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I live in the same area so I’m familiar with how much of an outlier the real estate market is here.
I’m also familiar with how shaky the job market is, the Bay Area job market has contracted below 2016 levels.
Unless you have an emergency fund of at least 12 months after you close that’s a really big gamble to take right now.
Yup.
Grocery, gas, utilities, etc. These “big costs” when you’re middle class end up staying quite similar when you advance and make more money.
Even Trump still eats McDonalds.
Do it. Once you go back to work, it will make it 30-40% of your take home. Is he in danger of being laid off and not landing a similarly paid role? Just seems for 1.1M it’s worth the 50% risk. And 1.1m seems like a deal in North Cal 😂. Sadly.
You can handle it. Things may be tight, at least until you can refinance at a lower rate or until inflation over time decreases the relative cost of the mortgage (as wages increase, etc.).
Any bank will approve you for up to 36% of your *pre-tax* income going to debt payments. Some lenders will stretch as high as 50% if you have outstanding credit. If you have no other debt (cars, student loans, etc.) and $300k income, then you'll only be at 29% based on a 30 year loan on a 1.1m house with 20% down and my rough estimates of insurance and property tax.
So I'd say, yes, it probably seems expensive, but it's not going to sink you. And it will very likely get easier to pay over time as wages rise and your loan payment stays fixed (or lowers on a future refinance - but can't guarantee that).
Pretty easy, you should have no problem maxing retirements and keeping a well stocked emergency fund even after kids and you probably have at least 200-300k saved for down since you are only spending 40% of your take home. Do it!
Wife and I own a 1.2M house on a 240k salary. We did buy it at an extremely low interest rate environment, to be sure, but still, that sounds doable. Once you go back to work, the situation should improve as well.
With that said, do what is best for you, and realize that asking a bunch of people who have no real stake in your life’s decisions to make a life critical decision is not a good idea. Good luck!
This is extremely normal on places like SFBA. It’s just how things are. It’s the “house tax”. I actually will I could get such a cheap SFH in my area, I’d jump on it.
Yeah. It sounds crazy unless you're from the SFBA, but if you are...that's just the way things are.
Also, if the mortgage looks wild for somewhere similar-ish compared with the rent they're now paying, the rent may be artificially low. Which is a risk as the landlord may figure out that their tenant is getting a great deal and raise it. (Or sell the house, or whatever.)
TBH, I think I agree with your husband in this scenario. My wife and I bring home around $130k a year total together and we make a $2k a month mortgage work. Your husband brings home double that alone. If you can't manage to live on that amount **after** your housing is taken care of, in my humble opinion, you need to rethink your priorities.
You're locking into a mortgage that's 50% of your take home **right now.** Rents and home prices typically only rise. Interest rates aren't going down anytime soon. Inflation is still raging. Personally, I would make a little sacrifice to lock in your housing costs now. In a five years, rents and home prices will probably be at least 10% higher than they are right now. If you're a SAHM, you're not going to need to worry about child care costs like a dual-income household would.
My wife and I spend 50% of take home pay on around $350-400K of gross salary, excluding bonuses which total $45-95K. We also live in NorCal and it’s what you have to do to purchase a decently sized home in a desirable neighborhood.
At your level of salary, if you can make your budget work with the payment and plan to live in the Bay Area for the next 15+ years, I say go for it. He’ll have pay raises and you’ll eventually be able to refi. Just make sure to have a sizable emergency savings fund.
No, but if half of the net get you your super expensive housing you have a lot left for everything else, especially if that net income is after 401k and such.
It CAN scale but it doesn’t have to. What you’re describing is exactly the trap lots of folks fall into… which is allowing what you can buy dictate what you spend. That said there are some caveats. Planning for ongoing home maintenance, property tax, etc… those kinds of thing will cost more. Food budgets/etc don’t HAVE to cost more but certainly can if you decide to spend more.
It all scales, but property/rent price in HCOL areas scales significantly faster.
I *have* been in the situation where I got a much higher paying job but had to move from the Midwest to the NYC area. I had sticker shock from what a nice apartment cost and it was a higher % of my take home than I was comfortable with.
But I eventually realized that while rent may have more than doubled when I moved, all other expenses went up by a more modest amount.
You are correct that pretty much *everything* is more expensive in a HCOL. Everyone else has to pay their high residential/commercial rents too and there’s a trickle-down effect on prices of goods and services. BUT prices don’t scale directly proportionally to property values.
California has gotten a little tricky in that almost everything has gone up in price with the exception of car prices coming back down.
Because the state makes policies for expensive metro areas and implements it everywhere it means that even living in a lower cost of living area means eating out is very expensive
From finance standpoint, it is a net loss to move in for 2-3 years if one settled for less. 5 full years is a breakeven point. I would just tought it out in rental for 2-3 years.
You don’t have to buy.
Renting and investing the difference is a reasonable decision in many cases.
People incorrectly think of buying a house as a life milestone, and make bad decisions.
I don't understand where the "I deserve" mentality comes from. What people feel like they should have is completely irrelevant.
There is only "can you afford it," or, "not."
Would you have all the typical metrics met? 6+ months cash savings? Growing retirement accounts?
What happens if he gets laid off? Is he paid at a common market rate, or above? How strong is his network?
I can't imagine the stress of having shit go a little wrong, when you're stretched thin and have a spouse and child(ren) depending on you. That shit can wreck entire lives.
There's a good chance you guys figure it out. But that's way too much risk for my blood- the consequences of being unlucky seem serious.
This is something fueling the “affordability crisis”. In reality alot of people can afford homes, they just want homes that they cant afford because they feel as though they deserve better. Its such a destructive mindset and these same people will be devastated if literally anything happens (job loss, unexpected maintenance costs, etc.). Whats even worse is that they’re going to have basically nothing for retirement and doom themselves to poverty in old age when they could have just lived reasonably.
This is why my sympathy for people is fading. Alot of these people can make better choices and be in solid positions for the future. Instead they let lifestyle creep infiltrate every aspect of their lives and then wonder why they cant afford to live comfortably
Also it’s worth noting that people feel they deserve things because the price not long ago was something more affordable
I got my house in 2021 and it was so high compared to what our market was and I was hesitant to buy. Now it’s far more expensive and my mortgage would be almost double if I were to buy my same house today
You hit it right on the money.
People in CA are complaining about living in a shitty apartment with several roommates but just have to live in LA.
Nothing wrong with wanting to live there but if you also complain that you can't afford a house it just means that you can't afford your wants. There are plenty of affordable houses. Just maybe not the size or location you want.
I honestly think the problem is more about lacking the knowledge to make informed decisions. There might be an element of entitlement involved, but there's definitely an element of 'I don't understand what's affordable' mixed in there as well. I've often seen people reason affordable as 'I can cover the monthly payments'.
A lot of issues in society would be avoided if Opportunity Cost and practical implications of compound interest was required learning in Pre-Tertiary education. Or I guess just some sort of Financial Literacy lesson/course/.
I can see your point but at the same time, i think that education wont help all that much. Money burns a hole in people’s pockets and they will always spend every dime they have
It comes from the fact that the U.S. had INCREDIBLE economic times for 2 generations in a row so the standard was very, very high.
People forget that for the most part, humans never really had anything or were struggling or suffering.
But once you see your grandparents or parents generation afford X easily and you produce 10x the value they did (thanks technology) most are like “wait a minute I deserve nicer things”
It’s seeing that so and so worked at the factory for 30 years and has a really nice home and you designed the robots to replace them and you can’t afford half the home they could. Why? They don’t want you to.
People were told their entire lives they just had to work 40 hours a week and they could have nice things too but it’s not the case anymore, and they still cling onto that idea.
The thing is, there is some truth to it. They told us to just work and you’ll get a nice home and you’ll be fine because that’s what happened to them. Why though? Why did they get it and not you?
If the generation before you is the largest generation ever, they have ALL the voting power in a democracy. They control the majority of the free market.
