Anonymous wrote:

Anonymous wrote:
If I understand your budget and income flow correctly, if you take on a $9k PITI then you wouldn't have any non-retirement savings each month, right? So every time you have a large one-off expense (annual vacations, new car, house repair/renovation), you would be drawing upon your existing savings rather than being able to save up for it. This doesn't seem sustainable?

Do you have a lot of equity in your current house? Can you make a higher down payment so your PITI is lower?

OP here - you are right - $9K would eliminate our positive savings cash flow. Certainly we could reduce it to $8K and have $1K monthly positive savings cash flow.

We have enough savings and equity in our current house to put 20% down on a new house (so $300-$400K). And accumulate about $90K in cash savings each year. I don't know why we would put more than 20% - though - PMI is done for, and I don't see why getting a smaller mortgage just for the sake of having a small mortgage is better (besides the positive cash flow issue).

Waiting as year to reduce the principal by $90K doesn't make sense to me if I am able to borrow at <5% (and possibly refinance if the rate drops below 3%). Suppose I had $2M in cash. I don't think I would buy the house in all cash (and have a $0 PITI). I think the right (income maximizing) thing to do is put pay exactly $400K down on a house (to eliminate PMI) and do something else with the remaining $1.6M that garners returns greater than my expected borrowing rate. or am I being financially illiterate here?

Anonymous wrote:We have a 300Kish HHI and am living in a 2000sqft SFH in Fairfax. We think the house is a bit small - ideally, we'd like to be in 4000sqft. Homes that size in our neighborhoods of interest are running $1.6-$2M. With a 20% down payment, I'm calculating monthly PITI payments of around $9K. We're paying $3.5K right now and are saving $6K+ per month, so just from basic accounting, it looks doable. But the 6:1 house price to income ratio seems crazy and out of line with other folks opinions.

Other threads on DCUM are suggesting house price around $1M for our HHI. But we're doing that right now and have $6K left over every month going into measly 1% savings accounts ( we have maxed out 401K, HSA, 529 plans, so this is after all those things). We are debt free (besides current mortgage)

What do you guys think? Should we upgrade and basically dump all of our extra savings into a bigger house? Or is that too much house for our income?

Anonymous wrote:

Anonymous wrote:
I have posted a couple of times already - I said that we stayed in our house and fixed it up and the extra money each month gives us flexibility, etc. It sounds like you have your mind made up and this is what you want to do. I hope that your income is straight salary and not dependent on bonuses bc if you have a bad year, you won’t be able to pay all of your expenses. I also want to add that when you look at the median income for, say, McLean, it also includes all of the condo buildings (I’m assuming). Plus you have to remember that a lot of people bought their homes years ago when prices were much lower and they may retired now but they likely have a lot of assets (which is what allows them to stay in their homes which are now worth a lot of money). I think you are assuming that all of your expenses will stay the same except for your mortgage. Have you checked the property taxes? Utilities? Landscaping costs? Put all that into your budget and see how much you have left over every month.

Op here. Good points. some responses

- I'm not keen on fixing up and/or expanding the current house beyond what's normal in the current neighborhood. If I have a 4000 sqft house in a neighborhood of 2000 sqft houses, it will be very hard to sell 5-15 years from now. I see neighborhoods in the midst of teardowns/rebuilds, and I'd rather not deal with those issues. (I think) it's better to just move into a neighborhood of 4000 sqft houses instead.

- we're civil servants, so income is just salary and pretty much steady until we retire, which we don't plan to do any time soon. so no income volatility. For those asking about college - I think there's a separate but real DCUM conversation on how much college costs should be prepaid by parents (rather than leveraging student loans ).

- our mind is certainly not made up. this arose out of a conversation where we were wondering "what do we do with the extra $6K? venture into a bear market? buy a rental property? trade-up our house? If the third option, could we possibly afford (for example) a 4000 sqft house in a Langley pyramid neighborhood with a short commute to Tysons?

- I chose the census data area ( https://data.census.gov/cedsci/profile?g=1400000US51059460100) specifically because that area has no condos/townhouses. Certainly if you include the townhouses/condos, the median HHI goes down - but I'm just using SFH HHIs as my comparison. And that's at (or just above) $200K.

