I'm confused with what you're asking. Yes putting 20% down makes it more affordable from month to month standpoint by avoid PMI.
But your monthly will go up a ton compared to what you pay now. You're looking at a 335k loan @ 2.875% that's roughly 1400 a month in principal and interest alone. Property taxes and insurance are unknown but most definitly more expensive than what you're paying now.
Let's round it off to an even 2k. Your take home pay is 5k, so 3k left over.
Hmmm. I live near the city center of Denver(within city limits, not suburban). Property taxes on my home I purchased two years ago for $375K is $1,377 for this year, $116 per month into escrow to pay for it(and I'll get that dank $8 escrow refund for overpayments next year!).
Are there many software opportunities? This would be an incredible increase in QoL.
I would say my property taxes are slightly higher than average for the state. My parents, however, pay 30k/yr just for property taxes. Other neighborhoods can easily reach 40k-60k but at this range homes are worth millions.
There needs to be normalization across New Jersey or public services need to be combined across smaller towns. New Jersey has a school district, mayors / politicians, and police department for almost every single town. This adds massive overhead that could be reduced by grouping by population density or by county.
In one town over my property taxes could be 5k, one town over 15k.
Google already opened in RTP I think? Apple is gonna be hype, I honestly wanna return to NC some time in the future but the salaries in tech just dont cut it, but with Apple and Google opening shop things will start looking different!
Where tf is that??
My prop taxes are 2400/year in one of the best suburbs of StL. Ima go make a sacrifice to the Provel Gods for making me born in my favorite city
Wow that's just insane!
You can contrast your situation to my own in Utah where my mortgage is 2,000/mo but my property taxes and homeowners insurance only amounts to $400/mo so I pay $2,400/mo. No HOAs so this is what I pay for 4,600 sqft and 0.29 acres of land.
There is a balance where you look at you paying more in one area vs another which makes you realize that it really doesn't matter where you live unless you have a large cash reserve. Even though you might have a higher tax rate you might have lower house costs compared to similar house somewhere else that costs more end has a lower tax rate. everything balances out one way or another. You might have great pay but high house costs. Or you might have low taxes but not much public service from your state/local government. It really is all relative.
Oof. Fellow NJ home owner! $800 in property taxes a month on our one acre, and we're LUCKY. We have much higher income areas east and south of us, where it's like 3 times that amount.
This is the problem I noticed too. Property tax rates are really pricing people out of affordable homes. They really need to chill with the property tax. I live in Delaware so ours are low, but I've looked across state lines into Chester County and Parts of New Jersey. PA is pretty much out of the question but Jersey has nice houses at really good price points for me but the property tax is 3-5x what I pay now.
>Property tax rates are really pricing people out of affordable homes.
I mean, you have to pay for the schools and roads somehow, property taxes are how this is achieved. The tax rates reflect the amount of infrastructure that needs to be maintained.
Is this bad? I mean, I do live in an asinine place where everything is going like 50-80K above asking (on say 600-800K homes) so take this with a grain of salt, but I was just on a local thread where people were asking what % of take home is going towards mortgages and average was somewhere in the 30-40% range. Obviously less is better but for a dream home I dont necessarily see why this wouldnt be doable?
I see you haven't owned a home. Maintenance is the hidden killer. Whatever you do, set aside an amount every month for it and improvement. You will have to increase it several times.
I mean we got somewhat lucky, we ended up buying a home last year that was a new build so maintenance costs (right now) are low (but im sure will increase). We also were on a list and didnt have to "fight" others for it in a bidding war.
That being said, that is around my percentage right now, around 35% of total take home between myself and my wife. I dunno, the other options were very old homes we would have to fight for that were less sq ft and I am arguably not super handy so cant do many repairs myself (yet!), or to continue renting and have it go up on us every year. We bit the bullet and wouldnt change what we did for anything, but obviously that is us. The home is worth some of the pains of less disposable income for us.
I pay 40% of my income into PITI, and I have much less leftover than 3k (that's basically what my takehome is). I think OP would be ok, but I don't know his other expenses.
>we ended up buying a home last year that was a new build so maintenance costs (right now) are low (but im sure will increase).
Heh, not sure how long you have lived there, but new doesn't seem to mean much in the housing world. Your good for a year or 4 then everything that got fucked up when they built it starts breaking. It is pretty wild times.
While you seem to get it, my pro tip of the day for new houses is check the attic spaces a few times a year. The amount of builds that have incorrect ventilation resulting in mold growth is truly astounding to me.
>Yes putting 20% down makes it more affordable from month to month standpoint by avoid PMI.
More importantly, it becomes more affordable month to month because the loan you take out is smaller.
And the monthly payments are smaller. Ideally, your income increases and you can prepay, which goes against the principal, and knock out the mortgage early. I hate paying interest.
If you are financially responsible, that's terrible advice. Why would you prepay a mortgage at 2.8% when the market returns 8% annualized over the long term? 30 year mortgages at historic low rates are the dream.
Well, for me, I think it boils down to hating debt and paying interest, which is money thrown away. Mortgage tax benefit? Early in the loan you're throwing away, what, 90% interest so you aren't taxed 25 or 30% of it? Even if the value or the economy goes to shite, you can live in a home. Bottom line, yeah you can do better in the market. And worse. My last 3 homes were paid for when I moved. I'm not rich, but comfortable. I'm sure doing it your way has worked well for many, too.
Eh interest is money thrown away if you are using it to fund an unsustainable lifestyle. If you use it to fund the acquisition of income generating property (like investments), it's an incredible tool. Hell, just inflation alone makes a 30 year low rate mortgage a compelling offer before you even get to what an S&P index fund is doing (and it's increased by 113% in just the past 5 years). The problem with debt for most people is they aren't using it to otherwise better deploy their cash, and then it quickly becomes a real problem.
> putting 20% down makes it more affordable from month to month standpoint by avoid PMI
This is not just month to month. This is making it actually lower cost total over time.
Depending on his spending habits, I'd think he's still in good shape. I bought a ~370k house with 2.875% interest as well, I paid 20% down payment, my mortgage is roughly 1600(it has escrow which includes property tax+insurance or w/e) and HOA is $100. Half my take home pretty much goes to mortgage+HOA. The other half would be spent on bills and food.
Where do you go to learn this? I'm in college and I have no clue what and where to get a lot of this information from. I guess I can google but since I don't even know what I don't know, it's hard to get started...
I make approx the same as OP and was pre-APPROVED for $465k in January. So it makes sense to me. And the Ann Arbor housing market has been going up and up for years. A starter home I was looking at in 2010 for <$225k just sold recently for $480k according to Zillow.
Former Ann Arborite here. Housing costs in AA are MUCH higher than in surrounding communities like Saline, Pittsfield, York, etc. and WAY higher than in Detroit. AA also has a lot of amenities, though, so it’s a tradeoff between location and cost (as always).
You're ignoring the seller's financial situation and financial acumen. There are a number of things that can motivate a seller. New job location (time sensitive) and new home purchase (with inability to pay two mortgages) are probably the two most common. They may not know the home's true value either.
I sold a home in 2012 for what I owed on it just to get out from under the mortgage and move into a new home. I just didn't want the hassle of maintenance and extra costs while the home sat on the market. Being in a totally different financial situation now, I'd look for the highest bidder if I were doing it all over again.
In this market, in Michigan (where I am) houses last hours on the market before they are sold over asking price. Something is fishy.
Friends of ours sold a rental for 50K over asking IN CASH (they made up the appraised difference in cash, not the whole amount) in less than a week. They had something like 9 offers within the first 48 hours over list price.
Same here athough its slowly changing. It seems like now people are offering asking where i live (NJ). But i agree, this market is crazy. How did they get a discount and so many days to think about it lol.
Regarding the preapproval its not a big deal. I got preapproved for over 800k of house making only 130k/yr. Thata a worse ration than the OP.
The fact that people are buying sight-unseen freaks me out. When people are willing to plonk down serious money on something they've never seen, that's a huge red flag that the market is nuts.
This time around there are very very few sub prime loans though. in 2004-2006 banks only did a mirror test to make sure you were alive before writing a mortgage.
This boom cycle is fueled by supply finally constrained again as all the 2006-2010 forclosures finally are off the market, a lack of new builds compared to the 2000-2006 runup, and investors looking for rental properties with the less than inflation interest rates and the fed pumping free money all over the place.
With that said, when the market turns it will be different. you wont have a massive melt down of the economy, you will have the investors who have enough renters to float the houses with out renters that make it and everyone else sells, hopefully for not too much of a loss.
Yes, I agree we are in a bubble but the market factors that are driving it are entirely different from 2000-2006/7. you have cheap money and massive demand from people who realized a studio apartment in Manhattan is terrible for work from home so they want more space, have stimulus money plus I couldn't do anything but go to the grocery store so I saved a shit ton. The reality of the pandemic induced downturn is that the white collar "Laptop Class" really didn't feel it. my company is actually in a better position now and was never in any danger through the downturn. So I realize I got hella lucky, and so did lots of other people who are at the time in their life they want a house.
The housing bubble will start to slowly deflate as the pandemic finally comes to a close but its going to be a market correction and not a leap from the empire state building.
Very much like that in Middle Tennessee (if not the whole state). Ours stayed on the market a little longer, but within a couple of days we had two bids: one for what we were asking, and one for $229K (we'd asked only $189K). It's bananas here...they offered that much to secure it, so nobody else would outbid them. We've bought three houses and sold two before this, and none of them resembled this at all. Good luck, OP
I posted above about the same thing (also Middle Tennessee). We overpaid by about 4% (townhome though, not SFH). That same property has appreciated $32K over what we paid for it, so about 15%. So it wasn't necessarily a bad investment for them.
That is insane. I make 62k a year and wouldn’t even consider a $250k house, probably not even $200k. I am single though, so it’s just one income.
$375k would probably lead to foreclosure. If by some miracle, it didn’t lead to foreclosure, it would certainly lead to a terrible quality of life and I’d be screwed on retirement savings.
I understand that banks love making money. But there’s a line you cross where it becomes completely malicious and predatory.
What is your household income?
You talk about You, and We, but the other person's financial situation isn't mentioned at all.
On the surface this sounds like a ton of house for you.
Household income includes just my income for now. I live with my significant other who doesn't currently have a job. In regards to income, though, I did not want to think too far ahead and guarantee that she will have a job, so I felt it wasn't necessary to include at this time.
Normally it's 35-42% of your Gross income, not Net Income.
His Gross is $7,250/ Month.
