Can I afford a 530,000$ home?

[Lace]

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.

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The 200k in student loan debt might throw a wrench in getting financing. Unrelated to buying the house, but is your significant other working in a field/industry that the current 10 year forgiveness programs qualify for? Usually there is a catch to qualifying for student debt forgiveness such as having the payments be income driven, not just the minimum payment and working for a government entity.

 

[sacrament]

No.

I'd only put minimal amount of money down to keep yourself liquid. 140k on a house, to meet monthly mortgage goals is not smart. You're in the phase of your life where revenue/take home is king. With new kid, you absolutely positively will have unforeseen expenditures, and probably day care (which I'd budget 1k per month, on top of everything else (diapers, etc)).

As kid grows, or you have more, you'll have different needs - likely needs in the next 5 years which will find yourself moving for better schools, more space, etc. This isn't your forever home, even if it feels like it. Average American moves every 5 - 7 years, so kiddo will be entering Kindergarten - you'll want to move just before that, probably. So buy what works for 5 years, and if it's in an area that is reasonably desirable it will sell when you're ready to move to the next step.

Meanwhile, the money you have saved, put towards other investments so when you want to step into the 500k+ home, and probably a home you'll stay in longer or know more about your "2 + kids" world, you can get the right home at the right time.

Safe, simple, 2 bedroom or maybe 3 for now. I'd target no more than 400k, and less if you can (it's hard in CA).

just because you could afford it (your math, and savings, says you could stretch it and make it work but....) doesn't mean you should.

 

[Pollux]

Yeah - you're good

 

[Apath]

.

 

[Possum Armada]

Always ask yourself: could we afford this if one adults ends up without income for an extended period of time?

focus on what you need for your family and home, not how much you can afford.

 

[Pollux]

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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you can afford it but keep in mind the cost of daycare that will hit in a few months. We're out in DC and it's 2k a month so our savings went to shit but we're still doing fine.

 

[Praetorpwj]

I would say yes. In fact I say stretch yourself because even though it's a burden in the short term it will ease over time and it's the best purchase you can make.

Just be mindful that interest rates are going up next year and I reckon for the foreseeable.

 

[Zachary_Games]

You can easily afford this.

Btw, don't do 20% down. That is a rookie mistake. Instead, do 5% down and agree to pay off PMI upfront.

Invest the other $112k. Or just pay off your student loans with the remainder.

EDIT: the lack of information in here is astounding. The seller normally pays realtor fees. If your real estate agent is saying she's charging you a cut for finder fee, cut bait. That is ridiculous.

You are on the hook for closing costs which includes your entire escrow, title fees, inspection and appraisal fees, etc.

 

[badatorigami]

We have an agent helping us. Is a realtor different or the same thing? She takes a cut if we buy, like you said.

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Yeah same thing. Thought I saw a comment asking about this earlier but can't find it anymore, my bad lol

 

[ajszenk]

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?

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I'm in a similar boat to you. We bought a house last year for $540k and we bring in about $8500 a month. We make it work fine. Have one kid with one on the way, just outside Seattle. Worth noting my mom watches our kid so we don't pay for childcare and we've paid off our student loans already. With the amount you have for a down payment you should be able to make that work pretty okay, especially if you expect to continue to make more money over the next few years. The extra $30k isn't going to kill you guys.

 

[Shalashaska]

A 530k house at your income level doesn't seem a stretch, but from what it sounds like you are already 200k in debt. I wouldn't plan on getting any loan forgiveness until you get it, and until then you have to assume you're going to have to pay that back. Adding on another $400,000+ in mortgage debt going to mean you're going to be working to pay it all off for a long, long time.

You have to factor in future costs as well. Property taxes and insurance are already high and ever increasing, interest rates are going to have to go up soon, and kids themselves aren't cheap. Houses are estimated to cost you 1-4% of it's total cost in maintenance every year as well. Owning a house is pretty expensive and you have to be prepared to put a lot more into it than just the monthly mortgage cost. And there is always a chance that you or your partner end up not working or being unable to.

