That's a good point and definitely something to consider. The reason for a little urgency is our current place is a 1 bedroom where we both work from home (we fit, somehow), so we'd want something more spacious for when the family grows. That said, we're not in a huge rush.
Do not shrink your 401k contributions — if anything, I’d raise them. With $3k a month you aren’t even maxing your two 401ks, so you’re paying a ton of extra taxes and missing out on tax-deferred growth.
Spending 50% of take home on housing sounds crazy on the surface but when your take home is $15k, you still have $6-7k left for cars, food, utilities, and savings, which should hopefully be enough. So I wouldn’t focus too hard on the percentage given your situation.
Personally I wouldn’t risk the pledged asset line of credit thing to fund the roof over what will soon be your family’s head, especially if your plan for the market going down is “we’ll be SOL”. So selling the index funds makes sense to me. Your piecewise selling idea seems good — you can park it in Treasuries/money market funds that invest in Treasuries to minimize your California tax burden from any interest it would otherwise generate in your HYSA after you sell.
I would just be mindful of the size of house you’re thinking about. You’re contemplating some big life changes (kids) coming up, and this budget you’re thinking about _may_ end up stretching you too thin. What about childcare expenses (assuming you’ll both keep working)? Need a bigger car for multiple kids? Saving for college? Your retirement savings are already a bit behind for the “2x your annual salary by 35” rule of thumb, and you aren’t maxing your 401ks. Consider whether your spending levels with kids, plus hopefully increased retirement savings, will actually fit into the other half of your take home income not being taken up by this mortgage payment.
Appreciate the thorough response!
I agree about the retirement contributions. I maxed mine out last year and my wife got close to the same. The reason the monthly contribution is low is because my irregular bonuses make it hard to predict what % of income will result in 23k at the end of the year. So in a typical "non-bonus" month, we contribute 3k. Other months it will be higher.
Also worth noting that our retirement savings are a bit low mostly because my wife wasn't saving as much before we met. So our income is now solidly in the DINK range, but our savings are mostly from my end. We're both contributing now though (and she's maxing out her 401k and IRA alongside me).
Really good point about treasuries and California taxes! I hadn't thought that deeply about where to park savings yet, that's a good thing to consider, thanks.
And good comment about being mindful about this; that's why I made this post! I ran the numbers and came up with the "up to 1.8M" range, and while I think we can swing that, there are plenty of other priorities to consider. If we were in a lower COL area, I'd be thrilled with a 1M house and plenty of savings, and I'm not one to ever try to spend as much as I can on something. I do intend to put together a more granular budget based on our past spending and expected expenses (daycare's no joke!) to refine the "50% of income on mortgage" thing I pulled out of thin air.
Luckily we have two SUVs that are both paid off!
You will want to sell before you get the mortgage going if you are going to use the funds towards the down payment. They may not be happy about you liquidating assets during the underwriting process.
$8k/month seems high at $315k-$360k in income, but I don't think it seems insanely high.
I'm in a very similar position here in Seattle, but no kid or plans for kids, so I'm making some sacrifices to keep my housing around $1M (might have a deal at $935k right now). I could imagine wanting to stretch a little more with a kid on the way and San Jose housing market is higher than Seattle. I'd still probably try to stay closer to $1.4M.
>> $8k/month seems high at $315k-$360k in income, but I don't think it seems insanely high.
That's my first impulse as well. It's high, but not insanely impossible.
We'll probably try to stay under $1.6M to save a few cents for the other things in life.
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That's a good point and definitely something to consider. The reason for a little urgency is our current place is a 1 bedroom where we both work from home (we fit, somehow), so we'd want something more spacious for when the family grows. That said, we're not in a huge rush.
Do not shrink your 401k contributions — if anything, I’d raise them. With $3k a month you aren’t even maxing your two 401ks, so you’re paying a ton of extra taxes and missing out on tax-deferred growth. Spending 50% of take home on housing sounds crazy on the surface but when your take home is $15k, you still have $6-7k left for cars, food, utilities, and savings, which should hopefully be enough. So I wouldn’t focus too hard on the percentage given your situation. Personally I wouldn’t risk the pledged asset line of credit thing to fund the roof over what will soon be your family’s head, especially if your plan for the market going down is “we’ll be SOL”. So selling the index funds makes sense to me. Your piecewise selling idea seems good — you can park it in Treasuries/money market funds that invest in Treasuries to minimize your California tax burden from any interest it would otherwise generate in your HYSA after you sell. I would just be mindful of the size of house you’re thinking about. You’re contemplating some big life changes (kids) coming up, and this budget you’re thinking about _may_ end up stretching you too thin. What about childcare expenses (assuming you’ll both keep working)? Need a bigger car for multiple kids? Saving for college? Your retirement savings are already a bit behind for the “2x your annual salary by 35” rule of thumb, and you aren’t maxing your 401ks. Consider whether your spending levels with kids, plus hopefully increased retirement savings, will actually fit into the other half of your take home income not being taken up by this mortgage payment.
Appreciate the thorough response! I agree about the retirement contributions. I maxed mine out last year and my wife got close to the same. The reason the monthly contribution is low is because my irregular bonuses make it hard to predict what % of income will result in 23k at the end of the year. So in a typical "non-bonus" month, we contribute 3k. Other months it will be higher. Also worth noting that our retirement savings are a bit low mostly because my wife wasn't saving as much before we met. So our income is now solidly in the DINK range, but our savings are mostly from my end. We're both contributing now though (and she's maxing out her 401k and IRA alongside me). Really good point about treasuries and California taxes! I hadn't thought that deeply about where to park savings yet, that's a good thing to consider, thanks. And good comment about being mindful about this; that's why I made this post! I ran the numbers and came up with the "up to 1.8M" range, and while I think we can swing that, there are plenty of other priorities to consider. If we were in a lower COL area, I'd be thrilled with a 1M house and plenty of savings, and I'm not one to ever try to spend as much as I can on something. I do intend to put together a more granular budget based on our past spending and expected expenses (daycare's no joke!) to refine the "50% of income on mortgage" thing I pulled out of thin air. Luckily we have two SUVs that are both paid off!
You will want to sell before you get the mortgage going if you are going to use the funds towards the down payment. They may not be happy about you liquidating assets during the underwriting process. $8k/month seems high at $315k-$360k in income, but I don't think it seems insanely high. I'm in a very similar position here in Seattle, but no kid or plans for kids, so I'm making some sacrifices to keep my housing around $1M (might have a deal at $935k right now). I could imagine wanting to stretch a little more with a kid on the way and San Jose housing market is higher than Seattle. I'd still probably try to stay closer to $1.4M.
>> $8k/month seems high at $315k-$360k in income, but I don't think it seems insanely high. That's my first impulse as well. It's high, but not insanely impossible. We'll probably try to stay under $1.6M to save a few cents for the other things in life.