How much $$ house can I afford?

Facebook Mitchh
May 28, 2018 23 Comments

My current salary is around $400k including RSU (without accounting for stock appreciation). Wife earns $150k but she is going to go back to school in a couple of years , so don’t want to count her salary atm.
If I sell all my investments (except 401k) + cash = I will have about $600-700k.
Online calculators suggest that I can borrow $1.5m with this income and afford something around $1.8m assuming I put $350k down (hence leaving about $350k as shelter) ... does that look financially sound?

We don’t have kids yet but will have in an year or two.

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TOP 23 Comments
  • Facebook public
    That would be super conservative. 1.8 would only cost you ~8500/month. Well below your ~20k take home per month minus your wifes ~7.5k. No need to blow the full budget but pushing a but higher will get you a much nicer house and location.
    May 28, 2018 8
    • Facebook Mitchh
      OP
      Most comp is rsu at amazon? Due to initial grant and stock appreciation?
      May 28, 2018
    • Facebook just a swe
      Are you guaranteed to have a job for the next 5 years at the same income? Awfully risky I think.
      May 28, 2018
    • Facebook Mitchh
      OP
      Yeah it is risky. How can you ever be sure about something like that?
      May 28, 2018
    • Barracuda / Sales
      YourMama

      Barracuda Sales

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      YourMamamore
      Banks know way more about risk than any of you do. There’s a reason most of them won’t let you count RSUs on a mortgage application.
      May 28, 2018
    • Facebook public
      So much bad information! Yes amzon comp is most rsu with a salary cap at 160 to 180 and backweighted vesting. Lenders absolutely do consider rsus as long as you have 2 years vested. No one is guaranteed a job or income but if you are ever sure about something there's no risk and therefore no reward.
      May 28, 2018
  • Cornerstone yNAq35
    IMO better to be conservative considering your situation.

    When calculating affordability use only base income, and then move DTI between 36-39%. If that doesn’t get you the house you want, consider investing outside the housing market until it does.

    Lenders generally dont include RSUs unless they’ve been delivered for years at a steady $.
    May 29, 2018 1
    • Amazon if else
      ^ This. Very well said.
      May 29, 2018
  • Proofpoint (+_+)
    Yes, that is fine. But you should pay down over time and have the bank do a recast in a few years
    May 28, 2018 3
    • Facebook Mitchh
      OP
      You mean refinance in a few years? Not sure I understand, what would be the benefit of that?
      May 28, 2018
    • Proofpoint (+_+)
      No, recast amortization. It is not well known but most banks can do it. Google it.
      May 28, 2018
    • Facebook Mitchh
      OP
      So it’s basically paying off lump sum towards your loan. This might be an option but probably the same money in an index fund would give me more returns so it’s debatable.
      May 28, 2018
  • Amazon if else
    Come with a number, if you are renting then move the difference of potential mortgage per month - rent to a different account and see if you can make do with the money you get :)
    May 28, 2018 0
  • Proofpoint (+_+)
    For jumbo I think you go better getting several quotes from banks. Brokers can't touch the rate I got.
    May 29, 2018 1
    • CBS Interactive / Other
      Calnadian

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      Calnadianmore
      Disagree. Broker was able to get us a jumbo from a credit union when big banks declined us. All bc we had high debt to equity ratio since we wanted to keep first condo as rental. We eventually refi’d with a big bank. If it wasn’t for our broker, we wouldn’t have gotten our second place with a jumbo. Third party independent mortgage broker that has relationships with all banks is best
      May 29, 2018
  • Amazon tzchar
    You could comfortably afford 2m+ as long as your job is secure
    May 28, 2018 1
    • Facebook Mitchh
      OP
      if tech goes down or there is a bubble burst, most tech jobs in Bay Area will be in jeopardy. Apart from that FB seems relatively stable and I have been doing decently well so far, no danger of getting fired due to performance etc
      May 28, 2018
  • Apple tuolumne
    Those limits sound reasonably good. I could have bought a lot more than I did when I had the chance, but I wanted to be really conservative and not overextend myself. But being conservative priced me out of the top zip codes I wanted to live in. Location location location. In hind sight I wish I extended myself further to get into my ideal location. I would have been house poor for a while, but my income would have grown to make it more comfortable.

    My point is focus on the budget to get into your top location. Your TC will grow unless you feel like you’ve hit your terminal level already.
    May 29, 2018 0
  • CBS Interactive / Other
    Calnadian

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    Calnadianmore
    Work with a mortgage broker. They’ll do calculations based on your liquid and paper assets, then tell you how much you can afford.
    May 29, 2018 0
  • Proofpoint (+_+)
    Yeah, it's the age old issue. Risky to buy and risky not to buy. I wish I had bought more in the beginning. But I did not know my comp would take.off.
    May 28, 2018 0