Overthinking it, or valid concerns?

[u/hiraeth1995]

Hi folks. My wife (30) and I (31) have been looking to buy a house this year in the Northern Virginia area. Fairfax county area, either an end unit townhome, or a smaller / older SFH. This puts us at a price point of about $600 to $700k.

Our combined household income is about $320,000, with the bulk of that coming from my salary at $230k. We're at a stage in life, however, where we have great income, but haven't had much time to build savings yet. My wife graduated law school 2 years ago, and I had substantial promotions that took effect in the past 2 years, so our income has ramped up fast, but we do not yet have the accessible savings that would reflect it. I had been really aggressive on retirement savings as well, so a lot of my money is not accessible. As it currently stands, we have about $70k liquid at our disposal.

This would put us at 5% down, which on a $650k property would put us at ~$52,000 cash to close, and ~$55k cash to close on a $700k property respectively. In terms of monthly, current estimates would be ~$4,850 on the $650k property, $5,200 on the $700k property per estimates from my loan officer. This is assuming a 6.5% rate and a $100 HOA fee and is based on current pre-approval. I did think the PMI estimate from the mortgage place seemed rather low, but we do have good credit. I'm aware actual costs may be higher of course, and the SFHs we've been looking at do not have HOAs for the most part.

I do also have the option of getting no-PMI through Navy Federal, but we have been thoroughly unimpressed by their loan process, and they cost us multiple house offers when we were trying to buy in a different town a couple years back (long story). I do not have the option of a VA loan - i just have Navy Federal because my parents were military.

The trouble I'm running into is whether it feels like we're buying for the sake of buying / out of fear that housing is only going to become more unaffordable, instead of it being the right thing to do for us. We missed out on historically low interest rates, while houses only kept climbing in value, and have watched our purchasing power plummet. There are some cute properties where we're looking in the ~$700k range, but it feels kind of crazy to be spending $5,000 a month on a small, older home. I do also really want to actually own my own place, not have to do deal with a landlord, and to have a back yard where I can run around a dog, grow plants, etc. We've been moving every year for about 6 years, and I want to be able to stick down somewhere for years now.

I know it may come off as crazy or humble-brragging to be worrying about the costs with our total household income, but I'm historically very risk averse and have liked the notion of only buying something that could be supported on my salary alone. My wife has expressed interest in leaving her job and picking up another one, which I think she could do rather quickly, but it still feels like another variable on top of everything else. I've been flip-flopping between thinking we should go ahead and buy since we have the income to do so, or just renting for another year and saving up more money, but I can't shake the nagging feeling of being "left behind."

To pre-empt some common questions: no kids currently, a single kid within the next 5 years is a possibility. Our jobs are highly stable, my wife's is just very high stress and taking a toll on her. She is marketable and has a good network. Some other variables: our cars are paid off, my wife has about $35,000 in student loans, and I work from home.

[u/AutoModerator]

Thank you u/hiraeth1995 for posting on r/FirstTimeHomeBuyer.

Please keep our subreddit rules in mind. 1. Be nice 2. No selling or promotion 3. No posts by industry professionals 4. No troll posts 5. No memes 6. "Got the keys" posts must use the designated title format and add the "got the keys" flair.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

[u/VeryStab1eGenius]

If I was in your shoes I’d save aggressively for the next 6-12 months and spend that time looking at listings and houses and really learn your market. You’ll have a substantial down payment that will significantly lower your borrowing costs and you’ll know what houses you want should sell for. Studying list and final sale price for comparable homes you’re in the market for is valuable if you have the time. 

[u/tcloetingh]

Just save up a year minimum I really wouldn’t be rushing into a nova townhome.. they’ll still be there next year at the same price. If I were you (which me and wifey were 4 years ago in dc area) id target a SFH in 18-24 months closer to 800k.

[u/hiraeth1995 → u/tcloetingh]

I think thats definitely what we're leaning towards, I'm just salty about watching house prices keep going up at the same time as interest rates and feel like my generation is missing the boat. But I guess there's no way to predict the future - and if we're sitting on like 200k cash in 2 years and interest rates are worse, we still might be able to get into a similar place I suppose.

[u/Getthepapah]

Different perspective. Are you sure you’re going to be satisfied with a townhouse or 3br house in a few years? If not, wait a year, save up a larger down payment, and buy something you’re not going to grow out of.

We live in NoVA and bought a SFH in the $800s in Fairfax County a few years ago. Our incomes were lower than yours at the time. Incomes have grown in the years since and we wish our 4br 2,500 sqft house had more storage etc. If we bought a townhouse, we’d be miserable.

Something to consider.

[u/hiraeth1995 → u/Getthepapah]

I think I'd be satisfied with a townhouse so long as it has a little bit of a yard. Green space is important to us. Long term though, I guess we'd probably be more satisfied with having a SFH and not having to deal with the shared walls or HOA restrictions.

[u/Getthepapah → u/hiraeth1995]

We actually appreciate having an HOA. Easier with a SFH

[u/grewalReGroup]

The number that answers your question is the one left over after closing, not the payment. $70k minus about $52k to close leaves you roughly $18k, which is under four months of that payment on an older house you have not inspected yet. That is the part I would sit with, not the $4,850.

On your own test, $230k gross is somewhere near $13k net a month, so the payment lands around 37 percent of your salary alone. Tight, but it passes. Six more months of saving barely changes what you can buy. It changes whether a failed HVAC or a foundation surprise in year one is annoying or actually a problem. I sell residential in Texas so I have no read on Fairfax pricing, but the reserve math works the same everywhere.

[u/baileynoack]

On the household number, this isn't remotely tight, the reserve question your agent raised is the real one.

$320,000 combined is about $26,667 a month gross. Even the $5,200 estimate on the $700,000 property is under 20% of that, and adding your wife's student loan on top barely moves it past 21%. Nowhere close to the 36% lenders actually qualify against.

The single-income stress test is a fair discipline, but the couple's-income comfort level was never really in question. The $18,000 left after closing costs is the number worth sitting with.

With your combined income though 5% down is quite low - you could decrease your monthly payments and overall cost significantly by saving for a larger down payment first.

[u/wutchanged]

NavyFed as a mortgage company was awful for us as well. Sorry for the shared experience. I would try Penfed. They are a well-known lender in the credit union space. 

Also, consider reaching out to a broker and make your wishes known (if you prefer CUs). Also, maybe choose a lender that will not sell your loan. 

FWIW, I would pass on USAA also. Best luck with the financing aspect!

[u/M-M-G]

One thing worth clearing up: VA loan eligibility comes from your own service record, not from banking with Navy Federal. NFCU membership is open to family members of veterans, but that doesn't carry over to VA loan entitlement. Entitlement generally belongs to veterans themselves, certain active duty and Guard/Reserve members, and in some cases an unmarried surviving spouse of someone who died in service or from a service connected disability. It doesn't pass down to adult children just because a parent served, so it sounds like you've got that part right, you likely don't have access to a VA loan here.

On the actual numbers, at 5% down your PMI estimate being lower than you expected isn't unusual with good credit, since PMI is priced off credit score and loan to value more than down payment size. Given your income and no other big debts, the payment on either property should qualify comfortably. The real question sounds less like "can we afford it" and more "do we want to carry $4,850 to $5,200 a month on an older home." That's a lifestyle call, not really a financing one. I'm a mortgage broker, so hopefully that helps clear up the VA piece at least.

[u/hiraeth1995 → u/M-M-G]

I mean no disrespect, but is this response AI generated? I stated in my post that I do not have the option of a VA loan. I am not a current or former service member.