Trying not to be house poor ...

[jimmychippewa]

Hello

My family (wife, 2 kids, 2 dogs) are moving to a HCOLA area in the north east from a relatively LCOLA area in the south to be near family.

We are trying to find the right quality of life balance --> buying a home that is a good fit for us and being closer to family without commuting one hr or more each way to work. Yeah, I know its what everyone probably wants who lives in a HCOLA.

We are a one income family and we do not want to be house poor. Our current house was bought with two incomes prior to kids and that caused us to be expectedly tight when we reduced my wife's hours to part time and then to zero.

We have zero equity coming to us on the sale of our current home and have a approx 12k student load debt that will be paid off in the next 3 months. We have no other debt.

Our current plan is to live with family for 2 yrs to save for a 20% down payment on our next house. Our family is not going to charge rent or utilities.

What we're trying to figure out now is, what is a reasonable monthly disposable income to have to ensure you do not become house poor? Given we have 2 young kids, new kid related expenses are coming our way (dance classes, sports, etc) so we want to prepare for that.

Disposable income defined here is money after retirement, savings, and utilities, groceries, care ins, life ins, etc are budgeted/paid. Is it min $500, $1,000, etc?

Thanks in advance for your input. I really appreciate it.

[snshijuptr]

No more than 28% of your gross income should go to housing. I prefer to think that you house payment (with taxes, insurance, maintenance, and in your case utilities) should not be more than you will be putting away every month for the downpayment. You know you can put that much money away every month so get used to living that lifestyle.

[cschin4]

Think about how YOU and YOUR FAMILY really want to live. Do you enjoy having a nicer home even if it costs a bit more? Or, would a nice, less expensive, simple home that is less expensive better for you? Do you like having more fun money and more discretionary income available to buy your toys, travel, etc. Or, are you homebodies who really want to put a lot of time and effort into your home as well? Really look at who your family is and what is important to you. We could have lived in a more expensive home, but we would rather have money to have fun with, go on vacations, etc and didn't want to live to close to the edge. In fact, our home is paid for in full now.
I would recommend that you do not buy a home that is more than 2 or 2.5X your income tops. If you want to play it safer, buy much less home than you can afford.

[maat55]

25 to 30% of take home pay for an house payment(P&I T&I) in the northeast may be difficult but it is the standard ratio to go by.

[BlackDiamond]

25 to 30% of take home pay for an house payment(P&I T&I) in the northeast may be difficult but it is the standard ratio to go by.

I make close to 50K a year. There is NO WAY as a single adult that I could buy even a run down shack with 30% of my take home pay. I couldn't even rent a 1BR apartment with 30% of my take home pay. I'm in the Boston area. I think the Northeast, in general, it is very very hard to stick with that standard. Granted I rent w/ a roommate now and spend less than 15% take home on that BUT I can't do that forever.

[jimmychippewa]

I would recommend that you do not buy a home that is more than 2 or 2.5X your income tops.

That is going to be really challenging to do .... does one resort to renting if you can't live by those parameters? Not sure I could ask my family to live with them longer to save more to live within those parameters ...