New Home Purchase - Please Help!

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Topic Author
CraneRigger31
Posts: 3
Joined: Mon Sep 27, 2021 8:27 pm

New Home Purchase - Please Help!

Post by CraneRigger31 »

Hello BH Team!

My wife and I are new to the BH way of life and are looking for some advice on a new home purchase.

A little bit about us:

Age: 30 for both of us
Dependents: 1 (6 month baby girl)
HHI: 200k (this number has increased from 100k 3 years ago)
Savings: 220k (150k +/- for down payment, 70k for emergencies)
Retirement: 300k (split between Roth IRAs and 401ks all invested in Vanguard Target Date 2055)
Debt: None, own two newer vehicles free and clear

We live outside of Nashville, TN and are looking at homes in the 500k range. Would anybody object to us taking on a 350k mortgage? We’ve never owned a home, so this is all new to us. The housing market is insane and we’ve been outbid on 20 homes. We’ve now shifted our focus to new construction.

Our jobs are pretty stable, but would certainly plan to up our emergency fund (it’s currently at 18 months) if we take on this much debt.

What are we missing? Please set us straight BH Team!

CR31
Topic Author
CraneRigger31
Posts: 3
Joined: Mon Sep 27, 2021 8:27 pm

Re: New Home Purchase - Please Help!

Post by CraneRigger31 »

(Deleted)
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Sandtrap
Posts: 19591
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: New Home Purchase - Please Help!

Post by Sandtrap »

CraneRigger31 wrote: Mon Sep 27, 2021 8:44 pm Hello BH Team!

My wife and I are new to the BH way of life and are looking for some advice on a new home purchase.

A little bit about us:

Age: 30 for both of us
Dependents: 1 (6 month baby girl)
HHI: 200k (this number has increased from 100k 3 years ago)
Savings: 220k (150k +/- for down payment, 70k for emergencies)
Retirement: 300k (split between Roth IRAs and 401ks all invested in Vanguard Target Date 2055)
Debt: None, own two newer vehicles free and clear

We live outside of Nashville, TN and are looking at homes in the 500k range. Would anybody object to us taking on a 350k mortgage? We’ve never owned a home, so this is all new to us. The housing market is insane and we’ve been outbid on 20 homes. We’ve now shifted our focus to new construction.

Our jobs are pretty stable, but would certainly plan to up our emergency fund (it’s currently at 18 months) if we take on this much debt.

What are we missing? Please set us straight BH Team!

CR31
Considerations:

1. Re: New Construction. It will take longer and cost more than you might initially think to do this.
(for humor and context: watch the old movie called "The Money Pit" with Tom Hanks.
2. New construction is not always a good alternative to buying existing. In general but not always, buying existing, even at inflated prices, gives more value per dollar than new construction, and, not always, is less stress, especially for a young family.
3. Your financials are solid. This is a good time to buy a home for your young family. IMHO. (input varies).
4. Consider widening your search area for homes.
5. Yes. A larger EF is a wise idea in proportion to debt and income stream size and stability.
6. If your income stream is solid and your employment/etc. stable such that you won't have to move or relocate, Consider a lower down payment, lower monthly payments, higher mortgage?

What made you settle on a nearly 50% down payment in this low interest rate environment?

j :D
dis laimer: zillions of options and paths and opinonions on zillions of things.
Wiki Bogleheads Wiki: Everything You Need to Know
Armoured
Posts: 45
Joined: Tue Mar 19, 2019 9:37 pm

Re: New Home Purchase - Please Help!

Post by Armoured »

We've purchased four homes thus far and without a doubt the "new home" incurred the most expenses.
· Sod
· Fencing
· Upgrading paint, the barely there whatever paint wouldn't take a wipe down with kids
· Builder grade carpet/pad
· Not an established neighborhood with highly rated schools
·Quickly became a rental neighborhood with the 2008 housing bust
· Had to purchase window screens, they weren't expensive but it's annoying as they should have been supplied with the windows
·Needed to purchase a refrigerator as well
· Difficult to get contractors to finish work on our punch list
· Wasted money on sod because within 1-3 years added a deck, swing set and storage shed.

I would rather purchase an existing home. I would only put down 20% as needed as well. Just my experience.
User avatar
bertilak
Posts: 10725
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: New Home Purchase - Please Help!

Post by bertilak »

There are two kinds of new construction:
  • Find or have drawn up your own plans and hire a builder. There can be lots of expensive surprises and frustrations with this route. Biggest source of frustration is keeping the builder on track. They can be easily distracted. Mine went on a long vacation (fishing with his father in Mexico) while we were paying for an apartment rental and storage of our furniture.
  • Find a new subdivision where the builder has a decent selection of plans to pick from. Easier and cheaper.
I have done both. If I ever do it again I will be very careful about any builder I hire!
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
Topic Author
CraneRigger31
Posts: 3
Joined: Mon Sep 27, 2021 8:27 pm

Re: New Home Purchase - Please Help!

Post by CraneRigger31 »

Sandtrap wrote: Tue Sep 28, 2021 7:35 am
CraneRigger31 wrote: Mon Sep 27, 2021 8:44 pm Hello BH Team!

My wife and I are new to the BH way of life and are looking for some advice on a new home purchase.

A little bit about us:

Age: 30 for both of us
Dependents: 1 (6 month baby girl)
HHI: 200k (this number has increased from 100k 3 years ago)
Savings: 220k (150k +/- for down payment, 70k for emergencies)
Retirement: 300k (split between Roth IRAs and 401ks all invested in Vanguard Target Date 2055)
Debt: None, own two newer vehicles free and clear

We live outside of Nashville, TN and are looking at homes in the 500k range. Would anybody object to us taking on a 350k mortgage? We’ve never owned a home, so this is all new to us. The housing market is insane and we’ve been outbid on 20 homes. We’ve now shifted our focus to new construction.

Our jobs are pretty stable, but would certainly plan to up our emergency fund (it’s currently at 18 months) if we take on this much debt.

What are we missing? Please set us straight BH Team!

CR31
Considerations:

1. Re: New Construction. It will take longer and cost more than you might initially think to do this.
(for humor and context: watch the old movie called "The Money Pit" with Tom Hanks.
2. New construction is not always a good alternative to buying existing. In general but not always, buying existing, even at inflated prices, gives more value per dollar than new construction, and, not always, is less stress, especially for a young family.
3. Your financials are solid. This is a good time to buy a home for your young family. IMHO. (input varies).
4. Consider widening your search area for homes.
5. Yes. A larger EF is a wise idea in proportion to debt and income stream size and stability.
6. If your income stream is solid and your employment/etc. stable such that you won't have to move or relocate, Consider a lower down payment, lower monthly payments, higher mortgage?

What made you settle on a nearly 50% down payment in this low interest rate environment?

j :D
dis laimer: zillions of options and paths and opinonions on zillions of things.
Thanks for your input!

The problem we are running into with existing are the crazy offers. We’ve been outbid on 20 homes ranging from waiving all contingencies plus paying 30k - 50k over asking. This is why we are considering new construction… somewhat less competition if you can get a contract signed early enough in construction.

I’ve never had a mortgage, so I thought about limiting the mortgage to a manageable level should I lose my job. We would still have a large EF, so maybe this isn’t necessary?

CR31
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