How much house can we afford?

[Anonymous]

Anonymous wrote:I will pay off my student and car loans first.

I would too.

[Anonymous]

Anonymous wrote:Our hhi is similar but 60k of that is in stock we don’t touch. We have a mortgage of 510k. Bought a 650k house with 20percent down. Our town taxes are high and our monthly mortgage bill is 3300$ which is the absolute max we would want to spend. We don’t feel stretched, but on the edge of comfortable.

Thanks for the feedback. That sounds reasonable.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

The student loan was a loan from my parents for my Masters degree. They are charging 0 percent interest and we've agreed upon a repayment timeline. So essentially there's no benefit financially to paying it off early and it would only push back other financial goals, like buying a bigger house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

The student loan was a loan from my parents for my Masters degree. They are charging 0 percent interest and we've agreed upon a repayment timeline. So essentially there's no benefit financially to paying it off early and it would only push back other financial goals, like buying a bigger house.

Right now it sounds like you are slowing down their financial growth to speed yours up, without telling them. If you are going to borrow money from family, you need to be honest with them and pay them back as quickly as reasonable (regardless of the terms). You cannot buy a 900k home while still owing them money for student loans. Why not tell them you want to pay back the student loan now with a lump sum before buying a house. Then explain your finances and price point. I bet they will loan you the money again (and possibly more). If they don't, then I would be glad I paid them back early.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

The student loan was a loan from my parents for my Masters degree. They are charging 0 percent interest and we've agreed upon a repayment timeline. So essentially there's no benefit financially to paying it off early and it would only push back other financial goals, like buying a bigger house.

Right now it sounds like you are slowing down their financial growth to speed yours up, without telling them. If you are going to borrow money from family, you need to be honest with them and pay them back as quickly as reasonable (regardless of the terms). You cannot buy a 900k home while still owing them money for student loans. Why not tell them you want to pay back the student loan now with a lump sum before buying a house. Then explain your finances and price point. I bet they will loan you the money again (and possibly more). If they don't, then I would be glad I paid them back early.

That doesn't really make any sense at all. The parents obviously made the loan on favorable terms as a means to improve the financial situation by not charging interest. I might check with the parents to see if there has been a change in their financial status, such that repaying in lump sum now is important, but otherwise, if you are meeting the terms of the agreement then you are simply using the gift you were given. It hardly makes sense to pay it back only to borrow again.

One thing that you don't mention is how much you are currently saving for the home per month. Or is that within the projected home budget? Another PP stated that the difference in cost of the two mortgages (assuming 20% down for each) was only $400 per month. Your car payment then is 2/3 of the difference in monthly expenditures and will presumably will be eliminated within 5 years. Once the car is paid off, will you be happy driving for several years until your childcare expenses reduce when number 2 reaches school age? Or is it a lease? Does you lifestyle require substantial driving such that a car isn't likely to last 10 years in good working order?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

The student loan was a loan from my parents for my Masters degree. They are charging 0 percent interest and we've agreed upon a repayment timeline. So essentially there's no benefit financially to paying it off early and it would only push back other financial goals, like buying a bigger house.

Right now it sounds like you are slowing down their financial growth to speed yours up, without telling them. If you are going to borrow money from family, you need to be honest with them and pay them back as quickly as reasonable (regardless of the terms). You cannot buy a 900k home while still owing them money for student loans. Why not tell them you want to pay back the student loan now with a lump sum before buying a house. Then explain your finances and price point. I bet they will loan you the money again (and possibly more). If they don't, then I would be glad I paid them back early.

Nope, the repayment timeline has been discussed with parents and financial goals are very transparent on both sides (i.e. they know we are trying to sock away as much cash as possible so that we are able to get ourselves settled into our long term home as soon as possible). In fact all the details surrounding the loan including the original offer to lend the money was initiated by my parents so from their perspective it's inconsequential to their financial status. They have been very generous so we are grateful and very lucky. If we end up being in as good a financial situation thirty years from now as they are, I would not hesitate doing the same for my own children.

Anyway, this is beyond the scope of my original question.

[Anonymous]

You'll be fine with a 750K mortgage on a 900K house. You won't be taking any extravagant vacations but with 2 small children, that's probably not a surprise.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

This is were dcum is ridiculous. Not everyone can just pay off their student loans like its a restaurant bill. You have no idea how long it took for them to save the current DP, just to wipe it out with paying these loans off.

