How much I should spend on house? (Edited)

Microsoft Paanos
Nov 10 639 Comments

Update: Based on overwhelming feedback, we backed out from the p&s based on one of the contingency. The house is back on market.


TC = 210k
Spouse TC = 190k

Can I afford 2.2 MM house? Just got one after losing a few in bidding wars.

Added more info based on questions.

1. I am already pre approved so I can get the mortgage.
2. I am putting 20% down.
3. I know it will be bit tight but as my teenager says YOLO. And here is my rough math.
34k gross monthly income. 13k for house, 4k for 401k. 13k for taxes. 4k for other expenses. No other savings until our pay increases.

401k combined balance 1.05M. Taxable accounts 1.4MM. equity in current home = 450K. 529 accounts = 120k

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TOP 639 Comments
  • F5 Networks RRA
    You already landed the house and now you want to know if you can afford it? You got it backwards.
    Nov 10 5
    • Oracle / Product
      larrys_mom

      Oracle Product

      PRE
      F5 Networks
      larrys_mommore
      Lul, do you not make life changing purchasing decisions and then weigh the consequences later? Gosh, it’s 2019 for Pete’s sake!
      Nov 10
    • F5 Networks RRA
      I'm just old school. Probably the result of growing up during the Great Depression.
      Nov 10
    • Oracle / Product
      larrys_mom

      Oracle Product

      PRE
      F5 Networks
      larrys_mommore
      I was being facetious. You’re 100% correct in your thinking. Carry on folks!
      Nov 10
    • F5 Networks RRA
      I was also being facetious about growing up during the 1930s. :)
      Nov 10
    • Amazon mopfloor
      Some of us lived through the Great Recession. Remember that one kids? God can’t believe that was 10 years ago. I feel so old. :( .
      Nov 12
  • Xilinx yodadev
    Talk to a mortgage agent!
    Nov 10 4
    • LinkedIn ampz
      Most will say yes to close the deal
      Nov 10
    • Cisco
      🦙 Alpaca

      Cisco

      BIO
      I am the Alpaca. DM me if you want to cuddle.
      🦙 Alpacamore
      Smells like a 2008
      Nov 10
    • Xilinx yodadev
      Fair point ampz 🤨
      Nov 10
    • New / Sales
      microbiome

      New Sales

      BIO
      Seeking Fall 2019 or Winter/Summer 2020 internship referrals in Finance.
      microbiomemore
      This is like going to a dealership and asking a car salesperson if you should buy a car
      Nov 11
  • Apple travel4les
    You people are the reason for next recession, i ll buy my 2nd house then
    Yes you can afford
    Nov 10 16
    • SolarWinds AnEngineer
      It's not even "the norm" in the bay. Like I said, out of touch.
      Nov 12
    • Microsoft XyYh51
      Yea. I’ll sit back with the popcorn. When the housing market takes a big shit and everyone decides that they will rent instead of buy because lending practices have even more tightened, and home prices steeply drop because no one is buying ...I’ll sweep in and buy that 2.2m home for 800k... maybe even less. So keep buying those homes that will create more house poor individuals.
      Nov 12
    • Facebook public2
      How is it not the norm in the bay when it is literally the norm? Good luck, that would be awesome and would love to buy a ton if the bay ever sees a crash. Unfortunately I don't see any path towards that given the laws, lack of supply, and constantly increasing demand.
      Nov 12
    • SolarWinds AnEngineer
      Housing crash happens once a lifetime, not once every ten years, so good luck with that. 😆
      Nov 12
    • Facebook public2
      We haven't had one in several decades so maybe we'll get a black swan but yea very unlikely.
      Nov 12
  • Microsoft who_me?
    You should max out your 401k X 2 = $38k a year plus an IRA each. And how about a 529 for your kid - is college paid for? Do you want to retire some day or work forever giving a bank 5k+ every month in interest to live there. They key to financial security is to live below your means. You are barely going to get by with a whale of a house tied around your ankle. Don’t do it.

    TC = 750k (double income), $1m House, retiring at 55 in 4 years with $4M in the bank to have fun with the rest of my life.
    Nov 11 8
    • Amazon westsea
      Well done, who_me? If you don’t mind sharing, when you say $4M in bank, do you mean across all pretax and posttax accounts (such as 401k, IRA, Roth, Stock etc)? OR literally in your banks checking/savings account?

