Advice Needed- Buying a house on one income

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dsmil
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Advice Needed- Buying a house on one income

Post by dsmil »

My fiancee and I would like to have children and buy a home within the next few years. We'll be able to save for a down payment while we are both working but once we have children we will likely switch to one income for the long-term. For the type of home we'd like, and the mortgage we can handle from my income alone, I think we will need a 30% down payment. I know this is unconventional since the return on any extra down payment would likely fall below the return of the stock market, but I can't come up with any other possibilities for us. Any advice would be greatly appreciated!
greensky
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Post by greensky »

I'm in a similar boat. I'm planning on putting 20% down so I can avoid PMI. Other than that I'm building up an emergency fund. Right now I'm just saving and hoping the market will fall a bit further. It jumped up later here than the rest of the country, so I'm hoping that our market will continue to fall.
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Re: Advice Needed- Buying a house on one income

Post by DiscoBunny1979 »

dsmil wrote:My fiancee and I would like to have children and buy a home within the next few years. We'll be able to save for a down payment while we are both working but once we have children we will likely switch to one income for the long-term. For the type of home we'd like, and the mortgage we can handle from my income alone, I think we will need a 30% down payment. I know this is unconventional since the return on any extra down payment would likely fall below the return of the stock market, but I can't come up with any other possibilities for us. Any advice would be greatly appreciated!
------

Actually, I'm a strong advocate for someone putting as much down as possible on a Primary Residence and making it work on only one income. While I understand your situation, there's a lot of reasons to have a mortgage in which only one income is needed. These reasons include unexpected job layoffs, Disability Illness impacting one or both persons on the mortgage, accidental or not so accidental death of one person, cuts in salary or increase in taxes/medical costs, seperation but no divorce, and other situations.

My rule, which is even tighter is . . . one person can qualify for the loan on their lowest income and that the mortgage payment (including taxes and insurance) is no more than 28-30% of gross income and that the principle and interest is on a 15 year fixed - not a 30 year fixed.

For instance Joe makes $60,000 a year and Jan makes $40,000. They both apply for the home loan, but the max loan is based on only Jan's salary of $40,000 or $12,000 a year or $1,000 a month! The top loan they could have is about $100,000 for monthly payments of $790 per month plus property taxes and insurance. This requires a BIG down payment in many areas of the country.

A lot of folks here disagree with the 15 year fixed. But, if the goal is eliminate the debt as soon as possible, the 15 year fixed builds equity fast and requires the extra payment, instead of someone just saying that they'll add extra monthly payments.
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Re: Advice Needed- Buying a house on one income

Post by sommerfeld »

dsmil wrote:For the type of home we'd like, and the mortgage we can handle from my income alone, I think we will need a 30% down payment.
I think that's very sensible; reducing your mandatory monthly payment will also let you stretch your emergency fund longer.
DiscoBunny1979 wrote:A lot of folks here disagree with the 15 year fixed. But, if the goal is eliminate the debt as soon as possible, the 15 year fixed builds equity fast and requires the extra payment, instead of someone just saying that they'll add extra monthly payments.
This is another internal vs external discipline thing. If under normal circumstances you actually *can* and *will* pay off a 30 year fixed mortgage at the 15 year (or faster) pace, the 30 year fixed mortgage gives you a greater margin of safety to cope with a temporary loss of income at a relatively small cost above the 15 year fixed mortgage.
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Re: Advice Needed- Buying a house on one income

Post by Opponent Process »

dsmil wrote:I know this is unconventional
sometimes unconventional just means smart.
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tibbitts
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Re: Advice Needed- Buying a house on one income

Post by tibbitts »

dsmil wrote:My fiancee and I would like to have children and buy a home within the next few years. We'll be able to save for a down payment while we are both working but once we have children we will likely switch to one income for the long-term. For the type of home we'd like, and the mortgage we can handle from my income alone, I think we will need a 30% down payment. I know this is unconventional since the return on any extra down payment would likely fall below the return of the stock market, but I can't come up with any other possibilities for us. Any advice would be greatly appreciated!
If you're saying that you're concerned that your money would earn more in equities than in reducing your mortgage payment, that certainly hasn't worked out in the recent past. I'd buy a home with cash if I could (and did, actually.) Sadly the tax laws favor the mortgage approach, but even with that there is still some appeal to paying cash.