But all that being said, housing is generally an appreciating asset. If you end up being unable to afford the monthly payments in 5 years for some reason and have to sell then you likely aren't going to lose the money you've put into the place. And I don't think the difference in payments between a 470k house and 530k changes anything enough to move it things from affordable to unaffordable.

Basically this is a lot of words to say I think you're fine with a 530k home, but just be cognizant of the risks and other costs that can sneak up on you.

 

[Random Painted Highway]

I would do it but not for the 100k down. I would feel way more comfortable with that in an emergency fund and pay a bit more per month. I would feel stressed at the numbers in your op otherwise. We picked up a similar mortgage in 2016 with similar income at the time. Now we're looking at upgrading houses which causes me to tense up again, mo money mo problems.

 

[Kharybdis]

One aspect to consider with a kid on the way is school district. Buy a house in a school district you would be comfortable sending your child to when they are older. If that's the 530k house you're referring to, you can use that as an bargaining chip.

 

[Blackie]

I just bought a house in the Sac area for around that much bringing home less than you, but with no other debt. It's definitely doable.

I will say I moved further up 50 to have my money go further, which I'd recommend. No mello roos, no HOA helps a lot. Do be aware of fire insurance, even down in El Dorado Hills and Folsom, it can get pricey.

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Partner prefers Elk Grove because that's where they work and hates to commute. I prefer Natomas for a variety of reasons, including that there seem to be higher quality homes, new homes, at slightly cheaper prices in great new neighbourhoods. However partner dislikes the commute from there, 20 mins in the morning and 25-49 coming back. Also is scared of flooding. I'm not too worried about flooding because of all the infrastructure improvements they have been making over the years and they work from home most of the time anyway, only goes into the office 2 or 3 times weekly so I don't think the commute is horrible *shrugs*.

You could probably swing it, but there are a lot of unknown unknowns that you really can't account for. And with a kid on the way, your partner probably just wants that extra cushion and extra peace of mind.

Whatever you decide, just remember that you can't put a price tag on your partner's happiness.

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Too true. So stressful about this point!

You can easily afford this.

Btw, don't do 20% down. That is a rookie mistake. Instead, do 5% down and agree to pay off PMI upfront.

Invest the other $112k. Or just pay off your student loans with the remainder.

EDIT: the lack of information in here is astounding. The seller normally pays realtor fees. If your real estate agent is saying she's charging you a cut for finder fee, cut bait. That is ridiculous.

You are on the hook for closing costs which includes your entire escrow, title fees, inspection and appraisal fees, etc.

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I've never heard of this 5% down and agree to pay off the PMI upfront. Very intriguing...

Ah no finder fee that I am aware of. She just takes a cut at the end, paid for by seller she says.

 

[Jason's Ultimatum]

Shit man. Our house we bought in April $361k. My soon to be wide and make close to $143k (I make $60k and her $83k) a year with our monthly mortgage $1900 and we're still feeling tight on money.

edit-she has a 6 yo son and we have an 11 month old. Plus a puppy lol.

 

[Mushlikeahusky]

My only hang up about buying a house is that if I or my wife or if we both randomly lost our jobs how screwed we would be . And I thought 250k is a lot for a house lol

 

[jb1234]

I think you need to put the 200k in student debt in the OP because that's gonna change a lot of answers.

 

[Wilsongt]

This thread makes me realize that I pay too much for mortgage…

 

[golguin]

I bought a house in 2017 and about 65% of my monthly income went to the mortgage alone. This was with zero debts before the house.

This did not take into account utilities, food or anything else, but with my estimates once everything was paid I would have about $200 for food for a month. I was prepared to do that with coupons and I did it for a year before my raise.

If you can comfortably pay all your bills, expenses, mortgage, etc and still have more than 50% of your monthly income then there is no issue.

 

[Sayre]

If you have stable jobs, consider that your mortgage is mostly fixed (taxes do go up) and your income will likely increase in the 30 years. Kids are expensive if you do daycare, but otherwise it's not much more when they're young. We are similar in that we have about 8k take home and 3k monthly mortgage + property tax combined. No student loans though.

