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Okay. I am looking to purchase a $141,000 1955 sq ft home with a FHA loan. I plan on living in the house for YEARS (at least 10) so I want to purchase something that is large enough to grow into, is in a great location and provides good schooling options. I am a single mom with 2 yr old twin boys with a steady, long term job. I make $54,000 a year. My expenses would be as follows:
After including the following bills into my expenses, I would have roughly $800 left over for food, gas, clothes, and entertainment.
These are the bills I included:
Mortgage, water, sewage, electricity, cable, car payment/insurance, cell phone bill, Kids schooling, school loans.
Would having $800 left over make me "house poor"?
I also want to add that I also eliminated the money I put into my 401K, childrens 525 college fund, and my own personal saving account. So even after that, it would be $800.
Last edited by noellea; 03-03-2011 at 09:30 AM..
Reason: forgot to add vital information
Emergency fund?
House maintenance?
Property taxes?
I think it sounds ok...provided everything you want to do in life can be covered with that 800 dollars (sports teams, vacations, presents, clothing, etc).
The $800 is also after the deduction of my families health insurance. Gas would be about $125 (if the gas prices dont beat me down!). Food-around $300 (sounds crazy, but we eat A LOT of chicken and fish. No junk food. And two potty trained kids!)
Oh, and the property taxes, PMI, and hazard insurance are rolled into the 1263 mortgage payment.
I plan on saving 300 a month for emergency funds (which was deducted before the $800 leftover, so that wouldn't come out of that). On top of that...I have would have about 4000 in the bank after closing costs/downpayment.
Last edited by noellea; 03-03-2011 at 09:47 AM..
Reason: bc, again, I forgot something.
The sticky point for me here would be, how much do you have in savings. As a single mom with a decent paying job, you will want to have at least a years worth of expenses in savings (2 years is better) before buying a house, since you don't have a second income to back you up if you lose your job.
Your payment would be in a reasonable range for that income in my opinion. And it sounds like you are being smart and paying yourself first, and then accounting for most expenses (are taxes and insurance included in that? And I don't see gas heat or trash on your list, which may or may not apply). You really should set aside an amount for house repairs as well (appliances that break, water heater and furnace repairs, roof repairs, repainting, etc). I would suggest $100/month.
Even with that, though, if you are being smart on shopping, groceries can be $300-$400 per month for 3 people, without scrimping, which leaves enough for other expenses.
I would say it sounds like you would be in reasonable shape from the numbers you gave.
NOW, with that said, I would say that you might want to check those numbers again. If you are not in a very low cost of living area, your numbers may not be correct. You have more left over after expenses than I would expect for 3 people, the debt you listed, and the income you listed.
That was one thing that I was worried about Lacerta. I would not have a years worth of savings in the bank upon closing. It would be more along the lines of $4000.
Luckily the house I am purchasing recently received all upgraded appliances (within a year), roof is about 7 yrs old, and new water heater. My parents are pitching in for the new paint (which it certainly needs. Really? Who paints their ENTIRE interior olive green?)
I had my father check the numbers for me (he's the smart one of the family). He agreed with me that it would make my life a lot tighter than I was accustomed to when married but that it was do-able. For me, I am willing to sacrifice a few restaurant visits and shopping sprees to provide my kids with a home.
And to answer your question about area. I would consider it a lower middle-middle income area. Everyday working class driving toyotas and hondas. Just trying to provide their family with a decent life. Cost of living is pretty bearable everywhere in San Antonio, TX though.
Seems a little tight to me, but not insane. A lot would depend, in my mind, on where you are in the whole career / family arc.
If you do not expect your income to increase and you do expect your family related expenses to grow I would be a lot more skittish about this than if you thought you stand a reasonably good chance of seeing your income increase and your expenses being at least 'flat'.
In my neck of the woods $155K would be a very modest starter home -- in the nice towns you literally could not get a vacant lot for even DOUBLE that so that would TOTALLY insulate you from any market down turns. You could really do well by upgrading such a house in most parts of the Chicago region and then down the road selling for a nice profit...
I think it is foolish, perhaps even downright DANGEROUS to ELIMINATE contributing to your own retirement, a general "savings / emergency" account and kids educational savings.
Depending on how old you and your kids are and the expected level of EXPENSES that your 55+ year old home (and probably cars...) might result in unexpected outflows, the IMPACT these decisions may have on your future could be DEVASTATING.
Further, depending on the current state of the fund balances in the kind of accounts above, I might rethink this purchase, or at least the allocation of your "income" -- you are basically looking at about $200/ wk in non-allocated costs. Out of that you ABSOLUTELY need to be setting aside SOMETHING or your standard of living will force you into debt. Clothing, food, entertainment, transportation EASILY could see you digging a big hole very fast.
Do you currently have any sort of formal or even "in your head" budget? Even if you do, please read this: Envelope Budget System & Excel
I really like this guy's site for some realistic views about re-shaping how you think about money.
It is also VERY LIKELY that you may benefit from reading about where your money goes before you even see it:Ignoring Your Single Largest Expense is Folly (the good part starts when talks about his cousin Casey, about 2/3 of the way down -- the gist is a SKILLED but HONEST tax guru can LEGALLY net you a huge pile of dough that TOO MANY people flush down the toilet with slip-shod tax preparation... )
If you only have 4k in savings you absolutely must wait until you've saved more! I needed a new roof (almost $9,000) which I knew before I bought the house but didn't know about the new furnace ($5,000) and all new appliances as one by one they all broke within 6 months of the purchase. There are sooooo many things you don't even think about that you will need to buy with a new home.
Saving $300/month it seems like you should have much more in the bank unless renting is way more expense for you than buying. Or maybe I didn't read the post correctly.
You just never know what life is going to throw at you and $4,000 isn't nearly enough. My teenage sons heat went out in his car (in Michigan) and cost me $600 a couple of weeks ago. Have at LEAST a years worth of living expenses in the bank especially with children.
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