HHI 200K - how much house can/should we afford

[Anonymous]

you can afford whatever you want. Being over conservative is different than what you can afford.

[Anonymous]

Anonymous wrote:

Anonymous wrote:But what PPs have said is correct -- everyone's threshold for what percentage of take-home they are willing to spend on mortgage is different.

Right. I would have no problem spending $4900 a month of a 200K HHI for the first year after I purchase the house (the childcare cost is going away in one year, I think?), if it was a house I was happy with. Particularly when there is a large tax benefit to the mortgage during the first few years of the loan and where home-ownership is one component of a long-term savings strategy.

Home ownership provides a place to live. Relying on it as a savings strategy is outdated.

[Anonymous]

Anonymous wrote:We make exactly 200k, have a mortgage payment of $2,400, day care and after care bill of $1500 total, and we would never be comfortable paying more than $2400, much less $4,900. Not if we want to keep maxing out our 401ks and deal with house improvements and live a little.

The $4,900 was [i]including[i] daycare. So you do right now pay more than $2,400.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:But what PPs have said is correct -- everyone's threshold for what percentage of take-home they are willing to spend on mortgage is different.

Right. I would have no problem spending $4900 a month of a 200K HHI for the first year after I purchase the house (the childcare cost is going away in one year, I think?), if it was a house I was happy with. Particularly when there is a large tax benefit to the mortgage during the first few years of the loan and where home-ownership is one component of a long-term savings strategy.

Home ownership provides a place to live. Relying on it as a savings strategy is outdated.

Relying on home ownership as an exclusive savings strategy is outdated. Including it as one component of your savings and tax strategy is common sense.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:But what PPs have said is correct -- everyone's threshold for what percentage of take-home they are willing to spend on mortgage is different.

Right. I would have no problem spending $4900 a month of a 200K HHI for the first year after I purchase the house (the childcare cost is going away in one year, I think?), if it was a house I was happy with. Particularly when there is a large tax benefit to the mortgage during the first few years of the loan and where home-ownership is one component of a long-term savings strategy.

Home ownership provides a place to live. Relying on it as a savings strategy is outdated.

LOL not really. http://www.xchangesolutions.net/retirementwealth.htm

[Anonymous]

I am always fascinated that people consult DCUM for the answer to this question--- and this type of thread appears almost every week. There is no "right" answer here. Figure out what interest rate you will qualify for-- and then calculate how that will translate into a monthly payment for various mortgage levels. Then look at your after-tax monthly income and figure out how you want to allocate it. Everyone is going to have a different set of priorities (travel, eating out, daycare, savings, mortgage, car payments, clothes, medical expenses, etc., etc.). You just have to develop the budget that works and feels right for your family. MS Excel will offer you way more help than any answers here.

[Anonymous]

Anonymous wrote:I am always fascinated that people consult DCUM for the answer to this question--- and this type of thread appears almost every week. There is no "right" answer here. Figure out what interest rate you will qualify for-- and then calculate how that will translate into a monthly payment for various mortgage levels. Then look at your after-tax monthly income and figure out how you want to allocate it. Everyone is going to have a different set of priorities (travel, eating out, daycare, savings, mortgage, car payments, clothes, medical expenses, etc., etc.). You just have to develop the budget that works and feels right for your family. MS Excel will offer you way more help than any answers here.

I think people are just checking to see whether they're totally and completely nuts. If OP said she were trying to buy a $1.5 million house, people would be telling her she's out of her mind. As it stands, she's in the "doable" range, and you can see that based on how divided the responses are.

[Anonymous]

OP how much do you each of you make? I see you have enough saved to make a very sizable down payment, but with out knowing how much you make no one can say if $500,000 is too much for you to afford.

[Anonymous]

Anonymous wrote:OP how much do you each of you make? I see you have enough saved to make a very sizable down payment, but with out knowing how much you make no one can say if $500,000 is too much for you to afford.

They make $200K together - it's in the subject line.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am always fascinated that people consult DCUM for the answer to this question--- and this type of thread appears almost every week. There is no "right" answer here. Figure out what interest rate you will qualify for-- and then calculate how that will translate into a monthly payment for various mortgage levels. Then look at your after-tax monthly income and figure out how you want to allocate it. Everyone is going to have a different set of priorities (travel, eating out, daycare, savings, mortgage, car payments, clothes, medical expenses, etc., etc.). You just have to develop the budget that works and feels right for your family. MS Excel will offer you way more help than any answers here.

