I’m debating whether it’s a bad idea to consider buying a $1.1M house. With 20% down, the total monthly payment (PITI + HOA) would be about $7,500.
Half of my income is a stable salary, but the other half fluctuates since it comes from a business/contractor job. However, we’re moving to grow that income.
Currently, after deductions (401k, ESPP, insurance), we net about $12-13K a month. We expect to net $15-16K after the move, conservatively. I could also reduce my ESPP and 401k contributions to free up another $1,500/month, but I’d prefer not to touch these unless absolutely necessary.
Here’s what’s on my mind:
Numbers: On paper, it seems doable, but we’re planning to have a baby within a year or two. I’m not sure how much extra monthly cost that would add.
Savings: We’d still have $60-80K as an emergency fund after the purchase.
Market: House prices in San Diego rarely go down, so the thought is to buy now and refinance later when rates drop. If we can survive until then, payments would decrease, and the house value would likely increase.
Current situation: We’re selling a house with a 3% mortgage rate, costing $3,400/month. Maybe it’s smarter to live in a rental for now and save the extra $2-3K per month?
I’ve been thinking about this so much I feel like I’ve lost objectivity. Any advice or logical perspectives are appreciated.
If you have the funds, consider buying a smaller apartment or condo and renting it out. Use that income to offset your primary home mortgage later.
Wait until your child is closer to school age to decide on the best area for schools. For now, renting might be a wiser choice, especially since you don’t know the area well yet.
@Caden
Do you mean using the down payment to buy another property to rent out? That makes sense. We also don’t know the area well enough yet to commit to a specific school district.
Wylie said: @Caden
Do you mean using the down payment to buy another property to rent out? That makes sense. We also don’t know the area well enough yet to commit to a specific school district.
Yes, exactly. You don’t want to lock yourself into a $1M+ house and later regret the decision when choosing schools. Alternatively, invest your down payment elsewhere for now.
With a baby coming, your first year will be stressful enough without the pressure of a huge mortgage payment. Renting sounds like a good interim plan until you know the area better.
If I were you, I’d live cheaply and save until your child is closer to school age. That way, you can focus on targeting the right area for schools when the time comes.
We make about the same as you and own a house in a similar price range. We don’t have kids yet because we don’t feel financially ready. If you can avoid buying right now and keep saving, that’s probably the smarter move. When your child is school age, you might want to move to a different area anyway, so renting for now could save you a lot of stress.
@Skylar
Thank you! It helps to hear from someone in a similar situation. I think you’re right that renting might be the safer option until we’re ready for a baby.
Is this San Diego or South Dakota? Either way, I wouldn’t sell your current house. Rent it out instead. If this move is for business reasons, rent a place in the new area until you’re sure it makes sense to commit to buying.