First Post -- How much house ($$$) can we afford??

[Anonymous]

Hello all,

I'm a federal employee transferring to the Washington, DC area (Rockville to be specific) with my GF. I'm currently a GS-12 (soon to be a GS-13) and GF, who works for a local municipality at home, is the equivalent of a GS-11/12. I'm due to the area later next year, but once I've relocated, we're hoping that GF can find a GS-11/12 position. Such would put our HHI around $175,000 - $185,000.00.

I'm able to take advantage of a VA loan and we're able to put down 3%-5%, depending on the price of the home. My question to you guys is what would be your maximum budget on a $185k HHI? Granted everyone's expenses are different, I'm trying to get a general feel.

I have a sister that lives in Owings Mills and she got away with recently purchasing a very nice 2,800 sq ft townhouse for $279k. The plus is that she also works in Baltimore County and Owings Mills is nearby. She's suggested that we stay in that range ($300k), but since I'll be working in Rockville, and would prefer to live nearby, the prices of homes in Montgomery/Frederick Co. appear to be in a total different ballgame than Baltimore Co. Everything nice that we see is in the $500k to $650k range. Is such stretching our budget on a $185k HHI? Such will grow in the next few years to $200k to 220k, but we'd really like to avoid putting a huge chunk of our HHI into a home. Nonetheless, we still want something nice in a decent school district. Any thoughts? Anyone else with similar HHI living in a $500-600k home? If so, is it manageable?

[Anonymous]

Rent. Save. Wait for the recession. Get married. Then buy a home where your mortgage is not mire than 2 to 2.5 times your income.

[Anonymous]

Not MORE...

[Anonymous]

I agree with the above poster. Hold off on buying for now and rent. Your money will go a lot further one year from now.

[Anonymous]

Anonymous wrote:Rent. Save. Wait for the recession. Get married. Then buy a home where your mortgage is not mire than 2 to 2.5 times your income.

This.

[Anonymous]

I think 2x income is overly conservative here. FWIW I have an HHI of $125k (also expected to go up, but not too dramatically), have been renting a couple years, and am now looking to buy in the $275-400k range in MD. (We are savers and have over 20% down but want to be cautious about monthly payments at our income level.) 2x income is just...not a thing at $125k here. I am interested to hear people say money will go further in a year or two, do you really think prices will fall more than appreciation and interest rates will rise?

OP have you considered Frederick County if you work in Rockville? You can get more for your $ there.

[Anonymous]

So you make 125k (pp) and you are targeting homes around $350k. You are putting diwn 20% (about 70k)....so your mortgage on a 350k house would be 350-70 =280k. And 280k just happens to be between 2 and 2.5 times your income. SURPRISE! That's what I suggested tO OP....THE MORTGAGE should be 2 to 2.5 times income....not the purchase price.

[Anonymous]

OP, I agree with the PPs. Buying a place in an area you don't yet know well isn't smart. Buying a place with a GF whose next job is not yet settled is also not smart. Come spend a year in your new assignment, decide where you want to be, and with whom, and then buy. But be sure you're going to want to stay put for a few years first.

[Anonymous]

Anonymous wrote:OP, I agree with the PPs. Buying a place in an area you don't yet know well isn't smart. Buying a place with a GF whose next job is not yet settled is also not smart. Come spend a year in your new assignment, decide where you want to be, and with whom, and then buy. But be sure you're going to want to stay put for a few years first.

OP here. Thanks for your suggestions. GF is long-term partner of over 18+ years, so we're in this for the long run. For the last 15 years, we've visited the DC area for 5-10 trips annually. Last year, I started spending a week every other month or so in Rockville, and GF joins me half the time. Such has given us the chance to realize that we really like the area. Also, since I'm a lifer with the federal gov't, the DC area was where I could get my GS-13, and possibly a GS-14 down the road.

We've begun looking at both apartments and homes, and sad to say, rental prices are almost identical to monthly mortgages. We're just trying to find out where we should be home purchase wise, and if folks in the area follow the 2 to 2 1/2 times your HHI rule. In NYC where we're from, most folks are way over that (I'd say 3 to 4 times your HHI). We'd like to be conservative and really didn't know how other folks in the area fair out.

[Anonymous]

Anonymous wrote:I think 2x income is overly conservative here. FWIW I have an HHI of $125k (also expected to go up, but not too dramatically), have been renting a couple years, and am now looking to buy in the $275-400k range in MD. (We are savers and have over 20% down but want to be cautious about monthly payments at our income level.) 2x income is just...not a thing at $125k here. I am interested to hear people say money will go further in a year or two, do you really think prices will fall more than appreciation and interest rates will rise?

OP have you considered Frederick County if you work in Rockville? You can get more for your $ there.

OP here. We've looked at homes in southern Frederick County and couldn't be happier. The Urbana area has some beautiful townhomes that would fit the top-end of our budget. Also, they have stellar schools.

Though I'm curious to find out where most folks like us live ($175k-$185k HHI), and if their in so-so areas, desirable or undesirable communities. Urbana is at the top of our list choice wise.

[Anonymous]

Side note-don’t count on your GF easily finding a GS position unless she is a disabled veteran.

[Anonymous]

Anonymous wrote:Side note-don’t count on your GF easily finding a GS position unless she is a disabled veteran.

OP here. You raise a very valid point. Though, in the last few years there seems to be less and less disabled veterans being hired. I think supervisors and HR are finding out ways around it or just simply finding out that veterans are not the only ones that can get the job done (I'm a disabled veteran, so I can fairly comment on this). Most of the positions that they are hired for are GS-7 through 9 anyways. GF is a mid-level HR person with an HR degree and certifications.

[Anonymous]

Please read "Your Money Ratios" by Charles Farrell and adapt according to your age and life situation. Yes, the banks may be willing to loan you 4 times your salary, and half of your neighbors may do it, but you have to play your own financial game to get to the prize at the end of your working years. How old are you? What other debts do you have? The "how much house debt should I buy?" question does not get answered in isolation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think 2x income is overly conservative here. FWIW I have an HHI of $125k (also expected to go up, but not too dramatically), have been renting a couple years, and am now looking to buy in the $275-400k range in MD. (We are savers and have over 20% down but want to be cautious about monthly payments at our income level.) 2x income is just...not a thing at $125k here. I am interested to hear people say money will go further in a year or two, do you really think prices will fall more than appreciation and interest rates will rise?

OP have you considered Frederick County if you work in Rockville? You can get more for your $ there.

OP here. We've looked at homes in southern Frederick County and couldn't be happier. The Urbana area has some beautiful townhomes that would fit the top-end of our budget. Also, they have stellar schools.

Though I'm curious to find out where most folks like us live ($175k-$185k HHI), and if their in so-so areas, desirable or undesirable communities. Urbana is at the top of our list choice wise.

We are in your income bracket but work in DC. We bought in Kensington near Einstein HS for $450,000. Couldn’t be happier with our neighborhood and proximity to Wheaton, Bethesda, rockville, silver spring and DC. Lots more options for you GF commute-wise if you are closer to DC.

[Anonymous]

Are you commuting downtown? I cannot imagine what the drive would be like from Urbana. There are a lot of nice areas like that, but are discounted by many due to the awful commute. I personally wouldn’t live north of Gaithersburg and even that would be pushing it.

I’m putting your salary at 97k and your GF at 50k (since you don’t know yet), so $147. If she makes more, you won’t be house poor. I would stay less than $450. Look in Rockville or Silver Spring.