I think people are just checking to see whether they're totally and completely nuts. If OP said she were trying to buy a $1.5 million house, people would be telling her she's out of her mind. As it stands, she's in the "doable" range, and you can see that based on how divided the responses are.

Yeah, I totally understand looking at an eye-popping mortgage number and thinking "can I really afford this?" But DCUM is more about fear mongering than reassurance.

[Anonymous]

Anonymous wrote:$1500 in childcare cost but only for another year

So no need for before/aftercare?

[Anonymous]

Anonymous wrote:

Anonymous wrote:$1500 in childcare cost but only for another year

So no need for before/aftercare?

Fortunately no.

[Anonymous]

We are going through the same process, with just about the same HHI. We currently live in Arlington, but we're moving to Potomac. One of us works in VA, the other MD, so we were trying to split the commute. We're looking at $700-725k with 20% down. We have one car payment, and one kid in a nanny share which combined costs $2,000/month (but we don't pay for child care in the summer). We will have a cash cushion when it's all said and done, but it will be hard to add to significantly for a few years. We both have steady and secure jobs.

To be frank it's a little more than I feel comfortable with, but with the areas that make sense for our commute there was nothing desirable for less than that. We both grew up in MoCo and we expect to be in this house for a while. There are definitely areas that we can cut back on if it came to that.

[Anonymous]

Anonymous wrote:We are going through the same process, with just about the same HHI. We currently live in Arlington, but we're moving to Potomac. One of us works in VA, the other MD, so we were trying to split the commute. We're looking at $700-725k with 20% down. We have one car payment, and one kid in a nanny share which combined costs $2,000/month (but we don't pay for child care in the summer). We will have a cash cushion when it's all said and done, but it will be hard to add to significantly for a few years. We both have steady and secure jobs.

To be frank it's a little more than I feel comfortable with, but with the areas that make sense for our commute there was nothing desirable for less than that. We both grew up in MoCo and we expect to be in this house for a while. There are definitely areas that we can cut back on if it came to that.

Have you looked at McLean or West Falls Church?

[Anonymous]

Anonymous wrote:We were in a similar position. Although we could have afforded a small house in Bethesda, we chose to buy in Silver Spring. My kids went to high school in the Northeast Consortium (Springbrook, Blake, Paint Branch) and got into very good colleges. They are now in their early and mid-20s, employed in jobs in their chosen fields, paying their own rent (not living in my basement!) and self supporting. I've talked to them about it and they think they benefitted from going to schools with very diverse populations. They know they benefitted by the fact that we were able to save enough money for their college education that they did not need to take out any loans.

If we had moved to Bethesda (which we seriously considered) I think there would have been more pressure on us to spend money on fancier clothes, technology, extra-curricular activities, etc. as they were growing up. Additionally, we would have paid more for housing. We certainly would have saved less money.

You can get a very good house in the Northeast Consortium area for $500,000. All the high schools offer A.P. classes and everything else your child needs to get into a good college. It is Montgomery County! Top students from these high schools get into Ivy League and similar colleges every year. Yes, there are fewer kids going to the top colleges than from BCC or Walter Johnson, but I think that may make it easier for your kid (assuming he or she is a top student) to stand out and get accepted. There is a limit to the number of students that any college is going to take from a given high school.

My house is almost paid off, my husband and I are maximizing our contributions to our retirement accounts, we have significant savings outside of retirement accounts, and our kids won't have to worry about supporting us when we get old. There are lots of benefits to living below your means. If you haven't read it, I recommend "The Millionaire Nextdoor." The book is somewhat out of date but the basic message still applies. I don't think anyone looking at us and where we live would think that our net worth is as high as it is and that is fine with me.

+1. There are some really nice houses in Silver Spring. As long as your kid is in Honors Classes, Paint Branch/Springbrook are great schools. My friends from PB are all doing really well (engineers, doctors, etc).

There is nothing wrong with living in a townhouse either. It's more affordable.