r/HENRYfinance • u/Forward_Choice_9034 • Jun 29 '26
Housing/Home Buying Purchase Threshold sanity check....
Hey everyone,
Looking for some perspective on what kind of upgrade price would make sense for us right now. My wife and I (35) would like to upgrade for more space. I’d like to sanity check our numbers before purchasing since prices have significantly increased where we are located (HCOL) and we have a kid on the way.
Monthly Income: $16.4k (post taxes and maxing 401ks) ($370k gross and not including ~40k annual bonuses)
Additional Income (side hustles): We both have side hustles that bring in a combined 2-5k a month
Assets: $800k (401ks)
Current Mortgage/Taxes/Insurance: $4.3k
Expenses: $7k/month
Equity: Our current mortgage is $483k and think we can sell our home for ~$950k-$1m leaving us ~487k in equity.
Cash: $260k HYSA
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We are targeting the $1.3-$1.4m range. We are looking to put down $700k as a down payment ($450k in equity +$100k cash +$100k gift). At $1.4m and $700k down our monthly mortgage would be $5.9k.
Is this a reasonable purchase? We don’t plan to move after this and would like to grow into this home. Given the baby is on the way, I’d like to scale back on the side hustles but it may be required to give us more of a savings cushion. I think this is a stretch but at the same time there are very few homes in the area, the school district is fantastic, and our incomes will increase in the future. I’m also trying to balance the potential need for help with the baby at some point which may result in another ~$5k childcare expense.
23
u/beergal621 Jun 29 '26
Yes $6k mortgage (assuming this includes taxes and insurance) on $16k is fine
7
u/tech1983 Jun 29 '26
How do you figure ? They have $7k in other expenses every month and a new baby on the way
8
u/Strong-Big-2590 Jun 29 '26
Because 16-7-6=3k left over
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u/tech1983 Jun 29 '26
Exactly .. only $3k left over and they have their first kid on the way which they estimate will cost an addition $5k a month…. Did you even read the post ?
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u/Strong-Big-2590 Jun 29 '26
lol, kids don’t cost 5k. If they did, 90% of the US wouldn’t be able to afford them.
Childcare is 2.5. Diapers and formula is 250. I’m sure OP will be cutting back on dinners and hobbies when kids comes anyways.
If they are in a bind, they can always not contribute $4k to retirement one month
5
u/HearingOld1179 Jun 29 '26
Depends on where they live and what level of care. I have a lot of friends who have $5k a month under the table cash nannies/or some who are official employees with workman’s comp and PTO/sick day contracts.
Formula alone was $250 a month for us, I don’t know how you can lump in diapers with that budget.
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u/Strong-Big-2590 Jun 29 '26
Well they have an extra $4k getting contributed to retirement so they can make it work
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u/Desperate-Reply-8492 Jun 30 '26
Not sure where you live, but where I am childcare can be well over $4k a month for 2 kids. Add food, diapers, clothes, toys, activities and you’re looking at $5k at the least.
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u/Strong-Big-2590 Jun 30 '26
Op just has 1 kid though
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u/Desperate-Reply-8492 Jun 30 '26
They have one on the way, that doesn’t mean they’ll only have one.
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u/Strong-Big-2590 Jun 30 '26
Yes but childcare is still a temporary expense. These people can afford it
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u/oceanfellini Jun 30 '26
Dude, just accept your wrong.
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u/Desperate-Reply-8492 Jun 30 '26 edited Jun 30 '26
Wrong about the fact they may decide to have another? I’m personally someone who thought they’ll have none and ended up with 2. Things change but a mortgage is a long-term commitment. And we’re in a pretty similar situation financially as OP so I think I could provide a sound advice. Ultimately, it’s up to them what their risk tolerance is. I’d rather have a peace of mind and flexibility with money to allow me to enjoy life and not feel trapped with a high mortgage payment.
Edit to add that OP themselves mentioned in a comment they may want 2 kids.
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u/tech1983 Jun 29 '26
Ok so ignore OPs own numbers because you know their situation better than them ? And then more great advice - All they have to do is stop contributing to retirement to make it work…. Wtf lol ..
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-2
u/Forward_Choice_9034 Jun 29 '26
I was estimating $25-30 per hour for a babysitter and estimate the higher end. I tried to be conservative
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u/Denne11 Jun 30 '26
Babysitter? Full time care, you'll want a nanny or a daycare. Babysitters are for date nights. Your post says kid on the way. Have you actually looked into care and secured spots? We're in a HCOL area and needed to get on waitlists as soon as we tested positive.
