Won the bid on a 900k house and now I feel sick

[Anonymous]

No house is worth being house poor.

No figures are set in stone either. Property taxes go up, home insurance goes up, utilities go up, some years escrow goes up. If you can't comfortably use one paycheck to pay home expenses and live on the other, that home will become a noose around your neck. Financial stress not only makes you feel sick 24/7 but it can and will kill a marriage. Quick. Have seen it many times.

Cover all your bases and the what ifs, have backup plans in place just in case then you can breathe. Keep in mind buying is the easy part. Maintaining a home is where the trouble starts. If you don't have money to maintain during your mortgage years, you're fucked.

Good luck.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

We are buying an 850k on 240k HHI. It's not a stretch at all for us. We are still able to max out retirement. I think the sticker shock is normal but you will get used to it!

this is our income, but we can't do this--are you putting a lot down?. We have not insignificant child care and medical costs (equal to about 3200k/month) so maybe that's the difference, and two car payments (500/month total) but no other loans. We are looking in the 650 range, with 150 down.

We are putting 10% down. We don't have any medical, childcare, car or other costs or debts.

Omg go away

[Anonymous]

Anonymous wrote:Yeah,it might be tough sledding for a bit, but that 900000 will soon be 1.7 million. This is Arlington, and prices are never going down again. So you made a reasonable move.

How old are you? Do you really think real estate only ever appreciates?

[Anonymous]

OP-- what do you love about this house? And does it need renos of kitchen or baths? If not, I bet you can swing it. And if you can't, wait a couple of years, and sell. We bought a house last year for way less than that, and we were still freaked out. It's a big move. Some freak-out is probably normal. Congrats!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

We are buying an 850k on 240k HHI. It's not a stretch at all for us. We are still able to max out retirement. I think the sticker shock is normal but you will get used to it!

this is our income, but we can't do this--are you putting a lot down?. We have not insignificant child care and medical costs (equal to about 3200k/month) so maybe that's the difference, and two car payments (500/month total) but no other loans. We are looking in the 650 range, with 150 down.

We are putting 10% down. We don't have any medical, childcare, car or other costs or debts.

Omg go away

Why?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yeah,it might be tough sledding for a bit, but that 900000 will soon be 1.7 million. This is Arlington, and prices are never going down again. So you made a reasonable move.

How old are you? Do you really think real estate only ever appreciates?

Yup. Over time. Buy land. They ain't making any more of it. and there's no land left in Arlington.

[Anonymous]

It's just cold feet. You will be okay.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Is this the colonial that was about 3100 sq ft? If so, you did great to pull the trigger. I've been watching the market for 10 months and that one was almost a steal for the space. We earn 210k and I understand being freaked out about the mortgage size, our current mortgage is less than $1k, and we were looking at under $860k, but searching up to $900k. That 900k house was really worth it.

Or if it was that other $900k house with the addition painted blue from the outside, that one had loads of character and charm and such a large backyard for that price range. I've looked long amd those two that came up the past month have been in the top 3 best at that price for 10 months.

INVU! Adjusting might take some effort but enjoy the house! You got a really good price.

In a worst case scenario rent out a room for a while until your incomes go up slightly or as needed.

Agree with this.. In fact, if money's tight now. I recommend doing this until you build a comfortable cushion.

Can you set up the basement as a separate apartment? You won't need much..

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Here's the situation- my husband and I are all cramped up in a two bedroom one bath condo in Arlington with two kids. We have been saving every dime living here. Our goal/dream has been to buy a house in north Arlington. We have been looking and looking recently. My oldest is 4 and ideally we want to be some where in the next year. Unfortunately, all of the homes in north Arlington between 8-850 are okay but some are still kind of small. My husband saw an awesome house for 900 and said I think we can do this. What?? We both do okay---220k combined! But, on paper it does appear we might be able to do this. we put in a bid and won. I do love the house. It's amazing--but now I'm totally freaking out. A mortgage of 4,100 seems huge. We have done budget after budget and it will be tight with childcare. If we back out now we loose the earnest deposit. Do real people do this and make it work? I'm so scared of making a bad financial decision.

Sorry OP there is no clear cut answer : you need to make and give us a full detailed monthly budget and We will be able to tell you if it is workable. Personally I would consider the following.
- you need to be pretty secure in your jobs and/or be in a type of profession that is in well in demand with stable or growing salaries
- you need to have an emergency fund equal to 6 months of expenses (to at least give you the time to sell your house if all goes to hell)
- you need your monthly budget to allow you to max out your 401K, if not now at least when the childcare costs stat declining a little (but everyone will tell you they never decline as much as you hope)
-you need to be able to spend 1% of home on repairs (would be 8-9000$ a year for you, to put on a separate account because when something important breaks it is usually a big lump sum)
- you need to have the funds to make your house enjoyable (furniture, paint, cosmetic updates can be expensive), I budgeted 35K for my 625k home.
- to be happy you need to double check if it fits your lifestyle : if you are a homebody happy to enjoin time at home and not interesting in splurging on plane tickets or fancy diners regularly you'll be fine. If not you'll feel house poor.

