1.6MM home- how much would you want to be making?

[Anonymous]

I think you could probably do it OP - but at what cost to your financial peace of mind? I could never take that high a debt on with only one working parent, two small kids, and minimal savings (not to mention college funds.)

I wouldn't sleep at night - I'd always be worrying about disastrous scenarios.

Put off the dream house for a few years and throw TONS of money into college funds and retirement - and some fabulous vacations along the way. Then see where you are in a few years, especially if/when your spouse re-enters the workforce.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The houses around here under 1.5M are terrible

We bought our 1.2M eight years ago. Crazy how expensive homes have become in this area.

'

Crazy how much of a ripoff most houses that cost that much in the DC area are.

[Anonymous]

No. Exercise some patience and self control.

Take that $7000/month and save it for 2 years. If you successfully save another $170K in the next 2 years (and your income rises as you think it will), then buy.

At this point, you will have very little cushion for true financial emergencies.
What if we hit another recession and you get laid off?
What if you, wife of kids have a medical problem?
What if you have to help out your aging parents?

I'm in Finance and make $350 (and rising) and we bought a $800K house with $400k downpayment and $400k mortgage. I believe houses over $1M should have a 50% downpayment, or you really can't afford it.

Before you buy a $1.6M house, you should save more for retirement, get your wife an IRA, fully fund your kids 529 plans and open a brokerage account where you save more.
Even saving the 401k max every year is not alone going to provide for enough income in retirement for someone used to living on $100,000+ /year. You better have a better plan.

I have 2 friends who recently had to sell their "dream" homes because they couldn't afford them after a minor financial setback

[Anonymous]

Anonymous wrote:No. Exercise some patience and self control.

Take that $7000/month and save it for 2 years. If you successfully save another $170K in the next 2 years (and your income rises as you think it will), then buy.

At this point, you will have very little cushion for true financial emergencies.
What if we hit another recession and you get laid off?
What if you, wife of kids have a medical problem?
What if you have to help out your aging parents?

I'm in Finance and make $350 (and rising) and we bought a $800K house with $400k downpayment and $400k mortgage. I believe houses over $1M should have a 50% downpayment, or you really can't afford it.

Before you buy a $1.6M house, you should save more for retirement, get your wife an IRA, fully fund your kids 529 plans and open a brokerage account where you save more.
Even saving the 401k max every year is not alone going to provide for enough income in retirement for someone used to living on $100,000+ /year. You better have a better plan.

I have 2 friends who recently had to sell their "dream" homes because they couldn't afford them after a minor financial setback

This.

[Anonymous]

Anonymous wrote:No. Exercise some patience and self control.

Take that $7000/month and save it for 2 years. If you successfully save another $170K in the next 2 years (and your income rises as you think it will), then buy.

At this point, you will have very little cushion for true financial emergencies.
What if we hit another recession and you get laid off?
What if you, wife of kids have a medical problem?
What if you have to help out your aging parents?

I'm in Finance and make $350 (and rising) and we bought a $800K house with $400k downpayment and $400k mortgage. I believe houses over $1M should have a 50% downpayment, or you really can't afford it.

Before you buy a $1.6M house, you should save more for retirement, get your wife an IRA, fully fund your kids 529 plans and open a brokerage account where you save more.
Even saving the 401k max every year is not alone going to provide for enough income in retirement for someone used to living on $100,000+ /year. You better have a better plan.

I have 2 friends who recently had to sell their "dream" homes because they couldn't afford them after a minor financial setback

Op is only contributing 13k a year towards his 401k but wanting to spend 84k a year on a mortgage. It's insane.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The assumption is that you're paid once every 2 weeks. Hence 26 payments per year, not 24.

When our mortgage is due, we don't get to count on that partial payment of the 2 extra pay cycles. We count on the 2 paychecks we know will hit our account.

Good for you. But i don't think that most people earning 300k are living paycheck to paycheck...

Actually OP sounds like they will be living paycheck to paycheck. One paycheck won't even cover the mortgage. He will need part of the second paycheck to cover the mortgage alone.

This. And this is what the problem is. Life is messy and because of that, expensive. Shit happens, emergencies come up, you drain your savings and then can't catch a break long enough to pad savings again. He'll be part of the majority of Americans who can't come up with $400 in an emergency if he takes on this mortgage. On an income of 300k which is just sad.

[Anonymous]

Can you (or someone else) give us an idea of the two kinds of houses you are considering? The 2M one and one that is more doable on your income? I don't live in DC and I'm just curious as to why someone might want to stretch that far.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Op, look at your financial situation, your consumption habits, and future income vs expenses. People on this forum are nuts. I think most just have bad spending habits....excessive alochol, travel, recreation drug use, etc. You don't need a $500k to purchase a $1.6m home, at least when you are not white (cacausian). We built a $2m custom for a income same as yours and not stretched by any means. Both kids in private college and retirement fully funded and we travel and shop at whole foods,mets. We are in our late 40s. Bunch of bull here on this form....!

