Author Topic: Is this too much home to stretch for? *Update*  (Read 3622 times)

Easye418

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Is this too much home to stretch for? *Update*
« on: February 16, 2016, 08:01:45 PM »
All,

I found this LOVELY home and I'm extremely tempted to put an offer in. This is in the Dallas market.

Married
Income: $142K dual, should be moving up to ~$149k next month.
Down Payment: $60k-$70k
Bene IRA: $74k
t IRA: $13k
401k: $6.5k

Debts: $63k student loan and current mortgage $305.5k @ 4.125% APR.

Saving: 14% my 401k w 3% emp match. 5% her 401k w 5% match.

Listed: $417,500
Offer: Max $399k ~$1575 mo @ $339k mortgage, $60k down
Prop rate: 2.44% ~ $811 mo
Home owners Ins: ~$2,400 or $200 mo
PMI: $90? mo
$2,676 total payment vs current payment $2,570

Lender said he can get me 30 year fixed for 3.75% rate and $2000 rebate. 

It cuts our 30 mile commute each way in half. That will save me 1.5hr a day. No tolls ($2,000 annually).  Good schools. Up and coming area.

Thoughts?
« Last Edit: February 17, 2016, 10:51:20 AM by Easye418 »

ETBen

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Re: Is this too much home to stretch for?
« Reply #1 on: February 16, 2016, 09:16:08 PM »
A few other costs to consider:

moving costs. 
Higher utility bills if a larger home
5yr expected maintenance needs. 10yr too.
Are you going to want more stuff to fill it?

Commuting is the worst to me, so quality of life is always an important factor.

Zamboni

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Re: Is this too much home to stretch for?
« Reply #2 on: February 16, 2016, 09:27:32 PM »
It's all a matter of priorities. Are there smaller homes in the same area, or other decent areas close to work, that are less expensive? Can you find something that you can afford for a 15 year mortgage? Does renting or buying make more sense in Dallas? (MMM had post on the comparison for Toronto . . . and renting is a clear winner there.) You are thinking about pouring a huge percent of your net worth into an illiquid asset, so it's good that you are really thinking it through.

Easye418

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Re: Is this too much home to stretch for?
« Reply #3 on: February 17, 2016, 05:09:38 AM »
A few other costs to consider:

moving costs. 
Higher utility bills if a larger home
5yr expected maintenance needs. 10yr too.
Are you going to want more stuff to fill it?

Commuting is the worst to me, so quality of life is always an important factor.

Smaller home but slightly older home so probably a wash energy wise.
We have the furniture already.
Good point on maintenance.

That's a big reason why I want to move closer. It would save me alone 3 hours and 45 minutes of travel a week.

KCM5

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Re: Is this too much home to stretch for?
« Reply #4 on: February 17, 2016, 07:37:41 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

It seems like the math works for higher expenses vs smaller commuting costs (it'll save you almost $6k/yr with 5 days/wk * 50 wks/yr * 30 miles/day *$0.5/mile and $2k toll costs).

I'd do it. Maybe not this house specifically, but the area seems better cost wise because of commuting costs. Any way you could get even closer so you could bike?

neo von retorch

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Re: Is this too much home to stretch for?
« Reply #5 on: February 17, 2016, 07:52:57 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

I find quotes like this funny - not to pick on you :) but I live in Pennsylvania. Housing is cheap!*
* if you live 60+ minutes from employment hubs and at least 120+ minutes from Philadelphia.

We live 45 minutes from Philly - it seems every 20 minutes further North we go, we can drop $25-40k off the price of a home. But there's (hopefully) a sweet spot where our commutes are no more than 25 minutes and we're still getting a reasonably good house/property/deal. We've looked at homes from $250k up to $400k in our area, with relatively little variety of sizes and conditions and features. There is no "one size fits all" rule.

We prioritize commute, land and quality in the building.
« Last Edit: February 17, 2016, 08:03:56 AM by neogodless »

I'm a red panda

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Re: Is this too much home to stretch for?
« Reply #6 on: February 17, 2016, 07:59:09 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

DFW housing (and Austin area) without a ridiculous commute is not cheap.  But lots of people are willing to drive.  And chances are $417k isn't a modest house, but a nice McMansion with granite countertops.  But it can sometimes be hard to find houses that are not- because that is the way development went.

Easye418

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Re: Is this too much home to stretch for?
« Reply #7 on: February 17, 2016, 08:18:35 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

It seems like the math works for higher expenses vs smaller commuting costs (it'll save you almost $6k/yr with 5 days/wk * 50 wks/yr * 30 miles/day *$0.5/mile and $2k toll costs).