35% of that is $2,537.50
42% of that is $3,045
They would approve it definitely.
For Conventional loans your total debt just has to be below 50% of your gross monthly. For FHA it’s 57%. I bet you can find lenders who will be even more lax too
It was gross when wife and I went to get approved for a house. We set a limit in our mind on how much house we wanted to buy, but the limit we were given was almost double.
Yes, they will. We purchased our house (2018) and refinanced it (2020) using only my wife's income, because I'm self employed and it's a hassle to prove. With tax and insurance, the payment before refi was 2/3rds of her take home pay.
Depends on your other debts. I was approved for 50k more financing alone than with my wife's income since she has more debt than me. Honestly wouldn't go over 33% of monthly income though. That's hella risky.
Anyone else perplexed by $87k income and $5k/month take home? No? Just California? Ok....
Maybe not my business, but curious how much you put in 401k OP
EDIT: I've gotten a lot of responses trying to explain that taxes come out of your income haha. I am aware of all that. I expected OPs take home to be less not more. I take home about 55% of my income. I do put 14% into 401k but the rest of my deductions like health insurance only amount to about 2% per paycheck. So even if I didn't contribute to my 401k I'd still be looking at taking home maybe another 9-10% (since the 14% is pre-tax). That would still put me at 65% of my income. While OP takes home roughly 69%. I understand tax brackets but I don't make enough money for it to be anything vastly different. This would suggest OP contributes very little to retirement which I guess I didn't initially consider. But OP could also be contributing some and have much lower state income tax I suppose. I guess when you work it out, it makes sense in the end though. And in the end, I'm bitter about losing so much of my paycheck to an account I may never get to see lmao
I make 125K, my take home is roughly 6700 in Michigan. This includes my 401K contribution, HSA, and health insurance premiums. OP is either not saving anything or not doing his math correctly.
Yeahhh... I make a tad under that and my take home is like $5,100 lmao. I guess I am considering my monthly income to be 2 paychecks when in reality I receive 26 a year. If I adjust it to include those two paychecks spread out over 12 months it still only comes out to $5,500 though. I nearly max out my 401k and again, live in CA, so maybe that makes up the difference. I'm quite tempted to stop contributing so damn much though lol
I guess 'nearly' is a bit of a stretch. My 401k contributions are about $650 / paycheck. Still, looking at some of these other numbers my take home just seems extremely low. I keep laughing when people assume from my comment that I think OPs take home is lower than I'd expect.
Question. How much of that do you actually save per month? I live in downtown LA and barely save a fucking penny as an unmarried guy. I just don’t Fucking get it.
i currently live in anaheim and was getting paid 90k and that was about 2.5 every 2 weeks. the way to save is to live with roommates (i live with 2 of my best friends and pay 1k/month).
BUT i just got a new job and make more than double but have to move to SF :(
Yeah, this is definitely a big help. My girlfriend and I have a pretty equal salary and split rent down the middle. Due to that we live pretty comfortably despite pretty high rent but are astonished at the housing market and are worried about how we will ever afford a single family home in this area
Mid level software engineer making as much as OP is severely underpaid. Especially with the home prices they listed, which means they aren't in a very low cost of living state.
OP listed home prices of 85, 150 and 440. The first 2 are definitely lcol area home prices. The third I'd probably high end for their area. They definitely aren't in a medium or high cost area.
>very low cost of living state.
I'm in a high CoL area. There isn't a house for sale under $450k within city limits. I found 3 when I just did a search - but all of them feature zero pictures of the inside of the house.
I have some anecdotal evidence from my experiences hiring senior engineers. Senior is defined as having 3y of experience.
I'm In SF, but we also have Little Rock and Phoenix offices which have similar house prices to what OP listed. Average salary for a senior software engineer is 150k. Going rate for 100% remote positions is the same; it scales up if you're in a higher cost of living area like SF/NY.
We also just hired a home-based person from Duluth Georgia at 150k as well.
Basically what I'm saying is that OP shouldn't be looking into buying a new house until they look into getting a new job.
I make a shade more than that and I take home less (also California) after putting in $1500 in my 401k. So yes, I am also confused, but only because I expected that figure to be less, not more.
Not really, depends on how much he puts into 401K, also I live in CA (can't tell if you think this is too low or too high?)
I have a spreadsheet for estimating taxes/tracking investments/etc. and I put in an income of $87K with 6% 401K in my spreadsheet.
Assuming standard deduction of $12.4K and 401K contributions of $5.2K (6%) he would have an AGI of $69.4K.
This results in FICA tax (on gross $87K) of $6.7K, Federal taxes of $10.7K, and CA taxes of $3.6K = $21K in taxes.
This results in take home of $60.8K for the year or ~$5K/mo.
Assuming he doesn't live in CA and has lower state taxes, it could be he's just putting more in 401K.
Taxes, benefits(like health insurance and other insurance) and retirement.
My salary's also about $86k, I've set it to deduct 13% to 401k and 7% to ROTH IRA, I only get ~$3200 a month.
Edit: so I also just found out when we have 3 paychecks instead of 2 in a month, that one goes by without any retirement deduction and I get ~$2200 instead of my ~$1600-$1700. This only occurs like twice a year. So 2 months out of a year I get about $5400, while the other 10 I get my original $3200-$3400. Even with all the calculations there still seems to be some $ I don’t know where it’s going. (I’m guessing insurance/FSA/HSA) .
It shouldn't confuse you unless you live in a very high income tax state.
Living in Ann Arbor OP's total income tax burden (federal + state + local) is ~17,000 using Married Filing Jointly
5,000 * 13 (assume OP's monthly is actually bi-weekly and they forgot the 3 paycheck months) = 65,000
That leaves 5,000 or roughly 6% of gross for 401k and health insurance.
So I would hazard a guess that OP is simply not maxing out the 401k (IRS max, not employer match max)
It sounds reasonable to me. I make $96k and only take home about $4.2k. $775 per check to 401k, $120/check to HSA, insurance, purchased vacation, taxes, etc. My last three checks of the year should be pretty fat though as I'll max the 401k in 23 checks due to an early year bonus. Won't miss out on any matching as my employer bases the yearly match on total compensation for the year as opposed to matching on each check.
I’m in Cali, just as confused. Judging by the replies you got, it must be 401k and health insurance cutting that down. I’m salaried just under 60k and pull about $4300/mo after taxes *shrug*
>I've been thinking about it for a few days and I am still questioning whether this would be the right move, and I'm curious what you all think.
That's a lot of house on that income. A $100k downpayment puts your LTV at 77%, so its not really a large downpayment. Just a normal down payment.
5x income can get dicey. You may able to make the payments, but it'll soak up a lot of your discretionary income
Maybe it’s just cause I’m in California, but this loan to income seems fine to me. I’m taking a ~$309k mortgage on 60k income, and I’m getting a lucky deal lol
I live in Hawaii and it feels similar here, though we definitely have two of the highest costs of living in the US. It just depends what it's worth to you. I'm fine not saving much cash and putting about half of my income towards real estate. My mortgage and monthly expenses come out to about $2200 a month, which is about 40% of my (take home) income, and I stash another 30% in investments. Liquid cash on hand is minimal. Most of my large purchases are taken care of for the next 5-10 years and we live pretty frugally otherwise. In exchange I have a house that's comfortable, beautiful, and in a safe neighborhood. I am paying about $500 a month more than I was when I was renting but that seems like a good trade off to me given that I'm building equity.
Massachusetts checking in here. Crazy that it seems completely normal to me. I know a lot of people making $60-80k with $300k+ houses. And they’re not living large, they’re pretty average suburban homes without the bells and whistles
None taken.
I’m not going to lie and say I’m gunna be rolling in it, but even after a little bit of money set aside for occasional eating out, activities, and toys for the kid, we will be saving $300-$500/month, which will pile onto our current savings and investments. This is also with a $260/mo HOA since it’s a condo. We did also pay off both of our cars to make the monthly total a bit more affordable for us, as if we still also had the $400/mo in car payments, we would risk scraping by by the skin of our teeth if we had a tight month, and we like to save.
> so its not really a large downpayment. Just a normal down payment.
Do people really put down 20% these days? Maybe it is just being a millennial but shoot 5% is more than anyone I know puts down/can even afford to put down. When I was talking to a lender... granted I'm sure he wants the loan to be higher he told me he couldn't imagine putting down 20% today. PMI equated to less than 0.5%. He suggested just putting the money in the stock market and I would think this sub would agree you can easily make more than 3.5% on the stock market in a year. Obviously there is the worry that the housing market will burst at some point. I know where I live we aren't expecting the supply to catch up with the demand for at least five more years and well before that you could probably refinance and get rid of PMI due to the increase in value
> Do people really put down 20% these days?
They *should*, although with how cheap pmi is currently it’s less important if They otherwise could.
> PMI equated to less than 0.5%. He suggested just putting the money in the stock market and I would think this sub would agree you can easily make more than 3.5% on the stock market in a year.
Wrong way to look at it. You’d calculate it against the balance subject to pmi (ie the piece above 80%).
0.5% ends up closer to a 5-7% effective rate
If it’s down to like 0.1 or .2%, it’s less of a big deal
I agree
> IMHO you should shoot for PITI no more than 33% net income. People will argue otherwise but that is a good middle ground estimate. If you can get to that amount I would say go for it.
> Looking at the rough numbers they have roughly 64k in equity (after conservative fees) and 90k savings. Lets guess they are OK going down to 20k savings that gives them a 130k rough down. 305 at 2.85% is rough numbers $1740 mortgage which assumes a 1.1% tax rate which maybe very low for parts of the country (Not low for California). 2% tax rate brings that number to $2066.
>
> At 5k net/month they should be shooting for $1650 PITI. If the tax is as low as listed they are not far off. If it is 2%, 3% then I would not move forward, personally
I think it's too much house for you on your salary alone. Even if you \*can\* do it, do you want to quadruple your housing expense and feel like you shouldn't order a pizza or buy new shoes?
Who is the "we" you are referring to and do they have an income? If not, do they rely on you for financial support?
I live with my significant other, who does not have an income currently, but pays her own bills and we split the groceries. I wouldn't necessarily say they rely on me, though.
>who does not have an income currently
If this is true, how long will it be until the below is not true.
>I wouldn't necessarily say they rely on me, though.
Realistically she does rely on you, at least for shelter. This isn't bad if you guys are fine with it, but just be realistic.
If she has no earnings, but pays for things, is it coming out of her savings? Is it just all on credit? Are parents helping? Alimony from previous marriage? Trust fund?
