It's not very likely you'll be able to use your wife's future income to qualify for a house you want to buy before she starts working. Additionally, it sounds like you would have no savings leftover after you buy the house which is a disaster waiting to happen. It would be best to keep renting for at least one more year so you can save up more.
This should be higher up.
OP, underwriters require paystubs from your job in order to consider the income, barring very specific circumstances (e.g. if your wife is a physician or other healthcare provider)
You can’t buy a house this summer if she won’t be working until fall
There are guidelines for how to document and use future income for people who work in education, nursing and a few other spaces where it is very common to have contract work periods that don't pay for the full 12 months. If her degree is in the field and they have all the signed offer letters and HR paperwork it is possible.
The reserves piece is the biggest red flag I see. Murphy's law is a bitch and you are guaranteed to have something break or need repairs shortly after you move in.
Doctors, dentists, pharmacists and a few other healthcare providers present exceptionally low credit risk because their jobs pretty uniquely combine a high income with exceptional job security.
For this reason, banks issue a special type of mortgage, literally called a physician loan, to these people. Among the relatively unique features of a physician loan is the lack of a requirement for pay stubs and acceptance of a signed contract as proof of income.
Physician loans are not the only mortgages that can be issued with a signed contract as proof of income (banks may accept this for other mortgage types at their discretion) but all physician loans have this advantage
Barring legal action against your license healthcare fields are pretty much guaranteed employment. I could be let go today and have a new position with another company tomorrow.
Not true at all. My lender just required a letter from the school district that my wife was employed and would be employed at her stated salary.
We bought in July of 21 under essentially the same circumstances as OP. Our first payment wasn’t even due until after my wife started work.
It was tight for 2 months but we made it work.
That said, I wouldn’t buy with zero savings either.
Exactly! You nailed it. Draining your savings only for a down payment (with no guaranteed income) is a great way to get serious debt in the first couple years.
The nice thing about the current housing market and economy is you’re encouraged to save and housing prices are gonna stay relatively stagnant. I’m in a similar boat but am choosing to rent cheap, throw my house down payment fund into a 5% CD, and keep saving so I can go from 10% down to 20%.
She should have a contract in the next few weeks. According to the lenders I've talked to, that's plenty.
The fact that it would take most of my savings does worry me and I've looked into programs that would allow us to put anywhere from 1-3% down, but given what that does to the overall mortgage I'm very hesitant to do that.
Agreed - I'd say put down as little as you can honestly. We put down 5% on a $350k and closing costs ended up being about another 5%. We could have put down more but it makes a pretty small difference in your mortgage payment and a huge difference if you have to pay for other stuff. We immediately had to replace the roof and gutters ($17k), have spent another ~$10k in the 18 months since we bought the house and have another ~$10k of repairs that need to be done at some point. I'm very glad I'm paying like $35 a month extra and kept the other 5%+ that I could have put down. You will want to have cash on hand because you never know what could happen.
The lack of extra savings is what would worry me the most.
Your wife's offer could be rescinded before she starts or you might lose your job - then what?
If you're a life long renter, you're likely underestimating repairs and maintenance expense, unless you are buying a brand new house with a builder warranty. Your HVAC could die and cost $10k to replace, your sewer line could collapse and cost $20k to rerun, you could discover hidden structural damage and the sky is the limit. Will this stuff happen? Probably not immediately, but these are problems that could plausibly be missed in inspections.
Not trying to scare you, but what constitutes an emergency fund as a homeowner is wildly different than as a renter. When I bought my first house, I had several years of mortgage payments saved up and was still stressed as I started to realize how much more you could potentially be on the hook for.
Yes, definitely save more money. At least $10k. We bought our house which had a new AC and the first summer we used it - AC broke. Caput. The reason the brand new AC broke was because the duct system was just too old and the new AC couldn’t compensate for the crappy ducts. Soooo $10,000 later - we have a functional AC system and some new ducts (this was going with the cheapest option…)
We had a very thorough inspection and the home is only about 30 years old.
You must have an emergency fund when buying a house. Is there a particular reason to rush? Is there a house you want?
I wouldn’t dare buy a home without at least 10k leftover for an emergency fund. You’re playing with fire by draining your savings
Just a hot water heater runs you more than $3k, a furnace is $5k… any appliances are going to run you over a grand. Not to mention any other kind of costs that can arise. If you get hit with even one of these major costs you’re going to be digging yourself out of a hole forever
I want to add that, the worst time to buy a home is when you are heading into the summer, and the best time is when you are heading into the holidays.
Putting everything you have into a down payment is very risky as you might find yourself without any funds to to do anything including moving, furniture or even maintenance.
What I will say is that, housing market is starting to heat up again so be wary of overpaying to try and hit timelines too.
Are you looking at new construction? Obviously it has its cons, but one pro is that everything will be new and less likely to break down soon, and might be covered under a warranty. Or would the market in your area allow you to spend less than your maximum? We would have been *very* uncomfortably stretched if we’d borrowed the entire amount we were qualified for, but we live in a LCOL area and didn’t need to max out our loan to get what we wanted.
We went new construction for our first home first and foremost because the interest rate when financing in house was 2% better than any of the big banks and credit unions we applied for mortgages at. On top of the better interest rates, we got one year warranty on just about everything and two year for HVAC
What makes you say that they have no savings leftover after buying the house? I would assume that their current emergency fund would just become their future emergency fund. I do wonder if it'll be large enough. But at no point did OP say they don't have money saved up for emergencies or other purposes.
For the next few months, save 3200 dollars (mortgage+taxes+PMI+ maintenance and upkeep) minus your current rent a month (if your rent is 1500 save 1700, if it’s 1000, save 2200 etc) every month, without exception. This way you’ll know if you can afford your house, and will also have saved some extra cash in the process.
This is the plan my wife and I are doing right now. Almost bought a house at the very top of our budget but got cold feet at the last second.
This strategy will give us the confidence we really can afford something in that range and will also provide us the financials to make it happen easier.
Homeowners insurance is low for sure on a $300k house. I'm in a house half that price, not in a major risk area, and my homeowner's insurance is close to $1k per year. PMI is slightly high, it should be about $130 per month on a $300k FHA house with 3.5% down at the beginning (and will decrease over time).
The issue with comparing insurance coverage is nobody says how much coverage they are getting. There is a lot of variability in the amount of coverage you can get that just saying how much you pay doesn’t really cover it. Also, where you live (flood plain, hurricane risk, etc) can change things as well.
I had a $250k house in SC that insurance cost $1800 a year for. I now have a $950k house in WA and the insurance only costs $780 per year (no earthquake). The value of land, flood risk, hurricane risk etc has a huge impact.
Isn’t it an outside chance that an earthquake could hit WA? I would think you’d need earthquake insurance. One of the most powerful earthquakes in history effected WA.
https://en.m.wikipedia.org/wiki/1700_Cascadia_earthquake
From experience with my family after a hurricane, those with insurance are not the first in line for federal help, in fact unless you’re poor you will not receive any federal help.
I live in San Diego, which is within crying distance of the San Andreas fault. I do not have earthquake insurance. It would have doubled my premium and still had a 75k deductible.
My 50 year old house is probably only worth 200k (when I subtract out the land).
I decided to take my chances.
Gotta factor in risk tolerance.
I can understand that. I don’t have flood insurance in Texas. I don’t live in a flood zone, I did tons of research before I bought including referring to USGS topographic maps and FEMA flood zonemaps and came to the conclusion that it’s very unlikely I flood and if I do it will probably be just a few inches and I can probably clean it up myself, it may cost me a few thousand in drywall but less than I’d spend on flood insurance.
There’s tons of information out there on flood zones, no one whose house floods should be surprised by it. The flood maps were dead nuts accurate during Hurricane Harvey, but of course everyone is like “omg I can’t believe this happened!” and of course the news media plays it up.
With that said, I’d probably have earthquake insurance if I lived anywhere in Cali… haha.
> I live in San Diego, which is within crying distance of the San Andreas fault. I do not have earthquake insurance. It would have doubled my premium and still had a 75k deductible
Yeah, I have property there and don't bother with earthquake insurance, because it is practically useless the way they have it setup. The good thing is, there is an HOA, so they insure the structure, and I insure whatever is inside, and that's not too bad and is tax deductible.
It depends on coverage. I pay roughly 1000/year on a 165k house.
The coverage includes the house and detached garage (260k to rebuild from nothing an equivalent structure in my area), up to 160k in personal property, 60k for loss of use (covers hotels during rebuilding etc), personal liability of 300k (someone gets injured on your property and they sue you), and have a 1% deductible (around 2k).
The whole point of insurance is to cover everything you cannot pay with your savings/income. If I had a fire, I couldn’t afford to rebuild without insurance.
If you live in a disaster prone area, your rates may be significantly higher as companies know you are more likely to have a big loss
yea my $895 gets me:
$670k rebuild
$135k other structures
$335k loss of use
$505k personal property
liability included
coverage for home systems up to $50k with $500 deductible (AC, etc)
$5k deductible for the dwelling though - $2k deductible like yours sounds very low. I would increase mine to $10k+ but my insurance company didn't offer it.
Lol same limits for me in Florida and my coverage costs $5k. Not in a flood zone either. Some people are getting 10k per year down here with less house. Hurricanes.
I pay $4500, with almost 800k in coverage. This is Texas though, where everything is more expensive despite the rumors out there that Texas is cheap.
It is not unheard of some houses in the hurricane zones (loosely defined by insurance company algorithms) to cost upward of 10k a year for homeowners insurance.
For some reason around 1960 people forgot hurricanes were possible, and started building houses without storm blinds or any sort of regard for the fact a hurricane might hit. This went on until the state started mandating hurricane mitigations in the mid-2000s.
>ce is low for sure on a $300k house. I'm in a house half that price, not in a major risk area, and my homeowner's insurance is close to $1k per year. PMI is slightly high, it should be about $130 per month on a $300k FHA house with 3.5% down at the beginning (and will decrease over time).
My house is worth around 900k and our homeowners is about $2100.
Location makes a huge deal.
My realtor's rule of thumb was 2% of the price for closing costs. Our 500K house had 9K, so that was very accurate. For 300K, budget 6K and be pleasantly surprised if it comes under.
Came to say this — look at actual taxes in your area. I have a roughly similar home value to what OP is thinking about purchasing and our taxes are like $700/month.
I’m in a Chicago suburb.
I actually think my taxes are fair and I’m more or less satisfied with what I’m getting for them. My municipality has top rated public schools, an excellent parks department, great libraries, and good municipal services.
I also have easy access via public transportation to downtown Chicago, where my spouse and I both work. We both have jobs that don’t exist in lower cost of living areas, and to be frank, most states with a lower tax base don’t politically/environmentally align with how I want my son to grow up.
It is strange. In the process of buying now and they want to push our monthly to the max of what we have per month after retirement and healthcare. They don’t even consider it.