As for having children, you can't plan on that happening with a high degree of probability, so what you're doing is really worst (financial) case planning. You might have those two incomes for a decade or more, or maybe forever.

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Post by Triple digit golfer »

Discobunny,

Why the rule of thumb at all? I would focus on dollars, not percentages. Percentages mean nothing to me in this case.

If I make $1,000,000 a year, I could afford to have a home be 80% of my gross pay. Still leaves me with $200,000 a year. That's plenty to cover my other necessities and all the other things I want to do.

On the other hand, if I make $30,000, maybe I can't even afford to have it be as much as 25% of my gross pay, since other necessities may eat up most of that $30,000.

I just hate rules of thumb. They lead to a false sense of security. Most people's fixed costs for absolute necessities are about the same. After necessities, if Person A has $500,000 left and Person B has $1,000 left, well, that's a big difference, and I'd throw out all the percentages and concentrate on dollars.

Just like the old save 15-20% of your salary.

If I make $30,000, 15-20% isn't much in dollars, but it's going to be much harder to do than if I made $1,000,000 per year.

I'm rambling, but you get the point.
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Post by Eureka »

I sincerely hope the stock market has great days ahead, but the past 10 years have been pitiful. Investing in a home that you can actually live in -- assuming you don't overpay wildly -- is still an excellent investment.

I put 35 percent down on my first and so far only house in 1994. The fixed interest rate on my 15-year mortgage was 8.25 percent!!!! That was with perfect credit and lots of money left in the bank.

I never refinanced but just threw every extra dollar I had into principal. Paid it off in less than nine years.

Living in a house that is 100 percent yours yields a lot of "psychic income."

A radio station in Chicago carries a show hosted by a stockbroker who advocates carrying "a big, long mortgage." That's probably good for him. You have to ask what's good for you.
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Post by giacolet »

Qualify for the 30 year fixed but make prepayments as if it were a 15 year fixed. You will save thousands by reducing the interest in the early year payments. The 30 years payment schedule is your safety cushion. There is also the possibility that the spouse could return to work if she chose to do so in the face of a financial crunch.
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Post by aggie91 »

I was in a similar situation about 12+ years ago. I was still single, earning a very nice income as an IT consulting manager, and my boyfriend was a young military officer. I was successful at my firm and moving quickly on the path to make Partner...but the personal cost of working 70 hrs+ for many years was taking it's toll on me. Even though I was not married at the time (just long-term/long-distance dating) my college sweetheart, I could tell the pull to full-time motherhood was in my future once I was finally married and had children.

I will never forget one late afternoon I was working out of town on a project and went lap swimming at a nearby YMCA for exercise/stress relief from my job. There was an 11 or 12 year old girl crying in the ladies locker room. I asked her what was wrong and she replied that she just wanted to be with her mother. She said her parents worked "all the time" and she was at the YMCA before school every morning and after school until they picked her up when the extended care ended. It truly broke my heart, made a huge impression on me (as I could see this would possibly be in my future if I had children and continued in the same profession).

