What I want to buy: House is $3.2 million in Bay Area peninsula (great schools, where we want to be long term) The house is about 1800 square feet , 4 bedrooms. I have $1.2 million for down payment , so a $2 million loan My NW is about $2 million with 0 debt, I’m 34 with 2 kids Monthly payment: with google mortgage calculator , including California taxes and insurance with a , a 6.63% mortgage + other costs would be ~$17,000 a month My TC: 680k, base is $350K With my TC, my 17,000 a month of housing costs is 30% of my pre tax income including stocks and bonus (average performance) It jumps to 58% if I don’t include stocks or bonus I’m worried about counting on a public company stock for comp Note: I’m not at EA just fyi Should I wait for a larger down payment or buy now?
Crazy 🤪. What’s your spouse income?
I’m curious to see what kind of houses you get for 3.2M over there because that’s insane. In most places that’s a magnanimous house
Probably a nice 50 year old 1500 sqft 3/2 but the premium being bought is the fact that it’s *relatively* needle free
3.2mil is just an average house in a good school district in South Bay
Have you talked to lenders? Do they count stock as part of income?
For stock and bonus lenders typically require a 2 year history of recieving the payments.
Yes I have that OKd by lenders
You shouldn't buy a house for more than 2-3x your TC, otherwise you hurt your potential to save & invest. If you want to know what the typical safe ratios are though, I recommend the Nerd Wallet How Much House Can I Afford? Calculator: https://www.nerdwallet.com/mortgages/how-much-house-can-i-afford
It says I can afford 3.8 million since I have a very large down payment and no debt
It depends on what company you work for if you’re gonna include stocks. The performance of your stock will affect your affordability
In the Bay Area, historically, people have regretted waiting (for whatever reasons) in terms of buying real estate.
Agreed. It seems like the price will keep going up
OP, I'm also in Bay area. I think you should do it. The alternative is to send kids to private or rent in good school districts. Both are inferior. BTW, where are you parking your down payment? Money market? Did you miss the bull run by parking the down payment in cash equivalent?
Do a 25 down and keep paying every 6 months towards principal until loan amount is close to 1.5M. Check for recast option as opposed to just reducing maturity date by paying principal. If rates drop 50 points by next year end you can refinance but by then try to be close to 1.8M by then. I kind of did this just
Cash flow works out, if the mortgage is approved go for it. (Standard DTI math is way too conservative for high-income folks....) The risk is job loss and having to dip into remaining savings or being forced to take a bad job. The upside is a refi when rates come down. Basically you are a semi-cash buyer which gives you an advantage in this market.
Just a consideration, but if something went to shit and you had to liquidate your NW to pay off the house whatever that scenario looks like it probably decreases your NW...I'd factor that into a dooms day scenario. Along with that, you'd still have probably around 5k mo once home was paid off to operate it (taxes, insurance, utilities, super conservative est for maintenance set aside). If you're cool with that and it doesn't stress you out, I'm not sure waiting going to be a huge value for you ... As you risk home prices outpacing your saving rate or inventory not being what you want.
I know houses are expensive, but this is insane financial risk.
Added some details I have 0 debt and about $2million net worth
That is still crazy, did some calculation, basically a lot of things need to go right for buying to be worthwhile compared to renting. Housing politics is in constant flux in Bay Area and the mortgage interest might not go down.