Can I afford a 530,000$ home?

[Blackie]

This has become a huge problem and is causing fights. Here me out.

Me and my partner live in Sacramento, CA. We have a combined monthly income of 8,000$ USD after taxes, take home. We have 140k saved up over the last 5 years for a down payment/savings. 1 kid on the way in January 2022. 1 dog. School loans, but only total 1,000$ a month. Very comfortable life, saving extra money right now too by living with parents...

But we cannot for the life of us agree on a house to buy.

My partner thinks we need to target 400k homes, low or mid 400k, maybe 470k or 480. No higher than 500k. This is for a 3 bed 2 bath with a backyard, mind you. HOWEVER home prices in the current market for a good new home with what we want are 500k base, the houses we like most are 530k MINIMUM. I'm talking about the houses that make our eyes light up and get excited when we see them. 530k homes mean 2,700$ a month payments (total, including taxes, HOA, mello roos, etc.). Affordable payment for us, I thought. 470k houses are like 2,300$ a month, not a big different in cost but a big difference in house quality, so an extra 400$ a month for the better 530k home, taking into account our 8,000$ monthly salary (minus 1,000$ monthly school loan payments, insurance, etc.) is totally reasonable for us and a good investment we would love to live in...

But my partner absolutely refuses. They say I am irresponsible with money and it makes them sick to think about getting a 530k home. I don't get it. 530k homes that we see here are in better neighbourhoods, are 2019/2020 new constructions instead of 1980s, 1990s to early 2000s construction, have bigger more modern interiors etc.... but my partner just won't budge. They keep saying that I don't understand how to be responsible with money, we should only pay under 25% of out total income or we are fiscal fools.

Am I crazy? You can't even get a Sacramento home nowadays without overbidding by 20k. Is 530k for a home when you make 8,000$ monthly truly an irresponsible idea?

 

[ChrisR]

140k saved up? Yes, yes you can afford it.

 

[Socivol]

You can totally afford that.

 

[Stop Motion Pornography]

27 percent of your collective income on a mortgage seems reasonable, but I'm not a fancy money scientist

 

[Skel1ingt0n]

Just to be super, duper clear, you're clearing $8K month after all state and federal taxes: medicare, SS, state, any weird property, etc. etc.?

If that's the case, a $2,700 month payment on $8,000 is a bit tight - but in a high cost of living area like Sacramento - is FAR from unheard of. You'll be fine. Especially if you anticipate growing upward mobility in your careers. I'm not sure the statistics, but it wouldn't surprise me if anyone that's making less than $200K HH in that area is likely spending 40+% on their home.

Only thing I'd add is 1) ensure you have enough savings you could weather BOTH of you losing your jobs for six months, and 2) I'd be sure you're contributing generously to your retirement plan. EDIT: 3) know that kids are expensive; if that's part of your plan, think on the budget now.

 

[maabus1999]

Compare the monthly payment between the two views and start there. It might not be hard to come to terms after doing so.

 

[Tukarrs]

This is probably going to be a place you're gonna live in for the next ten years at minimum. It's worth paying more for a place you truly love.

 

[ElectricBlanketFire]

What is a mello roo? It sounds delicious.

 

[Blackie]

Just to be super, duper clear, you're clearing $8K month after all state and federal taxes: medicare, SS, state, any weird property, etc. etc.?

If that's the case, a $2,700 month payment on $8,000 is a bit tight - but in a high cost of living area like Sacramento - is FAR from unheard of. You'll be fine. Especially if you anticipate growing upward mobility in your careers. I'm not sure the statistics, but it wouldn't surprise me if anyone that's making less than $200K HH in that area is likely spending 40+% on their home.

Only thing I'd add is 1) ensure you have enough savings you could weather BOTH of you losing your jobs for six months, and 2) I'd be sure you're contributing generously to your retirement plan.

Click to shrink...

Yeah it's 8,000$ take home. We easily saved up 140k in the bank over the last 5 years + 50k in stocks, bought a newcard, furniture, etc. Money has not been a problem.

 

[Meatfist]

That sounds fine to me, but with a kid on the way I would really recommend ironing out what your plans are in terms of child care or income lost due to unpaid leave

 

[captive]

I mean if you threw 100k down, that would leave 40k in savings, and your monthly payment would be 2000 a month.

