Can/should we afford a $215,000 house

[skives]

Straight forward question. $215,000 is asking price. I know most here would say have down payment of 20% but I'm basing this question on an rural development loan that lets us borrow 100% and no pmi.

Gross combined income yearly- $76,000
Savings - $30,000
My 401k - $75,000
Wife's 401k - $6,000

No debt what so ever. No kids either.

[feh]

Nope.

[skives]

Nope.

Can you explain?

[Fishindude77]

After taxes you probably net around $60K take home. In my opinion a $215,000 mortgage is a big stretch for someone at that income level. It will take 1/4 of your monthly take home pay just to pay the mortgage for 30 years. On top of that you will have real estate taxes, home owners insurance, home maintenance and upkeep, furniture to fill the place up, tools to care for the place, lawn and yard care, etc. Just because you can get a big loan without a down payment doesn't mean you should do it. My suggestion would be to keep saving and look for something cheaper that you could put a 20% down payment on.

[feh]

Can you explain?

One rule of thumb says price of house should not exceed annual income multiplied by 2.5. You're over that limit.

$0 down payment is also a red flag.

[disneysteve]

Rule of thumb is 2.5-3 times income so you're okay there.

However, that also assumes a 20% down payment.

DO NOT buy a house with nothing down. Just because you can doesn't mean you should. Since your question asked "Can/should" then I vote a big fat NO! Maybe you can but you definitely shouldn't.

Save up the 20%. Then you'll be all set. And don't forget to also have a 6-month emergency fund in addition to the down payment. Owning a home is expensive and will involve a lot of stuff you haven't though of or won't expect.

[skives]

Ok let me pose this question then. Our lease on our apartment is up at the end of July. Should we sign another lease or pay $50 more a month to not be in a lease so if we do find a house in our price range we can buy it? We can get out of the lease it just starts at $1,300 if you have 11 months left on the lease and goes down $50 a month I believe.

[autoxer]

...to not be in a lease so if we do find a house in our price range we can buy it?

How quickly will you be able to save up the 20% down payment?

[feh]

Ok let me pose this question then. Our lease on our apartment is up at the end of July. Should we sign another lease or pay $50 more a month to not be in a lease so if we do find a house in our price range we can buy it? We can get out of the lease it just starts at $1,300 if you have 11 months left on the lease and goes down $50 a month I believe.

Seems to me you are more than a year away from having a down payment saved.

[skives]

Seems to me you are more than a year away from having a down payment saved.

Breaking down the $30,000 in savings. $3,200 is emergency fund and $26,800 is for a down payment.

[Jluke]

Breaking down the $30,000 in savings. $3,200 is emergency fund and $26,800 is for a down payment.

Your EF will need to be much larger than 3k when you buy a home.

I suggest you list out your monthly budget and expected budget as a homeowner. that could help get you on track. I saw you save $450 per week in another thread.

No reason to include your 401k amounts in this discussion.

[skives]

Your EF will need to be much larger than 3k when you buy a home.

I suggest you list out your monthly budget and expected budget as a homeowner. that could help get you on track. I saw you save $450 per week in another thread.

No reason to include your 401k amounts in this discussion.

Yeah we save $450 a week. $150 to EF and 300 to down payment fund.

[rennigade]

No..do not buy it...its out of your price range at the moment.

Like others said...you should have a 20% down payment + 6-8 months of expenses in a savings account. IF you buy a home your expenses will be at least $2000/month. Lowest amount you should have is $12k to $16k in an emergency fund...but probably more.

You have years to go to reach that. Nothing wrong with renting...ive been doing it for 10 years and aggressively saving.

Either that or you need to look for a home priced much less.

[skives]

So should we sign another lease? Our actual price range for a house is $130,000 max.

[Jluke]

So should we sign another lease? Our actual price range for a house is $130,000 max.

Given the limited info, sounds like you should sign a lease.

while you may think you are throwing your money away on rent, when you own a home with a 30-year mortgage, you are simply throwing your money away on interest for the first many years (tax deduction aside, of course).

Now IF the 130k homes are appealing to you and you plan to stay in a home for appx 5-10 years, then you may want to look at that price range.