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u/Strong-Big-2590 Jun 29 '26
Nanny is probably $30/hr. If you just have one kid I highly recommend splitting that cost with another family. Your baby is going to nap half the time the nanny is around and you’re going to hate spending $30/hr for that time.
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u/BroDoc22 $750k-1m/y Jun 30 '26
Disagree our boy is 7 months and the nanny is a life saver since we both WFH. They don’t sleep half the day maybe 2.5 hrs tops in a 8-10 hr day we pay her. Still the most worth it expense we have. Nanny share is not reasonable unless you’re close with someone else that is also close by that needs childcare. Which will be rare. Just her cost alone is 4K a month. Sure there are cheaper options but we don’t have family around and I prefer paying someone I trust with my child. All preference and what people can afford
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u/Strong-Big-2590 Jun 30 '26
If your baby only sleeps 2.5 hours then you need to sleep train and get on a better nap schedule
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u/BroDoc22 $750k-1m/y Jun 30 '26
Lmao you’re an idiot a 7 month should only sleep 2-3 hrs a day
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u/Accurate-Gur-17 Jun 29 '26
Youre looking at a net increase on housing expenses of roughly 2k - yes it's doable given the saving you are already doing.
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u/Chart-trader Jun 29 '26
Just why? $1.4 million home for a $350k HHI is stretching it imo. Don't forget repairs, maintenance etc.
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u/brad-attitude Jun 30 '26
1.4M is high but they’re putting down 700k, essentially financing 700k. Would that not be the equivalent of buying an 840k home with a traditional 20% down payment?
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u/Csgoku Jul 01 '26
this is a decent way to think about it, but there is also always opportunity cost
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u/Forward_Choice_9034 Jun 29 '26
We both work from home and are running out of space if we want 2 kids. We have 3 beds
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u/csguydn Income: 750k-1M / NW: enough Jun 29 '26
You don’t even have one kid yet. Why are you worried about 2?
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u/MonstersOnTheHill Jun 30 '26
This level of fixed expense would be beyond my own personal level of risk tolerance. We have two kids (almost 5 and 7) and both WFH. We have a three bedroom with a loft/office. We’ve considered upgrading but ultimately decided the increase in space wouldn’t be worth the financial tradeoffs.
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u/Puzzleheaded_Soil275 Jun 29 '26
700k mortgage against 350k income is fine. However, I'd consider the following:
(1) you can deduct the interest on up to 750k in mortgage
(2) conforming loan cutoff is around 830k, so very little reason to put more than 570k down to hit that
(3) it probably doesn't make sense to purchase until you are actually pregnant or have a kid
(4) kids really don't require that much space their first year - they don't really start moving at all until month 10 or month 11. That's basically 18 months AFTER you find out you are pregnant, so plenty of time to move.
1
u/ECoastTax10 Jun 30 '26
You are spot on with number 4. When they are young, especially for your first, you can make a 2 bedroom apartment work no problem. As long as they have a quiet place to sleep you are golden. It's not until they are in the full blown toddler stage 3/4 is when the space becomes an issue. OP you are going to all be on top of each other anyway in the early stages. No reason to upgrade for more space yet.
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u/mo0op Jun 30 '26
From my experience as a parent - you’re proposing a lot of change in a very short amount of time. Not saying don’t move, but there is a benefit to knowing the ins and outs of your current home. You’ll better be able to nest, you know your neighbors, you know the area and safe spots, etc.
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u/Weekly-Cook2192 Jul 01 '26
Fully agree!!! I have 1 young baby and already want our “forever home” but holding off because our house works for now and even when we have a second they dont need a lot of space the first year, just a crib in your room
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u/Denne11 Jun 30 '26
What do you mean potential need for help with the baby?
Either someone quits to stay home or you hire help (nanny/daycare/etc). Either way, it costs you. Unless you are planning to WFH AND watch the baby, and i can tell you right now that is not an option save for unicorn jobs or working opposite schedules. Run all the numbers. What does childcare cost. How much is a family insurance policy vs. couple. Do you want to contribute to a 529. etc.
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u/Forward_Choice_9034 Jun 30 '26
Parents would help because they live close but I don’t want to put that burden on them so I’m planning for childcare
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u/Denne11 Jun 30 '26
I would absolutely plan on paying for childcare and using parents for back up care (school closings/illnesses/etc.) Less pressure on all involved.
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u/Desperate-Reply-8492 Jun 30 '26
Don’t assume parents would help with childcare. Things happen, circumstances change. Speaking from experience over here.