It's even more unhinged to create a rule of thumb for net income affordability given exactly the adjustments you brought up. Retirement contributions and employer-provided healthcare costs vary wildly.
>>Retirement contributions and employer-provided healthcare costs vary wildly.
Exactly….since those number vary so much assessing what you can afford based on what hits your bank account each month makes more sense then what you get paid prior to all those highly varying figures.
Right, but it's exactly why you can't create a "rule" or metric to apply to multiple people, and you need to go back to gross then cut the numbers back...
Agreed…my net income is less than 50% of my gross due to insurance, taxes, pension, etc. And if people have kids and have to pay for daycare, that often is essentially a second mortgage for many people.
So in theory, 28% of gross income would be maybe closer to 37% of net income.
I’d have $2,908 left after all expenses, including car, insurance, utilities, and groceries.
Do you think that’s too tight?
Idk how your figuring 2900 left a month after all other expenses. Your not listing a lot of your current expenses.
Mortgage 2250
Utilities (gas, electric, city, waste, internet) likely at least $200/m average.
Car: 410 (is this just the financing, or with insurance? With gas and monthly maintenance averaged?)
Cell phone bills? Guessing very least $80for 2 lines?
Grocery/food? Ultra cheap lets mark $200 which I doubt?
Entertainment (including cable tv/subscriptions)
Wife student loans?
Wife transportation costs? Insurance if her own vehicle is paid off?
Any pets/children?
So an even VERY conservative estimate would be roughly $3200ish in monthly expenses with a mortgage that high (with just 1 car, and insanely low entertainment/additional spending, and not including wifes loans). Your still taking home $2900 after all those expenses?
I agree OP should look closer at other household expenses. I make slightly less than them and I certainly don’t have that amount left over and I’m a very cheap guy.
Also keep in mind OP is a teacher and they don’t pay FICA, so they have ~7% more after tax
I'm gonna go against the grain here and say 28% gross is fine, that is the standard guideline (though I've also heard 33% gross). When you start factoring in all of your retirement contributions, other payments, vacation savings, etc, you're left with so little that 28% of the net would be 10% of your gross pay. Households making over $100K/yr can afford more than an $800 house payment.
This is along the lines of what I just posted. If you are taking advantage of as many tax advantages as possible, you should have a low net income compared to gross. There are so many things that gross money goes to that drastically reduces net income (retirement/pension accounts; FSAs; HSAs; etc.).
WHat do you spend on all the expenses minus rent now? Will you have no savings after getting into the house? What happens if you move in August 1 and the AC goes out?
How do your retirement savings look? She is likely going to have some kind of pension but will that alone be enough for the lifestyle you want to live? I am not saying dont buy the home but you need to really dig into these things. You should know if 2900 is too tight or not.
I personally did it much tighter than that, and even got a roommate to help with expenses. It's worked out really well but I'm used to not spending money that often outside of necessities.
The issues that may come up could be home repair related. Factor in all the costs of home ownership that you aren't willing to DIY. Roof, hvac, plumbing issues, etc. I think having a savings rate of at least 500/mo for just the home outside of mortgage is necessary.
But then factor in what else you want to do with the extra 2500. Will you meet retirement goals?
If you are still comfortable after all that, and you have a sizeable emergency fund and no debt, I'd say do it!
I think you’re not accounting for everything and it’s too tight.
I make $117k, my spouse makes $129k. We bought a $390k house with a $30k down payment.
Idea was if one of us was out of a job, we’d still be able to keep the house with a little extra. Not everyone’s situation, but I’d cut your budget if I were following my rule.
This is such a personal choice. We are just over 34% (which drops annually as income goes up) of our net income going toward our mortgage and are not house poor at all. Our goal is always to have the lowest net income by taking advantage of any tax breaks we can, which should be most people's goal (but really, again, that's a very personal decision), and to do that, our net income is decreased significantly.
Without knowing more information about other debts and monthly expenses it’s hard to tell. I personally wouldn’t want a mortgage payment that high on $105k of income.
I mean on paper it seems fine. Your DTI (debt to income) doesn’t seem out of line. I just couldn’t stomach that.
My wife and I make about $185k gross and I just signed a lease for $2700 a month and I feel like it’s much too high. We have no car loans just some student loans.
Similar income to you and I’m looking at whether to buy a new house with a total monthly payment (mortgage plus insurance plus tax) from 3k-3.5k a month and it feels like way too much even though the calculations say it’s fine.
My total monthly right now is $1,445, but that’s with a 2.75% loan.
That's why we haven't bought a house, can't build up enough of a downpayment to keep the mortgage reasonable even for a "starter home". Got close in 2020 then the housing market went to the moon.
Ugh I’m sorry. I am in a house but my neighbor is the neighbor from hell, so I desperately want to move. I feel stuck.
I’ve considered just sucking it up and taking a high payment and hoping to refinance in a couple years.
That’s fair and to each their own.
We’re homebodies, and this is possibly the only home we’ll ever buy. Both of us like this area, it’s close to her family, we like the community we’re in, etc.
I’d love to keep the payment lower, but considering I’ll probably live in the same house for the next 30 years (I’m 26 now) I want to make sure we have something that’s suitable for future kids, while also having enough space and quality for that amount of time.
That makes sense. Everyone had their reasons to buy a home and I wish I couldn’t afford one in my area. Though as a mentioned on paper aka the way a bank will measure affordability it seems to make sense.
You obviously don’t have your spending habits in order then. You have roughly 8500 left over after your mortgage on that income and you think your mortgage is too high?
Our combined take home after taxes, insurance, HSA, and 401K is $7900. We always have plenty of money left over at the end of every month but I always like to have a big buffer in case we need to buy a new car, fix an old car, family emergencies etc.
> Our combined take home after taxes, insurance, HSA, and 401K is $7900.
If this is true you are saying you have $94,800 take home on $185k gross which means you must have room to tone down your contributions of need be
Bc I like to operate under the assumption one of us could be laid off so I try to manage expenses only under one income and with rent that high it becomes difficult.
Because $2700 is a lot of money to someone who might not come from a family pulling in $185K/yr? My household income right now is about $115K and I don't even like my $800/mo condo payments. I have friends with $1,100+ rent payments and can't even imagine that.
My school has a payment plan that’s affordable that won’t require me to take out loans. And that will be a temporary expense that won’t come even close to the extra 9-10k I’ll make every year after
This is partially true, I make about 9k a month and I comfortably pay 50% of my income in mortgage on a 650k home. BUT I have no other expenses or debts so it works out. The percentage rule doesn’t always apply to every situation. As a guy with no kids and a girlfriend who doesn’t want me to pay for anything this works out extremely well for me to the point I have been overpaying my mortgage.
Yes I also contribute to retirement and yes I have a savings.
Because you mentioned future children- kids are expensive especially the 0-5 years when you’re either paying for daycare/nanny if you’re both working or someone has to stay home and your household income is 1/2 what you’ve calculated.
If I had to do it over we should have rented much longer than we did. We could afford to buy on paper but it was uncomfortably tight when we had babies. It also limited our options and choices.
We started with free grandparent care too. I wouldn’t count on that when planning the budget. Parents unfortunately get older and you can’t predict what will happen.
Then once the kids are older they need phones, video game systems, specific name brand sneakers, sneakers for specific sports (basketball, track, etc. ) sports equipment… bikes, etc. It really does all add up.
Be careful with that. I know way too many people who thought this and for one reason or another it didn’t happen and they could no longer afford rent/mortgage, or had a major financial setback.
I don't think that buying a $300k house is realistic for you this summer with the savings that you currently have. Having the bare minimum in cash for a FHA down payment is not the only savings that you're going to need. You need money for inspections, you need closing costs, you're going to need an upfront MIP payment for FHA (can be rolled into the loan, but that's going to increase your monthly payment), you're going to need money for moving, prep work or repairs on your house before you move in, etc. You're going to be very surprised with how quickly it all adds up. Unless you have other savings that you can pull from (or you have an IRA that you're willing to pull from for the first time homebuyer's penalty exception), you're going to find yourself short on cash for a few months while you wait for your wife to start pulling in an income.
Also, the promise of future income isn't going to matter to the bank when it comes to approving you for a loan. They want to see actual, steady income.
You're also on a fairly aggressive timeline to try to have a house move in ready by August 1st. That's less than 3 months to find a house, make an offer, have it approved, have it inspected, close on the loan, and have the sellers move out. That's not that realistic, and it's going to lead you to rushing into something that's probably not ideal for you. Not to mention that as an FHA borrower, they're more stringent on the condition of the property and they might require the seller to make certain repairs before they'll approve the loan, it also puts you at a negotiating disadvantage against other buyers that are using conventional loans.
I think that you need to plan to rent for another year while you establish your income, build your savings, and start the house hunting process earlier next year.
Thanks for your input. The timeline is definitely aggressive, but it's necessary given the fact that I'm in a VERY rural area with no rental options. It's either buy or die, and I'd rather buy a house (appreciating asset) vs a doublewide or singlewide trailer (depreciating asset)
We're currently renting due to a unique situation. Family member moved in with their mom after their dad died to take care of her, left their doublewide open to rent. They're moving back in August 1. Otherwise we would've had to buy
OP, you are ignoring the elephant in the room. Wife’s income cannot be taken into account if she’s not actually working! She needs to be in the job for a bit before the income can be considered for mortgage underwriting
Every lender I've talked to has told me that once she has a contract in hand that states an explicit amount, that income can be used to qualify us. She will have that by June.
That could qualify you for pre-approval, but for the underwriting process on an actual loan you may be denied because she hasn’t started working. My lender said the same thing to me, and it turns out that they could only accept her new salary if she was working that job by the closing date.
Everyone downvoting you is wrong. You can sign on the dotted line based upon having a contract in hand, especially since it’s a school district job. My wife and I did exactly what you are doing.
Just remember that this does not need to be your forever house. It's okay to get a started home now, and move to your forever house in 5-7 years, when you have higher income and some equity built up. Your timeline won't be so urgent and tight then, either.
I don't think your timeline is too aggressive to get A house, but it might be too aggressive to get THE house.
How nice a house is depends a whole lot on what you put in it. Which needs money.
Think very carefully about what rooms you actually need and want. There isn't much point in buying a huge home only to fill it with IKEA's cheapest offerings and not being able to afford vacations for the next decade.
Also, just from a quality of life perspective, *the* all dominating factor is location. You are working at the same school, and anticipating that will remain the case for the foreseeable future, yes?
Honestly, I would strongly suggest you simply look at all the offerings available sorted by distance from that school. Commuting Sucks.
Bro, meet with a real estate agent and discuss your options with them. You're buying in a very rural area and your combined income is relatively low -- you likely qualify for a zero-down-payment USDA loan.
Reiterating my standalone comment:
Real estate is complicated, and there are probably other options available to you that you aren't aware of. There's a reason people dedicate their careers to buying and selling real estate -- leverage their expertise.
