My combined household income is currently $210,000, expected to increase to $260,000 within the next 5-6 years. We are debt-free except for $18,000 in student loans and $14,000 on a car loan. We live in a low cost of living area (LCOLA) and have $150,000 ready for a down payment. What price range should we consider for buying a house?
Start by determining how much you’re comfortable paying each month for housing, then use that figure to calculate how much you can afford to borrow. Don’t focus solely on the purchase price.
Cameron said:
Start by determining how much you’re comfortable paying each month for housing, then use that figure to calculate how much you can afford to borrow. Don’t focus solely on the purchase price.
I’d be comfortable with a monthly payment of about $3500.
@Rin
A $500k house at 7% APR, with $700/month property tax and $100/month insurance, would roughly cost you about $3100/month, assuming a $150k down payment. Remember to factor in utilities into your total housing budget to keep within the $3500/month comfort zone.
@Cameron
Thanks for the breakdown, that helps a lot!
Rin said:
@Cameron
Thanks for the breakdown, that helps a lot!
Consider future increases in taxes and insurance. Also, plan for any potential issues with escrow shortages or miscalculations.
Consider the necessity versus the cost. Homeownership involves many hidden costs and responsibilities. If you might move again soon, weigh the benefits of buying against the flexibility of renting.
Jesse said:
Consider the necessity versus the cost. Homeownership involves many hidden costs and responsibilities. If you might move again soon, weigh the benefits of buying against the flexibility of renting.
Absolutely, the time and money involved in home maintenance can be significant.
Jesse said:
Consider the necessity versus the cost. Homeownership involves many hidden costs and responsibilities. If you might move again soon, weigh the benefits of buying against the flexibility of renting.
I moved from renting to buying in the same area and didn’t realize the additional responsibilities and costs.
Make sure to maintain a solid financial cushion beyond your down payment for unexpected expenses.
Zhen said:
Make sure to maintain a solid financial cushion beyond your down payment for unexpected expenses.
They have significant additional savings and retirement funds, so it seems they’re well-prepared financially.
Consider what monthly payment you are comfortable with, rather than just the total loan amount or home price.
It’s wise to spend no more than 25% of your income on housing. This includes mortgage, property taxes, insurance, and possibly HOA fees.
Devon said:
It’s wise to spend no more than 25% of your income on housing. This includes mortgage, property taxes, insurance, and possibly HOA fees.
The 25% rule is outdated. Housing costs have risen significantly, making this guideline less realistic for many people.
@Sage
Even with rising prices, it’s important to maintain affordability to ensure financial stability.
@Sage
In some areas, $310K barely gets you a livable space. It’s challenging.
@Sage
In Massachusetts, $310K is far from enough for a reasonable home.
A $500k home should be quite feasible with your income and savings, given the LCOLA.
Is the $150k all your savings?
Haru said:
Is the $150k all your savings?
No, it’s specifically for the down payment. We have additional savings and substantial retirement funds.