Fast forward several months...I become engaged, got married, and moved to the location where my husband was stationed at the time. From that moment on, we lived on one income (his--which was not a lot of money) and we saved/invested every single penny I earned. I had a vision in mind of what was important to me in my role as a mother. I wanted to do everything I could to make it so that I could be home with my children and, in a sense, my children/husband became my career. Both my husband and I were happy living on his income, our investments continued to grow and grow over time. We were blessed with two sons and continued to move from duty station to duty station...always living below our means and saving/investing every single month. When he was deployed overseas for months at a time, I made it a goal to save/invest every single penny of extra income. I lived on "beans and rice" as Dave Ramsay says, even though I never had to. I felt that I was contributing to my family's future prosperity, even though I was no longer earning a salary. When my husband came home from deployments, he was amazed at how our nest egg had grown. And amazed at how his sons had grown, too. Eventually, the time came for us to buy our first home and we put a very large sum of money down on the house so that we could minimize our mortgage payments. Now, we are 40 years old and on the verge of being mortgage-free. We still drive the same old '97 Ford Explorer we bought the year we got married and we never set foot in a mall. We value time with our kids more than "stuff".

My advice to you and your fiance is to ask yourselves how much do you really want to live on one income and how much do you value her role as a stay-at-home mom. Believe me, it's not easy. Drive around some of your favorite "target" neighborhoods and check out the families with young children. Can you/your fiance picture yourselves living there? If so, start living now on just your salary. Save hers. After taking care of emergency fund, investing for retirement, paying off all debts, then save as much as you possibly can towards a house downpayment. Can you adjust your lifestyle now with just the two of you? If not, then it will be especially hard to do once a baby arrives.

I realize our circumstances would not be appropriate for other families for a variety of reasons. To each his/her own. I wish you the very best.
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Re: Advice Needed- Buying a house on one income

Post by Alex Frakt »

dsmil wrote:For the type of home we'd like, and the mortgage we can handle from my income alone, I think we will need a 30% down payment. I know this is unconventional since the return on any extra down payment would likely fall below the return of the stock market, but I can't come up with any other possibilities for us.
Your plan is fine. Small down payments and 30-year mortgages are only conventional because the entire mortgage banking, real estate, and building industries' prime interest is to get you into the most expensive house you can (barely) afford, not because it makes the most financial sense.
Last edited by Alex Frakt on Wed Sep 09, 2009 4:34 pm, edited 1 time in total.
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dsmil
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Post by dsmil »

Thank you everyone above for the advice so far. Obviously it's a big decision to live off of one income, when that person isn't a CEO. But we think it would be worth it for the children and it wouldn't be such a bad thing to have some extra equity in the house or the ability for both of us to find jobs if I am laid off. We'll definitely start with building our emergency fund and continuing to contribute up to our 401k match as well as some roth contributions. After the emergency fund, we'll save for a large downpayment and see how it goes from there.
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Re: Advice Needed- Buying a house on one income

Post by Boris »

dsmil wrote:My fiancee and I would like to have children and buy a home within the next few years. We'll be able to save for a down payment while we are both working but once we have children we will likely switch to one income for the long-term. For the type of home we'd like, and the mortgage we can handle from my income alone, I think we will need a 30% down payment. I know this is unconventional since the return on any extra down payment would likely fall below the return of the stock market, but I can't come up with any other possibilities for us. Any advice would be greatly appreciated!
What you described is exactly what I did. It's a great plan and you should follow through with it.

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Re: Advice Needed- Buying a house on one income

Post by White Coat Investor »

dsmil wrote:My fiancee and I would like to have children and buy a home within the next few years. We'll be able to save for a down payment while we are both working but once we have children we will likely switch to one income for the long-term. For the type of home we'd like, and the mortgage we can handle from my income alone, I think we will need a 30% down payment. I know this is unconventional since the return on any extra down payment would likely fall below the return of the stock market, but I can't come up with any other possibilities for us. Any advice would be greatly appreciated!
Despite what it seems, there are still lots of one income families out there. Of course, if you want to live in the neighborhood where the two income families live (and send your kids to the same schools) the one income better be a good one.

