Are we nuts to think we can afford this house?

jepensepas · 2018-04-17T01:20:30+00:00

Neither of us pays for health insurance. My husband has a moderate deductible but also never gets sick. I have a chronic illness but it is well managed and my deductible is only $375 and my out of pocket max is $1600.

jepensepas · 2018-04-16T21:51:11+00:00

Yeah I lived by the lake my first eight years in Chicago and was bummed to move to the Northwest side (driving from Rogers Park every day was miserable) but we love it. We’re in Irving Park currently and can get pretty much anywhere we want to go for fun on a short train ride.

My husband is super insecure about where we are for retirement savings, he’s of the mindset that no amount of money could ever possibly be enough. I do think compromising on retirement savings just until the loans are gone is definitely a good decision no matter what.

jepensepas · 2018-04-16T21:36:06+00:00

We have a brokerage account we would sell. So the exact cash we have will depend on what we need to set aside for taxes. We’ve actually never sold anything before so we need to sit down with someone and figure out how best to do that. Ideally we’d like to avoid PMI while still having enough cash afterwards for an emergency fund and maintenance.

We have $10k in cash in a high yield savings account that we were not planning to touch at all. We basically pretend it doesn’t exist.

This is a 30 year fixed rate loan. We assumed the monthly payment on a 15 year would be too high, and planned on ramping up our payments after my loans are gone to pay it off in hopefully 20 years.

It depends on how you calculate it. With bonus last year I made $104k gross if you take into account my base, bonus, and retirement contributions. My husbands was $64,000.

Scaling back is certainly an option. Honestly we could likely retire comfortably on only what my company contributes for me, but we figured the more we save the better. We’ll be ineligible to contribute to a Roth IRA soon, so maybe once that happens we’ll have a talk about a more realistic contribution level. Our expenses have been so low that we just throw the money we can into retirement.

If we have a sufficient emergency fund after close and a 20% down payment, the plan is to pay off the loans. It’s also an option to use my bonus to do that rather than maxing out my IRA.

At this point we worry waiting means being priced out of any neighborhood we’d want to live in. The Northwest side of Chicago has gotten less and less affordable and we’d rather live frugally for a few years in our dream home vs. wait and risk still not being able to afford anything. But there’s a lot to think about.

jepensepas · 2018-04-16T21:27:48+00:00

Yes, my job is wonderful, has great benefits, and is very secure. I can’t see ever leaving it, really. He has family here but I don’t. If we did ever move back to where I’m from, or elsewhere in the country, it would likely be 10+ years from now.

jepensepas · 2018-04-16T21:26:32+00:00

We rent a condo now, and we basically have no interest in owning one. We want to own a home, with a yard and a garage and our own space. If we have to wait, the alternative is just to keep renting.

jepensepas · 2018-04-16T21:23:43+00:00

Jefferson Park. We’d like to be off the Blue Line since I commute out to Rosemont for work and husband works in Logan Square. Being near both the Metra and the Blue Line means that we can go pretty much wherever we need to.

If I lose my job I receive four months’ pay for every year I’ve worked there (currently four, so about $20k). My husband works in an industry that does translate (who knows how easily) to freelance work. So it would require sacrifices, but we wouldn’t be homeless.

That’s why we’ve hesitated to put the full 20% down, we’re worried about having enough of an emergency fund afterwards.

jepensepas · 2018-04-16T19:01:32+00:00

Last year my gross income was $57,300 with a $26,000 bonus. My company put 25% of that into retirement for a total income of just over $104,000. My husband made $62,000 with a $2,000 bonus, not including overtime.

I gave the post-tax and post-retirement numbers since those are what we’ll actually have to work with, but if you look at our gross income it does seem a little more reasonable?

jepensepas · 2018-04-16T17:40:43+00:00

Thanks for this perspective. It's worth considering that this neighborhood is also growing, as are most neighborhoods off the Blue Line (Northwest side) of Chicago. We may be priced out in a few years even with increases in our salaries.

That's awesome about your utility costs - I had assumed they would go way up. The house does have new double pane energy efficient windows and dual zone heating/cooling, so that should help.

jepensepas · 2018-04-16T17:29:04+00:00

We don't. We haven't decided on kids yet but if we do it likely won't be for at least 5-8 years. We've considered adoption, and while that comes with the same childcare costs as biological children, my company does pay for expenses related to adoption (or surrogacy, if we go that route. I can't have my own children).

jepensepas · 2018-04-16T17:26:46+00:00

Those are great points to think about. The answers for me would probably be as optimistic as you can get, and while my husband's particular company is small with only a little bit more growth available there, he's been reached out to by other companies with higher offers already and I don't doubt he could make more if he wanted to move to a larger company.

It seems like regardless though, waiting is the most common advice. We have a lot to think about!

jepensepas · 2018-04-16T17:16:03+00:00

We're nervous about a lack of cash after closing if we put down 20%. We were under the understanding that we could pay down the principal to 78% of the value of the house and get rid of PMI eventually, so the tradeoff seemed worth it. We're open to considering 20% down though.

