Buying home - What can we afford with our current savings and salary?

[Anonymous]

I just want to hear other people's opinion because I am not sure what would be the best course of action, so suggestion is deeply appreciated.

Both of us work FT (one in downtown DC) and HHI is around 130K.
We have 1 child and daycare is $1200/month. We'd like to try for a 2nd child next year (this will increase our childcare)
Current liquid assets 250K (all in the low-interest saving account).
Rent is 2100/month.

The catch is one of us cannot apply for mortgage yet because it is not a salarlied job (free lance/small business owner, started just this year).
We'd have to wait until two years worth of federal tax return is filed. Then we (i.e., combined salary) can potentially apply for a bigger mortgage.
At this time, we will not know for sure the HHI will drastically increase or decrease or stay the same.
With a single salary, pre-approved (after checking all the finances) number is 600K max.

We'd like to avoid long commute, but everything inside the beltway near the metro station is so sky high (SFH that is), so our option appears to be limited to condo!

Would you go for purcahsing a house (SFH or condo) now or wait until how the small business develops in a few year time to buy?

If not purchasing the house now, what would be the good place to keep our 250K? Sitting in a low-interest account doesn't seem a good idea, but not sure where.

[Anonymous]

OP here.
Forgot to include:

No student loan:
No substantial credit card debt: just monthly grocery, gas, etc.
No car loan:
Basically no debt.

But, No family money.

[Anonymous]

Take the time to really research where you want to and can afford to live. You can get a single family home, but you might have to bus or drive to the metro (or flex your schedule and drive at a time to avoid rush hour).

Spend time on Redfin and looking at morning and evening traffic maps and using google maps' transit feature to test addresses in areas you might like. Go to some open houses and get a feel for neighborhoods. This might all take a few months of going places on weekends, thinking about how much space you want, schools. See what you can find at $600,000 vs 650 or 700. You will work your way to an answer.

You can get neighborhood suggestions here. Silver Spring, Takoma Park, and parts of Falls Church all come to mind.

[Anonymous]

Given that you aren't sure about the business income and you are thinking about having two in daycare, I'd stick with the 600K number. Find a small house (or TH) in a good school district without crappy commutes and if the business takes off you can "upgrade" your house in another 5 years.

[Anonymous]

how old is your one child? i.e. when will daycare costs ease for that kiddo?

[Anonymous]

You could get a really nice townhouse for less than $600,000. In fact, if I were you, I wouldn't take out a mortgage for more than $300,000 based on your salary (and that is on the high side). If you use $150,000 from your savings, it will give you about $450,000 to buy a place with. You could buy a nice townhouse.

I keep my cash in a capital one savings account, which makes $0.75%. It's pathetic, but better than a regular savings account.

[Anonymous]

If it were me, I'd continue to rent for another couple years. The second child will increase more than just childcare costs, and as the first one gets older you might have more insight into schools, etc.

[Anonymous]

OP here.
My child is 14 months old, so will not start kindergarten for another 4 years.
Because of this, we don't necessary need to stay in the good school area just yet.
Should we hold off our house search and SAVE SAVE SAVE?
Or, buy something we can afford in the good school area now (plus the somewhat convenient area for commute)?

Can't make up our mind....

[Anonymous]

How about College Park? This looks nice for $465 and is walkable to the metro.

http://www.homesnap.com/MD/College-Park/6908-Carleton-Terrace

[Anonymous]

Depending on your age, I'd hold off on the second kid till the first is reading for free pre k so you Bly have one day care payment. Or you could get a nanny and have the nanny pick the four year old up after school to say on aftercare prices. And you could also stay in your smaller place.

Of course if you are over 34 or so and defn want a second child, this would be a bad idea.

[Anonymous]

OP here.
Thanks for the suggestion.
Forgot to include in the original post that I work in downtown DC, but my partner work in Fairfax county, Virginia (currently outside beltway near Tysons corner).
So, ideally we wish to stay VA side.
Also, because of age (AMA, over 35), would not want to delay for 2nd child.
Would have been nicer if we could just deal with daycare cost one at a time, but unfortunately cannot do that with not-so-youngish age.

SAVE?....

[Anonymous]

This is a tough one because you have such a great down payment and mortgage rates are relatively low. That said, two in day care and a new small business can lead to a ton of financial stress. I think I would see what we could afford on the salary of the person who has the secure job and determine if it is something we like. If there isn't anything out there I would continue to save.

[Anonymous]

Anonymous wrote:You could get a really nice townhouse for less than $600,000. In fact, if I were you, I wouldn't take out a mortgage for more than $300,000 based on your salary (and that is on the high side). If you use $150,000 from your savings, it will give you about $450,000 to buy a place with. You could buy a nice townhouse.

I keep my cash in a capital one savings account, which makes $0.75%. It's pathetic, but better than a regular savings account.

+1 good advice. OP we are in a similar financial situation (minus the large down payment), and took out a 300K mortgage on my salary alone (DH had also been in small business less than 2 years). We are able to comfortably pay our mortgage, meet our monthly expenses, and save. I didn't go for a townhouse though, as I didn't want to be stuck with association fees. You can still get a modest SFH in the area for 300-450K, you just have to do your research and be willing to sacrifice size for convenience and affordability.

[Anonymous]

We took a $400k mortgage on $300k HHI. Not bragging just giving you a data point.

[Anonymous]

OP here.

Thank you all for your varieties of suggestions.
Our concern is "uncertainty" of how this small business evolve into in the future (Financially, that is).

And, this is the major reason stopping us to take a plunge, next to our "hopefully 2nd child".

We saved sooo much because we wanted to reduce the monthly mortgage payment (keep it under $1700 if possible).

Number-wise, we think it is stretching but probably doable....
However, thinking about this "small business" endeavor.......
It's all comes down to this at this point....
Mentally, we may not be ready to take a plunge yet...