Buying a house -- Advice needed for our budget

[isiginamo]

My wife and I are expecting our first child and are looking to buy our first house. I am going to list our budget in hopes that we can get some peoples suggestions and make sure we are on the right track. If you see something missing or it looks to tight... please let me know.

PS - this is what it would be if we bought a house

$3450 - Take home pay. Sometimes is higher but this is a good basepoint

----------Fixed Bills
$345.00 - Tithe
$950.00 - Mortgage
$243.00 - Student Loan
$68.60 - Aflac
$32.00 - Compassion - charity
$164.15 - Student Loan
$99.41 - Cable, internet
$75.00 - Car insurance
$92.47 - Cell phone
$65.00 - Power bill - house is all electric w/ very low average
$45.00 - Water/Garbage
$2,179.63 - TOTAL FIXED

------------Variable Bills
$250.00 - Gas
$45.00 - Can Maintenence - CASH in envelope each month
$250.00 - Groceries/Household/baby stuff - CASH in envelope each month
$150.00 - Entertainment/fun.dining out - CASH in envelope each month
$40.00 - Clothing fund - CASH in envelope each month
$40.00 - Christmas/Birthdays - CASH in envelope each month
$40.00 - Blow money for whatever - CASH in envelope
$815.00 - TOTAL Variable

$3450.00 earned each month, low average
$2994.63 on bills each month

Leaves us with $455.37 each month to save, pay off student loans and mortgage faster.

Is this ok? or are we getting too close to living paycheck to paycheck?

[momof1in150]

Too close - you have nothing in there for home maintenance. Does your mortgage payment include taxes and insurance? If not, then you need to include that as well. The electric seems low if the house is all electric - where would it be located? If you need heat then it will go up significantly in the winter or if you need a/c it will go up in the summer.

[disneysteve]

What is your gross income? Are you contributing to employer-sponsored retirement plans like a 401k or 403b? What about Roths?

Same question as mom0f1in150 regarding taxes and insurance - is that part of the $950?

If you have $455/month left after all of that, that sounds good. But if savings and taxes and insurance still need to come out of that money, I'd say it isn't enough.

[isiginamo]

-We qualify for the USDA first time homebuyer program - so no PMI insurance is needed.
-I did for get home owners... and that would run about $600 a year here... so like $50 a month
-Mortgage does include taxes
-Electric is that low... Actually the 2 year average is $50 from the power company. It is a very well insulated house with all new appliances
-We make $about $65,000 a year. Right now our take home pay is reflecting no baby and no house (only married) we claim 0 deductions on taxes... so as of next year we would have a higher take home pay.
-I am contributing 6% and employer matches 3% to aggressive 401K

My wife is planning on starting a prechool/daycare in 2-3 years, and will make more than her $12/hour job she has now so income will go up then as well.

[disneysteve]

Originally Posted by isiginamo

We make $about $65,000 a year.

I am contributing 6% ... to aggressive 401K

You don't mention your wife's retirement plan so I'm assuming there isn't one. I don't think saving $3,900/year for retirement is nearly enough with your income. You should be doing at least 10% IMO, if not more. Once baby comes along, you may want to be starting a college savings plan, too.

How close are you to paying off the student loan? That $243/month would help out a lot.

[disneysteve]

I believe AFLAC is disability insurance. Once you have a baby, you'll be wanting life insurance, so be sure to factor that in, though that is quite cheap so really won't change the numbers much.

[isiginamo]

We have 10 times our saleries on life insurance... so that is covered.
Aflac is actually a maternity plan... it is going to pay out about $6000 when my wife gives birth! And you are correct, that is all we have going to 401K... we should add more... so is this something that we shouldn't do? Or is it workable?

[isiginamo]

Wow... I just got to thinking... I forgot daycare. Her mom is a daycare provider, so it would be about $150 a month. That would be before taxes because I have a FSA health/dependent account. And changing my 401k to 10%, that would leave us with on average a little more than $200 per month...

Our monthly take home pay is averaging on the low side, because I make some commission and she gets expense checks back for some of her mileage.

[jIM_Ohio]

Originally Posted by isiginamo

**my edit** 65k per year
$3450 - Take home pay. Sometimes is higher but this is a good basepoint

----------Fixed Bills
$345.00 - Tithe
$950.00 - Mortgage
$243.00 - Student Loan
$68.60 - Aflac
$32.00 - Compassion - charity
$164.15 - Student Loan
$99.41 - Cable, internet
$75.00 - Car insurance
$92.47 - Cell phone
$65.00 - Power bill - house is all electric w/ very low average
$45.00 - Water/Garbage
$2,179.63 - TOTAL FIXED

------------Variable Bills
$250.00 - Gas
$45.00 - Can Maintenence - CASH in envelope each month
$250.00 - Groceries/Household/baby stuff - CASH in envelope each month
$150.00 - Entertainment/fun.dining out - CASH in envelope each month
$40.00 - Clothing fund - CASH in envelope each month
$40.00 - Christmas/Birthdays - CASH in envelope each month
$40.00 - Blow money for whatever - CASH in envelope
$815.00 - TOTAL Variable

$3450.00 earned each month, low average
$2994.63 on bills each month

Leaves us with $455.37 each month to save, pay off student loans and mortgage faster.

Is this ok? or are we getting too close to living paycheck to paycheck?

The red items are what I would flag as questionable.

65k per year. You should be saving about 13k per year.
Put $9700 (15%) into 401k
the other $3300 into short term savings (or pay down mortgage or similar).

