Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Thanks! I think it's partly because I grew up working class lol. My mom had an 8th grade education and my dad only a high school one, so seeing and knowing I'd be on the hook for a 2500-3000 payment a month is a little scary.
I suppose $2700/mo MAX would be okay. I maximize my contributions to my 401k and IRA first and foremost. I also am going to use the VA Home Loan for 0 down. Even still, closing costs can be high for a home. I definitely want to research utilities though too and property tax. I'm probably being over analytical on this but I've never bought a home before, so I'm thinking of mortgage, property tax, HOA, utilities, maintenance, etc. I definitely don't want to be house poor or forego the ability to maximize my contributions to my retirement accounts.
Thanks for your advice!!
Make a budget. Write it all out on paper. You are at a minimum taking home $10-11k a month after taxes, 401k, health insurance, right?
So $2700 PITI + another $500 or so in home utilities still leaves you with $7800 a month to play with for car, food, saving & investing, and whatever fun things you enjoy.
I assume you have saved a down payment and have a healthy emergency fund + money saved for funitute / appliances, etc? ? With that kind of income and low expenses, it won’t take long for you to sock away a 20-30% down payment…..it’s not necessarily the best use of your savings but might make you feel better seeing a lower monthly PITI? I would not do 0% down….ever. Especially having lived through the 2008 housing crisis and having negative equity for a few years after a 10% down payment.
Thanks for the reply! I moved here summer 2020 from NYC. Back then I was working in consulting at a 105K salary. I'd had so much work on the West Coast I'd fly coast to coast every week pre-pandemic. GF and I initially considered Austin but found Dallas to be better (more metropolitan like Manhattan) for us. Plus with the 2 airports and location I could get to anywhere in the country in less than 3 hours via plane nonstop.
I've since job hopped and now make around 200K in a remote role. I like that Dallas is a big city and Texas has no state income tax. I'm finally able to comfortable maximize my contributions to my 401k and IRA, yay! With the rest of my income I'm either saving it or throwing it into a brokerage account for more growth. I also think Dallas will likely continue to grow. Where would you suggest I look into?
I'm considering doing either a PT or EMBA with my GI Bill. At this point in my career I wouldn't want to go full time, I think I'd lose way too much with where I am now. I've considered a move to Austin, but at my income level it doesn't make sense to keep being a renter, it gets tiring moving. I also don't want to move back to NYC as I'd be on the hook for $17K in income tax/year with higher cost of living
Where did you end up going if you don't mind me asking? I'm more of a city person so can't see myself in a rural or suburban environment. I like NYC and SoCal but not enough to fork over a large percentage of my paycheck
A few thoughts/responses:
1. The state gets its money one way or another. While it's true that Texas doesn't have an income tax, it does have high property taxes to make up for it. Its overall tax burden is anywhere between low and moderate, depending on your income/housing mix. But, one of the perks of being young and relatively rich is that you don't have to make every decision based on the absolute bottom line. You can do things that you want to do, even if they cost a little more. Living in a so-so place to save a few grand per year is for people with household incomes of $130k and three kids.
I'm not saying DFW is just a so-so place for everyone. Don't get me wrong. It was a so-so place for me relative to my desires and interests. For some people, it's heaven. If it's heaven to you, great. Stay there. If it isn't, go where you want to go. You have the world by the tail right now.
2. You're not asking for career advice, so disregard this if you wish. IMO, I don't see the value of an EMBA at this point unless you have good reason to believe some specific skills you will pick up will inherently be worth it. I own my own company and have considered it for these reasons (I have a BBA). But in terms of "on paper" credentials to help you move up, I'm not sure that investment is worth it based on what you are currently making. Standard caveats apply, though: if you want to do high finance and you are planning on going to Wharton/Sloan/Booth/etc., sure. But you have a cush gig right now, so I'm not sure why you'd want to take that on.