If you're bringing home 8k a month after taxes. I don't see an issue with 25% going to your forever home.

 

[Goldenroad]

You can afford it. It's somwhat close to the upper end of what you should be spending, but it's fine, especially with the savings you have in place. Go for it.

 

[zerocypher]

I haven't shopped rates for awhile but what's a safe monthly payment you can make while still saving for vacations, eating out, furniture, baby stuff, emergencies, etc? $8k is more than enough, at least here in Texas.

 

[Poltergust]

You're basically on the cusp of the "do not pay more than 1/3 of your monthly income on rent/mortgage" rule with a 530k home.

But if the quality increase is that substantial it may be worth it.

 

[Supercrap]

Are you younger and have lots more to grow in your careers? If you have a good job and have some upward mobility coming in the future it should be fine

 

[fallingedge]

2700 on a monthly budget of 8000 is a bit too close for me but by no means impossible nor irresponsible.

Insurance/taxes will change year to year so as long that is taken in consideration, you should be good to go.

 

[echoshifting]

Yeah it's 8,000$ take home. We easily saved up 140k in the bank over the last 5 years + 50k in stocks, bought a newcard, furniture, etc. Money has not been a problem.

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Sounds like you shouldn't have a problem then, but be sympathetic to your partner, it's an enormous commitment and some people get stuck on the what-ifs. Hopefully they come around.

 

[Skel1ingt0n]

Yeah it's 8,000$ take home. We easily saved up 140k in the bank over the last 5 years + 50k in stocks, bought a newcard, furniture, etc. Money has not been a problem.

Click to shrink...

In that case I sincerely believe you're more than fine. Based off what you've shared, you're definitely in the right.

There's something to be said about avoiding extravagance and/or getting less than you can afford... but I truly believe the numbers you've shared make sense, especially for a forever home and not something you plan to leave in a year or two.

EDIT: Also, make sure you're truly understanding where your partner's hesitation comes from. Maybe they lost their house as a kid? Maybe their parents lost their jobs and things got super tight? I dunno, but there may be some deep rooted fear; I'd be really respectful of that.

 

[Blackie]

What is a mello roo? It sounds delicious.

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Lol yeah I never heard of Mello Roos until we started touring new Sacramento properties. It's a kind of local infrastructure tax based on a government bond or something. Is supposed to decrease in cost over time and eventually disappear. Info here: https://www.investopedia.com/terms/m/melloroos.asp#:~:text=A Mello-Roos is a,finance local infrastructure or services.&text=The law permitted Mello-Roos,Proposition 13 property tax caps.

 

[ElectricBlanketFire]

Yeah it's 8,000$ take home. We easily saved up 140k in the bank over the last 5 years + 50k in stocks, bought a newcard, furniture, etc. Money has not been a problem.

Click to shrink...

I need to not go in these threads.

 

[Einbroch]

We're actually in a very similar situation to you.

The only difference is that we went for a 15 year loan to save on interest, but our numbers are SUPER similar to you. $7800 income after tax, $2700 a month for mortgage.

No kids, but we're doing fine. Every once and a while we have a big expense (18k new roof...10k to replace siding...4k furnace...etc) but that's life.

 

[kIdMuScLe]

This has become a huge problem and is causing fights. Here me out.

Me and my partner live in Sacramento, CA. We have a combined monthly income of 8,000$ USD after taxes, take home. We have 140k saved up over the last 5 years for a down payment/savings. 1 kid on the way in January 2022. 1 dog. School loans, but only total 1,000$ a month. Very comfortable life, saving extra money right now too by living with parents...

But we cannot for the life of us agree on a house to buy.

My partner thinks we need to target 400k homes, low or mid 400k, maybe 470k or 480. No higher than 500k. This is for a 3 bed 2 bath with a backyard, mind you. HOWEVER home prices in the current market for a good new home with what we want are 500k base, the houses we like most are 530k MINIMUM. I'm talking about the houses that make our eyes light up and get excited when we see them. 530k homes mean 2,700$ a month payments (total, including taxes, HOA, mello roos, etc.). Affordable payment for us, I thought. 470k houses are like 2,300$ a month, not a big different in cost but a big difference in house quality, so an extra 400$ a month for the better 530k home, taking into account our 8,000$ monthly salary (minus 1,000$ monthly school loan payments, insurance, etc.) is totally reasonable for us and a good investment we would love to live in...