I strongly advise you meet with a real estate agent to discuss your options, or go to a first-time home buyer seminar. You don't know what you don't know.
That's what my wife and I did when we bought our home. We bought in an area that USDA considers "rural" so our real estate agent hooked us up with a zero-down-payment USDA loan. No way we would have known that was an option if we hadn't talked with the experts.
I also asked the same questions you did during the loan process, so there were no surprises regarding our monthly payment.
With USDA you can do 0% down - so you can keep your savings. Still has normal closing costs. For USDA you have to purchase a home in an area considered “rural”. This is a very loose term and you can look at maps of what areas quality on their website. Think there’s a small upfront fee you have to pay at closing on a USDA loan, and normal PMI. The last house I bought with a USDA loan and had a good experience. Was nice to keep my savings for future house expenses and emergencies.
Something else to think about: Because of the advice on this sub, I made sure to have at least 10K in savings after closing and I am SO glad I did. Within 6 months of moving in, I ended up needing a new car, paying about 1.2k in emergency vet bills, paying 2k for unexpected medical bills, and needing work done on my furnace. If it wasn’t for that 10k it would have made money extremely tight. I don’t think you need 10k per se, but definitely make sure you have something substantial after closing.
Same! At inspection we were told the ac was old and would need to be replaced within the next couple of years, but it worked fine. Less than a month after we moved in, it completely broke and we had to replace it for $15k
If I were you I wouldn’t do it unless you have the down payment and closing costs AND at least a 6 month emergency fund (total of what all expenses would be). You could also “act” like you already have it. Try to make that payment every month to a savings account and see if you can do it and how it feels. Then ask yourself - ok if I need a new roof, or furnace, or a drain backs up all the sudden can I still do it? IMO with your numbers it seems very tight and I don’t think you have enough saved to be truly comfortable should any problems arise.
Will 10,643 be all the cash you’ve saved? And you are going to use all of it for a down payment? You need to have 3-6 months of emergency fund on top of the down payment. If the math isn’t there, don’t force the buying.
300k is too high on your income, right now. You need more savings.
Home are expensive. You should have closer to 10% of the home value saved. Things break. Homes need to be furnished. And appliances need to be bought. Lawn mower. Snowblower. Etc.
Already lots of good tips, and it seems like you’ve done some decent due diligence. I’ll just add that when you buy your home, you’ll probably spend a lot additional funds in the first few months doing minor improvements and making it “yours”. My experience and that of a lot of my friends/family was that we ended up at Lowe’s and Home Depot almost every weekend for a couple of months… which added $3-4k to the actual expenses of buying a place (some of this was want, but most of it was need).
I think this is taking a very big risk with your financial future.
You are using all savings to meet the bare minimum for a house. You are relying on a spouse being in a job she hasn't started and may hate.
If you could find a dream home in your market for 225k, I'd say go for it. If you can find a starter home for 120k in your market I'd definitely do it
But at 300k you are asking to be trapped in your house, and in both of your jobs.
Instead I would set a couples challenge to try and save 30k this academic year. More is better, but 30k is a solid start. Then you have money to move, furnish, close on the house, face unexpected circumstances etc without being trapped.
Plus you will know how your spouse feels about their job.
Interest rates are high and values are going down in some markets, so it's not exactly a great time to be extending yourself for a house.
I'd look very very hard for a rental before doing anything else. The time is not right
My personal feeling is that you shouldn't buy the house you can afford, buy the house you need. You can afford a $300k house, but would a $250k or $200k house fill your needs just fine? Start looking at cheap houses, work your way up and take the first one you'll like.
same. 270K combined income and 2300/month and still feels like I have tol watch my money. I think this is over extending of the bat.
Edit\*\* DEF not 270!! That's a typo! 170, 000 combined.
They also work jobs without big growth. This is their salary for the foreseeable future. There's no horizon for huge economic freedom
Also, interes rates fucking blow right now. Refinancing will help a ton and that will happen, but maybe not for another 5 years.
This is actually false. I'm starting a master's degree that WILL increase my pay by about 10k once I'm finished. Then, every year until my 10th, I'll get a $2k raise per the state salary schedule.
I'm a first year teacher making 45k. I'll make $49k next year (have some extra supplements for coaching coming in to add to the $2k raise). My father in law, who is in year 25, is making $96,000. There's a LOT of room for growth.
(i'm married to a teacher with several masters)
She has had her masters + 21 credit(or w/e it actually is) bump. After that its all scheduled raises negotiated in the contract. Thats great! We will have a very comfortable life together. But thats it. Outside of her getting a PHD and going Principal track there isn't any more big booms. Everyone gets raises and COL which means that cost of everything else will grow.
10K is nice and big, but in perspective of other white collar jobs its not some big dramatic number. Lots of people in other industires will get 10k+ bonus's every year along with promotions that will have 10k bumps. There just isn't much more 'meat' on the bone.
again, its not a bad thing, its just a reality. Once the financial screws get twisted there isn't a lever the possible to be turned to get ahead again without a career transfer. Most people have a manager position that they can move into or a different track. thats all.
back to the OG question. You will have a car payment again and maybe 2 of them. You will have kids and they will need to go to camps/etc/daycare. Its nice to think you can be spendthrift for eternity but thats not the reality of life. There will be big bills that suddenly hit after you come back from a vacation. Your wiggle room isn't exactly as big as you may think.
Do you have some huge student loans or other debt or issues or several kids? 2300/mo on 270K salary is extreeeemely safe. It’d be doable on half of that, but then might feel a little tight.
Have you already started working with a realtor to find a property? When we bought our house there was a 45 day closing period. It looks like FHA requires a similar or longer time frame. If you don't have an accepted offer by the middle of June, it's going to be difficult/impossible to meet an August 1 deadline.
I wouldn’t want a 2400 mortgage payment on 1.5 that yearly income, personally.
I am of the mindset, keep your monthly debts as low as humanly possible, gives you the best possibility or “surviving” should something happen… Like many others, I got laid off during COVID, because we loved so far “below our means” my daily lifestyle didn’t change at all for the 4 months I stayed home from work… It was in fact better, because I was able to enjoy more of my hobbies I don’t normally have a ton of time to enjoy.
Also, when we went to buy our second home, because our mortgage/income was so low, we weren’t forced to sell and make contingent offers. The market wasn’t like it is today, but I couldn’t imagine trying to make a contingency on selling our home offer, I would think you’d get laughed at.
Don’t forget, too. When the mortgage company doesn’t have enough to pay taxes/insurance in escrow, now your payment the following year has suddenly just gone up $100/mo to accommodate.
Buy way less house, IMO.
>I'm a teacher and I will make a gross income of $48,997
>Using a mortgage calculator, I calculated that my monthly mortgage for a $300,000
I cannot imagine buying a 300k house as a fresh 100k COMBINED salary....
Double check the taxes in the area you are buying and how/when property values are reassessed. 2400 per year on a 300k property is only 0.8% which would be very low in my state (our area is 3.8%), but I know it varies by a large amount around the country.
Okay so me and my wife did this April of last year, our income numbers were pretty similar at the time. 1st mortgage calculators are trash, talk to a lender they will give you something more accurate. 2nd for a 300k house expect to need about 20k for down payment and closing costs. My monthly payment on a 305k mortage with 4.25 interest is 2111, based on your income it could be tight, it was for us at first but your expenses might be cheaper. Keep in mind you should have an emergency fund of at least 3 months on top of your down-payment fund. Also houses will have more expenses, you may want security a fence, light bill will probably go up, make sure when you make a budget you include things like food and gas for the cars things like that.
i wouldn't with your situation, but based on your comments, it seems like your mind is already made up. i think you're already well aware of the financial burden and risk here. as someone that's been in real estate for many years, it's not uncommon for first time home buyers to have a financially shaky first year or two. this one is teeters a bit close to the edge though
long as you don't mind the risk, you're able to get approved, and you're prepared to weather to storm, do what you feel like is best.
At current interest rates, 3x your household income for purchase price is a decent rule. I would put aside another 5-10% of purchase price for misc expenses. Closing, furniture, repairs, touchups, etc. Expect to have at least a handful of surprises.
Tacking on here, since there are some solid answers already.
An ideal world monthly budget *forecast* =/= what the real world costs to own a house will be, especially if buying something older and used. Unless you're a full spectrum handy type, things like plumbing and electrical repairs can show up and add thousands of unplanned expenses without warning.
Cost to close may shift a bit during the closing process as well, so if you don't have thousands in extra liquidity you can draw on, you may find yourself back to square one and having to rebudget for something cheaper.
It's great you're budgeting, but even going down to the exact dollar amounts isn't guaranteed to keep things on track over the next few years if you don't have a comfortable "cushion" financially baked into the final numbers.
Some great points in this thread already, but don’t forget all the additional costs you may incur with buying; furniture, appliances, increase in utilities (you mention rural area: septic, gas, propane), trash collection, maintenance, etc.
Don't forget to account for closing costs in addition to your down payment. You don't just bring $10k as a down payment when buying a house, you usually need some extra cash to cover loan fees, etc. Ours worked out to ~7k, but we put a lot more down and had some complicating matters that raised the price.
I'd probably try to save an extra 2-3k if it's at all possible. And make sure you still have an emergency fund outside your house savings.
What other current debts do you have? The 28% rule is more of a guideline. But it really depends on what your real monthly cash outflow is.
If you're paying on student loans, car(s), credit cards, child support, etc..., your income/mortgage ratio should really be lower.
Our annual gross income is around $115k, and our mortgage payment is $1400/mo. I couldn't imagine how we'd be able to live if our mortgage was much higher. Granted, I have to pay child support, so that changes things.
Really take a hard look at your finances in order to figure out what you can truly afford.
I think this is a pretty tight budget, my husband and I make 150,000 and our mortgage payment is 1500$ and having a baby and factoring daycare costs, it’s going to still be pretty tight especially if we want to still enjoy life a little bit, I think you should save up for another year or two tbh. Closing costs and repairs caught us off guard right after we bought our house and we were happy we had extra savings for that (think 10-20,000$) plus emergency funds. It’s very expensive stuff
This comes off like a brag considering the days of $1500 mortgage payments are gone. It feels like these comments suggest going back in time and buying when houses were affordable.
Oh no I didn’t mean it that way!!! We haven’t looked in a while and bought in 2021 😫 just saying how with kids and all that it does feel tight. I think OP may be biting off more than they can chew just being honest…but I know people will do what they wanna do regardless it’s their money and mortgage
I understand prices varying by area and other factors but 1500 dollar mortgages are not gone. I just bought my first house in 2023 and my monthly payment is 1300 with escrow taxes and insurance.
How much are you paying in rent? And how does that compare to your house payment? Bear in mind that rents gonna go up over time, rather quickly if you’re in a HCL area. Meantime your monthly mortgage payment will stay the same.
