Buying $1.5 million home - can we afford it?

[Anonymous]

Anonymous wrote:The thing about life is somewhere along the line, shit will happen. I do not know when. It could come in the form of a job loss, an accident, medical issues....

It can get very expensive


I was unable to work for 18 months; after 12 weeks (3 months), I transitioned from Short Term to Long Term disability; payment went down but expenses went up.

This. Unexpected things happen like illness and job loss. You don't want to finance your house mostly on the future earnings.

[Anonymous]

We bought extra durability that included mortgage coverage.

[Anonymous]

Anonymous wrote:We bought extra durability that included mortgage coverage.

disability

[Anonymous]

Anonymous wrote:OP, how much do you expect your incomes to increase, and how fast?

My inclination is that this is crazy. But 3 years ago when our income was similar to yours (doubled now), we opted to make a lot of compromises for a less expensive house in a less nice area. Now, the higher priced home we were looking at instead has appreciated by almost half, and we are making enough that it would no longer even be tight. In the meantime, we don't like where we live, our house doesn't serve our needs, and it hasn't appreciated as much as the other house would have.

There were a couple factors, on the flipside, that I liked more about the home we're in. But in retrospect, given that we knew our incomes would be increasing, I think we would have done better to buy a more expensive home that fit our longterm needs better.

This is us, except we grew out of the smaller cheaper house. I'm nervous about the leap and mortgage we pay now but the reality is we would be paying a lot less today if we were more bullish 7 years ago when we looking,

[Anonymous]

Anonymous wrote:Why is everyone giving OP such a hard time? We have a 2M house on a 300K income. We are older though so no day care costs and minimal childcare costs. We were able to put 25% down. No plans to move though. Planning to stay here for a long time. If something crazy unexpected happens, we can always rent it out and move into an apartment. Got to take a few risks in life.

Gosh, why are people questioning this decision, we made the same one (except our circumstances were totally different and we had more money) and it worked out fine!

[Anonymous]

I am actually surprised you got approved for this loan, given your small downpayment and large monthly bills. I can't imagine thinking this is a good idea unless someone just finished residency and soon will be doubling their income or something similar.

[Anonymous]

The most helpful exercise here would be for you to figure out the PITI + HOA fee and then back that into your take home and recurring monthly expenses. This looks like it might be a bit high though based on the information provided.

[Anonymous]

We have an almost identical HHI (300k with 50k bonus), and our max is $1M home price (so, $800k mortgage for us). We are 30 and 34 and have a toddler with a second on the way. Although we are fairly young and expect our income to continue to grow, we want the flexibility to survive on one salary. At $1M, if we both work we would be able to continue to save money every month without needing to change our spending habits. If something happens to the economy or on of us, we would be able to continue paying the mortgage and expenses on one salary until we figured out a permanent solution. We have no debt and a sizeable emergency fund, but would not consider a $1.5M house.

[Anonymous]

we have in income of $375K and have a combined mortgage payment of about $750K on two houses. We max 2 401ks plus save about $80k additional per year.

In terms of expenses we pay about $20K a year in child-related expenses. We don't have many of the bigger expenses that others in our income bracket do (no housecleaning service, no yard guy, one paid-off car, no student loan payments).

But perhaps these figures can help you with your own.

[Anonymous]

Anonymous wrote:we have in income of $375K and have a combined mortgage payment of about $750K on two houses. We max 2 401ks plus save about $80k additional per year.

In terms of expenses we pay about $20K a year in child-related expenses. We don't have many of the bigger expenses that others in our income bracket do (no housecleaning service, no yard guy, one paid-off car, no student loan payments).

But perhaps these figures can help you with your own.

Please posted a detailed budget. I'm fascinated how the numbers add up.

[Anonymous]

Anonymous wrote:

Anonymous wrote:we have in income of $375K and have a combined mortgage payment of about $750K on two houses. We max 2 401ks plus save about $80k additional per year.

In terms of expenses we pay about $20K a year in child-related expenses. We don't have many of the bigger expenses that others in our income bracket do (no housecleaning service, no yard guy, one paid-off car, no student loan payments).

But perhaps these figures can help you with your own.

Please posted a detailed budget. I'm fascinated how the numbers add up.

NP here and I could see this. $375K - $36K = $339 gross. Assume 40% goes to taxes so they're left with $203.4K. Subtract out $80K for savings leaves them with $123.4K. PITI on the two houses is probably about $3.6K total or $43.2K per year leaving them with $80.2K - $20K for child-related expenses = $60.2K for everything else or about $5K per month. I could easily live pretty large on $5K per month for everything else.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:we have in income of $375K and have a combined mortgage payment of about $750K on two houses. We max 2 401ks plus save about $80k additional per year.

In terms of expenses we pay about $20K a year in child-related expenses. We don't have many of the bigger expenses that others in our income bracket do (no housecleaning service, no yard guy, one paid-off car, no student loan payments).

But perhaps these figures can help you with your own.

Please posted a detailed budget. I'm fascinated how the numbers add up.

NP here and I could see this. $375K - $36K = $339 gross. Assume 40% goes to taxes so they're left with $203.4K. Subtract out $80K for savings leaves them with $123.4K. PITI on the two houses is probably about $3.6K total or $43.2K per year leaving them with $80.2K - $20K for child-related expenses = $60.2K for everything else or about $5K per month. I could easily live pretty large on $5K per month for everything else.

Poster whose finances you are talking about----this is pretty much it exactly except our total taxes aren't 40% so we pay less there and our total PITI is more like $5K/month or $60K a year. But the rest is accurate... Outside of house and kid stuff we spend about $5K a month...
$5K a month is a very good but not extravagant life in DC... like it's been described on here a million times---we shop at Old Navy, Giant, go to Nats games but sit in the upper deck, eat out at Chipotle, etc. Anyway, that's our financial picture. And we're not saving $80K a year on purpose---it's just what
we end up saving per year after we live our lives and pay our bills. It's not any concerted goal.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Only do this if you buy inside the beltway with high school ratings

OP here: The home we are considering are all in Great Falls or Mclean, so school ratings will be among the highest in the country.

You should double check with a realtor, prices in these areas have been falling off. Lot of homes having to readjust prices in order to sell. I would only consider doing this inside the city proper where when the recession hit they barely felt it in some neighborhoods. Outside the city it was felt by all and you always have to anticipate the worst case scenario and see if you can ride through it. You don't want to be underwater on a house especially one that cost this much.

[Anonymous]

Don't do this. 2-3x income is already enough financial stress. 5x is not smart.

[Anonymous]

We were living in a 900k house (inside the beltway) that we put nothing down on. I had anxiety attacks CONSTANTLY. I couldn't take it anymore. We downgraded to a 550k house (outside the beltway, obviously) and now I sleep so much better at night. I can't stand being house poor.