Won the bid on a 900k house and now I feel sick

[Anonymous]

Here's the situation- my husband and I are all cramped up in a two bedroom one bath condo in Arlington with two kids. We have been saving every dime living here. Our goal/dream has been to buy a house in north Arlington. We have been looking and looking recently. My oldest is 4 and ideally we want to be some where in the next year. Unfortunately, all of the homes in north Arlington between 8-850 are okay but some are still kind of small. My husband saw an awesome house for 900 and said I think we can do this. What?? We both do okay---220k combined! But, on paper it does appear we might be able to do this. we put in a bid and won. I do love the house. It's amazing--but now I'm totally freaking out. A mortgage of 4,100 seems huge. We have done budget after budget and it will be tight with childcare. If we back out now we loose the earnest deposit. Do real people do this and make it work? I'm so scared of making a bad financial decision.

[Anonymous]

Anonymous wrote:Here's the situation- my husband and I are all cramped up in a two bedroom one bath condo in Arlington with two kids. We have been saving every dime living here. Our goal/dream has been to buy a house in north Arlington. We have been looking and looking recently. My oldest is 4 and ideally we want to be some where in the next year. Unfortunately, all of the homes in north Arlington between 8-850 are okay but some are still kind of small. My husband saw an awesome house for 900 and said I think we can do this. What?? We both do okay---220k combined! But, on paper it does appear we might be able to do this. we put in a bid and won. I do love the house. It's amazing--but now I'm totally freaking out. A mortgage of 4,100 seems huge. We have done budget after budget and it will be tight with childcare. If we back out now we loose the earnest deposit. Do real people do this and make it work? I'm so scared of making a bad financial decision.

Sorry OP there is no clear cut answer : you need to make and give us a full detailed monthly budget and We will be able to tell you if it is workable. Personally I would consider the following.
- you need to be pretty secure in your jobs and/or be in a type of profession that is in well in demand with stable or growing salaries
- you need to have an emergency fund equal to 6 months of expenses (to at least give you the time to sell your house if all goes to hell)
- you need your monthly budget to allow you to max out your 401K, if not now at least when the childcare costs stat declining a little (but everyone will tell you they never decline as much as you hope)
-you need to be able to spend 1% of home on repairs (would be 8-9000$ a year for you, to put on a separate account because when something important breaks it is usually a big lump sum)
- you need to have the funds to make your house enjoyable (furniture, paint, cosmetic updates can be expensive), I budgeted 35K for my 625k home.
- to be happy you need to double check if it fits your lifestyle : if you are a homebody happy to enjoin time at home and not interesting in splurging on plane tickets or fancy diners regularly you'll be fine. If not you'll feel house poor.

4100K if your income is secure, you know how to control your budget and you don't mind not having a lot of disposable income to splurge on other things, is not necessarily a bad idea.

I wondered myself if I didn't stretch enough (180k HHI, borrowed 425K, monthly payment 2500 including taxes and home insurance which is less then our previous rent), but we still had students debts, 2 kids barely starting years of expensive day care and a habit of 2 international trips a year...in our case 2500K is probably already stretching it.

[Anonymous]

I wouldn't back out if I were you. Keep in mind that your income will likely increase (at least keeping with the rate of inflation) while the mortgage amount will remain relatively stable. Also, worst case scenario you could just rend out a room to a craigslist rando or sell the house at a loss.

[Anonymous]

Two costs to factor into your budget -

Childcare costs will eventually go down marginally but will not disappear once both your kids are in school. Day care gets replaced with before/after care, summer camps (factor in before/after care costs there as well), activities costs for two kids

Landscape costs - including lawn care, tree care, gardening

[Anonymous]

Anonymous wrote:I wouldn't back out if I were you. Keep in mind that your income will likely increase (at least keeping with the rate of inflation) while the mortgage amount will remain relatively stable. Also, worst case scenario you could just rend out a room to a craigslist rando or sell the house at a loss.

Perhaps OP has been luckier, but for most Americans income has not been keeping up with inflation. There are increases in food, gas, home owner insurance, taxes, home repair and maintenance, etc. the mortgage will remain the same, but not the escrow.

[Anonymous]

Is this the colonial that was about 3100 sq ft? If so, you did great to pull the trigger. I've been watching the market for 10 months and that one was almost a steal for the space. We earn 210k and I understand being freaked out about the mortgage size, our current mortgage is less than $1k, and we were looking at under $860k, but searching up to $900k. That 900k house was really worth it.

Or if it was that other $900k house with the addition painted blue from the outside, that one had loads of character and charm and such a large backyard for that price range. I've looked long amd those two that came up the past month have been in the top 3 best at that price for 10 months.

INVU! Adjusting might take some effort but enjoy the house! You got a really good price.

[Anonymous]

Anonymous wrote:Is this the colonial that was about 3100 sq ft? If so, you did great to pull the trigger. I've been watching the market for 10 months and that one was almost a steal for the space. We earn 210k and I understand being freaked out about the mortgage size, our current mortgage is less than $1k, and we were looking at under $860k, but searching up to $900k. That 900k house was really worth it.

