Home Buying in Seattle>Question Details

SPC14, Home Buyer in Seattle, WA

how much home should we get?

Asked by SPC14, Seattle, WA Mon Feb 10, 2014

Hi, my husband and I make about 140k up to 150k (with overtime) gross annually. we are looking at a house that is $375k. we have excellent credit, no credit card debt and will be able to pay off our car payments in a year. Probably looking at $2300 - $2400 monthly mortgage. Right now we pay 1350 in rent - and live well within our means. that would be about $1000 more per month for housing. is this doable? and wanting to have a child this year as well. thoughts? are we pushing it?

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9
I skipped over this question for some reason--sorry. My reaction is $1,000 a month is a huge jump, particularly considering that you will also have other expenses with home ownership that you don't currently have (and are considering adding a kid). The last thing you want to be is "house poor" where all your disposable income is going into the house.

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.
1 vote Thank Flag Link Sat Mar 15, 2014
This is a great answer! Wish we had someone like you as a realtor when we were buying. Instead we used a friend of a friend and ended up with a house that we have poured so much into we should honestly be living on Lake WA. Totally wrong area for us, too. We were cash buyers.
Flag Tue Mar 25, 2014
2/10/2014

Thanks
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 ....dskow@eaglehomemortgage.com
1 vote Thank Flag Link Mon Feb 10, 2014
Great Question!

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.

Christopher Watkins
NMLS - 555103
Division President / Mortgage Loan Officer
Diamond Residential Mortgage Corporation
503-804-4379
0 votes Thank Flag Link Mon Mar 31, 2014
3/24/2014

SPC14 - hi there ...checking in to see if you are still planning to house hunt ? Do you have any loan / mortgage needs or questions at this time ?

thanks

Dave Skow
0 votes Thank Flag Link Mon Mar 24, 2014
SPC,
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.
0 votes Thank Flag Link Mon Feb 10, 2014
I am NOT a Home Buyer from Tacoma. I put that on when I first started with Trulia because I did not want to be harrassed by realtors!
Flag Fri Mar 14, 2014
The most important thing in "making" $ is location, location, location! Example: Friends bought in Clyde Hill a ways back...3000 sq ft older home on 1/2 acre for $873K. We bought in Woodinville for $1.35 million and have put 2 times that into reno over 4 years time. House is over 6300 sq ft on almost 2 acres. We did NOT over improve for neighborhood. .The 6 other houses in our enclave are all newer, as big or bigger, and nicer. Now? Our friends could probably sell their 3000 sf house for 2 times what we could sell our behemouth for...just because of LOCATION, not because we paid more $ or poured so much $ into it. My advice to this couple would be to buy the best townhouse in Seattle in their price range and focus on best area they can afford. Example, buy in Ballard for $400K or buy in say, Shoreline for $500K, where are they going to make most $ when they sell? Sure they will get more house but where will they make more $? It's all about LOCATION. We all know that.
Flag Fri Mar 14, 2014
I forgot to mention, most likely we can do 5% down - and we have a little extra to make it closer to 10% but thinking we rather save that money to pay off our cars which would help with monthly costs. we are thinking 5-7 years on the house.
0 votes Thank Flag Link Mon Feb 10, 2014
SPC
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.

Dan Tabit
Northstone Real Estate
DanTabit@Northstone.net
425-868-SOLD
0 votes Thank Flag Link Mon Feb 10, 2014
Everything sounds good to me, but you don't mention anything about down payment. You should sit down with a local lender who can review all of your financial info (credit scores, savings, debt to income ratio, etc) and show you want loan programs are available, what your payment would be for different price ranges, etc. I'm sure a lender will say it's "doable" but only you can say what's comfortable or not. I've heard of buyers taking that extra $$ you'd be putting into a mortgage payment, and put it into savings for a few months, and see how you do without that money every month. Are things tight, or are you fine with it? Good luck!
0 votes Thank Flag Link Mon Feb 10, 2014
It should be doable. Raw numbers say you can go up to +/-$3200/month. Unless you have substantial other debts a quick review says you can do it.
0 votes Thank Flag Link Mon Feb 10, 2014
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