Has anyone bought a house at the top of their budget?

posted 4 months ago in November 2017
Post # 2
Member
4611 posts
Honey bee

somethingblue222 :  I have not and would not. New houses have plenty of problems too so don’t assume you won’t need to spend any money on maintenance or repairs. Being house poor sucks and you want to have breathing room in your budget. Our PITI is about 20% of our average net pay and I would be hesitent to spend signifantly more than that to be honest. 

Post # 3
Member
1216 posts
Bumble bee
  • Wedding: October 2016

My husband and I intentionally did NOT buy at the top of our budget and I’m SO glad.  We bought a fixer-upper that is about 20% less than the top of our budget.  FWIW, the basement is quite dry and our structural engineer said that the way the house was positioned on the lot and built, all of the rainwater is directed elsewhere.  About 10 years ago my parents bought a brand new house in a brand new neighborhood.  The basement flooded within about 2 weeks and had to be gutted and then re-done. The builder had not paid attention to how rain water would flow and it flooded with the first heavy rain. THe next 8 months involved lawyers, getting an easement on the lot next door so that things could be graded properly, etc.  In short, lots and lots of unexpected expenses.  I would never make my budget tight intentionally, because then you are just hosed if unexpected stuff comes up.

Post # 4
Member
8065 posts
Bumble Beekeeper
  • Wedding: July 2016

We got one at the top of our budget–but for me the top was “I need to keep X much in savings no matter what” and we ended up spending literally every penny aside from X to make sure our mortgage payments were only a bit more than what we had been paying in rent before.

I have to say–we bought a house that was a brand new flip and I’ve been surprised at just how many small repairs/adjustments we’ve had to do.  E.g. we realized the kitchen was on a single circuit and had to pull up 3 more.  We realized the water furance was not up to code and had to pay a grand to bring it up to code (not happy with our inspector for missing such an obvious one!).  We realized the chimney we knew we’d have to repoint would cost $10k to repoint, not $1k as the inspector had said it would. Etc. etc.

Now.. if this is a brand new house and it comes with a warranty you have a little less to worry about in terms of repairs like that, but I’d try really hard if I were you to make sure you have a bit in savings both in case if there’s some sort of emergency and you need liquid funds and in case if something not under warranty needs professional attention NOW.

Post # 5
Member
623 posts
Busy bee
  • Wedding: August 2016

I’d advise against it personally… if you’d have to cut down on eating out to afford it I’d say it shouldn’t be at the top of your budget, but outside of it. 

Post # 7
Member
791 posts
Busy bee
  • Wedding: September 2005 - A Castle

We bought at the top of our budget and I would absolutely NOT do it again. The novelty of a new house wears off quickly and being house poor sucks. Luckily, both of our incomes increased significantly and we are no longer slaves to our mortgage, but that was a very hard lesson to learn and live with and it caused a lot of animosity in our relationship, too. Banks don’t care if you never go out to eat, never go on vacation, never leave your home for fun, etc. I would not recommend it. 

Post # 8
Member
777 posts
Busy bee
  • Wedding: May 2018

Would you still be saving money each month? If not, I wouldn’t. New house or not, things can happen to compromise your monthly budget….getting laid off and living off one income for a while or car getting totaled for example.

Post # 9
Member
58 posts
Worker bee
  • Wedding: August 2014

If the house is brand new ex. Straight from the builder, you need to consider what all will get done for you. For example my brand new house required front and back landscaping, fence, and deck (not to mention finishing the basement, though that’s usually less urgent) – these things can cost a lot, so if you need to do them make sure you have money saved for that!

Another consideration with brand new (again if you are first owners) is that there are a LOT of small costs that come up, and add up. I don’t know if this would also happen with any house, but things like storage shelves, spice racks, etc. I swear we were at hardware stores every weekend for two months!

Even if that doesn’t apply, I enjoyed buying a house we could easily afford. We have had no problem paying for furniture and making extra mortgage payments so that it will be payed off quicker. We still have plenty of money for extras and vacations and can still save a significant amount of money on top of that. it’s nice to not be house poor. But that’s mostly personal preference, if you are fine with a tight budget for the house you love then I’d say the important thing is having enough money to still save and have an emergency fund. 

Post # 10
Member
838 posts
Busy bee

somethingblue222 :  We bought a new house and when they reassessed our taxes (for a second time…Grrrr) –they’re over $350/mo more.  Our insurance also will be going up in a few months.  If you have changes in expenses like that (you most likely will) it sounds like you can’t afford this house.  