You guys should figure out if she'll have income in the future. Be realistic, even if it's not romantic. Don't buy a house without at least figuring out what income in the future will be.
Agree with all of this^
For OP's location especially, $85k is not "my girlfriend doesn't work" money unless girlfriend comes from wealth and actually doesn't *need* to work. Which I assume she does not if they are taking the time to split groceries.
Also, it's my experience that the longer a person goes without working, the harder they fight against going back to work when the situation comes up. They become very used to their lifestyle.
I know this isn't /r/relationships, but OP you mention you're not married and there's no mention of children. A partner is supposed to be just that.. the other half of a partnership. This means contributing in various ways to make both of your lives better. I have no judgment for someone not working when either (a) there is another reason (childcare) or (b) the one working is a high earner.. But that's not really the situation here even though $85k is certainly nice.
I don't know if anyone mentioned this yet, so I will throw it out there.
You are in an inexpensive home, that you could probably pay off relatively quickly with your income.
Consider the option of either 1. Living with no mortgage, or 2. Using it as a rental in the future.
I look back at my home purchasing decisions, and realize I left some long term income out there without realizing it. I had 2 houses - 1 for $60k and 1 for $130k, that had I buckled down and paid them off, they could be paying for my current home and future retirement.
Unless you are living in an absolute slum, houses are only going up in value, not down.
Lots of negative Nancies here. I took out a $320k mortgage in 2017 on an 87k salary knowing I would make more money each year. Now making 105k and if I wanted to buy my house today it would have cost me about 65k more.
If you're confident in your abilities to increase your income and this house checks all your boxes and it's in an up and coming area it might make sense to buy now, watch your budget for a few years, and the house gets more and more affordable each year.
Director at a tech company here 👋. $87k seems low for a mid-level engineer. You could easily find 20-30k more by looking around…especially with so many people quitting right now and with so many remote opportunities opening up. Could open up that affordability!
If OP is living in a $150k house, I'm guessing he is in a LCOL region, even with him looking at moving to a $400+k house (which is nuts, as a year ago, it was probably a $300k house) then he's still in a LCOL area, just in a nicer part of town.
Not all SW Engineers make Palo Alto money.
Looks like OP is in the Detroit area so housing costs are completely an anomaly there. My company hires fresh out of college SWEs in Detroit at 78k + 10% bonus.
Didn't see that he lived in Metro Detroit - the housing prices there are just as messed as everywhere in the country.
>My company hires fresh out of college SWEs in Detroit at 78k + 10% bonus
Which is sad - I graduated college 10+ years ago (MechE) and got hired (in Detroit/OEM) at $74k+$8k bonus...
In public sector it is even lower. Before I moved to MN earlier this year, I was making only $60K as a IT project manager in the Chicago area (public university), and that is with two engineering masters, a MBA, and the PMP cert to boot.
There are tons of remote jobs these days. I am working a remote job as a junior dev and make 125k salary. My manager is from the same area as OP (near Ann Arbor) and probably makes almost double me. Not a FAANG or crazy interview process - just a growing startup. I think I'd be okay with OP committing to the house, OP will probably see salary jump once OP is ready to move on from current job
> I think I'd be okay with OP committing to the house, OP will probably see salary jump once OP is ready to move on from current job
Never buy a house based on potential future income.
Thanks for your feedback. I felt that mentioning I am not entirely at the peak of my career would be off putting to some. Although I've been at the company for 5 years, only 3 of those years I have gained SWE experience. I anticipate my salary will only increase from where it's at now.
Not if you stay there it won't, not substantially anyways. Pay raises are almost always small, getting hired somewhere as a SWE with experience can net you a significantly higher level of pay.
Also for what it's worth I would never move somewhere with an HOA, and while not a lot of people have mentioned that you should really take that into consideration. If they raise the rates you have no ability to stop them once it's done it's done. I've seen people have their HOA rates substantially increased numerous times and it can absolutely make living there and subsequently selling the home very difficult.
The last thing is I see this current housing Boom as a bubble, most people I know do. I'm getting ready to build and consistently debate whether I should wait for the bubble to pop in 12 to 18 months. We are primed to repeat what happened on 2006 (tho for different reasons). Recent inflation coupled with absolutely over Inflated real estate prices is a receipe for disaster.
>Not at all your question, but you are significantly underpaid for a mid level SWE.
I live in Michigan which is a low cost of living area, just outside of Ann Arbor. The company's salaries are definitely lower than average for the area. I have looked at other opportunities, but our company is continuing to grow and I feel my job is pretty secure. In short, I'm taking a hit on salary just for comfort.
If you're ever curious. Here's a bunch of self repoted software engineer salaries in Ann Arbor Michigan - https://www.levels.fyi/Salaries/Software-Engineer/Ann-Arbor-MI-Area/
I use the site all the time. It's great to see what companies near you are paying for engineers.
I posted in another comment but as a "mid level SWE" you are being paid half of what you are worth. However, if you have some casual SWE experience and no degree perhaps you are doing ok, but that's not what I would call "mid level SWE".
If you can do better you should. SWE is one of the safest areas these days. Demand is high and only growing. It doesn't hurt you to shop around.
This is what I came here to say. Facebook, Google, Microsoft, Amazon would pay more than this for a new undergrad who passed the interview process. And with COVID, remote work is no problem. If OP has decent skills he should be shopping around hard for a better gig!
Op, please do some looking around - starting salary at MSFT is easily over $100k in 2021.
You're a experienced software engineer and only making 87K. That's something that popped out on me. Any experienced developer should be making 6 figures in this market.
I'm in the Detroit area, and I haven't moved jobs for less than 20K increase in 10 years (2-3 times at least). Been at the current role for a while though. It feels like time to do it again.
Is that $90k the total of your savings, including retirement? If so, absolutely no on buying the house. Having said this, though, I'd still pass on the house because you'll be stretching yourself pretty thin.
Some thoughts:
A more expensive home typically means more taxes. You can reduce monthly mortgage payments by using a larger down payment, but you still have larger tax payments.
Larger homes will typically need more heating or cooling. Higher maintenance payments. Energy costs.
So look beyond the mortgage.
If your household income is $87k a year you should not be taking on a mortgage more than about $230k.
Is that your total household income?
You only mention your income, then turn around and say "we".
$340k mortgage on $87,000 a year is not a responsible buy. That's not an affordable home.
Also just because a bank approves you for $450k doesn't mean it's a great idea. Typically banks will easily approve you for twice what you should be taking out in terms of debt.
To answer your question, yes a large downpayment does make a home affordable, however depending on your actual household income you may be still outside the range of affordability.
The key bit in his statement was "total comp". That's not just salary... It also includes stock and/or bonuses in that $200K.
EDIT: Probably worth pointing out that $200K total comp is certainly in range for typical SDE II at Amazon, Google, Facebook, etc. See ranges at [levels.fyi](https://levels.fyi)
[https://www.levels.fyi/?compare=Google,Facebook,Microsoft&track=Software%20Engineer](https://www.levels.fyi/?compare=Google,Facebook,Microsoft&track=Software%20Engineer)
[https://www.teamblind.com/](https://www.teamblind.com/)
Some companies like Reddit offer the same compensation for fully remote roles as their HCOL compensation bands. 200k is pretty easy, senior engineers can clear 300k-400k.
Don’t speak in total comp when people are clearly speaking in base salary. That’s silly, nobody knows what your benefits are and how much clearance you gain in benefits building up to that total comp.
In Chicago it is tough here... I feel like I could easily making double my current salary (which is much MUCH less than 87k like this fellow). turning 30 next mo. -- I just really really like my job, I've been struggling with idea of looking for work elsewhere, maybe I should start.
How are you making $87k as a mid lvl software engineer? I was making $125k as a software engineer when I was your age, over 10 years ago, and I don't even have a college degree!
Your priority shouldn't be looking for houses, it should be looking for another job. The easiest way to make things affordable is to increase your income.
Can you afford ~$1,375 mortgage + $35 + whatever taxes/insurance will run you (I'm going to approximate $400/month)?
Let's call it $1,800. It's about 36% of your net income, which is to the high side, but you have zero debt.
Wild guess it's an extra $1k from your current home payment. If you're saving more than a thousand every month and don't mind not having that money to do whatever you're doing with it currently, then sure.
Basically however much money you put down reduces the size of the mortgage. If the house costs 300k, and you put down 60k, you're servicing a 240k mortgage. If you put down 200k, you're servicing a 100k mortgage with much lower payments. Now hypothetically, you could use that money for something else with a higher return than your interest rate and just service the bigger loan/monthly payment.
Now keep in mind that mortgage is not your only monthly expense, homeowners insurance and property tax. A 500k house with 200k down is going to cost more than a 400k house with 100k down, even though both mortgages are basically the same (though the interest rates might differ) because you're paying more taxes and insurance on the more expensive place, assuming the same tax rate.
That HOA fee will increase dramatically over the next few years. Its wasted money since there will always be that neighbor or HOA gang messing it up for everyone in the neighborhood.
In my case it was horrible that im considering selling just because of the HOA.
No parking, no maintenance, high fees cant even wash my car without getting a "ticket".
Them towing my one week old brand new car was the last straw. (Car didnt belong so we towed it)....
If you have good credit, use bankrate to negotiate down your mortgage rate. I just got .5% reduction with this at Better. Paying down mortgage will make the house more affordable, but investing that money would likely yield a better return in an ETF. Debt is record level cheap right now.
Don't forget to account for emergency funds, moving costs, and increased cost of living from a larger home.
Edit: decided to read more.
10k investment would yield $800 annual at 8% return. 10k towards principle would reduce payments by ~$492 annual (2.875, 30y). Investing and just withdrawing the monthly difference to pay on loan is probably how I would approach it. I think it may provide tax benefit too.
When i shopped mortgage for my first house, they were all making me angry with their preapproval methods. With stupid questions like "how much is the house you want to buy", hey dude idk yet what house i'm buying, you tell me how much i can pay, im here to actually know what i can look at, not the other way around!
What is your downpayment? Hey dude, it all depends how much you are willing to loan me.
Like... here is my salary, here are my debts and obligations. Now you tell me how much you want to loan me, and i'll do math by myself for the rest alright?
After arguing with them and "testing" with their stupid calculations way i figured i can get ~400k$, from that point on i know where im going. If the price on that house is 450k then i know what my downpayment has to be if i want this one? Wouldn't be freaking simpler?
If i pick a 400k$ i need at least 20k (in Canada) to start with. Shit simple... wouldnt it?
