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

[Anonymous]

Yeah,it might be tough sledding for a bit, but that 900000 will soon be 1.7 million. This is Arlington, and prices are never going down again. So you made a reasonable move.

[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.

How long ago did you win this bid?

[Anonymous]

That is an extremely high mortgage for your income and life stage. Unless you have substantial and very likely raises on the near-term horizon, I would be highly uncomfortable with that.

How much was your earnest money?

[Anonymous]

Anonymous wrote:Yeah,it might be tough sledding for a bit, but that 900000 will soon be 1.7 million. This is Arlington, and prices are never going down again. So you made a reasonable move.

this was my thinking. buy now before you get priced out. for those who think prices won't go higher, look at silicon valley where homes were $1 mil in 2000 and are now $2.5 mil

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yeah,it might be tough sledding for a bit, but that 900000 will soon be 1.7 million. This is Arlington, and prices are never going down again. So you made a reasonable move.

this was my thinking. buy now before you get priced out. for those who think prices won't go higher, look at silicon valley where homes were $1 mil in 2000 and are now $2.5 mil

DC ain't silicon valley.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yeah,it might be tough sledding for a bit, but that 900000 will soon be 1.7 million. This is Arlington, and prices are never going down again. So you made a reasonable move.

this was my thinking. buy now before you get priced out. for those who think prices won't go higher, look at silicon valley where homes were $1 mil in 2000 and are now $2.5 mil

DC ain't silicon valley.

But the close in suburbs are. Or similar to the rich Chicago suburbs. This now is what it is and it's not turning back. The 2 million bridge will soon be crossed.

[Anonymous]

We make about the same and have a mortgage of $2900. Kids are in school, so we "only" have aftercare and camp costs. We are comfortable, but don't have a ton of extra money every month. I'm sure you can make it work, because there's always a way. But I personally would never feel comfortable with that much mortgage.

[Anonymous]

Anonymous wrote:

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.

FWIW, I think this is a bit conservative. You do need a plan for emergencies and selling your house-- it doesn't have to be 6 months expenses in a savings account. You also need a plan for house expenses and be able to afford both small and large unexpected expenses, but in 20+ years of homeownership there is no way that adds up to 1% a year for me ($9k is more than you'd spend for a new boiler or AC unit, and maybe what you'd spend for a new roof, so while you should be able to cover that it's not an every year type thing). And of course, nothing says you need to spend 35k on paint and furnishings when you move in.

If it's doable with childcare then it should be comfortable without childcare (even with camps and before/aftercare, I think that was a savings of about $1000 a month for us).

[Anonymous]

Anonymous wrote:Yeah,it might be tough sledding for a bit, but that 900000 will soon be 1.7 million. This is Arlington, and prices are never going down again. So you made a reasonable move.

It's a decent investment, of course, but only if they can afford the mortgage.

[Anonymous]

OP, in the absolute worst case that you realize down the road you truly can't afford the house, a well-maintained house in that price range will sell very easily in North Arlington. It's not like you're buying a townhouse in Ashburn and then you can't sell it when they build a few hundred more a mile away.

[Anonymous]

that is way too much mortgage for my comfort.

[Anonymous]

We earn 185k and have a mortgage of 300k. Sounds like every penny more than us you earn will go to your mortgage.

[Anonymous]

I miss our old townhouse mortgage every day and we have a comparable portion of HHI devoted to mortgage as you will. We can't do any cosmetic work on the house because any extra funds are saved for when things inevitably need repairs or maintenance. Other expenses are do-able but a little tight. Vacations don't really happen other than visiting family.

[Anonymous]

Anonymous wrote:OP, in the absolute worst case that you realize down the road you truly can't afford the house, a well-maintained house in that price range will sell very easily in North Arlington. It's not like you're buying a townhouse in Ashburn and then you can't sell it when they build a few hundred more a mile away.

That was my thought. And it will go for 1.3 million,at least, in a few months or weeks. Or days.

[Anonymous]

Anonymous wrote: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

Please. If you are willing to do work yourself, you don't have this cost. House costs aren't going down. You can also defer some maintenance. Do it.