First time home buyer. Am i over extending?

[Anonymous]

Hi,

I’m a 30 year old single mom of a preschooler with a yearly income of 85k looking to buy a home and wondering if a monthly mortgage payment of $1830 is considered too high for my income?

Here is a breakdown of my projected budget (based on my current budget and spending trends):
-pre-tax deductions: 15% for retirement, FSA for 3 days of preschool(split with DD’s dad. The other days she is cared for by family), and DD’s health insurance (mine is enployer paid)
- only owe 12k student loan. No other debt.
-$3353 are my total monthly expenses (mortgage payment $1880, utilities, car fuel, car insurance, DD fund to buy things she needs, student loan payment, groceries, cellphone, my allowance of $200).
- monthly saving buckets: car service fund $100, Home Maintaince fund $350, Vacation fund $200. Additionally $350 I received in child support goes to savings. I also only budget with 24 of the 26 annual paychecks so the other 2 paychecks go to savings close to 4K total. And I have a 12k emergency fund.

This is my zero sum budget so nothing is left. I won’t deny that it’s a very modest living but I’m hoping that I’m checking all the boxes: retirement, emergency fund, home maintenance savings, etc. The only things is that I’m not saving extra to replace my 9 year old car in the future and I’m not saving for college yet but in a couple of years I hope to increase my income and do so. I just started saving more intentionally for retirement.

Thoughts ? Am I over extending myself or on the right track given the monthly mortgage?

[Anonymous]

What’s your current rent?

[Anonymous]

I think it’s doable if you are not an extravagant spender.

[Anonymous]

Rent in the area cant possibly be lower, so the way I see it, there aren't any other options.

[Anonymous]

1900 for PITI of 3330 leaves you with 1400 for everything else. Can you break this down?

[Anonymous]

Anonymous wrote:Rent in the area cant possibly be lower, so the way I see it, there aren't any other options.

+1

[Anonymous]

What is your monthly take home based on 24 paychecks?

[Anonymous]

OP here. My current rent is 1830 including water and sewer. And I agree it’s hard to find a 2 bedroom apart lower than that in a decent safe place with decent schools. However, what makes me VERY nervous is the hidden cost of home ownership such a repairs, maintenance so I’m wondering if I’m getting myself into trouble and into a house poor situation. In previous threads in DCUM people making twice and three times as much as me have a $1800 mortgage...

So after pretax deductions which includes my share for preschool my take home pay is $3998 plus $350 of child support so total of $4350. Here is the breakdown:
-piti 1880
- utilities 240 (internet, electric, water/sewer)
- groceries and household goods $305
-car insurance and fuel $240
-cellphone $73
-personal allowance $200
- tithing $50
- subscriptions $16
- DD’s fund $50
- car service $100
- home maintance $350
-vacation $200
- savings to build emergency fund $397

[Anonymous]

It sounds like you are doing great!

[Anonymous]

Forgot to add $200 student loan payment

Anonymous wrote:OP here. My current rent is 1830 including water and sewer. And I agree it’s hard to find a 2 bedroom apart lower than that in a decent safe place with decent schools. However, what makes me VERY nervous is the hidden cost of home ownership such a repairs, maintenance so I’m wondering if I’m getting myself into trouble and into a house poor situation. In previous threads in DCUM people making twice and three times as much as me have a $1800 mortgage...

So after pretax deductions which includes my share for preschool my take home pay is $3998 plus $350 of child support so total of $4350. Here is the breakdown:
-piti 1880
- utilities 240 (internet, electric, water/sewer)
- groceries and household goods $305
-car insurance and fuel $240
-cellphone $73
-personal allowance $200
- tithing $50
- subscriptions $16
- DD’s fund $50
- car service $100
- home maintance $350
-vacation $200
- savings to build emergency fund $397

[Anonymous]

Are you buying a home or a condo? Can you rent out a room if needed? Maybe to a student over the summer?

How steady is child support? Wow that’s low. As if you can raise a kid on 2x that a month. The problem is you are spending well over 50% of your net on needs, the lower you can get it, the better. Do you get regular raises? Because things are tight and your expenses will go up slightly each year.

Will you continue to have free child care some days or might that change? Can you increase your income if necessary? Even a little side work when your child was with her father would go a long way. Worst case you can pull back on retirement for awhile.

[Anonymous]

Your groceries and utilities look low to me. The money for your kid looks low as well, a birthday party, new shoes and a winter coat would be more. Are you projecting or are these actual numbers?

[Anonymous]

Don't count on much tax savings due to mortgage interest under new law.

A payment of $1830 is probably throwing off around $16,800 in interest a year. The new standard deduction for heads of households is $18,000. And you are limited to $10,000 in state and local deductions. So you MIGHT get $26,800 in itemized deductions (probably less if you don't pay that much in state taxes). That will put you in the new 22% tax bracket, and your tax savings will be $1,936 for the year. It's not nothing, but it's not huge, either, if you're feeling extended.

[Anonymous]

The only thing I'm not seeing is a down payment fund and extra savings for earnest money. This is a very tight budget as would be paying 43% of your net on piti. It would be better if it was closer to 35%. Do you have a timeline for when you might get salary bumps? Can you wait until you are making enough such that the PITI would be only 35%? Your childcare expenses are likely to go up over the next few years depending on how reliable your family is at emergency childcare needs (summer camps, longer preschool days, activities, more expensive clothes, etc.).

It's probably doable but I don't see you buying yourself anything (haircuts, clothing, entertainment). $200 a month for all of this is fairly sparse. As is groceries at $305.

[Anonymous]

Thanks so much for all the responses. This is very helpful.

These numbers are based on actual spending except the piti and utilities are projected (down payment and earnest money are not included here as I have that separately and taken care of). Its a house and I’m thinking about doing Airbnb th days that DD is with her dad or renting a room in the summer. Also, I get regular mileage reimbursements from work that give me extra funds if I want to go outside of my budgeted expenses or if I want to spend more on fun stuff (clothes, nails, hair, etc)

I agree groceries is low not because I can’t eat well but because I have to be very cautious as it’s easy to go over this amount. I think that’s one that I would like to get up more but also it’s only me and my 3.5 year old daughter half the week so it is doable. For utilities in a 2 bedroom apartment I pay average $50 monthly so i imagine that with my current usage in abigger house It would be $150. $40 water and sewer. Currently my water and sewer bill is average $25. And internet $50.

For DD clothes, etc. I go to consignment shops and sell her old toys and clothes/shoes and buy new ones there. It saves so much. We go to playgrounds, farms and other low cost activities for now. Child support is very low (thanks for sympathizing) because we have equal time with her and share custody. I’m lucky that Family child care is reliable and will be available. Preschool is currently year round. I guess I would have to prepare and possibly get a new job when DD goes to ES.

Im also thinking that this situation will give me the motivation to get a higher paying job faster than I would. In 1.5-2 years.