How did you afford your $1M plus home?

[Anonymous]

Anonymous wrote:Similar situation here as the OP. I was thinking of a hardship withdrawal from 401K plan to get most of the downpayment -- not wise financially, but the only alternative I can think of. Silly?

not silly...completely moronic. Why on earth would you ever take money out of your 401K to buy a home that you clearly can't afford? Not to mention you hae to pay that money back and doing so means you are pretty much losing even mopre money in investments while you try to repay the money you took out. Oh and it is even harder to pay back if you are also throwing your money away on a house you can't afford just to keep up with the Jones. Sorry but buying more than you can afford even if for better schools is ridicuous. Why is that the only alternative? I also think that people need to stop placing such high priority on schools and thinking that unless theri kids goes to a "top" school in the most expensive neighborhood then they are screwed. There are plenty of wonderful schools in the DC area. The options aren't the top schools versus sending your kids to Anacostia.

If people lived with in their means and were realistic in what they can afford we wouldnt be in the mortgage/housing crisis that we are in.

[Anonymous]

You've got very high standards, little flexibility, and apparently not enough money. You may pull it off, but end up significantly "house-poor" and stressed about it.

We've chosen lower standards, more flexibility, and no worries about money. And still great schools. 250k income, and a 500K house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Similar situation here as the OP. I was thinking of a hardship withdrawal from 401K plan to get most of the downpayment -- not wise financially, but the only alternative I can think of. Silly?

not silly...completely moronic. Why on earth would you ever take money out of your 401K to buy a home that you clearly can't afford? Not to mention you hae to pay that money back and doing so means you are pretty much losing even mopre money in investments while you try to repay the money you took out. Oh and it is even harder to pay back if you are also throwing your money away on a house you can't afford just to keep up with the Jones. Sorry but buying more than you can afford even if for better schools is ridicuous. Why is that the only alternative? I also think that people need to stop placing such high priority on schools and thinking that unless theri kids goes to a "top" school in the most expensive neighborhood then they are screwed. There are plenty of wonderful schools in the DC area. The options aren't the top schools versus sending your kids to Anacostia.

If people lived with in their means and were realistic in what they can afford we wouldnt be in the mortgage/housing crisis that we are in.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We are a young couple who took a loss on a previous home and still managed to do it. Income about $200K/year but I am home so we don't have those expenses related to childcare. We used VA loan (not a lot down) and budget carefully because our $6,000 mortgage is a huge chunk. We have no other debts, no car payments, etc and it's doable but tight. We wanted to buy a house that we will stay in for 10+ years so after a couple years of owning should be able to loosen the budget. If we had used conventional financing we would not have had a big enough downpayment, so i guess for me the answer would be that eh VA loan allowed us to do so.

Dang, that is a huge mortgage payment given your HHI.

I don't understand why you would take on so much mortgage, especially after having taken a loss on a previous home. Is a $1M house really so important?

+1 That is insane. We make a similar HHI and I couldn't imagine paying that much for a mortgage. I'd have nothing left for retirement, 529, etc...

I agree that's insane. Makes me think, however, about all these posts on DCUM, where posters advocate sending a couple of kids to private school (b/c it is an important priority to them). Well, sending two kids to private school would equate to about 3k per month, per kid. So two kids, you've got 6k per month...and then you've got to pay for housing. Tell me again DCUM, how, exactly do families afford such things?

[Anonymous]

How? Bought our first Ward 3 home in 1995 and everyone laughed us and our "crackhead mayor." They said we'd be sorry we didn't alight to NoVa like they did.

Rolled the profit into current home in 2000.

OP, a tip, assuming you stay looking in 20015 / 20016: consider buying a dumpy property. There aren't many anymore, because long-time absentee landlords have been unloading these group houses, etc during the boom in AU Park and CCDC and Friendship Hts.

But EVERY year (I'm an avid market follower), a handful do come on the market. And they tend to have 4 bedrooms, sad bathrooms, sad kitchens and overgrown landscaping. But even still, you have to jump on the 5 or 6 that come to market every year. You'll be competing with developers but so be it.

Good luck!

[Anonymous]

Op again. We are, in fact, saving money. One reason I posted this thread is to understand how others prioritize saving money for a house/down payment. We save for retirement, some more short term money, long term help for aforementioned sick/unemployed parents. We haven't yet determined how/if we would shift money from any of those things because all of those things seem more important then a bigger house. However, once the kids get older, we will need to move for better public schools so we'd like to get in at the right time.
Nanny will go in a few years (if not sooner but with 2 kids we're not saving much by doing daycare and aftercare for both).
We have a honda civic now and one car thats 10 yrs old and paid off. We take a nice vacation (5-7k) every 2-3 years although the last one was in 2010 and there is no plan for another in the future because of other priorities. We just went through fertility treatments that cost an additional 25k we will be paying off for a while, etc. To be clear, we feel very blessed and want for nothing in terms of need. We'd just like to move into a home that has another bedroom and a little more room with good schools at some point in the next few years.
We just started looking in the last few weeks and were surprised at how high things were. We'll likely just readjust our plans and find something more modest, different area, etc. It just surprises me that we need to do that given what we make. We just got a planner to help us figure out what we are doing wrong.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Similar situation here as the OP. I was thinking of a hardship withdrawal from 401K plan to get most of the downpayment -- not wise financially, but the only alternative I can think of. Silly?

Hardship?
Seriously?
Yes, silly.

I am the silly one. "Hardship" is just a generic term: the 401K plan will allow me to take up to my whole balance for a number of reasons, which they call "hardship" reasons. One such reason is the purchase of a primary residence. I will not take all the balance, but a sizable chunk of it.

