can we afford it?

[beenster]

Wife and I make 440K we owe 900k on our current home which is worth 250K, we have no other debts, we are looking for a larger home and better school district, all the homes we really like seem to be in the 700k-900k price range, I am not sure we can afford this price range what do you folks think? we hope to have 20% at time of purchase.

[disneysteve]

Originally Posted by beenster

we owe 900k on our current home which is worth 250K

I'm hoping this is a typo and that you aren't actually $650,000 underwater on your mortgage.

[swanson719]

$440K a year or not, you'd be looking at $1.5M in total debt, which is over 10 years worth of income at your current rate. The payments on that alone would be $8K a month at a 5.0% 30 yr fixed, not counting insurance and taxes. That's putting you awfully close to $10K a month. If your net is $440K, you're looking at 1/4 of your take home pay a month going towards your house. If your gross is 440K, you're looking at 1/3 going on mortgage. Either way, you'll probably get approved for it, but to take a $650K hit, that's a heck of a wallop. I don't think I'd go for it personally. The national average in sales drop from a percentage standpoint is around 35% from previous, although the really expensive houses are much higher than that.

If you guys have a good Emergency Fund in place with about $220,000 in it, can put the 20% down, and no other debt than the house, you're borderline in my opinion. If you have debt, that needs to be gone first and foremost. Without the Emergency Fund with at least, minimally, $100,000, I wouldn't even think about it in your shoes. That's a heck of a mortgage payment, and if one of you lose your job, your lifestyle is going to drastically change.

$120,000 a year for 30 years, you're looking at 3.6 Million for a $900,000 house. I'd sit where you are for a while, wait for the market to turn, get some equity back in the house, build up enough to buy in cash, and then move up.

[ScrimpAndSave]

Disneysteve...this is what I was confused about...

[disneysteve]

Originally Posted by swanson719

$440K a year or not, you'd be looking at $1.5M in total debt, which is over 10 years worth of income at your current rate.

How is $1.5 million over 10 years' worth of an income of $440,000/year? It is 3.4 times income by my calculation.

[boosami]

I think they owe $90K, not $900K.

[GREENBACK]

Originally Posted by boosami

I think they owe $90K, not $900K.

surely this is the case. If not....

[disneysteve]

Originally Posted by boosami

I think they owe $90K, not $900K.

That would make sense.

So current home is worth 250K. Owe 90K so 160K equity.
New home would be somewhere between 700K and 900K.
20% down payment would be between 140K and 180K so the existing equity would cover all or most of that (after sales fees, moving expenses, etc.).
Income is 440K.

900K home would be 2.05 times income.
700K home would be 1.6 times income.

Assuming all of your other personal finances are in order, I think a home in that price range is very affordable for you.

[swanson719]

was looking at w/ interest, and guessing the $440K was gross.

[beenster]

sorry guys, it was a typo we owe 90k on our current home, I am a little nervous about a large mortgage, I wouldnt buy a home more than 700k. We really like a home with list price 780k clearly it wont sell for that but assuming we buy it for 700k with 150k down, the taxes are 14k, what would our monthly payment be approximately, our net is about 15k a month

[beenster]

also we have emergency fund of 40k, much less than suggested in earlier post but we figured we would have a fund for our current expenses not our income so we have 3 months living expenses not income, maybe we should increase that?

[pikey412]

I find it unfathomable that someone pulling in $440k could make so many grammatical errors in a single post.

[beenster]

Based on our small sample size it appears there is no correlation between income and grammar, thank God! also 2nd conclusion, typing on small devices is not conducive to grammatical accuracy...

[jazzpoint]

A friend told us that recently banks had trimmed down their interest rates from 6 to 8% a year down to 4 to 5%. He had his house re-financed. With the recent financial housing climate, and given the sizable income you are getting and the maturing current house mortgage, it is very tempting to invest in that nifty house you are considering. Check on the other in-tangibles. You mentioned about a better school district. Remember, location is a key consideration in real estates. I would be inclined to invest in properties with projected increase in value in the coming years. Weight on!

My five penny- opinion.

-Jazz

[thekid]

How secure is your 440K$ annual income? Is that after bonuses? Can you reasonbly count on it year after year?

If so, and assuming your other obligations are in order, I would think you can comfortably afford that 700K$ home.

[noppenbd]

How long have you been making $440K? I find it amazing that you do not have more in savings. You should easily have $200-250K a year in surplus, yet you have only $40K in emergency funds? I think you need to look at your spending before buying a home.

[MiikeB]

Originally Posted by beenster

sorry guys, it was a typo we owe 90k on our current home, I am a little nervous about a large mortgage, I wouldnt buy a home more than 700k. We really like a home with list price 780k clearly it wont sell for that but assuming we buy it for 700k with 150k down, the taxes are 14k, what would our monthly payment be approximately, our net is about 15k a month

Net 15k a month is not 440k a year...

[LivingAlmostLarge]

Maybe they save a lot and lots of child support or alimony?

[beenster]

1. We just finished paying off student loans and miscellaneous debt of $350k over the last 3 yrs thats why the EF is so small

2. We have 250k in retirement

3. Out incomes are very stable,most is salary our bonuses are only about 30k/yr

4. Actually after maxing out retirement, and putting a little extra withholding (2k i believe) for taxes (we are evil rich people) we take home about 15k, we comfortably save 5-7k a month

[thekid]

Originally Posted by beenster

1. We just finished paying off student loans and miscellaneous debt of $350k over the last 3 yrs thats why the EF is so small

2. We have 250k in retirement

3. Out incomes are very stable,most is salary our bonuses are only about 30k/yr

4. Actually after maxing out retirement, and putting a little extra withholding (2k i believe) for taxes (we are evil rich people) we take home about 15k, we comfortably save 5-7k a month

Well, that's great.

What do you do for a living, if I may ask?