Author Topic: First Time Home buyer Question  (Read 9760 times)

ShoulderThingThatGoesUp

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Re: First Time Home buyer Question
« Reply #50 on: June 11, 2016, 10:33:37 AM »
How about we assume good faith with CmFtns's comment? Railing on somebody doesn't help OP either.

I thought the point was to say: plenty of people are happy with houses that are a much lower multiple of income. Consider what it is that makes that unavailable from your life, OP, and consider changing it.

And it sounds like OP is now looking at lower-priced houses, so, high five, team.

Axecleaver

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Re: First Time Home buyer Question
« Reply #51 on: June 12, 2016, 09:04:35 AM »
I think the answer really depends on what you anticipate your future budget to look like. The case study spreadsheet has a budget worksheet with categories that will help you estimate your costs. If you start with what you spend today, and then imagine what life will be like in NJ (try to be honest with yourself!), this might help you figure out what you can really afford for a house.

Remember that a house costs much more than the mortgage - property taxes, school taxes, 1% per year in maintenance (more if you're buying a home with deferred maintenance items like an old roof or furnace), homeowner's insurance, utilities like heating fuel oil, electricity, water, propane/LNG are all recurring expenses. One-time expenses will include renovations (which can get pricey especially if DH likes to live in fancy places) and furnishings.

With such a big jump down in pay, it might be worth deferring the move to the new career for a short time and give you some time to stash more money. Figure out what you're clearing after taxes (you're probably close to 50% marginal rate in the city) and decide if a little more time might be worth it before downshifting. Creating 529's now for your future kids will give you the chance to stash 10k a year (5k for each of you) which is state and city tax-free in NY. You can create them in your name and transfer them to your kids later. 80 hour weeks have a tendency to wear you out, so maybe an extra year just isn't possible for him. Good luck and let us know how it turns out for you.

sis

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Re: First Time Home buyer Question
« Reply #52 on: June 12, 2016, 12:27:32 PM »
I think the answer really depends on what you anticipate your future budget to look like. The case study spreadsheet has a budget worksheet with categories that will help you estimate your costs. If you start with what you spend today, and then imagine what life will be like in NJ (try to be honest with yourself!), this might help you figure out what you can really afford for a house.

Remember that a house costs much more than the mortgage - property taxes, school taxes, 1% per year in maintenance (more if you're buying a home with deferred maintenance items like an old roof or furnace), homeowner's insurance, utilities like heating fuel oil, electricity, water, propane/LNG are all recurring expenses. One-time expenses will include renovations (which can get pricey especially if DH likes to live in fancy places) and furnishings.

With such a big jump down in pay, it might be worth deferring the move to the new career for a short time and give you some time to stash more money. Figure out what you're clearing after taxes (you're probably close to 50% marginal rate in the city) and decide if a little more time might be worth it before downshifting. Creating 529's now for your future kids will give you the chance to stash 10k a year (5k for each of you) which is state and city tax-free in NY. You can create them in your name and transfer them to your kids later. 80 hour weeks have a tendency to wear you out, so maybe an extra year just isn't possible for him. Good luck and let us know how it turns out for you.

Yep we've built a pretty detailed budget that incorporates all of this.  We've already been doing the 529 thing :-)  I'll keep you all updated as we go through the home buying process.  Our lease end date is September 29th so we've still got time.

sis

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Re: First Time Home buyer Question
« Reply #53 on: August 22, 2016, 05:44:10 AM »
So we are in contract on a house now for about 470k.  This is more than I thought we would spend, but as we got to know the town we were looking at more it seemed to be our best choice.  The house is a duplex is very good condition.  The rent for the unit we will not occupy should be about ~1800 per month according to comps, we could probably get up to 2k, but I think that we'll aim for 1800.  Right now we are just waiting on financing.  We should close in about a month.  **fingers crossed**

Our second choice was a single family listed at 360k (so maybe it'll sell for somewhere around 340k).  It's location was not quite as good as the one we are in contract for.  Since the single family home wouldn't have the rent potential it would have cost us much more than the duplex in the long run.