PP's parents made the loan more palatable and im sure theyll pay it as agreed. Whats the rush to pay it off?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

The student loan was a loan from my parents for my Masters degree. They are charging 0 percent interest and we've agreed upon a repayment timeline. So essentially there's no benefit financially to paying it off early and it would only push back other financial goals, like buying a bigger house.

Right now it sounds like you are slowing down their financial growth to speed yours up, without telling them. If you are going to borrow money from family, you need to be honest with them and pay them back as quickly as reasonable (regardless of the terms). You cannot buy a 900k home while still owing them money for student loans. Why not tell them you want to pay back the student loan now with a lump sum before buying a house. Then explain your finances and price point. I bet they will loan you the money again (and possibly more). If they don't, then I would be glad I paid them back early.

That doesn't really make any sense at all. The parents obviously made the loan on favorable terms as a means to improve the financial situation by not charging interest. I might check with the parents to see if there has been a change in their financial status, such that repaying in lump sum now is important, but otherwise, if you are meeting the terms of the agreement then you are simply using the gift you were given. It hardly makes sense to pay it back only to borrow again.

One thing that you don't mention is how much you are currently saving for the home per month. Or is that within the projected home budget? Another PP stated that the difference in cost of the two mortgages (assuming 20% down for each) was only $400 per month. Your car payment then is 2/3 of the difference in monthly expenditures and will presumably will be eliminated within 5 years. Once the car is paid off, will you be happy driving for several years until your childcare expenses reduce when number 2 reaches school age? Or is it a lease? Does you lifestyle require substantial driving such that a car isn't likely to last 10 years in good working order?

Yes, exactly, the interest they are losing is basically a gift they have been willing to give.

We currently are able to save about 6k per month which is basically my net take-home income. So given that we don't plan on buying a house for another year or so I expect to save at least another 50k in the next year.

I guess the root of my question is this: do you buy a more affordable house now with the high cost of childcare but that we will most likely grow out of again in 5 years and have to move yet again OR do we stretch now for more of a forever home knowing that once kids are in public school things will feel very different? That's the root of my question.

Also, we do have two cars (one owned outright) that we plan on driving for as long as safe. We have three more years on the one car payment. We don't drive more than an average commute.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

This is were dcum is ridiculous. Not everyone can just pay off their student loans like its a restaurant bill. You have no idea how long it took for them to save the current DP, just to wipe it out with paying these loans off.

PP's parents made the loan more palatable and im sure theyll pay it as agreed. Whats the rush to pay it off?

True, but in any case you always want to pay off your debt asap. That's finance 101.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

The student loan was a loan from my parents for my Masters degree. They are charging 0 percent interest and we've agreed upon a repayment timeline. So essentially there's no benefit financially to paying it off early and it would only push back other financial goals, like buying a bigger house.

Right now it sounds like you are slowing down their financial growth to speed yours up, without telling them. If you are going to borrow money from family, you need to be honest with them and pay them back as quickly as reasonable (regardless of the terms). You cannot buy a 900k home while still owing them money for student loans. Why not tell them you want to pay back the student loan now with a lump sum before buying a house. Then explain your finances and price point. I bet they will loan you the money again (and possibly more). If they don't, then I would be glad I paid them back early.

That doesn't really make any sense at all. The parents obviously made the loan on favorable terms as a means to improve the financial situation by not charging interest. I might check with the parents to see if there has been a change in their financial status, such that repaying in lump sum now is important, but otherwise, if you are meeting the terms of the agreement then you are simply using the gift you were given. It hardly makes sense to pay it back only to borrow again.

One thing that you don't mention is how much you are currently saving for the home per month. Or is that within the projected home budget? Another PP stated that the difference in cost of the two mortgages (assuming 20% down for each) was only $400 per month. Your car payment then is 2/3 of the difference in monthly expenditures and will presumably will be eliminated within 5 years. Once the car is paid off, will you be happy driving for several years until your childcare expenses reduce when number 2 reaches school age? Or is it a lease? Does you lifestyle require substantial driving such that a car isn't likely to last 10 years in good working order?