- property taxes should project proportionally with the property value/size. Utilities, on the other hand, are a tossup. We're paying $300 for gas and electricity, $100 for cell and internet, and $250 quarterly for Water. Even if those doubles, that's still doable. But if it triples or quadruples, yeah that's a concern.

Anonymous wrote:

Anonymous wrote:Why? Sometimes you just have to live within your means. I don’t understand how everyone believes that they must live in a $1.5-$2m house. We’re at $650HHI. House purchased at 630k around 2900 sq ft. We’d never buy a 1.8m home.

Everything new costs that much around here. In my area you can either get a teardown for slightly less than $1m, or a nice place for $2m. Not much in between.

Anonymous wrote:
I have posted a couple of times already - I said that we stayed in our house and fixed it up and the extra money each month gives us flexibility, etc. It sounds like you have your mind made up and this is what you want to do. I hope that your income is straight salary and not dependent on bonuses bc if you have a bad year, you won’t be able to pay all of your expenses. I also want to add that when you look at the median income for, say, McLean, it also includes all of the condo buildings (I’m assuming). Plus you have to remember that a lot of people bought their homes years ago when prices were much lower and they may retired now but they likely have a lot of assets (which is what allows them to stay in their homes which are now worth a lot of money). I think you are assuming that all of your expenses will stay the same except for your mortgage. Have you checked the property taxes? Utilities? Landscaping costs? Put all that into your budget and see how much you have left over every month.

Anonymous wrote:

Anonymous wrote:

It sounds like you are not actually “maxing out” the 529s. How much do you have saved in those accounts now, and how old are your kids? How much have you saved for retirement? And how much do you have in other savings? I agree it doesn’t make financial sense to dump large amounts of money in a bank account earning no interest. There are many ways to invest your money.

I also agree with pps that your expenses will not stay the same with a house double the size. Everything is more expensive. Unless you have a huge amount in savings now it seems risky to halt all savings. Can you compromise, maybe getting a somewhat bigger house but not so much bigger?

OP here - thanks for the vigorous discussion - it has definitely helped feed the conversation between my spouse and myself about this issue. I have a couple of clarifying comments for some folks:

1. I meant $4K per child (so $8K total) for the 529s. We aren't sure whether 529s are the best vehicle for college savings (besides the tax deduction) so we're mum on that at the moment. Putting $ in stocks during a bear market doesn't look enticing either. We're maxed out on ibonds - but that's just $10K per year per person. I don't see many other investment opportunities. The nice thing about real estate is that you get to enjoy the benefits of your investment.
2. I think I wasn't clear about the prospective location. We're in fairfax now, but the neighborhoods of interest are not in or around Fairfax City. They are in Vienna/Mclean/Great Falls.
3. For those who say that we would be the "poorest" in the neighborhoods - I don't see how that aligns with the data. If you look at census data for neighorhoods in the general area (e.g. https://data.census.gov/cedsci/profile?g=1400000US51059460100 ), you can see median household income of around $200,000. So we would be higher than the median. We drove through these neighborhoods - I don't think the people driving land rovers and BMWs would be looking down their noses at our Odyssey - this isn't Bugatti territory.
4. It definitely sounds like a $9K PITI is outside DCUM's comfort level. But maybe $6K PITI is easier to swallow.

Anonymous wrote:No. Don’t take the risk. If one of you goes, it’s too much for one.

Anonymous wrote:How many kids do you have? I don’t see childcare or cost of automobiles in your budget. Or home maintenance.

I would think in Fairfax you could upgrade without having to spend that kind of money.

Anonymous wrote:

It sounds like you are not actually “maxing out” the 529s. How much do you have saved in those accounts now, and how old are your kids? How much have you saved for retirement? And how much do you have in other savings? I agree it doesn’t make financial sense to dump large amounts of money in a bank account earning no interest. There are many ways to invest your money.

I also agree with pps that your expenses will not stay the same with a house double the size. Everything is more expensive. Unless you have a huge amount in savings now it seems risky to halt all savings. Can you compromise, maybe getting a somewhat bigger house but not so much bigger?