Afford $1.8M on 300K?

[Anonymous]

Anonymous wrote:Assuming you pay about 25% of your income in taxes - federal state, SSDI, etc., you net $225k after taxes. You're proposing that you pay 48% of that net in a home payment - and that's not including 401k, medical, or any other deductions.

People do that because they have to. They don't do without a very good reason, and your rationale, "We think the house is a bit small - ideally, we'd like to be in 4000sqft," doesn't come close to that.

OP's math doesn't work. Her claims for her monthly take home vs HHI do not add up once taxes, 401K contributions, etc are added up.

[Anonymous]

I haven’t followed the entire thread, but has OP indicated how much savings they have? One option is to make a large down payment to make the monthly payments affordable. Our HHI is $225k and we will probably buy at $1.5 million but we have very substantial savings due to being frugal, investing wisely, and having no kids. So we will put at least 50% down and still have plenty of investments and savings left (at least seven figures left). I guess based on the comments here we will be viewed as the poors in our new neighborhood when we buy but who cares.

[Anonymous]

If you can get approved for it, it is your choice. But you would have basically no buffer for anything going wrong, which is very stressful. There are a lot of people in the world who have no choice but to live like that. Voluntarily doing it so that you can have a mansion seems crazy to me.

[Anonymous]

Anonymous wrote:If you can get approved for it, it is your choice. But you would have basically no buffer for anything going wrong, which is very stressful. There are a lot of people in the world who have no choice but to live like that. Voluntarily doing it so that you can have a mansion seems crazy to me.

NP - and to add to this, I can't imagine telling my kids that they need to take out college loans because Mom and Dad simply had to have a $2m, 4000 sq. ft. house, rather than stay in a 2000 sq. ft home. Life's about choices, and that's a bad one.

[Anonymous]

After reading this thread, I am beginning to wonder whether any posters understand the concept of deficit spending.

[Anonymous]

Anonymous wrote:After reading this thread, I am beginning to wonder whether any posters understand the concept of deficit spending.

Why don't you explain it then?

[Anonymous]

Sounds absolutely crazy to me OP. Almost idiotic.

[Anonymous]

Anonymous wrote:Lol at paying $2M to live in Fairfax.

We are a boutique builder in fairfax....new homes on 1/2 acre lots in close in Fairfax sell for min $2.2m...approx
4000sq ft top two floors, with 1200 sq ft finished basement. Lots cost anywhere from $650K to $750K.

[Anonymous]

OP, don't listen to the whimps on this post. Since you and spouse have stable income, time is on your side to stretch and purchase the best home possible. BTDH.....and zero regrets. Go for it....and hope you stay healthy....

[Anonymous]

Anonymous wrote:

Anonymous wrote:Lol at paying $2M to live in Fairfax.

We are a boutique builder in fairfax....new homes on 1/2 acre lots in close in Fairfax sell for min $2.2m...approx
4000sq ft top two floors, with 1200 sq ft finished basement. Lots cost anywhere from $650K to $750K.

Well, by all means charge whatever people will pay, but you can grab a larger new construction house up in north Arlington for that price. If OP is just looking for a basic 4,000 square foot house in Fairfax, you can do a LOT better than 1.8m. But whatever, the underlying question is just a personal calculation of risk tolerance and spending priorities.

[Anonymous]

If anyone ever needed a case study for why personal finance should be mandatory in high school and then again for college, this is it.

Setting aside the question of what they can afford, OPs grasp of financial concepts and reasoning is frankly, scary. You really don't understand why having a smaller mortgage is better than a larger one? You do know that money isn't free right? That interest is...expensive? You do know that just maxing out your 401K will not be enough for you to retire on at your current lifestyle right? That $4k per kid is likely not enough to pay for college? You seriously leave $6k per month in a savings account? You don't want to "get in to a bear market"?

I think this post actually killed some of my brain cells...or it will shortly when I start beating my head against a brick wall. OP, you have much bigger financial problems than whether you can afford this new house (which, BTW, you can't...or at least you absolutely shouldn't).

[Anonymous]

Anonymous wrote:I haven’t followed the entire thread, but has OP indicated how much savings they have? One option is to make a large down payment to make the monthly payments affordable. Our HHI is $225k and we will probably buy at $1.5 million but we have very substantial savings due to being frugal, investing wisely, and having no kids. So we will put at least 50% down and still have plenty of investments and savings left (at least seven figures left). I guess based on the comments here we will be viewed as the poors in our new neighborhood when we buy but who cares.

No, but they have indicated they don't understand why a smaller mortgage is preferable to a larger one, so I think this is a lost cause.

