Afford $1.8M on 300K?

[Anonymous]

Op, kids use laptops for homework. They work where they are comfortable - in my case it was their bed or the dining room table. I understand you don’t want computers in their rooms. Therefore, when homework is done, you say laptops stay [here] until the morning. The kids don’t need a separate office each. I can assure you that your kids would rather have you put money toward college than a larger house so they could each have an office. And, yes, there are other ways to fund college including merit aid. There are many many schools that give merit aid to students that are not top students but that is a discussion for another day. You don’t have to spend 200,000 to get a degree and your children won’t have to take on $200,000 of debt. You are being dramatic. Just like you probably can find what you need in a 3,000-3,500 house that costs less than 1.8 to 2 million (you likely won’t get separate offices for the kids but maybe you can make a homework area in a finished basement if you think you need it). But you are stuck on a certain type of house in a certain area.

Most threads like this tell the op to go for it and the naysayers are slammed for being too risk averse. Here you have almost universal consensus telling you that this is a bad idea but you keep coming back explaining why you can afford it. The real test will be whether you can get approved for a mortgage for the amount you want.

[Anonymous]

Anonymous wrote:Op here. I'm grateful that my question has spurred so much conversation. My takeaway is the $9K PITI won't allow us to have a buffer for huge unexpected purchases that we've been lucky to avoid these last few years.

I'd like to address some of the recurring themes:

- On 300(ish) K gross, we pay about: 40K for 401K, 65K for federal+state+fica taxes, 10K for HSA + insurance = about 115K total. Even if we made exactly 300K, that still leaves 185/12 = 15.5K per month. I don't see why my estimate of "just under $16K" is incredible. Perhaps other folks are withholding too much? or not itemizing?

- As discussed in a previous post, we spend about $6K per month outside PITI and utilities. That's $72K per year - more than what most households' gross income. I don't see why our spending habits are unbelievable. I would say that our lifestyle is similar to when we made <$200K... so our lifestyle has not crept up with our income.

- as for why we "need" a 4000sqft house - we need offices. We are both WFH for the foreseeable future, and our children are at an age where they need their own computers, and we don't want computers in their bedrooms, and no one wants to share an office. So ideally we need 4 more rooms to have as offices. I'm tired of zooming on the kitchen table.

- there are separate discussions about funding your kids' colleges that deserve their own thread. I might ask those parents who are giving an 18yo $200K and tell them to choose their lifetime career to reconsider. I know I would rather have my kids have some skin in the game when they make their choices about college and major. Then maybe they might be surprised with a $200K loan payoff or down payment gift after they graduate. Who knows?

Because people at that income level normally contribute another 10-30% of pretax/post tax to other tax advantageous accounts such as Roth IRA, Roth 401k, 529, ibonds etc. so in order to get 16k net per month, you almost have to have close to 400k HHI. That’s our finance and our PITI is only 3500. Also have two cash flow rental properties.

I understand the need for two offices. But you probably don’t need 2mn to achieve that. 1.6 can get you something decent in your target area.

[Anonymous]

Anonymous wrote:I posted earlier in the thread that we bought 1.2 on 300k hhi.
We put down about 30% and had two kids in daycare for 24k per kid a year (posted 12k for some reason). Our mortgage was like 5700 when we first got in the house. It was tight with daycare. We had a “fund” we had saved up and slowly burnt it down over 3 years to offset the costs when needed.

Fast forward 11 years and mortgage is closer to 6200 (property tax increases from home appreciation).

We are fortunate now that daycare/nanny days are behind us; income has gone up. BUT in the last 2 years we have replaced the furnaces and both ac for 25k (house is now 11 years old).

If that would have happened when we first moved in it would have been a hard pill to swallow. We had cash on hand (like if we lost a job) for emergency and we would have had to hit that or take out a loan for the hvac. Now we just write a check and, while it sucks, does not impact much financially.

Our net now monthly is around 23k after all the usual insurance, retirement; etc. our mortgage fits our income much better than it did a decade or so ago. So if you expect to
Be 400-500k range hhi if you plan for it and have cash on hand after down payment it may be doable.

How come your PITI after 30% on a 1.2 is so high? We put 20% down for a 1.2 with low 2% interest rate, and the PITI is under 5000. Are you in a high tax area?