Not sure why you need a 30% down payment. There are lots of ways to lower your monthly payments if that's the problem. You definitely want to put down at least 20% to avoid PMI or a higher rate. However, that extra 10% can be used to buy down the rate if you think you're going to be there a long time. It can also be used to help make payments for "the lean years". If the lean years go away for some reason (the other partner starts working, or your income goes up) you can always send it in as a lump sum to the mortgage company. Other alternatives include buying less house, getting an ARM (I would only do this if you are awfully sure you'll be out of the house before the rate changes), or getting a creative mortgage such as a 40 year or an interest only (same thing practically, which I don't recommend).

Good luck. My problem when buying this home was different. I could handle the payments no problem, but I didn't have much to put down and I refused to put down less than 20%. So I scraped together a bit, borrowed a little from my parents (paid it back within 4 months), and came up with 20% of the worth of an inexpensive townhouse. I send in 3X the required payment now and would have the place paid off in 2-3 more years if I wasn't moving next summer. There's nothing that says you have to buy the most expensive home you can afford. I encourage you to buy what you need, not what you want. You'd be surprised what you can do with all the extra cash you're not sending to the mortgage company each month...travel, invest, pay cash for your vehicles etc.
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Re: Advice Needed- Buying a house on one income

Post by Fbone »

dsmil wrote: For the type of home we'd like, and the mortgage we can handle from my income alone,
Please be reasonable on your choice of home. You will have major expenses in the future many of which you cant plan for. Loss of income, home maintenance, children, college funds, etc. It's hard to plan for the unexpected.

If you have to put 30% down, it gives me the impression you may struggle to maintain mortgage payments. Add in the cost of a growing family ... then I start to worry.
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Re: Advice Needed- Buying a house on one income

Post by Eureka »

EmergDoc wrote:There's nothing that says you have to buy the most expensive home you can afford. I encourage you to buy what you need, not what you want.
Amen. Real estate agents will always tell you the maximum house you can buy with your income. Listening to that advice is how people get in over their heads.
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Post by ddb »

Here's a slightly-contrary viewpoint: let's say the home will cost $300K, and your will be taking a 30-year mortgage at 7% interest. The difference in loan amount on 20% down vs. 30% down is $30,000 which would reduce your monthly mortgage payment by $200.

So basically, you're saying that your budget works under a particular scenario (30% down), but doesn't work if you find yourself with an additional $200/month of expenses. If your budget is really going to be that tight, then you may want to rethink whether a home in this price range is feasible.

- DDB
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Post by dsmil »

ddb wrote:So basically, you're saying that your budget works under a particular scenario (30% down), but doesn't work if you find yourself with an additional $200/month of expenses. If your budget is really going to be that tight, then you may want to rethink whether a home in this price range is feasible.
- DDB
At this point I'm just planning for the future, I don't know exactly what I'll be able to afford but I'd like to get a rough estimate . I'm looking to keep my housing costs around 30% and am estimating where I think my income will be at the time of a house purchase...a lot can change.
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Post by schnoodlemom »

We did exactly what you are proposing, except we put 20% down on a 15 year fixed. When we both worked and rented, before kids, we lived on his income, saved mine. After the birth of our first, we bought a modest house in a good neighborhood big enough that we wouldn't need to move up as our family grew and inexpensive enough that we could afford the mortgage while still maxing out all tax-deferred space and living a decent LWYM lifestyle. (We live in low cost of living Midwest and our house isn't fancy or modern, despite being built in 1994.)

Our realtor told us we were under-buying and that it would be best to buy a house where the mortgage was a stretch because our income would go up. I'm so glad we didn't do that because there is no end to what to do with any money that's left over after the Big Three: taxes, long-term savings, monthly fixed expenses. We spent the past 10 years paying big $$ for fence, underground sprinkling, basement finishing and to fully furnish the home using cash. Now that our house is older, we're going to need to spend more within the next 5-10 years for roof, mechanicals and replacing worn surfaces and appliances, and doing some exterior design work. Home ownership is definitely still our preferred way of life, but it's been more expensive than we had expected and the mortgage is just one element of it. I hope I haven't been discouraging.