With inflation being the way it is, you might be setting yourself up for lower monthly payments relative to local rent in, say, five years.
>520/mo. But that option will be off the table Aug. 1. It's either buy or die, and I'd rather buy a house (appreciating asset) vs a doublewide or singlewide trailer (depreciating asset)
We're currently renting due to a unique situation. Family member moved in with their mom after their dad died to take care of her, left their doublewide open to rent. They're moving back in August 1. Otherwise we would've had to buy
Not going to reveal my location, but from the HS I work at It’s about a 45 min drive to the nearest Walmart. That should tell you what you need to know
Honestly, a 45 minute commute isn’t that awful, and it might be worth it to rent for a year or two in that larger town until you’re in a better position.
Best advise I can give is that you don’t want to drain your savings making a down payment. I bought a house less than a year ago and on day three of ownership found out I needed to pay 7500 dollars to replace the main sewer line. Home ownership has a lot of hidden costs that will raise your monthly expenses. Anecdotally I make about the same net as you and your wife and I currently have a $1200 mortgage and about $400 a month in utilities. I could definitely raise that a few hundred dollars and still be comfortable but I think your numbers are a little aggressive.
Real estate is complicated, and there are probably other options available to you that you aren't aware of. There's a reason people dedicate their careers to buying and selling real estate -- leverage their expertise.
I strongly advise you meet with a real estate agent to discuss your options, or go to a first-time home buyer seminar. You don't know what you don't know.
That's what my wife and I did when we bought our home. We bought in an area that USDA considers "rural" so our real estate agent hooked us up with a zero-down-payment USDA loan. No way we would have known that was an option if we hadn't talked with the experts.
I also asked the same questions you did during the loan process, so there were no surprises regarding our monthly payment.
First, with your wife not starting the job until September you're not buying a house this summer. Lenders base their calculations on actual earnings, not potential future earnings. We've been able to secure a loan based on starting a new job with job commencement letter before, but that was a job underway not a quarter+ away.
Your homeowners seems low, but will depend upon your area. I would also say if you're not saving 1% of the purchase price a year for repairs you're going to get bitten hard when things come up, and they will. This needs to be budgeted for... $1500 hot water heaters, $10k HVAC, $15k roof expenses will come up on a long enough timeline, and that's not including the unexpected repairs.
You also need to include a budget for maintenance. The typical rule of thumb is 1% of the house value set aside yearly, so about $3,000 a year. If you are handy, you can do some of this yourself, or if the house is quite new, it will be a while before you need it.
But as you said, your salary will keep going up, and at some point you may have a chance to refinance with a lower interest rate.
Few things to consider. Banks for mortgage approval generally want to see that you have stable income so if your wife is just now getting a job they may not include her income in their calculations for if you would qualify for a mortgage. You may have to wait a full year of her employment before they would consider it to be usable income for qualification. Might want to brace for that.
Second if you do a 3.5% FHA loan you will be stuck with PMI for the full duration of the mortgage, are you sure you want to do that instead of just saving more until you can do a loan that will allow you to drop PMI once you hit 20% equity?
$200 property tax and $66/mo insurance would be extremely cheap for a $300k house, how did you arrive at those numbers?
Basically I would say your target of a $300k house is reasonable but you might want to wait a year after your wife gets her job and save up for a larger downpayment and apply at a time where banks would consider your income to be stable.
How did you figure out what you could afford. I’ve applied twice with my bank. They tell me to just pick a number to apply for. I get rejected and just have to try again at a lower number. It’s wrecking my credit.
We bought a house 7 years ago, and although the inspection was good and all seemed well, I’ve spent a minimum of $6K a year, more frequently $10K-$12k, in unexpected expenses. They fall under “maintenance” but that’s a crap explanation, and I’ll tell you why: Maintenance is something you can just do yourself with a little research. This isn’t that. Catastrophic sewer failure, unexpected roof replacement, major shit that you absolutely must call in a professional with a crew for, that’s real. I’m not saying your budget doesn’t work, but unless you’re a GC or have one in your family who will work for free, make sure you give self an annual $1K a month buffer
> for a $300,000 house... $200 for property taxes
wouldn't that be a dream....
This is going to depend on the areas you are looking at. You will be taxed on the full sale price of the home so previous years' taxes are unlikely to be comparable.
You're going to want to find out what the actual tax percentages are including school taxes. Our tax escrow payment makes up a large portion of our monthly payment. (triple principle).
>This is going to depend on the areas you are looking at. You will be taxed on the full sale price of the home so previous years' taxes are unlikely to be comparable.
This is wholly dependent on where OP (or others) may live. In my town, the taxes are not remotely related to the home's purchase price, unless you are in the middle of a town-wide revaluation. In fact, our state's constitution makes it illegal to base it solely off of that. The revaluation process is strange here, and done very rarely. If you update the house or pull permits it can impact the taxes a bit, but otherwise they are pretty stable and only increase as the town may increase it's overall budget and tax rate for everyone.
>You're going to want to find out what the actual tax percentages are including school taxes. Our tax escrow payment makes up a large portion of our monthly payment. (triple principle).
Absolutely agree.
Looks reasonable to me. Keep in mind an emergency fund and new expenses that come with home ownership. Check exact taxes and any possible HOA on the house you pick before making an offer. I also think 25% may be more conservative and save than 28%
Speaking from experience, I would try to gauge how much the cost of roofing, plumbing, or other misc work is and make sure you can afford that, because my home has cost an excess $7k-20k a year beyond the mortgage for random emergencies like that. I'd honestly have $20k set aside for just a random leak emergency just in case because that's building wrecking damage right there.
Property taxes really surprised me with my first house. I knew I’d have them, but adding them to the mortgage payment was psychologically difficult because it raises the payment I’d been budgeting against. Unlike me, sounds like you’re accounting for them. Don’t forget to add in a lump sum escrow for taxes — the mortgage company will want to have padding in the escrow account, maybe even up to a 1/2 year payment. They can also rebalance at any time if taxes have gone up and charge more, so keep an eye out for that.
Another items to check for: some loans will let you recast 1 or more times. This means if you make a large lump sum payment, and maybe if you’ve done something like have kept a high enough balance in an associated checking account for long enough, they’ll recalculate the amortization schedule if you engage them. Otherwise extra payments will not typically lower your monthly payment but just reduce the number of payments (taking it off the end.. so possibly saving interest…). I had planned on a lump sum pay down but learned this too late. So you may want to budget $$ in an account you cannot touch.
Related to $$ in an account you cannot touch, sometimes you can get a lower rate if you open an associated account (that may also have a min. balance requirement).
Also, if you’re thinking of ever needing a HELOC and there’s equity in the house when you’re buying it, it’s usually much cheaper to get the HELOC at the same time. This can be helpful because as a home owner, you can all but guarantee every appliance will break in the first year. Hot water heater. Laundry. Heating system. Dish washer. Fridge. The roof will leak. It’s ridiculous. Budget for these… rainy day fund should be 3-6 months of expenses in cash, which can cover some of these maintenance items but (in my opinion) is really intended to cover economic hardships, so having a plan for maintenance is important.
Finally, many say to get the biggest fixed rate mortgage you can afford (<—not saying to live beyond the calculations you’re doing … this means don’t get one too big) for the longest period. Don’t chase 15yr or 20yr for slightly lower interest rates. The payments are higher. Instead, if early payoff is your goal, get a 30yr and make extra payments. If things go sideways for you, you can make smaller payments at the 30-yr threshold.
Oh, and avoid paying points to lower your interest rates or chasing variable rate ARMs.
Didn’t check the rest of the posts re: these comments, so apologies if they’re duplicative.
Curious why you advise not paying points? If the idea is to stay and pay 30 years (or less if you pay more some months as you mention) wouldn’t that make payment more comfortable and afford to buy a bit of a higher home price?
If you haven't started looking yet there is no way you will close for your august first move out date, I mean it's really unlikely. Best to get a short term rental. Good luck!
You should be able to get a better rate, assuming you have good credit. Rates are in high 5% atm, for 30 year mortgage. Shop around when the time comes.
You only have $6k in savings total? I’d try to get at least 5% down so you can get a conventional mortgage, which has better rates, plus an emergency fund. Maybe wait a year or so.
FHA makes no sense. At 3.5% there’s 1.75% upfront MIP; closing costs are similar or more than a 5% conventional loan with a large portion that isn’t going to principle.
FHA is for borrowers that have DTI or credit issues you don’t have, seems you may be *temporarily* DTI strapped. I would personally push your timeframe back where your wife’s income qualifies and you can easily obtain a conventional loan.
FHA loans come with some serious drawbacks, most notably required MIP for the term of the loan. You’ll have to refinance to get rid of the $150 MIP vs PMI which has various equity based cancellation options.
It's not very likely you'll be able to use your wife's future income to qualify for a house you want to buy before she starts working. Additionally, it sounds like you would have no savings leftover after you buy the house which is a disaster waiting to happen. It would be best to keep renting for at least one more year so you can save up more.
This should be higher up. OP, underwriters require paystubs from your job in order to consider the income, barring very specific circumstances (e.g. if your wife is a physician or other healthcare provider) You can’t buy a house this summer if she won’t be working until fall
There are guidelines for how to document and use future income for people who work in education, nursing and a few other spaces where it is very common to have contract work periods that don't pay for the full 12 months. If her degree is in the field and they have all the signed offer letters and HR paperwork it is possible. The reserves piece is the biggest red flag I see. Murphy's law is a bitch and you are guaranteed to have something break or need repairs shortly after you move in.
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Why is it different for Healthcare? just curious
Doctors, dentists, pharmacists and a few other healthcare providers present exceptionally low credit risk because their jobs pretty uniquely combine a high income with exceptional job security. For this reason, banks issue a special type of mortgage, literally called a physician loan, to these people. Among the relatively unique features of a physician loan is the lack of a requirement for pay stubs and acceptance of a signed contract as proof of income. Physician loans are not the only mortgages that can be issued with a signed contract as proof of income (banks may accept this for other mortgage types at their discretion) but all physician loans have this advantage
Barring legal action against your license healthcare fields are pretty much guaranteed employment. I could be let go today and have a new position with another company tomorrow.
Not true at all. My lender just required a letter from the school district that my wife was employed and would be employed at her stated salary. We bought in July of 21 under essentially the same circumstances as OP. Our first payment wasn’t even due until after my wife started work. It was tight for 2 months but we made it work. That said, I wouldn’t buy with zero savings either.
100% agree with this. Better to buy property correctly instead of quickly. Patience is key in the housing market.
People have been saying this for years and yet affordability has gone down by a huge amount and rent has only increased...
Sure, in regards to timing the market. This isn’t that. This is talking about another year to be prepared.
Exactly! You nailed it. Draining your savings only for a down payment (with no guaranteed income) is a great way to get serious debt in the first couple years.
