Post by SusanBAnthony on Oct 13, 2012 21:41:01 GMT -5
I know there are guidelines, percent of income, etc. that's not what I am talking about.
I mean more along the lines of, what things did you personally consider when you came up with you house budget.
Seem amount of fun money? Ability to take vacations? How much did you want to go into savings after monthly expenses? Was it based on how nice of a hose you can get for the price?
We can technically afford way more than we want to spend. We want to be able to save, pay the mortgage off early, spend a ton of money on organic food, etc. maybe take a vacation some year.
But the difference in house you can get from 175k to 225k is insane. Or two finalists are night and day and the 50k price difference will be about 300$ difference a month, plus a bit higher utilities at the larger house.
House 1: 175k, 1100 sq ft, 3 bed/1.5 bath, needs new kitchen and baths, horrible ugly mismatched carpet, detached 1 car garage. Overall scuzzy feeling.
House 2: 225k, 1700 sq ft, one more bedroom, one more bathroom, all wood floors, larger lot, 2 car attached garage. needs no work, perfect shape.
It isn't just these two houses, but there seems to be plenty in the 150-175 range like house 1, and plenty in the 225-250k range like house 2. Not buying yet is an option, I am more looking for an overall picture of how people chose what to spend. I may post a hypothetical budget sometime but I am not ready to yet. We are less conservative than MM overall, and won't be house poor either away, but neither will be saving 1k+ a month.
Post by theintended on Oct 13, 2012 21:51:01 GMT -5
Are you going to keep the kitchen, bath and carpet as is in house one? If not, spring for house 2, which lets you essentially pay for that work with the 3.something mortgage (for all intents and purposes: free money).
If it would have been my choice only, I would have chosen a house that's a lot cheaper. It was tough negotiating with H. He wanted a brand new house. Period. Then the list of must haves became very loooong. :-(
The original budget was ~40% of how much the new house cost. Yep. I did crunch a lot of numbers. At the end, I convinced myself we'll be fine since my lower income would still be able to cover our monthly expenses if something happens to H's job. But I still worry about it though.
we initially wanted to stick to our version of house 1's price range. however, just going over a certain threshold really opened up a lot more houses that were a lot nicer. because we're hoping to stay here for a very long time and had enough down to keep the monthly payments comfy for us, we took the leap and bought a house 2. by doing that, we ended up in a house with all our must haves plus a lot of extras. and this is in hcol, so the difference between house 1 range and house 2 range was more than 50k.
We determined how much we could afford and still have the things we wanted. Our number was less flexible than yours because we make much less. Once we actually checked out a few houses in that price range, we fell in love with one and went for it. We ended up with a little more house than we thought we would partly because we didn't realize that we could afford so much (only 1200 sq ft) but mostly because while we would be happy with a lot less, something smaller in our area would be very difficult to resell.
We are casually looking now but probably won't buy bc our market is way higher than yours and we need more for our down payment since our current house depreciated so much.
But we determined we can afford a mortgage up to a certain % of our take home based on our expenses, and did a reverse calculation to see what that would be with the anticipated taxes.
Post by Balki.Bartokomous on Oct 13, 2012 22:46:22 GMT -5
We essentially wanted to keep everything the same - be able to afford everything on one salary, maintain same standard of living, save as much $ every month, etc. - but gain more space & features.
We pay a few hundred bucks more per month for a 3BR TH w/2car garage and awesome porch than we did for a 1BR apt. Both times we've bought we went places that are more like your #2. On the bottom of our range, but still nice.
We wanted to have a certain amount leftover each month after bills/mortgage/retirement savings/etc. In truth, I wish we'd made that number higher now that we're in the house.
In our market, a nice townhouse is ~$350K and a detached house in similar condition is ~$400K. We would have been more comfortable with a townhouse price wise, but we likely would have moved in less than 10 years. It made more sense to us to buy detached once we factored in cost of selling in the future and that we'd take a hit if we didn't keep the townhouse updated. There are a LOT of townhouses around here so the competition to sell is pretty fierce.
I would go with #2 if you like it as-is, $50k gets used up pretty quick remodeling.
I think you will be surprised how quickly a stretch home becomes affordable assuming nothing goes sideways with your income. Five years from now, you'll be making 15% more dollar-wise if you get the "typical" 3% raise, 25% more in 8 years. Unlike rent, mortgage payments don't go up (unless you escrow taxes/insurance, and even then not usually much per year).
What we could afford, we could see ourselves living there for at least 5 years, good location, easily access to highways. At the time we thought it was great it was close to beaches and casino for resale factor.
We are casually looking now but probably won't buy bc our market is way higher than yours and we need more for our down payment since our current house depreciated so much.
But we determined we can afford a mortgage up to a certain % of our take home based on our expenses, and did a reverse calculation to see what that would be with the anticipated taxes.
This is us too. And we left a buffer of about a thousand dollars a month just in case.
I would go with #2 if you like it as-is, $50k gets used up pretty quick remodeling.
I think you will be surprised how quickly a stretch home becomes affordable assuming nothing goes sideways with your income. Five years from now, you'll be making 15% more dollar-wise if you get the "typical" 3% raise, 25% more in 8 years. Unlike rent, mortgage payments don't go up (unless you escrow taxes/insurance, and even then not usually much per year).
in your case, i'd absolutely pick #2. between the hassle and costs of renovations, it's worth it.
we bought a house at the top of our price range, but it was in perfect condition and needed no work (except choosing to paint 1 room). it was worth it to us. it was a stretch at the time, but even a year later, we're so used to the payments that we work around them. our (combined) 5% raise is going to DH's 401k because we're comfortable with all of our other payments now.