But my partner absolutely refuses. They say I am irresponsible with money and it makes them sick to think about getting a 530k home. I don't get it. 530k homes that we see here are in better neighbourhoods, are 2019/2020 new constructions instead of 1980s-earpy 2000s construction, have bigger more modern interiors etc.... but my partner just won't budge. They keep saying that I don't understand how to be responsible with money, we should only pay under 25% of out total income, 30% at most, or we are fiscal fools.

Am I crazy? You can't even get a Sacramento home nowadays without overbidding by 20k. Is 530k for a home when you make 8,000$ monthly truly an irresponsible idea?

Click to shrink...

you can afford more lol…. Be thankful you guys have that much as majority of homeowners pay 50% of their income towards their mortgage

 

[Lobster Roll]

Depends on how conservative / savings-geared you are with your money. You and your partner make marginally more than mine and myself (we have no kids and never will), and we set our limit around ~$275,000 to $325,000.

 

[Blackie]

That sounds fine to me, but with a kid on the way I would really recommend ironing out what your plans are in terms of child care or income lost due to unpaid leave

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We get 1 month paid leave before the birth, then 2-3 months paid leave after the birth. We are in Sacramento to use parents/family for childcare.

 

[Lumination]

With your income, you can afford it. Watch out for baby costs though.

Also, in general, don't invest 6 figures into a home you hate.

 

[fallingedge]

We're actually in a very similar situation to you.

The only difference is that we went for a 15 year loan to save on interest, but our numbers are SUPER similar to you. $7800 income after tax, $2700 a month for mortgage.

No kids, but we're doing fine.

Click to shrink...

I get where you are coming from but a 15 year would feel so aggressive. I would rather take out a 30 year and pay it like a 15 in case anything goes wrong. You pay more in interest but that peace of mind in case anything happens is what I would appreciate.

 

[PeakPointMatrix]

I think the bigger issue here is your partner viewing you as so irresponsible with money… Has your history with cash actually been reckless? I'm shocked such a negligible difference in price has been such an issue. If they refuse to budge, just keep "looking" for a house while you keep saving. If you hit 160-180k saved up then you can pretty much "brute force" past your partner's concerns since you have the extra savings to cover the spending difference.

 

[MotherFan]

Yeah it's 8,000$ take home. We easily saved up 140k in the bank over the last 5 years + 50k in stocks, bought a newcard, furniture, etc. Money has not been a problem.

Click to shrink...

What is the plan for childcare? If you think that one of you will have to stay home, factor that in. If you think you will need to have childcare, budget in 1500 to 2k a month for that. Also, what will happen with the budget if one of you lose your job?

My advice is to make sure you are solvent with one person working. Coming up to the 30% threshold using both salaries is a dangerous game to play imo.

 

[Einbroch]

I get where you are coming from but a 15 year would feel so aggressive. I would rather take out a 30 year and pay it like a 15 in case anything goes wrong. You pay more in interest but that peace of mind in case anything happens is what I would appreciate.

Click to shrink...

Totally fair. We only accepted this because our careers are very stable and we have quite a bit in savings. We both lived with my parents or in small apartments for many years after school. We also started on a 30 year in our first two homes. This is our third, so we're just in a better place in our lives and more comfortable.

I don't blame OP's partner. It can be scary. But just looking at the numbers, they should be fine. Of course, this assumes they work in stable fields, buy a home in decent condition, don't have any looming debt, etc etc.

 

[atdawnwestrike]

I need to not go in these threads.

Click to shrink...

for real.

 

[Justin Bailey]

Seems fine but you're stretching it a bit. Are they 530k listing price? Because you're not going to get them for that In this market.

More importantly, your partner has a price in their head and you're going over it. You should try to figure out why they have this price set. Showing them this thread and saying "see, the internet people say we can do it" probably isn't going to work :)

 

[yellowfury]

Wait homes in sac are still in the 500s? Which neighborhood are you looking at?

