I was hoping to get some advice for how big of a mortgage we can safely handle. My wife and I currently make $330k combined with an additional ~$50k in annual bonuses. We also have long term incentive bonuses that will begin to pay ~$6-10k next year and greatly increase in the next few years (will be upwards of $50k in 2-3 years). We have $20k emergency fund and $215k for a down payment. Houses around us are about $1.5M. We have no CC debt, a $15k car loan and ~$90k in student loans between the two of us. We do pay ~$1.2k a month for a nanny as well.
Can we comfortably afford this?
Do you have a budget? How much are you spending per month excluding housing?
You should not need a car loan (and should have student loans paid off quickly) at that income level.
What’s your rent currently? How is the income divided up? How many children do you have/and or plan to have and what are their ages? What state do you live in?
You go buy a 1.5 million dollar house and depending on your interest rate and state that’s going to be expensive re property taxes; interest, and insurance on top of the mortgage principal.
Can you afford a 1.2 million dollar mortgage at 6 percent making 330-400? Maybe. Depending on your state, but I’ll tell you it isn’t going to be “comfortable.”
I wouldn’t do it.
But then I decided to move about 22 miles out where homes are about 1 mil vs 1.5-2 mil equivalent in the more expensive area. On the plus side fewer homeless and crack heads walking around out here.
I’d pay off those student loans, car debt and get the emergency fund bigger. If you buy a million dollar house, you’re going to want a bigger emergency fund than 20k.
You are likely going to be paying about $12k/month on housing, depending where you are and what your taxes come out to be. That doesn’t leave you much wiggle room considering your student loan debt and limited savings.
I wouldn’t do it.
Some personal advice, do not factor things like bonuses in when it comes to how much of a mortgage you want to take on. Only go off of what reliably comes in every week/bi weekly/month as opposed to bonuses which can fluctuate or be outright canceled if the economy gets rough enough. That being said, if you put a little over 200k down you may be looking at a mortgage thats around 4k-5k a month. You also need to factor in things like your home owners insurance, escrow, property taxes as well as what the basic upkeep of a house like that will cost.
It might be a good idea to get pre-approval first just to see what the bank has to say before you start looking and getting your heart set on anything. When I did pre-approval, I found out that I could qualify for a mortgage for about 200k. So while the bank said that was available to me, I found out that the monthly payment was beyond what I was comfortable with after talking with the lender more on what the actual monthly payment would look like.
How much mortgage you want to take on will also depend on your lifestyle habits. Plus with a kid, that kid might need braces, other medical care things like eye surgery or just the general costs of raising a child. You may want to set your sights on a much more affordable house in the 400k-500k range just to keep extra cash free if needed. Plus, the market is finally starting to settle a bit so you may see nicer houses start to go for much lower prices by the time winter hits.
Consider paying off your student loans and car payment before buying a home. This will allow you to obtain a favorable mortgage rate from your lender in the future and frees up more cash for your monthly budget. A mortgage is the only debt you should ever have to carry is a mortgage. Every other consumer debt is dead weight.
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