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OP: if you spend wisely and watch your budget, you have no issue with this purchase. Yeah, it's probably your first time buying, so there is always hesitant and unknown. You can work out the PITI (principle, interest, tax, insurance) easily using online calculator. Then you can do your own cost of living and budget calculation, which only you will know.
Also, just make sure you assess forum input into perspective. Some don't live in CA and don't understand the real estate market here. And they don't see or experienced the real estate investment in east and west coasts. So best you check with your friends and coworkers who live in OC.
In addition to being a home you can live in, real estate is a great investment opportunity. But like any investment, there are risks and there are cycles. Real estate cycles can be longer. If you are willing to hold onto to home for 10+ years, that should minimize the risk.
My husband and I have a household income similar to yours, but we won't buy a house if we can't put at least 80% down on it, and I'd prefer to pay entirely in full. It's too risky otherwise. What if one of you or both lose your job? What if there's a health emergency that insurance doesn't cover?
This is not a realistic way to think about house purchases...
Quote:
Originally Posted by ohhwanderlust
My husband and I have a household income similar to yours, but we won't buy a house if we can't put at least 80% down on it, and I'd prefer to pay entirely in full. It's too risky otherwise. What if one of you or both lose your job? What if there's a health emergency that insurance doesn't cover?
Look, you can make up scenario in your head but the FACT is lenders routinely make mortgages the CHEAPEST way to borrow money. They do that because the record of folks not being able to pay a mortgage is well documented and default is VERY UNCOMMON, especially among folks that have managed their credit in a responsible manner.
It it of course up to you how you spend your money but the data that backs-up the lending decisions of hundreds of thousand of deals per year rather clearly supports the model that allows borrowers the best rate with just 20% down and LEVERAGING the returns on any money they have to their advantage. There are certainly arguments to be made, but it really comes down to personal emotions over any sort of "spreadsheet" --
Simple. Anything that catastrophic that isn't covered by savings or insurance means selling the house. OTOH, anyone in that income bracket (who isn't over-leveraged) won't be too averse to having a mortgage since there are tax deductions gained. YMMV. Too many variables at play here though.
Quote:
Originally Posted by ohhwanderlust
My husband and I have a household income similar to yours, but we won't buy a house if we can't put at least 80% down on it, and I'd prefer to pay entirely in full. It's too risky otherwise. What if one of you or both lose your job? What if there's a health emergency that insurance doesn't cover?
I would take that 500k and pay cash for a house instead. I love being debt free. Jobs come and go and there are no guarantees. If you live way below your means and invest the difference you may be able to retire super early. If one of you looses your job would the other be able to support the mortgage?
I retired at 58 and I can't tell you what a relief it is knowing that I don't have to work at my high stress, soul crushing occupation any more. That kind of security doesn't come with keeping up with the Jone's.
Think about what you really want with an eye on your future.
You clearly have no idea about real estate prices in California.
According to realtor.com a minute ago, there are 902 properties for sale in Irvine. Set an upper price limit of 500K, and there are 3. That's not a typo. Three single family homes under 500K.
Yes, home prices in California are ridiculous. That doesn't mean that the people who choose to live there get to unilaterally pretend that they are the same as other places. Million dollar homes in Irvine aren't mansions, they are just normal, nice 3-4 bedroom single family houses.
A lot have said they would not put a $500K down payment and others have said buy a cheaper house and go private school.
A big reason for a large down payment is due to a couple reasons. First if one of us lost our jobs we can still pay the mortgage and other fixed home expenses. Second, putting a large down allows us to save about 15% of take home pay on top of 10% for 401K. Being able to save 15% of take home pay will allow us to build reserves within a year or two. After that we should have more disposable income for other investments.
A big reason why we don't want to buy a cheaper house is because we want to stay in Irvine. Irvine schools really are top notch. Lastly Irvine is one of the safest cites you can live in. Can you really put a price on education and safety of your family?
After reviewing my budget, I'm really feeling comfortable moving forward with the purchase despite housing expense being 40% of take home pay.