[Anonymous]

Anonymous wrote:I haven’t followed the entire thread, but has OP indicated how much savings they have? One option is to make a large down payment to make the monthly payments affordable. Our HHI is $225k and we will probably buy at $1.5 million but we have very substantial savings due to being frugal, investing wisely, and having no kids. So we will put at least 50% down and still have plenty of investments and savings left (at least seven figures left). I guess based on the comments here we will be viewed as the poors in our new neighborhood when we buy but who cares.

Op here - I haven't said much about my savings because I didn't think it was relevant to the conversation - I would say my finances are similar to yours. Probably around $1M in fairly liquid assets. Others on this thread have opined that smaller mortgage are better, and i still don't understand why. In your case, you are paying down 50% in order reduce monthly payments. Can I ask why you don't consider downing 20% and separately investing the other $450K (~ 1.5M * .3)? If a bank is willing to lend me an extra $450K for tax advantaged and (relatively) low interest rates, why wouldn't I do that? Or do you imagine that you can't find investment opportunities that garner greater than 3.5 (or 4 or 4.5%) ROI? If no such opportunity arises, I don't see why you couldn't use the $450K to reduce your mortgage principal later on. If the monthly payment @ a 20% DP becomes too large, you also could use the $450K to recast the mortgage to lower the monthly payments later on.

I'm asking because (as others on this thread have surmised), I'm financially illiterate and I'd like to crowd-source some ideas.

Thanks in advance

[Anonymous]

Anonymous wrote:

Anonymous wrote:I haven’t followed the entire thread, but has OP indicated how much savings they have? One option is to make a large down payment to make the monthly payments affordable. Our HHI is $225k and we will probably buy at $1.5 million but we have very substantial savings due to being frugal, investing wisely, and having no kids. So we will put at least 50% down and still have plenty of investments and savings left (at least seven figures left). I guess based on the comments here we will be viewed as the poors in our new neighborhood when we buy but who cares.

Op here - I haven't said much about my savings because I didn't think it was relevant to the conversation - I would say my finances are similar to yours. Probably around $1M in fairly liquid assets. Others on this thread have opined that smaller mortgage are better, and i still don't understand why. In your case, you are paying down 50% in order reduce monthly payments. Can I ask why you don't consider downing 20% and separately investing the other $450K (~ 1.5M * .3)? If a bank is willing to lend me an extra $450K for tax advantaged and (relatively) low interest rates, why wouldn't I do that? Or do you imagine that you can't find investment opportunities that garner greater than 3.5 (or 4 or 4.5%) ROI? If no such opportunity arises, I don't see why you couldn't use the $450K to reduce your mortgage principal later on. If the monthly payment @ a 20% DP becomes too large, you also could use the $450K to recast the mortgage to lower the monthly payments later on.

I'm asking because (as others on this thread have surmised), I'm financially illiterate and I'd like to crowd-source some ideas.

Thanks in advance

20% down and investing the rest would be financially astute.

20% down and putting the rest in a savings account because you don't invest outside of retirement and don't want to invest in a bear market -- which is what you said you've been doing -- is idiotic. The money you have earning 1% a year is losing value every day due to inflation. You're not even beating the rate on your mortgage, and then you're setting yourself up to have no spare cash flow every month. Unless you enjoy stress there's no upside.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Lol at paying $2M to live in Fairfax.

We are a boutique builder in fairfax....new homes on 1/2 acre lots in close in Fairfax sell for min $2.2m...approx
4000sq ft top two floors, with 1200 sq ft finished basement. Lots cost anywhere from $650K to $750K.

Well, by all means charge whatever people will pay, but you can grab a larger new construction house up in north Arlington for that price. If OP is just looking for a basic 4,000 square foot house in Fairfax, you can do a LOT better than 1.8m. But whatever, the underlying question is just a personal calculation of risk tolerance and spending priorities.

I know the DC/Arlington/Bethesda crowds will find this mind boggling, but there are MANY of us living in NoVa who do not want to live in Arlington, Alexandria or close-in suburbs. They're unappealing, cramped and riddled with crime. We like the space, schools, and peace in the farther out burbs. I live in FFX and the $2.2M number for the new construction homes here sounds right. It's not something that I want to spend for ANY house, but new construction across the board is overpriced. And yes, we could get a house in Arlington or DC but do not want to live in or near the city.

https://www.zillow.com/homedetails/4057-Doveville-Ln-Fairfax-VA-22032/51837519_zpid/
https://www.zillow.com/homedetails/9224-Okla-Dr-Fairfax-VA-22031/51837703_zpid/
https://www.zillow.com/homedetails/8600-Hillside-Pl-Fairfax-VA-22031/51838621_zpid/