Just bought an $800,000 house on a $186,000 salary and now I'm panicking....

[Anonymous]

Why? I guess one could argue that it is the area that we live in but why tie up that much money in a house. I don't get it. Your salary is really low for this area and that is almost a million dollar house. Seems a bit crazy.

[Anonymous]

That is nuts. What will you do if you or your spouse lose your job?!

[Anonymous]

It's common in good stable job market like dc to spend 35% gross on housing. The old boomers and gen x a holes are out of touch

[Anonymous]

Anonymous wrote:Wow. This is nuts. Sorry, but, yeah. We are at 350k and our mortgage is 640k (of which we owe 560k) and we still worry it is too high but COL here is high. We max out 19.5k retirement each, one of us has a potential pension, we save for college, and we're still paying off student loans. Making real strides on the latter now that kids are out of daycare. Still...no way I would have done this. When we earned what you do we had a 200k mortgage.

You have to know this is extremely conservative, no?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Wow. This is nuts. Sorry, but, yeah. We are at 350k and our mortgage is 640k (of which we owe 560k) and we still worry it is too high but COL here is high. We max out 19.5k retirement each, one of us has a potential pension, we save for college, and we're still paying off student loans. Making real strides on the latter now that kids are out of daycare. Still...no way I would have done this. When we earned what you do we had a 200k mortgage.

You have to know this is extremely conservative, no?

Another poster here - not really of the students loans are something like 2k/month. Student loans can make or break a budget IMO.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is your income after a 401k contribution, and if so how much?

And how much emergency fund do you have?

And are any of your kids in paid child care or private school?

OP again - yes, income is after 401k contributions (we each contribute 5%, and get a 5% match), and DW is a fed who will qualify for a pension.
We are done with paid child care, kids are in public school, and will attend in-state public college.

do they know this?

They can tell their children that they will pay for the equivalent of in-state public college. Kids can then make the decision if they would like to pay for / take loans out for any remaining tuition as a result of making a different choice. I have a similar agreement with my children.

I bet you haven’t had to cross that bridge yet. It’s not that easy. It’s not that simple.

I don't understand this comment. I have two children who are in college right now, and one who is a junior in hs in the college search process. We told them all when they started looking at colleges - we will contribute $35k per year toward your college education (which is a little more than what our state flagship costs)...if you want to go to a college that costs more than that, scholarships and/or loans. Then they selected colleges to apply to based on that criteria. One ended up at UMD, and one is at a midwestern private college (loyola in Chicago) on a merit scholarship that brought the cost down to $37k per year. It was very simple -- what am I missing?

We have a different philosophy. Student loans are a huge drag and one of the main reasons this generation cannot buy a house, so we saved enough to launch our kids debt free. It's my responsibility as a parent to pay for education. All my Asian mom friends also pay for the children's med or dental school, too.

[Anonymous]

The 3x income rule is wayyyyyyyy outdated. It came about during the 70s/80s when interest rates were like 10%.

It is common for people who live in HCOL areas to have to stretch more.

This is a personal matter. Everyone has different levels of financial discipline. $186k is probably about $7500-9000 in after income tax and after 401k contributions. Can a family of 4 really not live off of $4000-5000 per mo. after paying the mortgage? Plenty of families live off way less.

Scaling to income isn't linear. Example:

$50K income and 3x mortgages = $150k home according to the 'rules.

$50k income and 30% salary increase = $65k income = $195k home.

$180K income = $540K house.

10% raise on $180k salary = $200k (easier math rounding) = $600K home.

The 10% raise on a higher income allows for a $60K more in housing compared to an increase of a $45k in mortgage due to a 30% raise on a $50k salary. Salaries and debt leverage do not scale linearly. If the OP has a reasonable chance of career advancement, it also makes sense to jump in now before home values keep increasing. It'll just require some discipline for a little while.

[Anonymous]

I make a similiar income but am a single woman in a house that cost about half. I have PLENTY of money left over each month and totally believe you'll be fine. I could easily swing double my mortgage payment (which would actually be higher than your payment.)

[Anonymous]

Emergency fund: what is it? And how much cash do you have available for the inevitable repairs?

Just generally, how much cash do you have now that this transaction is done?

[Anonymous]

Anonymous wrote:Your payment seems low. We just refied at 2.625% for $750k, and our PITI is right around $4000. You presumably are paying PMI - is that factored in?

Agree that it sounds low. Pre-tax amount We're? We're paying $2100 on 370K with PMI as well as $3100 no PMI on $550K both at 2.75%

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This makes me panic. There is now way after taxes and retirement savings you still have 70% of your take home. You should not count on the pension or kids going to in state college. There are all unknowns until she actually retires and college is next year.

You must have posted here because you know this wasn’t a good move. Done deal?

