As with all things in life, you get what you pay for in real estate.
We looked at a couple houses in the 500K-ish range. That's a lot of money...
On one hand, this is our only chance to buy into this kind of neighborhood... But, it's a lot of money. I really think it could be a good investment for that super-fancy neighborhood. But, it's a lot of money.
I've been watching friends buy (or think about buying) in DC, NYC, and California. In those places, 500 sounds like a bargain. So maybe I've lost perspective on cheap Texas real estate.
Can we afford 500K?
Monday, November 16, 2009
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24 comments:
As with all things in life, you get what you pay for in real estate.
How very original.
LMFAO
How much home do you want to be tied to? Clean? Upkeep? Do you want that much money every month going towards a house, taxes, and insurance instead of your retirement and travel?
From the rate you two are going, I seriously doubt that this is your "only" opportunity to buy into the McMansion way of life. I thought I was being bold 7 years ago buying a 150K house and thought 2 years ago that 250K was way more than I wanted to spend (so I managed to get it down to 220K.) Funny how the payments go up nonlinearly as the amount borrowed increases...
Why is this your only chance? Surely your chances will increase over time as your income rises and your husband's business becomes more secure.
It seems that you want it all right now, but I'll bet that most people who live in a $500k home are not first time buyers, and are probably about 20 years older than you.
Take your time. What's the rush??
Buy into the fancy neighborhood and you'll spend the rest of your life keeping up with the neighborhood--cars, vacations, kids schools--and you'll be forever comparing your television screen size to theirs, your backyard pool to theirs, your furniture and decor to theirs. Perhaps this is what you want. Also, you must keep in mind that you are no longer pulling in the big salary that you once were and it is possible that you won't be in the future. Sr. Dog's business may do well but then maybe not.
Buy what you can afford now--a good rule of thumb is that your house payment be around 25% of your take home pay. IMHO
I've heard lots of different "rules of thumb" - my belief is you take out a 15 year mortgage and spend no more than 1/4 of your take home pay.
Too many people took out fancy interest only, 45 year, piggy back loans or any other kinds. Too many people assumed that real estate would only go up in value. Recent history has proven that wrong.
In NJ, you can't buy much for 500K. Our house was 560K (1800 sq ft on .21 acres) in 2005 and now is worth about 530K. We pay 9K in property taxes. Honestly, I wouldn't want a bigger house not only because of the financial aspect but because of the upkeep. A McMansion is usually around 1M with the taxes being in the 18K range. Crazy.
Can you afford a 500K house? Probably but here are some numbers to compare to. We have a 30 year fixed on $412,500 5.75% and our mortgage is $2400/mo. With the escrow of taxes our mortgage is just over $3100. We make about 175K. I think you have implied that you make something close to 150K after Senor Dog's income and your new job. You should be able to afford it but the question is really if you should stretch yourself that thin in this economy? Especially since it would buy a huge house in TX and its only you and Senor Dog. A lot of things to think about. Good Luck!
I don't know. Can you?
That is a lot of money!!! It will make your life more and more difficult and limit your choices. You will be less able to sell should you want to move because the price will limit the number of potential buyers, you will be unable to stop work if you want to once you have a child, etc, etc. Think long and hard about why do you think that you need SO MUCH SPACE and such an expensive house????? Good luck.
If it is more than 3x your annual salary, you can't afford it. So, if you are pulling in $170,000 per year, go for it.
shouldn't the question be "how much house do we need?"
Spending 500k here in DC gets you a hell of a house... I can't imagine what kind of mansion you are buying in TX. Is it really necessary/worth it?
I earn about the same as you and Sr Dog earn together and I can't afford a $500k house. My opinion is based on the total cost of ownership over the next 30 yrs and how it will affect the lifestyle I desire, not just the monthly PITI payment.
500k in DC? My friends just bought a lovely i guess you would consider it a townhouse (converted old church building into units) slightly over 500k. Not a house with a yard.
Price shouldn't be the first thing you decide. You should decide what you want in a house and where you want to live. Then see what you want costs and adjust or not accordingly.
You will have plenty of chances to buy a house.
When we were buying our last house, we got into this place too. You're desperate to buy a house, nothing's coming up right away, your standards start to drop, all of a sudden, you're considering a mortgage way bigger than you should be.
Breathe. Just breathe.
Now breathe again.
If you're getting to this point, you need to back off the house search for a while. Something that's you'll love will come up in your price range- just maybe not right now.
Make peace with where you're living right now, or start concentrating on finding rental property. Step away from the MLS.
You'll gain some eprspective and feel better for it. Not to mention your wallet will thank you.
