That said, I don't think anyone can really tell you what you'd be comfortable spending. Before you do make a move though I would suggest actually living with that budget if you haven't been putting $1,500 a month or more into savings for at least the last year.
Also, not much information on where you work, but outlying areas are generally less expensive, so you can get more house by being further out. If your work isn't in downtown Seattle that can easily lead to savings.
Using a conservative income figure of $11,600...your max debt load per month = $5000 ( using conservative debt to income ratio of 43% )
using a 375K purchase price ...5 % down ...loan amount of $356,250 ....30 yr fixed rate of 4.25% ....prin and int =$1753...estimated monthly taxes and homeowners insurance of $450....estimated monthly mortgage insurance of $250.....makes total est payment ~ $2453
Your qualifying ratio should be Ok assuming all is varifiable .....does this payment fit into your comfort zone ?
When you think you are within a few months of beginning to house hunt - get the pre approval process completed ....its free / easy and simple to do ...if you need assistance with this - feel free to call or email
>>>>Dave Skow ..>Eagle Home Mortgage....206-714-9745 ....firstname.lastname@example.org
First and foremost, congratulations on looking for a home, keeping your credit clean, and also thinking about having children. This is a really exciting time for you!
To answer your first question regarding whether you can afford a 375K home. I did a worse case scenario and was able to put something in the 2400 range. So yes, this is definitely something that you can look at doing.
Comparing what you want to your debt - Right now with your current income sitting around 12,500 and assuming your car payment is 900 (450 x 2) this is how your debt situation would currently look.
2400 House Payment
900 Car Payment
3300 Total Debt compared to 12500 Total Income
Your Debt Ratio with your new home on the information you have provided to us sits at around 26%.
There are many schools of thought that have their own opinion on this. The general consensus is that you want to stay under 30% Debt Ratio.
Adding a child to the mix - So when you add a child to the mix I encourage people to use the 900/200 rule. Which is 900 for yourself and 200 for each additional individual in the house for "necessities". That being said, you are sitting at 1300 per month needed for "Life" items/"Necessities". When we add the 1300 to your Debt Ratio you are now at 37% which is still amazing.
Now I am sure that everyone will tell you their opinion here in which I encourage you to do one thing - not listen to any one of us. We are not Financial Advisors. I would advise you to set up a time to meet with one. Diversifying and managing your income/assets is something you will want to do early on and have it in play prior to having a child.
I hope this information helps. Let me know if you have any questions.
NMLS - 555103
Division President / Mortgage Loan Officer
Diamond Residential Mortgage Corporation
5% is great, you'll be able to get a conventional loan where the Mortgage Insurance can be removed when your equity reaches 75%. Weighing the benefits of paying off the cars or not will come down to more information than you should share here. It would free up your debt ratio, but in the price you are considering and your income it probably isn't an issue.
With a 5-7 year plan and your income, you may make sense to buy a more expensive house than you are considering. Realize that if you buy a $300,000 house and it goes up in value 10% you've gained $30,000. If you buy a $500,000 house that goes up 10% you've made $50,000. Now over 5-7 years you won't get that much every year, but if you use 5% annual appreciation your investment value will increase very nicely.
Now if you anticipate changes in your income (higher or lower) you want to factor that in too. Raises are great and make the tight budget easier as you go. But if one of you stays home with kids, your income goes down and expenses go up. Your plans are up to you, but these are just some considerations.
You are well in the affordable range based on your income and debt situation. Your down payment may be an issue, but only by applying with a great lender can you find out what your limits are. I work with some excellent lenders, and as a former lender I'm in a great position to be able to make that statement.
It's never too early to get pre-approved. Once you've taken this step you can look with confidence.
One important question I ask my first time buyers is where do they see themselves in 3, 5 and 10 years? If you think you will be staying local for the longer term, stretch your budget and buy nearer to the top of your range. If you see a change in 3 years or 5 years, buy comfortably but don't push things too far. Every time you sell a home it costs money. The home you can buy now for the long run will mean less turnover and allow you to grow into what may be tougher payments in the short range. Don't forget too, with the tax deductibility of your mortgage payment, your taxes will go down, making that payment more affordable.
Let me know if I can help.
Northstone Real Estate