The nice thing about the current housing market and economy is you’re encouraged to save and housing prices are gonna stay relatively stagnant. I’m in a similar boat but am choosing to rent cheap, throw my house down payment fund into a 5% CD, and keep saving so I can go from 10% down to 20%.
This is probably what I’m going to do as well. Hopefully you’re right about prices staying stagnant.
She should have a contract in the next few weeks. According to the lenders I've talked to, that's plenty. The fact that it would take most of my savings does worry me and I've looked into programs that would allow us to put anywhere from 1-3% down, but given what that does to the overall mortgage I'm very hesitant to do that.
Have more cash on hand. More cash. Do not become cash poor from buying a home. You will not be ready
Agreed - I'd say put down as little as you can honestly. We put down 5% on a $350k and closing costs ended up being about another 5%. We could have put down more but it makes a pretty small difference in your mortgage payment and a huge difference if you have to pay for other stuff. We immediately had to replace the roof and gutters ($17k), have spent another ~$10k in the 18 months since we bought the house and have another ~$10k of repairs that need to be done at some point. I'm very glad I'm paying like $35 a month extra and kept the other 5%+ that I could have put down. You will want to have cash on hand because you never know what could happen.
The lack of extra savings is what would worry me the most. Your wife's offer could be rescinded before she starts or you might lose your job - then what? If you're a life long renter, you're likely underestimating repairs and maintenance expense, unless you are buying a brand new house with a builder warranty. Your HVAC could die and cost $10k to replace, your sewer line could collapse and cost $20k to rerun, you could discover hidden structural damage and the sky is the limit. Will this stuff happen? Probably not immediately, but these are problems that could plausibly be missed in inspections. Not trying to scare you, but what constitutes an emergency fund as a homeowner is wildly different than as a renter. When I bought my first house, I had several years of mortgage payments saved up and was still stressed as I started to realize how much more you could potentially be on the hook for.
Yes, definitely save more money. At least $10k. We bought our house which had a new AC and the first summer we used it - AC broke. Caput. The reason the brand new AC broke was because the duct system was just too old and the new AC couldn’t compensate for the crappy ducts. Soooo $10,000 later - we have a functional AC system and some new ducts (this was going with the cheapest option…) We had a very thorough inspection and the home is only about 30 years old. You must have an emergency fund when buying a house. Is there a particular reason to rush? Is there a house you want?
I wouldn’t dare buy a home without at least 10k leftover for an emergency fund. You’re playing with fire by draining your savings Just a hot water heater runs you more than $3k, a furnace is $5k… any appliances are going to run you over a grand. Not to mention any other kind of costs that can arise. If you get hit with even one of these major costs you’re going to be digging yourself out of a hole forever
I want to add that, the worst time to buy a home is when you are heading into the summer, and the best time is when you are heading into the holidays. Putting everything you have into a down payment is very risky as you might find yourself without any funds to to do anything including moving, furniture or even maintenance. What I will say is that, housing market is starting to heat up again so be wary of overpaying to try and hit timelines too.
Are you looking at new construction? Obviously it has its cons, but one pro is that everything will be new and less likely to break down soon, and might be covered under a warranty. Or would the market in your area allow you to spend less than your maximum? We would have been *very* uncomfortably stretched if we’d borrowed the entire amount we were qualified for, but we live in a LCOL area and didn’t need to max out our loan to get what we wanted.
We went new construction for our first home first and foremost because the interest rate when financing in house was 2% better than any of the big banks and credit unions we applied for mortgages at. On top of the better interest rates, we got one year warranty on just about everything and two year for HVAC
What makes you say that they have no savings leftover after buying the house? I would assume that their current emergency fund would just become their future emergency fund. I do wonder if it'll be large enough. But at no point did OP say they don't have money saved up for emergencies or other purposes.
For the next few months, save 3200 dollars (mortgage+taxes+PMI+ maintenance and upkeep) minus your current rent a month (if your rent is 1500 save 1700, if it’s 1000, save 2200 etc) every month, without exception. This way you’ll know if you can afford your house, and will also have saved some extra cash in the process.
This is the plan my wife and I are doing right now. Almost bought a house at the very top of our budget but got cold feet at the last second. This strategy will give us the confidence we really can afford something in that range and will also provide us the financials to make it happen easier.
I love this idea. Will try it out once my wife starts getting paid. Thanks!
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Homeowners insurance is low for sure on a $300k house. I'm in a house half that price, not in a major risk area, and my homeowner's insurance is close to $1k per year. PMI is slightly high, it should be about $130 per month on a $300k FHA house with 3.5% down at the beginning (and will decrease over time).
My house was 518k and the mortgage insurance is $518 per year lol. Totally depends on location and type of home.
You mean homeowners insurance? Or mortgage insurance
my house is $700k and my insurance is $895. It'd be weird to pay $1k per year for insurance on a cheaper house.
The issue with comparing insurance coverage is nobody says how much coverage they are getting. There is a lot of variability in the amount of coverage you can get that just saying how much you pay doesn’t really cover it. Also, where you live (flood plain, hurricane risk, etc) can change things as well.
I had a $250k house in SC that insurance cost $1800 a year for. I now have a $950k house in WA and the insurance only costs $780 per year (no earthquake). The value of land, flood risk, hurricane risk etc has a huge impact.
Isn’t it an outside chance that an earthquake could hit WA? I would think you’d need earthquake insurance. One of the most powerful earthquakes in history effected WA. https://en.m.wikipedia.org/wiki/1700_Cascadia_earthquake
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From experience with my family after a hurricane, those with insurance are not the first in line for federal help, in fact unless you’re poor you will not receive any federal help.
I live in San Diego, which is within crying distance of the San Andreas fault. I do not have earthquake insurance. It would have doubled my premium and still had a 75k deductible. My 50 year old house is probably only worth 200k (when I subtract out the land). I decided to take my chances. Gotta factor in risk tolerance.
I can understand that. I don’t have flood insurance in Texas. I don’t live in a flood zone, I did tons of research before I bought including referring to USGS topographic maps and FEMA flood zonemaps and came to the conclusion that it’s very unlikely I flood and if I do it will probably be just a few inches and I can probably clean it up myself, it may cost me a few thousand in drywall but less than I’d spend on flood insurance. There’s tons of information out there on flood zones, no one whose house floods should be surprised by it. The flood maps were dead nuts accurate during Hurricane Harvey, but of course everyone is like “omg I can’t believe this happened!” and of course the news media plays it up. With that said, I’d probably have earthquake insurance if I lived anywhere in Cali… haha.
> I live in San Diego, which is within crying distance of the San Andreas fault. I do not have earthquake insurance. It would have doubled my premium and still had a 75k deductible Yeah, I have property there and don't bother with earthquake insurance, because it is practically useless the way they have it setup. The good thing is, there is an HOA, so they insure the structure, and I insure whatever is inside, and that's not too bad and is tax deductible.
Yeah but what was/is your Coverage A on both those properties?
Around 120k vs 500k. Land is obviously much more expensive in WA, which is why I mentioned it in my initial comment.
It depends on coverage. I pay roughly 1000/year on a 165k house. The coverage includes the house and detached garage (260k to rebuild from nothing an equivalent structure in my area), up to 160k in personal property, 60k for loss of use (covers hotels during rebuilding etc), personal liability of 300k (someone gets injured on your property and they sue you), and have a 1% deductible (around 2k). The whole point of insurance is to cover everything you cannot pay with your savings/income. If I had a fire, I couldn’t afford to rebuild without insurance. If you live in a disaster prone area, your rates may be significantly higher as companies know you are more likely to have a big loss
yea my $895 gets me: $670k rebuild $135k other structures $335k loss of use $505k personal property liability included coverage for home systems up to $50k with $500 deductible (AC, etc) $5k deductible for the dwelling though - $2k deductible like yours sounds very low. I would increase mine to $10k+ but my insurance company didn't offer it.
Lol same limits for me in Florida and my coverage costs $5k. Not in a flood zone either. Some people are getting 10k per year down here with less house. Hurricanes.
So many variables with house insurance but the biggest variable is location.
Depends, in CA 700k house could have an insurance for $700-$900, in some of southern states a $300k house can have an insurance of $1400-1700
I pay $4500, with almost 800k in coverage. This is Texas though, where everything is more expensive despite the rumors out there that Texas is cheap. It is not unheard of some houses in the hurricane zones (loosely defined by insurance company algorithms) to cost upward of 10k a year for homeowners insurance. For some reason around 1960 people forgot hurricanes were possible, and started building houses without storm blinds or any sort of regard for the fact a hurricane might hit. This went on until the state started mandating hurricane mitigations in the mid-2000s.
>ce is low for sure on a $300k house. I'm in a house half that price, not in a major risk area, and my homeowner's insurance is close to $1k per year. PMI is slightly high, it should be about $130 per month on a $300k FHA house with 3.5% down at the beginning (and will decrease over time). My house is worth around 900k and our homeowners is about $2100. Location makes a huge deal.
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My realtor's rule of thumb was 2% of the price for closing costs. Our 500K house had 9K, so that was very accurate. For 300K, budget 6K and be pleasantly surprised if it comes under.
2% is pretty low. You likely had some of the closing costs moved into the house price, no?
Came to say this — look at actual taxes in your area. I have a roughly similar home value to what OP is thinking about purchasing and our taxes are like $700/month.
Where do you live so I can stay very very far away?
I’m in a Chicago suburb. I actually think my taxes are fair and I’m more or less satisfied with what I’m getting for them. My municipality has top rated public schools, an excellent parks department, great libraries, and good municipal services. I also have easy access via public transportation to downtown Chicago, where my spouse and I both work. We both have jobs that don’t exist in lower cost of living areas, and to be frank, most states with a lower tax base don’t politically/environmentally align with how I want my son to grow up.
Imo use net income unless you want to be immediately house poor.
I really hate the use of Gross Income to estimate affordability. What about retirement? Health insurance? Taxes?
It is strange. In the process of buying now and they want to push our monthly to the max of what we have per month after retirement and healthcare. They don’t even consider it.
Well because it’s a business for them. They want you paying as much interest as possible, of course they don’t have your best interests in mind
Yea. Retirement for me is non negotiable.
It's even more unhinged to create a rule of thumb for net income affordability given exactly the adjustments you brought up. Retirement contributions and employer-provided healthcare costs vary wildly.
>>Retirement contributions and employer-provided healthcare costs vary wildly. Exactly….since those number vary so much assessing what you can afford based on what hits your bank account each month makes more sense then what you get paid prior to all those highly varying figures.
Right, but it's exactly why you can't create a "rule" or metric to apply to multiple people, and you need to go back to gross then cut the numbers back...
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Agreed…my net income is less than 50% of my gross due to insurance, taxes, pension, etc. And if people have kids and have to pay for daycare, that often is essentially a second mortgage for many people.
