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I'm trying to figure out if I'm in over my head here.
Taxes are also 11k/year
Currently, my wife and I are living on just my income. She will be done school in less than a year and will start out making around 60k. We want to buy a home that we can settle into, start a family, and not move for at least 10-15 years. At 300k-400k, you really do not get much in central-north Jersey. We don't want to buy a home only to move when she starts working. I also want to take advantage of the low mortgage rates.
Here are some pertinent information about me:
-I'm 26
-I make 100k gross. I expect my salary to increase 3%-5%/yr over the next few years
-Preapproved for 480k house at 3.1%(assuming 20%down)
-I have 150k cash
-I have 40k in my 401k
-I have no debts but I will be getting a car soon
-I have monthly bills of around $800
With taxes my monthly payment would b around $2700
My biggest worry is if I lose my job in the next year. My wife won't be working yet and I will only have funds to last a few months.
If all goes well. With both our incomes we would try to pay this off in 7-10 years(or should we not with such a low rate?).
This is a HUGE decision for us. Please provide any advice you can and thanks in advance.
I really admire you for looking into this. I cannot tell you how many times, people - of all ages, do not plan ahead and then are in debt and everything falls apart.
Here's a link to help you figure out what you can and cannot do:
[url=http://www.coldwellbankertownandcountrypa.com/howMuchHouseCanYouAfford.php]How Much House Can You Afford? - Coldwell Banker Town & Country Real Estate[/url]
My advice: Wait a little longer, save more money JUST in case, because the economy is still not at its best and prices of houses, rise and fall every month.
Don't guess, talk to a good lender. a GOOD lender will run your numbers and tell you what you can afford. that number would be your ceiling then. Remember there is PMI if your downpayment is below %20.
Figure our the taxes (remember taxes go up every year!), expenses, etc, and your tax write-offs (mortgage interest and property tax). after that decide if you are comfortable with the monthly payment as calculated. If not-dont buy a house for $500k.
Not to kick up an old thread, but I find myself in a similar but slightly better situation as the OP had. Except I am in this situation in Nov 2015, and I'm about to enter attorney review, so I still have a few days to do heavy math and bail.
I also currently rent in "North Jersey"; Summit region to be exact. We just signed a home contract for 490k. The home is nearly new; new furnace, new roof, new kitchen, new deck, etc. The taxes are currently 10k. We were looking in the range of 400-450, but after seeing about 40 homes in this range, we realized you REALLY cannot get anything for that price. If you can, it's a fixer upper you are going to pump tons of money into fixing.
I'm 28 and my wife is a few years older. My wife and I make about 170, but 150 of that is mine. We do not have kids currently, but maybe in the next year or so, and if so she will quit and take care of them; no day care. So, assuming my salary remains flat, we would be making 150.
If we take my wife out of the picture, my net takehome, *after paying taxes*, and *after maxing out my 401K contribution of 6% (matched by my employer)*, is 8200$/mo. Some of the math threads in here included retirement as coming out of net income, does not apply here.
We have about 130 saved so with 20% down and 10K in misc closing costs, we would have 20k in the bank. That's not a huge emergency fund but my wife is still working, so for now our current net takehome is 9600$/month. Since we are not even pregnant yet, it will be at least 9 months before that goes away.
We have 0 debt. We have no student loans, and two cars paid off completely. One is a junker but she runs. I have no payments to make on anything.
With a 30 year fixed, my mortgage + taxes would be ~3100$. That is 25% of my gross income, or 38% of my net takehome. When people talk about debt ratios, I've heard conflicting views; is it 28% of gross or net?
There's two sums of money we get per year. Last year I got a massive tax refund in April; about 20k. People say not to count this, but that is non-trivial. That amounts to an extra ~1500$ per month towards principal amortized if I dump it right into the mortgage. I also get 12% of my salary as a bonus in December, depending on personal and company performance. If we say I get half of that, that is 8700$.
BTW, lots of people in this thread instantly assumed OP was privileged somehow. We did recieve a gift of 50k towards our down payment, but other than that, we are both from families without money. I'm 28 and making 150. I did that by getting a PhD in computer science and hard work.
Not to kick up an old thread, but I find myself in a similar but slightly better situation as the OP had. Except I am in this situation in Nov 2015, and I'm about to enter attorney review, so I still have a few days to do heavy math and bail.
I also currently rent in "North Jersey"; Summit region to be exact. We just signed a home contract for 490k. The home is nearly new; new furnace, new roof, new kitchen, new deck, etc. The taxes are currently 10k. We were looking in the range of 400-450, but after seeing about 40 homes in this range, we realized you REALLY cannot get anything for that price. If you can, it's a fixer upper you are going to pump tons of money into fixing.
I'm 28 and my wife is a few years older. My wife and I make about 170, but 150 of that is mine. We do not have kids currently, but maybe in the next year or so, and if so she will quit and take care of them; no day care. So, assuming my salary remains flat, we would be making 150.
If we take my wife out of the picture, my net takehome, *after paying taxes*, and *after maxing out my 401K contribution of 6% (matched by my employer)*, is 8200$/mo. Some of the math threads in here included retirement as coming out of net income, does not apply here.
We have about 130 saved so with 20% down and 10K in misc closing costs, we would have 20k in the bank. That's not a huge emergency fund but my wife is still working, so for now our current net takehome is 9600$/month. Since we are not even pregnant yet, it will be at least 9 months before that goes away.
We have 0 debt. We have no student loans, and two cars paid off completely. One is a junker but she runs. I have no payments to make on anything.
With a 30 year fixed, my mortgage + taxes would be ~3100$. That is 25% of my gross income, or 38% of my net takehome. When people talk about debt ratios, I've heard conflicting views; is it 28% of gross or net?
