high mortgage?

[dvcnewgirl]

I agree with the town/school thing. I paid higher than I wanted for a house to have good schools for my children. That is top #1 priority. But I also bought one of the cheapest houses in town. It is a decent size 1950SF and a good neighborhood but it is not fancy. Is there anything like that around where you are looking?? Good Luck! I hate house hunting.

 

[JandJ]

For example...my husband and I qualified to have a large mortgage; however, we sat down and figured out that we a) wanted to retire comfortably and by age 60, b) wanted to pay for at least 80% of our children's education, c) wanted to be able to take at least one great family vacation a year and d) wanted to be able to survive if anything happened to either one of us or either of our jobs, and e) stay debt free except for the mortgage. With all that, we were able to buy a lovely home that we are thrilled with and took out a mortgage that was $200K less than what they said we were qualified for. We are able to max out on our 401Ks, invest heavily in our kids' 529 plans, and pay an additional amount on our mortgage every month. We expect to meet every single one of the goals that were set forth at the beginning.

Just something to think about. Good luck with whatever decision you arrive at!

Your goals sound just like ours! We don't have kids yet but when we do we want that same things and we did the same thing you did with our mortgage. We got a house we could afford on one of our salaries (roughly half what we qualified for) and we're glad we did! We've both suffered lay-offs in the last 2 years and we were fortunate to move into better-paying jobs, but it can really shake up your life if you're not prepared for it. Having no debt (except for the mortgage), reasonable cars, taking one nice vacation a year, and a mortgage we can afford makes life easier!

 

[dvcgirl]

So true! One of the homes in my neighborhood I think is heading to foreclosure--long story but they've been trying to sell for nine months, and the market is flat. They lived in the house for one week last fall then moved. About a month ago they stopped having the lawn done. After three weeks I called the property management company. She told me I was the fifth person to call about it, and she had sent the owners a letter the week before. She said if they didn't have it done by a certain date, she'd have it taken care of.

Last weekend I saw the guy who does most of the lawncare in the neighborhood over there mowing, trimming and edging. My guess is that the property manager hired him to take care of it--she mentioned that he does a great job during our conversation. Of course the other homeowners will have to foot the bill for it until the house sells and they can collect.

Of course if they aren't paying the lawncare bill they've probably also stopped paying the HO association fees. Amazing that people build a $750K home, decide they don't like living in Florida, move back to New England a week after they move in. I just don't understand the logic. Suck it up until you can sell, then move so you don't end up ruining your credit over your lack of foresight.

ETA: They have an interest only, adjustable rate mortgage note for $435K. The first adjustment happened two weeks ago. They bought at the height of the market, and at this point might be lucky to get the money they put into it out of it. This is a prime example of how to get into deep financial trouble. Their payment went from $1632 to $2811. That doesn't include taxes and insurance which will be at least another $1000/mo.

Anne

We are living in Windermere now, temporarily and we're seeing major signs of foreclosure troubles here. Of course, in the neighborhood we're in right now many "investors" got in too late and now they're dropping like flies. Browned out loans and overgrown bushes are the telltale signs here.

As for us, we decided that Florida wasn't for us. The crime had gotten to the point where it was insane with the local authorities seemingly unable to stop it. It's gotten worse since we sold in February. And with the market here falling as it is, we decided to get out why the getting was good. We made 100K on the house whereas we had we sold in the summer of 2005 we would have made much more.....but we still felt safe here then with no reason to leave.

We moved into a short-term rental out here in Windermere so I could wrap up my businesses. We bought up in Monmouth County NJ, where we are from......

 

[mickeyfan2]

We are living in Windermere now, temporarily and we're seeing major signs of foreclosure troubles here. Of course, in the neighborhood we're in right now many "investors" got in too late and now they're dropping like flies. Browned out loans and overgrown bushes are the telltale signs here.

As for us, we decided that Florida wasn't for us. The crime had gotten to the point where it was insane with the local authorities seemingly unable to stop it. It's gotten worse since we sold in February. And with the market here falling as it is, we decided to get out why the getting was good. We made 100K on the house whereas we had we sold in the summer of 2005 we would have made much more.....but we still felt safe here then with no reason to leave.

We moved into a short-term rental out here in Windermere so I could wrap up my businesses. We bought up in Monmouth County NJ, where we are from......

You have been a busy person. No wonder we have not seen you around much lately.

Good luck on your new home.

 

[klj27]

OP: I hope you haven't been scared away. Where are your thoughts leading you right now?

 

[punkin]

I don't think the 25% is outdated at all -- it's just that lenders have become much more liberal in what they're willing to lend, and people have become more comfortable with taking on excessive debt (and using revolving credit card debt when "necessary"). Being debt-free is not even on the horizon for many people.

The 25% thing still works. Yes, housing has increased, but so has everything else -- wages included. If you're spending more than 25% on housing, then you have less for all those other things, and you're going to be in a financial pinch.