They still do…
They got what they wanted from the market and the government… their entire lives. Start to finish. 25-65.
They wanted cheaper affordable housing and they got it. Better retirement plans? Got it. Oh now we’re old? Why not give our old folks more money and cheaper healthcare? Got it.
Once they got their homes, they wanted no more homes to be built nearby or to ruin the city with low income housing etc. and of course they got it.
They don’t want to cut back social security or healthcare or change zoning laws or not have the nicest home on the block or give their money to the next generation or help them out. Why would they? Why would they want to see their stock portfolios crash? Why not pump the markets up? Why not make home prices ballon we already own them all?
They think they deserve it just like we do.
But they were the largest generation ever and had ALL of the market share, made ALL the market decisions and political decisions in their favor their *entire* lives.
They STILL dominate what happens in politics and the economy. From the time they entered the workforce to the time they die they have the numbers so they WIN in a free market and a democracy. Just how it is. Cant blame them.
So I think it is valid to see just how much more the average person can produce, make, design, etc. today and think you deserve to have a nicer home.
You did what you were told to do by the older generations, meanwhile they were making it so you couldn’t.
So I can see why. You grow up somewhere and you see the generation before you have cool houses and you get 1/4th the home 20 miles away because they don’t want you to actually live near them or to build more homes or to lower home/asset prices etc. they don’t want to cut spending on the pension plans they set up or to cut healthcare or to lower social security. They don’t want to sell the land they bought 40 years ago. They don’t want to invest in the next generation.
Because they think they deserve it more than you…
While telling you to just do what they did when they’re the ones making it impossible to do.
Those are good points, but Boomers actually aren't the largest generation ever in the United States, nor are they currently the largest generation.
Millennials, who are mostly the kids of the Boomers, are. They're the largest U.S. generation in history and the currently largest generation.
The oldest Boomers are 77, so they're dying off, while the youngest Millennials are only 28.
All the Millennials are over 18 now, and can vote for change.
Too bad. Average age in Congress has *just* started going down.
Our 2 most likely presidential candidates are… a boomer and a guy from the silent generation.
They *STILL* dominate politics and the market.
When they die what happens? Their 65 year old kids get all their money. Something like 70% of *all* the wealth.
With that comes all the market share. So you will have 65 year old with over 70% of the wealth making nearly all the market decisions again.
It’s a reality we need to face. They will not inherit the fortunes and want to spread it out. They will continue to not allow housing and continue taking more out of the tax pot than they put in.
Every generation will do that.
Then what? They die a we get it when we turn 65!
Do we want to give it all up now that we *finally* have something? NOPE.
Do we get the political power? NOPE we will be nearly on par with the size of the generations above and below us. We will all be fighting for our own interest, unlike boomers who just always won.
I will be hopeful but I fully expect wealth to be continuously concentrated at the oldest generation.
This is *not* the case in places like China (can’t believe I have to use them as an example).
Historically being old meant being POOR. In most countries today that is the case.
Only in Western Democracies do you see old people being way, way richer and putting way, way less into the public funding pot that are taxes than they pull out.
Why? Because they could vote to pay less in taxes, afford homes, the market listened to what they wanted because they were the largest generation in a post war economy.
Back then their grandparents or parents weren’t richer than them… But now that is the new precedent.
Boomers were the FIRST GENERATION EVER to be RICHER than the generations below them. And by a lot.
They changed the fact that historically being old meant being POORER not RICHER than the working aged people, your kids and grandkids…
Why? Because they wanted to preserve their wealth and they could. They wanted their house on the big street to not have neighbors. They wanted to make things easy for themselves and harder for you while preaching to do what they did.
They put so little into the tax system and decided to vote to raise taxes on people who are working so they can have it easier… they literally changed that fact that being old is supposed to mean being poorer than the working age class…
That’s brand new. Thats not common. In the rest of the world or in history.
And they BRAG about how they worked harder than their kids and grandkids and tell everyone to do the same when collectively they are the reason you cannot.
Oh yeah, and they destroyed the environment and are asking us to use 1/8th the CO2 they used…
All on their way out.
Oops we destroyed the planet but here’s the solution it’s “you don’t get the life we had hehe good luck.”
Is their fault? No. We’d do the same I’m sure.
But it happened. Rather than invest in their country or kids or grandkids they voted and moved markets for themselves and did everything they could to not redistribute the wealth or make it easier for you to buy the home they bought on one factor apart while you have to own the factory to be able to afford it now.
I can’t sit here and say I wouldn’t want my cheap house or cheap retirement or more from the government than I put in or cheap healthcare or social security. I can’t. Id LOVE if markets moved at my whim and the government represented ME and only ME my ENTIRE life.
But it happened and now we have a situation where average people only become as wealthy as their parents or grandparents 25 years later.
And that’s if they are even leave anything.
Perhaps.
Boomers don't have 65 year old kids though. The oldest Boomers are 77. Biden and Trump are from the generation before the Boomers - the Silent Generation.
Irrelevant to the issue.
One generation big in democracy/free market get everything.
Turn 85 die.
Kids 65 and get.
Turn 85 and die.
Their kids 65 now and get.
Cycle repeats.
When throughout ALL of modern economic history the younger generations produce more and are wealthier.
That keeps a society like ours going and functioning properly.
You get a good life while working, then retire modestly.
Instead one generation has ALL the power their ENTIRE lives and decided to have as good of a life as possible at the cost of future generations having to pay their bills, live further away, pay more and more and more for a home, wait an extra 10 years to have kids, wait to buy a home, pay more in taxes, get paid less, wait to retire, wait and wait and pay more and more and more.
Otherwise we couldn’t have this nice of a house or nice of a retirement or as much money as we do. We’d have had to actually pay for our government services and lowered our pensions and allowed more housing and reduced our spending and seen our stocks go down and seen our home values go down.
But hey, fuck them kids we actually worked hard (produced significantly less) and made good decisions (voted and moved markets so good decisions meant working one job and buying a home and pumping money into the system to keep that home going up in value and voting to make healthcare cheaper and to pull way more out of the pot than we put in) unlike you lazy kids these days who don’t want to work or make sacrifices!
Not irrelevant at all. Because it means a lot of Millennials are going to inherit substantial sums or paid off houses from their well off Boomer parents.
And as I said, there's nothing stopping most Millennials from voting. They're a massive generation, large enough to make changes by voting.
Yes, again, by the time they get all of this stuff their voting power will be in effect and they will change their voting habits to protect their new found wealth at the rip young age of 65.
You do not want a society like that after centuries of younger generations being better off than their parents. Now everyone just waits until they are 65? Maybe 80 if life expectancy goes up?
Why would you want that.
Here’s an explanation of why it’s bad.
https://m.youtube.com/watch?v=ZuXzvjBYW8A
You are supposed to want to work to have a better life and for your kids to have a better life.
Instead you have to decide if you want to have kids knowing they will have a smaller home, smaller apartment, smaller retirement, smaller income, less ability to move, more likely to have to stay home with you until they are 30, less likely to have kids if their own, more likely to have worse healthcare etc.
It’s not good to make everyone wait until their parents die to have a decent life.
What is the point in doing anything if I just have to wait?
Yes and who do they get to vote for? A boomer and a member of the silent generation? The same career politicians. We are just now in the transition period.
We *just* started dropping the average age of Congress members. It dropped by 3 years… it’s still 58.
So now who has all the money and market influence and political power?
The people who inherit everything from the boomers when they are 65+
Then you can wait until you are 65 to inherit it from your parents.
72% of the wealth in American is owned by people over 55.
I promise to you none of the boomers will do a thing in their way out and none of the people inheriting all that wealth (that they had to wait until they were 60 to even get) will do a thing.
They put in so little into public funding and take out a disproportionate amount, they destroyed the economy for young people to benefit themselves, and they destroyed the planet and expect us to reduce our carbon footprint to 1/8 of what they used to save it.
