We're in the process of looking at homes and our finances and deciding how much to spend. I'm seeing online 30% of gross monthly income. Ultra conservative FIL says your house should be 2.5 times your gross yearly income. These two numbers are VERY different.
So, in figuring out how much house we can afford, how much should we be cushioning for savings? Can we less conservative because I will most likely be contributing to our income once my youngest is in school? Market and interest rates are low now, should we be speculating a bit and spending more?
The reason why I am so confused about this, is that DH has been looking at jobs in Silicon Valley and Seattle, and we currently live in Texas. The real estate markets are very different.
Currently, we only spend less than half of DH's net income.
Here's us now:
Single-income. We have a 3 YO and 8 MO. We're 30.
DH makes a hefty 401k contribution, which is deducted from his paycheck.
Here's what we have saved:
EF. DH insists on 2 years net income, which I find to be absurd. But that's what we have. This is in money market and short-term bond funds.
Fully-funded college accounts to pay for both kids for in-state college.
Goal-specific savings for cars, vacations.
We also both have retirement accounts.
Plus cash for a down payment.
How do we figure out how much to spend?