4100K if your income is secure, you know how to control your budget and you don't mind not having a lot of disposable income to splurge on other things, is not necessarily a bad idea.

I wondered myself if I didn't stretch enough (180k HHI, borrowed 425K, monthly payment 2500 including taxes and home insurance which is less then our previous rent), but we still had students debts, 2 kids barely starting years of expensive day care and a habit of 2 international trips a year...in our case 2500K is probably already stretching it.

FWIW, I think this is a bit conservative. You do need a plan for emergencies and selling your house-- it doesn't have to be 6 months expenses in a savings account. You also need a plan for house expenses and be able to afford both small and large unexpected expenses, but in 20+ years of homeownership there is no way that adds up to 1% a year for me ($9k is more than you'd spend for a new boiler or AC unit, and maybe what you'd spend for a new roof, so while you should be able to cover that it's not an every year type thing). And of course, nothing says you need to spend 35k on paint and furnishings when you move in.

If it's doable with childcare then it should be comfortable without childcare (even with camps and before/aftercare, I think that was a savings of about $1000 a month for us).

I am the previous PP, you are probably right. I am a first time homeowner and have been scared by stories about the cost of homeownership. At 32 I've been renting all this time so no clue what repairs cost, we decided to use the 1% we were reading everywhere, thinking that if we don't use it it will finance the upgrades we may need (kitchen for ex or finish the attic to add a room when kids grow up for ex. We were quoted 75k if we want to raise the roof, which would be awesome).

Regarding the 35K, that s the cost of moving from small rental to a modest 1600sqft if we want to do everything we dream of (including change the kitchen asap-even for a modest one, the floors of our walk out basement and add real smart durable closet space), we probably won't spend all that but given that we have old ikea furniture for one small living room and we now need to furnish also a family room and a sun room, there is no way we won't need at least 10K.

And after visiting a lot of homes this year, most of them bought in 2007-2008, I noticed one clear thing: it showed when people bought at top of the market and were house poor (and this year is also a top of the market/stretch tendency), because in 8 years they were just able to do the basic repairs (roof, ac..) but the furniture still looked cheap and mismatched even in "nice" homes. Some basic improvements (finishing an almost finished basement) hadn't been done, window treatment was cheap etc.. No big deal of course, and I don't plan to have a house that look like a pottery barn catalogue, but i prefer to have a smaller house well decorated than a bigger space with no cash left to put the lights I really want.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Here's the situation- my husband and I are all cramped up in a two bedroom one bath condo in Arlington with two kids. We have been saving every dime living here. Our goal/dream has been to buy a house in north Arlington. We have been looking and looking recently. My oldest is 4 and ideally we want to be some where in the next year. Unfortunately, all of the homes in north Arlington between 8-850 are okay but some are still kind of small. My husband saw an awesome house for 900 and said I think we can do this. What?? We both do okay---220k combined! But, on paper it does appear we might be able to do this. we put in a bid and won. I do love the house. It's amazing--but now I'm totally freaking out. A mortgage of 4,100 seems huge. We have done budget after budget and it will be tight with childcare. If we back out now we loose the earnest deposit. Do real people do this and make it work? I'm so scared of making a bad financial decision.

Sorry OP there is no clear cut answer : you need to make and give us a full detailed monthly budget and We will be able to tell you if it is workable. Personally I would consider the following.
- you need to be pretty secure in your jobs and/or be in a type of profession that is in well in demand with stable or growing salaries
- you need to have an emergency fund equal to 6 months of expenses (to at least give you the time to sell your house if all goes to hell)
- you need your monthly budget to allow you to max out your 401K, if not now at least when the childcare costs stat declining a little (but everyone will tell you they never decline as much as you hope)
-you need to be able to spend 1% of home on repairs (would be 8-9000$ a year for you, to put on a separate account because when something important breaks it is usually a big lump sum)
- you need to have the funds to make your house enjoyable (furniture, paint, cosmetic updates can be expensive), I budgeted 35K for my 625k home.
- to be happy you need to double check if it fits your lifestyle : if you are a homebody happy to enjoin time at home and not interesting in splurging on plane tickets or fancy diners regularly you'll be fine. If not you'll feel house poor.

4100K if your income is secure, you know how to control your budget and you don't mind not having a lot of disposable income to splurge on other things, is not necessarily a bad idea.

I wondered myself if I didn't stretch enough (180k HHI, borrowed 425K, monthly payment 2500 including taxes and home insurance which is less then our previous rent), but we still had students debts, 2 kids barely starting years of expensive day care and a habit of 2 international trips a year...in our case 2500K is probably already stretching it.

FWIW, I think this is a bit conservative. You do need a plan for emergencies and selling your house-- it doesn't have to be 6 months expenses in a savings account. You also need a plan for house expenses and be able to afford both small and large unexpected expenses, but in 20+ years of homeownership there is no way that adds up to 1% a year for me ($9k is more than you'd spend for a new boiler or AC unit, and maybe what you'd spend for a new roof, so while you should be able to cover that it's not an every year type thing). And of course, nothing says you need to spend 35k on paint and furnishings when you move in.