      We are in our 30s and hoping to retire in our early 50s.
      Nov 11
    • Microsoft who_me?
      Thanks. 4m In a mix of ROTH, 401K, IRA, mutual funds and some company stock. Only 50k in “cash” emergency fund. It is not hard to save if u live below your means - u can do it too!
      Nov 11
    • Amazon westsea
      Thanks for sharing, who_me?
      Nov 11
    • Tesla / Ops
      Bigballer

      Tesla Ops

      BIO
      bbb
      Bigballermore
      It’s not hard to save if your TC is $750k lol
      Nov 11
    • Microsoft who_me?
      Fair, but my first job out of college paid $20k /year 30 years ago and we started with $3k in savings. As our income grew, so did our savings proportionally.
      Nov 11
  • Microsoft ghakskdk
    Our TC together is 750K - we just bought a 1.4M house and money still feels tight. We are SO glad that we didn’t end up getting a 2MM one.
    Nov 11 9
    • Uber opjfs
      May I know your age???
      Nov 11
    • Facebook / Eng dnpm23
      This is the definition of humble bragging
      Nov 12
    • Arista Networks rBi1nrp
      750K TC and 2M saving seems low. Did you mean 2M in savings bank a/c? Because it if it is total investments it seems low?
      Nov 12
    • Apple / Eng wambam1234
      2m in savings and you feel strapped for cash. What is this. First world problems??
      Nov 13
    • Arista Networks rBi1nrp
      Depends on the volatility of the investment. If price fluctuates wildly or it is not diversified, then you would always be worried
      Nov 14
  • Samsung statarb
    Your household income is too low for a 2.2M home. If I were you, I wouldn’t buy a home for more than $1M. Put 20% down, finance the rest. Save some, travel some, have a life — remember you live only once and you need to cherish every moment instead of being held hostage by s mortgage.
    Nov 11 4
    • Cisco / Eng
      gosharks

      Cisco Eng

      BIO
      Hands on developer, hardworking, leader, influencer, extremely committed to work, like to learn new things, level head in times of pressure
      gosharksmore
      Travel is overrated, so is this new age phenomenon of 'making memories' and 'experiences'. Those are just lame excuses for people who don't want to commit or raise a family.
      If you really want adventure, try raising 2 kids and put effort to growing them into amazing human beings with education and skills. If u want a fulfilling life, take care of your parents in their old age and support your spouse through your life.
      These are very valuable parts of life which this YOLO generation misses the point.
      Making your life about travel and experiences at the cost of a legacy carry forwarded by your next generation.
      Nov 11
    • Dell LUHV04
      Cisco you brought up elephant in the room

      Most people know this , but hide away

      Instagram , Facebook has made people believe that unless you are posting pretty pictures , you don’t have a good life
      Nov 12
    • New / Eng aHDu88
      Cisco, you just proved the OP's point. They said save some, travel some, have a life. They didn't say "travel every second you can". Having a life means actually raising your kids and making memories with them instead of paying someone else to. They said save some so that you can afford to help take care of your parents down the road. You literally proved them right. All the things you said to do can't be done if you spend every waking hour working to afford a house that's way bigger than you need.
      Nov 12
    • Shape Security / Eng yCiH57
      Damn true.....
      Nov 12
  • Microsoft / Eng exsoftie
    I and my wife make roughly twice that and we don’t feel comfortable taking more than 2m for our house. I feel like putting too much of our income towards one asset class that doesn’t generate income.

    TC 600k
    Nov 10 4
    • Amazon xAmznTechy
      Too true! Also, It’s not just one asset class, it’s literally 1 asset! Owning a REIT or investing in a few RE syndication funds would be synonymous to investing in RE as an asset class.
      Nov 11
    • Amazon shaaadow
      One asset that is associated to local economy. Sounds like a great financial move ;)
      Nov 11
    • Volvo erzt52
      How can your TC be 600k? Head of engineering?
      Nov 12
    • Microsoft / Eng exsoftie
      Nope, a peasant FB E6. TC was around 500k when I joined last year. A couple of good reviews and some stock appreciation, it’s now 600k.
      Nov 12
  • Google gHKL27
    1.5M mortgage == ~10k monthly payment.
    Nov 10 11
    • Facebook public2
      Haba what fees are you paying?
      Nov 12
    • Google zlmA04
      It's definitely closer to 10 than 7 bruhhh
      Nov 12
    • Facebook public2
      6736 is closer to 10 than 7? Even once you add 1200/month properly taxes you are at 7900 (assuming the high 3.5% rate) which is significantly less than 10k. Still not sure where everyone is getting 10k from unless they are trying to add a ton of utilities and "fees" (hoa)?. At most I can round up to ~8k with a high end insurance plan?
      Nov 12
    • Amazon sekuro
      Property tax is more like 1750 in Seattle area, plus paying your bills will and insurance will bring you up a few hundred more so you are at 8800 with no maintenance. What’s your maintenance budget annually for a 2.2 million dollar home? Lol
      Nov 12
    • Facebook public2
      Oh seattle, much different. Prop taxes are higher and can increase yearly. Taxes should still be only 1% post deductions. Maintenance depends, it could be 0 or a ton depending on the house but is a tax deduction. Either way no one ever includes maintenance in the cost of a mortgage so again even at a high estimate of 8.8k that's not 10 :)
      Nov 12
  • Facebook TheBoz
    Sounds insane to me. I make 500k+ TC and my house was 900k and still too much. Are you counting on RSUs to pay your mortgage? If so, super bad idea. You will be eaten alive by stress now and by the recession later.
    Nov 11 8
    • Facebook TheBoz
      Clover I’m just really frugal and conservative. I can easily swing it right now but will have to sell when I FI.