[For the record, we wound up with a house that was way too expensive for us and, although it was a very nice neighbourhood, it just wasn't right for us. We were way too "poor" for our neighbours! My husband also didn't have much/any latitude to leave a job he hated, because we needed his salary to be able to cover the mortgage payments. I am thankful every day that we sold that house and got our lives back.]
I agree with Greg. I do live in Texas. You can get a McMansion in the outlying areas of my home city (San Antonio) for $250K. I can't imagine what you're getting for $500K, unless you're looking at a ritzy near-downtown neighborhood. I say go with what is adequate for your needs. Don't be house poor! You'll regret it.
Sorry Pidgeon92...numbers like that based on what people "go by" are ridiculous. $170k per year dog should go for it? The bitch will use all their cash for a downpayment and be able to afford it for a couple months should one lose a job. Should they both go without a paycheck for a couple months they'll be looking at foreclosure and bankruptcy.
As someone else said, it really doesn't matter if you might be able to swing $500k - 20-somethings buying a first home have no reason to spend $500k - it borders on stupidity. If you can swing $500k, then buy something for $250k...save lots of money, and be able to pay the mortgage even if you have to work at Walmart.
Lastly, if your income is so high, you are are probably subject to AMT, so don't think you're just going to be able to deduct all that mortgage interest.
I don't know enough about your finances to say. I have a $340k mortgage, our combined income is around $125,000, and I feel constrained by the cost to keep the house. Aren't property taxes high in Texas? Today I shelled out $7000 to replumb the house, homeownership isn't fun. Don't stretch with your budget, buy something you can easily afford. It will give you more choices later on.
I was a 20-something in a 500k house. My now-ex and I had a combined income of 200 at the time. It ended up a stretch financially. I can't imagine doing that on my single salary now.
I loved the house. It was beautiful and spacious. It was also a tremendous amount of work to take care of. We had to hire people to help with the cleaning and the landscaping. The utilities, taxes, HOA fees, and the peer pressure were all costly.
You'll end up paying more for everything else. You'll have to buy more blinds. You'll have to buy more furniture. You'll have to pay more property tax. Your utilities will be higer. You'll have to either spend all of Saturday cleaning or pay a cleaning lady at least $100/week. It's all less money you'll have to invest.
I think I get where you're coming from. When I was your age (about 5 years ago), I wanted all the trappings of wealth: the fancy job, the suits, the pricey dinners, the 5,000 sq ft house. The best thing I did for myself was let go of the desire to impress others and of the craving to have the best of everything.
By living at a modest, but majority, standard of living, I've been able to save & invest $50,000/year. I walked into a bank recently to open a new account. I was in a $30 dollar pair of jeans and a gray t-shirt. The manager's shocked expression when he read my financials made me smile.
Being 'undercover' wealthy is much more fulfilling than the 500k-house-lifestyle ever was. Good luck.
-S
Seriously? When did it become appropriate to call someone a bitch, let alone on their blog?
Agree with Dog or not, that's not cool.
Nevermind. I read through the rest of your blog. Now I understand the troll infestation. As much as I hate trolls I do think you're providing the perfect fodder for them. Perhaps with time graciousness and humility will find you. The most successful men and women I have known have often been the humblest.
-S
I agree with the anonymous commenter that mentions being "undercover" wealthy. This is the kind of wealth that I'm aiming for, and also the kind that's described in the classic "The Millionaire Next Door"
There's a posting today about a new book by the gentleman who wrote The Millionaire Next Door. In his study for this new book, he found that people with the big homes, as some posters have said, had less wealth than those with moderate homes. This is party due to the high cost of the home, the high cost of the upkeep, the high cost of utilities and the high cost of keeping up with the neighbors in said nice neighborhood.
So if your goal is wealth accumulation and financial stability, buying a house that would be a stretch would not be a good idea.
Yes, "deals" can probably be had right now, but like anything you buy, if you can't afford it and you don't really need it, it's not a deal for you.
People are still saying the same thing. "Now is the time to buy because it will go up, homes are a steal." "You'll get your money back when the value goes up." It's the same kind of thinking that got people to buy homes when the market was "up" that caused the housing collapse in the first place.
depends on if you want the lifestyle. I think it depends on if you can afford it.
You can't - not right now.
On your NetworthIQ page, it says you have $70K cash + $9K stocks. Even if you wouldn't have to pay any capital gains taxes on the stocks, that only comes out to about $80K. If we obey the rule of a 20% down payment, ou can only afford $400,000. And that's if you want to drain your savings.
My advice is to go with no more than $300K for a house. I think that should be plenty, especially considering your location.
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