Mortgage payment on 175 HHI

[Anonymous]

Hi Everyone,

Just wondering if we are over extending ourselves on a home that we are planning to build (9 month build time) in the ideal location for us. Mortgage payment would be $3250 PITI (550k home with 27% down).

Wife and I are 28 and no kids (plan to have kids in the near future)
Current Total savings -
Retirement savings - 125k
Non Retirement savings - 150k

Current Monthly savings -
Retirement Savings - $1500 for me / $1250 wife (includes company match for both)
Non-Retirement savings - $3500

Expect a upward trajectory in our HHI. Since we are planning on having kids in the near future, there will be childcare expenses (daycare+food+misc) we have to account for. This is my main concern - will we be able to afford our dream home and start a family in this home. Appreciate the help.

[Anonymous]

Sorry I left out that our current mortgage is $1700 PITI.

[Anonymous]

What are you currently earning?

[Anonymous]

175k HHI

[Anonymous]

We have the same HHI and similar savings, and pay for daycare for 1 toddler (1300/month). But we also have a car payment, student loan payments, and commuting expenses. Our mortgage is $2500 PITI; we save as aggressively as we can and don't have much disposable income, but I feel comfortable.

Would your down payment come out of your current non-retirement savings, or does that number reflect what you'd have left? If you're currently saving $3500 a month and your current mortgage is $1700 and nothing else changes after you buy, wouldn't you just be saving $1800 instead? It sounds doable.

[Anonymous]

PP above, just wanted to add - if/when the time comes for daycare, you can always pay a year's tuition up front (usually there's a discount) rather than weekly/monthly. This is what we did the first year. It's just optics, but psychologically we felt less "pinched" when we were able to take a chunk from savings and replenish it throughout the year, rather than have a large amount of each paycheck earmarked for the daycare expense.

[Anonymous]

We have that HHI and we currently have a $2800 mortgage. It's very easy for us to manage and we're still saving 4k a month. No childcare though. We're hoping to lower it with our next mortgage though.

[Anonymous]

The down payment would come from our current savings. Since we plan on building our home we would have 9 more months to create a reserve (30K+) after we deplete most of our non-retirement funds.

I'm just worried about the uncertainty of having kids and all the expenses related to that.

[Anonymous]

Anonymous wrote:The down payment would come from our current savings. Since we plan on building our home we would have 9 more months to create a reserve (30K+) after we deplete most of our non-retirement funds.

I'm just worried about the uncertainty of having kids and all the expenses related to that.

Childcare is expensive depending on what you want to do. A nanny around here can run $3000-$4000/month. There are also additional expenses of food, clothing, toys, doctor's visits, etc. with kids. I think that mortgage payment is high for your income. We have a similar payment and make about $250,000/year. Our childcare expenses ended 2 years ago since our kids are in full time school. We are comfortable, but are definitely not rolling in money with all our expenses each month.

[Anonymous]

If you are in the DMV and plan to use a high-quality day care center, I'd budget $25K/year per child for the first few years.

[Anonymous]

Anonymous wrote:If you are in the DMV and plan to use a high-quality day care center, I'd budget $25K/year per child for the first few years.

We have a wonderful daycare center (church-based), and we're paying 14k a year. While I don't dispute that there's plenty of places that DO charge 2k/month, the best course of action would be to research centers in the area where you're building your home. I assume if you're looking at a new build for 550k, you're not looking in Arlington or a close-in DMV suburb, and costs of daycare will probably reflect that. But I could be wrong!

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you are in the DMV and plan to use a high-quality day care center, I'd budget $25K/year per child for the first few years.

We have a wonderful daycare center (church-based), and we're paying 14k a year. While I don't dispute that there's plenty of places that DO charge 2k/month, the best course of action would be to research centers in the area where you're building your home. I assume if you're looking at a new build for 550k, you're not looking in Arlington or a close-in DMV suburb, and costs of daycare will probably reflect that. But I could be wrong!

AND make sure you can get a space in the daycares. For instance, there are many daycares in the District that charge $1200/month. However, most have 1-2 year waitlists (rendering them kind of irrelevant unless you call at just the right moment or just the right kids happen to age out when you need a spot). So people end up paying more for nannies or nanny shares.

[Anonymous]

OP what interest rate is that? Sounds high for 550k and 27% down.

[Anonymous]

Ours is 2500 with 1900 in daycare costs. Slightly higher HHI but not much upside potential. I'd go a little lower if you're going to have a kid soon.

[Anonymous]

184k hhi here with 3250 piti and 1600 in daycare. No issues.