      HCL I live an awesome life (Tesla, ocean view) specifically because I didn’t buy a 2.2m house at the top of the market!
      Nov 11
    • Facebook TheBoz
      Clover where’s your house?
      Nov 11
    • Clover Health AsQd52
      Mid Peninsula. We're aiming to FatFIRE as well but yeah, we'll likely not retire here.
      Nov 11
    • Facebook / Eng dnpm23
      house under 2x tc is too low. you are either single don't care about schools or have long commute or not in bay area. 4x sounds right in bay area
      Nov 12
    • Facebook TheBoz
      Seattle
      Nov 12
  • Pinterest / Data
    sovfh

    Pinterest Data

    PRE
    Facebook
    sovfhmore
    LOL! Bro! You should be looking at 1.2m houses. Imagine owning that 2.2m and one of you loosing a job. The mortgage and taxes will fuck you up.

    With a home that’s <= 1.2m you can save and invest so much!
    Nov 12 7
    • Apple ((🥃))
      I'd rather have peace of mind than "a piece of mind."
      Nov 12
    • Pinterest / Data
      sovfh

      Pinterest Data

      PRE
      Facebook
      sovfhmore
      Damn it.
      Nov 12
    • HPE tuxm
      Lol. Short and sweet, finally, Pinterest :)
      Nov 14
    • Apple ((🥃))
      Thanks for being a good sport, Pinterest. 🍻
      Nov 14
    • Pinterest / Data
      sovfh

      Pinterest Data

      PRE
      Facebook
      sovfhmore
      Thanks for evaluating my grammer.
      .
      .
      .
      .
      .
      .
      .
      Yea, that’s a softball right there.
      Nov 15
  • Apple ct.Thanos
    Don’t do it.. you’ll be hand to mouth, i have 500k+ family income and I took less than 1.4m and i have good assets left after buying home
    Nov 10 0
  • Citadel Securities bluetiger
    Seems very high given your household TC - I wouldn’t look for more than 1.5M
    Nov 10 0
  • EY UGKq81
    What is TC?
    Nov 12 6
    • Twitter / Eng ItsRon
      Taco Cat
      Nov 12
    • WeWork wWwa07
      Testicular Circumference
      Nov 12
    • Square / Product
      hardly

      Square Product

      PRE
      Google, Unilever
      hardlymore
      Total comp
      Nov 12
    • Twitter CkLj82
      None of the above
      Nov 13
    • New / IT
      spartan90

      New IT

      PRE
      Sopra Steria
      BIO
      Blah blah tech blah
      spartan90more
      Total Credibility (score)
      Nov 15
  • Veritas dogyear
    Lol not more than 28% of salary
    Nov 10 3
    • Apple travel4les
      33% is max I know
      Nov 10
    • Facebook public2
      Good rule of thumb for smaller salaries, doesn't apply here.
      Nov 10
    • Intel man utd
      Pre tax or post tax ( including 401k etc )
      Nov 11
  • Argonne National Laboratory amdN73
    OP this sounds dumb as hell. You’re going to be house poor. Wife and I make a combined $280K, our house was $200K, and the amount of free capital we have allows us to do whatever the hell we want without any debt. That financial freedom is better than any house.
    Nov 11 3
    • Alarm.com BiII Gates
      Where do you live and how long is your commute?
      Nov 11
    • Apple tmptng2no
      Easy to say when houses cost $200K where you live. That’s barely a down payment in the Bay Area.
      Nov 12
    • Google g0ogle
      Why wouldn’t someone want to spend $200k on a house?! But you’re in Illinois. This is the Bay Area. $200k literally gets you nothing
      Nov 12
  • Microsoft / Eng exsoftie
    I understand the YOLO argument. I and my wife just went through the same thought about buying a 2M+ home (but our combined TC is 900k).