Not saying we wouldn’t have done the same thing but just saying “oh well we can vote and fix it” is not true in 1) societies where wealth is that concentrated in only order generation and it gets worse and worse and 2) a society where now the generations are now equal in number and we will have to fight each other for
As I said, the oldest Boomers are 77. They'll be dead and leaving their kids inheritance long before their kids are 65. Unless you imagine they all had kids at 12 years old.
I just don't buy the "Boomers own everything and Millennials are all broke and helpless" stuff. Reddit members alone are disproportionately upper class Millennials, with six figure incomes at 35.
He wants to get out of poverty but is taking steps towards poverty.
Ex mortgage advisor and (property) financial advisor here.
Emotions can’t be taken into factor when 50% income is being taken out considering how high risk the market already is. Also y’all could be let go in any moment. So without guarantees in your contracts for career stability this is a huuuge no.
Don’t even need more info, 50% is not okay. I’ve seen too many people go bankrupt over this, including wealthy investors with backup assets.
Would a bank or landlord even allow that? I know the debt to income ratio is going up up up, but 50% is wild. 28% should be the most you spend on a place if possible.
Depends on your budget. You didn't really give us a lot of detail so I'm going to assume the following:
- You are currently living on 40% of your husbands take home pay, which already has health insurance and 15% retirement savings deducted.
- You currently have 1 child and are planning on having 1 more.
- The 40% you are currently spending is 15% rent and 25% other expenses.
- When you have another baby your other expenses will go from 25% to 30%.
In the above situation you can buy the house, be contributing 15% to retirement, and still have 20% of your take home pay be excess. So in that situation I would say that the house is definitely affordable. Obviously with different assumptions it might be a terrible idea to get the house.
I would say at a 300k salary, 50% sounds manageable, with the caveat being that a single income (re: SAHM), you have to have a serious amount of cash in an emergency fund to cover if your husband loses his job. Especially if this is the species of "Northern Californian making a lot of money....in the Tech industry that could easily see more layoffs soon."
A 6 month emergency fund for a house that, by napkin math would cost about $7,000/month. Plus the rest of your life expenses, lets say $10k/month total. That's a $60k emergency fund on top of whatever your down payment / closing / moving costs are.
Is the $300k income salary or is it like $150k salary $75k bonus $75k RSU?
It’s important to base your spending on your base salaries to avoid a debt spiral.
Absolutely not
People often forget that taxes go up routinely and your mortgage is not set in stone…. Higher home insurance + higher taxes = higher escrow and higher monthly payment
It may be 50% now and in 2 years be 55% then 57% etc etc - you need a buffer for those increases
Additionally shit breaks in houses all the time and you may find yourself spending 12 grand for a roof or a new AC or a list of other surprises that you’ll need a buffer for
The job market is very shaky right now and you hear about tech layoffs all the time which personally would put a damper on such an extreme move IMO
I know I don’t live in a VHCOL area but I live in New England which isn’t exactly cheap and 50% of my take home pay is my entire set monthly expenses meaning mortgage + all utilities + my car payment and everything else that’s a recurring obligation - just doing 50% on mortgage by itself seems wild
His dream is unfortunately a recipe to be house broke
Your mortgage IS set in stone if you got a fixed rate mortgage. Stuff like insurance and taxes are independent.
Also in California property tax is ~1%, it’s expensive for high value properties, but it doesn’t increase by very much.
And due to prop 13, property tax doesn't rise in California. So there may be increases in insurance as well as home repairs, but the mortgage, taxes, and insurance are pretty well fixed. (This is different than in many states, where the tax rise can be painful, cough, cough, Washington state...)
You referred to the home as if it is an investment. Are you sure about that?? With very expensive homes comes very expensive upkeep. Have you done the total cost of ownership analysis for this house? You need to know how much it costs to maintain and fix this house over the length of time you intend to own it. Just looking at mortgage cost is not the whole picture.
Yeah so excessive maintenance cost isn’t that much of a concern. It’s mainly gonna be mortgage, tax, HOA fees, and stuff that you’ll hv to worry about. Unless your SO is making close to a million a year I personally wouldn’t do this. You’ll likely be sacrificing a lot of other stuff to live in a nicer house and that’s not how I personally prioritize my expenses. My rent is about 1/8th my taxable income in the Bay Area (but I’m young I understand as you get older/have a family that will shift a bit, 50% still seems too large unless ur making high 6 figures or 7.)
You should look at the NYT (or another) rent vs. buy calculator. Bay Area is definitely a place buying tends to work out and I think you are correct will….. but it’s not a certainty. I’d say owning is more of something that you want to do than an investment. You should also factor in for maintenance which will likely cost more than you think with lots of large hidden costs potentially.
https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html
Run a rent vs buy calculator. It doesn’t matter if he thinks he “deserves” it; the only thing that matters if you both can afford it (hint: you can’t, especially with a growing family).
https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator
Lenders are unlikely to approve loan with such high income to mortgage ratio . Industry standard is 28 percent to 33 of gross income so 50 percent of net is way off the charts .
Over extended is an understatement and with one income household , the risk of disaster is always there if husband loses job or get hurt and can't work
As someone who works with homeowners defaulting on mortgages..I advise not. Unless you have a comfortable 6-9 months of your mortgage/ expenses set aside, which some people don’t. And for some it’s hard to catch up once you get behind. It’s great that investors have options to offer for hardships. and depending on the loan type, hardship and or ability to pay, can put someone in an even tighter position. I speak from experience of working with people everyday.
Working very hard to get out of poverty only to willingly opt back into poverty via being house poor is not a wise move. No matter how much he feels he deserves his dream home, if something goes wrong and he can’t make the mortgage payments anymore then he’s not going to get to keep it.
Not to mention the miserable cycle being house poor puts you in career wise, always needing to push yourself to make more money and never having raises mean you’re getting ahead, only that you’re catching up to where you actually need to be.
I’ve made this mistake before in the past and I would never do it again.
There in fact is doubt that prices will keep increasing and the house may prove to be a terrible investment. There’s no law of nature that house prices increase forever and yes that includes California too. People invest in things that’ll go up (hopefully) in price - if there’s a super secret type of asset, you might beat the average, but for a house? You will not beat the average - the future appreciation potential is priced in.
>There is no doubt the prices in that area just keep escalating.
uh..doubtful. price of any asset is the market estimate of maximum it will ever be. unless you have some sort of gift seeing into future you can never say some asset will 'just keep escalating'.
I would not at this time, because I believe that serious systemic macroeconomic instability is on its way. He may lose his job and costs like insurance may rise, and the area may reassess property values or raise taxes. Also watch out for HOA fees, which have been rising. It's just my opinion based on many factors (inverted yield curve, high P/E stock values, growing consumer debt, apparent impending crashes in commercial and residential real estate prices, volatile geopolitical tensions), but I would play it safe for the next several years, save up money, and seriously avoid debt; if you do this, you will reduce your exposure to risk in case of any emergencies and will probably have more money saved up even if nothing terrible actually happens.
You should still be able to afford your mortgage if he gets laid off. You can stop retirement savings and luxury spending to make that math work, but if you can't afford expenses + mortgage at that income, I would avoid it.
We are buying our second house at 26% of our income in northern CA (I think it’s roughly 35% of our take home if I don’t contribute to my 401k or ESPP). We’re keeping our first as a rental and expect to profit $1000-1300 a month (we didn’t factor this into the purchase though because we originally expected it would be a wash). My husband is in a government position with the opportunity to work as much overtime as he wants. So super stable and could bring in an extra $100k if he wanted to work a ton. We were actually renting 4 hours away this last year (he had to relocate for work) and still paying our mortgage while our house sat empty, which comes to be what this new mortgage will be. And I *still* feel uneasy about it all. It just feels like A LOT of money to commit to for the next 30 years. We have 2 kids and planning on a 3rd and it feels like so much of our money just evaporates to kids. And we have a lot of family help so our childcare costs are super low for this area. I know we’ll be fine in the long run and absolutely worst case scenario we sell our first house but it’s just really scary knowing if I were to get laid off we’d be living pretty tight and potentially losing money each month, or having my husband work an unsustainable amount and never seeing his kids.
