought the opposite way - and our mortgage would have been nearly $50,000 more! Luckily, we changed our minds. I still loved our first house and we stayed in it a bit longer than I expected, but our mortgage was nice and small and we were able to pay it off in the 5 years we lived there. It was nice to be able to put the amount we sold the house for directly into the new house which is about even with heart and mind. But, I like having everything paid off too...it all depends on you.
Just because you could(buy a bigger house) doesn't mean you should. Being house poor is alot of what got us into the mess we're in now. Buy what you are comfortable with rather than what you can get approved for.
Just because you could(buy a bigger house) doesn't mean you should. Being house poor is alot of what got us into the mess we're in now. Buy what you are comfortable with rather than what you can get approved for.
Thing is, I think both are pretty comfortable for us. One is just a bit more comfortable than the other.
Only you and your spouse can answer that question. We can offer different inputs for the decision making process but you both have to live alone with the decision. Figure out what you will have to give up(1 dinner a month out etc) to pay the higher monthly payment and decide what is more important for the both of you forgetting what the rest of us think.
Thing is, I think both are pretty comfortable for us. One is just a bit more comfortable than the other.
If you are really doing a good calculation and really think it is not an issue to swing the bigger house then go ahead. But make sure you really are being objective when you decide what is "comfortable".
You guys are right, only we can decide. But it'd be great to hear what others think so I can hear opinions other than my own from between my ears.
Savings per month after a 15y mortgage (including ALL expenses including student loans (10y repayment x2), car payments x2 (though we will only have 1 payment left after next year - we'll count it as if we are still paying the monthly), insurance/s, food, utility, entertainment -> no credit card debt):
Modest Home $500K = $6,500/mo after expenses
Dream Home $800K = $4,000/mo after expenses
We will be 29 years old at purchase date (so we are not starting out late).
The dream home was listed at $1.2 million when we began looking 2 years ago and it was something that I wrote off as a pipe dream because it was over-budget, but I found out that the price had dropped on this custom home and this is our chance to get it.
I just don't want any regrets.
I figured let's do it while we're still young and able.
Beauty is after 15y of elbow grease (I work 40h a wk, wife works 32h a week), we'll have the house paid off, the loans paid off and have a nice net worth.
You'll have 6.5k a month in cash after all that? Congrats.
I barely get that much to begin with muchless after paying all da bills. I couldn't imagine what the note is on a 800k home on a 15 yr loan. Probably eye popping.
You'll have 6.5k a month in cash after all that? Congrats.
I barely get that much to begin with muchless after paying all da bills.
Yeah, lots of hard work and patience especially with lots of my friends having had started several years before me. Many friends of mine are professionals - lawyers and accountants who started their lives 6 years ago and now I'm just beginning to start mine.
6.5K after a 500K loan ($4K after an 800K loan) does sound nice but there's a few negatives there.
1. If my wife gets injured, my income would only be just enough to cover all our expenses -> no savings.
2. If I get injured, we're screwed because we'd be about 7K in the hole each month.
Our expenses tally up to be about $7K (with 10% overestimate) not including the mortgage/property tax/home insurance. The home will probably cost $4900/mo for the $500K home and about $7500/mo for the $800K home over 15 years.
Of course, I have not included any tax deduction including the hefty deduction we get from the interest on the mortgage and property taxes... so there's a little breathing room there.
Last edited by pinipig523; 02-02-2011 at 07:41 PM..
Then get a home based on just your income or hers (whichever is the lowest). That way you won't get a nervous break down if one of you loses a job, gets hurt or worse. Just my opinion though. And good luck.
What's the tax rate on the house? Once the economy gets back up then the local government will reappraise your house to the moon raising your property taxes which depending on the tax rate could be excessive.
7,500/month, yeah that's eye popping alright. lol
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