Hello everyone!
My wife and I are considering becoming first-time homeowners but have the luck/misfortune of living in a high-priced real estate market (Bay Area). When we started the process, we told ourselves we didn't want our overall monthly housing (PITI) payment to exceed what we currently pay on rent ($3200). Now I'm wondering: was that self-imposed benchmark completely arbitrary and possibly counter-productive?
After a couple months looking at homes, we are realizing that finding a neighborhood we subjectively feel comfortable in with a tolerable commute--with a 20% down payment--leads to a monthly PITI payment of roughly $3500-4000. I am confident we can handle that amount from a cash flow standpoint. And, as I understand it, once (1) the mortgage interest and property tax deduction and (2) principal payment "savings" are taken into account, the after-tax real monthly cost may be less than our current rent.
Initially, we were ruling out any house with a payment higher than our rent, thinking it would be so satisfying to have our outflow decrease as a result of home ownership. No luck so far. So my question for you all, is my self-imposed rule crazy? Is it just a recipe for ending up in a property that doesn't meet our basic neighborhood and commute distance criteria? Or are we talking ourselves into home ownership when we should take a couple years to save more down payment and drive down the monthly costs? (Of course, I'm worried that continued Bay Area appreciation and rising interest rates would cancel out our prospective savings!) Thanks for reading!
Here is some basic info:
Down Payment Saved: 130,000
Monthly Gross Income: 15,000
Non-Housing Monthly Spending: 2,000
Current Monthly Rent: 3,200
Projected PITI payment (estimate): 4,000
Marginal Federal Tax Bracket: 25%