If it's doable with childcare then it should be comfortable without childcare (even with camps and before/aftercare, I think that was a savings of about $1000 a month for us).

I am the previous PP, you are probably right. I am a first time homeowner and have been scared by stories about the cost of homeownership. At 32 I've been renting all this time so no clue what repairs cost, we decided to use the 1% we were reading everywhere, thinking that if we don't use it it will finance the upgrades we may need (kitchen for ex or finish the attic to add a room when kids grow up for ex. We were quoted 75k if we want to raise the roof, which would be awesome).

Regarding the 35K, that s the cost of moving from small rental to a modest 1600sqft if we want to do everything we dream of (including change the kitchen asap-even for a modest one, the floors of our walk out basement and add real smart durable closet space), we probably won't spend all that but given that we have old ikea furniture for one small living room and we now need to furnish also a family room and a sun room, there is no way we won't need at least 10K.

And after visiting a lot of homes this year, most of them bought in 2007-2008, I noticed one clear thing: it showed when people bought at top of the market and were house poor (and this year is also a top of the market/stretch tendency), because in 8 years they were just able to do the basic repairs (roof, ac..) but the furniture still looked cheap and mismatched even in "nice" homes. Some basic improvements (finishing an almost finished basement) hadn't been done, window treatment was cheap etc.. No big deal of course, and I don't plan to have a house that look like a pottery barn catalogue, but i prefer to have a smaller house well decorated than a bigger space with no cash left to put the lights I really want.

One last thing OP: after all this I did get cold feet.. I think that's also a perfectly normal feeling, after a month I still wake up wondering if I didn't make a horrible costly choice that will make us bankrupt if one of us loses our job... And at the same time in this area if you have 80/150k type of salaries it is really hard to buy a forever home that is not a bit of a stretch..

[Anonymous]

OP - I have your HHI, house price and mortgage (PITI). It is tight but worth it. We still save for retirement, college and go on vacation.

We have a $48K emergency fund that will cover our mortgage for one year and we can live on my (lower) income alone should anything happen with my husband's job (not likely). My job is extremely secure. That was my only stipulation.

[Anonymous]

Anonymous wrote:When you do you budget, don't forget that you will also have to pay a little less than 1K per month in escrow for taxes and home insurance, so you will really be at $5K monthly for home payments.

You can do this, but you will be house poor. You may have to think of ways to control costs (such as getting an au pair). But this is the reality of living in DC/Arlington/Bethesda/Mclean now. And other posters are right - homes are not getting cheaper. Even if homes don't go up in price, homes in this range are getting expanded or torn down for bigger homes.

What you have to worry about now is qualifying for the loan. There are higher qualification requirements for jumbo loans, and you are very much on the limit for income, unless you have a lot of savings (putting down more than 20%). In my opinion, you may have a hard time getting a mortgage for more than $700K, so you will have to bring at least $230K to closing (about 25%).

I just went through the jumbo loan process and actually found it easier than the conventional loan process. The debt to income ratio allowances were insanely high and so we fell very comfortably below the limits with similar stats to OP. We did bring 25% to closing, but we were also approved while keeping for first home (which we did end up selling).

[Anonymous]

Anonymous wrote:Anonymous
Are we happy being frugal? It is what it is to survive inside the beltway. Should we have bought an 750-800 house, that is where I am . And, stay there for a few years and then move on.

I'm as cautious as they come, and I think it's much better to stretch a little and be able to stay put -- buying and moving are expensive. It's almost never going to be worth it (financially -- life may make it necessary) to move after a few years.

I go nuts when I'm watching TV and a family is proposing to sell a house for, say, $700K and buy a new one for $775K. That kind of change benefits realtors plenty but the family not much.

[Anonymous]

It is hard not to panic about a QUARTER MILLION DOLLAR in debt so it is normal to get cold feet but go ahead with the purchase you will be fine.

My husband and I make slightly less HHI than you (210K) but we did get the same mortgage 3 years ago (we were making less but no kids at the time). We max our 401Ks (36K) and after all other deductions (Heath, life insurance, FSA) still get 9500 each month (change your tax withholding, you will be getting a lot back). After 4k for PITI and 2k for childcare we are still left with 3.5K each month for everything else (no car or student loans though). We still go on a vacation and find 4k at the end of the year for college saving. No other savings for now but claiming we are house poor is a stretch.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Anonymous
Are we happy being frugal? It is what it is to survive inside the beltway. Should we have bought an 750-800 house, that is where I am . And, stay there for a few years and then move on.

I'm as cautious as they come, and I think it's much better to stretch a little and be able to stay put -- buying and moving are expensive. It's almost never going to be worth it (financially -- life may make it necessary) to move after a few years.

I go nuts when I'm watching TV and a family is proposing to sell a house for, say, $700K and buy a new one for $775K. That kind of change benefits realtors plenty but the family not much.

+1.