Didn't someone write a book about that very concept? The basic premise was that you should allot X % for necessities, etc.

Umm...are you agreeing with me or disagreeing? I think I wrote that 25% with a 100K salary with a decent down payment puts you in a 425K house. That's affordable and realistic in the area.

I am saying that 2.5X anual salary for purchase price is outdated because that would put you in $250K house and there are none around here in any half way decent area.

 

[punkin]

In any event, it looks like this thread has deteriorated like so many others into "look what I did with nothing, you should be able to also."

OP, like I said before, good luck with your decision. I hope everything turns out OK no matter what that decision ultimately is.

 

[photo_chick]

I have not read all the resposes here but i will share a little of our story...

We buit our house in 2000. we could have afforded and easily qualified for twice what we bought at the time. at the beginning of 2001 DH took a salary cut. We did not see it coming. He switched jobs bu tstill did not make as much as he did when we bought the house. A tthat time we could still comfortably afford our house and bills. Come 20o3 he got laid off nad was out of work for a year. We made it through that but to find a job he had to change fields slightly which meant another salary cut. At this point we could barely afford our house. Now he is still at that job and makes close to what he did when we bought our house.

My point is you never know what is goign to happen, especially in today's economy. Also remember homeowners insurance and property taxes. Our property tax has finally leveld out but it has made our monthly payment go up by $300 a month since we closed in 2000. Look a tthe tax history of wherever you are thinking of so you have an idea if it is stable or will go up.

 

[zalansky]

Someone earlier said that a home purchase is largely an emotional decision. That was what happened to us! The model homes are decorated to WOW you. We wanted that home more than anything. Our story went like this, we went out to look at a $300k model which was 2200 square feet. The salesman tell us we NEED something bigger because we are a family of four. Next thing you know, we're signing on the dotted line for a $450k home, 3300 square feet, 4 bedrooms, 3.5 bathrooms, family room, living room, dining room, bonus room (the kids NEEDED that) and an office. Oh and a 3 car garage. We NEEDED a 3 car garage because even though we have 2 cars we needed the extra garage for storage.
In my defense, I foolishly signed for this house a week after my father died and I was thinking I should live in the moment because life is not certain. It was a terrible mistake and I thank God we realized it before we moved in and were headed for foreclosure. I think they played on our weaknesses. Snakes.
By the way, we were "approved" for $400k. I don't know how they came up with that. They said our credit scores are so good, that was why they gave us so much.

 

[MrsPete]

Umm...are you agreeing with me or disagreeing? I think I wrote that 25% with a 100K salary with a decent down payment puts you in a 425K house. That's affordable and realistic in the area.

I am saying that 2.5X anual salary for purchase price is outdated because that would put you in $250K house and there are none around here in any half way decent area.

I'm disagreeing.

Buying more than you can afford (and the 2.5 salary is a pretty good rule of thumb) is risky, regardless of what the market looks like. You can't judge what you can afford by what's available on the market; you must judge what you can afford by your salary.

 

[punkin]

I'm disagreeing.

Buying more than you can afford (and the 2.5 salary is a pretty good rule of thumb) is risky, regardless of what the market looks like. You can't judge what you can afford by what's available on the market; you must judge what you can afford by your salary.

So you are saying that 25% is too much?

You are completely confusing me.

 

[photo_chick]

Someone earlier said that a home purchase is largely an emotional decision. That was what happened to us! The model homes are decorated to WOW you. We wanted that home more than anything. Our story went like this, we went out to look at a $300k model which was 2200 square feet. The salesman tell us we NEED something bigger because we are a family of four. Next thing you know, we're signing on the dotted line for a $450k home, 3300 square feet, 4 bedrooms, 3.5 bathrooms, family room, living room, dining room, bonus room (the kids NEEDED that) and an office. Oh and a 3 car garage. We NEEDED a 3 car garage because even though we have 2 cars we needed the extra garage for storage.
In my defense, I foolishly signed for this house a week after my father died and I was thinking I should live in the moment because life is not certain. It was a terrible mistake and I thank God we realized it before we moved in and were headed for foreclosure. I think they played on our weaknesses. Snakes.
By the way, we were "approved" for $400k. I don't know how they came up with that. They said our credit scores are so good, that was why they gave us so much.

I fell in love with the first model home we went into. I just had to have that one. But then we decided to wait 6 months and when we wen tout looking again I found the house we have now which I still absolutely love. I guess your salesman would have laughed at me, I have a family of 4 in a 2000 square foot house adn it is plenty of room for us.

 

[Snow_White]

600K is a reasonable price for this area. A lot of people from other states don't realize how expensive it is to live in MD (we live in a "fancy" townhouse that is currently going for 425K. MD is many things, but cheap isn't one of them). Just crunch the numbers and then crunch them again. You know if you can afford it or not.