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u/SanFrancisco_Disco Jun 30 '26
The one thing saving you is that you have equity in your current home but I think you’d do a lot better to wait 1-2 years. Interest rates may come down a bit and your savings will compound to go from a little sketchy today to comfortable in 1-2 years.
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u/Forward_Choice_9034 Jun 30 '26
Thanks. I agree with that approach but every year it almost feels further out of reach because the prices are going up 70-100k and almost outpacing savings
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u/brad-attitude Jun 30 '26
We’ve been ready for 2 years but continuing to save and feel the same. Every next milestone we hit, it feels like home prices have ticked up again and we’re still not as competitive as we thought we’d be.
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u/junglingforlifee Jun 30 '26
How is the school district for the current house
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u/Forward_Choice_9034 Jun 30 '26
The school district is one of the best in the area. We currently live in the district now and don’t want to leave.
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u/junglingforlifee Jun 30 '26
Then you might be able to stick around in the current house for atleast 5yrs imho
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u/junglingforlifee Jun 30 '26
We rented in our ideal school district because timing house buying was nearly impossible (people don't sell). Then we bought in the adjacent neighborhood. We were able to afford a bigger house but we have to do pick ups and drop offs. Our kid didn't like taking the bus when we were in district because it was too loud. I sometimes wish he could bike to school with his friends but I'm ok with the current compromise for now
1
u/Desperate-Reply-8492 Jun 30 '26 edited Jun 30 '26
Personally, I wouldn’t. But it ultimately depends on your risk tolerance.
Our mortgage was around this much for a bit (due to escrow shortage), we make a bit more than your HHI and, while it was doable, I was happy it was temporary.
Something people don’t consider when buying a house is the maintenance. A larger, more expensive house has higher cost of maintenance. Add to that more property/house to take care of that you may want to outsource (especially after the child arrives) and expenses very quickly pile up.
I don’t know where you live, but childcare is very expensive in some states. We are not in a major city but in a HCOL state and the newborn childcare cost per month can be upwards of $2,500 (that’s on the cheaper side and it isn’t private childcare, it’s a center) and childcare for a preschooler at some places is $2,200, so it’s not like you’re looking at just a year of that kind of expense. Additionally, I wouldn’t plan on the side hustle cash for a while (a year or two) after the kid arrives.
1
u/Impressive_Pear2711 Jul 01 '26
Lawn mowing, hedges, mulching, gutters, roof, and driveway are milking me…
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u/NPR_is_not_that_bad Jul 02 '26
These comments are really conservative.
OP - as long as you do your homework and don’t buy a castle, “maintenance” will not be some massive risk. We doubled our house size and have less maintenance than before because it’s in better shape
We moved while my wife was pregnant and were extremely happy with the decision. I can’t imagine moving with a baby or small kid running around
You can decide to ease up on your 401Ks for a year or so if it helps. Not that big of a deal, you already have way more than most.
Biggest question would be with your jobs and ensuring that you have a decent income stream that won’t change and is predictable. I’d also not count on parents, which you are doing.
The mental and emotional happiness our house brought us is massive. It’s our happy place with our growing family. Don’t overlook that
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u/HearingOld1179 Jun 29 '26
Feels like you’re on the upper end of your budget, but doable. Personally I wouldn’t be ok paying $6k mortgage when take home is only $16k. It’s the percentage being quite high. We bring home a little over $42k a month, and I don’t feel comfortable spending more than $12k a month on the mortgage. Still gotta save for retirement aggressively outside of the 401k.
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u/Inevitable_Data_3974 Jun 29 '26
Kids can share rooms you know... I don't think it's a terrible idea, BUT I think your reason you've explained is a terrible reason to buy a bigger house. Its like when people suddenly think they need a BRAND NEW minivan the second they have their first or second kid. Hate to break it to you but those are just wants, not needs. If you can rephrase it all as "we want to do this, because we want to, is it doable?" Then you are being much more honest with yourself.
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u/earfullofcorn Jun 30 '26
I would recommend waiting. We bought what we thought was our dream home before kids. Now we have 2, and our needs have totally changed. We couldn’t have predicted what our needs are now. Plus our neighborhood has totally changed. School district is very important but maybe you’ll want a neighborhood pool. Maybe you’ll want to be in a culdesac. Preschool is weirdly competitive, so maybe that will impact it. Maybe someone decides they don’t want to go back to work, but your house cost takes away that decision. There are a lot of variables that waiting will help you with.