Why do I want to do that? This is the context: HHI of about $300K+, current mortgage about $710K, current home value about $800K. Almost no car or other debt, but nanny expenses. Problem: for a number of reasons (long story), we don't have a lot of savings, other than our $90K home equity (which will go down to $50K or so if/when we sell due to realtor fees), and my 401K. (We have good pensions, and we're not touching those).

We want to move for schools to MoCo in a couple of years, but we are aiming to a smallish, not updated home. We've seen homes we like for less than $850K. So we'll plan to use about $120K of the 401K, plus some other minor savings and current equity. I don't see any other way to get the downpayment. Still silly to get $120K from a 401K plan if really want to move? Why?

Sorry but if you currently haven’t saved any money and have no savings, no matter what the reasons, then you should not be buying a $1m home or any home that you can’t afford a down payment on without your 401K. There are plenty of homes out there for less than that. Maybe they aren’t your dream home, but truth is you clearly can’t afford your dream home. People need to start being realistic in what they want and what they can afford. And no I am not someone who lives in a $1m home. When buying our home we were realistic in what we could afford. For us that was $450k. By afford I mean a mortgage that was reasonable and still left us with enough money to live in a way we like, save aggressively for retirements and college, save for the sake of saving and having an emergency fund. Sure I drooled over the more expensive homes that needed no work, were in neighborhood I absolutely loved and had the top schools, but I knew those were not an option for us. So we bought in an area with good school, but not the best ones. Still I love our neighborhood and look forward to raising our children there. While my home is not my dream home I like it and look forward to making it the home of my dreams over time.

[Anonymous]

Anonymous wrote:Similar situation here as the OP. I was thinking of a hardship withdrawal from 401K plan to get most of the downpayment -- not wise financially, but the only alternative I can think of. Silly?

We are probably going to do this, we are in our early 30s and have had our money in there for 15 years and it has done nothing and even has gone down. At least once you pay off real estate you can rent it out as a steady stream of retirement income. What other investment guarantees this?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Similar situation here as the OP. I was thinking of a hardship withdrawal from 401K plan to get most of the downpayment -- not wise financially, but the only alternative I can think of. Silly?

We are probably going to do this, we are in our early 30s and have had our money in there for 15 years and it has done nothing and even has gone down. At least once you pay off real estate you can rent it out as a steady stream of retirement income. What other investment guarantees this?

Oh to add, to all the i saved bs people, you all lie, you either bought before 2004 and made money off the bubble or inherited it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Similar situation here as the OP. I was thinking of a hardship withdrawal from 401K plan to get most of the downpayment -- not wise financially, but the only alternative I can think of. Silly?

We are probably going to do this, we are in our early 30s and have had our money in there for 15 years and it has done nothing and even has gone down. At least once you pay off real estate you can rent it out as a steady stream of retirement income. What other investment guarantees this?

Oh lord you need a lesson in retirement savings. I really can't beleive that your 401K money has done nothing in 15 years. Really is the amount you put in is equal to what you currently have in there with no gains? Really? Please don't see things so short term. Investing in any sort of stocks is about the long term. Real estate is the same way. There are ups and downs but if you hold onto it for the long term there will be gains.

The issue with taking money form a 401k is that you have to pay it back. While you are paying it back you are no longer inversting and they not gaining or saving anything for that period of time.

I think too many people think "oh we are young and have plenty of time to save." not thinking that mone they put in when younger will do a lot more for them and grow more than the money they put in when they are older and near retirement.

[Anonymous]

You CAN buy a million dollar home if you don't think of yourself as the kind of people who can afford a million dollar home.

This is really the crux of it.

[Anonymous]

From all I've read, taking money out of your 401k - even for a first time homebuyer - should really be a 'last resort' sort of thing. I was considering it, but now I think we will rent for another year and save, while continuing to contribute to our 401ks at least at the level where we will get the employer match.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Similar situation here as the OP. I was thinking of a hardship withdrawal from 401K plan to get most of the downpayment -- not wise financially, but the only alternative I can think of. Silly?

We are probably going to do this, we are in our early 30s and have had our money in there for 15 years and it has done nothing and even has gone down. At least once you pay off real estate you can rent it out as a steady stream of retirement income. What other investment guarantees this?

Oh to add, to all the i saved bs people, you all lie, you either bought before 2004 and made money off the bubble or inherited it.

Of course we bought before 2004, we're 45 years old now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:However, most of what I have seen that I really like is in the $1M plus range. Also, for the 7-800k range, I'd basically be getting exactly what I have now with a tiny yard (if any yard at all) and better public schools. The thought of spending 100k more to get almost exactly what I have just makes me ill.

So maybe you don't get something you really like. You'll be saving a lot on school tuition -- that has a value to a lot of homebuyers; if it doesn't to you, I guess you're not moving.

Yes, and if you are getting better public schools, then you are not basically be getting exactly what you have now. Better schools = better than what you have now.

[Anonymous]

Anonymous wrote:From all I've read, taking money out of your 401k - even for a first time homebuyer - should really be a 'last resort' sort of thing. I was considering it, but now I think we will rent for another year and save, while continuing to contribute to our 401ks at least at the level where we will get the employer match.

no it shouldn't even be an option. Taking money out for a real emergency (loss of income, medical expenses and so forth) is not the same as taking money out because you want a house you didn't save for and can't afford.

As i have said 100x before..if you cant afford to save for a home then you can't afford to buy a home. What people don't realize is that saving for a downpayment is a small task in the world of home buying. Any homeowner can tell you that you also need to save and have money on hand for unexpected home expenses and repairs that come up (new roof, furnace dying, basement flooding and so forth.)