My main concern would probably be the school district and the neighborhood in general.

 

[whatsinaname]

Considering rents and also the minimum you will have to spend to get a house out there, 400k vs 530k is not a huge difference.

But you should go in with eyes open about total cost of ownership.

(I am scaling my own costs to the 530k you a are looking at)

$2800 - Principal + Interest
$100 - Electricity/Gas
$50 - Water
$200 - Saving for maintenance
$100 - Home Insurance

Also

- If any of the big items need replacements in year 1 (Roof/Windows/HVAC), that's a very large immediate cost. ~$10-15k.
- Other costs that might arise based on where you buy - HOA fees, flood/fire insurance, garbage.
- Be prepared for $5k-$10k for 'closing costs'. (some loan fees and some pre-payments for next year's property taxes).

Now for the first few years, there is a chance you might get some money back due to itemising taxes. Mortgage interest + property taxes are deductible to a certain limit. But you will have to run those numbers and check.

 

[Jimmypython]

I think so.

We are around $8k monthly and the cheapest we can get for a house (not condo) is 700k....damn are we living in the wrong place..

 

[Col.IndianaLongnuts]

The market is gonna crash anytime now

wait to buy

 

[Darknight]

The market is gonna crash anytime now

wait to buy

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Waiting in a lot of markets just means paying more and the only thing that changed in the market is the rate of increase of value.

 

[XMonkey]

The market is gonna crash anytime now

wait to buy

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Ya? Been hearing that for years now.

OP, if you're going to live in the home for a long while don't worry about this.

 

[Zoe]

Echoing to not put down 20%. I wouldn't say it's necessary to pay PMI upfront either, but that's a discussion to be had with several mortgage lenders (repeat, several). With a child on the way, it's best to have the cash on hand, and you may need the extra cash if you have to bid above appraisal.

Yall have no idea what you're doing financially if you're relying on that program. Look into the acceptance rates.

Edit: Sorry, that was too harsh. But for real, you need to look into that. Also do you pay rent or utility bills to your parents currently?

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That's ridiculous. Most failures thus far have been due to misinterpreting the rules, but there's a lot more help out there now. If you follow the rules, it's quite easy to qualify, and people post their success stories daily to r/PSLF.

 

[Corran Horn]

This thread makes me realize that I pay too much for mortgage…

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For real. When I bought my place I was paying like 50% of my income to my mortgage/hoa 😅

 

[Deleted member 12833]

140k saved, yes

otherwise no

 

[guiloahhhhh]

Hilarious you are here South Sac checking in. That seems like a reasonable price if it's in a nice area/good square footage. Market in my opinion will only go up here. If you can make monthly payments BUY and invest in yourself.

 

[KillingJoke]

You will be more then fine. The wife and i went through the same thing. She wanted 230s but ended up 330 but its the perfect house. We can afford it no problem but she was all worried about being "house poor". She had to accept reality fucked the market up. My goal is to pay it off in 15 maybe even sooner.

If you didn't have the savings would be a different story.

 

[Tappin Brews]

Haven't read the thread - theres probably MUCH more knowledgeable folk on the issue...

I'd go with your partners estimate. We make a bit more and purcahsed a 400k home (but without that down payment!) and while we aren't worried for money each month, it would be nice to put more away and have more on hand. Er on the side of caution.

Also, is this the best time to buy? Seems like the market is quite high (but what do I know?)

Finally - Sac native too!

 

[ChrisR]

Also, is this the best time to buy? Seems like the market is quite high (but what do I know?)

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Issue is, when the market pops next time there are billions of dollars in the wings that will buy up property keeping prices higher and just rent them out. I don't know if we see a collapse any time soon.

 

[Blackie]

The market is gonna crash anytime now

wait to buy

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Hilarious you are here South Sac checking in. That seems like a reasonable price if it's in a nice area/good square footage. Market in my opinion will only go up here. If you can make monthly payments BUY and invest in yourself.

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Haven't read the thread - theres probably MUCH more knowledgeable folk on the issue...