I'm also want to share that I've been very happy I haven't needed to work because elder-care has been a big part of my life the past 10 years as well as raising our two girls. I am very grateful for the freedom to help out as much as possible and realize that it's not possible for everyone to live on one income without major sacrifices. As for floorplans, our only regret in our home choice is that we didn't foresee the need for a main floor bedroom and full bath. These would have been very useful when my grandmother came to temporarily live with us or when we had elderly parents overnight. Also, when my kids were young we wanted their bedrooms close to ours. Now that they're preteens, we could handle a master bedroom either a floor apart or on the opposite side of the house. I haven't seen the perfect design that takes into account the changing needs of an aging family, but it intrigues me. I'm sure it's out there, probably a ranch with two master suites at opposite ends of the house, one with additional smaller bedrooms nearby.

The best of everything as you start your life together and build a home for yourself!! Enjoy it all, Amanda :-)
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Post by dm200 »

Another alternative to stashing a lot away now so that you can afford the mortgage later (on one income) would be to buy sooner with a lower down payment. Then you get into the house sooner.

Then, while there are 2 incomes, save extra for that period of time while still 2 incomes.

When you go down to 1 income, then use the savings/investments to supplement the mortgage payment.
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Post by giacolet »

Where are all of the Bogleheads who advocate renting?

This is a perfect time to rent from a desperate homeowner who has been transferred or has to move for some other reason.

Find a nice place to rent with the rental amount equal to the PITI payment. You can then work on an advantageous option to buy with your owner.
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Post by norookie »

I can only offer proven but outdated advice, your mtg. payment including taxes, should'nt be more than 30% of your net income. ~
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Post by ddb »

giacolet wrote:Where are all of the Bogleheads who advocate renting?

This is a perfect time to rent from a desperate homeowner who has been transferred or has to move for some other reason.

Find a nice place to rent with the rental amount equal to the PITI payment. You can then work on an advantageous option to buy with your owner.
Agreed; I think renting is USUALLY a better option, with the big assumption that you can find a desirable place to rent. Where I live, if you want a house with a yard, rental options are very limited.

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
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Post by Eureka »

ddb wrote:
giacolet wrote:Where are all of the Bogleheads who advocate renting?

This is a perfect time to rent from a desperate homeowner who has been transferred or has to move for some other reason.

Find a nice place to rent with the rental amount equal to the PITI payment. You can then work on an advantageous option to buy with your owner.
Agreed; I think renting is USUALLY a better option, with the big assumption that you can find a desirable place to rent. Where I live, if you want a house with a yard, rental options are very limited.

- DDB
We could debate the relative merits of home ownership vs. renting until the cows come home. I think most people who own their own home prefer that to renting. I appreciated it more than most after renting all through college and grad school and for 18 years thereafter.

However, I found it much easier to save money while I was renting. Owning a home is wonderful for most people, but it is not cheap. Someone who has never owned a house will be astounded at how much cash it takes just to get things up and running: Brooms, garbage cans, more insurance, lawn mower, grass seed, furniture, drapes, blinds, appliances if they aren't included in the sale, plumbing and electrical repairs the previous owner never got around to, paint, garbage service, new locks, why is that water coming up in the front yard? and a hundred other things, not including taxes and mortgage. Make sure you have a good stash of cash when you close on that first house.

Upkeep is not cheap, either.
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Post by Eureka »

Some timely advice from the New York Times:

http://www.nytimes.com/2009/09/12/your- ... ml?_r=1&hp
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Post by Triple digit golfer »

Ddb,

I'm intrigued. Why do you feel that renting is usually a better option?
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Post by dsmil »

Instead of putting 30% down, I received advice that I should put 20% down and put the other 10% in a bond fund. That way I could withdraw money from the bond fund as needed for mortgage payments and it will free up come cash. As my income grows, and I don't need extra money for mortgage payments, I could move the money to stocks. Any thoughts?
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Post by tibbitts »

dsmil wrote:Instead of putting 30% down, I received advice that I should put 20% down and put the other 10% in a bond fund. That way I could withdraw money from the bond fund as needed for mortgage payments and it will free up come cash. As my income grows, and I don't need extra money for mortgage payments, I could move the money to stocks. Any thoughts?
That's a horrible idea. You may very well be taking huge losses every time you withdraw from the bond fund.

