Background: I invested in NVIDIA and made about $630k. My current condo's market value is $450k. I'm house hunting since my family will be growing, and I've found two houses. 1. The first is a great 4 bed, 4 bath house with 2813 sq feet—plenty of room for my family. The builder agreed on a $1.5M price and is offering me a 4% interest rate for the first year, 5.5% for the second, and 6.6% for the third year and beyond. My wife loves this house. It's in a school district with a 9 rating and has an A crime rate. The monthly mortgage would be around $5200. 2. The second is My dream home, the one from movies. It's on a hill with high ceilings and a panoramic view of the city. It's surrounded by greenery, has a small basketball court, and a swimming pool. It has 4 beds, 4 baths, and sits on 0.3 acres. The price is $2.2M. The seller bought it for $3M in 2019 before the pandemic. The school rating is 7, the crime rate is C, and it's in a high fire zone. It needs about $150k in repairs, but not immediately. Wells Fargo is offering a 6.7% interest rate, and my monthly mortgage would be around $10,000. Our household take-home pay is $13k per month. We expect to earn $1.5k in rent from our current condo, and I believe I can sell it for around $530k when the housing market improves. I'm willing to stretch for the dream house, but my wife is skeptical. I believe that after refinancing and selling our condo, we can bring the mortgage down to $5k after two years. Just wanted to know I am going in right direction? Edited: I think I was blinded by returns from NVIDIA, thanks Blind community for the reality check. YOE : 7.5 MY TC: 330k #bayarea #housing #mortgage
The dream house is tempting, but it is for someone who can buy it in cash and has enough money to not worry about insurance and loss of property in the case of a wildfire (or has the money to hire private fire fighters to protect it). Your description sounds like Oakland Hills.
Take the first house. Stretching to that point will put your family through hell and one fire sweeping through could send all your efforts up in smoke.
I would say go with the dream house. It will only get more expensive and will become harder to afford. To reduce your future mortgage you can: sell your old condo, refinance and pay down additional principal slowly with some investment earning and a higher income down the road. All the best!
Insurance in fire zones are a serious problem and can get worse, and have huge impact on home values. Insurance companies are not issuing new policies and looking for any excuse to drop current clients in fire zones.
This!
Keep the condo if you still have a mortgage on it with low interest rate.
No go on the second. You’ll be house poor and you are leveraging too much placing your hopes on things you cannot control.
Your monthly and TC don't match up... Is this a single income HH? If that's the case, don't stretch. If you had 2x the TC as HH TC, then by all means go for it.
Take home is inclusive of my wife salary too
I’d go with 1. When layoffs went through my co. the one thing that kept my stress down was knowing I could manage mortgage payments for a long time, and I would be okay taking a hefty pay cut if the job market sucked. That peace of mind is priceless when you have kids. On 320k salary, a 5-6k mortgage would be about where I’d feel ok. If your partner works, you could go higher
Also, the more expensive a house is, the more maintenance costs. If you think of it as your dream home, you’re going to spend more to make sure it is top notch. If you go something that’s still great all around, but not “dream home” then you can make some more practical decisions (eg less expensive furniture) without feeling regret
I feel like I am blinded by the dream house and my hopes are high after NVIDIA returns. Thanks for the reality check😅
10k mortgage on 13k take home, I would also be skeptical. Go with House 1 if you really want to move.
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Look for more options. You'll get a better dream house.