We’re relocating from our 1100 sq ft starter home to a new construction in Elk Grove, which offers a 2700 sq ft space, better schools, and access to major freeways. With one child and both sets of parents to accommodate, we need the space. We will commute to the Bay Area a few times a week for work.
Our mortgage pre-approval is for a $675k loan at 7%, bringing monthly payments and property taxes to about $5100. Our combined gross income is $180k, which post-tax covers the mortgage with my salary alone, and we plan to live off my wife’s income.
Considering our financials and a six-month emergency fund, does our plan seem too ambitious? We’re seeking more affordable housing compared to what’s available in the Bay Area.
It’s about priorities. With a $180k income and significant retirement contributions, we maintain flexibility for savings and travel without a high mortgage strain. Overextending on a mortgage can restrict this freedom, even with higher incomes. Your new mortgage might consume over half your net income, which is risky without accounting for other essential expenses like utilities and childcare.
Have you considered all related housing costs? Besides the mortgage, there are utilities, insurance, and taxes. If these exceed your budget, even with six months of emergency funds, it could lead to financial strain. Consider building a larger safety net of at least 18 months.
@Poe
Agree, becoming house poor is a risky choice. It might be wise to temporarily reduce retirement savings to boost your emergency fund significantly.
It’s important to consider the total percentage of your combined take-home pay that will go towards the mortgage to assess affordability more accurately.
Taylor said:
It’s important to consider the total percentage of your combined take-home pay that will go towards the mortgage to assess affordability more accurately.
The mortgage would take up about 55% of our combined take-home pay, which is a bit high. We’re planning to cut other expenses to manage this.