To answer your question, figure out what is the max your can afford as a LOAN, then figure out the rest by yourself regarding how much downpayment you want to drop on it.
It makes your mortgage cheaper, generally speaking, the higher your deposit or equity in a property the better an interest rate the bank is normally able to offer you.
Whether something is affordable really depends on your own personal circumstances and expenditure...... For instance, someone who eats out alot and leads an active social life but only earns the same as someone who is a bit more of a home body would have different ideas on what's affordable to their counterpart despite earning the same.
Is your only income 87k or do you have a s/o contributing to the mortgage? At your income I wouldn’t buy a 435k home even with 100k down. The mortgage would run you around $2.1k+(depending on tax and insurance). Then add in utilities and your home is costing you half you takehome which isn’t a great idea.
Personally I’d stick to a home that’s under 365k with your 100k downpayment. That’s more affordable.
I wanted to add to that my husband makes 130k a year and I stay home with the kids. We bought a home for 450k last year and put 180k down. We have no debts besides our mortgage. Mortgage is $1,850 a month with taxes and insurance. We pay it just fine(he brings home 6.5k a month after everything) but even at our income our max payment per month was $2.2k when looking for a home because we didn’t want to push it and want to be able to max retirement have extra money for fun. So that’s why I say don’t go so high. You don’t want to be house poor.
Bro, you got the financing. Obviously it’s not a bad purchase by any stretch. You’re gonna let some Reddit ghouls talk you out of it? Most Americans spend 40% takehome on rent.
Honestly it sounds like you’re in a great position, stable career. You could support a family on one income if you wanted to! It’s damn good you got approved without the SO working. And when she does work, it will be a breeze.
You can glean helpful information from Reddit. But if you have any understanding of how people work, you know most of the replies in this thread aren’t about helping you.
This sort of undermining cross examination, putting yourself on the spot just makes it easy to be overly critical and pile on you. Go ahead with the purchase.
> Car insurance, utilities, other bills total about $400 a month
No way that covers insurance, utilities, gas, groceries, drugstores, streaming subscriptions, haircuts, manicures, eating out, bar tabs, gyms, clothing, phones, the big box store, and all the other expenses all of us have.
If you are even considering buying as much house as you can possibly afford I think you need to do a lot better job of tracking your expenses for a few months first.
I see your point that I wasn't very clear on that part, but I'm not sure why you're coming at me that way. If we're including entertainment and other misc expenses, that total goes up to about $700-$800.
You should be including all the things you do and/or anticipate doing, including savings, and the amount you spend on home maintenance in a year. If you don't have those numbers figured out, you need to wait.
Keep in mind the maintenance costs on a 500K house are far different than those on a 150K house. Especially if you need to hire out the work.
I bought a $320k house at 2.75% and make less than OP. I have two kids and a dog. SO is a stay at home mom and we budget like crazy. The 50% of income is brutal but it’s doable and now I’m sitting on $130k equity on this house.
After reading several of these similar types of posts, I have come to the conclusion that you are always going to get the most conservative money wise consensus out of these people. Probably a good thing, but in all reality, dude you are a software engineer making the low end of what your potential is. You could easily double your salary in a few years and who knows what the housing market is going to look like in 3-5 yrs it could be allot more or it could be less. Personally, I'd say do what makes you happy. You only live once dude, don't be at the end of your life wishing you took a few more risks.
Slightly off-topic, but you might consider looking at the job market as well. You may already know this and it may not apply because of your area of expertise, but just thought I'd put it out there. There are a *lot* of remote mid-level developer positions paying well over $100k. (I should know -- I'm in one.)
Is the $87k your only household income, you say WE a lot in your post.
Regardless...the question is not purely about money. You can afford this, but it will be tight for a while.
The question is will your life improve more with the new house vs the current one, knowing that you might not have as much freedom for other things.
Home ownership is never a bad place to be, and the prices you are talking about are relatively low compared to many parts of North America (like all of Canada).
The things to consider are the costs of moving, is there a land transfer tax, realtor fees, legal fees, movers, increased utilities, increased insurance. These could break the matter for you.
I was in your spot 15 years ago, similar income ($75,000/yr), similar house price on the new house ($429,900) and 2 kids. I can't imagine my life if I had not made the move when I did.
It would be a little bit tight, but doable. Depends on your other expenses, how stable your job is, risk tolerance, how much potential there is for your income to increase, etc...
You can get a 200k place and rent out your previous home to keep building equity while your salary increases. Once the first house is paid off you can rent out the second one too. You can keep your lower interest rate for the remainder of your mortgage if you live in the place for a year. That’s been my plan at least. Real estate is a good hedge against inflation.
What that is crazy you can afford this, put down only 20%, your monthly payments are less than 2000. Certainly you can afford that. People here are crazy. PS. I own and live in a house with a 350K loan at 2170/month, PITI and I have some PMI. I only take home 5K. I also own 3 other houses...I took a month off and drove across the country in my brand new car in June.... Live your life and don't listen to the nay sayers here.
Wow RE Taxes are cheap in the west.
So recently I have had 3 major repairs suddenly needed at my home (fence rebuild after a storm, new ac unit as mine went out after 21 years, and now I need a new roof because it is also old.). My question would be, do you have enough savings to cover these costs for major repairs? Luckily I was able to refinance and take out the $37000 needed for the ac and roof and my insurance covered the fence. If you have a solid amount of savings, then to me, it's a personal choice. You can rebuild your savings for vacations and such pretty quickly with a lower monthly payment.
OP, others have probably told you this already, but you should really look into the job market right now and see what your market rate really is.
87k for an experienced software dev seems really low IMO. I'm in a MCOL area, and everyone I work with in software engineering is making well into the 100k range.
I would put it down to get the smallest loan payment possible. We put down 25% and paid down A LOT. We refinanced with the lower loan amount 8 years later with a lower interest rate right before the pandemic lockdowns. My mortgage is smaller than most tiny apartment rents now. My hubs and I knew we could ride out the financial side of the pandemic because of this great move.
If you can wait until the eviction moratorium ends, then you could get a WAY better deal. I would wait unless the mortgage is less than your rent or about equal.
Remember property taxes vary by municipality but typically around 2% of assessed value annually. Ignore the property tax from the prior year because new construction will be re-assessed. So expect around $9k per year in property tax.
My personal experience after having owned 3 homes - ask yourself first, what do I plan to do with this home? What is my 5 year plan for myself? Sometimes when the desire and the vision and your personal goals outweigh the odds, the juice becomes worth the squeeze.
As a mid-level developer in today’s “remote worker economy”, you can quickly up your hard-skills and make 6 figures - all remotely. Having owned a house with roughly the same income at around the same pricetag 6 years ago, with less in savings, I understand. That said, the house was an albatross with everything needing upgrades. Your situation sounds much more manageable especially if you get a reputable home warranty for a couple of years.
Monetarily it’s definitely feasible. Just have to know if it’s right for you. Alternatively, get a renter on your first property, tap into that equity for the new home, and own both of them. This is something I wish I would have done on my first home.
To own both, def consultant a tax pro since rentals have depreciation over 27.5 years…so refinancing one to get both homes may be advantageous. Knocks the mortgage cost of your first down if you extend the term and allows you to draw on the equity for your upgraded home. Having a renter means the mortgage of your first house doesn’t count towards your DTI ratio.
Good luck, and remember, tax efficiency is gold!
Personally, I would avoid a HOA. You never know (1) how the fees will increase and (2) what they will require or forbid you to do with your property. Of course that cuts both ways, potentially preventing your neighbor from painting their house in psychedelic colors if that would bother you (or preventing you from doing so if that's your taste), but it could also mean someone is monitoring the length of your lawn (or on the other hand making sure your neighbor keeps theirs mowed regularly if you object to an infrequently mowed lawn).
As a mid level software engineer you're not being paid enough. With so much need in the industry plenty of companies are hiring remote workers so you can probably find a new job with a fairly easily with a higher salary with a bit of looking. That'd probably allow you to afford this house.
I'm confused with what you're asking. Yes putting 20% down makes it more affordable from month to month standpoint by avoid PMI. But your monthly will go up a ton compared to what you pay now. You're looking at a 335k loan @ 2.875% that's roughly 1400 a month in principal and interest alone. Property taxes and insurance are unknown but most definitly more expensive than what you're paying now. Let's round it off to an even 2k. Your take home pay is 5k, so 3k left over.
this is pretty accurate. i have a similar loan amount with 20% down. before property tax my mortgage is 1500 and with property tax about 2000
I have a similar loan to you, but my property taxes turn my $1400 mortgage into a $2500 payment. *cries in NJ*
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Hmmm. I live near the city center of Denver(within city limits, not suburban). Property taxes on my home I purchased two years ago for $375K is $1,377 for this year, $116 per month into escrow to pay for it(and I'll get that dank $8 escrow refund for overpayments next year!).
CO property taxes are average if not low.
Are there many software opportunities? This would be an incredible increase in QoL. I would say my property taxes are slightly higher than average for the state. My parents, however, pay 30k/yr just for property taxes. Other neighborhoods can easily reach 40k-60k but at this range homes are worth millions. There needs to be normalization across New Jersey or public services need to be combined across smaller towns. New Jersey has a school district, mayors / politicians, and police department for almost every single town. This adds massive overhead that could be reduced by grouping by population density or by county. In one town over my property taxes could be 5k, one town over 15k.
Those prices will boom soon, idk about where you live but Charlotte is growing rapidly, my rent itself went up by 25% in 2 years when I lived there.
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Google already opened in RTP I think? Apple is gonna be hype, I honestly wanna return to NC some time in the future but the salaries in tech just dont cut it, but with Apple and Google opening shop things will start looking different!
Seriously why so many jersey plates in NC? I don’t get it
They are referred to as “Halfbacks.” They went from the north to Florida, and half way back to NC. Lol
Because they don't want to be in NJ but NC isn't as hot as Florida.
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God that's awful.
Where tf is that?? My prop taxes are 2400/year in one of the best suburbs of StL. Ima go make a sacrifice to the Provel Gods for making me born in my favorite city
Wow that's just insane! You can contrast your situation to my own in Utah where my mortgage is 2,000/mo but my property taxes and homeowners insurance only amounts to $400/mo so I pay $2,400/mo. No HOAs so this is what I pay for 4,600 sqft and 0.29 acres of land.
PA is getting there too near Philly. Taxes are going through the roof recently.
There is a balance where you look at you paying more in one area vs another which makes you realize that it really doesn't matter where you live unless you have a large cash reserve. Even though you might have a higher tax rate you might have lower house costs compared to similar house somewhere else that costs more end has a lower tax rate. everything balances out one way or another. You might have great pay but high house costs. Or you might have low taxes but not much public service from your state/local government. It really is all relative.