We wound up seeing a full spectrum of houses.  The worst house we saw looked like it belonged on an episode of hoarders.  It was priced as though it should have been in pristine condition though... The listing agent said "it has some minor cosmetic issues"... Yeah I don't know what that lady took that listing.  Sadly we saw it on like the first or second day it was on the market, so that was ... interesting.  We also saw one duplex where one of the units had not been updated in several decades, while the other unit was mint/pristine/beautiful.

slow hand slow plan

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Re: First Time Home buyer Question
« Reply #54 on: August 22, 2016, 10:30:55 AM »
That rent price will not cover half of the mortgage on a duplex (let alone including the taxes) That is not a good investment.

Happy in CA

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Re: First Time Home buyer Question
« Reply #55 on: August 22, 2016, 11:21:20 AM »
Congratulations on buying a house.  I guess I am in the minority here but it sounds to me like you can afford it.  Mostly because if your spouse does take the pay cut for the federal job, he will have both job security and a defined benefit pension in the future.  And because your spouse works in a high paying field, the pension will be ample so you'll need less in savings to FIRE.  You will have rental income to offset housing expenses, and it seems to me that $1800 should cover more than half of your mortgage at today's rates.  Of course shit happens: job loss, decline in home value, etc.  If so, you react.  But there is a really positive side to owning a home as well, including having a stable, safe place to raise kids, if that's what you're planning.  Being a landlord may not always be enjoyable, but it sure beats being at the mercy of your landlord when you disagree over what really needs fixing (at least that's my experience having just been a renter for a year after 22+ years of owning).


Lmoot

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Re: First Time Home buyer Question
« Reply #56 on: August 22, 2016, 12:18:04 PM »
Good luck. Hope it works out. I wouldn't expect to count on rental income to meet your mortgage, so hopefully you are able to afford the mortgage payment even without a tenant. It's one thing to expect to use rental income on a rental property mortgage, but I would be extremely uncomfortable with putting the responsibility of the fate of my primary residence, in the hands of complete strangers.

sis

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Re: First Time Home buyer Question
« Reply #57 on: August 22, 2016, 12:40:36 PM »
That rent price will not cover half of the mortgage on a duplex (let alone including the taxes) That is not a good investment.

At some point you need a place to live and not all things are an investment.  We are viewing this as an expense.  PITI will be approx 2900/month so it covers over half of the mortgage.  In the short term we are going from 3600/month in rent on a 1 bedroom apartment to a PITI of 2900.

sis

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Re: First Time Home buyer Question
« Reply #58 on: August 22, 2016, 12:46:09 PM »
Congratulations on buying a house.  I guess I am in the minority here but it sounds to me like you can afford it.  Mostly because if your spouse does take the pay cut for the federal job, he will have both job security and a defined benefit pension in the future.  And because your spouse works in a high paying field, the pension will be ample so you'll need less in savings to FIRE.  You will have rental income to offset housing expenses, and it seems to me that $1800 should cover more than half of your mortgage at today's rates.  Of course shit happens: job loss, decline in home value, etc.  If so, you react.  But there is a really positive side to owning a home as well, including having a stable, safe place to raise kids, if that's what you're planning.  Being a landlord may not always be enjoyable, but it sure beats being at the mercy of your landlord when you disagree over what really needs fixing (at least that's my experience having just been a renter for a year after 22+ years of owning).

Yep the $1800 will cover over half.  After watching our rent go up, and up, and up for the past 5 years we are looking forward to some stability in our housing costs.  We also found out that the starting salary for the federal job is closer to 105k so that gives us a little wiggle room.  I can always go back to work full time with a salary of ~50k as a teacher or I could probably go into industry for ~80k if push comes to shove.