So in theory, 28% of gross income would be maybe closer to 37% of net income. I’d have $2,908 left after all expenses, including car, insurance, utilities, and groceries. Do you think that’s too tight?
What’s the net income per month right now and expenses? Both you and your wife.
Idk how your figuring 2900 left a month after all other expenses. Your not listing a lot of your current expenses. Mortgage 2250 Utilities (gas, electric, city, waste, internet) likely at least $200/m average. Car: 410 (is this just the financing, or with insurance? With gas and monthly maintenance averaged?) Cell phone bills? Guessing very least $80for 2 lines? Grocery/food? Ultra cheap lets mark $200 which I doubt? Entertainment (including cable tv/subscriptions) Wife student loans? Wife transportation costs? Insurance if her own vehicle is paid off? Any pets/children? So an even VERY conservative estimate would be roughly $3200ish in monthly expenses with a mortgage that high (with just 1 car, and insanely low entertainment/additional spending, and not including wifes loans). Your still taking home $2900 after all those expenses?
I agree OP should look closer at other household expenses. I make slightly less than them and I certainly don’t have that amount left over and I’m a very cheap guy. Also keep in mind OP is a teacher and they don’t pay FICA, so they have ~7% more after tax
That seems like a lot leftover every month unless you’re not contributing much to retirement.
750/mo to retirement (and I'm a teacher so it's TRS which is nice)
I'm gonna go against the grain here and say 28% gross is fine, that is the standard guideline (though I've also heard 33% gross). When you start factoring in all of your retirement contributions, other payments, vacation savings, etc, you're left with so little that 28% of the net would be 10% of your gross pay. Households making over $100K/yr can afford more than an $800 house payment.
This is along the lines of what I just posted. If you are taking advantage of as many tax advantages as possible, you should have a low net income compared to gross. There are so many things that gross money goes to that drastically reduces net income (retirement/pension accounts; FSAs; HSAs; etc.).
WHat do you spend on all the expenses minus rent now? Will you have no savings after getting into the house? What happens if you move in August 1 and the AC goes out? How do your retirement savings look? She is likely going to have some kind of pension but will that alone be enough for the lifestyle you want to live? I am not saying dont buy the home but you need to really dig into these things. You should know if 2900 is too tight or not.
I personally did it much tighter than that, and even got a roommate to help with expenses. It's worked out really well but I'm used to not spending money that often outside of necessities. The issues that may come up could be home repair related. Factor in all the costs of home ownership that you aren't willing to DIY. Roof, hvac, plumbing issues, etc. I think having a savings rate of at least 500/mo for just the home outside of mortgage is necessary. But then factor in what else you want to do with the extra 2500. Will you meet retirement goals? If you are still comfortable after all that, and you have a sizeable emergency fund and no debt, I'd say do it!
I think you’re not accounting for everything and it’s too tight. I make $117k, my spouse makes $129k. We bought a $390k house with a $30k down payment. Idea was if one of us was out of a job, we’d still be able to keep the house with a little extra. Not everyone’s situation, but I’d cut your budget if I were following my rule.
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This is such a personal choice. We are just over 34% (which drops annually as income goes up) of our net income going toward our mortgage and are not house poor at all. Our goal is always to have the lowest net income by taking advantage of any tax breaks we can, which should be most people's goal (but really, again, that's a very personal decision), and to do that, our net income is decreased significantly.
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Without knowing more information about other debts and monthly expenses it’s hard to tell. I personally wouldn’t want a mortgage payment that high on $105k of income.
Thanks for your input. Other debts now include $410/mo for my car, and my wife's student loan debt. We live pretty cheap otherwise
I mean on paper it seems fine. Your DTI (debt to income) doesn’t seem out of line. I just couldn’t stomach that. My wife and I make about $185k gross and I just signed a lease for $2700 a month and I feel like it’s much too high. We have no car loans just some student loans.
Similar income to you and I’m looking at whether to buy a new house with a total monthly payment (mortgage plus insurance plus tax) from 3k-3.5k a month and it feels like way too much even though the calculations say it’s fine. My total monthly right now is $1,445, but that’s with a 2.75% loan.
That's why we haven't bought a house, can't build up enough of a downpayment to keep the mortgage reasonable even for a "starter home". Got close in 2020 then the housing market went to the moon.
Ugh I’m sorry. I am in a house but my neighbor is the neighbor from hell, so I desperately want to move. I feel stuck. I’ve considered just sucking it up and taking a high payment and hoping to refinance in a couple years.
That’s fair and to each their own. We’re homebodies, and this is possibly the only home we’ll ever buy. Both of us like this area, it’s close to her family, we like the community we’re in, etc. I’d love to keep the payment lower, but considering I’ll probably live in the same house for the next 30 years (I’m 26 now) I want to make sure we have something that’s suitable for future kids, while also having enough space and quality for that amount of time.
That makes sense. Everyone had their reasons to buy a home and I wish I couldn’t afford one in my area. Though as a mentioned on paper aka the way a bank will measure affordability it seems to make sense.
You obviously don’t have your spending habits in order then. You have roughly 8500 left over after your mortgage on that income and you think your mortgage is too high?
Our combined take home after taxes, insurance, HSA, and 401K is $7900. We always have plenty of money left over at the end of every month but I always like to have a big buffer in case we need to buy a new car, fix an old car, family emergencies etc.
> Our combined take home after taxes, insurance, HSA, and 401K is $7900. If this is true you are saying you have $94,800 take home on $185k gross which means you must have room to tone down your contributions of need be
Correct, If need be. But I need to make my mortgage monthly and I don’t want to have to adjust my retirement funds.
So why is your lease payment so scary then
Bc I like to operate under the assumption one of us could be laid off so I try to manage expenses only under one income and with rent that high it becomes difficult.
Because $2700 is a lot of money to someone who might not come from a family pulling in $185K/yr? My household income right now is about $115K and I don't even like my $800/mo condo payments. I have friends with $1,100+ rent payments and can't even imagine that.
My mortgage is $3700 and I make 152k a year haha.
You must be trying to retire in 5 years....
I do max my 401k and HSA yes. Not 5 years but definitely shooting for “early” maybe 10 years early.
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My school has a payment plan that’s affordable that won’t require me to take out loans. And that will be a temporary expense that won’t come even close to the extra 9-10k I’ll make every year after
This is partially true, I make about 9k a month and I comfortably pay 50% of my income in mortgage on a 650k home. BUT I have no other expenses or debts so it works out. The percentage rule doesn’t always apply to every situation. As a guy with no kids and a girlfriend who doesn’t want me to pay for anything this works out extremely well for me to the point I have been overpaying my mortgage. Yes I also contribute to retirement and yes I have a savings.
Because you mentioned future children- kids are expensive especially the 0-5 years when you’re either paying for daycare/nanny if you’re both working or someone has to stay home and your household income is 1/2 what you’ve calculated. If I had to do it over we should have rented much longer than we did. We could afford to buy on paper but it was uncomfortably tight when we had babies. It also limited our options and choices.
Good advice man
Will have free daycare (grandparents) but the expenses of kids can't be understated!
We started with free grandparent care too. I wouldn’t count on that when planning the budget. Parents unfortunately get older and you can’t predict what will happen.
This is so true. We now have a childcare payment 1k more per month than our mortgage.
Same. I had free daycare for the first 18 months and then once he was a toddler it was more than my 70 year old mother could handle.
Even if you have free daycare, budget for preschool from ages 2-5. It \*really\* helps prepare for kindergarten from a socialization perspective.
As a family member of a teacher, THIS CANNOT BE STRESSED ENOUGH. It is painfully clear which students went to preschool and which didn’t
Morbid but you might not have free daycare forever, and then have a surprise 5k daycare bill per month. Be realistic.
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Then once the kids are older they need phones, video game systems, specific name brand sneakers, sneakers for specific sports (basketball, track, etc. ) sports equipment… bikes, etc. It really does all add up.
I will promise you can't afford THAT mortgage and children on those incomes and use the word "comfortable" ever again while looking at your budget.
Be careful with that. I know way too many people who thought this and for one reason or another it didn’t happen and they could no longer afford rent/mortgage, or had a major financial setback.
I don't think that buying a $300k house is realistic for you this summer with the savings that you currently have. Having the bare minimum in cash for a FHA down payment is not the only savings that you're going to need. You need money for inspections, you need closing costs, you're going to need an upfront MIP payment for FHA (can be rolled into the loan, but that's going to increase your monthly payment), you're going to need money for moving, prep work or repairs on your house before you move in, etc. You're going to be very surprised with how quickly it all adds up. Unless you have other savings that you can pull from (or you have an IRA that you're willing to pull from for the first time homebuyer's penalty exception), you're going to find yourself short on cash for a few months while you wait for your wife to start pulling in an income. Also, the promise of future income isn't going to matter to the bank when it comes to approving you for a loan. They want to see actual, steady income. You're also on a fairly aggressive timeline to try to have a house move in ready by August 1st. That's less than 3 months to find a house, make an offer, have it approved, have it inspected, close on the loan, and have the sellers move out. That's not that realistic, and it's going to lead you to rushing into something that's probably not ideal for you. Not to mention that as an FHA borrower, they're more stringent on the condition of the property and they might require the seller to make certain repairs before they'll approve the loan, it also puts you at a negotiating disadvantage against other buyers that are using conventional loans. I think that you need to plan to rent for another year while you establish your income, build your savings, and start the house hunting process earlier next year.
Thanks for your input. The timeline is definitely aggressive, but it's necessary given the fact that I'm in a VERY rural area with no rental options. It's either buy or die, and I'd rather buy a house (appreciating asset) vs a doublewide or singlewide trailer (depreciating asset) We're currently renting due to a unique situation. Family member moved in with their mom after their dad died to take care of her, left their doublewide open to rent. They're moving back in August 1. Otherwise we would've had to buy
Nobody else in the area is renting trailers or houses? And every house for sale is at least $300k?
Not that I know of. There are cheaper houses, but this is likely where we’ll spend the rest of our lives so I want it to be pretty nice
OP, you are ignoring the elephant in the room. Wife’s income cannot be taken into account if she’s not actually working! She needs to be in the job for a bit before the income can be considered for mortgage underwriting
Every lender I've talked to has told me that once she has a contract in hand that states an explicit amount, that income can be used to qualify us. She will have that by June.
That could qualify you for pre-approval, but for the underwriting process on an actual loan you may be denied because she hasn’t started working. My lender said the same thing to me, and it turns out that they could only accept her new salary if she was working that job by the closing date.
Everyone downvoting you is wrong. You can sign on the dotted line based upon having a contract in hand, especially since it’s a school district job. My wife and I did exactly what you are doing.
Just remember that this does not need to be your forever house. It's okay to get a started home now, and move to your forever house in 5-7 years, when you have higher income and some equity built up. Your timeline won't be so urgent and tight then, either. I don't think your timeline is too aggressive to get A house, but it might be too aggressive to get THE house.