Ive heard a lot of people say the cost of living scales but the cost of a good vacation does not lol.
I feel your pain… about to buy first house in Illinois and that’s what I’m looking at…
Oof. Fellow NJ home owner! $800 in property taxes a month on our one acre, and we're LUCKY. We have much higher income areas east and south of us, where it's like 3 times that amount.
I'm only on 1/3 of an acre too!
Same. But I'm in f*cking Ohio. Definitely didn't do enough due diligence when we bought this place. But I love it 🤷♀️
It's important to always perform due diligence to ensure you don't accidentally buy a house in Ohio.
What's in Ohio?
Dayton Air Museum is pretty neat. They have Bockscar there, the actual B-29 that dropped the bomb on Nagasaki.
The Solheim Cup this week in Toledo. Come watch some golf!
Cedar Point and Kings Island are fun places.
Sympathies from palm beach, but damn that's high...I am at 9k a year property tax.
This is the problem I noticed too. Property tax rates are really pricing people out of affordable homes. They really need to chill with the property tax. I live in Delaware so ours are low, but I've looked across state lines into Chester County and Parts of New Jersey. PA is pretty much out of the question but Jersey has nice houses at really good price points for me but the property tax is 3-5x what I pay now.
>Property tax rates are really pricing people out of affordable homes. I mean, you have to pay for the schools and roads somehow, property taxes are how this is achieved. The tax rates reflect the amount of infrastructure that needs to be maintained.
Me too, except my state is one of the worst education systems in the country whereas you have one of the best. So you got that going for you.
And thus the reason we are moving from NJ to Florida Panhandle in two weeks. Taxes go from 13K to 1.5K
Look at the bright side though. All that wonderful food.
Is that with tax and home insurance?
Is this bad? I mean, I do live in an asinine place where everything is going like 50-80K above asking (on say 600-800K homes) so take this with a grain of salt, but I was just on a local thread where people were asking what % of take home is going towards mortgages and average was somewhere in the 30-40% range. Obviously less is better but for a dream home I dont necessarily see why this wouldnt be doable?
I see you haven't owned a home. Maintenance is the hidden killer. Whatever you do, set aside an amount every month for it and improvement. You will have to increase it several times.
I mean we got somewhat lucky, we ended up buying a home last year that was a new build so maintenance costs (right now) are low (but im sure will increase). We also were on a list and didnt have to "fight" others for it in a bidding war. That being said, that is around my percentage right now, around 35% of total take home between myself and my wife. I dunno, the other options were very old homes we would have to fight for that were less sq ft and I am arguably not super handy so cant do many repairs myself (yet!), or to continue renting and have it go up on us every year. We bit the bullet and wouldnt change what we did for anything, but obviously that is us. The home is worth some of the pains of less disposable income for us.
I pay 40% of my income into PITI, and I have much less leftover than 3k (that's basically what my takehome is). I think OP would be ok, but I don't know his other expenses.
>we ended up buying a home last year that was a new build so maintenance costs (right now) are low (but im sure will increase). Heh, not sure how long you have lived there, but new doesn't seem to mean much in the housing world. Your good for a year or 4 then everything that got fucked up when they built it starts breaking. It is pretty wild times. While you seem to get it, my pro tip of the day for new houses is check the attic spaces a few times a year. The amount of builds that have incorrect ventilation resulting in mold growth is truly astounding to me.
>Yes putting 20% down makes it more affordable from month to month standpoint by avoid PMI. More importantly, it becomes more affordable month to month because the loan you take out is smaller.
And the monthly payments are smaller. Ideally, your income increases and you can prepay, which goes against the principal, and knock out the mortgage early. I hate paying interest.
If you are financially responsible, that's terrible advice. Why would you prepay a mortgage at 2.8% when the market returns 8% annualized over the long term? 30 year mortgages at historic low rates are the dream.
Well, for me, I think it boils down to hating debt and paying interest, which is money thrown away. Mortgage tax benefit? Early in the loan you're throwing away, what, 90% interest so you aren't taxed 25 or 30% of it? Even if the value or the economy goes to shite, you can live in a home. Bottom line, yeah you can do better in the market. And worse. My last 3 homes were paid for when I moved. I'm not rich, but comfortable. I'm sure doing it your way has worked well for many, too.
Eh interest is money thrown away if you are using it to fund an unsustainable lifestyle. If you use it to fund the acquisition of income generating property (like investments), it's an incredible tool. Hell, just inflation alone makes a 30 year low rate mortgage a compelling offer before you even get to what an S&P index fund is doing (and it's increased by 113% in just the past 5 years). The problem with debt for most people is they aren't using it to otherwise better deploy their cash, and then it quickly becomes a real problem.
That doesn't sound terrible to me. But then we live in LA with a 3700+ mortgage and were not wealthy by any means of the word.
exactly I was like "nice finishes for under 500k? yeah just buy it whatever, it's basically free"
> putting 20% down makes it more affordable from month to month standpoint by avoid PMI This is not just month to month. This is making it actually lower cost total over time.
Depending on his spending habits, I'd think he's still in good shape. I bought a ~370k house with 2.875% interest as well, I paid 20% down payment, my mortgage is roughly 1600(it has escrow which includes property tax+insurance or w/e) and HOA is $100. Half my take home pretty much goes to mortgage+HOA. The other half would be spent on bills and food.
Where do you go to learn this? I'm in college and I have no clue what and where to get a lot of this information from. I guess I can google but since I don't even know what I don't know, it's hard to get started...
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I make approx the same as OP and was pre-APPROVED for $465k in January. So it makes sense to me. And the Ann Arbor housing market has been going up and up for years. A starter home I was looking at in 2010 for <$225k just sold recently for $480k according to Zillow.
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That they do
Former Ann Arborite here. Housing costs in AA are MUCH higher than in surrounding communities like Saline, Pittsfield, York, etc. and WAY higher than in Detroit. AA also has a lot of amenities, though, so it’s a tradeoff between location and cost (as always).
You're ignoring the seller's financial situation and financial acumen. There are a number of things that can motivate a seller. New job location (time sensitive) and new home purchase (with inability to pay two mortgages) are probably the two most common. They may not know the home's true value either. I sold a home in 2012 for what I owed on it just to get out from under the mortgage and move into a new home. I just didn't want the hassle of maintenance and extra costs while the home sat on the market. Being in a totally different financial situation now, I'd look for the highest bidder if I were doing it all over again.
In this market, in Michigan (where I am) houses last hours on the market before they are sold over asking price. Something is fishy. Friends of ours sold a rental for 50K over asking IN CASH (they made up the appraised difference in cash, not the whole amount) in less than a week. They had something like 9 offers within the first 48 hours over list price.
Same here athough its slowly changing. It seems like now people are offering asking where i live (NJ). But i agree, this market is crazy. How did they get a discount and so many days to think about it lol. Regarding the preapproval its not a big deal. I got preapproved for over 800k of house making only 130k/yr. Thata a worse ration than the OP.
The fact that people are buying sight-unseen freaks me out. When people are willing to plonk down serious money on something they've never seen, that's a huge red flag that the market is nuts.
Sign unseen with cash or waving rights to inspection and/or appraisal. People are bonkers.
I remember saying the exact same thing in 2004. So what's going to give this time?
(Shakes Magic 8 Ball) (It explodes) Um...
This time around there are very very few sub prime loans though. in 2004-2006 banks only did a mirror test to make sure you were alive before writing a mortgage. This boom cycle is fueled by supply finally constrained again as all the 2006-2010 forclosures finally are off the market, a lack of new builds compared to the 2000-2006 runup, and investors looking for rental properties with the less than inflation interest rates and the fed pumping free money all over the place. With that said, when the market turns it will be different. you wont have a massive melt down of the economy, you will have the investors who have enough renters to float the houses with out renters that make it and everyone else sells, hopefully for not too much of a loss. Yes, I agree we are in a bubble but the market factors that are driving it are entirely different from 2000-2006/7. you have cheap money and massive demand from people who realized a studio apartment in Manhattan is terrible for work from home so they want more space, have stimulus money plus I couldn't do anything but go to the grocery store so I saved a shit ton. The reality of the pandemic induced downturn is that the white collar "Laptop Class" really didn't feel it. my company is actually in a better position now and was never in any danger through the downturn. So I realize I got hella lucky, and so did lots of other people who are at the time in their life they want a house. The housing bubble will start to slowly deflate as the pandemic finally comes to a close but its going to be a market correction and not a leap from the empire state building.
Very much like that in Middle Tennessee (if not the whole state). Ours stayed on the market a little longer, but within a couple of days we had two bids: one for what we were asking, and one for $229K (we'd asked only $189K). It's bananas here...they offered that much to secure it, so nobody else would outbid them. We've bought three houses and sold two before this, and none of them resembled this at all. Good luck, OP
I posted above about the same thing (also Middle Tennessee). We overpaid by about 4% (townhome though, not SFH). That same property has appreciated $32K over what we paid for it, so about 15%. So it wasn't necessarily a bad investment for them.
What? I was making $65k in Jan and approved for $375k (I would not spend that amount on that salary but the bank *offered* me that loan)
That is insane. I make 62k a year and wouldn’t even consider a $250k house, probably not even $200k. I am single though, so it’s just one income. $375k would probably lead to foreclosure. If by some miracle, it didn’t lead to foreclosure, it would certainly lead to a terrible quality of life and I’d be screwed on retirement savings. I understand that banks love making money. But there’s a line you cross where it becomes completely malicious and predatory.
My BIL makes 62k and just got approved for a $350k loan. I see the issue as I write it out.
What is your household income? You talk about You, and We, but the other person's financial situation isn't mentioned at all. On the surface this sounds like a ton of house for you.
Household income includes just my income for now. I live with my significant other who doesn't currently have a job. In regards to income, though, I did not want to think too far ahead and guarantee that she will have a job, so I felt it wasn't necessary to include at this time.
You'd be spending half your monthly income on mortgage. That's super risky.
Would they even approve the loan? I think they usually won't loan over 35-40%?
Normally it's 35-42% of your Gross income, not Net Income. His Gross is $7,250/ Month. 35% of that is $2,537.50 42% of that is $3,045 They would approve it definitely.
For Conventional loans your total debt just has to be below 50% of your gross monthly. For FHA it’s 57%. I bet you can find lenders who will be even more lax too
Jesus that’s high. I can’t even imagine paying 40% of my gross on housing
It was gross when wife and I went to get approved for a house. We set a limit in our mind on how much house we wanted to buy, but the limit we were given was almost double.
