Can we afford $500k house? (mortgage, finance, real estate) (insurance, 401k, approved)

[heresjohnnee]

disregard.

[heresjohnnee]

We've always been financially conservative people who live well within our means. We've lived in a 2-family flat, which we own, for 8 years where our tenant has been paying all but $300/mo of our mortgage. So taking on any size mortgage feels unfamiliar to us. We've worked hard to make sure we're in a good position for our next move and don't want to make a bad choice. When we move out of the 2-family, we'll keep it and it will provide positive cash flow.

We're in our late 30's, no kids (or plans for them) and very little debt. The house we want is bigger than we need but we can really see ourselves living there for many years to come. It doesn't have good schools working in favor of resale value, but it's in a stable area. I know we don't NEED the number of bedrooms or square footage. I know taxes and insurance will cost us more. It's definitely a WANT situation for us and we're ok with that as long as we're not taking on unmanageable debt.

Combined income is $175K and mine is expected to continue to rise (by at least $30k next year).
The house is $500k and we'd put 20% down.
Financed amount would be $400k.
Taxes $5200/yr, Insurance 1900/yr.

TOTAL DEBT
PITI would be $2550/mo (4.25% 30yr conventional fixed)
Cars total $500/mo
Credit cards $100/mo (paid to zero each month)
2-family PITI $1069/mo, income $19,000/yr (after we rent out our unit)

We are preapproved with our lender already.

We have about $160k in savings, and $85k in retirement.

Do we take the plunge before rates go up higher? Buy less house and focus on retirement savings? It seems that we can afford the house, it's just hard to tell whether we're being reasonable since we're coming from the perspective of living dirt cheap in our investment property! We could certainly buy less and save more but aren't sure whether it's critical to do so.

Thoughts?

[1grin_g0]

ok

[heresjohnnee]

We've always been financially conservative people who live well within our means. We've lived in a 2-family flat, which we own, for 8 years where our tenant has been paying all but $300/mo of our mortgage. So taking on any size mortgage feels unfamiliar to us. We've worked hard to make sure we're in a good position for our next move and don't want to make a bad choice. When we move out of the 2-family, we'll keep it and it will provide positive cash flow.

We're in our late 30's, no kids (or plans for them) and very little debt. The house we want is bigger than we need but we can really see ourselves living there for many years to come. It doesn't have good schools working in favor of resale value, but it's in a stable area. I know we don't NEED the number of bedrooms or square footage. I know taxes and insurance will cost us more. It's definitely a WANT situation for us and we're ok with that as long as we're not taking on unmanageable debt.

Combined income is $175K and mine is expected to continue to rise (by at least $30k next year).
The house is $500k and we'd put 20% down.
Financed amount would be $400k.
Taxes $5200/yr, Insurance 1900/yr.

TOTAL DEBT
PITI would be $2550/mo (4.25% 30yr conventional fixed)
Cars total $500/mo
Credit cards $100/mo (paid to zero each month)
2-family PITI $1069/mo, income $19,000/yr (after we rent out our unit)

We are preapproved with our lender already.

We have about $160k in savings, and $85k in retirement.

Do we take the plunge before rates go up higher? Buy less house and focus on retirement savings? It seems that we can afford the house, it's just hard to tell whether we're being reasonable since we're coming from the perspective of living dirt cheap in our investment property! We could certainly buy less and save more but aren't sure whether it's critical to do so.

Thoughts?

[Lovehound]

Sorry to say, I'd call it 50/50. I'll say if you really like the place and expect you may end up in a house rich, lifestyle poor situation to have your dream house it might be justified.

If you find your finances stressed you could always sell the rental.

Myself, I paid way more than I was justified because I'm retired and wanted my dream house. Same price range, I paid cash, worried about what will happen when I get really old, may need assisted living, decided I have enough assets I can always sell out everything if that's what it takes. At least I know I'll have 25-30 years in a beautiful home like I always wanted for my retirement.

By the way, IMO rates are headed for a long term increasing trend. I think people who are thinking of buying a home should do it sooner rather than later.

[399083453]

Only you can decide if you can afford it. None of us know what your monthly expenses are or lifestyle. If you had a budget, you would know exactly what you can afford. Its simple math.

[janster100]

Originally Posted by heresjohnnee

We've always been financially conservative people who live well within our means. We've lived in a 2-family flat, which we own, for 8 years where our tenant has been paying all but $300/mo of our mortgage. So taking on any size mortgage feels unfamiliar to us. We've worked hard to make sure we're in a good position for our next move and don't want to make a bad choice. When we move out of the 2-family, we'll keep it and it will provide positive cash flow.

We're in our late 30's, no kids (or plans for them) and very little debt. The house we want is bigger than we need but we can really see ourselves living there for many years to come. It doesn't have good schools working in favor of resale value, but it's in a stable area. I know we don't NEED the number of bedrooms or square footage. I know taxes and insurance will cost us more. It's definitely a WANT situation for us and we're ok with that as long as we're not taking on unmanageable debt.

Combined income is $175K and mine is expected to continue to rise (by at least $30k next year).
The house is $500k and we'd put 20% down.
Financed amount would be $400k.
Taxes $5200/yr, Insurance 1900/yr.

TOTAL DEBT
PITI would be $2550/mo (4.25% 30yr conventional fixed)
Cars total $500/mo
Credit cards $100/mo (paid to zero each month)
2-family PITI $1069/mo, income $19,000/yr (after we rent out our unit)

We are preapproved with our lender already.

We have about $160k in savings, and $85k in retirement.

Do we take the plunge before rates go up higher? Buy less house and focus on retirement savings? It seems that we can afford the house, it's just hard to tell whether we're being reasonable since we're coming from the perspective of living dirt cheap in our investment property! We could certainly buy less and save more but aren't sure whether it's critical to do so.

Thoughts?

Not enough information. What percentage of your pay do you save for retirement. You describe your debt as "little". How much is "little"? How much is your investment property worth and how much do you still owe on it? Do you have any big expenses coming up, such as repairs to the rental, upgrades or furnishings to the home you want to buy?

[Hemlock140]

It seems a reasonable price for your income, as long as you are not taking a lot of international vacations, eating at expensive restaurants a lot, or other spending not mentioned. A house can be a good part of your retirement portfolio, assuming in an area that will go up in value and you stay there. Ours for example, cost $190k and is now worth $700k, and we plan to downsize when we retire in 4-6 years, and if all goes well, pay cash for the next house.

[Jkgourmet]

I'm more concerned that you have only $85k in retirement with $175+ in salary. You guys should be stashing $35k a year into a 401k (15%).

Why so much in "savings" - again, you'd be farther ahead with that in a Roth IRA or 401k.

[heresjohnnee]

Originally Posted by Jkgourmet

I'm more concerned that you have only $85k in retirement with $175+ in salary. You guys should be stashing $35k a year into a 401k (15%).

Why so much in "savings" - again, you'd be farther ahead with that in a Roth IRA or 401k.

The higher salary is new just this past year. We're both self employed so 401k isn't an option. We do have Roth IRAs and definitely need to focus on funding them.