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First time home buyer

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  • First time home buyer


    I am new to this site and my wife and I are going to buy our first home in the next 6 months and appreciate any input. I am 35 and my wife is 30. We have no kids but are actively working on this We are fortunate to have stable combined income of around $700,000 gross.(I make $600K, wife $100K)
    We live in a High cost of Living area. We have $200,000 in retirement, $200,000 in cash for a down payment, and have paid off school loans and have no debt. We are looking to buy a long term home where we can raise our kids in an area with good public schools. We are budgeting $1-1.2 million and I would like to get a 15 year mortgage. We both come from middle class families are never thought we would buy such an expensive home, but in the area we live in it is the going rate for what we are looking for.

    We tend to be very financially conservative and thus the question- Is this well within our means?

    Thank you

  • #2
    As long as you feel good about your income continuing at that level you should be ok since you have no other debt.  I just caution you if the job is new to think about a couple things before you take on so much debt 1. There are three threads I read on this site this morning about practice problems and income dropping.  One is a large ER group that lost their contract, one is a radiology group with partners goals going in different directions, and one is an academic practice that their base salary is being cut. This can happen to people so think about it. 2. I think it is hard to know what kind of house you need before kids are conceived.  I am an Ob/gyn and lots of things can happen.


    • #3
      Hard to know, depends upon other goals such as how long you plan to stay there, if you plan to retire early, if you have other high-cost goals (such as helping your parents when they retire), etc. hatton1 has given you very good advice.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


      • #4
        We have 3 kids and are also buying our first home in the next 6 months. (My husband and I are both MDs, ages 32 and 34.) I just want to echo hatton1 above with not knowing your needs before kids. My dream house pre-kids is totally different that the house at the top of the list now. Things I would have never had as a consideration are now a deal breaker in houses we have looked at. Just something to keep in mind!


        • #5
          At $700k/year, a $1.2M home is downright frugal.   

          Be sure though of a few common sense items:

          1) you are confident of your earnings, not tied to incentive pay you will not achieve, good job security.

          2) you both really like the house and the area.  Just closing costs, commissions, etc. to sell would be large if you decide to move in a short time.

          3) you are very sophisticated on the market, willing to negotiate aggressively to get a good price.  You make or lose money on the buy, not the sell.  If you overpay on the buy you will never get that back.

          4) you have considered the upkeep, property tax, insurance, utilities, HOA, etc., as well as cost to furnish a big fancy house.

          And then yeah, is this house going to be big enough?  Something like four or five bedrooms sounds like a lot for your own house with room for an office, gym, room for the kids, until your first kid pops out and your house is swamped with kids toys, baby swings and rockers and bassinets and playpens and God-knows-what-else.  How many kids do you want?  Will they share rooms?  If you want 3+ kids, even sharing rooms, often that means at least a boys room, girls room and a nursery.  And that's just where they sleep.


          • #6
            If you have a middle-class upbringing, then why buy a house for $1 million?
            I would consider to continue renting, have your first kid. Then decide what kind of community you want to live in because of that time you're going to start looking at preschools, kindergartens, schools. School location will certainly affect your choice of where to buy a house and maybe tou will not go for the type of house you think of getting now.
            Are you living in Bay Area?


            • #7
              Read a couple of threads on this forum, especially ones in HCOL. Especially one about buying one in DC and another one with an in law moving in and having only one bedroom downstairs. See if it applies in your case.

              Make sure that at least one bed room is downstairs, two would be better.