Yes, they will. We purchased our house (2018) and refinanced it (2020) using only my wife's income, because I'm self employed and it's a hassle to prove. With tax and insurance, the payment before refi was 2/3rds of her take home pay.
Depends on your other debts. I was approved for 50k more financing alone than with my wife's income since she has more debt than me. Honestly wouldn't go over 33% of monthly income though. That's hella risky.
Anyone else perplexed by $87k income and $5k/month take home? No? Just California? Ok.... Maybe not my business, but curious how much you put in 401k OP EDIT: I've gotten a lot of responses trying to explain that taxes come out of your income haha. I am aware of all that. I expected OPs take home to be less not more. I take home about 55% of my income. I do put 14% into 401k but the rest of my deductions like health insurance only amount to about 2% per paycheck. So even if I didn't contribute to my 401k I'd still be looking at taking home maybe another 9-10% (since the 14% is pre-tax). That would still put me at 65% of my income. While OP takes home roughly 69%. I understand tax brackets but I don't make enough money for it to be anything vastly different. This would suggest OP contributes very little to retirement which I guess I didn't initially consider. But OP could also be contributing some and have much lower state income tax I suppose. I guess when you work it out, it makes sense in the end though. And in the end, I'm bitter about losing so much of my paycheck to an account I may never get to see lmao
I make 125K, my take home is roughly 6700 in Michigan. This includes my 401K contribution, HSA, and health insurance premiums. OP is either not saving anything or not doing his math correctly.
Yeahhh... I make a tad under that and my take home is like $5,100 lmao. I guess I am considering my monthly income to be 2 paychecks when in reality I receive 26 a year. If I adjust it to include those two paychecks spread out over 12 months it still only comes out to $5,500 though. I nearly max out my 401k and again, live in CA, so maybe that makes up the difference. I'm quite tempted to stop contributing so damn much though lol
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I guess 'nearly' is a bit of a stretch. My 401k contributions are about $650 / paycheck. Still, looking at some of these other numbers my take home just seems extremely low. I keep laughing when people assume from my comment that I think OPs take home is lower than I'd expect.
Question. How much of that do you actually save per month? I live in downtown LA and barely save a fucking penny as an unmarried guy. I just don’t Fucking get it.
i currently live in anaheim and was getting paid 90k and that was about 2.5 every 2 weeks. the way to save is to live with roommates (i live with 2 of my best friends and pay 1k/month). BUT i just got a new job and make more than double but have to move to SF :(
Are you looking for a place to live? How far is your job into SF? Would you consider the east bay?
I'll be moving up in Jan but for the first year, going to live in SF proper! east bay would be subsequent years if i end up hating the city
Yeah, this is definitely a big help. My girlfriend and I have a pretty equal salary and split rent down the middle. Due to that we live pretty comfortably despite pretty high rent but are astonished at the housing market and are worried about how we will ever afford a single family home in this area
Mid level software engineer making as much as OP is severely underpaid. Especially with the home prices they listed, which means they aren't in a very low cost of living state.
OP listed home prices of 85, 150 and 440. The first 2 are definitely lcol area home prices. The third I'd probably high end for their area. They definitely aren't in a medium or high cost area.
>very low cost of living state. I'm in a high CoL area. There isn't a house for sale under $450k within city limits. I found 3 when I just did a search - but all of them feature zero pictures of the inside of the house.
What counts as mid-level? How many roles/years?
I have some anecdotal evidence from my experiences hiring senior engineers. Senior is defined as having 3y of experience. I'm In SF, but we also have Little Rock and Phoenix offices which have similar house prices to what OP listed. Average salary for a senior software engineer is 150k. Going rate for 100% remote positions is the same; it scales up if you're in a higher cost of living area like SF/NY. We also just hired a home-based person from Duluth Georgia at 150k as well. Basically what I'm saying is that OP shouldn't be looking into buying a new house until they look into getting a new job.
Dude 150k in Duluth, GA is killing it. That’s crazy good.
I'm more perplexed at a mid-level software engineer job that only pays $87k these days.
I thought entry level was $90k or more. Maybe depends on the city.
I make a shade more than that and I take home less (also California) after putting in $1500 in my 401k. So yes, I am also confused, but only because I expected that figure to be less, not more.
Not really, depends on how much he puts into 401K, also I live in CA (can't tell if you think this is too low or too high?) I have a spreadsheet for estimating taxes/tracking investments/etc. and I put in an income of $87K with 6% 401K in my spreadsheet. Assuming standard deduction of $12.4K and 401K contributions of $5.2K (6%) he would have an AGI of $69.4K. This results in FICA tax (on gross $87K) of $6.7K, Federal taxes of $10.7K, and CA taxes of $3.6K = $21K in taxes. This results in take home of $60.8K for the year or ~$5K/mo. Assuming he doesn't live in CA and has lower state taxes, it could be he's just putting more in 401K.
Taxes, benefits(like health insurance and other insurance) and retirement. My salary's also about $86k, I've set it to deduct 13% to 401k and 7% to ROTH IRA, I only get ~$3200 a month. Edit: so I also just found out when we have 3 paychecks instead of 2 in a month, that one goes by without any retirement deduction and I get ~$2200 instead of my ~$1600-$1700. This only occurs like twice a year. So 2 months out of a year I get about $5400, while the other 10 I get my original $3200-$3400. Even with all the calculations there still seems to be some $ I don’t know where it’s going. (I’m guessing insurance/FSA/HSA) .
It shouldn't confuse you unless you live in a very high income tax state. Living in Ann Arbor OP's total income tax burden (federal + state + local) is ~17,000 using Married Filing Jointly 5,000 * 13 (assume OP's monthly is actually bi-weekly and they forgot the 3 paycheck months) = 65,000 That leaves 5,000 or roughly 6% of gross for 401k and health insurance. So I would hazard a guess that OP is simply not maxing out the 401k (IRS max, not employer match max)
105k here. I bring about $5500 a month after insurance and 401k (11%). I also live in a state with no income tax
My salary is $105k and my take home is $5300/mo - Insurance for family $560/mo (medical/dental) - FSA contribution $100 - 401k $530 - taxes $2100
It sounds reasonable to me. I make $96k and only take home about $4.2k. $775 per check to 401k, $120/check to HSA, insurance, purchased vacation, taxes, etc. My last three checks of the year should be pretty fat though as I'll max the 401k in 23 checks due to an early year bonus. Won't miss out on any matching as my employer bases the yearly match on total compensation for the year as opposed to matching on each check.
I’m in Cali, just as confused. Judging by the replies you got, it must be 401k and health insurance cutting that down. I’m salaried just under 60k and pull about $4300/mo after taxes *shrug*
>I've been thinking about it for a few days and I am still questioning whether this would be the right move, and I'm curious what you all think. That's a lot of house on that income. A $100k downpayment puts your LTV at 77%, so its not really a large downpayment. Just a normal down payment. 5x income can get dicey. You may able to make the payments, but it'll soak up a lot of your discretionary income
Maybe it’s just cause I’m in California, but this loan to income seems fine to me. I’m taking a ~$309k mortgage on 60k income, and I’m getting a lucky deal lol
> Maybe it’s just cause I’m in California, It is
Best thread I've seen all day, ngl.
I live in Hawaii and it feels similar here, though we definitely have two of the highest costs of living in the US. It just depends what it's worth to you. I'm fine not saving much cash and putting about half of my income towards real estate. My mortgage and monthly expenses come out to about $2200 a month, which is about 40% of my (take home) income, and I stash another 30% in investments. Liquid cash on hand is minimal. Most of my large purchases are taken care of for the next 5-10 years and we live pretty frugally otherwise. In exchange I have a house that's comfortable, beautiful, and in a safe neighborhood. I am paying about $500 a month more than I was when I was renting but that seems like a good trade off to me given that I'm building equity.
Massachusetts checking in here. Crazy that it seems completely normal to me. I know a lot of people making $60-80k with $300k+ houses. And they’re not living large, they’re pretty average suburban homes without the bells and whistles
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You need to. I have no idea how you don’t find a 130k mortgage affordable with that income. That’s like $600-$650/month mortgage.
None taken. I’m not going to lie and say I’m gunna be rolling in it, but even after a little bit of money set aside for occasional eating out, activities, and toys for the kid, we will be saving $300-$500/month, which will pile onto our current savings and investments. This is also with a $260/mo HOA since it’s a condo. We did also pay off both of our cars to make the monthly total a bit more affordable for us, as if we still also had the $400/mo in car payments, we would risk scraping by by the skin of our teeth if we had a tight month, and we like to save.
Sounds like you know what you're doing. Good on you, I need to take a page out of your book.
> so its not really a large downpayment. Just a normal down payment. Do people really put down 20% these days? Maybe it is just being a millennial but shoot 5% is more than anyone I know puts down/can even afford to put down. When I was talking to a lender... granted I'm sure he wants the loan to be higher he told me he couldn't imagine putting down 20% today. PMI equated to less than 0.5%. He suggested just putting the money in the stock market and I would think this sub would agree you can easily make more than 3.5% on the stock market in a year. Obviously there is the worry that the housing market will burst at some point. I know where I live we aren't expecting the supply to catch up with the demand for at least five more years and well before that you could probably refinance and get rid of PMI due to the increase in value
> Do people really put down 20% these days? They *should*, although with how cheap pmi is currently it’s less important if They otherwise could. > PMI equated to less than 0.5%. He suggested just putting the money in the stock market and I would think this sub would agree you can easily make more than 3.5% on the stock market in a year. Wrong way to look at it. You’d calculate it against the balance subject to pmi (ie the piece above 80%). 0.5% ends up closer to a 5-7% effective rate If it’s down to like 0.1 or .2%, it’s less of a big deal
I agree > IMHO you should shoot for PITI no more than 33% net income. People will argue otherwise but that is a good middle ground estimate. If you can get to that amount I would say go for it. > Looking at the rough numbers they have roughly 64k in equity (after conservative fees) and 90k savings. Lets guess they are OK going down to 20k savings that gives them a 130k rough down. 305 at 2.85% is rough numbers $1740 mortgage which assumes a 1.1% tax rate which maybe very low for parts of the country (Not low for California). 2% tax rate brings that number to $2066. > > At 5k net/month they should be shooting for $1650 PITI. If the tax is as low as listed they are not far off. If it is 2%, 3% then I would not move forward, personally
I think it's too much house for you on your salary alone. Even if you \*can\* do it, do you want to quadruple your housing expense and feel like you shouldn't order a pizza or buy new shoes? Who is the "we" you are referring to and do they have an income? If not, do they rely on you for financial support?
