How much house can we really afford

[JenniferG]

My husband and I plan on buying a house at the end of 2018 I'd like to do a 15 or 20 year mortgage. Were looking to purchase in the 230 - 300 k range

Current mortgage purchased in 2010
Owe 108k
Worth 200-210k ( we will be putting the total amount of the sale from our house as a down payment) 70k ish?
Current mortgage 1100/ month

My take home 4K - 4300
My 401k 45k (I'm currently only saving 2% I'll be bumping this up to 10% this year) I'm 34

Husband 30
Take home 3k - 3500
401k o (he plans on opening up a Roth IRA)

Debt

Car 1 2013 accord owe 8500
Car 2 2014 Silverado owe 12k

EF 3k

We are going to aggressively pay off our cars by the end of this year
In 2018 we plan at throwing all extra money into our EF with a goal of 15 - 20k

Ideally I'd like a 1500 dollar ish mortgage a month but if we do a 15 year loan I'm afraid a 2k mortgage would be more of a stretch since we are planning to aggressively contribute to our 401ks.

The areas that were looking in the houses are between 260k and 300k these are the cheapest houses in the are I like with home values reaching 600k plus the others areas were able to afford are in less desirable locations and I worry about homes holding their value. So basically I'm torn between moving to a desirable location and taking a 30 yr mortgage or a less desirable location with cheaper houses and a 15 year mortgage. If we were to do a 30 yr mortgage I would still try to pay it off quickly I just think a 15 yr mortgage would keep us on plan better.

Thoughts?

[Jluke]

is $1500/month mortgage payment with or without property taxes?

will you put the ~90k from the sale of your home towards the downpayment?

[Jluke]

$1500/month: 15 year, 3.5% you can borrow 210k.

[Singuy]

Hmm, without looking at your expected expenses, it's hard to gauge how well you will do with a 15 year mortgage.

Usually people with 15 year mortgages have plenty left over after meeting all their expenses and retirement savings. I probably wouldn't do a 15 year and just pay extra when you have it to safeguard from any possible foreclosures.

[disneysteve]

You threw out a bunch of numbers that aren't entirely clear.

What was your household gross income for 2016?

[JenniferG]

Hello everyone thanks for the responses

The 1500 a month is with property tax

Our estimated gross earnings is 110 to 120k my husband has his own buisness so this varies

Rough run down on expenses minus the car payments since they will be paid off

I'm estimating getting 70k for the sale of our hose because of closing fees etc


Utilities electric 300 350 depends on size of house we buy probably 2500 is Sq foot

Gas 100? Depends on if of if it's a gas or electric heater

Husband gas 200 - 250
Me gas 20 I work from home

Cell 200
Internet 100 (40 dollar credit from work)
Cable 100

Water 80

Groceries 600

Total 1680

I didn't include misc things like eating out etc

Me savings 350
Husband 300

Total with savings 2330

Since we need to start aggressively saving for retirement im thinking our net pay will go down by 600 a month or more depending on how much we decide to save I didn't include this into my figures

[greenskeeper]

go with a 30 year mortgage and pay extra principal when you can. You may find out you can afford the 15 year payment so just pay the 30 as if it is a 15. Then if you have a month were you have some bad luck you can always fall back on the lower 30 year payment.

FWIW I took out a 30 year note and am on track to pay if off at most in 12 years, probably less.

[sblatner]

I agree with greenskeeper. We had a 30 year mortgage that we paid off in 17 years. My husband was laid off in 2002...boy were we glad we had a 30 year instead of a 15. We had always paid extra but when it came to the layoff, we were able to be conservative until he got a new job.

The only idea might be to save extra so you could put more down and lower your payments. As Dave Ramsey would say, get gazelle intense, sell stuff, eat at home more and get those cars paid off and then start saving for your emergency fund and house!

[MooseBucks]

Why are you moving from your current home? It is nearly impossible to say how much you could afford in two years because no one knows what interest rates are going to be in 24 months.

[JenniferG]

Oops posted twice

[JenniferG]

Thanks everyone very valid points for going with a 30 yr mortgage and paying it off early.

Were moving because we've outgrown our house I bought this house when I was single and it just doesn't fit us anymore also my husband drives lot for work he does home remodels so we'd like a more centralized location with quick highway access.

I realize that the market could do many things two years from now but as of right now I'm just trying to make sure we're as financially prepared as possible for when were ready to purchase a new home so I'm using current market prices because I have nothing to compare to... youre right anything could happen two years from now

[feh]

Ideally I'd like a 1500 dollar ish mortgage a month but if we do a 15 year loan I'm afraid a 2k mortgage would be more of a stretch since we are planning to aggressively contribute to our 401ks.

I'll give you the same advice I always give when somebody asks this question - buy the house you need, not the house you can afford.

If you're looking at this as "what is our monthly payment", you need to change your perspective.

[snafu]

The 1st rule of buying a house is location, location, location. Unless you're in a 'hot market' location, you can ignore listing price and make an offer based on comparable 'solds' averaging the past 3 or so months in the chosen community.
I add my voice to feh, and suggest you work out what you 'need' in housing, add what you,'want,' and list 'nice to have extras.' Don't fixate on appliances as they are easily changed, and it seems odd to continue to pay for them on a 30 yr mortgage. I don't reject homes in need of updated decor because paint is the cheapest fix and a reasonable DIY project.

In hope of being helpful, I suggest starting to prepare your current home for sale. [Have you read 'The Life-Changing Magic of Tidying Up?'] I found it helpful to use stationary 'dots' to identify anything that is not moving to the future house; sell, consign, donate anything not currently in use or recycle/trash if damaged.

I hope you'll consider reviewing online information about ''staging' your home for sale when nearing listing date. It's extra work but all the research insists it's beneficial because you want to capture all value possible and it's so difficult to have strangers traipsing through your home for months and months and months.

[thestrongprofessional]

30-year mortgage is the way to go

Hey Jennifer,

Everyone has made valid points regarding your situation. I feel that the 30 year mortgage is definitely the best route to take as greenskeeper mentioned, you can always pay it off early. Based on the numbers you have provided to the group, I think it would be cutting it close for you to spend 2000 on a mortgage. All your listed expenses don't account for miscellaneous purchases and entertainment costs. I'm sure those included you'll see that paying over $2000 for a mortgage just isn't feasible on your budget.


Raphael

[Fishindude77]

I'm not a fan of the 30 year mortgage and would encourage you to go with a 15 year mortgage. Sure you can pay them off early, and this being a finance forum no doubt some of the posters have done just that. However .... I think the average person that takes out a mortgage pays the normal monthly payment and uses the entire term length. Many even take out additional $$ against it soon as they get some equity, extending the duration.

Being stuck to a 15 year term forces you to pay it off in 15 years. Think about how old you are now. Do you really still want a house payment in 30 years? I will always encourage, short term loans, large down payments and borrowing way less than the max you can afford.