 

[Prototype-03]

Money would be tight, but I would assume it's manageable. Just keep in mind that you'll have to pay utilities and taxes.

Have you considered hiring a real estate finance expert to see what you should be targeting? Might help you guys decide.

 

[Chasex]

Dude, you are perfectly fine. In fact I'd say you can afford a bit more and still be fine. I am in a similar financial situation, and granted i'm a single guy, but I pay that much a month without breaking a sweat.

1. Interest rates are stupid cheap
2. It's extremely rare to lose money on a house
3. If you get something newer it will have less issues and maintenance cost down the road
4. If you get something you exactly want you're likely to stay there longer. This is better because of amortization rates meaning you'll pay off more principal and not just interest. Also staying longer means you avoid realtor and closing costs.

So get into something you actually want and stay put. You're going to MAKE money on this in the end.

 

[Blackie]

In that case I sincerely believe you're more than fine. Based off what you've shared, you're definitely in the right.

There's something to be said about avoiding extravagance and/or getting less than you can afford... but I truly believe the numbers you've shared make sense, especially for a forever home and not something you plan to leave in a year or two.

EDIT: Also, make sure you're truly understanding where your partner's hesitation comes from. Maybe they lost their house as a kid? Maybe their parents lost their jobs and things got super tight? I dunno, but there may be some deep rooted fear; I'd be really respectful of that.

Click to shrink...

My partner is an immigrant and their family was very poor growing up. They are always super duper careful with money.

 

[Jag]

Financially yes it makes sense (and I think you already know that), but your bigger issue is possible anger and resentment if you push your partner hard into doing something they feel strongly against. As someone whose first house was $535K with a newborn and 1 dog, money issues came up very quickly and my partner started freaking out about needing to downsize.

Bottom line, you really need to be on the same page as your partner or bad things can happen.

 

[Spork4000]

No if your only savings are what you've been putting away for the house. Running the numbers the payments on a $540,000 house after your down payment would be higher than you're currently saving every month, add to that the inevitable lifestyle creep costs of homeownership. I'm with your partner and you should shoot for housing costs to be 25% or less than your monthly income.

 

[Blackie]

We're actually in a very similar situation to you.

The only difference is that we went for a 15 year loan to save on interest, but our numbers are SUPER similar to you. $7800 income after tax, $2700 a month for mortgage.

No kids, but we're doing fine. Every once and a while we have a big expense (18k new roof...10k to replace siding...4k furnace...etc) but that's life.

Click to shrink...

I get where you are coming from but a 15 year would feel so aggressive. I would rather take out a 30 year and pay it like a 15 in case anything goes wrong. You pay more in interest but that peace of mind in case anything happens is what I would appreciate.

Click to shrink...

We are thinking take a 30 years then pay an extra 500$ a month. Our agent said that could turn a 30 year into a 15 year + if we get into financial trouble we can just stop paying the extra money.

 

[STRUDEL]

This has become a huge problem and is causing fights. Here me out.

Me and my partner live in Sacramento, CA. We have a combined monthly income of 8,000$ USD after taxes, take home. We have 140k saved up over the last 5 years for a down payment/savings. 1 kid on the way in January 2022. 1 dog. School loans, but only total 1,000$ a month. Very comfortable life, saving extra money right now too by living with parents...

But we cannot for the life of us agree on a house to buy.

My partner thinks we need to target 400k homes, low or mid 400k, maybe 470k or 480. No higher than 500k. This is for a 3 bed 2 bath with a backyard, mind you. HOWEVER home prices in the current market for a good new home with what we want are 500k base, the houses we like most are 530k MINIMUM. I'm talking about the houses that make our eyes light up and get excited when we see them. 530k homes mean 2,700$ a month payments (total, including taxes, HOA, mello roos, etc.). Affordable payment for us, I thought. 470k houses are like 2,300$ a month, not a big different in cost but a big difference in house quality, so an extra 400$ a month for the better 530k home, taking into account our 8,000$ monthly salary (minus 1,000$ monthly school loan payments, insurance, etc.) is totally reasonable for us and a good investment we would love to live in...