Fwiw we had an emergency fund of 100k and 50k daycare fund after putting 30% down, and about 60k to put into the house for blinds and all the stuff you need for a new build.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I posted earlier in the thread that we bought 1.2 on 300k hhi.
We put down about 30% and had two kids in daycare for 24k per kid a year (posted 12k for some reason). Our mortgage was like 5700 when we first got in the house. It was tight with daycare. We had a “fund” we had saved up and slowly burnt it down over 3 years to offset the costs when needed.

Fast forward 11 years and mortgage is closer to 6200 (property tax increases from home appreciation).

We are fortunate now that daycare/nanny days are behind us; income has gone up. BUT in the last 2 years we have replaced the furnaces and both ac for 25k (house is now 11 years old).

If that would have happened when we first moved in it would have been a hard pill to swallow. We had cash on hand (like if we lost a job) for emergency and we would have had to hit that or take out a loan for the hvac. Now we just write a check and, while it sucks, does not impact much financially.

Our net now monthly is around 23k after all the usual insurance, retirement; etc. our mortgage fits our income much better than it did a decade or so ago. So if you expect to
Be 400-500k range hhi if you plan for it and have cash on hand after down payment it may be doable.

How come your PITI after 30% on a 1.2 is so high? We put 20% down for a 1.2 with low 2% interest rate, and the PITI is under 5000. Are you in a high tax area?

Fwiw we had an emergency fund of 100k and 50k daycare fund after putting 30% down, and about 60k to put into the house for blinds and all the stuff you need for a new build.

How come your PITI after 30% on a 1.2 is so high? We put 20% down for a 1.2 with low 2% interest rate, and the PITI is under 5000. Are you in a high tax area?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I posted earlier in the thread that we bought 1.2 on 300k hhi.
We put down about 30% and had two kids in daycare for 24k per kid a year (posted 12k for some reason). Our mortgage was like 5700 when we first got in the house. It was tight with daycare. We had a “fund” we had saved up and slowly burnt it down over 3 years to offset the costs when needed.

Fast forward 11 years and mortgage is closer to 6200 (property tax increases from home appreciation).

We are fortunate now that daycare/nanny days are behind us; income has gone up. BUT in the last 2 years we have replaced the furnaces and both ac for 25k (house is now 11 years old).

If that would have happened when we first moved in it would have been a hard pill to swallow. We had cash on hand (like if we lost a job) for emergency and we would have had to hit that or take out a loan for the hvac. Now we just write a check and, while it sucks, does not impact much financially.

Our net now monthly is around 23k after all the usual insurance, retirement; etc. our mortgage fits our income much better than it did a decade or so ago. So if you expect to
Be 400-500k range hhi if you plan for it and have cash on hand after down payment it may be doable.

How come your PITI after 30% on a 1.2 is so high? We put 20% down for a 1.2 with low 2% interest rate, and the PITI is under 5000. Are you in a high tax area?

Fwiw we had an emergency fund of 100k and 50k daycare fund after putting 30% down, and about 60k to put into the house for blinds and all the stuff you need for a new build.

How come your PITI after 30% on a 1.2 is so high? We put 20% down for a 1.2 with low 2% interest rate, and the PITI is under 5000. Are you in a high tax area?

Probably because not everyone has a 2% interest loan for their mortgage? You were incredibly lucky to catch that rate.

[Anonymous]

This actually made me laugh - our children each need their own "offices" to do their school work!

hahahaha

[Anonymous]

Anonymous wrote:Op here. I'm grateful that my question has spurred so much conversation. My takeaway is the $9K PITI won't allow us to have a buffer for huge unexpected purchases that we've been lucky to avoid these last few years.

I'd like to address some of the recurring themes:

- On 300(ish) K gross, we pay about: 40K for 401K, 65K for federal+state+fica taxes, 10K for HSA + insurance = about 115K total. Even if we made exactly 300K, that still leaves 185/12 = 15.5K per month. I don't see why my estimate of "just under $16K" is incredible. Perhaps other folks are withholding too much? or not itemizing?

- As discussed in a previous post, we spend about $6K per month outside PITI and utilities. That's $72K per year - more than what most households' gross income. I don't see why our spending habits are unbelievable. I would say that our lifestyle is similar to when we made <$200K... so our lifestyle has not crept up with our income.

- as for why we "need" a 4000sqft house - we need offices. We are both WFH for the foreseeable future, and our children are at an age where they need their own computers, and we don't want computers in their bedrooms, and no one wants to share an office. So ideally we need 4 more rooms to have as offices. I'm tired of zooming on the kitchen table.

