My husband and I are debating whether we should try to purchase a home in the NYC 'burbs this spring. Long story short, our original plan was to save as much $$ as we could before moving to a lower COL, more relaxed area of the country, but we're expecting our first child and when it came down to it we didn't think we could leave the area where most of our friends and family live and where he has the best career opportunities in his field. Maybe in the longer term down the road, but for now looks like we're staying put. We just don't want to stay put in our overpriced Manhattan rental, and we don't like the idea of moving further out to one of the boroughs either, we want a little more green space for ourselves and our family.
Current assets:
~$165,000 in savings/checking account
~$40,000 in combined 401ks (we've only been funding them since last summer when we graduated law school)
~$35,000 in Vanguard brokerage account, pretty much all in VTSMX
Current debt:
~$10,000 outstanding on one law school loan, will be paid off at 4.4% interest in just under 4 years. We were going to sink it completely months ago, but then talk turned to maybe buying a house and we wanted as much liquidity as possible/within reason when the time came.
We're planning on living off just his income when I leave work to care for our baby - right now we're both at law firms, he'll stay at his and I'll be a SAHM but hopefully be able to do some (MUCH smaller-scale) legal work when I have the time from home - basic estate planning and wills, who knows maybe even basic real estate contracts. But we'd consider that gravy. His current salary is $190K and that goes up about $20k/year for the next few years because NYC law firms pay all of their junior lawyers a fixed amount per year they've been working. After maxing his 401K, my IRA, and paying health insurance premiums pre-tax, we're left with $9500/month or so take home.
Our choices for buying in a nice suburb with a reasonable commute to NYC (walk or biking distance to commuter rail of 50 minutes or less) are a whole lot less than pretty much anywhere else in the country, but we know HCOL comes with the high salaries around here.
Condo/townhome: 2-3 bed, 1-1.5 bath, 1200 sq ft condos will run you about 500k in a town with good public schools and low property taxes/HOA fees (8k/year total) or cost you 100k less but force you to double or triple that tax amount, depending on the area.
"Starter" home: (for us, a house plenty big enough for the long haul, but apparently not for some) with 1800 sq feet, 3 bedrooms and 2-2.5 bathrooms that aren't in need of immediate massive renovation will run us 550-600k with high taxes or 750-800k with lower taxes. We're leaning towards the lower tax, higher house cost area (CT, vs NY/NJ) because of family in the area, a nicer town with excellent schools where we'd be buying, a decent commute, and various other reasons.
Our bank is happy to lend us massive amounts but we're not keen on the idea of stretching too far. We're just wondering whether it makes sense to go for a condo now with one child due in April and knowing we'd like to have two relatively close together - it's plenty large enough for a young family, and we could take out a 15-year mortgage with a 25% down payment, planning to pay it down even faster, therefore building equity and making the rent vs. buy calculus come out in favor of buying after just 2-3 years, though we'd plan to stay at least 5-6. We also have the option of stretching for the house that we see as a long haul home, on which we could pay 20% down, and perhaps do a 20-year mortgage (we really don't like the idea of a 30 year given the massive interest to principal ratio at the beginning, and the difference in payments would be about $700/month) - but know our budget would be tight for awhile if we want to continue saving aggressively. We could do it with our current savings and keep everything in the retirement/investment accounts untouched, and rebuild our emergency fund savings with my maternity leave pay in the first few months after buying.
Any thoughts on this? We know we're incredibly fortunate to have saved what we've got, and that there are a lot of options open to us.