Yes, exactly, the interest they are losing is basically a gift they have been willing to give.

We currently are able to save about 6k per month which is basically my net take-home income. So given that we don't plan on buying a house for another year or so I expect to save at least another 50k in the next year.

I guess the root of my question is this: do you buy a more affordable house now with the high cost of childcare but that we will most likely grow out of again in 5 years and have to move yet again OR do we stretch now for more of a forever home knowing that once kids are in public school things will feel very different? That's the root of my question.

Also, we do have two cars (one owned outright) that we plan on driving for as long as safe. We have three more years on the one car payment. We don't drive more than an average commute.

Why don’t you split the difference and buy a small, relatively cheap home in a good school district that you can add space to later? A rancher, for example, is relatively inexpensive to build onto, especially compared to two-level homes.

People advise against building additions, but these people are not considering that trading up for a parger home usually comes with large acquisition costs. If you sell a $700k home that’s $42,000 in realtors fees plus at least $10,000 in closing costs when you buy a new home. And then you need to start from scratch with another mortgage on top of that. I’d rather throw that $50k towards an addition and additional equity.

[Anonymous]

Anonymous wrote:

I guess the root of my question is this: do you buy a more affordable house now with the high cost of childcare but that we will most likely grow out of again in 5 years and have to move yet again OR do we stretch now for more of a forever home knowing that once kids are in public school things will feel very different? That's the root of my question.

In your case, I'd stretch. Transaction costs are high to trade homes and you risk being priced out when you are ready to move in 5 years. Your high fixed costs of daycare are temporary.

The math on a 750K mortgage at 4% is $3580 PITI.
For a 600K mortgage it's $2864.

That's not a small difference, but at a 300K HHI you should be able to come up with the difference between the two (it might end up being slightly higher due to higher taxes on a more expensive property). Even at a 900K property you are looking at less than 20% of your gross income which is very affordable.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

I guess the root of my question is this: do you buy a more affordable house now with the high cost of childcare but that we will most likely grow out of again in 5 years and have to move yet again OR do we stretch now for more of a forever home knowing that once kids are in public school things will feel very different? That's the root of my question.

In your case, I'd stretch. Transaction costs are high to trade homes and you risk being priced out when you are ready to move in 5 years. Your high fixed costs of daycare are temporary.

The math on a 750K mortgage at 4% is $3580 PITI.
For a 600K mortgage it's $2864.

That's not a small difference, but at a 300K HHI you should be able to come up with the difference between the two (it might end up being slightly higher due to higher taxes on a more expensive property). Even at a 900K property you are looking at less than 20% of your gross income which is very affordable.

2nd that I would stretch. Sounds like your family could help if things really hit the fan. If it were the other way around (you’re someone else’s safety net) I wouldn’t. Transaction costs are killer. I would aim to find the forever home now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

I guess the root of my question is this: do you buy a more affordable house now with the high cost of childcare but that we will most likely grow out of again in 5 years and have to move yet again OR do we stretch now for more of a forever home knowing that once kids are in public school things will feel very different? That's the root of my question.

In your case, I'd stretch. Transaction costs are high to trade homes and you risk being priced out when you are ready to move in 5 years. Your high fixed costs of daycare are temporary.

The math on a 750K mortgage at 4% is $3580 PITI.
For a 600K mortgage it's $2864.

That's not a small difference, but at a 300K HHI you should be able to come up with the difference between the two (it might end up being slightly higher due to higher taxes on a more expensive property). Even at a 900K property you are looking at less than 20% of your gross income which is very affordable.

Sorry, those numbers are only PI, not including taxes and insurance. But add another $1k/month and you're still under 20% of your gross HHI.

The difference over 5 years is 42K. Do you think you could trade houses for less than $42K in transaction and moving costs? I don't. You won't actually save money by going with the cheaper house now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will pay off my student and car loans first.

I would too.

This is were dcum is ridiculous. Not everyone can just pay off their student loans like its a restaurant bill. You have no idea how long it took for them to save the current DP, just to wipe it out with paying these loans off.

PP's parents made the loan more palatable and im sure theyll pay it as agreed. Whats the rush to pay it off?

They are buying a very expensive house, in which they can buy a $500-600K house and be far more financially comfortable and pay off debt. They don't have a lot of savings either.