My family (wife, 3 kids 5/3/1yo) is looking to buy our 1st home. I felt pretty confident in our budget plan...until I browsed this site and saw the landslide of comments on various threads encouraging people NOT to buy that house they love, but to be more conservative and stay well within their means. I still think our plan is financially solid, but I want to be sure we're planning to spend appropriately for our income. Details below. Please weigh in!
I'm 30, and make ~ 130k/year. I consider my future employment prospects to be pretty stable, but clearly there are never guarantees. My wife is home with the kids for now, but plans to go back to work once the kids are in school. Again, for now no guarantee of income there.
I've been renting my entire life. Today we rent a house for $2600/month and have been able to save ~ 15-20k/year in the last 2 years. We are debt free and have ~ 130k in savings. My goal is to upgrade the house we live in and keep our lifestyle constant without straining our finances.
Our ideal house would cost ~ $670k, with prices in the places we want to live seemingly rising by the day. We would put ~ 100k down (15%) and finance the rest with a 30yr mortgage. Monthly payments would be roughly $2700/month BUT once you add in property taxes, PMI (ugh), HOA, insurance you're at ~ $3500/month. Add in a 1% monthly fund for maintenance, etc and now you're at $4000/month, $1500 more than rent! The only thing working the other way is the tax break for mortgage interest which should offset ~ $300/month.
Long story short: Our DTI would be ~ 32% depending on what you include, our savings would be mostly invested in the house and I estimate our saving power drops from $20k/year to $8k/year.
Is this a reasonable burden? Are we taking on too much house? I didn't think so, but I've been using the argument that our income is likely to go up and so we'll eventually be saving significantly again. But if "something" happens (lost job, medical disaster, whatever), there's a chance we can't afford our home. Equally, if you worry about "something's" all the time, you can never move forward in life! So what do you say, /r/personalfinance?
Submitted April 15, 2017 at 05:07AM by PhillyPDX http://ift.tt/2oxbUDx