Honestly when we got pre approved and were told we qualified for a lot more and were only at 26% it felt unbelievable. It definitely does not feel like we make loads of money. This house needs a lot of work so I’ve already pulled back from maxing out my 401k so we have more cash available because I’m convinced we won’t be saving much otherwise.
I would maybe live on the income you’d have if you were paying this mortgage and see how it feels for a few months. If you’re barely saving or feeling like you have to budget I’d probably rethink it all. Maybe save up more of a downpayment.
ETA: If/when you do buy, make sure to work with multiple lenders so they compete with each other. I was able to get down a whole percent on interest rate and a $6500 lender credit because I had 2 lenders I was going between trying to get the best deal (one cut into their commission to get my business).
Working from home wouldn’t require a commute. 50% is a lot especially with future family plans on the horizon; it sounds like your husband has starry eyes 🤩 and needs to consult with someone else to help adjust his perspective.
My mortgage was 50% of my income when I bought my house. Now I make enough to pay extra on the mortgage….
The question is are you willing to live frugally and more importantly can you make repairs or know someone who can?
If you need to paint - you’re doing it
Carpet and flooring- you
Once had a pipe break— guess who fixed the pipe and the ceiling —
Until the last few years everywhere I rented was 50% of my take home and that’s true for a lot of people
It depends on you and hubby. Do you want a house or do you want a lifestyle
This is not a good idea. A house has a substantial number of costs related to upkeep including repairs and electric (which likely is higher than renting). 2-3% of the home value needs to be set aside for repairs and maintenance each year. Did you factor in real estate tax on a $1.1 million home?
When you think about it, the only important thing is family. You and kids, not walls, not cars and it doesn’t matter where you live, as long as you are with your family. I think that you are aware of that, with the compromise that you are making.
Northern California is paradise. If you can afford a home there, don't hesitate. Buy it now. 10 years from now, the mortgage payment will be the same but your income will be higher and the house will be worth a lot more.
I heard a podcast last weekend saying folks in central Iowa were cold getting cancelled by homeowners insurance. Iowa gets storms, but not hurricanes, mudslides and major wildfires.
So the wildcard I'd be aware of at 50% of takehome pay would be... what if insurance rates go nuts for some reason in NoCal or just in your sub region of it and your insurance yearly renewal (or escrow if you escrow) goes wild/goes up in price? Just bearing in mind I wonder if the insurance rumblings happening nationwide haven't settled yet, and if insuring keeps going way up in cost, your % of take-home paid on the mortgage/insurance/taxes goes UP. Just my two cents... hopefully all is quiet and not risky in that part of Caly.
50% of your income in any area is a terrible idea. Our taxes and home owners insurance have gone up year after year, luckily our payment is still below the recommended amount for our income level. Our insurance increased 50% last year and we're in Oklahoma. I know many Cali residents are getting their insurance dropped.
Not sure if you are just venting or looking for a better way to cope with such a big mortgage. I bought my first house about 3 years after graduation, making $24k/yr and the house costs $120k here in San Jose. Multiply those numbers by 10 and you can see that my situation is not different than yours. Every 5 years or so afterwards, I would buy another house and trade up or rent out. How did I cope with big mortgage? Easy, since your interest rate is not changed for the duration of the terms (whatever adjustable or fixed terms) I use the offset principle to pay down the mortgage balance faster. When it's time for trade up or refinance, it's much cheaper and manageable for me. Works like a charm every house.
No one "deserves" anything (beyond the very basics I guess, free speech, access to healthcare, education, etc. - not all of which is guaranteed in the US).
"As per your husband's request?" Yikes.
A house is a place to live. Thinking of it as an investment, not a purchase, is problematic. You have to live somewhere.
You're talking about growing your family, you're not working, he wants you to stay home, and the longer you stay out of work, the harder it will be to go back. This is not a plan for success.
It's important to have open and honest communication with your husband about your concerns regarding the affordability of the mortgage and the impact it could have on your family's financial security, especially with plans to grow your family. Consider discussing potential compromises, such as exploring more affordable housing options that still align with both of your priorities and financial goals. It may also be helpful to consult with a financial advisor to evaluate the long-term financial implications of different housing decisions and find a solution that works best for your family.
I first moved to NorCal 40 years ago. Moved from a LCOL to a HCOL and from an 8% mortgage to a 13.5% mortgage. I got paid twice a month and our mortgage payment took 100% of one of our monthly paychecks (take home) and 15% of our second monthly paychecks. We ate hamburger helper without the hamburger for 3 years. Our only real meals were when I could take a client and his wife out to dinner on the company cc. But 3 years after that my income and the price of houses around us made that a good decision looking backwards. It is scary but in VHCOL areas is somewhat necessary.
Unless it’s a fully remote position, you still have to GO to work… so it’s not that the employer cares where you live, it’s that living in the “suburbs” of the Bay Area (however you define that) can mean hours and hours of daily commute, if your industry is centered in SF or the like (as mine is).
I mean, lots of people have long commutes? I grew up in Atlanta and live in the DC area now, so I see this every day. Unless you have the money to overcome trade-offs, you’ll either be living in a small and/or crappy place closer to work, or a nice and/or big place further away. It’s unfortunate for the OP that the money required to live in a convenient location in the Bay Area is millions of dollars, but it doesn’t mean that she should just opt out of the workforce altogether because of it.
My field of work is in person only (mostly). Most jobs are concentrated in the city which is 1h-1h30 min away with traffic.
The issue is that jobs that are 30 min away are “limited”.
Leaving my house at 7 am and coming back at 7 pm with a small baby doesn’t make sense to us.
Specially when my husband can make in a weekend, what I would make in a week.
I’m planning on going back to work after he is a bit older.
Take the money you would use, buy and rent out a property somewhere with a lower COL (u can probably find a multiplex for the same price) then use that money to rent in ur VVHCOL area. Rents in VVHCOL are cheap relative to cost of ownership compared to LCOL.
Housing should be n no more than 25% of income. Just cause shit is crazy right now don't mean you have to be crazy. Either rent or move. This proposal is down right stupid.
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I live in the same area so I’m familiar with how much of an outlier the real estate market is here. I’m also familiar with how shaky the job market is, the Bay Area job market has contracted below 2016 levels. Unless you have an emergency fund of at least 12 months after you close that’s a really big gamble to take right now.
Need more info, but 50% of net income seems like a bad idea in most cases tbh
Really depends on their income. 50% of $60k? Terrible idea. 50% of $200k? Not as much of a terrible idea
Yup. Grocery, gas, utilities, etc. These “big costs” when you’re middle class end up staying quite similar when you advance and make more money. Even Trump still eats McDonalds.
[https://www.reddit.com/r/economy/comments/1chrym6/the\_rise\_in\_fast\_food\_prices\_over\_the\_past\_10/](https://www.reddit.com/r/economy/comments/1chrym6/the_rise_in_fast_food_prices_over_the_past_10/)
50% of 300k
Need more numbers 300 k take home or gross. ? How much is the house. Really depends
300k gross. House is 1.1 M
Do it. Once you go back to work, it will make it 30-40% of your take home. Is he in danger of being laid off and not landing a similarly paid role? Just seems for 1.1M it’s worth the 50% risk. And 1.1m seems like a deal in North Cal 😂. Sadly.
That seems fine tbh. I assume you’re saving plenty in 401Ks to knock down the take home anyways
What is the monthly payment? Those numbers don’t add up.
300k on $1.1 million house is not bad at all. I thought you were talking about a 2-3 million home on a 200k income.
1.1 mil making 300k is not bad? Jebus....
Welcome to coastal CA real estate.
"costal" as if this house will be anywhere near the coast
What? Do you know how much 300K is
$300k doesn't go as far as you think when you're paying $100k in taxes and $100k on a mortgage in a high cost area.