But my partner absolutely refuses. They say I am irresponsible with money and it makes them sick to think about getting a 530k home. I don't get it. 530k homes that we see here are in better neighbourhoods, are 2019/2020 new constructions instead of 1980s, 1990s to early 2000s construction, have bigger more modern interiors etc.... but my partner just won't budge. They keep saying that I don't understand how to be responsible with money, we should only pay under 25% of out total income or we are fiscal fools.

Am I crazy? You can't even get a Sacramento home nowadays without overbidding by 20k. Is 530k for a home when you make 8,000$ monthly truly an irresponsible idea?

Click to shrink...

Can you afford it? Yes. Will you win the bid without paying over ask in cash or making concessions? Highly unlikely in Sacramento. Prices here are absurd and it's not a buyers market. Also look at daycare costs if your family will be needing it. Sacramento area we pay 18+k a yr for childcare.

We got extremely lucky and bought in Elk Grove about 4 years ago at 400k, house is now estimated at 600k. If there's any way to continue saving and try to wait for a better buyers market, I would recommend it at this time. Of course no idea when that will happen :/

 

[Deleted member 18179]

So the house is 410. Break out a mortgage and insurance calculator. Look at your budget- Is that amount more or less than what you spend in rent now? If it's more, do you have surplus? Also, have you budgeted for your child?

Each of my kids costs about $1400/mo between daycare and diapers and clothes and doctors and whatever else.

This is a rare question that has a simple numerical answer!

 

[PeakPointMatrix]

Have you considered hiring a real estate finance expert to see what you should be targeting? Might help you guys decide.

Click to shrink...

How would I start or go about this? I feel totally naked and clueless on the process of starting the process of buying a home. Are people like these pricey? How do you find one? Is it a multi-session thing?

 

[Blackie]

Financially yes it makes sense (and I think you already know that), but your bigger issue is possible anger and resentment if you push your partner hard into doing something they feel strongly against. As someone whose first house was $535K with a newborn and 1 dog, money issues came up very quickly and my partner started freaking out about needing to downsize.

Bottom line, you really need to be on the same page as your partner or bad things can happen.

Click to shrink...

This is what I am most worried about. I don't want them to be resentful or angry BUT I think they will regret it in a few years if we don't get a house we truly love. Also: they make more than me so it's hard to tell them what to do financially. I feel very bad about pushing :(

 

[platocplx]

Yes you could, however what are your plans when the baby comes and the working situation that can def make your income dip and that's where maybe they feel a way about things.

 

[Kyrios]

Yeah it's 8,000$ take home. We easily saved up 140k in the bank over the last 5 years + 50k in stocks, bought a newcard, furniture, etc. Money has not been a problem.

Click to shrink...

Well enjoy your new house!

 

[Soda]

How large is your student loan debt? Do you have other debts? How will your income change with a kid?

 

[platocplx]

This is what I am most worried about. I don't want them to be resentful or angry BUT I think they will regret it in a few years if we don't get a house we truly love. Also: they make more than me so it's hard to tell them what to do financially. I feel very bad about pushing :(

Click to shrink...

You all can always upgrade later on. It's okay if you don't love that home fully and want a different home a few years later. People do it all the time once they build up enough equity.

 

[burgerdog]

Is the 2700 just for principal+interest?

 

[DirtyManos]

My guy, you are totally fine to afford that house with your income, even with a child. If that 2700 includes your taxes, and after insurance/utilities/student loans, you'll barely be at 4k I'd imagine. Get the house you two would be happy in, that if the market went down or whatever, you'd still be happy living in.

You'll be more than fine/comfortable, especially since it's Cali real estate.

We just bought a house in SoCal, and I wish our numbers looked like yours lol.

 

[ascii42]

We are thinking take a 30 years then pay an extra 500$ a month. Our agent said that could turn a 30 year into a 15 year + if we get into financial trouble we can just stop paying the extra money.

Click to shrink...

Yep, that's a good plan. The longer term loan will come with a higher interest rate, but I'd think it'd be worth that extra expense.

 

[Blackie]

How large is your student loan debt? Do you have other debts? How will your income change with a kid?

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I paid mine down from 40k to 2k but my partner still has 200k. They are targeting the loan forgiveness program, paying minimum payments until hopefully the government will forgive the majority in 2027.