am i insane for considering this? 820k mortgage on a 240k income

[Anonymous]

It's a tad high but it's doable. You're not insane for considering it. If it doesn't work you can sell the house and downsize. There is very little risk here.

[Anonymous]

Yes, you can do it. Just budget. This area has a high cost of living.

[Anonymous]

We're at 760 mortgage on a $300k salary but we have high childcare costs ($2k/mo) and it feels ever so slightly tight. We could be saving more by doing less takeout but it's honestly tiring trying to work full time, cook, and take care of the kids. If you can manage, I think it is doable. Just make sure you have enough left over for an emergency fund (6 months worth of expenses) in case shit happens.

[Anonymous]

I also don't get the $3600 PITI comments here. At that loan amount, PITI would certainly be mid $4k.

[Anonymous]

Anonymous wrote:Eh, we did 800K (1M house with 20% down) on 250K/HHI. Not even an issue financially, we are able to save, pay for daycare, and travel. So we owe money on 3.2x of gross.

I mean we don't need a car (walk/bike/metro) and employers are super generous with retirement matching, so maybe that gave us the leeway? We're 3 years into this now and are feeling pretty good about our choices. Current PITI is 3500.

How is a $3500 PITI on an $800k mortgage possible? What is the breakdown on that (interest rate/taxes/insurance?). Some of these posted PITIs seem super low, and this is coming from someone with a 2.75% mortgage rate.

[Anonymous]

Anonymous wrote:Yes, you can do it. Just budget. This area has a high cost of living.

We do this. $250k HHI and $820k mortgage. It's fine!

[Anonymous]

I think you are looking at PITI around $4.5K. 3% rate on jumbo = $3.4K + $160 insurance + 900 property tax (1.1% assumed tax rate) for a total of $4,465.

By comparison, we have a similar HHI but we have two kids in full time daycare for a total of $2.7K per month and a PITI of $3K per month plus we have a $1K per month student loan payment combined (no car payment which I see you have).

We max retirements, do backdoor Roths and contribute $1K to 529s per month.

You probably can do this but what matters here is how much money you guys spend per month. Some DCUM folks live very lavish lifestyles and spend a lot per month, others like me don't. You really need to think about what you currently spend per month and how that fits into what your new budget would look like with the higher mortgage. I would also take a closer look at what "limited upside" means in your situation. Two GS-15s at the bottom of the step ladder is different situation than two maxed out GS-12s.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Eh, we did 800K (1M house with 20% down) on 250K/HHI. Not even an issue financially, we are able to save, pay for daycare, and travel. So we owe money on 3.2x of gross.

I mean we don't need a car (walk/bike/metro) and employers are super generous with retirement matching, so maybe that gave us the leeway? We're 3 years into this now and are feeling pretty good about our choices. Current PITI is 3500.

How is a $3500 PITI on an $800k mortgage possible? What is the breakdown on that (interest rate/taxes/insurance?). Some of these posted PITIs seem super low, and this is coming from someone with a 2.75% mortgage rate.

Agree. According to online calculators, the mortgage payments alone - not counting property taxes or insurance - for 30 year loan of $800k with a 2.5% interest rate is $3,160. I'd add AT LEAST $1k of property taxes and home insurance on top of that

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eh, we did 800K (1M house with 20% down) on 250K/HHI. Not even an issue financially, we are able to save, pay for daycare, and travel. So we owe money on 3.2x of gross.

I mean we don't need a car (walk/bike/metro) and employers are super generous with retirement matching, so maybe that gave us the leeway? We're 3 years into this now and are feeling pretty good about our choices. Current PITI is 3500.

How is a $3500 PITI on an $800k mortgage possible? What is the breakdown on that (interest rate/taxes/insurance?). Some of these posted PITIs seem super low, and this is coming from someone with a 2.75% mortgage rate.

Agree. According to online calculators, the mortgage payments alone - not counting property taxes or insurance - for 30 year loan of $800k with a 2.5% interest rate is $3,160. I'd add AT LEAST $1k of property taxes and home insurance on top of that

Our mortgage is $820k and our PITI is $4900, but that's property taxes on a $1.6m house, so I imagine a little less would be right. We're at 2.75%.

