Post by crashgizmo on Jun 30, 2015 20:04:09 GMT -5
Some questions:
1. How much is left on the car? 2. Am I reading your bonus amounts correctly? I don't want to quote, but if those bonus numbers are correct I don't even know why you're posting! 3. What are your base annual salaries?
Are the bonuses once a year? Are you planning to buy based on monthly income, or save bonuses and draw from it monthly if your expenses are greater? It might be easier to start with the house price you're targeting, and see how that fits in with your goals.
Love of my life baby boy born 11/11. One and done not by choice; 3 years of TTC yielded 4 MMC and 2 CPs, through 4 IUIs and 2 IVFs. Focusing on making the world a better place instead...and running.
Let's say you want 2000 sqft at 280$/sqft - that works out to be 560k$
If you could use last year/this years bonuses plus savings, to cover down, you could get a mortgage that is just shy of the jumbo limit, at about 415k$.
That would assume 110k$ down. That puts your mortgage payment at about 2100$ per month, which would be comfortable, given your income.
You could technically go higher on this, if you are comfortable with the bonuses being stable.
This wouldn't be MM if I didn't give you a small blurb about bumping up your retirement savings, even if it is post tax.
Post by giantsgirl on Jun 30, 2015 21:00:28 GMT -5
So, your bonuses are more each year than your base? If that is the case, what are you doing with that bonus money each year? I feel like there is a typo somewhere.
debt is student loan, $700 total car $11,000 no cc
I'm not doing the detailed math lime did above, just going on my gut. For DINK with this level of income, I feel like you should be at a higher percentage of your target retirement savings goal for your age. Even if you think your income will continue to increase with promotions, etc., once you buy a house, your monthly maintenance expenses will also go up and your income increases may not outpace that by much, depending on how much you decide to sink into a place. But again, I'm not doing the math here, just guesstimating.
I may have missed it, how much do you currently have set aside for the DP? I don't think interest rates should be a reason to buy a home, there is so much that goes into maintenance on a regular basis.
I always have trouble with using bonus as part of the regular living expenses but your bonuses are so large that they are a big factor. With your current monthly income and expenses I wouldn't even be comfortable spending what you spend on rent now because you don't have a line item for savings, home repairs, decorating, or miscellaneous home related expenses that would be necessary when you have a home. If you can set up a save to spend account for some of your line items I think you would be okay to spend a fair amount.
In my mind it looks a bit like this- Bonus $XXX Pay for: Day care- $18k Travel/gifts/clothes- $18.5k IRA (to help catch up)- $11k Home repair and maintenance savings- 1% of home cost- $10k? More if you have a pool. Personal savings- 10% of the bonus? This could also be increased to cover a future vehicle or other big expense. Decorating and misc. house expenses- $25k (this is a guess based on your other spending habits) Gardener- $1500 Charitable giving- I have no idea what you give. $10k? That is only about 2% of your base. That should be easy to do. College savings for kid- $5k? Again, guessing.
Remainder- This leaves a good chunk of the bonus. I know you have extra money in your monthly budget, even more when the student loan is gone, but I assume that will be eaten up by things like increased utility costs and baby expenses. There is no way I would spend all of this because I'm sure I am forgetting about a dozen different categories. With these amounts in mind and the understanding that I am totally forgetting things, I would probably be okay to spend around $5000 PITI. However, you have to be really good at managing your save to spend accounts to cover this since it isn't in your regular budget.
I have no idea what your tax or insurance rates will be so I can't give you any idea of a house price that this would cover.
You've got very low debt, but I'd be concerned at the small savings you seem to have, considering the expenses shown and the incomes shown. Unless the income level is an _extremely_ recent change, where has the extra income been going? Are you sure you have the numbers correct for your expenses? Only having a 4 month e-fund at this point in time would worry me...
forcuarto- Wait can you explain.. you wouldn't be comfortable spending $1700 on a mortgage on our current income? or our current net monthly base?
I understand people are conservative on here but we can't completely dismiss my DH's commission income in our budget because that is his pay structure.
I would be okay with taking the $1700 you spend now and add $3300 from the bonus. This means you would save about $40k from the bonuses each year to go toward mortgage payments plus the $1700 you already allocate each month for housing. This gives the total of $5000 per month PITI that I mentioned I would be comfortable with. Unless you have crazy high taxes and insurance this shoudl easily cover the $500-$600k that you mentioned in another reply.
Does that make more sense? My post made a lot more sense when I first typed it out but I had used several of your numbers (total bonus amounts, salary amounts, etc.) and I didn't know if you would be comfortable with that information being left out there. After I deleted those numbers it became a little more confusing.
You've got very low debt, but I'd be concerned at the small savings you seem to have, considering the expenses shown and the incomes shown. Unless the income level is an _extremely_ recent change, where has the extra income been going? Are you sure you have the numbers correct for your expenses? Only having a 4 month e-fund at this point in time would worry me...
we have our DP fund and our retirement funds in addition to the e-fund
Well, retirement funds are behind, so that would be concerning. Is the DP fund big enough for a 20% DP, or are you eligible for a loan type that does not include PMI for a smaller DP? Do you have any specific savings for the starting costs of homeownership (ie: lawn mower, weed wacker, other garden/yard implements, furniture that you'll want/need soon after moving in, decorating expenses like painting and other potential changes to the home, etc...)