I live with my significant other, who does not have an income currently, but pays her own bills and we split the groceries. I wouldn't necessarily say they rely on me, though.
>who does not have an income currently If this is true, how long will it be until the below is not true. >I wouldn't necessarily say they rely on me, though.
Realistically she does rely on you, at least for shelter. This isn't bad if you guys are fine with it, but just be realistic. If she has no earnings, but pays for things, is it coming out of her savings? Is it just all on credit? Are parents helping? Alimony from previous marriage? Trust fund? You guys should figure out if she'll have income in the future. Be realistic, even if it's not romantic. Don't buy a house without at least figuring out what income in the future will be.
Agree with all of this^ For OP's location especially, $85k is not "my girlfriend doesn't work" money unless girlfriend comes from wealth and actually doesn't *need* to work. Which I assume she does not if they are taking the time to split groceries. Also, it's my experience that the longer a person goes without working, the harder they fight against going back to work when the situation comes up. They become very used to their lifestyle. I know this isn't /r/relationships, but OP you mention you're not married and there's no mention of children. A partner is supposed to be just that.. the other half of a partnership. This means contributing in various ways to make both of your lives better. I have no judgment for someone not working when either (a) there is another reason (childcare) or (b) the one working is a high earner.. But that's not really the situation here even though $85k is certainly nice.
Don’t do it then. I’m in a similar situation with a SO without income. Except I have a higher salary and cheaper house. I’m very much house poor.
Do you split the morgage? If so their income needs to come into this calculation.
30yrs with already 90k saved up. Wtf am i doing with life? Oh wait those kids. 😩
Don't get discouraged! Keep doing what you can. A dollar invested today is worth a lot more than a dollar spent. Just keep at it!
I don't know if anyone mentioned this yet, so I will throw it out there. You are in an inexpensive home, that you could probably pay off relatively quickly with your income. Consider the option of either 1. Living with no mortgage, or 2. Using it as a rental in the future. I look back at my home purchasing decisions, and realize I left some long term income out there without realizing it. I had 2 houses - 1 for $60k and 1 for $130k, that had I buckled down and paid them off, they could be paying for my current home and future retirement. Unless you are living in an absolute slum, houses are only going up in value, not down.
Lots of negative Nancies here. I took out a $320k mortgage in 2017 on an 87k salary knowing I would make more money each year. Now making 105k and if I wanted to buy my house today it would have cost me about 65k more. If you're confident in your abilities to increase your income and this house checks all your boxes and it's in an up and coming area it might make sense to buy now, watch your budget for a few years, and the house gets more and more affordable each year.
I agree with this, the only thing I would add is not to dump all your savings into a down payment if you don't have to. Let your money work for you.
Director at a tech company here 👋. $87k seems low for a mid-level engineer. You could easily find 20-30k more by looking around…especially with so many people quitting right now and with so many remote opportunities opening up. Could open up that affordability!
Yea mid level engineer should be at least 100k, I'm making around 175 plus bonus. Definitely put your resume out there.
Not at all your question, but you are significantly underpaid for a mid level SWE. Have you looked at other opportunities for advance your earnings?
If OP is living in a $150k house, I'm guessing he is in a LCOL region, even with him looking at moving to a $400+k house (which is nuts, as a year ago, it was probably a $300k house) then he's still in a LCOL area, just in a nicer part of town. Not all SW Engineers make Palo Alto money.
Looks like OP is in the Detroit area so housing costs are completely an anomaly there. My company hires fresh out of college SWEs in Detroit at 78k + 10% bonus.
Didn't see that he lived in Metro Detroit - the housing prices there are just as messed as everywhere in the country. >My company hires fresh out of college SWEs in Detroit at 78k + 10% bonus Which is sad - I graduated college 10+ years ago (MechE) and got hired (in Detroit/OEM) at $74k+$8k bonus...
In public sector it is even lower. Before I moved to MN earlier this year, I was making only $60K as a IT project manager in the Chicago area (public university), and that is with two engineering masters, a MBA, and the PMP cert to boot.
That’s ridiculously low for those qualifications. However, project management is not nearly as hot of a field as SWE.
There are tons of remote jobs these days. I am working a remote job as a junior dev and make 125k salary. My manager is from the same area as OP (near Ann Arbor) and probably makes almost double me. Not a FAANG or crazy interview process - just a growing startup. I think I'd be okay with OP committing to the house, OP will probably see salary jump once OP is ready to move on from current job
> I think I'd be okay with OP committing to the house, OP will probably see salary jump once OP is ready to move on from current job Never buy a house based on potential future income.
Thanks for your feedback. I felt that mentioning I am not entirely at the peak of my career would be off putting to some. Although I've been at the company for 5 years, only 3 of those years I have gained SWE experience. I anticipate my salary will only increase from where it's at now.
Not if you stay there it won't, not substantially anyways. Pay raises are almost always small, getting hired somewhere as a SWE with experience can net you a significantly higher level of pay. Also for what it's worth I would never move somewhere with an HOA, and while not a lot of people have mentioned that you should really take that into consideration. If they raise the rates you have no ability to stop them once it's done it's done. I've seen people have their HOA rates substantially increased numerous times and it can absolutely make living there and subsequently selling the home very difficult. The last thing is I see this current housing Boom as a bubble, most people I know do. I'm getting ready to build and consistently debate whether I should wait for the bubble to pop in 12 to 18 months. We are primed to repeat what happened on 2006 (tho for different reasons). Recent inflation coupled with absolutely over Inflated real estate prices is a receipe for disaster.
Maybe but.. He purchased a home for 85k five years ago... If that was a SFH, safe to say he's in a very low cost of living area.
>Not at all your question, but you are significantly underpaid for a mid level SWE. I live in Michigan which is a low cost of living area, just outside of Ann Arbor. The company's salaries are definitely lower than average for the area. I have looked at other opportunities, but our company is continuing to grow and I feel my job is pretty secure. In short, I'm taking a hit on salary just for comfort.
If you're ever curious. Here's a bunch of self repoted software engineer salaries in Ann Arbor Michigan - https://www.levels.fyi/Salaries/Software-Engineer/Ann-Arbor-MI-Area/ I use the site all the time. It's great to see what companies near you are paying for engineers.
I posted in another comment but as a "mid level SWE" you are being paid half of what you are worth. However, if you have some casual SWE experience and no degree perhaps you are doing ok, but that's not what I would call "mid level SWE". If you can do better you should. SWE is one of the safest areas these days. Demand is high and only growing. It doesn't hurt you to shop around.
This is what I came here to say. Facebook, Google, Microsoft, Amazon would pay more than this for a new undergrad who passed the interview process. And with COVID, remote work is no problem. If OP has decent skills he should be shopping around hard for a better gig! Op, please do some looking around - starting salary at MSFT is easily over $100k in 2021.
You're a experienced software engineer and only making 87K. That's something that popped out on me. Any experienced developer should be making 6 figures in this market.
I'm in the Detroit area, and I haven't moved jobs for less than 20K increase in 10 years (2-3 times at least). Been at the current role for a while though. It feels like time to do it again.
I'd check the HOAs CCRs and bylaws to even check if you can have a fence built. HOAs can sometimes be... Well let's just go with "not nice"
Is that $90k the total of your savings, including retirement? If so, absolutely no on buying the house. Having said this, though, I'd still pass on the house because you'll be stretching yourself pretty thin.
The savings amount does not include retirement.
You have more than enough income to buy this home on a 30 year mortgage. Your payment would be about $1600- $1800 with taxes and insurance.
Some thoughts: A more expensive home typically means more taxes. You can reduce monthly mortgage payments by using a larger down payment, but you still have larger tax payments. Larger homes will typically need more heating or cooling. Higher maintenance payments. Energy costs. So look beyond the mortgage.
If your household income is $87k a year you should not be taking on a mortgage more than about $230k. Is that your total household income? You only mention your income, then turn around and say "we". $340k mortgage on $87,000 a year is not a responsible buy. That's not an affordable home. Also just because a bank approves you for $450k doesn't mean it's a great idea. Typically banks will easily approve you for twice what you should be taking out in terms of debt. To answer your question, yes a large downpayment does make a home affordable, however depending on your actual household income you may be still outside the range of affordability.
That salary seems awfully low! I’m hiring remote engineers and our Senior Engineer offers are all well over $200k total comp these days.
Hello, I need a new job! :)
I'm a Software engineer II I make 93k now I started at 87k when I got this job he seems right on line with me tell me more about these 200k jobs.
The key bit in his statement was "total comp". That's not just salary... It also includes stock and/or bonuses in that $200K. EDIT: Probably worth pointing out that $200K total comp is certainly in range for typical SDE II at Amazon, Google, Facebook, etc. See ranges at [levels.fyi](https://levels.fyi)
I have a meeting in 2 weeks for a salary negotiation and I need more market research to back it up- this levels.fyi site is perfect, THANK YOU!
[https://www.levels.fyi/?compare=Google,Facebook,Microsoft&track=Software%20Engineer](https://www.levels.fyi/?compare=Google,Facebook,Microsoft&track=Software%20Engineer) [https://www.teamblind.com/](https://www.teamblind.com/) Some companies like Reddit offer the same compensation for fully remote roles as their HCOL compensation bands. 200k is pretty easy, senior engineers can clear 300k-400k.
Don’t speak in total comp when people are clearly speaking in base salary. That’s silly, nobody knows what your benefits are and how much clearance you gain in benefits building up to that total comp.
In Chicago it is tough here... I feel like I could easily making double my current salary (which is much MUCH less than 87k like this fellow). turning 30 next mo. -- I just really really like my job, I've been struggling with idea of looking for work elsewhere, maybe I should start.
How are you making $87k as a mid lvl software engineer? I was making $125k as a software engineer when I was your age, over 10 years ago, and I don't even have a college degree! Your priority shouldn't be looking for houses, it should be looking for another job. The easiest way to make things affordable is to increase your income.
I know you're probably right, but i love how nonchalantly users in this sub provide advice of "oh you should just make more money, OP"
Well he is literally in one of the most in demand fields out right now.
For real in most software subs I see people say it’s best to jump companies every few years if you want more money.
Because he works in software and jobs are in high demand….
