How much house can we afford?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:HHI: 200k (1 fed, 1 beltway contractor, both telecommute a few days/week)
Downpayment: 300k
No student loan, car or CC debt. We rent out our condo in Alexandria for an amount that just covers PITI + condo fees, but there's $100k remaining on that mortgage. It's in a location and condition that we could rent it out for another 20 years with minimal issues though, so we're happy to let it ride.

Children aged 5 and 7, but we're coming home from being overseas for 10 years so no idea what that entails for raising kids in DC area. We expect kids to be our second largest spending category after the house, from education, occupational therapies, extracurriculars, camps, tutors, etc. Preference is for strong well-funded public school district over private school (probably can't afford it but also we went to good public schools).

Online I get ranges from $650k to $1.2 million. Any tips?

You already have an investment, I'd consider renting.

It is not about how much house you can afford it is about monthly cash flow. You have a stable government job, which will never make you much money. You have a government contract job which as we all know, is horrible unstable. I'm going to make some assumptions:

200k minus retirement contributions (don't buy a house that makes it so you cannot fully fund retirement, that's just dumb)
164 taxable income
assuming 30% in taxes, net monthly income $9,500
pay yourself 10% at a bare minimum, net income $8,610
Children still need childcare, right? lets go conservative at $1,000/mo and completely forget about the insane expenses in summer and extra curriculars (sports/academic enrichment) if that is not important to you.
New net income of $7,600/mo
utilities, groceries, phones, internet $1,800
New net income before housing $5,800
Transportation...a conservative $500/mo
New Net income before housing $5,300
Do you want to fund college, go on vacation, buy clothes and shoes, furniture, get your haircut professionally, send your kids to camps in the summer (you can always put them in front of the TV for the summer, people do it)?

Personally with this picture, I would not pay a dime over $2,500 in PITI in mortgage. Any more you have to start shaving off retirement, college, savings, and experiences. I would also use as little of that 300K towards the down payment. I would keep an emergency fund (especially having a spouse that is a government contractor!), start or add to the 529 and invest heavily. In your situation, given that you already have an investment, I'd seriously consider not buying.

Where do you get 30% tax? After deductions, OP's effective tax rate will be about 15% at most, and probably less than that. The only people who are going to pay more than 30% tax are those making well over half a million per year. And OP said his kids are 5 and 7, and that they telecommute several days per week. So why $1,000 for childcare and $500 for transportation?

I think with OP's rather large savings of $300k, they could put down 20% on a house in the 800-950 range and save the rest for an emergency fund, college fund, etc.

This poster did not even factor in health insurance, which is not getting any cheaper, and did not factor in camps and a host of other things.

What kind of telework do you do that you don't need childcare for? Do you think teleworkers do not get childcare? I'm REQUIRED by my employer to sign off that my children have childcare while I WFH. I also telework 5 days a week, spend $1,120 in aftercare because ya know, I actually work. And even despite telworking, we still have transportation costs. Very very few people anywhere int he DC area have no transportation costs, be in metro, uber, or personal car-especially people with children.

taking on a mortgage like you suggest at an amount of $3,940-$4,680 on that income is a fools errand.

I'm still trying to find the part where you explain how you got 30% for tax, because that calculation means your numbers are off by more than $2k per month. Some things like insurance will go up, and some things like childcare will disappear. But in any case, if OP splits the difference and puts 20% down on a $875k house, they will have $125k left over for other expenses and savings. That's in addition to the $7,300 or more that's left over according to your numbers (with a more realistic tax calculation).

[Anonymous]

We had $100K down, went to $915K with an income unit that gets us $2200/month. HHI = $275K, I have student loans.

I'm OK with the debt, we are doing well on the cash. Fully invested, have ample emergency funds, plus I am fully vested in my defined benefit pension.

Location, location, location.