3. My wife and I (I'm 36) are into the outdoors and wanted a mid-sized city. We moved to Colorado Springs, and it was one of the best decisions we've ever made. If you're a city guy, you'd hate it. You might feel differently about Denver, but it isn't a city in the way that NYC or Chicago are. If I'm imagining myself in your shoes, I'd go to Chicago, Seattle (getting pricey, though) or San Diego. The sleeper would be Kansas City (yes, KC...great, underrated city where you could live like a king). I'd live in a place with bad schools but cool stuff around me. I'd be in a neighborhood where I could walk to a lot of things and avoid using a car as much as possible.
4. I get being conservative with a house purchase. I spent about 1x my annual salary on our current house. Being house poor sounds terrible, and the single most desirable thing money can give me is the ability to not worry about money. But you're a business guy, so you should also recognize that rates are really low and the old house/salary multiples don't apply anymore. $200k can comfortably get you $600-650k so long as you don't have any overly expensive habits. With that said, if I could get what I wanted (or very close to it) for $500k, I'd feel better about it.
Last edited by Wittgenstein's Ghost; 11-16-2021 at 07:58 PM..
4-5X is NOT in any way, shape or form conservative.
That’s why I suck to 2-2.5x income. That is conservative!
You can't just divide the total cost of the house by pre-tax income. You have to consider the down payment among many other factors.
Taking out a mortgage that high would not be wise on half that income, but with 20 percent down, I would have to strongly disagree with you. That is very much entry level pricing in the housing market, and most buyers are not making that much.
You can't just divide the total cost of the house by pre-tax income. You have to consider the down payment among many other factors.
Taking out a mortgage that high would not be wise on half that income, but with 20 percent down, I would have to strongly disagree with you. That is very much entry level pricing in the housing market, and most buyers are not making that much.
I agree that we should be looking at PITI relative to income, not just purchase prices. But looking at what average buyers are spending relative to their income may not result in the best decisions. Most people are probably overextending themselves. I read an article a while back saying that the average new pickup transaction is a little over $50k, but the average household income of buyers is just $96k. So I'm not sure market norms are particularly instructive.
You can't just divide the total cost of the house by pre-tax income. You have to consider the down payment among many other factors.
Taking out a mortgage that high would not be wise on half that income, but with 20 percent down, I would have to strongly disagree with you. That is very much entry level pricing in the housing market, and most buyers are not making that much.
And most buyers are not conservative financially. Most people are not conservative financially. Most first time buyers are “stretching” beyond their current circumstances because they assume there are promotions, raises, etc coming their way and that they’ll grow into the hole that was a stretch.
OP said 0% down. 0% down with 5X income purchase price is a recipe for financial ruin should the wrong piece get pulled out of the Jenga tower.
1. I'm not saying DFW is just a so-so place for everyone. Don't get me wrong. It was a so-so place for me relative to my desires and interests. For some people, it's heaven. If it's heaven to you, great. Stay there. If it isn't, go where you want to go. You have the world by the tail right now.
2. You're not asking for career advice, so disregard this if you wish. IMO, I don't see the value of an EMBA at this point unless you have good reason to believe some specific skills you will pick up will inherently be worth it. I own my own company and have considered it for these reasons (I have a BBA). But in terms of "on paper" credentials to help you move up, I'm not sure that investment is worth it based on what you are currently making. Standard caveats apply, though: if you want to do high finance and you are planning on going to Wharton/Sloan/Booth/etc., sure. But you have a cush gig right now, so I'm not sure why you'd want to take that on.
3. My wife and I (I'm 36) are into the outdoors and wanted a mid-sized city. We moved to Colorado Springs, and it was one of the best decisions we've ever made. If you're a city guy, you'd hate it. You might feel differently about Denver, but it isn't a city in the way that NYC or Chicago are. If I'm imagining myself in your shoes, I'd go to Chicago, Seattle (getting pricey, though) or San Diego. The sleeper would be Kansas City (yes, KC...great, underrated city where you could live like a king). I'd live in a place with bad schools but cool stuff around me. I'd be in a neighborhood where I could walk to a lot of things and avoid using a car as much as possible.
4. I get being conservative with a house purchase. I spent about 1x my annual salary on our current house. Being house poor sounds terrible, and the single most desirable thing money can give me is the ability to not worry about money. But you're a business guy, so you should also recognize that rates are really low and the old house/salary multiples don't apply anymore. $200k can comfortably get you $600-650k so long as you don't have any overly expensive habits. With that said, if I could get what I wanted (or very close to it) for $500k, I'd feel better about it.