There's two sums of money we get per year. Last year I got a massive tax refund in April; about 20k. People say not to count this, but that is non-trivial. That amounts to an extra ~1500$ per month towards principal amortized if I dump it right into the mortgage. I also get 12% of my salary as a bonus in December, depending on personal and company performance. If we say I get half of that, that is 8700$.
BTW, lots of people in this thread instantly assumed OP was privileged somehow. We did recieve a gift of 50k towards our down payment, but other than that, we are both from families without money. I'm 28 and making 150. I did that by getting a PhD in computer science and hard work.
So, there is my situation.
Does that leave room for when taxes go up? What about kids? Also you being the one bringing in most of the money, you should ideally have a bigger emergency fund in case you lose employment. Also why is your tax refund so large?
Does that leave room for when taxes go up? What about kids? Also you being the one bringing in most of the money, you should ideally have a bigger emergency fund in case you lose employment. Also why is your tax refund so large?
RE the refund, I'm not exactly sure. I was certainly overpaying that year, about 40%, because my deductions were screwed up. I was paying as single 0 deductions and I think it should have been married/2. Also, my wife was not working that year. 150 as a single income for a married couple, I guess you don't pay 50k in taxes but maybe something like 30. I do not expect that tax situation to be so extreme this year. Let's say half?
Last edited by johnredcorn7; 11-14-2015 at 06:50 AM..
RE the refund, I'm not exactly sure. I was certainly overpaying that year, about 40%, because my deductions were screwed up. Also, my wife was not working that year. 150 as a single income for a married couple, I guess you don't pay 50k in taxes but maybe something like 30. I do not expect that tax situation to be so extreme this year. Let's say half?
Does that leave room for when taxes go up? What about kids? Also you being the one bringing in most of the money, you should ideally have a bigger emergency fund in case you lose employment. Also why is your tax refund so large?
RE tax increases, I hope that my salary scales at least a little bit.. OP's assumption of 3-5% is aggressive, but if we assume 2%, that is 3k/year. The tax history on the house has gone up about 200 per year on average for the past many years.
Not to kick up an old thread, but I find myself in a similar but slightly better situation as the OP had. Except I am in this situation in Nov 2015, and I'm about to enter attorney review, so I still have a few days to do heavy math and bail.
I also currently rent in "North Jersey"; Summit region to be exact. We just signed a home contract for 490k. The home is nearly new; new furnace, new roof, new kitchen, new deck, etc. The taxes are currently 10k. We were looking in the range of 400-450, but after seeing about 40 homes in this range, we realized you REALLY cannot get anything for that price. If you can, it's a fixer upper you are going to pump tons of money into fixing.
I'm 28 and my wife is a few years older. My wife and I make about 170, but 150 of that is mine. We do not have kids currently, but maybe in the next year or so, and if so she will quit and take care of them; no day care. So, assuming my salary remains flat, we would be making 150.
If we take my wife out of the picture, my net takehome, *after paying taxes*, and *after maxing out my 401K contribution of 6% (matched by my employer)*, is 8200$/mo. Some of the math threads in here included retirement as coming out of net income, does not apply here.
We have about 130 saved so with 20% down and 10K in misc closing costs, we would have 20k in the bank. That's not a huge emergency fund but my wife is still working, so for now our current net takehome is 9600$/month. Since we are not even pregnant yet, it will be at least 9 months before that goes away.
We have 0 debt. We have no student loans, and two cars paid off completely. One is a junker but she runs. I have no payments to make on anything.
With a 30 year fixed, my mortgage + taxes would be ~3100$. That is 25% of my gross income, or 38% of my net takehome. When people talk about debt ratios, I've heard conflicting views; is it 28% of gross or net?
There's two sums of money we get per year. Last year I got a massive tax refund in April; about 20k. People say not to count this, but that is non-trivial. That amounts to an extra ~1500$ per month towards principal amortized if I dump it right into the mortgage. I also get 12% of my salary as a bonus in December, depending on personal and company performance. If we say I get half of that, that is 8700$.
BTW, lots of people in this thread instantly assumed OP was privileged somehow. We did recieve a gift of 50k towards our down payment, but other than that, we are both from families without money. I'm 28 and making 150. I did that by getting a PhD in computer science and hard work.
So, there is my situation.
I think you have a very reasonable view. You have the right down payment with some cushion afterwards. You have no debt. The bulk of your income will not be impacted by having a kid (though expenses will increase!). You're in great shape as a first time home buyer.
The only thing that I'd mention is that with a new mortgage and potential baby in the near future, it's time to look at life insurance if you haven't already.
With a 30 year fixed, my mortgage + taxes would be ~3100$. That is 25% of my gross income, or 38% of my net takehome. When people talk about debt ratios, I've heard conflicting views; is it 28% of gross or net?
Gross is the usual benchmark. 40% gross is about the max the banks will accept with good credit. That's right where we were at when we bought my current house (including still carrying the old one with a mortgage and a maxed-out HELOC that covered the down payment)
Quote:
BTW, lots of people in this thread instantly assumed OP was privileged somehow. We did recieve a gift of 50k towards our down payment, but other than that, we are both from families without money. I'm 28 and making 150. I did that by getting a PhD in computer science and hard work.
So, there is my situation.
Yeah, you're good (assuming the economy doesn't collapse again, but then we're all f-ed) even if your numbers are right. But with $10K in taxes, you're talking about a principal and interest of about $2300, which translates to a rate of 5.8%, which is way way too high. If your credit is good you should be able to get under 4% (possibly significantly under), total payment more like $2700 + insurance.
On taxes: first year interest is $16K, which is a nice deduction that applies even if you get hit by AMT, and is larger than the standard deduction.
Last edited by nybbler; 11-14-2015 at 09:51 PM..
Reason: Add taxes
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New buyer, similar situation
