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

[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.

We can afford to buy all new furniture but are waiting for the kids to grow up. What a dumb statement.

[Anonymous]

Anonymous wrote:

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.

Dude, you must be loaded to afford the time machine, since it's clear you got here from 2006.

Honestly, I think this a bubble predictor sock puppetting as an RE cheerleader, there is no way anyone believes this.

OP it all comes down to your personal situation; you can ride the price up and down, through job loss or parent illness, or taking off a few years to help a kid having trouble in school. If your budget/situation affords this, then enjoy a lovely house. If you are stretched taut... look really hard at what you can cut to be sure it isn't the mortgage you should be cutting...

[Anonymous]

Anonymous wrote: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.

Don't you mean THREE-QUARTER MILLION DOLLAR debt? 250k sounds great to me!

[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?

He said never going down again which he is right. It might not appreciate but in N. Arlington prices are not coming down and will sustain after the prime rate increases which is sometime next year.

My example, bought N. Arlington old house in 2007 $630K nice deep lot but less than 10K Sq Ft. Developer bought my neighbor house/tore it down (lot size similiar) and just sold for $1.6M. I have been offered $750K cash for my house even knowing its a tear down.

Bottom line, OP you are good and glad you got a house you can grow into.
Also, I make $150K which my salary covers $4.3K(Mortgage+PPT) monthly payment. Obviously, I live below my means and my DW $110K carries one DS daycare bill, groceries, and etc. I know I have one less kid but you do afford your new home and enjoy it.

[Anonymous]

Anonymous wrote:We have a 595 loan and 350k income but I was adamant on being able to pay the mortgage and live on one salary. I wouldn't feel comfortable with your loan and salary but I like to spend money in other areas. I like good food, weekend trips, expensive clothing etc, which I realize isn't a good investment. Spending this money on a bigger house would be better. However, I wouldn't be happy living extremely frugally so I can live in a bigger house. However, you may be fine with it.

Not OP, but I really appreciate this post. It's rare that a poster on DCUM can appreciate that others may make different choices than them that are equally valid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We have a 595 loan and 350k income but I was adamant on being able to pay the mortgage and live on one salary. I wouldn't feel comfortable with your loan and salary but I like to spend money in other areas. I like good food, weekend trips, expensive clothing etc, which I realize isn't a good investment. Spending this money on a bigger house would be better. However, I wouldn't be happy living extremely frugally so I can live in a bigger house. However, you may be fine with it.

Not OP, but I really appreciate this post. It's rare that a poster on DCUM can appreciate that others may make different choices than them that are equally valid.

Different people have different priorities. However you like to spend your money, you should still prioritize being fiscally responsible (i.e. saving money for a rainy day/retirement/college, etc).

[Anonymous]

no risk without rewards

[Anonymous]

Anonymous wrote:no risk without rewards

if you are going to try and blow up this housing bubble further, at least get your jargon right:

no rewards with risks

OP seems absent, and won't comment on how their personal situation can handle this?

[Anonymous]

We have a similar (but larger) mortgage and child care on same HHI. We are doing ok. Definitely was worth it for house and area as our salaries will climb over years and mortgage won't.

[Anonymous]

Anonymous wrote:

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.

We can afford to buy all new furniture but are waiting for the kids to grow up. What a dumb statement.

Thanks.... You can contradict me without being insulting ..

[Anonymous]

Anonymous wrote:

Anonymous wrote:no risk without rewards

if you are going to try and blow up this housing bubble further, at least get your jargon right:

no rewards with risks

OP seems absent, and won't comment on how their personal situation can handle this?

I think the only people who prattle on about bubbles in this space are people who've been insisting that's the case for two years as they sit on the sideline. Wishful thinking.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

Dude, you must be loaded to afford the time machine, since it's clear you got here from 2006.

Honestly, I think this a bubble predictor sock puppetting as an RE cheerleader, there is no way anyone believes this.

OP it all comes down to your personal situation; you can ride the price up and down, through job loss or parent illness, or taking off a few years to help a kid having trouble in school. If your budget/situation affords this, then enjoy a lovely house. If you are stretched taut... look really hard at what you can cut to be sure it isn't the mortgage you should be cutting...

No idea what you're talking about. The point is, I think the 900000 buy was fine. Others might disagree.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

Don't you mean THREE-QUARTER MILLION DOLLAR debt? 250k sounds great to me!

Thank you. Yes, I meant THREE-QUARTER but the rest still stand.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Two costs to factor into your budget -

Childcare costs will eventually go down marginally but will not disappear once both your kids are in school. Day care gets replaced with before/after care, summer camps (factor in before/after care costs there as well), activities costs for two kids

Landscape costs - including lawn care, tree care, gardening

Please. If you are willing to do work yourself, you don't have this cost. House costs aren't going down. You can also defer some maintenance. Do it.

There is a cost - time. Also, if it's trees, forget it you need a professional.

[Anonymous]

I would feel sick living in a small home with the kids. Once the kids leave you can downsize.