$1M home on $157k base compensation?-DC

[Anonymous]

OP, can you give us a little more info about your savings, how much you would get from cashing out of your home in Bethesda, and your prospects for a better job? Do you supervise staff now?

[Anonymous]

No way. Big mistake.

[Anonymous]

Anonymous wrote:New developments in DC are at this price point. Currently living in MD and want to move to the city. Some MD new builds are also at the $1M mark. Have $108k for a down payment. Remaining savings after down payment and closing costs will be $128k.

I have been looking at homes since February and it seems the longer I wait the more the interest rates increase and builder incentives/inventory go down. As of now, one builder is offering 5.875% for a 30-year fixed. That’s the best I can find.

Have been looking for a new job. But there’s little in the way of openings that are a substantive increase in comp/level; I’m in tech and the job market has softened incredibly.

I am hoping I can just buy now and my income situation will change in the next year or two.

This is a good way to find yourself in foreclosure.
Purchasing a new home should never be left up to chance or crossing your fingers and hoping for the best.

[Anonymous]

That’s way too much house.

[Anonymous]

Anonymous wrote:OP, can you give us a little more info about your savings, how much you would get from cashing out of your home in Bethesda, and your prospects for a better job? Do you supervise staff now?

I don’t own a home currently.
I currently have $100k in a 401k, $120k in a savings account, and $156k in a brokerage account. So, should have $129k left in savings/brokerage after accounting for the down payment and closing costs. In terms of a new job, the job market for my industry is pretty soft at the moment and I have basically seen ~40% of my comp package (RSUs) take a complete nosedive (value declined ~80% from initial grant). This is why I’m only counting base at this point.

[Anonymous]

From your 401k balance it sounds like you may be either a) somewhat early in your career or b)you haven’t been in a position to save all that much in retirement. Taking on a 1M house likely means saving less for retirement. Side note: hopefully you’re not thinking of liquidating any of your 401k to pay for the house- it’s a penalty on top of additional taxes.

1 m sounds like too much house. What type of house do you need? Are you supporting other family members?

[Anonymous]

Anonymous wrote:From your 401k balance it sounds like you may be either a) somewhat early in your career or b)you haven’t been in a position to save all that much in retirement. Taking on a 1M house likely means saving less for retirement. Side note: hopefully you’re not thinking of liquidating any of your 401k to pay for the house- it’s a penalty on top of additional taxes.

1 m sounds like too much house. What type of house do you need? Are you supporting other family members?

Yes, I am relatively early career. Late 20s. Started maxing out on my 401k around 3 years ago. If I move forward with this purchase, I will continue to max out on 401k contributions; not planning to tamp that down.

No, I won’t be using my 401k for my down payment/closing costs. Just my brokerage/savings accounts.

I am looking for 3-5 bedrooms. There have been some price cuts, so one of the developments I am looking at is now has homes for $950k. There are other developments coming in the $700k-$850k range, but they will not be ready until end of 2024, early 2025. Obviously, I could get something smaller like a 1-2 bedroom but I would have to move in the foreseeable future. If I buy something with more space (3-4 rooms), I see myself staying for a long time.

[Anonymous]

OP, you cannot afford that house, and you do not need to. Rent something, pass on all of the maintenance and headaches to your landlord, put your excess savings in CDs at 5.5%. Your housing dollar will have more purchasing power in a year or two. This is very much like 2007-- and don't listen to all of the realtors on this board who have convinced themselves we're not at the sputtering end of a bubble. Good luck.

[Anonymous]

Anonymous wrote:

Anonymous wrote:From your 401k balance it sounds like you may be either a) somewhat early in your career or b)you haven’t been in a position to save all that much in retirement. Taking on a 1M house likely means saving less for retirement. Side note: hopefully you’re not thinking of liquidating any of your 401k to pay for the house- it’s a penalty on top of additional taxes.

1 m sounds like too much house. What type of house do you need? Are you supporting other family members?

Yes, I am relatively early career. Late 20s. Started maxing out on my 401k around 3 years ago. If I move forward with this purchase, I will continue to max out on 401k contributions; not planning to tamp that down.

No, I won’t be using my 401k for my down payment/closing costs. Just my brokerage/savings accounts.

I am looking for 3-5 bedrooms. There have been some price cuts, so one of the developments I am looking at is now has homes for $950k. There are other developments coming in the $700k-$850k range, but they will not be ready until end of 2024, early 2025. Obviously, I could get something smaller like a 1-2 bedroom but I would have to move in the foreseeable future. If I buy something with more space (3-4 rooms), I see myself staying for a long time.

Why do you need 3-5 bedrooms if you’re single? Get a 1 or 2 bedroom condo and then if you get married, buy something bigger together with your combined incomes.

Even if you had a stable job as a Fed, your salary is not high enough to afford a $1M home. The tech industry is a lot less stable. You can’t pay a $900k mortgage by yourself if you lose a job. I make what you do, and when DH recently quit his job, I was barely able to support us for the 6 months he was unemployed …with a $500K mortgage at 3%.

[Anonymous]

Anonymous wrote:Why do you need 3-5 bedrooms if you’re single? Get a 1 or 2 bedroom condo and then if you get married, buy something bigger together with your combined incomes.

Even if you had a stable job as a Fed, your salary is not high enough to afford a $1M home. The tech industry is a lot less stable. You can’t pay a $900k mortgage by yourself if you lose a job. I make what you do, and when DH recently quit his job, I was barely able to support us for the 6 months he was unemployed …with a $500K mortgage at 3%.

I second this.

When you are single, you should saving money (families and kids are expensive!). Even if had have the money (which you don’t), it likely doesn’t make financial sense to buy a large, expensive home (i.e., much more than you need) if you are single. As mentioned earlier in this thread, you’ve got outlays for property taxes, homeowner’s insurance, homeowner’s association fees, etc. All those can easily add $12K to $15K per year in expenses on a $1M home. That’s money you aren’t saving or investing. There’s also the lost opportunity cost of spending money on a home you don’t need versus gaining a 5-6% return (or more) on savings; real estate in most markets is unlikely to appreciate at the same 5-6% rate under current rate conditions.

[Anonymous]

Did a bank even approve you for that sizable mortgage?

[Anonymous]

I don't see how you can make those numbers work, sorry.

I'd get a roomate and save all you can for a while. Maybe you'll get lucky and interest rates will come down by the time you are ready to buy. And you can start like I did - a town house way, way outside the beltway.

[Anonymous]

Not to sound like your mother, dear, but what do your parents think? We’ve always operated on only buying a house if we can put 20% down to avoid P&I, a big extra monthly expense. If you have an earning spouse you probably would have mentioned it. I agree with the others. Buy a condo if you must ( do you need to report to an office nearby there?) and wait for appreciation gains over 2 years, then maybe jump up the ladder. You’ll spend your weekends doing maintenance and going to free museums. Not dining out and shopping. Nice to dream big, but you will be house-poor and possibly risk forfeiture if anything unforeseen happens. Also don’t know enough-your age, do you buy with a spouse, do you have a rich and generous relative in case you get in a bind?

[Anonymous]

Buying from a builder - you’ll lack the objectivity of a good realtor, who may or may not tell you the truth-you cannot afford this. But they all get their commission all the same. I’m glad you came here for a reality check. I sense you are not getting good advice in your life.

[Anonymous]

Be wary of builder as loaner. Be wary of their “partners” at the bank. It’s in their best interest to sell you the more the merrier. A cahoots pipeline.