How much can we afford to spend on home?

[Anonymous]

Have out off buying for 12 years because didn't like what I thought I could afford. Am starting to rethink what I can afford.

Wwyd?

Married
Annual income: $280k ($150 DH, $130 me)
Annual income not likely to increase significantly (DH is fed. I might make up to $20k more if promoted)
Pay $1,000 month in student loans. No other debt.
Bank approval for $1.2M home loan
Have toddler and baby on way. Would like one more in 3 years.
Daycare expenses about $25k now, $45 with 2
"On track" with retirement and college savings
Can put $90k down


Ideally would like to spend $700k on house but not finding anything desireable.

$850k would get us nice house in good school district.

Are we setting ourselves us for regret?

[Anonymous]

You can afford way more than that. (The $700-850 you laid out) Talk to a bank, not the internet.

[Anonymous]

With your hhi, I would have not qualms with 850. Why does that amount bother you? You can easily afford the mortgage payment.

[Anonymous]

Get a $950k house in falls church.

But why is daycare so expensive?

[Anonymous]

Any chance you're going to want to go part-time after #3?

[Anonymous]

How old are you -- that matters a lot. It's not just about what you can afford today -- it's about having your house paid off in retirement.

It seems odd that you only have 90K saved based on your salary. Our salary is 80K less than yours, and we save $60K/yr. outside of 401k.

could you figure out what your mortgage payment would be (with PMI and property taxes and insurance) and then start putting that much every month (minus your current rent payment) in savings? If you do that for 4+ mos., that will tell you if you can live on that level of mortgage.

[Anonymous]

Anonymous wrote:Any chance you're going to want to go part-time after #3?

Same thing I'm wondering. Or would you want to just quit working for a while? That would change the game completely - then you'd be living on $150K, and then you couldn't afford more than maybe a $450K mortgage.

[Anonymous]

OP here.

To answer your questions:

I am 34. DH is 39.
Would like to only put down 90k but we do have more if needed.
I don't think I'll ever want to stay home full time but I may want a less stressful/part time job. In my field though, those aren't plentiful.

We are both very risk adverse and like our apt so we scares ourselves into not doing anything housing wise.

[Anonymous]

Seems like sinking a lot of debt into a $900K+ house would be a really bad investment idea for you. It's like going from zero to 70 mph. Why not find a middle ground that will put a lot less stress on you. Live the good life, not the "house poor" life!

[Anonymous]

Anonymous wrote:OP here.

To answer your questions:

I am 34. DH is 39.
Would like to only put down 90k but we do have more if needed.
I don't think I'll ever want to stay home full time but I may want a less stressful/part time job. In my field though, those aren't plentiful.

We are both very risk adverse and like our apt so we scares ourselves into not doing anything housing wise.

But with that HHI you are leaving a huge amount of money on the table (for the government) by renting. We have the same HHI and a considerably more expensive house than you are looking at (although we also had 20% down). We cannot offer NOT to own.

[Anonymous]

$280k here too. We paid $850 for our place and put down $500. We then took $200 of that a year later out to remodel and expand a bit when we (unexpectedly) had a 2nd. That's a comfortable amount and still allows us to save well. At the time our income was lower and we ended up stressed over finances. Don't make that mistake.

The thing about home ownership - especially ownership in the $800's is that the houses often need work, even where you don't expect it. In the few years we've been here we've had our roof spring two leaks, a window break when I hit by accident, the exterior water spout freeze and break, our ac unit died, we discovered poor insulation in the attic, our sink faucet broke off when te kids played with it too much, our chimney needed work, we had a shared fence break when a tree sort of pushed it over, we had to replace the 1980s w-d, the garage door was in bad shape and had to be repaired, our front door mortise lock started acting up, etc. There's always something. Most of these were $200 issues - and some were just diy fixes - but they certainly add up. Be careful overextending.

We are very happy now with our modest (by dc standards) mortgage in the mid 500s and can do things friends who live in bigger houses can't (vacations, dinner out whenever we want etc).

[Anonymous]

I would go for a bigger house. But the biggest house you can comfortably afford. This was one of the main regrets we had with our previous homes. The buying just-good-enough mentality is wasteful, especially for a growing family.

[Anonymous]

I disagree. Don't go over $800. But really, the issue is your take home v. The payments. Give us those numbers and we can help better. Also, are you looking in a school district that will likely keep your kids out of private?

[Anonymous]

Put down $100k and get a $900k house at historically low interest rates. The $100k will give you a far greater return than any other investment as the house appreciates, even if a low amount.

No brainer.

[Anonymous]

Make sure you buy in a school district that you are comfortable, really comfortable, with the public schools