I am considering buying a house for $250 to 255k. I had actually wanted to take a pause on house buying but my wife sorta pushed me on one and I was inclined to go with her on it as it was one of the cheaper options we found in the area. I have posted before and noted that my job situation is a bit unstable. However I don't know if I am just being paranoid. Ultimately I'm a Fed employee so people tell me that I shouldn't worry about stability. I'm honestly more worried about me quitting(because I'm so annoyed with boss) as opposed to getting fired. I have stuck with it for now though because any job in this town would probably pay me half as much for similar work....
FI timeline with renting: Basically if we subsisted on our down payment to reach a 60-70k(out of 115k) savings rate we could be FI in approximately 6-7 years. I have contemplated doing something that was more 'halfway to FI' and then going back to school(let's say $500,000 in bank).
FI IF WE BOUGHT HOUSE: we would lose that cash savings and I figure that on top of the $1200 payment(piti) we could expect to pay another $200 a month in utilities, maintenance/repairs, etc. If anyone wants to correct me on that let me know. I am trying to be overly conservative. So if we bought a house, I figure we would be hard pressed to save $35,000 a year and that would bring our FI date out a good 7-10 years....depending on how accurate my estimates are.
So the cost of FI in buying this house, even though cheap is significant. I didn't really factor in that it's a fixed cost so maybe I should somehow? I will say that our rental price is extremely under market and I don't think we will get that when we move up. Most likely if we have 1-2 kids, we will need to move up and then we will pay $1300 to $1500 a month to live in town.
NY Times calculator Was pretty break even on this scenario.
I am struggling because my wife really wants to move on with this aspect of our life(but she is supportive either way)....but I am feeling a little scared with my job situation lately. She makes $38k a year and we couldn't afford it on her income alone.On the other hand, she makes a good point that the PITI payment at $1200 a month would allow us to "lock" in a price that we may not be able to get in the coming years as rents and housing prices have rapidly increased in this town. We are getting a lot of retirees moving here and this is driving up costs.
I know I have posted a few case studies here so forgive me for posting again. Thanks for all the help, encouragement, and putting up with our "House fever" lol
Thanks for any help. I have posted our life situation below:
Life Situation: IRS filing status Joint, no dependents, live in collegetown in the northwest. Was a low cola but this is changing fast. Used to be you could get a luxurious house for $250,000 but now anything that is in this price range is going to be in a less desireable area, super small, or super crappy. Both stable jobs but I recently got a new manager who is not that fun to work for. I am looking for transfers but i live in a remote town so it is difficult to find...it would have to be a remote job most likely.
Gross Salary/Wages: Together we make $115,000 year gross wages. (Me: 77k. Her:38k
Pre-tax deductions/Savings: Currently we are doing 18000 on her deferred comp(maxing out her paychecks). She has an 8% contribution with a 5% match. I have a 5% match with a 5% contribution. Since we could live off of our down payment money I am thinking it may be a good idea to just max everything out and live frugally, and if we needed a few thousand bucks over the year we could always access the down payment money. Thoughts? At this rate we will be doing about $35k a year in deferred savings but I think if we didn't save for down payment and even dipped into the cash fund a little we could do $60k to $70k a year for several years...I haven't ever done this extreme of savings so I am not sure how much the tax savings would help out(I mean I think it will help a lot but not sure exactly how much)
Other Ordinary Income: None
Qualified Dividends & Long Term Capital Gains: None
Current expenses: I would estimate we spend about $2000-3000 a month on regular monthly fixed expenses and pleasure expenses. We are frugal on big things like car(one 14 year old car and 825/mo rent) but maybe go out for fancy drinks more than we should :P
Assets: No assets other than a $3000 car. We are shopping for a newer used car now but not really in a hurry. Our car is a 2003 Toyota Corolla. Note: Net work is $210k between cash and retirement investments
Liabilities: No loans. No debts.
Specific Question(s): Here is my situation:
Currently we have about $83,000 saved up for a down payment(cash/liquid act) and about $5,5000 in a Roth Account. I also have another 4000 in a deferred comp account from an old job(so it can be cashed out at anytime--we will have to pay taxes).
Our retirement accounts approximate about $120,000.(Mostly traditional tax deferred accounts(TSP, 403b, TIRA, deferred compensation for wife.). I can break this down more if anyone wants. In the past we have mostly been piling into our down payment savings so we could really get a good down payment. So our retirement savings aren't as strong as they could be. Recently I have ratcheted that up and am fully depositing my wife's paycheck into her deferred comp, while she is also doing 403b of 8%(employer matches 5%), and I am doing 5% into TSP(employer matches 5%) I think we are pretty good savers but maybe not as extreme as some in the FI community.
TOTAL APPROXIMATE NET WORTH $210,00 TO $215,000
At this point I anticipate we will have saved about $35,000 in tax-deferred savings by end of year. We definitely could do more if we were less focused on the house....like about $60k to $70k
Other details:
Current rent: 825 a month(our landlord is quite generous and does not raise rent so we are locked into pre-housing boom rates)
Average rent for similar house as we are considering buying: $1300 to $1500
Incomes: Both are generally stable. I don't see huge jumps in income but steady steps. My job is stable but sensitive at times due to political nature of my work.
Future: We plan to have 1-2 kids starting within the next year. We may wait for my income/job situation to stabilize a little here.