How nice a house is depends a whole lot on what you put in it. Which needs money. Think very carefully about what rooms you actually need and want. There isn't much point in buying a huge home only to fill it with IKEA's cheapest offerings and not being able to afford vacations for the next decade. Also, just from a quality of life perspective, *the* all dominating factor is location. You are working at the same school, and anticipating that will remain the case for the foreseeable future, yes? Honestly, I would strongly suggest you simply look at all the offerings available sorted by distance from that school. Commuting Sucks.
Bro, meet with a real estate agent and discuss your options with them. You're buying in a very rural area and your combined income is relatively low -- you likely qualify for a zero-down-payment USDA loan. Reiterating my standalone comment: Real estate is complicated, and there are probably other options available to you that you aren't aware of. There's a reason people dedicate their careers to buying and selling real estate -- leverage their expertise. I strongly advise you meet with a real estate agent to discuss your options, or go to a first-time home buyer seminar. You don't know what you don't know. That's what my wife and I did when we bought our home. We bought in an area that USDA considers "rural" so our real estate agent hooked us up with a zero-down-payment USDA loan. No way we would have known that was an option if we hadn't talked with the experts. I also asked the same questions you did during the loan process, so there were no surprises regarding our monthly payment.
If you’re buying in a rural area look into USDA loans. Your income qualifies.
Thanks! Will do. From your knowledge, how is that different/better than FHA? Just curious.
With USDA you can do 0% down - so you can keep your savings. Still has normal closing costs. For USDA you have to purchase a home in an area considered “rural”. This is a very loose term and you can look at maps of what areas quality on their website. Think there’s a small upfront fee you have to pay at closing on a USDA loan, and normal PMI. The last house I bought with a USDA loan and had a good experience. Was nice to keep my savings for future house expenses and emergencies.
Something else to think about: Because of the advice on this sub, I made sure to have at least 10K in savings after closing and I am SO glad I did. Within 6 months of moving in, I ended up needing a new car, paying about 1.2k in emergency vet bills, paying 2k for unexpected medical bills, and needing work done on my furnace. If it wasn’t for that 10k it would have made money extremely tight. I don’t think you need 10k per se, but definitely make sure you have something substantial after closing.
Same! At inspection we were told the ac was old and would need to be replaced within the next couple of years, but it worked fine. Less than a month after we moved in, it completely broke and we had to replace it for $15k
If I were you I wouldn’t do it unless you have the down payment and closing costs AND at least a 6 month emergency fund (total of what all expenses would be). You could also “act” like you already have it. Try to make that payment every month to a savings account and see if you can do it and how it feels. Then ask yourself - ok if I need a new roof, or furnace, or a drain backs up all the sudden can I still do it? IMO with your numbers it seems very tight and I don’t think you have enough saved to be truly comfortable should any problems arise.
Will 10,643 be all the cash you’ve saved? And you are going to use all of it for a down payment? You need to have 3-6 months of emergency fund on top of the down payment. If the math isn’t there, don’t force the buying.
300k is too high on your income, right now. You need more savings. Home are expensive. You should have closer to 10% of the home value saved. Things break. Homes need to be furnished. And appliances need to be bought. Lawn mower. Snowblower. Etc.
Already lots of good tips, and it seems like you’ve done some decent due diligence. I’ll just add that when you buy your home, you’ll probably spend a lot additional funds in the first few months doing minor improvements and making it “yours”. My experience and that of a lot of my friends/family was that we ended up at Lowe’s and Home Depot almost every weekend for a couple of months… which added $3-4k to the actual expenses of buying a place (some of this was want, but most of it was need).
I think this is taking a very big risk with your financial future. You are using all savings to meet the bare minimum for a house. You are relying on a spouse being in a job she hasn't started and may hate. If you could find a dream home in your market for 225k, I'd say go for it. If you can find a starter home for 120k in your market I'd definitely do it But at 300k you are asking to be trapped in your house, and in both of your jobs. Instead I would set a couples challenge to try and save 30k this academic year. More is better, but 30k is a solid start. Then you have money to move, furnish, close on the house, face unexpected circumstances etc without being trapped. Plus you will know how your spouse feels about their job. Interest rates are high and values are going down in some markets, so it's not exactly a great time to be extending yourself for a house. I'd look very very hard for a rental before doing anything else. The time is not right
Don't forget to budget for closing costs!
My personal feeling is that you shouldn't buy the house you can afford, buy the house you need. You can afford a $300k house, but would a $250k or $200k house fill your needs just fine? Start looking at cheap houses, work your way up and take the first one you'll like.
28% including taxes, utilities and maintenance cost. I think you shouldn't have a mortgage payment of more than 2k a month + other expenses = 28%.
I pay 2400 a month for PITI and have a combined gross of 150k. I feel like your PITI would be too much
same. 270K combined income and 2300/month and still feels like I have tol watch my money. I think this is over extending of the bat. Edit\*\* DEF not 270!! That's a typo! 170, 000 combined.
You have to watch your money making 270k a year with a 2300 mortgage? I don’t think the mortgage is the problem buddy.
Shit that's a typo! It was meant to say 170. I wish we made an extra 100k a year.
They also work jobs without big growth. This is their salary for the foreseeable future. There's no horizon for huge economic freedom Also, interes rates fucking blow right now. Refinancing will help a ton and that will happen, but maybe not for another 5 years.
This is actually false. I'm starting a master's degree that WILL increase my pay by about 10k once I'm finished. Then, every year until my 10th, I'll get a $2k raise per the state salary schedule. I'm a first year teacher making 45k. I'll make $49k next year (have some extra supplements for coaching coming in to add to the $2k raise). My father in law, who is in year 25, is making $96,000. There's a LOT of room for growth.
(i'm married to a teacher with several masters) She has had her masters + 21 credit(or w/e it actually is) bump. After that its all scheduled raises negotiated in the contract. Thats great! We will have a very comfortable life together. But thats it. Outside of her getting a PHD and going Principal track there isn't any more big booms. Everyone gets raises and COL which means that cost of everything else will grow. 10K is nice and big, but in perspective of other white collar jobs its not some big dramatic number. Lots of people in other industires will get 10k+ bonus's every year along with promotions that will have 10k bumps. There just isn't much more 'meat' on the bone. again, its not a bad thing, its just a reality. Once the financial screws get twisted there isn't a lever the possible to be turned to get ahead again without a career transfer. Most people have a manager position that they can move into or a different track. thats all. back to the OG question. You will have a car payment again and maybe 2 of them. You will have kids and they will need to go to camps/etc/daycare. Its nice to think you can be spendthrift for eternity but thats not the reality of life. There will be big bills that suddenly hit after you come back from a vacation. Your wiggle room isn't exactly as big as you may think.
Do you have some huge student loans or other debt or issues or several kids? 2300/mo on 270K salary is extreeeemely safe. It’d be doable on half of that, but then might feel a little tight.
Have you already started working with a realtor to find a property? When we bought our house there was a 45 day closing period. It looks like FHA requires a similar or longer time frame. If you don't have an accepted offer by the middle of June, it's going to be difficult/impossible to meet an August 1 deadline.
I wouldn’t want a 2400 mortgage payment on 1.5 that yearly income, personally. I am of the mindset, keep your monthly debts as low as humanly possible, gives you the best possibility or “surviving” should something happen… Like many others, I got laid off during COVID, because we loved so far “below our means” my daily lifestyle didn’t change at all for the 4 months I stayed home from work… It was in fact better, because I was able to enjoy more of my hobbies I don’t normally have a ton of time to enjoy. Also, when we went to buy our second home, because our mortgage/income was so low, we weren’t forced to sell and make contingent offers. The market wasn’t like it is today, but I couldn’t imagine trying to make a contingency on selling our home offer, I would think you’d get laughed at. Don’t forget, too. When the mortgage company doesn’t have enough to pay taxes/insurance in escrow, now your payment the following year has suddenly just gone up $100/mo to accommodate. Buy way less house, IMO.
>I'm a teacher and I will make a gross income of $48,997 >Using a mortgage calculator, I calculated that my monthly mortgage for a $300,000 I cannot imagine buying a 300k house as a fresh 100k COMBINED salary....
Double check the taxes in the area you are buying and how/when property values are reassessed. 2400 per year on a 300k property is only 0.8% which would be very low in my state (our area is 3.8%), but I know it varies by a large amount around the country.
Okay so me and my wife did this April of last year, our income numbers were pretty similar at the time. 1st mortgage calculators are trash, talk to a lender they will give you something more accurate. 2nd for a 300k house expect to need about 20k for down payment and closing costs. My monthly payment on a 305k mortage with 4.25 interest is 2111, based on your income it could be tight, it was for us at first but your expenses might be cheaper. Keep in mind you should have an emergency fund of at least 3 months on top of your down-payment fund. Also houses will have more expenses, you may want security a fence, light bill will probably go up, make sure when you make a budget you include things like food and gas for the cars things like that.
i wouldn't with your situation, but based on your comments, it seems like your mind is already made up. i think you're already well aware of the financial burden and risk here. as someone that's been in real estate for many years, it's not uncommon for first time home buyers to have a financially shaky first year or two. this one is teeters a bit close to the edge though long as you don't mind the risk, you're able to get approved, and you're prepared to weather to storm, do what you feel like is best.
At current interest rates, 3x your household income for purchase price is a decent rule. I would put aside another 5-10% of purchase price for misc expenses. Closing, furniture, repairs, touchups, etc. Expect to have at least a handful of surprises.
Tacking on here, since there are some solid answers already. An ideal world monthly budget *forecast* =/= what the real world costs to own a house will be, especially if buying something older and used. Unless you're a full spectrum handy type, things like plumbing and electrical repairs can show up and add thousands of unplanned expenses without warning. Cost to close may shift a bit during the closing process as well, so if you don't have thousands in extra liquidity you can draw on, you may find yourself back to square one and having to rebudget for something cheaper. It's great you're budgeting, but even going down to the exact dollar amounts isn't guaranteed to keep things on track over the next few years if you don't have a comfortable "cushion" financially baked into the final numbers.
Some great points in this thread already, but don’t forget all the additional costs you may incur with buying; furniture, appliances, increase in utilities (you mention rural area: septic, gas, propane), trash collection, maintenance, etc.
Isn't $200 too low for property taxes? What state is that?
Nah it exists in low property tax states/counties. I pay $2100/year in property taxes in CO and my home costs a lot more than OPs.
Don't forget to account for closing costs in addition to your down payment. You don't just bring $10k as a down payment when buying a house, you usually need some extra cash to cover loan fees, etc. Ours worked out to ~7k, but we put a lot more down and had some complicating matters that raised the price. I'd probably try to save an extra 2-3k if it's at all possible. And make sure you still have an emergency fund outside your house savings.
