Buying $1.5 million home - can we afford it?

[Anonymous]

Anonymous wrote:

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!

Unless you're leaving something out of the story, there is no way you could afford a $1.5M mortgage on $300K income. It it interest only perhaps? We are by no means conservative with our finances, but a $1M house on $300K income was all we could manage and even then, we're not saving enough.

[Anonymous]

Our HHI is higher and the thought of buying a $1.5M house makes me sick to my stomach. Why deny yourself healthy savings? Cash is king, you'll never know when you might need a spare $2k or 3k a month. You can buy a great house for $800k. $1.5M houses are for people making double what you are.

[Anonymous]

Anonymous wrote:

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.

Another poster here with very similar finances. We save around 50k a year though outside of retirement because we probably spend more than you on travel and clothing. We also receive stock grants each year which we don't touch and we also pay an additional 20k towards our mortgage each year. But we are similar in that we don't have any student loans, car payments or leases and have a similar mortgage. I've learned it's all about keeping your fixed expenses low. I think the only fixed expense we have outside of our mortgage is our utilities. Apart from our mortgage, we could live off of the $1,200 unemployment insurance if we really had to.

[Anonymous]

Anonymous wrote:Our HHI is higher and the thought of buying a $1.5M house makes me sick to my stomach. Why deny yourself healthy savings? Cash is king, you'll never know when you might need a spare $2k or 3k a month. You can buy a great house for $800k. $1.5M houses are for people making double what you are.

This.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Our HHI is higher and the thought of buying a $1.5M house makes me sick to my stomach. Why deny yourself healthy savings? Cash is king, you'll never know when you might need a spare $2k or 3k a month. You can buy a great house for $800k. $1.5M houses are for people making double what you are.

This.

+1000. We also have a higher HHI and bought a house that costs half what you are proposing. If you can't do it in a 15 year mortgage and still save a third of what you gross then I would pass. Believe me, it is much more satisfying to be sitting on a large net worth knowing that even if you lose your job tomorrow you will be fine than it is to come home to a fancier house.

[Anonymous]

We make $325k and both kids will be in public school next year so childcare costs are going to decrease. We have good equity on our current home for a nice down payment and I would not feel comfortable going above 1 million and would probably only pull the trigger on 900k max.

[Anonymous]

We make 400k and when we trade up houses in a few years our plan is to have 600k for a downpayment. We will be looking at 1.5-1.7 with 600k down. Even then I feel like we are stretching a bit but we won't have any other fixed expenses besides the mortgage and both should receive sizeable inheritances at some point.

[Anonymous]

We bought for a little under $1.3M on HHI a little over $300k and put 40% down so our mortgage was $750k. It feels very tight.

I will say, we have made decisions that made it a little tighter - 15 year loan and we still max out 401k. However, I think with a bigger mortgage it would be tight for you even with a 30 year note.

[Anonymous]

300k in HHI is really more like $160k in after-tax income from which you'll be paying your mortgage and expenses. My spouse and I bought a house for $1.4m at a time our HHI was "only" $500k, but we put $600k down thanks to savings and proceeds from our predecessor home sale, so the mortgage payment was entirely affordable. Do you plan to have money to furnish the house too? Big houses require lots of rugs, wall-hangings, chairs, sofas, tables, beds, lamps, etc. Big houses like require $20-25k to be repainted or to replace the roof shingles. And a new A/C unit is at least $5,000. Just sayin' -- plan ahead.

[Anonymous]

OP I have your same HHI and the highest I would want to go is $750k. However I have daycare costs and some rental properties as well that makes me behave a little more conservatively. In the absence of those obligations, I think I would not go above $850. COL is high in DC even without owning an expensive home. Can you buy a fixer upper at a lower price point, and invest in the renovations thus building your equity base?

[Anonymous]

If you have to ask...

[Anonymous]

Maybe I'm simple minded because I'm not from dc and live in a simple, small town. But what does a $1.5 million home have to offer that a $750,000 home doesn't? It just seems so downright silly to me. You obviously have some concerns if you need to seek out advice on this. So why would you spread yourself thin over what, the difference in moldings? Heated floors in the garage? A gazing pool? What of these material things could possibly justify it?

[Anonymous]

Anonymous wrote:Maybe I'm simple minded because I'm not from dc and live in a simple, small town. But what does a $1.5 million home have to offer that a $750,000 home doesn't? It just seems so downright silly to me. You obviously have some concerns if you need to seek out advice on this. So why would you spread yourself thin over what, the difference in moldings? Heated floors in the garage? A gazing pool? What of these material things could possibly justify it?

You're obviously not from DC. $1.5 million may not even get you a garage. Heated floors and a gazing pool is a $3 million dollar plus house.

To put things in perspective, I live in a 750k rowhouse and only have one bathroom. We are in a good location though. If we want more than three bedrooms and a similar location we will need to spend at least $1.5.

[Anonymous]

Never borrow more than $1.1 million.

[Anonymous]

Anonymous wrote:Maybe I'm simple minded because I'm not from dc and live in a simple, small town. But what does a $1.5 million home have to offer that a $750,000 home doesn't? It just seems so downright silly to me. You obviously have some concerns if you need to seek out advice on this. So why would you spread yourself thin over what, the difference in moldings? Heated floors in the garage? A gazing pool? What of these material things could possibly justify it?

A $750,000 house here is a tear down. $1.5 won't be anything too fancy either. It's probably very similar to the $600,000 house where you live.