Can we afford $500k house? (mortgage, finance, real estate) (preapproval, property, financial)

[chet everett]

Originally Posted by CGab

I understand the home is more of a want than a need, but I can't comprehend having a home that size for two people. At any rate if you have no debt but what you listed I think you could easily afford it; however, for the amount of income you make your retirement savings is extremely low! Personally if it was me I would buy a smaller least expensive home and sock more away for retirement.


Also as others have said, with a home that big, you will most likely resell it to a family later. If schools are bad, you will have a hard time selling! Typically if schools are bad, the area is bad a well!

I am generally a HUGE advocate for buying the most affordable home in the NICEST area you can BUT if the OP has a compelling reason to choose an area with inferior schools AND they intend to stay in the area for a LONG LONG LONG time the might do OK.


What would be a compelling reason? Well homes that are some kind work / live situation might be in that category -- if you have a business like auto/ truck / power equipment repair that can be run from an out-building that's an obvious one. Folks that have "farmettes" and maybe board domestic animals or sell poultry could be another. Heck even using a big yard to grow high value herbs or organic sprouts in a greenhouse could qualify. Conceivably there options that are less "dirt under your fingernails" too -- a home office that is sufficiently segregated from your living space so you could see clients in a professional setting, a studio to record music / video or create art profitably would be other compelling options. I suppose if you work at client locations but need a truck / tools / warehouse for supplies a even a residential style three-car garage would offer an compelling "home business" type deduction.

Unless I'm missing something does not sound like OP plans on kids and while that is a compelling reason for more space I would be reluctant to move forward with poor quality local schools even if the plan is for home schooling / private options as the neighbors that your kids play with and such would be going to those inferior schools and that is not ideal...

[CGab]

Originally Posted by heresjohnnee

It's an all-brick 3900 sqft home built in 1899 w/a replacement cost of $629k. Maybe can insure it for just the purchase price instead of replacement cost?

I would not insure it for purchase price as that's only about $128 a sq ft. In my opinion that's way too low, but I know some carriers will insure it at 80% of replacement cost and that would be $503K. It could just be your area, but $1900 seems really high to me even with replacement cost at $629K. I'm 40 miles from Chicago and here for a home that size insurance would cost about $1,400. That's not adding any extra's though such as water/sewer coverage, jewelry etc.

[SmartMoney]

As the numbers work, you only need ~100K net to qualify for this loan. What concerns me is the hesitation and the lack of confidence to handle it. For that reason alone, I recommend some soul searching and working with a budget on paper. Live like you have taken out the mortgage, with the associated expenses (higher utilities). Sock that money into another savings account. Pretend like your side of the 2 unit is vacant and you need to carry the entire mortgage with just one tenant. See how that goes for 60 days. 120 days. Then make the decision if you are biting off too much.

[LLCNYC]

Originally Posted by tiltheendoftime

with that retirement amount, i wouldn't do it. You are so far behind, it is cringe-worthy.

And what would happen if your business failed?

+1.

[chet everett]

Originally Posted by heresjohnnee

This house is just an exceptional example of turn of the century construction, amazing details, high ceilings, big mantles...I could go on. The foot print of the house makes for a very large common area rooms which we'd get a lot of use out of. It's 3900 sqft and each room is very spacious. It just has a feel that would be difficult to find elsewhere at this price. Trouble is, there are 2 bedrooms and a bathroom we honestly don't need. I could make a home office out of one of them.

Realistically, we should probably by a 3br for $380k or so. Maybe we just have a bad case of house fever.

If this a "historic home" and you have not previously shopped for this style / area it can seem like a "once in a lifetime" opportunity but in my experience that is NOT A PLUS, as that means that the value is not stable -- the other homes that are SIGNIFICANTLY more affordable almost certainly are a wiser use of your HOUSING dollars. OTOH if you are ok with seeing the extra costs as kind of "substitute hobby" that takes the place of travel / sports / dining out / other entertainment there are worse things to spend money on as you do get deduction for taxes and such...

[Caltovegas]

Get what you need and build up cash. You can always upgrade if you want later. Cash is king. Also as you are renting you can look at a self directed 401k which can allow more investment options. Consult with your investment advisor.

[Lbjen]

Have you been living this way and taking care of your money so that you could spend it all on the experience of living in a certain house? It sounds like this house could potentially end up costing you a lot of money, utilities have the potential to be very costly, it sounds like there is a lot of potentially expensive maintenance because of the age of the home, and since it's not in a good school zone, you might have trouble unloading it later on.

What happens if the economy turns again? Or if one of you just loses their job? Will you still be able to afford it on one income?

I understand falling in love with a home, I think most of us have at one time or another. Some people make a choice to spend their money on the place they live in. Others choose to live with less so that they can spend their money on other things. It's really up to you.

[elliedeee]

Originally Posted by heresjohnnee

It's an all-brick 3900 sqft home built in 1899 w/a replacement cost of $629k. Maybe can insure it for just the purchase price instead of replacement cost?

check that out with an insurance company but I doubt it. Sales price has nothing to do with replacement cost.

The reason your insurance is so high is because of all those 1899 architectural details that would need to be replaced if something were to happen to the home.

A friend of mine spent a little over 100k for a home built in the 1800's. It's gorgeous.. Big tall windows in every room, all original detailed woodwork, fireplaces galore etc. When she went to get insurance she was quoted a replacement cost of over a million dollars. She managed to get the premium down a little bit by not opting to insure the carriage house that was on the property, but she's still paying a lot of money per month in insurance.

I know you love this house but you can always add those architectural details in any other home too.

[loves2read]

Originally Posted by heresjohnnee

This house is just an exceptional example of turn of the century construction, amazing details, high ceilings, big mantles...I could go on. The foot print of the house makes for a very large common area rooms which we'd get a lot of use out of. It's 3900 sqft and each room is very spacious. It just has a feel that would be difficult to find elsewhere at this price. Trouble is, there are 2 bedrooms and a bathroom we honestly don't need. I could make a home office out of one of them.

Realistically, we should probably by a 3br for $380k or so. Maybe we just have a bad case of house fever.

When you say "turn of the century" I am guessing you mean 1900 vs 2000...
I am thinking that means lack of insulation, wiring might be questionable because of revision over time being done by different contractors...
I would think it is more a money pit than exceptional architectural example...

You better get really good inspection by engineer that will checking wiring, plumbing, and general construction quality...

[LifeIsGood01]

Originally Posted by CGab

Also, $1900 a year for homeowner insurance for a $500k home is WAY too expensive! Shop around for a better rate! If you have good credit as I'm assuming you do, it should be more like $1200!

Depends where you are. I'm in Florida and my home cost less than $100K but it has to be insured for at least that because that's what it would cost to rebuild and I"m paying about $1650 a year with the highest deductibles.