    What killed the idea for us is this math:
    1. Assuming you like to put the money in REI.
    2. For 2.2M, you can buy 11 houses in the midwest.
    3. The total rent income will be around 15k/mo
    4. Even after property management fee, repairs and vacancy, you will still net around 12k/mo. Note: not counting mortgage payment here since it's roughly the same for both cases.
    5. Assuming the houses appreciate at the same rate (which you can argue either way), it's 12k a month income you will be "losing" by living in your own 2.2M house. That's 144k a year different and rents only go up from here.
    6. As an icing on top, those rental incomes are practically tax free if you know what you are doing.
    Nov 11 9
    • Twitch -4+8*8!3-)
      You are going to live in the finest memory care facility money can buy when your children sell off all those investments for you
      Nov 11
    • Arista Networks rBi1nrp
      At 900K TC and assuming a good return from investments, isn't the 144K rental income just a drop in the bucket that you would give up to live in the house of your dreams?
      Nov 13
    • Microsoft / Eng exsoftie
      Good point, that did come up. We don’t like the idea that both of us will have to work forever so we can pay for the big mortgage. Maybe we will buy in a couple of years when the income from our investments can help offset it.
      Nov 13
    • DoorDash Bh34567A
      Ok I know I was dismissive but did you actually go through with your plan? I speak because even with a property management company managing our properties across the country has been a nightmare
      Nov 13
    • Microsoft / Eng exsoftie
      Yeah. We have a property management company we can reasonably trust (from personal reference). We have bought 4 properties there in the past 2 years they have been doing great (30% annual ROI with 4-5% cash flow). Now that we are not buying the 2m house, we will use the money to buy at least 5 more next year.
      Nov 13
  • PNC / Ops vNUN13
    Our TC is $265K and we have a $275K house. Our residual income is stupid and the ability to buy or do whatever we want on a whim beats any million dollar house. But that’s up to you.....just be prepared for a ton of expenses on a home.
    Nov 11 4
    • Alteryx / Other SIxE21
      This. It's great when your mortgage is an after thought every month. I think mine is 8% of my gross.
      Nov 11
    • PNC / Ops vNUN13
      Agreed. It allows us to focus on so many other things & the stress of one of us losing our job, or even quitting to pursue a passion is invaluable. No house can make you feel that way, no matter the price tag...but everyone has a different idea of what it means to be successful.
      Nov 12
    • Arista Networks rBi1nrp
      That is great. Except that most of the good tech jobs are in areas where that equation is impossible.
      Nov 14
    • PNC / Ops vNUN13
      @Arista Networks - unfortunately, you are right. That TC is for both incomes. I could easily be earning that with the FAANGs but the cost of living there would increase so exponentially that it makes no sense for me to move jobs for a higher TC that will eventually end up being a financial drag at the end 🤷🏻‍♀️
      Nov 15
  • Symantec / Eng sympleton
    Look at Dave Ramsey on YouTube.
    Nov 11 1
    • Google zlmA04
      That guy gives great advice for people with credit card debt. For people with some financial planning knowledge, he's totally wrong on so many things.
      Nov 11
  • Salesforce hCIP73
    Why do you need 2.2M house?
    Nov 11 0
  • Tableau vvqP11
    3x your household base income. If you and your wife make $300k base annual then you can afford just under $1mm. Do t let anyone tell you more. If you want to be comfortable and not scared if you loose a job and still want to eat out, this is your formula.
    Nov 11 9
    • Google / Eng ¶¶
      Taking away half your pay is living way below your means lmao
      Nov 11
    • Splunk / Eng
      jabberjaws

      Splunk Eng

      PRE
      Microsoft
      jabberjawsmore
      Stock shouldn’t be counted. At best it should be heavily discounted to like 10% of value. For instance, either you or your spouse could choose to work at a startup that throws out bonus and stock out the window.
      Nov 11
    • Google / Eng
      🏋🏼‍♂️🏄🏽‍♂️🏄🏽‍♂️

      Google Eng

      PRE
      Wendy's
      🏋🏼‍♂️🏄🏽‍♂️🏄🏽‍♂️more
      The amount of stupid advice coming from seemingly intelligent people is astounding.
      Nov 12
    • Google / Eng ¶¶
      Stock at Google is very different than stock at a startup
      Nov 12
    • Splunk / Eng
      jabberjaws

      Splunk Eng

      PRE
      Microsoft
      jabberjawsmore
      The point I’m making is that if your budget needs stock to sustain, you can’t leave Google to join a startup even if you wanted to. It would also suck to tell your spouse that they can’t do something different because of a household budget situation. If you budget such that you only use 10% of your stock, it’s easier to make discretionary cuts when your situation changes that lowers your TC.
      Nov 12

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