Can you wait 6-12 months and save really aggressively so you can afford a similar home to this one?  I totally understand not wanting a fixer upper, so I would recommend waiting until you’re more financially ready for a new home that’s a better fit or can find one that’s within budget.  Sometimes there are great deals on model homes during the winter as the builders are preparing new ones for the spring market so that’s something to consider as well. 

Post # 11
Member
428 posts
Helper bee
  • Wedding: August 2017

My banker said to expect to pay 2x your mortgage every month on “house” things. Ie your expected mortgage plus insurance and other bills/items for home maintenance (property tax, power, cable/internet, security system, natural gas, snow removal, lawn maintenance, etc). At my bank, they take that into account when approving a mortgage. 

Our monthly bills end up being slightly less than our mortgage cost, and obviously it depends if you’re in a HCOL area (where this theory might not apply at all). To give example when I sum up everything we pay monthly for the house it ends up being ~ 70% of our mortgage. 

Plus, you’ll want to buy new things for your house, we spent at least $30,000 on home decorating in the first year (furniture, light fixtures, decor, paint, window treatments). It really depends how tight your budget is… 

So I would recommend you make a list of all of your current monthly expenses (plus seasonal such as lawn care and snow removal if applicable), include how much you contribute for retirement and other savings (I keep an emergency account for my house of $15,000), plus other savings you might want to be contributing to… then find out how much you would have leftover for a mortgage payment. Obviously you and your SO need to have the same priorities for this list too, if you are buying the house together.

im not saying live in a house with water damage/mold (although unless it’s a bank repo your realtor could prob help negotiate the seller taking off some of the sale price to deal with known issues that are observed during your buyer inspection), but I would also personally not risk being house poor either. There is probably a happy medium, and if this is your first house it doesn’t need to be your dream home the first house either (although everyone would prefer that I’m sure!!). 

Also, one more thing in our situation I’m the “bread winner” of the family, if I was sick and couldn’t work we would not be able to afford our house. I have invested in disability insurance in the event I become sick and can’t work so we don’t have to sacrifice our house if I get sick (which also covers if we have a sick baby that needs time in the NICU… we are currently TTC and as you can see I’m definitely a “planning” type person!).

Good luck! 

Post # 12
Member
796 posts
Busy bee
  • Wedding: June 2012

if you can afford life but need to cut down on fun stuff, I would maybe consider it if your careers are still growing. 

BUT if one of you got laid off, or got in an accident and can’t work, and you can’t afford it without the other’s income, no way. You’d be screwed.

What about any expenses in the next few years? Kids?

And new houses can cost a lot… we bought ours from someone, less than 3 years old. Put in $3k in the first month, and none of it was fixing broken stuff. They were just dumb home owners and didn’t realize you needed to do a few things and we had to get plumbers and electricians out. 

Post # 13
Member
2723 posts
Sugar bee
  • Wedding: September 2008

DH and I did with the idea that it would be our forever home. It had everything we were looking for – ideal location, floor plan, yard, swimming pool, etc. 

I would recommend that you put at least 20% down on your home so you can get the best mortgage rate (we got a 30-year fixed at 3.25%) and have a plan in place where you can adjust the payment as a reward for paying it quickly. Then, if you have access to a large sum of money (e.g. through vested stock options or a stock grant at work like DH, or a class action settlement or an inheritance like me), you can reduce the monthly amount and have a lot more flexibility. 

Post # 14
Member
4611 posts
Honey bee

litttlemisslamb :  +1, our taxes go up every year! It’s well worth it for the amenities our city provides, but it is an added cost. 

Post # 15
Member
1785 posts
Buzzing bee
  • Wedding: August 2014

I think it depends on a lot of different factors. How much do you have in liquid savings, for example? $50/week for “fun” money would be woefully inadequate in certain circumstances. For example, your best friend is having a baby and you would like to help throw her a baby shower. Where does that money come from? Your car needs new tries or a significant repair? You yourself fall pregnant? There is no way to account for these circumstances in your budget. We did purchase a house at the top of our budget($5k over actually) but our “budget” was $100k less than the approval we got from the bank specifically because we did not want to be house poor. 

No matter how new the house is, expenses come up and things break. If you can’t comfortably pay for these repairs out of pocket you are setting yourself up for failure. 

Based on the situation you describe, it sounds like you can not afford the house. We all want the pretty brand new house with upgraded features but that’s just not realistic for a lot of people. Consider other options like going further outside your search radius where homes like that may be cheaper, a condo or townhouse, or continuing to rent until you’ve built up more in savings. 

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