PPP may be on to something here. I have seen many immigrant (the professional kind) with good, but not super high incomes purchasing high end (>$1.5m) homes throughout the finer suburban Montgomery and Fairfax county sub divisions. I own a small hme improvement business and find myself installing decks, patios, hardscaping, etc at numerous newly built homes owned by immigrants. Must be a cultural and/or lifestyle thing I guess.

The immigrant families are able to do this because single adult children often live with their parents and their income contribute to the household expenses.

[Anonymous]

How old are you? With a 5 yr old in this area, I'm guessing at least 30? I don't think the HHI or house price are the huge issue - though that ratio of HHI to housing is not for me. The issue is 75k in retirement? For 2 people? In their 30s?? I'd think hard about your spending habits generally bc that's really low for someone in your HHI range.

[Anonymous]

Anonymous wrote:I'm curious to see opinions on how much you think your HHI should be if you were to purchase a 1.6MM home, 20-25% down (i.e., around $7000-7500 monthly mortgage).

Assume no student debt, no car loans, and no child care costs.

I'm thinking about doing this sometime next year, but in seeing the housing vs. HHI numbers of people here on various threads, I think I'd be on the 'very risky' side. HHI is around 310K (wife is SAHM for now), 2 'jobs' so side job is bringing in good income + has lots of income upside potential, and if I put down 20% down I'd still have over 125K liquid cash in the bank.

In addition, my retirement savings are below average I'd say (75K 401K/IRA, 1 rental property with 140K equity).

Interested to hear your thoughts.

Hell no. Why do you need to stretch your budget like this?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op, look at your financial situation, your consumption habits, and future income vs expenses. People on this forum are nuts. I think most just have bad spending habits....excessive alochol, travel, recreation drug use, etc. You don't need a $500k to purchase a $1.6m home, at least when you are not white (cacausian). We built a $2m custom for a income same as yours and not stretched by any means. Both kids in private college and retirement fully funded and we travel and shop at whole foods,mets. We are in our late 40s. Bunch of bull here on this form....!

PPP may be on to something here. I have seen many immigrant (the professional kind) with good, but not super high incomes purchasing high end (>$1.5m) homes throughout the finer suburban Montgomery and Fairfax county sub divisions. I own a small hme improvement business and find myself installing decks, patios, hardscaping, etc at numerous newly built homes owned by immigrants. Must be a cultural and/or lifestyle thing I guess.

The immigrant families are able to do this because single adult children often live with their parents and their income contribute to the household expenses.

Asian-American here. Many Asians also have family wealth. My parents came to America with family money even though they never had a high income. DH and I live in an expensive home but we have a seven figure income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op, look at your financial situation, your consumption habits, and future income vs expenses. People on this forum are nuts. I think most just have bad spending habits....excessive alochol, travel, recreation drug use, etc. You don't need a $500k to purchase a $1.6m home, at least when you are not white (cacausian). We built a $2m custom for a income same as yours and not stretched by any means. Both kids in private college and retirement fully funded and we travel and shop at whole foods,mets. We are in our late 40s. Bunch of bull here on this form....!

PPP may be on to something here. I have seen many immigrant (the professional kind) with good, but not super high incomes purchasing high end (>$1.5m) homes throughout the finer suburban Montgomery and Fairfax county sub divisions. I own a small hme improvement business and find myself installing decks, patios, hardscaping, etc at numerous newly built homes owned by immigrants. Must be a cultural and/or lifestyle thing I guess.

The immigrant families are able to do this because single adult children often live with their parents and their income contribute to the household expenses.

It can be all over the map with immigrant families. Sure some have the set up you're describing -- where grown adult children live at home until marriage so there are multiple incomes paying off the mortgage. There are other scenarios where immigrants come here with family money and/or their family back home funds a lot of a house purchase. But there are also scenarios where they come here with a few suitcases and no family help and buy a $2 million home when their kids are 8 and 10 and obviously not contributing to the mortgage -- never under estimate immigrant scrimping and saving and sacrificing to get what they want; I have seen it time and time again.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op, look at your financial situation, your consumption habits, and future income vs expenses. People on this forum are nuts. I think most just have bad spending habits....excessive alochol, travel, recreation drug use, etc. You don't need a $500k to purchase a $1.6m home, at least when you are not white (cacausian). We built a $2m custom for a income same as yours and not stretched by any means. Both kids in private college and retirement fully funded and we travel and shop at whole foods,mets. We are in our late 40s. Bunch of bull here on this form....!

