I'm not a regular on this board, but you guys seem to be really reasonable when it comes to finances.
We just relocated to a new city and we're house hunting. Our previous mortgage was a little under 10% of our take home pay by the time we moved, so I think I may be being a little too risk averse.
We've found a house that is in the perfect location. It's also in good shape, and hits pretty much everything on our wishlist. The real draw is the location, as it will allow us to really enjoy the city, and we'll have zero trouble reselling when we want to.
So the numbers. Let me know if you need the full budget or any other info and I'll post it.
Take home: $8200 (before any OT or bonus, after maxing out 401k, etc and charitable donations)
Proposed payment: $2888
I think the payment will actually be a little lower (by about $150-200), because I'm putting a pretty big number in for flood insurance. I'm trying to be really conservative in my estimates, and putting in big numbers for restaurants, entertainment, and travel, I'm still looking at around $2k/month going into savings.
We have no debt right now. Don't plan on taking on any other than the mortgage in the foreseeable future.
Does this sound reasonable to you?
If you want any other info, let me know and I'll get it.
If you have covered everything in your proposed budget and have $2k a month surplus, then it sounds like you are fine.
Do you have kids, and if not, do you plan to? Childcare for a kid or two would deplete a $2k a month surplus pretty fast. We would not be comfortable with that mortgage payment on that income, but that is largely because we have ~$3k a month in childcare/school tuition and also want to save for college.
What about utility bills/maintenance/furniture? How much more are they going to be?
Bills will be lower than we're used to (house has solar panels and just got new insulation blown in), maintenance should be same or less than we're used to (new roof/ac/hot water/newly painted/etc). We also won't need any new furniture.
That is more than I would be comforatable with, I'd try and stay closer to %25 of take home. But if you really would still be putting $2k into savings it would certainly be doable.
Our mortgage is about that much but our take home is higher. However, we have another $2500 going out just for daycare and student loans.
I think you'll be comfortable for now because it sounds like your other expenses are relatively low. Some (rhetorical) questions to consider: Are the OT and bonuses you mention a significant part of the picture? Do you see your salary increasing down the road in case you ever change your mind about kids? If the answer to those is yes, then you should be in pretty good shape.
That is higher than I would be comfortable with, but I'm very risk-averse and have school tuition payments. That said, with those numbers and no kids, I would probably pay that for location.
Post by delawarejen on Nov 20, 2014 10:59:54 GMT -5
How big is the OT and bonus in your world? Obviously it's not something to count on as a sure thing, but on the other hand if it's a huge amount of your annual income that isn't reflected in the take-home above than it changes the calculation somewhat.
If that amount is on a 30 year, I wouldn't do it at all. If that's the payment on a 15 year, I *might* consider it depending on your OT and bonuses. (I wouldn't switch to a 30 year just to get the payment down though, if this quote is a 15 year.) But the fact that you're new to this city and therefore likely new to your places of employment gives me pause, plus the fact that you haven't completely settled on the children issue and daycare or a SAHP may kill your finances. (You don't mention what the income split is between the spouses).
Normally it's a bit too high for my liking, but your $2K in savings per month gives you enough cushion assuming you have a good eFund and are happy with your retirement contributions.....just keep in mind that jumping off the fence to have kids will eat up that $2K in a heartbeat if childcare is involved.
I think you'll be comfortable for now because it sounds like your other expenses are relatively low. Some (rhetorical) questions to consider: Are the OT and bonuses you mention a significant part of the picture? Do you see your salary increasing down the road in case you ever change your mind about kids? If the answer to those is yes, then you should be in pretty good shape.
My bonuses are usually pretty good, but not hugely significant. Around 12%. OT is not super significant. My boss is currently pushing through a promotion for me and he has some guaranteed raises coming up (he's in a union) but I didn't want to take that into account for now.
Also, I'm on the verge of transferring into a new "tier" at work, likely mid-next year, which will be a big jump in salary. We both have excellent job security.
ETA: This is a 15 year. I was transferred so I'm not new to my employer. They transferred me knowing it will be long term. I have actually been supporting my new work site for the past two years (we moved from about 90 miles away). My H is new to his employer, but when we moved, he had three job offers within a week of starting.
Post by Velar Fricative on Nov 20, 2014 11:08:05 GMT -5
Eh, I'd do it, especially if you don't have debt. I assume that payment includes home insurance, taxes, etc., right? We have roughly the same numbers in our household WITH student loan debt and childcare and we do fine. We don't swim in our money or anything but it's fine.
But I'm also not a regular on this board so take my opinion with a grain of salt...
Post by dr.girlfriend on Nov 20, 2014 11:18:43 GMT -5
With the additional info about kids and job security, I think you're in good shape. If you don't have big cushions already (which, 10% of your salaries toward housing? Hope you've been saving a lot!) I would start socking away the $2k into Roth/investments/efunds or whatever as soon as possible so you have a nice big cushion if you did have some interruptions to income or other unexpected expenses. Even without kids, etc., things still come up -- within a few years of our house/kid combo we had to replace both cars and paid about $20k for MIL's funeral, and that's separate from the unexpected home expenses (hot water heater replacement, etc.) Life happens, but having a great house in a great location is also a big part of what will make your life happy. I guess the last consideration would be, if you're still really on the fence with kids, do you feel like the school district would be okay? It wouldn't be a consideration for a while, I know, but it can fly by.
Personally, no. If I were you, probably. I am risk averse and have different expenses (kids and all that) so I would be nervous spending that much. You have fewer liabilities than I do so I think you would be fine. If you really like the house then you should be fine to make it work.
I'd do it with no other debt, given what you've posted, assuming you have a decent amount in savings already to cover the unexpected stuff that comes up with homeownership (which it appears you're already aware of given your statement about a previous mortgage).
We spend > 50% of our take home on [mortgage + SLs], so if you don't have SLs, a mortgage at 35% is way below what we're shelling out. But there are so many factors that %s really aren't useful. It's about whether the monthly budget works, both now and in the future that you're planning.
Post by barefootcontessa on Nov 20, 2014 11:56:58 GMT -5
how long have you been looking? if you have been looking for a long time and finally have found something then I think it is probably worth it. Our PITI is about 30% of our take-home. We have a big family but no daycare and we still manage alright. I make about an additional 10% each year outside our regular payroll income and use that to fund savings.
Do you have interest rate numbers for 15, 20, and 30 year terms?
We opted for a 20 year when we refi'ed because going to a 15 year only got us down 1/10 of a percent. We pay ahead as if it was a 15 year loan, except for the 3 months I was on unpaid maternity leave. Having the flexibility of a lower required payment has been good for us.
It sounds tight, but given everything you posted you could probably do it. Things could get tight very quickly if you did decide to have kids (or had an "oops" baby), but given that it's a 15-year term then it's possible that you could later refinance to a longer term. It might help if you posted your whole proposed budget, since someone here might spot somewhere that you're not budgeting enough.
We have about the same take home and MM told me we couldn't afford a 2200/month mortgage. But we have some other circumstances too that you don't have. It still seems pretty high to me, but not knowing the location and what other cheaper options would mean giving up, it's hard for me to answer.
That's the payment for a 15 year mortgage? Then I think you are fine. For a 30 year I would think it was a little tight but doable. Mainly tight if you decide to have kids, which even if it is a few years out, you should be considering when buying a home. But in your case it sounds fine.