Post by SusanBAnthony on Oct 14, 2012 7:27:56 GMT -5
We are one income, (I SAHM) but I am planning to go back to school or work shortly. If it is school, that will delay me having income for a few years.
We are not handy either, and would hire out renovations. So to me it is worth buying the more expensive house- but DH is less convinced.
We would prefer to buy sooner because rent is almost as much as buying so we aren't saving much more a month renting vs. buying.
Gah, I don't know. We are going to get preapproved this week, and we will see what interest rates are looking like (we have excellent credit). So that will be a factor. Our realtor is also looking up utilities for each house to compare those.
Post by Doggy Mommy on Oct 14, 2012 7:57:23 GMT -5
We wanted to spend around 250k. We ended up buying a house for 266. The extra 16k was an extra 600 more finished sqft and much more open layout. The 250 and under houses were all pretty much the same layouts and felt a bit cramped. We also got a walk-out full basement instead of a partial and a greenbelt behind us, which was didn't see in the under-250k houses.
However, we qualified for a ridiculously high amount. We owned a townhouse too (we have since sold it) so we couldn't have spent it all on a house anyway, but I am soooo glad we didn't go near the top of our budget. Our financial situation is not the same now at all and if we had bought much more house than we did, we wouldn't be able to afford it now.
That being said, I would go for house 2 if you can afford it. 50k gets you a LOT.
First house ($128k, 0% down) was based on what we could afford on one income & then we found our dream fixer upper & went Over our budget by about $15k. It was no big deal going over & I soon quit working to SAH. House 2 ($255K, 50% down) we were modest in budget & bought basically the only decent house in the area we wanted that we could afford & have lots of extra money. I never liked that house but we had looked months & I was about to give birth. It was cheap & now is a great rental. House 3 ($380k, 3.5% down) was at the top of what DH even qualified for & for the first time my MIL even gave us the 20% downpayment (we ended up not using it for that & now it's in stocks). It was a "stretch" on 1 income but it was in my absolute dream area & much bigger than our bungalow. We've lived here 2.5yrs & never regretted it for a moment. This house was $100-200k cheaper than most SFH in the neighborhood so we probably never would have broken into this area otherwise & we got instant equity.
We picked house size based on our desire to have enough room to stay there for at least 7 years. The budget was based on the desire to be able to afford necessities on one salary. We were not aganist a home that needed work as long as no immediate work was needed before moving into the house.
You live in your house every day, so if house 2 is going to make you happier and more comfortable, it seems worth it to give up a few other things to have the house you really like. There are tons of ways to cut $300/month from other spending to allow you to have the better house. Cut back a little on groceries, a little on entertainment, a little on eating out, a little on clothing, a little on gifts, a little on the vacation fund, and you've probably found $300 pretty easily. You don't have to cut anything out completely, just cut back a little in several areas.
With more space, house 2 might allow you to stay longer, you run the risk on growing out of house 1. Plus, if you need to sell at some point, a 4br/2.5ba is a much easier sell than a 3/1.5.
The big kicker for me is that house 1 needs a new kitchen and baths. You could easily spend $50k on those. If you end up spending $225k on house 1 with kitchen & bath renovations, you still end up with a 3/1.5. House 2 gives you a 4/2.5 for the same price.
The only way I can see going with house 1 is at house 2 is in a bad location.
Unless you can't afford it, I'd pick house #2, no question. We bought at the top of our price range for the same reason, we got a lot more house by increasing our budget. We figured it was better to get more house, the garage (vs no garage), and a newer house that didn't require any work. This worked for us because we are not the type who have the time or patience for home renovations. We're very glad we bought the more expensive house because we know we won't outgrow it when we have kids. We can easily stay in this house for 10 years or more, forever if we only have one kid (or none). We decided to make a long term decision, but our budget was such that we could afford it. In your case, it will depend on how much breathing room you have in your budget.
Post by penguingrrl on Oct 14, 2012 11:22:02 GMT -5
We're in a HCOL area so it will be whatever we can get within a reasonable budget. I'm desperately hoping whatever house we buy will have at least two toilets (not something we've had in our adult lives) and since we'll have 3 kids it will need to be a 3 bedroom.
In the town we're in $300K (which is our top budget) won't really buy a house (and there are no apartments or townhouses here). There is one 1,200 SF cape on the market for $289K but it's being sold as is with the disclaimer that buyers are responsible for getting a CO and no pictures listed of the kitchen or bathrooms.
Honestly, not much thought went into it for us. We were qualified for up to 300K so we set that as our top. It was based on our previous year income which was half of what we were projected to make the year we brought so we felt comfortable with that. I wanted to go up to $325, that 25K made such a difference in the move in readiness of homes we were looking at but the H wasn't comfortable with that. Instead we ended up buying a fixer upper for $275K and putting $80K into updating it. So yeeeah, that obviously worked out better then just going up to $325K.
You didn't ask but I'll echo others by saying buy house no.2
We qualified on my income alone (DH didn't have a permanent contract yet) and then pretty much maxed that out. Now that DH has a grown up job, it's a nice comfy mortgage payment. We needed to spend what we spent to get a house we'd want to stay in; I had no interest in a starter home and having to move and sell and buy again. Ever, hopefully.
Post by schrodinger on Oct 14, 2012 12:42:27 GMT -5
When we bought, we were paying rent of $1400/month and saving $1000/month for our house downpayment. On top of this, we were still living comfortably (maxing out retirement, saving, vacations, etc.). So, we decided that we were okay paying up to $2400/month for PITI. This ended up being a loan of ~$325k, even though the bank approved us for ~$500k. Not the most scientific method, but its worked well for us.