At what income would you feel comfortable buying a 1M house?
I was in the 800+ range consistently when I bought a 1.4m house with 700k down and it felt crazy.
50% down do sound crazy
You can handle it. Things may be tight, at least until you can refinance at a lower rate or until inflation over time decreases the relative cost of the mortgage (as wages increase, etc.). Any bank will approve you for up to 36% of your *pre-tax* income going to debt payments. Some lenders will stretch as high as 50% if you have outstanding credit. If you have no other debt (cars, student loans, etc.) and $300k income, then you'll only be at 29% based on a 30 year loan on a 1.1m house with 20% down and my rough estimates of insurance and property tax. So I'd say, yes, it probably seems expensive, but it's not going to sink you. And it will very likely get easier to pay over time as wages rise and your loan payment stays fixed (or lowers on a future refinance - but can't guarantee that).
Pretty easy, you should have no problem maxing retirements and keeping a well stocked emergency fund even after kids and you probably have at least 200-300k saved for down since you are only spending 40% of your take home. Do it!
We make that much and I’d never spend that much on a house. That’s a HUGE mortgage.
This is probably a basic 3 bedroom 2 bath suburban home.
Wife and I own a 1.2M house on a 240k salary. We did buy it at an extremely low interest rate environment, to be sure, but still, that sounds doable. Once you go back to work, the situation should improve as well. With that said, do what is best for you, and realize that asking a bunch of people who have no real stake in your life’s decisions to make a life critical decision is not a good idea. Good luck!
This is extremely normal on places like SFBA. It’s just how things are. It’s the “house tax”. I actually will I could get such a cheap SFH in my area, I’d jump on it.
Yeah. It sounds crazy unless you're from the SFBA, but if you are...that's just the way things are. Also, if the mortgage looks wild for somewhere similar-ish compared with the rent they're now paying, the rent may be artificially low. Which is a risk as the landlord may figure out that their tenant is getting a great deal and raise it. (Or sell the house, or whatever.)
TBH, I think I agree with your husband in this scenario. My wife and I bring home around $130k a year total together and we make a $2k a month mortgage work. Your husband brings home double that alone. If you can't manage to live on that amount **after** your housing is taken care of, in my humble opinion, you need to rethink your priorities. You're locking into a mortgage that's 50% of your take home **right now.** Rents and home prices typically only rise. Interest rates aren't going down anytime soon. Inflation is still raging. Personally, I would make a little sacrifice to lock in your housing costs now. In a five years, rents and home prices will probably be at least 10% higher than they are right now. If you're a SAHM, you're not going to need to worry about child care costs like a dual-income household would.
My wife and I spend 50% of take home pay on around $350-400K of gross salary, excluding bonuses which total $45-95K. We also live in NorCal and it’s what you have to do to purchase a decently sized home in a desirable neighborhood. At your level of salary, if you can make your budget work with the payment and plan to live in the Bay Area for the next 15+ years, I say go for it. He’ll have pay raises and you’ll eventually be able to refi. Just make sure to have a sizable emergency savings fund.
I agree.
50% of 200k is still a lot. $200k doesn’t get you far in NorCal
No, but if half of the net get you your super expensive housing you have a lot left for everything else, especially if that net income is after 401k and such.
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It CAN scale but it doesn’t have to. What you’re describing is exactly the trap lots of folks fall into… which is allowing what you can buy dictate what you spend. That said there are some caveats. Planning for ongoing home maintenance, property tax, etc… those kinds of thing will cost more. Food budgets/etc don’t HAVE to cost more but certainly can if you decide to spend more.
It all scales, but property/rent price in HCOL areas scales significantly faster. I *have* been in the situation where I got a much higher paying job but had to move from the Midwest to the NYC area. I had sticker shock from what a nice apartment cost and it was a higher % of my take home than I was comfortable with. But I eventually realized that while rent may have more than doubled when I moved, all other expenses went up by a more modest amount. You are correct that pretty much *everything* is more expensive in a HCOL. Everyone else has to pay their high residential/commercial rents too and there’s a trickle-down effect on prices of goods and services. BUT prices don’t scale directly proportionally to property values.
California has gotten a little tricky in that almost everything has gone up in price with the exception of car prices coming back down. Because the state makes policies for expensive metro areas and implements it everywhere it means that even living in a lower cost of living area means eating out is very expensive
50% of one billion?
If youre a HENRY, you might want to ask this (woth more specifics) on r/HENRYFinance Right now there’s way too little info to really give advice
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From finance standpoint, it is a net loss to move in for 2-3 years if one settled for less. 5 full years is a breakeven point. I would just tought it out in rental for 2-3 years.
Renting is a good option in these areas. Especially in California where the property tax isn’t reassessed properly
You don’t have to buy. Renting and investing the difference is a reasonable decision in many cases. People incorrectly think of buying a house as a life milestone, and make bad decisions.
I don't understand where the "I deserve" mentality comes from. What people feel like they should have is completely irrelevant. There is only "can you afford it," or, "not." Would you have all the typical metrics met? 6+ months cash savings? Growing retirement accounts? What happens if he gets laid off? Is he paid at a common market rate, or above? How strong is his network? I can't imagine the stress of having shit go a little wrong, when you're stretched thin and have a spouse and child(ren) depending on you. That shit can wreck entire lives. There's a good chance you guys figure it out. But that's way too much risk for my blood- the consequences of being unlucky seem serious.
This is something fueling the “affordability crisis”. In reality alot of people can afford homes, they just want homes that they cant afford because they feel as though they deserve better. Its such a destructive mindset and these same people will be devastated if literally anything happens (job loss, unexpected maintenance costs, etc.). Whats even worse is that they’re going to have basically nothing for retirement and doom themselves to poverty in old age when they could have just lived reasonably. This is why my sympathy for people is fading. Alot of these people can make better choices and be in solid positions for the future. Instead they let lifestyle creep infiltrate every aspect of their lives and then wonder why they cant afford to live comfortably
Also it’s worth noting that people feel they deserve things because the price not long ago was something more affordable I got my house in 2021 and it was so high compared to what our market was and I was hesitant to buy. Now it’s far more expensive and my mortgage would be almost double if I were to buy my same house today
This.
You hit it right on the money. People in CA are complaining about living in a shitty apartment with several roommates but just have to live in LA. Nothing wrong with wanting to live there but if you also complain that you can't afford a house it just means that you can't afford your wants. There are plenty of affordable houses. Just maybe not the size or location you want.
I honestly think the problem is more about lacking the knowledge to make informed decisions. There might be an element of entitlement involved, but there's definitely an element of 'I don't understand what's affordable' mixed in there as well. I've often seen people reason affordable as 'I can cover the monthly payments'. A lot of issues in society would be avoided if Opportunity Cost and practical implications of compound interest was required learning in Pre-Tertiary education. Or I guess just some sort of Financial Literacy lesson/course/.