- there are separate discussions about funding your kids' colleges that deserve their own thread. I might ask those parents who are giving an 18yo $200K and tell them to choose their lifetime career to reconsider. I know I would rather have my kids have some skin in the game when they make their choices about college and major. Then maybe they might be surprised with a $200K loan payoff or down payment gift after they graduate. Who knows?

Each child needs their own office? WTF

[Anonymous]

We have HHI at 450K and bought a 1.8m house last year. Monthly payment is around $8000 including tax and insurance. We don't have other debt and no car loan. Monthly utilities is around $500.

So without doing anything, it is already $8500 going out every month. We also max out 401K and other stock purchase plans but cut travel and goods spending for almost half year.

I just hope the property tax will not go higher next year.

[Anonymous]

Anonymous wrote:This actually made me laugh - our children each need their own "offices" to do their school work!

hahahaha

yeah now I think this is just made up...

[Anonymous]

Anonymous wrote:We have HHI at 450K and bought a 1.8m house last year. Monthly payment is around $8000 including tax and insurance. We don't have other debt and no car loan. Monthly utilities is around $500.

So without doing anything, it is already $8500 going out every month. We also max out 401K and other stock purchase plans but cut travel and goods spending for almost half year.

I just hope the property tax will not go higher next year.

PP, can I ask what made you decide to take on such a huge monthly mortgage? Are you expecting salary increase or some windfall to pay it down? We are similar HHI but find it very mind blowing to have such high portion of take home pay into housing. Please help us think it through.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We have HHI at 450K and bought a 1.8m house last year. Monthly payment is around $8000 including tax and insurance. We don't have other debt and no car loan. Monthly utilities is around $500.

So without doing anything, it is already $8500 going out every month. We also max out 401K and other stock purchase plans but cut travel and goods spending for almost half year.

I just hope the property tax will not go higher next year.

PP, can I ask what made you decide to take on such a huge monthly mortgage? Are you expecting salary increase or some windfall to pay it down? We are similar HHI but find it very mind blowing to have such high portion of take home pay into housing. Please help us think it through.

PP here. We took on the mortgage because of low rate at 2.75% for 30 years and we do expect salary increase and some positive cash flow from our investiment property (luckily I got it rented out last month.). For the $8000 monthly payment, we are expecting a refund from escrow account for overestimating the property tax so next year the monthly payment including tax and insurance could reduce to $7600. We also expect the housing price around DMV to be more stable than other areas such as Florida, Arizona, and Texas. The principle part of the monthly payment (around $2700) is deemed as monthly saving towards equity value of the house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eh, it may be possible.
When we were at 300k range we bought at 1.2 and were freaked out. We had 2 kids in daycare for 24k a year (12k each).

It was tight for couple of years. Kids in school and incomes over 400k now no worries.

12k each for daycare? How long ago was this? Twenty years?

It was 24k each kid: so 48k a year in child care.

That is not what the post said.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Someone explain the math to me how OP is having $6k leftover on her current budget.

By my rough math, $300k is about $13k/month take home after maxing 2 401k’s, HSA, and 529s, and taxes. Take out $3500 for her current PITI, gets her to $9500. For her to save $6k/month she is only spending $3500/month. This includes all utilities, internet and cellphones. Home maintenance, food, dining out, kids activities, gifts, travel, and saving for buying cars with cash since OP says she doesn’t have car payments.

It’s just not adding up to me. We make a similar income and don’t live a fancy life and have at best a couple thousand left over, not $6k! I’d love to know the secret because I’m not seeing it.

I think OP posted on the thread saying they aren’t funding kids college so maybe taking out the 529 contributions gets you closer?

The OP mentions 529 savings.

Right, but only $4k. That's not really funding college.

We we are saving $1600/month ($800/per kid) but that still doesn’t get me to the $6k excess OP references. And also, cars. Eventually one or both of them will need a new car. Are they saving for it? Planning to have a car payment?

Well, she's saving $6k per month; presumably the car costs would come from that. However, it just illustrates the lunacy of a $9k mortgage payment.

[Anonymous]

9K mortgage is crazy for that income. 6K tops for that income. Why does the OP need a 2M house? I didn't realize someone could get anywhere near a 9K a month mortgage loan based on that income.

1M houses are fine.

OP will have not disposable/savings income.

[Anonymous]

With the 6K savings a month, I would stay in current home and hire a weekly cleaner, and plan to retire at age 50-55. When the kids move out what's the point of a big house? No need to buy an expensive house.