[Anonymous]

Anonymous wrote:What about emergency funds, college tuition, retirement savings, vacations, preparing for sandwich years? Can you afford a layoff/furlough, medical diagnosis, if your parents have dementia/healthcare needs? If your car is totaled tomorrow, how will you swing it?

+1 Or if your car breaks down, or you unexpectedly need a roof, or your kid really wants to do an expensive extracurricular activity. Risk is a personal decision but I think you're cutting it really close to the edge and setting yourself up for alot of stress, or failure.

[Anonymous]

Why lock yourselves into the high-end housing costs and thereby lock yourselves out of all the other decisions you might want to make over the next 20+ years?

It's the equivalent of signing a contract to eat at Ruth's Cris every night. Sure, it'll solve your daily need for food, but you could also do it at a much lower price day after day after day.

Why lock in the Ruth's Cris price point of housing? You don't need to buy the McDonald's version of housing, but maybe shoot for something that is a better match for the needs of a 3-person family.

A better value for 3 people is not spending $1 million on housing needs.

It's these kinds of "big" financial decisions that lock you into other financial outcomes later on. No financial decision can be made in isolation. If you buy the high end version of housing, then you can't also have X, Y, Z.

I suggest you think about financial decisions in a more global sense. "Your Money Ratios" Charles Farrell.

[Anonymous]

Ok here are our stats - close, but not exact -

240K income with a 780K loan @ 30 years/2.25% from last Dec (we got a relationship discount since we have 250K in a brokerage account - would be 2.5 otherwise).

PI: 2983
Tax: 550
Insurance: 100
PITI: 3600

Take Home: 10.5K/mo (after max 401k and 100% of medical/transport, and some daycare costs).

Average budget:
Other housing (sinking fund+maintenance/utilities): 470 (we get about 200/mo in SREC offsets by living in DC)
Daycare (outside the pre-tax FSA): 700
Other kid stuff+college fund: 800
Car maintenance/insurance/gas (metro/included in payroll): 100
Food: 1200
Shopping: 450
Fun (tickets/vacation/etc): 1600
Extra Brokerage/Donations: 1500

Overall, seems fine. We spend about 20K/year on vacations + entertainment and still save (max 401K+Match+Brokerage) = 90K/year,

[Anonymous]

Anonymous wrote:

Anonymous wrote:What about emergency funds, college tuition, retirement savings, vacations, preparing for sandwich years? Can you afford a layoff/furlough, medical diagnosis, if your parents have dementia/healthcare needs? If your car is totaled tomorrow, how will you swing it?

+1 Or if your car breaks down, or you unexpectedly need a roof, or your kid really wants to do an expensive extracurricular activity. Risk is a personal decision but I think you're cutting it really close to the edge and setting yourself up for alot of stress, or failure.

Seriously, does everyone really rely on cars for everything here? If you are paying that much for a house, I'd assume you are next to work/transport/school. Otherwise, why pay 1M?

[Anonymous]

Anonymous wrote:

Anonymous wrote:That mortgage is 3.4x your annual income.

I think it's totally fine. It's actually a lot lower than some areas of the country where people typically buy 5x their income (SF, LA, San Diego, Seattle).

We did an 815K mortgage on $260K when we bought our house in 2017. Our HHI is now near $400K and will eventually top out at $500K. Very stable jobs.

I will add that our house has a basement income unit and we were pulling in $25K/year for the first three years of our mortgage. It helped us immensely. Our net housing outlay each month was $2400 once we factored in the rental income.

If this house has a rentable unit, you are absolutely fine to pay this much.

"I should add . . . " Jesus Christ, PP.

[Anonymous]

Anonymous wrote:So PITI of about 3600/mo or 43K/yearly? Or 18% of gross income?000

Doesn't seem to be a problem. PITI to income is the only ratio that matters. i.e. interest rates matter!

Interest+Payments on $820K principal today at 30years/2.5% is $2,963/mo.

The same payment on 30year/6.5% - which is what is was in 2008 - would correspond to a $475K loan.

If they had said they were getting a 475K mortgage on a 240 income, nobody would bat an eye.

Depends on taxes. I have a $750k loan with a 2.625% interest rate, and our PITI is just over $4k/month. The Escrow portion of that is ~$1000/month, though.