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We're in the mid 30's and couple of kids. I am looking for a house in the DC metro area, e.g. in fairfax county in virginia that is 4 BR, >2500 sq feet above grade finished area not counting basement. I can find something decent at 500k in an ok school district with school ratings of 6 or more that is not more than 20 years old in the area, in decent condition but has no upgrades. I would like to buy once, buy right and stay there but with the option to be able to sell quickly if required.
Income is approximately $10k per month before bonus which can vary from 0-10%, great credit and no debt. So there's possibility of income growth in the future if she started working full time as well and I got something higher of additional 1k per month based on research, although that's potentially like counting the chickens before they are hatched.
The house would be around $500k and we'd put 10% down. There's a possibility to go higher but would like to have cash in hand. Financed amount would be $450k. Taxes ~ $5000/yr, Insurance ~ 1000 per year
PITI+pmi would be about $2800 to 3000/mo (4.25% 30yr), so around the 28% to 30% of gross income towards housing mark that is suggested by most mortgage calculators.
It's currently looking a little bit stretched, but the other way to go would be buy something very old like a split level in the low 400s, or buy smaller and conservative and then buy again after a while, which I would ideally like to avoid given the effort and overhead.
I thought about doing this last year, but held off to see how the market goes. The trend seems higher.
This year, with the change in government, there's probably a bigger question of how things will go. If as they say the real estate market goes in cycles, are we coming potentially coming to an end of a high RE market cycle of 4 years to a lower one, even for the DC metro area?
Thoughts on whether this is doable or am I stretching beyond what I should? Jump in or wait and watch?
I'd do whatever it takes to get enough to put 20% down. Beans and rice. Stop 401k contributions TEMPORARILY. No restaurants or vacations. At ten grand a month, it shouldn't take long.
Or MAYBE consider a 80/10/10 mortgage. You don't want PMI.
I'd do whatever it takes to get enough to put 20% down. Beans and rice. Stop 401k contributions TEMPORARILY. No restaurants or vacations. At ten grand a month, it shouldn't take long.
Or MAYBE consider a 80/10/10 mortgage. You don't want PMI.
What is the big threat of PMI? I would do the math. If interest rates rise enough you would be wishing for PMI which could be gone in About five years, whereas a higher interest rate is locked unless you can refi.
I would do mtge no more than 25% NET income. Total 35-36% all debts combined, of NET pay. But your lender will have its own guidelines.
PMI is only temporary. When you hit the 20% in balance in principal, you can cancel it. I would not stop contributing to your retirement accounts; that will cost yu more in the long run than a couple of years in PMI.
If you can, you can pay down your principal faster, IF yu end up having more income in the future. Then you can stop the pmi sooner, and you'll have less interest to pay on the loan.
Word to the wise: Do not count on future income raises. Buy what you can afford NOW, and no more. Even if it's tight, it will ease up, since you won't have closing cost and new home expenses in the future.
Do not count on double income, if all you have NOW is single income. This is how many people lost their homes during the recession. If either one of you loses the job, you lose your house, esp if you don't have an emergency fund to fund expenses for a while, should you become unemployed.
the general guidelines continue to be 28/36%. 28% mortgage obligation, 36% total debts.
The "DC market" as a whole seems to be fairly recession-proof .... though I say that based on anecdotal evidence from folks I know and not ass a practitioner in the market. a "4 year runup" however, wouldn't be the full cycle...typically more like 7 years.
You've given it a year, and watched it go up. Your expectation should be continued price increases, perhaps not at the same rate, but definitely interest rate increases. If you haven't seen, they're already earmarking 2 additional rate hikes in 2017.
I didn't run your numbers but I suggest you should pay 20% down and avoid mortgage insurance and an impound account (property taxes and homeowner's insurance) IF YOU CAN.
My feeling is that interest rates have entered a new era of increasing rates and that it will be a long term run IF Trump succeeds in delivering on his campaign promises.
In other words, I think anybody considering buying should do it as soon as you can.
We're in the mid 30's and couple of kids. I am looking for a house in the DC metro area, e.g. in fairfax county in virginia that is 4 BR, >2500 sq feet above grade finished area not counting basement. I can find something decent at 500k in an ok school district with school ratings of 6 or more that is not more than 20 years old in the area, in decent condition but has no upgrades. I would like to buy once, buy right and stay there but with the option to be able to sell quickly if required.
Income is approximately $10k per month before bonus which can vary from 0-10%, great credit and no debt. So there's possibility of income growth in the future if she started working full time as well and I got something higher of additional 1k per month based on research, although that's potentially like counting the chickens before they are hatched.
The house would be around $500k and we'd put 10% down. There's a possibility to go higher but would like to have cash in hand. Financed amount would be $450k. Taxes ~ $5000/yr, Insurance ~ 1000 per year
PITI+pmi would be about $2800 to 3000/mo (4.25% 30yr), so around the 28% to 30% of gross income towards housing mark that is suggested by most mortgage calculators.
It's currently looking a little bit stretched, but the other way to go would be buy something very old like a split level in the low 400s, or buy smaller and conservative and then buy again after a while, which I would ideally like to avoid given the effort and overhead.
I thought about doing this last year, but held off to see how the market goes. The trend seems higher.
This year, with the change in government, there's probably a bigger question of how things will go. If as they say the real estate market goes in cycles, are we coming potentially coming to an end of a high RE market cycle of 4 years to a lower one, even for the DC metro area?
Thoughts on whether this is doable or am I stretching beyond what I should? Jump in or wait and watch?
TI!
You're talking about a townhouse, right? With the new administration arriving soon, there will be a price increase for sure.
I'm a fan of the 80/10/10, I just did that to avoid pmi and an impound account.
Also if you go with interest only on the second you lower your payment. That's nice if you expect to pay off the second with bonuses or other large one time income events but want a lower overall payment.
80/10/10 would be a smart place to start. Seriously reducing your wants (lowering your price to 400K as a "sacrifice") is setting yourself up for failure. I'll give it 18 months max before you're unhappy with the home or location, but now you are stuck. To sell, any equity and your original down payment has been eaten up by closing costs. So you can get out, but now you need to find a 100% program at 6%. Any purchase, where you could possibly need to move, potential rental income should be evaluated in the equation. New homes are a great way to go, but plan to be there for a bit. It's hard to compete selling a home while the builder is offering a shiny new product.
The DC area churns every 4 years, (actually, every two) but it's an ongoing process. We will still see new relocations coming in early next year. It's a good location to be in.
I think you need someone to analyze your options. If you are uncomfortable with the payment for what you want, rent. If you aren't certain about the location, rent. Have with of you lived here previously? You may hate it, it's not everyone's cup of tea. Fortunately, there are many micro-markets, you just need to find the right match. (Know what you like -- need open space where you can sit on your porch naked and no one see you? Or do you want to be able to live with one car and walk everywhere? Horse riding important? Junior League for the daughter?) Don't buy and sacrifice what's important.
If the job situation is unclear (for the primary wage-earner), you really can't make any plans until that part of the picture is known. Then determine the max payment you feel comfortable with, not with what someone says you should pay. Start with a budget, if you aren't sure and track spending. There are some great apps for that. It's overwhelming, but if you break it down into manageable tasks, much of the stress will be gone.
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