Income doesn't grow by default. Some jobs pay less and less every year until you leave to find a still lower-paying job. The old notion of an annual pay raise is... old.

Despite the government's misguided attempts at social engineering by making mortgage interest deductible, I'd still save to buy a house with cash. Most people lose most of the tax benefit anyway, with the increases in the standard deduction.

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Post by DSInvestor »

Good points made in posts above. If you can afford to buy the home with 30% down payment *and* have adequate emergency cash reserves, you should do that. It doesn't make sense to borrow more money if you don't need to. I would suggest that you also consider your savings rate for retirement carefully before committing to your home purchase. If you cannot afford to make large retirement contributions after you buy your home, I'd argue that you cannot afford to buy the home. If a 30% down payment helps you lower your future fixed costs, that's a good thing.

Remember that the more you borrow, the more interest you pay. I encourage you run some numbers with mortgage calculators and get familiar with amortization tables. Amortization tables show you very clearly how much you pay in principal, interest and how that affects your mortgage balance. The mortgage calculators typically have features to allow you to see the effect of adding some extra principal payments too (so you can figure out how to pay off a 30YR mortgage in 15 yrs etc).

See www.dinkytown.net

For example: On a 300K home purchase with 20% down, you'd take out a 240K mortgage. I'm not sure what current rates are but let's use 6% for 30 YR fixed mortgage.
Monthly payment: $1,438

Code: Select all

Payment schedule

........Total...........Principal.......Interest........End Principal
Year....Payment.........Paid............Paid............Balance
........................................................$240,000.00
1.......$17,267.04......$2,947.21.......$14,319.83......$237,052.79
2.......$17,267.04......$3,128.99.......$14,138.05......$233,923.80
3.......$17,267.04......$3,321.97...... $13,945.07......$230,601.83
4.......$17,267.04......$3,526.88.......$13,740.16......$227,074.95
5.......$17,267.04......$3,744.40.......$13,522.64......$223,330.55
6.......$17,267.04......$3,975.36.......$13,291.68......$219,355.19
7.......$17,267.04......$4,220.52.......$13,046.52......$215,134.67
8.......$17,267.04......$4,480.84.......$12,786.20......$210,653.83
9.......$17,267.04......$4,757.22.......$12,509.82......$205,896.61
10......$17,267.04......$5,050.63.......$12,216.41......$200,845.98
11......$17,267.04......$5,362.14.......$11,904.90......$195,483.84
12......$17,267.04......$5,692.88.......$11,574.16......$189,790.96
13......$17,267.04......$6,044.01.......$11,223.03......$183,746.95
14......$17,267.04......$6,416.80.......$10,850.24......$177,330.15
15......$17,267.04......$6,812.54.......$10,454.50......$170,517.61
16......$17,267.04......$7,232.73.......$10,034.31......$163,284.88
17......$17,267.04......$7,678.84.......$9,588.20.......$155,606.04
18......$17,267.04......$8,152.45.......$9,114.59.......$147,453.59
19......$17,267.04......$8,655.27.......$8,611.77.......$138,798.32
20......$17,267.04......$9,189.12.......$8,077.92.......$129,609.20
21......$17,267.04......$9,755.87.......$7,511.17.......$119,853.33
22......$17,267.04......$10,357.59......$6,909.45.......$109,495.74
23......$17,267.04......$10,996.42......$6,270.62.......$98,499.32
24......$17,267.04......$11,674.65......$5,592.39.......$86,824.67
25......$17,267.04......$12,394.73......$4,872.31.......$74,429.94
26......$17,267.04......$13,159.22......$4,107.82.......$61,270.72
27......$17,267.04......$13,970.86......$3,296.18.......$47,299.86
28......$17,267.04......$14,832.52......$2,434.52.......$32,467.34
29......$17,267.04......$15,747.38......$1,519.66.......$16,719.96
30......$17,268.38......$16,719.96......$548.42.......  $0.00
Topic Author
dsmil
Posts: 773
Joined: Tue Sep 08, 2009 10:51 am