Then find a way to live on 52k per year.
$250 for groceries and kids is tight. We budget $200/month just for our groceries.
We have twins, our formula runs $15/can, and we go through one can every other day with 7 month old twins. We go through around 35 diapers per kid per week. Walmart brand do us fine, but that will cost around $100/month I think.

Is $250 gas for your car or house? I pay $100 every 2 weeks for gas and I drive a full size truck.

The cable-internet-cell phone of $180 total is high. We pay $80 for satelite dish and another $80 for cell phones (two phones, 2 different plans).

If you free up the student loan this might get easier. I won't suggest removing the 10% tithe, but I will mention that you need to pay yourself 10% if you tithe 10%- why pay the church more than you pay yourself?

[disneysteve]

Originally Posted by isiginamo

We have 10 times our saleries on life insurance

so is this something that we shouldn't do? Or is it workable?

Originally Posted by isiginamo

Wow... I just got to thinking... I forgot daycare. ... about $150 a month.

And changing my 401k to 10%, that would leave us with on average a little more than $200 per month...

Our monthly take home pay is averaging on the low side, because I make some commission and she gets expense checks back for some of her mileage.

Is there any cost to you for the life insurance? If it is fully paid for by your employer, you may still want to consider taking out at least a small policy on your own because if anything happens to the job, you lose that coverage.

Increasing your 401k to 10% would be a good start but that still isn't enough. What about your wife? She needs to be saving, too. And as Jim suggested, 10% isn't enough to be saving overall. If she has no plan at work, at the very least, she should be maxing a Roth for $5,000/year.

Even though you earn commission and she gets some reimbursement, just ignore that in your calculations because that money can't be counted on. It might be there one month and not there the next, so you can't base your budget on that. You need to budget based on the guaranteed base income.

You haven't mentioned anything about existing savings. Do you have an adequate EF in place? Do you have a 20% downpayment for the house you are considering?

The more I read, the more I'm thinking that you would be overextending yourselves to spend that much on a house.

[tripods68]

I agree Jim---10% Tithe...i'm sure the God won't mind.

[isiginamo]

I am not paying the church... I am trusting God with what is already his in the first place. It is my way of thanking him for what he has already blessed me with. Unfortunately the student loans are about $40K and they can't be consolidated because one is private and one is government or something like that... Gas is budgeted at just under $4 a gallon... but better safe than sorry... and the cable/internet/phone is down to the lowest it can go other than canceling cable and internet. We live in a very small town so our options are limited... no shopping around for the best rate for us.

Does someone want to take the liberty to take my budget... show what should be saved... and show what kind of house payment we should go for.

We don't have 20% down on a house. Right now we qualify for grants to cover closing costs, 100% financing, and we can get the $7500 tax credit for first time homebuyers.

We have $1000 EF set up and will have about $4000 in there by the time we have the baby.

[momof1in150]

Originally Posted by isiginamo

We don't have 20% down on a house. Right now we qualify for grants to cover closing costs, 100% financing, and we can get the $7500 tax credit for first time homebuyers.

We have $1000 EF set up and will have about $4000 in there by the time we have the baby.

This is partly the reason we are in the current housing crisis is the 100% finance. As a REALTOR I can tell you the least you can put down and still get a mortgage is 3% with a FHA loan. The only 100% loans out there are VA Loans and they are guaranteed by the government. Who is telling you that you can get 100% financing? I would question their information as I don't know of a bank or mortgage company doing 100%, except VA.

[ActYourWage]

"I am not paying the church... I am trusting God with what is already his in the first place. It is my way of thanking him for what he has already blessed me with."

Amen to that.

[disneysteve]

Originally Posted by isiginamo

Right now we qualify for grants to cover closing costs, 100% financing

I'd say that just because you qualify for 100% financing doesn't mean it is a good idea. Look at the current situation. Something like 20% of homeowners are currently upside down on their mortgages, meaning they owe more than the house is worth. That mainly happens to folks who buy with little to nothing down. If you buy with 20% down, it is much less likely even if the property value falls.

[noppenbd]

I would question that AFLAC is going to pay out $6000 for a normal pregnancy on a policy where they are only collecting $68 a month. First of all, wouldn't it be based on your wife's income, since she is the one who is considered "disabled"? From what I read online, they cover 6-8 weeks of pay. If she is making $12 an hour that is about $500 a week. So I don't see how you get to $6000. Just from a business sense it doesn't seem like a profitable offering for AFLAC to make.

[isiginamo]

Aflac... it is not "technically" called a maternity plan, it is a hospital indemnity plan and a sickness indenmity plan... and we pay about $130 per month... part of the plan is pre tax. It is not a disability or anything like that.

Because we live in rural iowa we qualify for the USDA rural first time homebuyer program... look into it.. it's pretty good deal! and yes.. 100% finiancing.

And since we live in rural iowa, where the local economy is agriculture... we never had the housing boom. Our house prices didn't raise or lower... so I have a hard time thinking our home prices are going to drastically plummit.

[isiginamo]

and I forgot... my wife has ippers. she pays 4% and they pay 6% towards retirement

[MonkeyMama]

I was about to ask how old you were. If you were quite young I didn't think it was much of a stretch.

But you lost me on the 100% financing. I'd say that mortgage is a bad idea - no matter what the age.

[Ima saver]

I have to agree. I think the 100% financing is a very bad move and the emergency fund should be at least 3-6 months worth of living expenses before buying a house.