The expenses listed add up to approximately your base takehome income. But, the bonuses listed are _massive_. There is no accounting for where that money is currently being spent. Has it all be saved (in non-retirement accounts, assuming your retirement savings is primarily pre-take-home pay)? That is what I am getting at - if you've been saving most of that bonus up each month, then you can probably afford a darn huge home, because you'll be able to pay for most of that giant home with cash if you want to... (really, 2 years of those bonuses adds up to a hefty chunk of change, enough to pay outright for a pretty decent home in many MCOL areas) But, if you've been earning those bonuses for 2-3 years, and only have, say, $50k saved, then that money is being spent on something that isn't showing up in the numbers you posted earlier. If you know where it has been going, and it's temporary (ie: paid down student loans so you only have a teeny bit of student loan debt left) or whatever, then maybe it isn't a big deal. But, if you can't identify where that money has been going, you need to do some serious analysis of your expenses before you look at buying a house.
Another option we discussed and is not completely off the table is to buy in a neighborhood we don't plan to raise kids in and get a 2/2 or 2/1, 1000 square foot house closer to 350k in the city and sell or hold to rent when we need to move out for more space in a few years. I have a few reasons why I don't want to do this but mostly because I think it will be a PITA to move twice. If we are going to buy I would prefer to buy someplace I see myself longer.
I would not do this. I don't think it's wise to buy when you already know you would plan to sell.
I missed your savings/DP numbers, but if you have a substantial DP saved up, I don't see any issues here.
How much are the 3/3 houses you want to buy? Have you figured the estimated monthly payments?
Clean up your spending habits now so you have your 20% DP (you already have this) and a least $20-30k set aside for the start up costs, maintenance, house emergencies, etc. You say you won't decorate but there are still tons of costs associated with moving and purchasing your first home. IMO most people get the itch to decorate when they're sitting in an empty house or have friends and family coming over and have tons of bare walls.
I think you can easily purchase a home in the $400-500k range but I encourage you to purchase a "moderate" home so you can focus the following year on continuing to save for your future kids and get caught up in your retirement.
Not necessarily I say moderate in the sense of don't focus on going as big or as expensive as you want because you have other future expenses to consider (retirement catch up, kids, house maintenance costs, etc)..
If you got into your dream home now what would that look like with your budget? Start living like you are already in your dream home and see if you're comfortable with those payments/situation.
In my mind it looks a bit like this- Bonus $XXX Pay for: Day care- $18k Travel/gifts/clothes- $18.5k IRA (to help catch up)- $11k Home repair and maintenance savings- 1% of home cost- $10k? More if you have a pool. Personal savings- 10% of the bonus? This could also be increased to cover a future vehicle or other big expense. Decorating and misc. house expenses- $25k (this is a guess based on your other spending habits) Gardener- $1500 Charitable giving- I have no idea what you give. $10k? That is only about 2% of your base. That should be easy to do. College savings for kid- $5k? Again, guessing.
We do not plan to spend 25k to furnish our house. We would like to get nicer furniture eventually but it's not a priority when we buy this year. If we go into a 3/3 we will probably do an office which will eventually be an office and guest room, a baby nursery that we will keep empty until we have a kid and a master. We have living room furniture, office, kitchen and master furniture. There are a lot of areas in the budget we can cut if necessary including travel, gym and clothes. We were thinking of cutting cable as well because we have in the past but DH watches during football season. How is 10k 2% of our base? lol
I didn't mean that you would spend that on furniture alone. I was thinking more along the lines of pest control, house cleaner (weekly, monthly, or not at all), alarm system monitoring, mulching or landscaping each spring, opening and closing a pool, plus redecorating or buying furniture. You may also have large projects in mind that you want to save some of this for over a few years. A complete kitchen remodel costs $18-$45k on average. Maybe your kitchen is great but you may remodel a bathroom, put in a pool, add an outdoor kitchen, add an addition, finish a basement, or any of a thousand other projects.
In the 10 years that DH and I have been home owners we have redecorated 1-2 rooms each year. Some of those we complete, down-to-the-studs remodeling, and some were a coat of paint, some new curtains, and a lamp. I think this is pretty on par with most people. This year we redid our master bathroom (new lighting, medicine cabinets, mirror, shower curtain, art, accessories, and paint) and I changed out our 7 year old sofa for some chairs and added new curtains and art in the formal living room. We have 9 rooms in our home and we seem to decorate them once ever 6-7 years. This isn't a set schedule or anything, it just seems to work out that way. Tastes change, needs change, we and our children age and mature and we do what we can at the time. DS2 is in a crib right now in the nursery but will be ready for his big boy bedroom next year so I am already thinking ahead to that. Nothing huge, but they could definitely eat in to the budget pretty easily when you add it to the other expenses I mentioned in the first paragraph.
The only reason I am mentioning any of this stuff is because it was never something I thought of before I bought a home. Your home should make you happy and be something that you love and sometimes that costs money.
Oh, and I used the wrong word. I meant that was 2% of your total gross, not base. Sorry. That is also a guess because I have no idea what your pretax numbers look like.