I'd go with your partners estimate. We make a bit more and purcahsed a 400k home (but without that down payment!) and while we aren't worried for money each month, it would be nice to put more away and have more on hand. Er on the side of caution.

Also, is this the best time to buy? Seems like the market is quite high (but what do I know?)

Finally - Sac native too!

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Do we think the California/Sacramento market might crash within the next 1 year? With work from home taking off and the Covid stuff not slowing but only accelerating housing prices it feels like we have at least 1-2 years before any downturn? And prices could increase 100k or more before any crash?

 

[PieOMy]

You can do it, but I would advise against it. Find a place you can rent together. Try to hold it down there for a year or two then purchase a house.

 

[skeptem]

Without talking about time to buy and any other detail. Based on the amount you make and how much you take home you will be fine.

I'm at around the same but our house was in the high 300's. Would it be nice to put away more for savings? Sure. But we have a house that fits our family (wife, kids, and myself).

 

[Darknight]

Do we think the California/Sacramento market might crash within the next 1 year? With work from home taking off and the Covid stuff not slowing but only accelerating housing prices it feels like we have at least 1-2 years before any downturn? And prices could increase 100k or more before any crash?

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It won't. If anything, like you said with work from home taking off, you're just going to deal with people from the Bay Area spreading outward towards cheaper housing which will just raise the housing prices in that area. I'm pretty sure if you don't buy now, it's just going to cost you more when you do buy and it will buy you less than what you could have bought. There's also a good argument to be made that buying the slightly more expensive home will put you in a better position to move to another house should you ever need or want to.

 

[Waikipedia]

Doable. And dont forget to factor in salary/career progression.

 

[Malleymal]

Wife and I in the same boat… looking at 600,000 plus houses and trying to figure out if it is worth it for the school districts and all. Just hard finding the house that we can both love.

can't stand this process.

 

[Mammoth Jones]

One aspect to consider with a kid on the way is school district. Buy a house in a school district you would be comfortable sending your child to when they are older. If that's the 530k house you're referring to, you can use that as an bargaining chip.

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This. So much this. We are in the middle of working on a house now and school district is super important for the munchkin.

When we got our current place a decade ago we weren't thinking about that. Not we gotta sell the condo and move.

 

[Darknight]

This. So much this. We are in the middle of working on a house now and school district is super important for the munchkin.

When we got our current place a decade ago we weren't thinking about that. Not we gotta sell the condo and move.

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One warning with this is things will change over the years. What may once have been an amazing school when you moved in, might not be when your kid is going to school. Teachers change, principals change, district super intendants change, etc. Heck, even the criteria in how they rate the school can change. It's something I've noticed as I've watched school ratings change year by year over time. When we moved in, our elementary school was rated a 9. Today, it's rated a 6. It's kind of a roll of the dice.

 

[Tater]

Do you have an emergency fund set up already? What's your plan if your partner loses their job? I think you can afford the house, but I'm concerned about the impact of your partner's student loan payment on top of your mortgage + other expenses if they're suddenly out of work.

I tend to be on the financially conservative side like your partner, and what tends to make me feel better about these kinds of decisions is mapping out the different "what if cases". If they know there's a reasonable plan in place in case of a problem, it might help them feel better about the decision.

 

[Drain You]

Its funny this thread pops up after I just was trying to figure out how tight things will be with the house we closed on yesterday. I'm honestly flying by the seat of my pants here.

 

[Mathieran]

You'll have day care for 5 years, make sure you consider that

 

[gozu]

You can absolutely afford it. Chances are are both of you will get salary increases in the next 5 years which will make it even more affordable.

Interest rates are low. You can put it a minimum downpayment and have 100K of cushion if one of you loses their job.

Good luck on your house hunt!

 

[D23]

If i wanna buy a house in wa state thats pretty much the minimum i need. Fml

 

[billiam]

No.

I'd only put minimal amount of money down to keep yourself liquid. 140k on a house, to meet monthly mortgage goals is not smart. You're in the phase of your life where revenue/take home is king. With new kid, you absolutely positively will have unforeseen expenditures, and probably day care (which I'd budget 1k per month, on top of everything else (diapers, etc)).