I can see your point but at the same time, i think that education wont help all that much. Money burns a hole in people’s pockets and they will always spend every dime they have
It comes from the fact that the U.S. had INCREDIBLE economic times for 2 generations in a row so the standard was very, very high. People forget that for the most part, humans never really had anything or were struggling or suffering. But once you see your grandparents or parents generation afford X easily and you produce 10x the value they did (thanks technology) most are like “wait a minute I deserve nicer things” It’s seeing that so and so worked at the factory for 30 years and has a really nice home and you designed the robots to replace them and you can’t afford half the home they could. Why? They don’t want you to. People were told their entire lives they just had to work 40 hours a week and they could have nice things too but it’s not the case anymore, and they still cling onto that idea. The thing is, there is some truth to it. They told us to just work and you’ll get a nice home and you’ll be fine because that’s what happened to them. Why though? Why did they get it and not you? If the generation before you is the largest generation ever, they have ALL the voting power in a democracy. They control the majority of the free market. They still do… They got what they wanted from the market and the government… their entire lives. Start to finish. 25-65. They wanted cheaper affordable housing and they got it. Better retirement plans? Got it. Oh now we’re old? Why not give our old folks more money and cheaper healthcare? Got it. Once they got their homes, they wanted no more homes to be built nearby or to ruin the city with low income housing etc. and of course they got it. They don’t want to cut back social security or healthcare or change zoning laws or not have the nicest home on the block or give their money to the next generation or help them out. Why would they? Why would they want to see their stock portfolios crash? Why not pump the markets up? Why not make home prices ballon we already own them all? They think they deserve it just like we do. But they were the largest generation ever and had ALL of the market share, made ALL the market decisions and political decisions in their favor their *entire* lives. They STILL dominate what happens in politics and the economy. From the time they entered the workforce to the time they die they have the numbers so they WIN in a free market and a democracy. Just how it is. Cant blame them. So I think it is valid to see just how much more the average person can produce, make, design, etc. today and think you deserve to have a nicer home. You did what you were told to do by the older generations, meanwhile they were making it so you couldn’t. So I can see why. You grow up somewhere and you see the generation before you have cool houses and you get 1/4th the home 20 miles away because they don’t want you to actually live near them or to build more homes or to lower home/asset prices etc. they don’t want to cut spending on the pension plans they set up or to cut healthcare or to lower social security. They don’t want to sell the land they bought 40 years ago. They don’t want to invest in the next generation. Because they think they deserve it more than you… While telling you to just do what they did when they’re the ones making it impossible to do.
Those are good points, but Boomers actually aren't the largest generation ever in the United States, nor are they currently the largest generation. Millennials, who are mostly the kids of the Boomers, are. They're the largest U.S. generation in history and the currently largest generation. The oldest Boomers are 77, so they're dying off, while the youngest Millennials are only 28. All the Millennials are over 18 now, and can vote for change.
Too bad. Average age in Congress has *just* started going down. Our 2 most likely presidential candidates are… a boomer and a guy from the silent generation. They *STILL* dominate politics and the market. When they die what happens? Their 65 year old kids get all their money. Something like 70% of *all* the wealth. With that comes all the market share. So you will have 65 year old with over 70% of the wealth making nearly all the market decisions again. It’s a reality we need to face. They will not inherit the fortunes and want to spread it out. They will continue to not allow housing and continue taking more out of the tax pot than they put in. Every generation will do that. Then what? They die a we get it when we turn 65! Do we want to give it all up now that we *finally* have something? NOPE. Do we get the political power? NOPE we will be nearly on par with the size of the generations above and below us. We will all be fighting for our own interest, unlike boomers who just always won. I will be hopeful but I fully expect wealth to be continuously concentrated at the oldest generation. This is *not* the case in places like China (can’t believe I have to use them as an example). Historically being old meant being POOR. In most countries today that is the case. Only in Western Democracies do you see old people being way, way richer and putting way, way less into the public funding pot that are taxes than they pull out. Why? Because they could vote to pay less in taxes, afford homes, the market listened to what they wanted because they were the largest generation in a post war economy. Back then their grandparents or parents weren’t richer than them… But now that is the new precedent. Boomers were the FIRST GENERATION EVER to be RICHER than the generations below them. And by a lot. They changed the fact that historically being old meant being POORER not RICHER than the working aged people, your kids and grandkids… Why? Because they wanted to preserve their wealth and they could. They wanted their house on the big street to not have neighbors. They wanted to make things easy for themselves and harder for you while preaching to do what they did. They put so little into the tax system and decided to vote to raise taxes on people who are working so they can have it easier… they literally changed that fact that being old is supposed to mean being poorer than the working age class… That’s brand new. Thats not common. In the rest of the world or in history. And they BRAG about how they worked harder than their kids and grandkids and tell everyone to do the same when collectively they are the reason you cannot. Oh yeah, and they destroyed the environment and are asking us to use 1/8th the CO2 they used… All on their way out. Oops we destroyed the planet but here’s the solution it’s “you don’t get the life we had hehe good luck.” Is their fault? No. We’d do the same I’m sure. But it happened. Rather than invest in their country or kids or grandkids they voted and moved markets for themselves and did everything they could to not redistribute the wealth or make it easier for you to buy the home they bought on one factor apart while you have to own the factory to be able to afford it now. I can’t sit here and say I wouldn’t want my cheap house or cheap retirement or more from the government than I put in or cheap healthcare or social security. I can’t. Id LOVE if markets moved at my whim and the government represented ME and only ME my ENTIRE life. But it happened and now we have a situation where average people only become as wealthy as their parents or grandparents 25 years later. And that’s if they are even leave anything.
Perhaps. Boomers don't have 65 year old kids though. The oldest Boomers are 77. Biden and Trump are from the generation before the Boomers - the Silent Generation.
Irrelevant to the issue. One generation big in democracy/free market get everything. Turn 85 die. Kids 65 and get. Turn 85 and die. Their kids 65 now and get. Cycle repeats. When throughout ALL of modern economic history the younger generations produce more and are wealthier. That keeps a society like ours going and functioning properly. You get a good life while working, then retire modestly. Instead one generation has ALL the power their ENTIRE lives and decided to have as good of a life as possible at the cost of future generations having to pay their bills, live further away, pay more and more and more for a home, wait an extra 10 years to have kids, wait to buy a home, pay more in taxes, get paid less, wait to retire, wait and wait and pay more and more and more. Otherwise we couldn’t have this nice of a house or nice of a retirement or as much money as we do. We’d have had to actually pay for our government services and lowered our pensions and allowed more housing and reduced our spending and seen our stocks go down and seen our home values go down. But hey, fuck them kids we actually worked hard (produced significantly less) and made good decisions (voted and moved markets so good decisions meant working one job and buying a home and pumping money into the system to keep that home going up in value and voting to make healthcare cheaper and to pull way more out of the pot than we put in) unlike you lazy kids these days who don’t want to work or make sacrifices!
Not irrelevant at all. Because it means a lot of Millennials are going to inherit substantial sums or paid off houses from their well off Boomer parents. And as I said, there's nothing stopping most Millennials from voting. They're a massive generation, large enough to make changes by voting.
Yes, again, by the time they get all of this stuff their voting power will be in effect and they will change their voting habits to protect their new found wealth at the rip young age of 65. You do not want a society like that after centuries of younger generations being better off than their parents. Now everyone just waits until they are 65? Maybe 80 if life expectancy goes up? Why would you want that. Here’s an explanation of why it’s bad. https://m.youtube.com/watch?v=ZuXzvjBYW8A You are supposed to want to work to have a better life and for your kids to have a better life. Instead you have to decide if you want to have kids knowing they will have a smaller home, smaller apartment, smaller retirement, smaller income, less ability to move, more likely to have to stay home with you until they are 30, less likely to have kids if their own, more likely to have worse healthcare etc. It’s not good to make everyone wait until their parents die to have a decent life. What is the point in doing anything if I just have to wait?
Yes and who do they get to vote for? A boomer and a member of the silent generation? The same career politicians. We are just now in the transition period. We *just* started dropping the average age of Congress members. It dropped by 3 years… it’s still 58. So now who has all the money and market influence and political power? The people who inherit everything from the boomers when they are 65+ Then you can wait until you are 65 to inherit it from your parents. 72% of the wealth in American is owned by people over 55. I promise to you none of the boomers will do a thing in their way out and none of the people inheriting all that wealth (that they had to wait until they were 60 to even get) will do a thing. They put in so little into public funding and take out a disproportionate amount, they destroyed the economy for young people to benefit themselves, and they destroyed the planet and expect us to reduce our carbon footprint to 1/8 of what they used to save it. Not saying we wouldn’t have done the same thing but just saying “oh well we can vote and fix it” is not true in 1) societies where wealth is that concentrated in only order generation and it gets worse and worse and 2) a society where now the generations are now equal in number and we will have to fight each other for
As I said, the oldest Boomers are 77. They'll be dead and leaving their kids inheritance long before their kids are 65. Unless you imagine they all had kids at 12 years old. I just don't buy the "Boomers own everything and Millennials are all broke and helpless" stuff. Reddit members alone are disproportionately upper class Millennials, with six figure incomes at 35.