PP, you are right, and I should have clarified....the $15,500 gross salary is gross after pre-tax deductions of retirement savings and health insurance costs. Once taxes are taken out, net is $11,000.

In your subject, you said you have a salary of $186,000. $15,500 * 12 = $186,000. But now that amount is after some, but not all, payroll deductions? Come on. Precisely no one describes their "salary" as the amount left over after having retirement and health insurance deducted.

I am starting to think you are a troll, or have absolutely no idea about your finances. I actually hope it's the former, because if not - yikes.

Yes, I don't understand these numbers at all. But, if you take home 15,500 a month, after savings, then yes you can afford the mortgage. Unless you have huge medical expenses, you have over 11k a month to live on. What would be your concern about living on over a 11k a month after your mortgage is paid?

[Anonymous]

Anonymous wrote:We weren’t comfortable with more than a $200k house on a HHI of $100,000/yr so that would be a big no from us. But we are resisting the two income trap and live in the Midwest.

Same, we make ~$200K a year and live in the Midwest and have a remaining mortgage of $180K-ish. We continually look at new houses, but we absolutely do not want to be house poor or work forever.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We weren’t comfortable with more than a $200k house on a HHI of $100,000/yr so that would be a big no from us. But we are resisting the two income trap and live in the Midwest.

Same, we make ~$200K a year and live in the Midwest and have a remaining mortgage of $180K-ish. We continually look at new houses, but we absolutely do not want to be house poor or work forever.

So, basically, you have no idea what it's like to live in a HCOL area or how much houses cost in the DMV, but you'd like to weigh in to share your entirely irrelevant opinion why? $200K is a studio/one-bedroom condo that's a mile walk from the metro, likely with stupid high condo fees. There are no $200K houses here. But, hey, living in the Midwest is a big no from us.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We weren’t comfortable with more than a $200k house on a HHI of $100,000/yr so that would be a big no from us. But we are resisting the two income trap and live in the Midwest.

Same, we make ~$200K a year and live in the Midwest and have a remaining mortgage of $180K-ish. We continually look at new houses, but we absolutely do not want to be house poor or work forever.

So, basically, you have no idea what it's like to live in a HCOL area or how much houses cost in the DMV, but you'd like to weigh in to share your entirely irrelevant opinion why? $200K is a studio/one-bedroom condo that's a mile walk from the metro, likely with stupid high condo fees. There are no $200K houses here. But, hey, living in the Midwest is a big no from us.

Seriously, I wish the Midwestern folks would refrain from giving advice on the RE boards like it's actually feasible here. A 200K house is not an option in the DMV unless you want to have a 4 hour round trip commute. Do a search and see what 200K gets you and where.

And this isn't a case of wanting a "new" house. An 800K house around here is not a brand new, decked out McMansion. And a move to the Midwest is not an option for all of us.

OP - don't panic. You will be fine. Do you have savings? You will be able to pay your bills but will likely not be able to save much for a few years until your income goes up.

We bought an 800K house on an HHI of about 220K, with 20% down. We had no debt but did have daycare costs for two young children. We were able to make it work just fine but not able to save as much as we wanted initially, so not maxing out our 401Ks and not contributing much to the kids' 529s. This resolved in a few years with incomes going up. However, I must note we did have a cash cushion that would have gotten us through about 6 months of living expenses if both of us were to become unemployed at the same time. Still, I'm sure DCUM would have told us we were crazy.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is your income after a 401k contribution, and if so how much?

And how much emergency fund do you have?

And are any of your kids in paid child care or private school?

OP again - yes, income is after 401k contributions (we each contribute 5%, and get a 5% match), and DW is a fed who will qualify for a pension.
We are done with paid child care, kids are in public school, and will attend in-state public college.

do they know this?

They can tell their children that they will pay for the equivalent of in-state public college. Kids can then make the decision if they would like to pay for / take loans out for any remaining tuition as a result of making a different choice. I have a similar agreement with my children.

I bet you haven’t had to cross that bridge yet. It’s not that easy. It’s not that simple.

I don't understand this comment. I have two children who are in college right now, and one who is a junior in hs in the college search process. We told them all when they started looking at colleges - we will contribute $35k per year toward your college education (which is a little more than what our state flagship costs)...if you want to go to a college that costs more than that, scholarships and/or loans. Then they selected colleges to apply to based on that criteria. One ended up at UMD, and one is at a midwestern private college (loyola in Chicago) on a merit scholarship that brought the cost down to $37k per year. It was very simple -- what am I missing?

We have a different philosophy. Student loans are a huge drag and one of the main reasons this generation cannot buy a house, so we saved enough to launch our kids debt free. It's my responsibility as a parent to pay for education. All my Asian mom friends also pay for the children's med or dental school, too.

Not everyone can afford to save and not everyone values saving. However, they shouldn't allow these high student loans and if you choose to take them, stop complaining as you made that choice.