How much home can I afford?
I have 1M in savings (currently invested in the stock market). TC 370k in Los Angeles. That’s with 190k base, rest is stock and bonus. Current long term girlfriend and potential wife only makes ~40k. The only houses I can see myself being happy with are 1.7M+ (where my ideal home would actually be around 2M) because of the high housing prices. Can I reasonably afford this? Have never purchased a home before. I don’t think I would want to spend more than 250k for a down payment and all associated costs to finish purchasing the home.
Is the 1M all for housing or also includes retirement, other taxable investing, etc. do you have goal of early retirement? Is your income flatlining or expect to still go up Personally I’d limit at 1.7ish but you could do 2m if use existing savings and want to over invest in housing... This assumes retirement is on track and it’s ‘worth it’ for you to buy a house vs rent
Thanks. I am 28. The 1M is everything I have, so it is my retirement savings too. I don’t plan to retire early. I expect my income to flatline or increase to 500k and flatline.
You don’t have 401k or you are including that in your 1M for downpayment. I’d personally keep renting in your case or find a fixer house in 1.3-1.5 range that would work. I wouldn’t empty 401k to buy a house
You already know you can afford the house. I think the question you are actually asking is if you should.
Yea exactly
The rule of thumb I've heard is don't borrow more than 3x annual income. It looks like you can borrow $600k off salary, maybe higher off bonuses, assuming no other debts. If you put all your savings into the down payment, $1.7m sems achievable, but that's a lot of egg in one basket. Imagine spending n years in the house. Imagine it's value doesn't appreciate as much as hoped. Imagine the investment gains you may miss. Will regrets outweigh the joy your house will bring you? https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 https://www.redfin.com/how-much-house-can-i-afford
When I had my 1M+ loan a few years back I was only earning 250k TC, with 150K being base. The Nx rule is shit be it 3x 4x whatever. Your cost of living outside of home purchase is not related to your TC. Consider it a constant. You rate is also different time to time person to person. Apply the poor Americans' 3x rule to 400K TC is just funny.
I think Redfin was talking about the borrowing amount. So if OP puts down 250K on a 1M house, then he’s borrowing 750K. Using the 3X rule, he should be making TC of at least 250K
OP, what's your level? Your TC is so damn high...
4
Good for you! I assume you joined pre-IPO ;)
Your girl only makes 40k... 🤭
Definitely get new girlfriend. Love conquers all except when it comes to housing affordability
I’m thinking about asking her to start a business and I will support her. Her working for 40k when I’m making almost 400 is not worth it, assuming we get married
Do not buy an expensive house in LA or any market right now, as the market has been inflated for awhile. With that kind of cash reserves, wait until the market crashes in 2019/2020 and then swoop in to buy that 1.7M house for $1M
I agree with this and have a similar strategy in mind
Lol
The only house you'd be happy in are 2mil? This world done fucked up when a 28 yo making a dick pic app can turn their nose up at houses under 2 mil. Is it time to storm Versailles yet?
Not too late to join the party, far from full fun.
It's too late for this old dog to learn new tricks I'm afraid, need to stockpile ammo and gasoline now.
If you only out 250k down that's not enough. Do not put less than 20% own and assume 21% with closing.
You can easily afford a 2M home with that much savings and total income of 410. I just bought 1.2M home with 250 down and 280 TC (400 in savings)
What's your yoe?
3 but TC includes wife, similar situation as OP.
Go for it. How old are you ? Are you planing on having kids ?
Snapchat is not going any where. U need a house to live. Worst case you might lose 200k
I’m 28, yes plan on kids