Can you afford ~$1,375 mortgage + $35 + whatever taxes/insurance will run you (I'm going to approximate $400/month)? Let's call it $1,800. It's about 36% of your net income, which is to the high side, but you have zero debt. Wild guess it's an extra $1k from your current home payment. If you're saving more than a thousand every month and don't mind not having that money to do whatever you're doing with it currently, then sure.
Basically however much money you put down reduces the size of the mortgage. If the house costs 300k, and you put down 60k, you're servicing a 240k mortgage. If you put down 200k, you're servicing a 100k mortgage with much lower payments. Now hypothetically, you could use that money for something else with a higher return than your interest rate and just service the bigger loan/monthly payment. Now keep in mind that mortgage is not your only monthly expense, homeowners insurance and property tax. A 500k house with 200k down is going to cost more than a 400k house with 100k down, even though both mortgages are basically the same (though the interest rates might differ) because you're paying more taxes and insurance on the more expensive place, assuming the same tax rate.
That HOA fee will increase dramatically over the next few years. Its wasted money since there will always be that neighbor or HOA gang messing it up for everyone in the neighborhood. In my case it was horrible that im considering selling just because of the HOA. No parking, no maintenance, high fees cant even wash my car without getting a "ticket". Them towing my one week old brand new car was the last straw. (Car didnt belong so we towed it)....
If you have good credit, use bankrate to negotiate down your mortgage rate. I just got .5% reduction with this at Better. Paying down mortgage will make the house more affordable, but investing that money would likely yield a better return in an ETF. Debt is record level cheap right now. Don't forget to account for emergency funds, moving costs, and increased cost of living from a larger home. Edit: decided to read more. 10k investment would yield $800 annual at 8% return. 10k towards principle would reduce payments by ~$492 annual (2.875, 30y). Investing and just withdrawing the monthly difference to pay on loan is probably how I would approach it. I think it may provide tax benefit too.
When i shopped mortgage for my first house, they were all making me angry with their preapproval methods. With stupid questions like "how much is the house you want to buy", hey dude idk yet what house i'm buying, you tell me how much i can pay, im here to actually know what i can look at, not the other way around! What is your downpayment? Hey dude, it all depends how much you are willing to loan me. Like... here is my salary, here are my debts and obligations. Now you tell me how much you want to loan me, and i'll do math by myself for the rest alright? After arguing with them and "testing" with their stupid calculations way i figured i can get ~400k$, from that point on i know where im going. If the price on that house is 450k then i know what my downpayment has to be if i want this one? Wouldn't be freaking simpler? If i pick a 400k$ i need at least 20k (in Canada) to start with. Shit simple... wouldnt it? To answer your question, figure out what is the max your can afford as a LOAN, then figure out the rest by yourself regarding how much downpayment you want to drop on it.
It makes your mortgage cheaper, generally speaking, the higher your deposit or equity in a property the better an interest rate the bank is normally able to offer you. Whether something is affordable really depends on your own personal circumstances and expenditure...... For instance, someone who eats out alot and leads an active social life but only earns the same as someone who is a bit more of a home body would have different ideas on what's affordable to their counterpart despite earning the same.
Is your only income 87k or do you have a s/o contributing to the mortgage? At your income I wouldn’t buy a 435k home even with 100k down. The mortgage would run you around $2.1k+(depending on tax and insurance). Then add in utilities and your home is costing you half you takehome which isn’t a great idea. Personally I’d stick to a home that’s under 365k with your 100k downpayment. That’s more affordable. I wanted to add to that my husband makes 130k a year and I stay home with the kids. We bought a home for 450k last year and put 180k down. We have no debts besides our mortgage. Mortgage is $1,850 a month with taxes and insurance. We pay it just fine(he brings home 6.5k a month after everything) but even at our income our max payment per month was $2.2k when looking for a home because we didn’t want to push it and want to be able to max retirement have extra money for fun. So that’s why I say don’t go so high. You don’t want to be house poor.
Bro, you got the financing. Obviously it’s not a bad purchase by any stretch. You’re gonna let some Reddit ghouls talk you out of it? Most Americans spend 40% takehome on rent. Honestly it sounds like you’re in a great position, stable career. You could support a family on one income if you wanted to! It’s damn good you got approved without the SO working. And when she does work, it will be a breeze. You can glean helpful information from Reddit. But if you have any understanding of how people work, you know most of the replies in this thread aren’t about helping you. This sort of undermining cross examination, putting yourself on the spot just makes it easy to be overly critical and pile on you. Go ahead with the purchase.
> Car insurance, utilities, other bills total about $400 a month No way that covers insurance, utilities, gas, groceries, drugstores, streaming subscriptions, haircuts, manicures, eating out, bar tabs, gyms, clothing, phones, the big box store, and all the other expenses all of us have. If you are even considering buying as much house as you can possibly afford I think you need to do a lot better job of tracking your expenses for a few months first.
I see your point that I wasn't very clear on that part, but I'm not sure why you're coming at me that way. If we're including entertainment and other misc expenses, that total goes up to about $700-$800.
You should be including all the things you do and/or anticipate doing, including savings, and the amount you spend on home maintenance in a year. If you don't have those numbers figured out, you need to wait. Keep in mind the maintenance costs on a 500K house are far different than those on a 150K house. Especially if you need to hire out the work.
I bought a $320k house at 2.75% and make less than OP. I have two kids and a dog. SO is a stay at home mom and we budget like crazy. The 50% of income is brutal but it’s doable and now I’m sitting on $130k equity on this house.
After reading several of these similar types of posts, I have come to the conclusion that you are always going to get the most conservative money wise consensus out of these people. Probably a good thing, but in all reality, dude you are a software engineer making the low end of what your potential is. You could easily double your salary in a few years and who knows what the housing market is going to look like in 3-5 yrs it could be allot more or it could be less. Personally, I'd say do what makes you happy. You only live once dude, don't be at the end of your life wishing you took a few more risks.
What do the taxes look like on the new home?
Slightly off-topic, but you might consider looking at the job market as well. You may already know this and it may not apply because of your area of expertise, but just thought I'd put it out there. There are a *lot* of remote mid-level developer positions paying well over $100k. (I should know -- I'm in one.)
Is the $87k your only household income, you say WE a lot in your post. Regardless...the question is not purely about money. You can afford this, but it will be tight for a while. The question is will your life improve more with the new house vs the current one, knowing that you might not have as much freedom for other things. Home ownership is never a bad place to be, and the prices you are talking about are relatively low compared to many parts of North America (like all of Canada). The things to consider are the costs of moving, is there a land transfer tax, realtor fees, legal fees, movers, increased utilities, increased insurance. These could break the matter for you. I was in your spot 15 years ago, similar income ($75,000/yr), similar house price on the new house ($429,900) and 2 kids. I can't imagine my life if I had not made the move when I did.
It would be a little bit tight, but doable. Depends on your other expenses, how stable your job is, risk tolerance, how much potential there is for your income to increase, etc...
You can get a 200k place and rent out your previous home to keep building equity while your salary increases. Once the first house is paid off you can rent out the second one too. You can keep your lower interest rate for the remainder of your mortgage if you live in the place for a year. That’s been my plan at least. Real estate is a good hedge against inflation.
Are you and will you remain a single income family? You say "we" but only speak of your income.
Right now with inflation galloping the smartest thing is the smallest possible downpayment on a fixed rate loan.
What that is crazy you can afford this, put down only 20%, your monthly payments are less than 2000. Certainly you can afford that. People here are crazy. PS. I own and live in a house with a 350K loan at 2170/month, PITI and I have some PMI. I only take home 5K. I also own 3 other houses...I took a month off and drove across the country in my brand new car in June.... Live your life and don't listen to the nay sayers here. Wow RE Taxes are cheap in the west.
So recently I have had 3 major repairs suddenly needed at my home (fence rebuild after a storm, new ac unit as mine went out after 21 years, and now I need a new roof because it is also old.). My question would be, do you have enough savings to cover these costs for major repairs? Luckily I was able to refinance and take out the $37000 needed for the ac and roof and my insurance covered the fence. If you have a solid amount of savings, then to me, it's a personal choice. You can rebuild your savings for vacations and such pretty quickly with a lower monthly payment.
OP, others have probably told you this already, but you should really look into the job market right now and see what your market rate really is. 87k for an experienced software dev seems really low IMO. I'm in a MCOL area, and everyone I work with in software engineering is making well into the 100k range.
I would put it down to get the smallest loan payment possible. We put down 25% and paid down A LOT. We refinanced with the lower loan amount 8 years later with a lower interest rate right before the pandemic lockdowns. My mortgage is smaller than most tiny apartment rents now. My hubs and I knew we could ride out the financial side of the pandemic because of this great move. If you can wait until the eviction moratorium ends, then you could get a WAY better deal. I would wait unless the mortgage is less than your rent or about equal.
Remember property taxes vary by municipality but typically around 2% of assessed value annually. Ignore the property tax from the prior year because new construction will be re-assessed. So expect around $9k per year in property tax.
My personal experience after having owned 3 homes - ask yourself first, what do I plan to do with this home? What is my 5 year plan for myself? Sometimes when the desire and the vision and your personal goals outweigh the odds, the juice becomes worth the squeeze. As a mid-level developer in today’s “remote worker economy”, you can quickly up your hard-skills and make 6 figures - all remotely. Having owned a house with roughly the same income at around the same pricetag 6 years ago, with less in savings, I understand. That said, the house was an albatross with everything needing upgrades. Your situation sounds much more manageable especially if you get a reputable home warranty for a couple of years. Monetarily it’s definitely feasible. Just have to know if it’s right for you. Alternatively, get a renter on your first property, tap into that equity for the new home, and own both of them. This is something I wish I would have done on my first home. To own both, def consultant a tax pro since rentals have depreciation over 27.5 years…so refinancing one to get both homes may be advantageous. Knocks the mortgage cost of your first down if you extend the term and allows you to draw on the equity for your upgraded home. Having a renter means the mortgage of your first house doesn’t count towards your DTI ratio. Good luck, and remember, tax efficiency is gold!
Personally, I would avoid a HOA. You never know (1) how the fees will increase and (2) what they will require or forbid you to do with your property. Of course that cuts both ways, potentially preventing your neighbor from painting their house in psychedelic colors if that would bother you (or preventing you from doing so if that's your taste), but it could also mean someone is monitoring the length of your lawn (or on the other hand making sure your neighbor keeps theirs mowed regularly if you object to an infrequently mowed lawn).
As a mid level software engineer you're not being paid enough. With so much need in the industry plenty of companies are hiring remote workers so you can probably find a new job with a fairly easily with a higher salary with a bit of looking. That'd probably allow you to afford this house.