I'd do it. Maybe not this house specifically, but the area seems better cost wise because of commuting costs. Any way you could get even closer so you could bike?

Thanks for the reply. See comment below.

I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

DFW housing (and Austin area) without a ridiculous commute is not cheap.  But lots of people are willing to drive.  And chances are $417k isn't a modest house, but a nice McMansion with granite countertops.  But it can sometimes be hard to find houses that are not- because that is the way development went.


Thank you for chiming in iowajes.

You are exactly right.  If I wanted to live 15 minutes from my job, I would be looking at $750k to $1MM home. 

You are also correct that it is a decent McMansion, however, it also comes with land, which is a RARITY down here for this price.  It's very "futureproof" and we would have no reason to ever move honestly. 

Slight correction to the commute.  It would cut my commute from 33 miles to 16.9 miles.  It would drop my wife's from 38 miles to 20 miles as well as drop $9.50 toll per day.  She works 5 days a week now, but will drop to 3 days down the road.  so $200 savings a month now, $120 savings a month later.

I would cut 3 hours a week off the road every week and be able to spend all of that time with my wife and hopefully child(ren) down the road.   

Also, to disclose, I'm not a diehard MMM.  Something in the middle.  Care more about FI. 

slugline

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Re: Is this too much home to stretch for?
« Reply #8 on: February 17, 2016, 08:23:34 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

It would still be cheap if builders would offer more Mustachian houses in Texas cities. Instead, I see lots of people moving in from out of state that seem to be comfortable with house prices that are $X and simply use that same $X to buy ridiculously larger dwellings with fancy finishes/appliances in upscale suburban master-planned communities.

Easye418

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Re: Is this too much home to stretch for?
« Reply #9 on: February 17, 2016, 08:28:17 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

It would still be cheap if builders would offer more Mustachian houses in Texas cities. Instead, I see lots of people moving in from out of state that seem to be comfortable with house prices that are $X and simply use that same $X to buy ridiculously larger dwellings with fancy finishes/appliances in upscale suburban master-planned communities.

I agree.  Its the builders fault.  I have been scouring for properties and all of them are jumbo because they know they can do it.

Rosy

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Re: Is this too much home to stretch for?
« Reply #10 on: February 17, 2016, 08:55:33 AM »
I like moderation - you are a self-proclaimed middle of the road MMM and I'd say all things considered, this sounds like a good decision. My only caution would be - you mentioned "stretch" - if for any reason the cost of this home is a stretch, I would not do it. Stretch and home do not belong in the same sentence together.

1. Cut commute times in half for both of you - big win!
2. Save on tolls - approx $2K annually
3. This new home is slightly smaller - so perhaps it will lighten the amount of "stuff" in your life too:) - always a plus. No lifestyle inflation here.

4. You say you have enough furniture, but we all know - there will be some expenses involved in the move. Window coverings for instance, never fit:) Not all your furniture will fit exactly and that's fine. Part of the joy of finding a new home that is a better fit for your lifestyle is to give yourself permission to add, delete and upgrade where necessary.
5. The extra land - Bonus!

I say go for it on the basis that it will be a lifestyle improvement for you, not to mention actually save you money, unless it is a stretch, in that case keep looking.
PS - the houses are bigger, because everything is bigger (and better) in Texas:)

Thinkum

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Re: Is this too much home to stretch for?
« Reply #11 on: February 17, 2016, 09:02:39 AM »
The one thing I did not see mentioned, and excuse me if I missed it, would be property taxes. They are quite high here in Texas. Depending on what county/city you live in now, versus where you want to buy could be the difference of thousands per year. Dallas County is higher than Collin for instance.

PMI sucks too. So just make sure you do the full analysis before deciding to make the stretch.

Jack

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Re: Is this too much home to stretch for?
« Reply #12 on: February 17, 2016, 09:06:03 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

It would still be cheap if builders would offer more Mustachian houses in Texas cities. Instead, I see lots of people moving in from out of state that seem to be comfortable with house prices that are $X and simply use that same $X to buy ridiculously larger dwellings with fancy finishes/appliances in upscale suburban master-planned communities.

I agree.  Its the builders fault.  I have been scouring for properties and all of them are jumbo because they know they can do it.

And because the zoning code lets them do it.

That doesn't have to be the case: for example, my neighborhood has pretty good zoning in the commercial district (a special zoning that called "neighborhood commercial" that we mostly designed ourselves) and a track record of saying "no" to developers who want to be exempted from it so they can get more profit.