[Anonymous]

1) Property taxes are part of PITI, so don't double count in the overall equation
2) 30% is not a terrible estimate for federal + SS + Medicare + state
3) The effective AMT threshold is going up significantly with the new plan making it less of a burden
4) For the OP...I think it's reasonable to assume that once you crunch numbers to "back into" a comfortable monthly payment and then price...you can probably make a reasonable assumption that a 900k house (or 720k mortgage) is going to generate tax savings of $10-12k per year, which you can add back to your monthly housing budget or general budget

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:HHI: 200k (1 fed, 1 beltway contractor, both telecommute a few days/week)
Downpayment: 300k
No student loan, car or CC debt. We rent out our condo in Alexandria for an amount that just covers PITI + condo fees, but there's $100k remaining on that mortgage. It's in a location and condition that we could rent it out for another 20 years with minimal issues though, so we're happy to let it ride.

Children aged 5 and 7, but we're coming home from being overseas for 10 years so no idea what that entails for raising kids in DC area. We expect kids to be our second largest spending category after the house, from education, occupational therapies, extracurriculars, camps, tutors, etc. Preference is for strong well-funded public school district over private school (probably can't afford it but also we went to good public schools).

Online I get ranges from $650k to $1.2 million. Any tips?

You already have an investment, I'd consider renting.

It is not about how much house you can afford it is about monthly cash flow. You have a stable government job, which will never make you much money. You have a government contract job which as we all know, is horrible unstable. I'm going to make some assumptions:

200k minus retirement contributions (don't buy a house that makes it so you cannot fully fund retirement, that's just dumb)
164 taxable income
assuming 30% in taxes, net monthly income $9,500
pay yourself 10% at a bare minimum, net income $8,610
Children still need childcare, right? lets go conservative at $1,000/mo and completely forget about the insane expenses in summer and extra curriculars (sports/academic enrichment) if that is not important to you.
New net income of $7,600/mo
utilities, groceries, phones, internet $1,800
New net income before housing $5,800
Transportation...a conservative $500/mo
New Net income before housing $5,300
Do you want to fund college, go on vacation, buy clothes and shoes, furniture, get your haircut professionally, send your kids to camps in the summer (you can always put them in front of the TV for the summer, people do it)?

Personally with this picture, I would not pay a dime over $2,500 in PITI in mortgage. Any more you have to start shaving off retirement, college, savings, and experiences. I would also use as little of that 300K towards the down payment. I would keep an emergency fund (especially having a spouse that is a government contractor!), start or add to the 529 and invest heavily. In your situation, given that you already have an investment, I'd seriously consider not buying.

Where do you get 30% tax? After deductions, OP's effective tax rate will be about 15% at most, and probably less than that. The only people who are going to pay more than 30% tax are those making well over half a million per year. And OP said his kids are 5 and 7, and that they telecommute several days per week. So why $1,000 for childcare and $500 for transportation?

I think with OP's rather large savings of $300k, they could put down 20% on a house in the 800-950 range and save the rest for an emergency fund, college fund, etc.

This poster did not even factor in health insurance, which is not getting any cheaper, and did not factor in camps and a host of other things.

What kind of telework do you do that you don't need childcare for? Do you think teleworkers do not get childcare? I'm REQUIRED by my employer to sign off that my children have childcare while I WFH. I also telework 5 days a week, spend $1,120 in aftercare because ya know, I actually work. And even despite telworking, we still have transportation costs. Very very few people anywhere int he DC area have no transportation costs, be in metro, uber, or personal car-especially people with children.

taking on a mortgage like you suggest at an amount of $3,940-$4,680 on that income is a fools errand.

I'm still trying to find the part where you explain how you got 30% for tax, because that calculation means your numbers are off by more than $2k per month. Some things like insurance will go up, and some things like childcare will disappear. But in any case, if OP splits the difference and puts 20% down on a $875k house, they will have $125k left over for other expenses and savings. That's in addition to the $7,300 or more that's left over according to your numbers (with a more realistic tax calculation).

NP, but what? I'm making 225k and end up paying about 25% when all is said and done. Thank you AMT. Let's hope Trump's plan changes that!

[Anonymous]

Anonymous wrote:We had $100K down, went to $915K with an income unit that gets us $2200/month. HHI = $275K, I have student loans.

I'm OK with the debt, we are doing well on the cash. Fully invested, have ample emergency funds, plus I am fully vested in my defined benefit pension.

Location, location, location.

You make 25% more than the OP. Your situation is not relevant.