Originally Posted by sarah_bella1050
Dh and I found a great house. 3 be 2 bath 1.5 acres. We can have backyard homestead like we have always dreamed. The only problem is it is a bit more then we planned to pay. Our mortgage would be 300 more then planned and would be 1/3 of our lowest possible take home pay. If we stay in budget we will have about 500 left over to put in savings each month.
We would be putting all our saving into the down plus borrowing 3k from dhs awesome sister. We would be getting a 30 year fixed at 3.5% and putting 3% down. We have no other debt besides a 7k student loan.
It seems risky but do you think its TO risky? We have always been very fiscally responsible and don't take many risks so this is hard for us! We are just so sick of renting, we have been renting for 9 years now and if we wait until we have 20% to put down it will be another 3
Have you calculated fully any "extra" costs that will come with homeownership--- increased utilities/ property taxes/ insurance/ does that number include PMI? The average rule of thumb is no more than 35% of take-home on housing. Does that work? How much of your income does your student loan payment represent? Is that $500 into savings on top of or instead of retirement savings?
Those are just a few things to think about. Personally, our first mortgage was WAY more than 1/3 of our take home pay (I don't remember the exact numbers, but it was over 60% of take home). It didn't concern us for a number of reasons:
1) the amount we had been saving for a down payment PLUS our rent was more than the mortgage for our house (so, we had been effectively "paying" that amount for some time). It sounds like you have "extra" savings each month as well, so you might be in the same boat.
2) we were predicting DP's salary to increase more than average over the next few years which would rapidly bring us within more reasonable guidelines. Now, I don't think we EVER actually got under that 35% but it wasn't that big of a deal
3) we were not low income. Having 30% of your income left for food/clothing/car/etc... when you're only making minimum wage simply doesn't leave you enough to live. On the other end of the spectrum, Bill Gates spending 90+% of his income on housing would still leave him with MORE than enough to live an extravagent lifestyle. For people in high COL areas this is often true--- the "others" beyond housing simply take a smaller percentage than they would in a lower COL area (after all, there are many places where houses cost 5-10 times as much as others, a car or a gallon of milk (excluding Alaska or the like) isn't going to vary by nearly as much).
4) we were putting money into retirement savings. While we wouldn't *want* to stop those contributions, it would be a quick way to increase our take home pay. It provided an emergency cushion if we ever needed it (which we didn't).
Good luck making your decision.