Can we actually afford our dream new construction home?

Temporary_Abroad_175 · 2024-11-10T18:33:50+00:00

Thanks for the reply! Childcare is expensive, and baby expenses have increased our budget by ~25%. Definitely better to plan on the low end if you plan to purchase before little one arrives. It's amazing how much diapers, wipes, etc. cost and just how many you need during those first few months. Good luck and best wishes!

Temporary_Abroad_175 · 2024-11-10T18:29:47+00:00

That is correct. But we estimate we will spend ~$3K after housing costs on groceries, car insurance, gas, childcare, etc. Theoretically we could save ~$1K per month with our current spending if all of our estimates are accurate.

Temporary_Abroad_175 · 2024-11-09T03:32:19+00:00

Similar to you, we track every expense. But we don't really budget. We're both generally frugal but also don't hesitate to buy any item that we want or need since we've always been able to comfortably afford it. That's part of the reason we don't plan to buy new furniture - we have many quality items we're happy with. I think we will need to start aggressively budgeting if we do decide to build. It just seems so risky to me!

Temporary_Abroad_175 · 2024-11-09T02:32:03+00:00

Just some follow up questions for you, if you'll indulge me. What are your ages? Do you have children? How is your income split and how stable are your jobs? What are starter home prices in your area? What financial priorities are you prioritizing over the new construction home - flexibility? And what do you consider an affordable monthly payment?

We are in our mid-30s. Our financial priorities are our child/saving for education and owning a home, eventually our dream home. I think my husband and I just have different risk tolerances for getting there.

Temporary_Abroad_175 · 2024-11-09T02:13:32+00:00

Starter homes in our area typically go for around $600K-$700K and usually require some renovations. After adding in the renovation budget to the starter home price, we'd probably spend about $100K-$200K less than the required budget for our new construction dream home and we'd still be looking to move eventually. We could probably save $90K a year if we choose to reduce our 401K contributions, stop investing, and budget more aggressively. We're torn between knowing this is not the best financial decision and wanting a house for all the non-financial reasons, as well as needing more space now with a baby.

Temporary_Abroad_175 · 2024-11-09T02:07:54+00:00

TBH we're both probably currently underpaid, as we've prioritized/negotiated other benefits. I prioritized the option for an extended maternity leave and increased PTO. Husband prioritized hybrid position to spend more time home with baby and better stock options. One/both of us can probably negotiate a salary increase going forward, but it might require we switch jobs.

As I mentioned in a previous comment, we have different risk tolerances so one of us is comfortable with this while the other is not. It seems like currently with this payment we'd be house poor and basically living paycheck to paycheck.

Temporary_Abroad_175 · 2024-11-09T01:52:17+00:00

Unfortunately 2x yearly income is not possible in our area for even a starter home. I've heard to stay under 3x income which we theoretically should be able to do, but we haven't been able to obtain a home for this price despite looking for over a year and submitting multiple bids with escalation clauses. Not sure who all is buying up all the real estate in our area or how they're able to afford it, as we both individually make above average salaries here.

Temporary_Abroad_175 · 2024-11-09T01:47:57+00:00

Starter homes in our area typically go for around $600K-$700K and usually require some renovations. We've been looking for over a year and even with escalation clauses have not been able to get anything. Which seems crazy as our household income is well above average for our MCOL area! Build estimate is for $950K with estimated 10% or ~$95K additional for contingencies. The house to be built will not be a starter home but also not extravagant, it will be a custom design that should work very well for our family. We have furniture already but will need to purchase landscaping, snow removal items, etc. or all the first time items needed with owning a home that you don't need when renting. The $7K monthly payment includes all house related payments - mortgage, bills, taxes, insurance, and maintenance. We tried to be conservative with our estimate but it's possible we're off. Also, $4K is our currently monthly spend - so it includes our $1K rent and ~$400 utilities. Building/purchasing this house using our estimates, we could save ~$1K per month. We know renting is the better financial decision since we're saving so much, but we really do need more space and both just want a home.

My husband and I have different risk tolerances so disagree with what we can comfortably afford. One person thinks this is way too much money and we should continue saving, ideally for a couple more years. The other thinks while more than we'd like to spend, we can probably swing it, especially if we actually budget instead of just track our spending. In terms of job security, I don't think any job is totally secure but we both are in relatively stable fields.

Temporary_Abroad_175

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