$1mm home, $800k mortgage

Yes, I have seen other posts, but it’s always helpful to get perspective on my own case.

My wife and I just had our first child in September and both agreed it was time to start looking to purchase a home in a HCOL area (Orange County / Los Angeles).

My annual salary is $195k (plus discretionary bonus which was $105k in 2024). My wife is currently on leave (healthcare professional) at a practice making $180k annually working full-time (though will be working only 40% until our baby goes to daycare so we save on nanny costs, ~$5k/month in our area for a full-time nanny).

Between the two of us:

  • $375k 401k (me)
  • $50k 401k (her)
  • $350k trading account (me)
  • $55k trading account (her)
  • $54k HYSA (me)
  • $55k cash (me)
  • $15k cash (her)
  • $110k student loans (her, paying off $1k/month and is our only monthly debt outside everyday expenses, etc.)
  • No outstanding car loans

So a bit of background: I’m from a very poor family (mom was a nanny) with a household income of $30k (4 people in the house, including 2 cousins). We never owned a home before and lived in subsidized housing growing up, whereas she lived more of a middle/upper-middle-class life, and her parents live in a $1.6mm home. This has never been an issue in our relationship. But now that we are looking at homes, it feels like there’s some push & pull. Maybe I’m being too frugal, but there’s that voice always in the back of my head to never get back to that situation I grew up in.

My question is: can I afford it? Home information below:

  • 20% down ($200k) with an $800k mortgage loan.
  • Total costs monthly are roughly $7k/month (estimated tax, $390 HOA, $150 insurance, and P+I).

My real estate agent says I can comfortably afford it, and our lender has us pegged at 29% DTI (excluding her income, so presumably less DTI in theory when she returns to work), and he reminds me a lot of people in our area are closer to 40%.

Am I crazy to be paying $7k/month when our rent is $3k? Or am I just actually crazy and overthinking the purchase?

If both of you are working full-time, it’s a comfortable situation. However, with a newborn and one of you not working full-time, it may feel tighter.

Can you clarify:

  1. What is your family’s monthly take-home pay after taxes and deductions?
  2. What are your monthly expenses (utilities, groceries, baby items, etc.) in addition to the $7k mortgage?
  3. How are you funding the $200k down payment? Selling investments, or from cash savings?

@Zed

  1. With my bonus averaged over 12 months and my wife working part-time, take-home is around $19k-$20k/month.

  2. We aren’t big spenders; expenses are roughly $1k-$2k/month outside of housing and savings.

  3. The down payment will come from cash savings (HYSA, savings accounts, and cash in the brokerage). No need to touch long-term investments.

@Emerson
Your mortgage is about 35% of take-home pay, which is manageable. Plan for $3k-$5k in monthly expenses with the new home and baby. Also, quickly rebuild a 3-6 month emergency fund post-down payment. You’re in good shape—congratulations!

You make $500k annually when both are working. A $7k mortgage leaves $12k for everything else monthly. You’re fine—buy the house.

Double-check your $150/month insurance estimate—seems low for a $1M home in a high-risk area. Otherwise, a 29% DTI is reasonable. Plan for lifestyle changes as your family grows, but you should be okay.

Are you currently saving $5k/month? If not, you may struggle with this mortgage. If you can, proceed confidently.

Bay said:
Are you currently saving $5k/month? If not, you may struggle with this mortgage. If you can, proceed confidently.

Yes, we’re saving well over that amount monthly.

If $7k/month feels like too much, you might not be ready. Rent closer to your desired area first to test how the higher cost of living affects your finances.

Quincy said:
If $7k/month feels like too much, you might not be ready. Rent closer to your desired area first to test how the higher cost of living affects your finances.

In Orange County/LA, renting for $4k would get you a small condo in a not-great area. Buying makes more sense long-term if you can afford it.