As kid grows, or you have more, you'll have different needs - likely needs in the next 5 years which will find yourself moving for better schools, more space, etc. This isn't your forever home, even if it feels like it. Average American moves every 5 - 7 years, so kiddo will be entering Kindergarten - you'll want to move just before that, probably. So buy what works for 5 years, and if it's in an area that is reasonably desirable it will sell when you're ready to move to the next step.

Meanwhile, the money you have saved, put towards other investments so when you want to step into the 500k+ home, and probably a home you'll stay in longer or know more about your "2 + kids" world, you can get the right home at the right time.

Safe, simple, 2 bedroom or maybe 3 for now. I'd target no more than 400k, and less if you can (it's hard in CA).

just because you could afford it (your math, and savings, says you could stretch it and make it work but....) doesn't mean you should.

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Would agree with this entirely. Went through the same things. Kids change the equation in ways not expected.

We also looked initially near our pre-approval max but after really budgeting out everything (and in the end the housing costs still were more), we were uncomfortable with such a small amount left over that we chopped a large amount off and several years later, we feel like we absolutely made the right choice for us.

For you specifically, I would suggest taking a real hard look at that 1k per month on necessities (food, toiletries, clothing, gas). We live in a much lower COL area and with 4 people/1 dog end up around 3k per month. If that is really your monthly expense amount, that's great but it feels low.

If you end up going through with the 530k purchase, I would agree with others not to put that huge chunk of savings down. Put down the minimum; the fact that you may qualify for loan forgiveness means you may have access to a more favorable mortgage. You should check widely with national / local banks and credit unions. I got way different loan products from what I had thought would be very similar banks.

 

[Deleted member 70788]

You can afford it in theory. I guess to me there are other questions to ask.

1) What's the alternative? What is rent running you right now?

2) How stable are your jobs?

3) What's the outlook for your income when kids come into the picture?

4) Will you have enough margin for repairs?

I get where your spouse is coming from to some degree. It's all about lifestyle choices. Some people see a house as something they invest a huge amount of their money in. Others want to travel or have other priorities and want the house margin to be lower. At your level it is going to be a great deal of your money after student loans, baby, dog, repairs, etc. Good luck on vacation or going out to eat without really counting pennies.

 

[Deleted member 70788]

No.

I'd only put minimal amount of money down to keep yourself liquid. 140k on a house, to meet monthly mortgage goals is not smart. You're in the phase of your life where revenue/take home is king. With new kid, you absolutely positively will have unforeseen expenditures, and probably day care (which I'd budget 1k per month, on top of everything else (diapers, etc)).

As kid grows, or you have more, you'll have different needs - likely needs in the next 5 years which will find yourself moving for better schools, more space, etc. This isn't your forever home, even if it feels like it. Average American moves every 5 - 7 years, so kiddo will be entering Kindergarten - you'll want to move just before that, probably. So buy what works for 5 years, and if it's in an area that is reasonably desirable it will sell when you're ready to move to the next step.

Meanwhile, the money you have saved, put towards other investments so when you want to step into the 500k+ home, and probably a home you'll stay in longer or know more about your "2 + kids" world, you can get the right home at the right time.

Safe, simple, 2 bedroom or maybe 3 for now. I'd target no more than 400k, and less if you can (it's hard in CA).

just because you could afford it (your math, and savings, says you could stretch it and make it work but....) doesn't mean you should.

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Yup. This is great advice.

 

[werezompire]

Given that you already have nearly a quarter of a million dollars in student loan debt AND are soon to be new parents (with all the struggles & unforeseen expenses that this entails), I'd definitely side with her and pick something cheaper. Can you get something smaller & nicer for less money? A 2-bedroom house or apartment should be plenty for a couple with a baby on the way. You can always sell it and get something bigger down the road if necessary.

 

[JohnsonUT]

How long do you anticipate living there? One thing to keep in mind is that the mortgage stays the same for its life even with inflation. $2700 in five years will feel more like $2400. How stable are your employment situations?