Post by dsmil »

I agree that the advice given to me probably doesn't make too much sense especially if I already have a nice emergency fund set up.
Happydayz
Posts: 39
Joined: Sun Jul 12, 2009 4:48 pm

Post by Happydayz »

Someone making $1 million a year could afford to spend $800k on a mortgage.

But then the problem is one of diversification. They will be tying up a huge amount of their networth into not just one asset class, but literally one asset. You also have to take into account the opportunity cost of your money and whether it can be put to work more efficiently for you elsewhere.
User avatar
Bruce
Posts: 401
Joined: Fri Mar 02, 2007 7:02 am
Location: Alaska

Post by Bruce »

Another option to consider is buy a duplex and live in half and rent half.

It gives you the option of keeping as an investment property if you later upgrade to a single family house.

regards,
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."
acegolfer
Posts: 3029
Joined: Tue Aug 25, 2009 9:40 am

Post by acegolfer »

dsmil wrote:I agree that the advice given to me probably doesn't make too much sense especially if I already have a nice emergency fund set up.
I believe you are financially sound so congrats on your future home purchase.

To answer how much to put down more than 20%, ask yourself whether you want to borrow at mortgage rate to invest in something else such as stocks. If yes, then just put down 20% and invest the rest. If not, then put down as much as you can (aside from the emergency fund).
Topic Author
dsmil
Posts: 773
Joined: Tue Sep 08, 2009 10:51 am

Post by dsmil »

acegolfer wrote:
dsmil wrote:I agree that the advice given to me probably doesn't make too much sense especially if I already have a nice emergency fund set up.
I believe you are financially sound so congrats on your future home purchase.

To answer how much to put down more than 20%, ask yourself whether you want to borrow at mortgage rate to invest in something else such as stocks. If yes, then just put down 20% and invest the rest. If not, then put down as much as you can (aside from the emergency fund).
Basically the reason I want to put down more than 20% is because I want to have low housing expenses that aren't more than 30% of my income. If we had two incomes and the ability to have a larger mortgage, than I would definitely like to have a 20% down payment and invest anything above in stocks.
Ron
Posts: 6972
Joined: Fri Feb 23, 2007 6:46 pm
Location: Allentown–Bethlehem–Easton, PA-NJ Metropolitan Statistical Area

Post by Ron »

My wife/me have had four homes over our 40 years of marriage. All had at least 20% down, and all were purchased with only my income as a consideration.

Why? For the first 5 years, I was the only one employed. My wife needed to stay home with our son due to his disability (but that's another story, and not for this forum). During that time, we purchased our first two homes.

We were in each of the first two homes, four years each. The next (3rd) we were in 15 years. Our current (terminal) home, 15 years thus far.

Unlike many others today (and due to the housing market), we bought what we could afford, and moved up when it made sense, or family conditions required it.

BTW, we put down 50% on our current home when we built it, rolling over all previous profits (yes, there were some :lol: ) into each future purchase. I know (even back in our days), many would "cash out" after a sale. We did not, in order to keep our payments under control - as you are attempting to do.

We always planned on just my income with the assumption that "sh** happens" and even if my wife had a job, she could loose it or something would come up within our family that would require her to leave.

Just a story from long past, and it may not even apply to today, but since you asked the question.

- Ron
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