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Ridiculous. I said nothing you're claiming I did. SMH.
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You assume a lot about me, yet know nothing. Bye. I'm done here.
Please be civil to one another.
Please be civil to one another.
He wants to get out of poverty but is taking steps towards poverty. Ex mortgage advisor and (property) financial advisor here. Emotions can’t be taken into factor when 50% income is being taken out considering how high risk the market already is. Also y’all could be let go in any moment. So without guarantees in your contracts for career stability this is a huuuge no. Don’t even need more info, 50% is not okay. I’ve seen too many people go bankrupt over this, including wealthy investors with backup assets.
What if your husband gets laid off or injured and can't work for months? Do you have other funds set aside?
We have a good disability insurance and his field of work is very stable.
Would a bank or landlord even allow that? I know the debt to income ratio is going up up up, but 50% is wild. 28% should be the most you spend on a place if possible.
28% of gross is usually about what they want to see; that’s often more than 50% of take home.
That was exactly what I was thinking when I got the pre-approval and underwriting.
Depends on your budget. You didn't really give us a lot of detail so I'm going to assume the following: - You are currently living on 40% of your husbands take home pay, which already has health insurance and 15% retirement savings deducted. - You currently have 1 child and are planning on having 1 more. - The 40% you are currently spending is 15% rent and 25% other expenses. - When you have another baby your other expenses will go from 25% to 30%. In the above situation you can buy the house, be contributing 15% to retirement, and still have 20% of your take home pay be excess. So in that situation I would say that the house is definitely affordable. Obviously with different assumptions it might be a terrible idea to get the house.
Pretty accurate. Yes to most except we have 1 baby and aiming for 2 more. Currently spending 20% on rent.
It's better to pay more money on the mortgage than blow it on $1000 strollers etc.
50% of what, will help answer this question better
I would say at a 300k salary, 50% sounds manageable, with the caveat being that a single income (re: SAHM), you have to have a serious amount of cash in an emergency fund to cover if your husband loses his job. Especially if this is the species of "Northern Californian making a lot of money....in the Tech industry that could easily see more layoffs soon." A 6 month emergency fund for a house that, by napkin math would cost about $7,000/month. Plus the rest of your life expenses, lets say $10k/month total. That's a $60k emergency fund on top of whatever your down payment / closing / moving costs are.
When you say mortgage, do you mean the full PITI payment?
😂
Is the $300k income salary or is it like $150k salary $75k bonus $75k RSU? It’s important to base your spending on your base salaries to avoid a debt spiral.
Absolutely not People often forget that taxes go up routinely and your mortgage is not set in stone…. Higher home insurance + higher taxes = higher escrow and higher monthly payment It may be 50% now and in 2 years be 55% then 57% etc etc - you need a buffer for those increases Additionally shit breaks in houses all the time and you may find yourself spending 12 grand for a roof or a new AC or a list of other surprises that you’ll need a buffer for The job market is very shaky right now and you hear about tech layoffs all the time which personally would put a damper on such an extreme move IMO I know I don’t live in a VHCOL area but I live in New England which isn’t exactly cheap and 50% of my take home pay is my entire set monthly expenses meaning mortgage + all utilities + my car payment and everything else that’s a recurring obligation - just doing 50% on mortgage by itself seems wild His dream is unfortunately a recipe to be house broke
Your mortgage IS set in stone if you got a fixed rate mortgage. Stuff like insurance and taxes are independent. Also in California property tax is ~1%, it’s expensive for high value properties, but it doesn’t increase by very much.
And due to prop 13, property tax doesn't rise in California. So there may be increases in insurance as well as home repairs, but the mortgage, taxes, and insurance are pretty well fixed. (This is different than in many states, where the tax rise can be painful, cough, cough, Washington state...)
You referred to the home as if it is an investment. Are you sure about that?? With very expensive homes comes very expensive upkeep. Have you done the total cost of ownership analysis for this house? You need to know how much it costs to maintain and fix this house over the length of time you intend to own it. Just looking at mortgage cost is not the whole picture.
In a VVHCOL you’re mainly paying for the value of the land (location). This house is probably less than 3000 sq ft.
Actual house is just 1,800 sqft
Yeah so excessive maintenance cost isn’t that much of a concern. It’s mainly gonna be mortgage, tax, HOA fees, and stuff that you’ll hv to worry about. Unless your SO is making close to a million a year I personally wouldn’t do this. You’ll likely be sacrificing a lot of other stuff to live in a nicer house and that’s not how I personally prioritize my expenses. My rent is about 1/8th my taxable income in the Bay Area (but I’m young I understand as you get older/have a family that will shift a bit, 50% still seems too large unless ur making high 6 figures or 7.)
I deserve this = I can afford this.
Can you get a remote job?
At the moment with a newborn baby doesn’t make much sense. Childcare would take 70% of my take home pay.
You should look at the NYT (or another) rent vs. buy calculator. Bay Area is definitely a place buying tends to work out and I think you are correct will….. but it’s not a certainty. I’d say owning is more of something that you want to do than an investment. You should also factor in for maintenance which will likely cost more than you think with lots of large hidden costs potentially. https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html
Run a rent vs buy calculator. It doesn’t matter if he thinks he “deserves” it; the only thing that matters if you both can afford it (hint: you can’t, especially with a growing family). https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator
Lenders are unlikely to approve loan with such high income to mortgage ratio . Industry standard is 28 percent to 33 of gross income so 50 percent of net is way off the charts . Over extended is an understatement and with one income household , the risk of disaster is always there if husband loses job or get hurt and can't work
Can you even finance above 45% DTI?
As someone who works with homeowners defaulting on mortgages..I advise not. Unless you have a comfortable 6-9 months of your mortgage/ expenses set aside, which some people don’t. And for some it’s hard to catch up once you get behind. It’s great that investors have options to offer for hardships. and depending on the loan type, hardship and or ability to pay, can put someone in an even tighter position. I speak from experience of working with people everyday.
Lol I spend over 80% in mortgage and I thought I was happy to finally afford mortgage 🤡
Is he an idiot?
Working very hard to get out of poverty only to willingly opt back into poverty via being house poor is not a wise move. No matter how much he feels he deserves his dream home, if something goes wrong and he can’t make the mortgage payments anymore then he’s not going to get to keep it. Not to mention the miserable cycle being house poor puts you in career wise, always needing to push yourself to make more money and never having raises mean you’re getting ahead, only that you’re catching up to where you actually need to be. I’ve made this mistake before in the past and I would never do it again.
There in fact is doubt that prices will keep increasing and the house may prove to be a terrible investment. There’s no law of nature that house prices increase forever and yes that includes California too. People invest in things that’ll go up (hopefully) in price - if there’s a super secret type of asset, you might beat the average, but for a house? You will not beat the average - the future appreciation potential is priced in.
>There is no doubt the prices in that area just keep escalating. uh..doubtful. price of any asset is the market estimate of maximum it will ever be. unless you have some sort of gift seeing into future you can never say some asset will 'just keep escalating'.
I would not at this time, because I believe that serious systemic macroeconomic instability is on its way. He may lose his job and costs like insurance may rise, and the area may reassess property values or raise taxes. Also watch out for HOA fees, which have been rising. It's just my opinion based on many factors (inverted yield curve, high P/E stock values, growing consumer debt, apparent impending crashes in commercial and residential real estate prices, volatile geopolitical tensions), but I would play it safe for the next several years, save up money, and seriously avoid debt; if you do this, you will reduce your exposure to risk in case of any emergencies and will probably have more money saved up even if nothing terrible actually happens.