 

[DawnM]

I haven't read this whole thread, so forgive me if I am repeating anything.

You may have mentioned your salary, but I really wouldn't buy any house that would make me "house poor."

Have you read Total Money Makeover by Dave Ramsey? If not, I would do so before you buy.

Dawn

 

[Cindy B]

That seems very high to me but a $600k house seems high to me. We got our mortgage based on one of our salaries. So, we could have afforded a house twice as much as what we have if we'd used our total income, but we got one that we could carry on just one of our incomes. .

We qualify on one income as well. Granted our house is smaller Cape Cod, bit it works for us.

Once I start working (I'm still in college)we will have more money. But we are going to keep our cheap mortgage.

 

[nowellsl]

Didn't someone write a book about that very concept? The basic premise was that you should allot X % for necessities, etc.

"All Your Worth" by Elizabeth Warren. It's a good book to read and gives sound advice about keeping your financial self "balanced".

I would also recommend seeing the newly release on DVD documentary "Maxed Out" it's pretty disturbing!

 

[shelly3girls]

One thing I haven't seen mentioned that really affected us as a family is the kids age. I know the OP plans to go back to work so they will have increased income and this may not be a concern but others need to think about it. As children get older they get much more expensive. We kept thinking how much money we would have when we stopped paying for daycare. What we didn't account for is the cost of activities, increased cost of food and clothing, and before/after/vacation school care. Again, we planned wisely but if we were strapped originally we would be even more strapped now. Kids are expensive. Especially if DDs end up in a competitive sport. We have one that figure skates, oh boy!

 

[dvcgirl]

"All Your Worth" by Elizabeth Warren. It's a good book to read and gives sound advice about keeping your financial self "balanced".

I would also recommend seeing the newly release on DVD documentary "Maxed Out" it's pretty disturbing!

All Your Worth by Warren and Tyagi is one of my favorite books to recommend to people looking to change their financial lives. The percentages that they use for the budget are derived from years of research into peoples' budgets and why some succeed and some fail.

Basically, all of your "Must Haves" in life, meaning necessities like housing, taxes, insurance, groceries, transportation, utilities and so on should equal no more than 50% of your take-home pay. Our OP here would be spending 50% on housing alone.

30% of your take-home pay to "Wants", and then 20% to savings.

They do say that these numbers can be slightly out of balance at certain times of your life. Like when a new baby arrives or when there is a job loss. But I don't think many would advise going out to buy a house that takes up 50% of ones net pay and then "growing into the payment". There are just far too many things that can go wrong with that plan.....a zillion things.

I read the book "Maxxed Out" recently.....pretty disturbing stuff.

 

[barkley]

just wanted to chime in on the concept of considering the 'good schools' and a 'safe family neighborhood' in a given area when buying.

when we purchased our former home, the schools in the area were considered among the best (it was'nt a huge consideration for us since we intended to keep our kids in private, but we kept it in the back of our mind for re-sale down the line). as housing prices in the san francisco bay area increased crazily people began looking farther and farther out so they could maximize their purchasing dollars. since we were on the exteem end of what people considered a 'reasonable' commute- we ended up with a neighborhood largly people who would leave at 5 a.m. not to return until 7 p.m. at night, with the bulk of the kids latch-key. did'nt see a huge change at first, but as a few years passed the schools had less parental support/involvement and it's level of performance slipped. we also began to see those little neighbor kids who obediently went home and stayed alone inside as k and first graders become bored and start causing problems as 2nd and 3rd graders-by 4th grade we had regular incidents with vandelism and outright dangerous behaviours that realy changed the mood of our neighborhood-what had been a very close knit neighborhood where everyone knew each other and watched out for the kids largly became just the place people left early in the day and returned late at night to in order to financialy maintain.

i guess what i'm saying is a good school may not be good forever, and if a certain level of instruction is important to a parent they may want to take into consideration what private ed. will cost in the event their local school declines. if a family friendly neighborhood with a sense of community is important-look to who a development is marketing, it's hard to foster that kind of environment when you or your neighbors are gone 12 or 14 hours a day, every day.

 

[goofyforlife]

You know OP, I think it's probably going to work out.

What people have to look at is that she's not getting a mortgage for $600K. They have a decent down payment off the profit from their first house so it's great that they can move up so soon.

There's no other debt that we know of which is great too.

My DH and i don't even make 6 figures together but were stretching by for our payments...You obviosly have far less debt then we do at this point. Now you will be limited in the future though when it comes time for a new car or family minivan.

As long as you budget carefully and conserve energy and such you'll be fine.

The last thing i'll add is that you'll notice a big jump in heating prices between a townhouse and a single home. I spend way, way less to heat/cool our interior unit townhouse than i ever did with our single home in PA. I even can notice the difference between the last place we rented before this house which was an end unit.