The 40% number is misleading for people with higher incomes. If I am bringing home $15K/month, I could pay $8k/month for housing a month and still be fine. If I am bring home $1500/month, $800 would be hard. The $15K/month person is NOT paying 10X times the food/cable/cellphone/utility bills that $1500/month person is.)
If you are already in Irvine why not STAY PUT? Heck, nowhere in the thread is there any mention of how this $1M home compares to either the OP's existing home OR other homes in Irvine -- here is a home that would leave $150K in your pocket and shows no obvious signs of putting your child's education or safety at risk -- https://www.redfin.com/CA/Irvine/38-...0/home/4780258
Sounds like you are planning on essentially taking all the proceeds from the sale of your existing home and plowing all of it into a more costly home.
Not saying this is not a common move that folks do, but it really does nothing to increase your actual wealth.
Anyone who wants to "rationalize" that if they are selling their home for than they paid, it may "feel" like they are better off, but a more careful analysis shows that this kind of "inflated value" is rather different than actually have increased earnings / savings. While I generally think the ideas in "Rich Dad - Poor Dad" are not helpful, the one area that should be something for the OP (or anyone else considering "moving up") should give serious thought to is the aspect that one's residence is NOT helping your cash flow, especially when one dives DEEPER into "luxury pricing" -- Real estate: Asset or liability? - Mighty Bargain Hunter
I might suggest that if the OP thought about selling their existing home and then using the proceeds to buy a home that was the same price as what they got into the original home and using any "profit" to buy say a boat it would be much clearer that this is NOT a really good well to increase one's wealth. While this is extreme, as even the most "rationalizing" type person would very likely agree that at boat is "a hole in the water that you try to fill with money" I would caution that so too is a new $1M home much easier to become part of lifestyle that burns more of your income rather than making it easy to continue to achieve true financial independence...
If you are already in Irvine why not STAY PUT? Heck, nowhere in the thread is there any mention of how this $1M home compares to either the OP's existing home OR other homes in Irvine -- here is a home that would leave $150K in your pocket and shows no obvious signs of putting your child's education or safety at risk -- https://www.redfin.com/CA/Irvine/38-...0/home/4780258
Sounds like you are planning on essentially taking all the proceeds from the sale of your existing home and plowing all of it into a more costly home.
Not saying this is not a common move that folks do, but it really does nothing to increase your actual wealth.
Anyone who wants to "rationalize" that if they are selling their home for than they paid, it may "feel" like they are better off, but a more careful analysis shows that this kind of "inflated value" is rather different than actually have increased earnings / savings. While I generally think the ideas in "Rich Dad - Poor Dad" are not helpful, the one area that should be something for the OP (or anyone else considering "moving up") should give serious thought to is the aspect that one's residence is NOT helping your cash flow, especially when one dives DEEPER into "luxury pricing" -- Real estate: Asset or liability? - Mighty Bargain Hunter
I might suggest that if the OP thought about selling their existing home and then using the proceeds to buy a home that was the same price as what they got into the original home and using any "profit" to buy say a boat it would be much clearer that this is NOT a really good well to increase one's wealth. While this is extreme, as even the most "rationalizing" type person would very likely agree that at boat is "a hole in the water that you try to fill with money" I would caution that so too is a new $1M home much easier to become part of lifestyle that burns more of your income rather than making it easy to continue to achieve true financial independence...
Don't know if they can still get good schools at that price point, but there is always the middle option of putting $500k down on (for example) an $800k house, so the mortgage would only be $300k. This makes the one-job-loss situation much more doable than a $500k mortgage.
I would look at it differently. With a job loss, the best thing to tide you over is cash. I would buy a $750K house, put down 20% and invest the rest in something relatively liquid. If the housing market tanks, the government steps in and bails borrowers out. The ones with a substantial equity position in their house lose out. Also, the difference in expenses between a $300K mortgage and $500k mortgage is only ~$1000 month @4%, so it doesn't help that much in a job loss expense situation.
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This is not a realistic way to think about house purchases...