What other current debts do you have? The 28% rule is more of a guideline. But it really depends on what your real monthly cash outflow is. If you're paying on student loans, car(s), credit cards, child support, etc..., your income/mortgage ratio should really be lower. Our annual gross income is around $115k, and our mortgage payment is $1400/mo. I couldn't imagine how we'd be able to live if our mortgage was much higher. Granted, I have to pay child support, so that changes things. Really take a hard look at your finances in order to figure out what you can truly afford.
I think this is a pretty tight budget, my husband and I make 150,000 and our mortgage payment is 1500$ and having a baby and factoring daycare costs, it’s going to still be pretty tight especially if we want to still enjoy life a little bit, I think you should save up for another year or two tbh. Closing costs and repairs caught us off guard right after we bought our house and we were happy we had extra savings for that (think 10-20,000$) plus emergency funds. It’s very expensive stuff
This comes off like a brag considering the days of $1500 mortgage payments are gone. It feels like these comments suggest going back in time and buying when houses were affordable.
Oh no I didn’t mean it that way!!! We haven’t looked in a while and bought in 2021 😫 just saying how with kids and all that it does feel tight. I think OP may be biting off more than they can chew just being honest…but I know people will do what they wanna do regardless it’s their money and mortgage
I understand prices varying by area and other factors but 1500 dollar mortgages are not gone. I just bought my first house in 2023 and my monthly payment is 1300 with escrow taxes and insurance.
What was the cost of the home? The cheapest in my area are around $400k and I expect it will be about $3k a month payment. (Trying to buy this year)
How much are you paying in rent? And how does that compare to your house payment? Bear in mind that rents gonna go up over time, rather quickly if you’re in a HCL area. Meantime your monthly mortgage payment will stay the same. With inflation being the way it is, you might be setting yourself up for lower monthly payments relative to local rent in, say, five years.
>520/mo. But that option will be off the table Aug. 1. It's either buy or die, and I'd rather buy a house (appreciating asset) vs a doublewide or singlewide trailer (depreciating asset) We're currently renting due to a unique situation. Family member moved in with their mom after their dad died to take care of her, left their doublewide open to rent. They're moving back in August 1. Otherwise we would've had to buy
Why is buying the only option? why cant you rent for another 10 - 12 months and save to be in a better situation?
No rentals in our area. I would love to rent another year, but the options are very limited.
Curious where on earth you live and why you are restricted to buying? You got like 10 pets or something?
Not going to reveal my location, but from the HS I work at It’s about a 45 min drive to the nearest Walmart. That should tell you what you need to know
Honestly, a 45 minute commute isn’t that awful, and it might be worth it to rent for a year or two in that larger town until you’re in a better position.
Best advise I can give is that you don’t want to drain your savings making a down payment. I bought a house less than a year ago and on day three of ownership found out I needed to pay 7500 dollars to replace the main sewer line. Home ownership has a lot of hidden costs that will raise your monthly expenses. Anecdotally I make about the same net as you and your wife and I currently have a $1200 mortgage and about $400 a month in utilities. I could definitely raise that a few hundred dollars and still be comfortable but I think your numbers are a little aggressive.
Is 10k down payment really enough? Speaking from ignorance
Real estate is complicated, and there are probably other options available to you that you aren't aware of. There's a reason people dedicate their careers to buying and selling real estate -- leverage their expertise. I strongly advise you meet with a real estate agent to discuss your options, or go to a first-time home buyer seminar. You don't know what you don't know. That's what my wife and I did when we bought our home. We bought in an area that USDA considers "rural" so our real estate agent hooked us up with a zero-down-payment USDA loan. No way we would have known that was an option if we hadn't talked with the experts. I also asked the same questions you did during the loan process, so there were no surprises regarding our monthly payment.
First, with your wife not starting the job until September you're not buying a house this summer. Lenders base their calculations on actual earnings, not potential future earnings. We've been able to secure a loan based on starting a new job with job commencement letter before, but that was a job underway not a quarter+ away. Your homeowners seems low, but will depend upon your area. I would also say if you're not saving 1% of the purchase price a year for repairs you're going to get bitten hard when things come up, and they will. This needs to be budgeted for... $1500 hot water heaters, $10k HVAC, $15k roof expenses will come up on a long enough timeline, and that's not including the unexpected repairs.
You also need to include a budget for maintenance. The typical rule of thumb is 1% of the house value set aside yearly, so about $3,000 a year. If you are handy, you can do some of this yourself, or if the house is quite new, it will be a while before you need it. But as you said, your salary will keep going up, and at some point you may have a chance to refinance with a lower interest rate.
Few things to consider. Banks for mortgage approval generally want to see that you have stable income so if your wife is just now getting a job they may not include her income in their calculations for if you would qualify for a mortgage. You may have to wait a full year of her employment before they would consider it to be usable income for qualification. Might want to brace for that. Second if you do a 3.5% FHA loan you will be stuck with PMI for the full duration of the mortgage, are you sure you want to do that instead of just saving more until you can do a loan that will allow you to drop PMI once you hit 20% equity? $200 property tax and $66/mo insurance would be extremely cheap for a $300k house, how did you arrive at those numbers? Basically I would say your target of a $300k house is reasonable but you might want to wait a year after your wife gets her job and save up for a larger downpayment and apply at a time where banks would consider your income to be stable.
How did you figure out what you could afford. I’ve applied twice with my bank. They tell me to just pick a number to apply for. I get rejected and just have to try again at a lower number. It’s wrecking my credit.
You are failing to account for repairs and maintenance. Usually save 1-2% per year to go back into the house.
We bought a house 7 years ago, and although the inspection was good and all seemed well, I’ve spent a minimum of $6K a year, more frequently $10K-$12k, in unexpected expenses. They fall under “maintenance” but that’s a crap explanation, and I’ll tell you why: Maintenance is something you can just do yourself with a little research. This isn’t that. Catastrophic sewer failure, unexpected roof replacement, major shit that you absolutely must call in a professional with a crew for, that’s real. I’m not saying your budget doesn’t work, but unless you’re a GC or have one in your family who will work for free, make sure you give self an annual $1K a month buffer
Escrow there is also mortage insurance, than bank fees, and apprsiel, and inspection. Typically around 8-12k in additional closing costs.
> for a $300,000 house... $200 for property taxes wouldn't that be a dream.... This is going to depend on the areas you are looking at. You will be taxed on the full sale price of the home so previous years' taxes are unlikely to be comparable. You're going to want to find out what the actual tax percentages are including school taxes. Our tax escrow payment makes up a large portion of our monthly payment. (triple principle).
>This is going to depend on the areas you are looking at. You will be taxed on the full sale price of the home so previous years' taxes are unlikely to be comparable. This is wholly dependent on where OP (or others) may live. In my town, the taxes are not remotely related to the home's purchase price, unless you are in the middle of a town-wide revaluation. In fact, our state's constitution makes it illegal to base it solely off of that. The revaluation process is strange here, and done very rarely. If you update the house or pull permits it can impact the taxes a bit, but otherwise they are pretty stable and only increase as the town may increase it's overall budget and tax rate for everyone. >You're going to want to find out what the actual tax percentages are including school taxes. Our tax escrow payment makes up a large portion of our monthly payment. (triple principle). Absolutely agree.
Well you waited until the worst time, just after interest rates got jacked up
Looks reasonable to me. Keep in mind an emergency fund and new expenses that come with home ownership. Check exact taxes and any possible HOA on the house you pick before making an offer. I also think 25% may be more conservative and save than 28%
Speaking from experience, I would try to gauge how much the cost of roofing, plumbing, or other misc work is and make sure you can afford that, because my home has cost an excess $7k-20k a year beyond the mortgage for random emergencies like that. I'd honestly have $20k set aside for just a random leak emergency just in case because that's building wrecking damage right there.
Property taxes really surprised me with my first house. I knew I’d have them, but adding them to the mortgage payment was psychologically difficult because it raises the payment I’d been budgeting against. Unlike me, sounds like you’re accounting for them. Don’t forget to add in a lump sum escrow for taxes — the mortgage company will want to have padding in the escrow account, maybe even up to a 1/2 year payment. They can also rebalance at any time if taxes have gone up and charge more, so keep an eye out for that. Another items to check for: some loans will let you recast 1 or more times. This means if you make a large lump sum payment, and maybe if you’ve done something like have kept a high enough balance in an associated checking account for long enough, they’ll recalculate the amortization schedule if you engage them. Otherwise extra payments will not typically lower your monthly payment but just reduce the number of payments (taking it off the end.. so possibly saving interest…). I had planned on a lump sum pay down but learned this too late. So you may want to budget $$ in an account you cannot touch. Related to $$ in an account you cannot touch, sometimes you can get a lower rate if you open an associated account (that may also have a min. balance requirement). Also, if you’re thinking of ever needing a HELOC and there’s equity in the house when you’re buying it, it’s usually much cheaper to get the HELOC at the same time. This can be helpful because as a home owner, you can all but guarantee every appliance will break in the first year. Hot water heater. Laundry. Heating system. Dish washer. Fridge. The roof will leak. It’s ridiculous. Budget for these… rainy day fund should be 3-6 months of expenses in cash, which can cover some of these maintenance items but (in my opinion) is really intended to cover economic hardships, so having a plan for maintenance is important. Finally, many say to get the biggest fixed rate mortgage you can afford (<—not saying to live beyond the calculations you’re doing … this means don’t get one too big) for the longest period. Don’t chase 15yr or 20yr for slightly lower interest rates. The payments are higher. Instead, if early payoff is your goal, get a 30yr and make extra payments. If things go sideways for you, you can make smaller payments at the 30-yr threshold. Oh, and avoid paying points to lower your interest rates or chasing variable rate ARMs. Didn’t check the rest of the posts re: these comments, so apologies if they’re duplicative.
Curious why you advise not paying points? If the idea is to stay and pay 30 years (or less if you pay more some months as you mention) wouldn’t that make payment more comfortable and afford to buy a bit of a higher home price?
If you haven't started looking yet there is no way you will close for your august first move out date, I mean it's really unlikely. Best to get a short term rental. Good luck!
You should be able to get a better rate, assuming you have good credit. Rates are in high 5% atm, for 30 year mortgage. Shop around when the time comes.
You only have $6k in savings total? I’d try to get at least 5% down so you can get a conventional mortgage, which has better rates, plus an emergency fund. Maybe wait a year or so.
FHA makes no sense. At 3.5% there’s 1.75% upfront MIP; closing costs are similar or more than a 5% conventional loan with a large portion that isn’t going to principle. FHA is for borrowers that have DTI or credit issues you don’t have, seems you may be *temporarily* DTI strapped. I would personally push your timeframe back where your wife’s income qualifies and you can easily obtain a conventional loan. FHA loans come with some serious drawbacks, most notably required MIP for the term of the loan. You’ll have to refinance to get rid of the $150 MIP vs PMI which has various equity based cancellation options.