1. I feel that DFW is a good mix of large city at a cheaper price. I feel really lucky with my skills (tech) that I can pull off remote roles for the rest of my career. Dallas can be a great base, I just value cheap cost of living, urban amenities, and the ability to save/invest. Walkability is something I really value though
2. Oh true! So part of my motivation for a PT MBA/EMBA is to use my Post 9/11 GI Bill. I'll have the benefit regardless, so I might as well use it for the best masters degree (MBA). I'll even get paid a tax-free housing allowance while I'm in based off the schools zip code. That's about an extra $2K/month tax free on top of my salary. I think an MBA would help with executive roles down the line in tech too.
3. Yeah I love SD a lot, as well as Chicago. Just hard to justify with the taxes tbh. I love making my current income with no state income tax. My rent is around $2K/month though and this floor plan now rents for $2.4K month. So I won't renew when it comes time if I'm still here.
4. You're right a bout that, I feel like these deals aren't going to be around anymore. I think $500K when factoring in PITI isn't unreasonable. It's the T in the acronym that is the challenge
I agree that we should be looking at PITI relative to income, not just purchase prices. But looking at what average buyers are spending relative to their income may not result in the best decisions. Most people are probably overextending themselves. I read an article a while back saying that the average new pickup transaction is a little over $50k, but the average household income of buyers is just $96k. So I'm not sure market norms are particularly instructive.
I read a similar article about car prices with financial advice that your car budget should be 1/10th of your annual income….I thought, hmm. Don’t think all the people driving $100k Range Rovers all over Dallas, Plano & Frisco have $1M HHI.
(And in full disclosure my own household does not follow the 1/10th rule either.) Not throwing stones.
And most buyers are not conservative financially. Most people are not conservative financially. Most first time buyers are “stretching” beyond their current circumstances because they assume there are promotions, raises, etc coming their way and that they’ll grow into the hole that was a stretch.
OP said 0% down. 0% down with 5X income purchase price is a recipe for financial ruin should the wrong piece get pulled out of the Jenga tower.
Thanks! I am a conservative buyer. I definitely don't want to be house broke. Homes aren't just the PITI, it's the maintenance, utilities, etc. I feel fortunate that I have the VA Home Loan, I don't see a reason not to use the benefit I can. With the low rates of today, I can sock away the rest of my earnings in other investments.
After my taxes/deductions/401k(max contribution)/IRA(max contribution) I have around $9K a month in earnings. Car payment brings me down to $8.5K a month. I work remotely, so only times I really drive my car is to get groceries or go somewhere fun. I live in Uptown so tend to walk as much as possible.
I'm thinking with that remainder a PITI/month of $2K-3K is reasonable. That would leave me with $6.5K - $8.5K left for utilities/car insurance/gas/food/entertainment. The rest would go into savings or a brokerage.
It's notable that I'm not factoring in my GF's income either. We're not married, so I'm not going to factor in her salary as a possibility of a payment.
I guess when it comes to budgeting I don't want to over extend myself. I'm confident that I can maintain my current salary level, but in the event that it ever dropped I'd want to be shielded. Also property taxes can rise too. Downside of home valuation increasing right?
And most buyers are not conservative financially. Most people are not conservative financially. Most first time buyers are “stretching” beyond their current circumstances because they assume there are promotions, raises, etc coming their way and that they’ll grow into the hole that was a stretch.
OP said 0% down. 0% down with 5X income purchase price is a recipe for financial ruin should the wrong piece get pulled out of the Jenga tower.
I'll agree with that, although at $200K, OP wouldn't need to worry. I look at affordability through a lens of absolute income and savings not percentage. Typical expenses don't vary as a percentage of income, and the amount one wishes to save each month varies from person to person. Some people want more things than others. Everyone has his or her own comfort level.
There is also the factor of the amount of savings one has. Some people have enough savings to pay off a current home or to get by for quite some time.
However, for one person living alone, there is little advantage to buying above the entry level price point for a safe, reasonably convenient area.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