PPP may be on to something here. I have seen many immigrant (the professional kind) with good, but not super high incomes purchasing high end (>$1.5m) homes throughout the finer suburban Montgomery and Fairfax county sub divisions. I own a small hme improvement business and find myself installing decks, patios, hardscaping, etc at numerous newly built homes owned by immigrants. Must be a cultural and/or lifestyle thing I guess.

The immigrant families are able to do this because single adult children often live with their parents and their income contribute to the household expenses.

Asian-American here. Many Asians also have family wealth. My parents came to America with family money even though they never had a high income. DH and I live in an expensive home but we have a seven figure income.

If you see an average Chinese guy buying an expensive home that is not well supported by his income, it's most likely the older parents in China funding their lifestyle. I wouldn't go so far as to call this family wealth because the older parents are not really wealthy, they just passed on their life savings to their kids while they are still alive. This is quite common in modern Chinese culture where the male side of the family is expected to put up the housing for the young couple. This is in contrast to rich families from HK, Taiwan, or even the newly rich from mainland China, who are truly wealthy, and these people tend to buy much much larger homes - $3M and above typically.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op, look at your financial situation, your consumption habits, and future income vs expenses. People on this forum are nuts. I think most just have bad spending habits....excessive alochol, travel, recreation drug use, etc. You don't need a $500k to purchase a $1.6m home, at least when you are not white (cacausian). We built a $2m custom for a income same as yours and not stretched by any means. Both kids in private college and retirement fully funded and we travel and shop at whole foods,mets. We are in our late 40s. Bunch of bull here on this form....!

PPP may be on to something here. I have seen many immigrant (the professional kind) with good, but not super high incomes purchasing high end (>$1.5m) homes throughout the finer suburban Montgomery and Fairfax county sub divisions. I own a small hme improvement business and find myself installing decks, patios, hardscaping, etc at numerous newly built homes owned by immigrants. Must be a cultural and/or lifestyle thing I guess.

The immigrant families are able to do this because single adult children often live with their parents and their income contribute to the household expenses.

It can be all over the map with immigrant families. Sure some have the set up you're describing -- where grown adult children live at home until marriage so there are multiple incomes paying off the mortgage. There are other scenarios where immigrants come here with family money and/or their family back home funds a lot of a house purchase. But there are also scenarios where they come here with a few suitcases and no family help and buy a $2 million home when their kids are 8 and 10 and obviously not contributing to the mortgage -- never under estimate immigrant scrimping and saving and sacrificing to get what they want; I have seen it time and time again.

I don't think you can get to a $2M house by scrimping and saving. You need cash flow to maintain the lifestyle of a $2M house. Even if you managed to save up $2M in cash and paid off the house in full, the yearly property tax, maintenance, landscaping, utilities, and etc, are all significantly higher than say a $1M house. I see plenty of people scrimping and saving their way to a large house, but it's all $1M or less - and most often with multiple generations living together.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op, look at your financial situation, your consumption habits, and future income vs expenses. People on this forum are nuts. I think most just have bad spending habits....excessive alochol, travel, recreation drug use, etc. You don't need a $500k to purchase a $1.6m home, at least when you are not white (cacausian). We built a $2m custom for a income same as yours and not stretched by any means. Both kids in private college and retirement fully funded and we travel and shop at whole foods,mets. We are in our late 40s. Bunch of bull here on this form....!

PPP may be on to something here. I have seen many immigrant (the professional kind) with good, but not super high incomes purchasing high end (>$1.5m) homes throughout the finer suburban Montgomery and Fairfax county sub divisions. I own a small hme improvement business and find myself installing decks, patios, hardscaping, etc at numerous newly built homes owned by immigrants. Must be a cultural and/or lifestyle thing I guess.

The immigrant families are able to do this because single adult children often live with their parents and their income contribute to the household expenses.

Asian-American here. Many Asians also have family wealth. My parents came to America with family money even though they never had a high income. DH and I live in an expensive home but we have a seven figure income.

If you see an average Chinese guy buying an expensive home that is not well supported by his income, it's most likely the older parents in China funding their lifestyle. I wouldn't go so far as to call this family wealth because the older parents are not really wealthy, they just passed on their life savings to their kids while they are still alive. This is quite common in modern Chinese culture where the male side of the family is expected to put up the housing for the young couple. This is in contrast to rich families from HK, Taiwan, or even the newly rich from mainland China, who are truly wealthy, and these people tend to buy much much larger homes - $3M and above typically.

PP here. I'm from NYC and went to school in Boston. Many of my Asian friends bought multi million dollar homes in Manhattan in cash from family money from Asia. There is tons of money in Asia. I see it less in the DC area. Those Asians are more attracted to NYC, LA and SF.