Or if it was that other $900k house with the addition painted blue from the outside, that one had loads of character and charm and such a large backyard for that price range. I've looked long amd those two that came up the past month have been in the top 3 best at that price for 10 months.

INVU! Adjusting might take some effort but enjoy the house! You got a really good price.

In a worst case scenario rent out a room for a while until your incomes go up slightly or as needed.

[Anonymous]

Go read the stretch thread. Very apropos.

What is your backup plan if one of you gets sick or laid off? Can your parents help you out?

What is your careers? Maybe income will rise but a probably not so much unless you are partner track.

We make almost twice as much and we settled on TH in No Arlington, but we recognize that a house can be a much better investment like yours. But housing could also be inflated so we don't pretend to know what will happen and just hedge our bets

Really it comes down to your backup: can your parents help you out in a pinch? We help out our parents hence our reluctance but if you have that firewall enjoy this awesome house.

[Anonymous]

Anonymous wrote:Go read the stretch thread. Very apropos.

What is your backup plan if one of you gets sick or laid off? Can your parents help you out?

What is your careers? Maybe income will rise but a probably not so much unless you are partner track.

We make almost twice as much and we settled on TH in No Arlington, but we recognize that a house can be a much better investment like yours. But housing could also be inflated so we don't pretend to know what will happen and just hedge our bets

Really it comes down to your backup: can your parents help you out in a pinch? We help out our parents hence our reluctance but if you have that firewall enjoy this awesome house.

This is dc area, there are tons of jobs at the 100 to 125 mark. It's not like there is one factory that got shutdown. You'll be fine, no need to worry about one income. If you require one job at 200k or two jobs at 400k it may be more difficult

[Anonymous]

Don't back out. How much more is your mortgage that what you were paying in rent? What can you cut out?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Go read the stretch thread. Very apropos.

What is your backup plan if one of you gets sick or laid off? Can your parents help you out?

What is your careers? Maybe income will rise but a probably not so much unless you are partner track.

We make almost twice as much and we settled on TH in No Arlington, but we recognize that a house can be a much better investment like yours. But housing could also be inflated so we don't pretend to know what will happen and just hedge our bets

Really it comes down to your backup: can your parents help you out in a pinch? We help out our parents hence our reluctance but if you have that firewall enjoy this awesome house.

This is dc area, there are tons of jobs at the 100 to 125 mark. It's not like there is one factory that got shutdown. You'll be fine, no need to worry about one income. If you require one job at 200k or two jobs at 400k it may be more difficult

It's not just layoffs, it's also health, children needing extra help, elder care. They care giving up all that flexibility.

Also the DC job market has been sucky, and it is a company town despite best efforts to diversify.

[Anonymous]

We are buying an 850k on 240k HHI. It's not a stretch at all for us. We are still able to max out retirement. I think the sticker shock is normal but you will get used to it!

[Anonymous]

Anonymous wrote:

Anonymous wrote:I wouldn't back out if I were you. Keep in mind that your income will likely increase (at least keeping with the rate of inflation) while the mortgage amount will remain relatively stable. Also, worst case scenario you could just rend out a room to a craigslist rando or sell the house at a loss.

Perhaps OP has been luckier, but for most Americans income has not been keeping up with inflation. There are increases in food, gas, home owner insurance, taxes, home repair and maintenance, etc. the mortgage will remain the same, but not the escrow.

I remember my boss telling me this when we bought our first home. Three years later, she was gunning to have my fired because someone had to take the fall for her bad management. I changed professions and don't regret it, but I realize now that was likely the most I'll ever make.

[Anonymous]

We have a 595 loan and 350k income but I was adamant on being able to pay the mortgage and live on one salary. I wouldn't feel comfortable with your loan and salary but I like to spend money in other areas. I like good food, weekend trips, expensive clothing etc, which I realize isn't a good investment. Spending this money on a bigger house would be better. However, I wouldn't be happy living extremely frugally so I can live in a bigger house. However, you may be fine with it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Go read the stretch thread. Very apropos.

What is your backup plan if one of you gets sick or laid off? Can your parents help you out?

What is your careers? Maybe income will rise but a probably not so much unless you are partner track.

We make almost twice as much and we settled on TH in No Arlington, but we recognize that a house can be a much better investment like yours. But housing could also be inflated so we don't pretend to know what will happen and just hedge our bets

Really it comes down to your backup: can your parents help you out in a pinch? We help out our parents hence our reluctance but if you have that firewall enjoy this awesome house.

This is dc area, there are tons of jobs at the 100 to 125 mark. It's not like there is one factory that got shutdown. You'll be fine, no need to worry about one income. If you require one job at 200k or two jobs at 400k it may be more difficult

It's not just layoffs, it's also health, children needing extra help, elder care. They care giving up all that flexibility.

Also the DC job market has been sucky, and it is a company town despite best efforts to diversify.

Sucky? How so, it's still one of the best in the nation especially for thr 100 to 125 range.