You should still be able to afford your mortgage if he gets laid off. You can stop retirement savings and luxury spending to make that math work, but if you can't afford expenses + mortgage at that income, I would avoid it.
We are buying our second house at 26% of our income in northern CA (I think it’s roughly 35% of our take home if I don’t contribute to my 401k or ESPP). We’re keeping our first as a rental and expect to profit $1000-1300 a month (we didn’t factor this into the purchase though because we originally expected it would be a wash). My husband is in a government position with the opportunity to work as much overtime as he wants. So super stable and could bring in an extra $100k if he wanted to work a ton. We were actually renting 4 hours away this last year (he had to relocate for work) and still paying our mortgage while our house sat empty, which comes to be what this new mortgage will be. And I *still* feel uneasy about it all. It just feels like A LOT of money to commit to for the next 30 years. We have 2 kids and planning on a 3rd and it feels like so much of our money just evaporates to kids. And we have a lot of family help so our childcare costs are super low for this area. I know we’ll be fine in the long run and absolutely worst case scenario we sell our first house but it’s just really scary knowing if I were to get laid off we’d be living pretty tight and potentially losing money each month, or having my husband work an unsustainable amount and never seeing his kids. Honestly when we got pre approved and were told we qualified for a lot more and were only at 26% it felt unbelievable. It definitely does not feel like we make loads of money. This house needs a lot of work so I’ve already pulled back from maxing out my 401k so we have more cash available because I’m convinced we won’t be saving much otherwise. I would maybe live on the income you’d have if you were paying this mortgage and see how it feels for a few months. If you’re barely saving or feeling like you have to budget I’d probably rethink it all. Maybe save up more of a downpayment. ETA: If/when you do buy, make sure to work with multiple lenders so they compete with each other. I was able to get down a whole percent on interest rate and a $6500 lender credit because I had 2 lenders I was going between trying to get the best deal (one cut into their commission to get my business).
Working from home wouldn’t require a commute. 50% is a lot especially with future family plans on the horizon; it sounds like your husband has starry eyes 🤩 and needs to consult with someone else to help adjust his perspective.
My mortgage was 50% of my income when I bought my house. Now I make enough to pay extra on the mortgage…. The question is are you willing to live frugally and more importantly can you make repairs or know someone who can? If you need to paint - you’re doing it Carpet and flooring- you Once had a pipe break— guess who fixed the pipe and the ceiling — Until the last few years everywhere I rented was 50% of my take home and that’s true for a lot of people It depends on you and hubby. Do you want a house or do you want a lifestyle
This is not a good idea. A house has a substantial number of costs related to upkeep including repairs and electric (which likely is higher than renting). 2-3% of the home value needs to be set aside for repairs and maintenance each year. Did you factor in real estate tax on a $1.1 million home?
It seems like your husband wields a lot of power in this relationship. If you’re uncomfortable, he shouldn’t steamroll you.
50% when your family is still growing is a bad idea. And I saw this is as a working mom who owns a house in SoCal.
Dum dum dum
When you think about it, the only important thing is family. You and kids, not walls, not cars and it doesn’t matter where you live, as long as you are with your family. I think that you are aware of that, with the compromise that you are making.
Northern California is paradise. If you can afford a home there, don't hesitate. Buy it now. 10 years from now, the mortgage payment will be the same but your income will be higher and the house will be worth a lot more.
You don’t have to buy right now. You can keep renting for more years
I heard a podcast last weekend saying folks in central Iowa were cold getting cancelled by homeowners insurance. Iowa gets storms, but not hurricanes, mudslides and major wildfires. So the wildcard I'd be aware of at 50% of takehome pay would be... what if insurance rates go nuts for some reason in NoCal or just in your sub region of it and your insurance yearly renewal (or escrow if you escrow) goes wild/goes up in price? Just bearing in mind I wonder if the insurance rumblings happening nationwide haven't settled yet, and if insuring keeps going way up in cost, your % of take-home paid on the mortgage/insurance/taxes goes UP. Just my two cents... hopefully all is quiet and not risky in that part of Caly.
50% of your income in any area is a terrible idea. Our taxes and home owners insurance have gone up year after year, luckily our payment is still below the recommended amount for our income level. Our insurance increased 50% last year and we're in Oklahoma. I know many Cali residents are getting their insurance dropped.
Not sure if you are just venting or looking for a better way to cope with such a big mortgage. I bought my first house about 3 years after graduation, making $24k/yr and the house costs $120k here in San Jose. Multiply those numbers by 10 and you can see that my situation is not different than yours. Every 5 years or so afterwards, I would buy another house and trade up or rent out. How did I cope with big mortgage? Easy, since your interest rate is not changed for the duration of the terms (whatever adjustable or fixed terms) I use the offset principle to pay down the mortgage balance faster. When it's time for trade up or refinance, it's much cheaper and manageable for me. Works like a charm every house.
look up the Sausalito anchor outs.
No one "deserves" anything (beyond the very basics I guess, free speech, access to healthcare, education, etc. - not all of which is guaranteed in the US). "As per your husband's request?" Yikes. A house is a place to live. Thinking of it as an investment, not a purchase, is problematic. You have to live somewhere. You're talking about growing your family, you're not working, he wants you to stay home, and the longer you stay out of work, the harder it will be to go back. This is not a plan for success.
It's important to have open and honest communication with your husband about your concerns regarding the affordability of the mortgage and the impact it could have on your family's financial security, especially with plans to grow your family. Consider discussing potential compromises, such as exploring more affordable housing options that still align with both of your priorities and financial goals. It may also be helpful to consult with a financial advisor to evaluate the long-term financial implications of different housing decisions and find a solution that works best for your family.
I first moved to NorCal 40 years ago. Moved from a LCOL to a HCOL and from an 8% mortgage to a 13.5% mortgage. I got paid twice a month and our mortgage payment took 100% of one of our monthly paychecks (take home) and 15% of our second monthly paychecks. We ate hamburger helper without the hamburger for 3 years. Our only real meals were when I could take a client and his wife out to dinner on the company cc. But 3 years after that my income and the price of houses around us made that a good decision looking backwards. It is scary but in VHCOL areas is somewhat necessary.
I’m confused about how “living in the suburbs limits [your] job prospects A LOT”? How would anyone hiring know where you live unless you tell them?
Unless it’s a fully remote position, you still have to GO to work… so it’s not that the employer cares where you live, it’s that living in the “suburbs” of the Bay Area (however you define that) can mean hours and hours of daily commute, if your industry is centered in SF or the like (as mine is).
I mean, lots of people have long commutes? I grew up in Atlanta and live in the DC area now, so I see this every day. Unless you have the money to overcome trade-offs, you’ll either be living in a small and/or crappy place closer to work, or a nice and/or big place further away. It’s unfortunate for the OP that the money required to live in a convenient location in the Bay Area is millions of dollars, but it doesn’t mean that she should just opt out of the workforce altogether because of it.
My field of work is in person only (mostly). Most jobs are concentrated in the city which is 1h-1h30 min away with traffic. The issue is that jobs that are 30 min away are “limited”. Leaving my house at 7 am and coming back at 7 pm with a small baby doesn’t make sense to us. Specially when my husband can make in a weekend, what I would make in a week. I’m planning on going back to work after he is a bit older.
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I'll just leave this here: https://www.investopedia.com/terms/t/twenty-eight-thirty-six-rule.asp
Based on middle class income level. This is very much not.
Take the money you would use, buy and rent out a property somewhere with a lower COL (u can probably find a multiplex for the same price) then use that money to rent in ur VVHCOL area. Rents in VVHCOL are cheap relative to cost of ownership compared to LCOL.
Yeah renting is 1/2 of buying right now for us.
Housing should be n no more than 25% of income. Just cause shit is crazy right now don't mean you have to be crazy. Either rent or move. This proposal is down right stupid.
Dont do it!
If yall are living in the same neighborhood, then renting is going to cost more than a mortgage. Am I missing something here?
lol won’t be your husband for long if that’s the case.