We still have a problem of people tearing down $150k 700-1500 ft2 bungalows to build $400k 2500+ ft2 two-story houses, but aren't willing to become a historic district to stop it.

KCM5

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Re: Is this too much home to stretch for?
« Reply #13 on: February 17, 2016, 10:22:06 AM »
I was under the impression that housing was relatively cheap in Texas. $417,000 does not seem cheap!

DFW housing (and Austin area) without a ridiculous commute is not cheap.  But lots of people are willing to drive.  And chances are $417k isn't a modest house, but a nice McMansion with granite countertops.  But it can sometimes be hard to find houses that are not- because that is the way development went.

I was going to qualify that comment with "unless it's a McMansion" but I didn't want to be rude. I was imagining a 2 bed 1 bath bungalow or something - apparently those are hard to find in urban Texas ;)

ohana

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Re: Is this too much home to stretch for?
« Reply #14 on: February 17, 2016, 10:29:53 AM »
I'm just wondering if it's a seller's market down there right now?  I'm wondering if, given the state of the economy and the OG sector, you might want to wait and see if prices come down soon? 

Of course, no one can see the future!

Axecleaver

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Re: Is this too much home to stretch for?
« Reply #15 on: February 17, 2016, 10:44:58 AM »
Hey Easy, we were just discussing the real estate market in Dallas on this other thread: http://forum.mrmoneymustache.com/ask-a-mustachian/reader-case-study-house-hunting-when-so-was-laid-off

If I were in your spot, I would wait six months. Given the state of the O&G labor market, you're probably looking at foreclosure rates to spike in about 6-12 months. That would be a great time to buy. Additionally, you can probably do better than 3.75%. Rates at my credit union hit 3.5% after the weekend. Rates are unlikely to recover much, if at all, before next year.

One of the things I did during my recent housing search was to look for a home that was priced to move. They don't last long. But given your market, get some experience with comps and then look for places that are priced far enough below the market value to represent a good deal to you. There are likely to be families looking to relocate to where the jobs are even now, and that could create some great buying opportunities.

sol

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Re: Is this too much home to stretch for?
« Reply #16 on: February 17, 2016, 10:47:55 AM »
We make substantially more money than that, and would never have even considered houses over $400k even with three kids. And we're in a HCOL area.

Did I miss the past where you justified needing so much house and land?  Do you have six kids and three cows that need pasture?  Are you a farmer?  A developer? 

Nothing is a good deal, regardless of price, if it's not what you actually need.  Don't pay for wasteful luxuries until there is no better use for your money in the whole world. 

Easye418

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Re: Is this too much home to stretch for? *Update*
« Reply #17 on: February 17, 2016, 10:51:39 AM »
House is gone :(  Decision out of my hand now.

Thinkum

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Re: Is this too much home to stretch for?
« Reply #18 on: February 17, 2016, 10:58:09 AM »
Dallas is not overly tied to O&G sector, or any other one sector either. It is pretty diversified in tech, financial, healthcare, services, etc. Prices have gone up because so many people have been moving here and there are not enough housing in the areas a lot of people want to live. In the "hot" areas, home prices are high and the area average has been creeping up for the entire time I've been here, little over 2 years.

OP, perhaps it's best you didn't get the place. Either way, I'm sorry since it seemed you really liked it.

Easye418

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Re: Is this too much home to stretch for?
« Reply #19 on: February 17, 2016, 11:06:08 AM »
Dallas is not overly tied to O&G sector, or any other one sector either. It is pretty diversified in tech, financial, healthcare, services, etc. Prices have gone up because so many people have been moving here and there are not enough housing in the areas a lot of people want to live. In the "hot" areas, home prices are high and the area average has been creeping up for the entire time I've been here, little over 2 years.

OP, perhaps it's best you didn't get the place. Either way, I'm sorry since it seemed you really liked it.

Yes to the above post and I think you are correct that it may have been best if I didn't get it.

caseyzee

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Re: Is this too much home to stretch for? *Update*
« Reply #20 on: February 17, 2016, 11:36:55 AM »
Oh my, if I were you, I'd be thankful that house is gone! 

With all due respect, you did not give nearly enough info to earn a blessing on a purchase like that.  Do you have kids?  What are your other expenses?  You say your wife will be dropping down to 3 days - does that mean less income?  What exactly is your take home now?  What's the rate on your student loans?  We're you planning on selling your current house?

I'm not sure why so many people were telling you to go for it, I think you dodged a bullet.

Use the maths!  Calculate true savings and true costs. Get all those numbers together now so you have your eyes wide open and are better prepared next time. Good luck.