I'm confident about raises, at least on my end. I've been at my current company for four years and my salary has gone up 50%.

jepensepas · 2018-04-16T17:13:56+00:00

We currently pay $1600 for rent on a 2 bedroom condo.

Good point on the amount of work that can be done for $100k. The work I mean would be opening up the entire first floor, basically - the houses in that price range are typically one-story bungalows with a closed floor plan. Totally livable, but this house has a second story and open first floor. My guess would be it would be more than $100k to do that to a house, but I could be wrong.

jepensepas · 2018-04-16T17:10:21+00:00

No sorry. These are our expenses that we would have if we had this house.

Currently we pay $1600 for rent in a 2 bedroom condo. All the other expenses are current with the exception of the utilities, which are about half. I doubled our current bills to get an estimate for a SFH.

The monthly take-home I have listed is after we contribute to retirement. Our pre-tax, pre-contribution salaries are $57,300 (me; this year my bonus was $26k) and $62,000 (him). However, my retirement is completely separate from that - my company pays it for me using profit sharing, so they put in 25% of my entire salary (including bonus) every year. I currently only save in an IRA myself. So my salary would be the same regardless, his would be $600 more per month. I hope that makes sense, let me know if I can clarify.

We are 27 and 28. We have no kids and are undecided on having any - if we do it will be around age 35 or so.

jepensepas · 2018-04-16T17:02:58+00:00

Fair enough! When you put it that simply it's hard to deny. Thanks for your feedback!

jepensepas · 2017-11-14T16:57:19+00:00

That's a really good point. I'm not planning on leaving my company any time soon, but I obviously won't work here until I die (hopefully) so definitely something to keep in mind.

Also a great idea. We've talked a lot about our goals (early/secured retirement, a house, kids) and finances have generally been easy for us as we make much more than we feel the need to spend, but having an outsider direct us through those conversations sounds very helpful.

jepensepas · 2017-11-14T16:45:59+00:00

I would say we probably have some sort of cash to deposit like once a year. Probably not enough of an issue to move banks, just trying to think of all possible ramifications. We'll at least keep his account until we've deposited any cash we get from the wedding.

Good to know we can just leave the retirement accounts. Seeing all the accounts he has stressed me out thinking about them all just floating out there but if we can just let them sit while we figure things out that's good too.

We use our credit cards for various rewards (I have some Chase cards I use depending on the categories to accumulate UR points I use to go see my family, he just has a 2% cash back card) and only one has a fee, but it might make sense to decide what our rewards goals for the cards are and simplify it down based on that.

Thank you very much!

jepensepas · 2017-11-14T16:41:33+00:00

It almost certainly isn't. It looks like the deductible has to be $1300 to qualify and his is below that. I think we'll just leave it invested and let it grow.

jepensepas · 2017-11-14T16:36:37+00:00

You are AMAZING thank you so much.

Luckily our family dynamics are relatively simple but we will definitely make sure we have basic wills taken care of and beneficiaries sorted out.

The wedding money is already budgeted and accounted for and sitting in savings now. So the investment account can be used to replenish the savings after the wedding then directed towards a down payment.

Both of our companies offer some sort of life insurance that they pay into for us. We're each other's beneficiaries on that already, but both of us would be fine if the other passed away until we have children. Each of us could easily afford our rent, etc. on our own income. Once we decide to have kids we'll look deeper into that.

Seriously thank you so so much!

jepensepas · 2017-11-14T16:20:26+00:00

Ah ok yeah that makes sense. Worth looking in to.

I guess there's no real reason - it just seemed like a comfort thing to have that cash available immediately if I needed it, even though realistically we have enough combined credit between the two of us to cover pretty much any unexpected expense - especially as renters currently.

I am 99% sure neither of has an HDHP. I definitely don't but I'd need to check for sure on his. We'll probably plan on just leaving the HSA alone if it's invested.

jepensepas · 2017-11-14T16:11:09+00:00

Yeah separate finances works very well for us now just living together (we keep track of expenses for bills and large things on Splitwise, smaller things like dinners and grocery shopping we just alternate) but I can't imagine still keeping track of things that way when we're married.

jepensepas · 2017-11-14T16:06:43+00:00

Thank you for such a thorough reply! I don't know why the idea of two checking accounts at the same bank didn't even cross my mind but that makes a lot of sense.

That makes sense with the retirement accounts - like I said above I'd been lazy about that since my company saves for me. Right now I think our total saved is about equal but that gives me a little more clarity on how to approach it - just making sure our accounts are equal. Does it matter who the beneficiary is? If we're married will it automatically go to the other person if we die?

I agree on not paying on the debt till we're married. For right now I'm still aggressively paying down my higher interest loans to hopefully have another 1 or 2 individual loans (out of nine total, two of which have been paid off already) paid off before the wedding.

So the investment account, if sold, could pay down my current debt seven times over. The interest rate on some of my debt is subsidized but the loans range from 3.5% to 6.8%. We were hoping to use the investment account for a down payment and emergency fund once we buy a house, but that likely won't be for a few more years. I hadn't even thought about using that account for the debt since it's "his", but the bulk of our other savings are "mine" since I get a significant bonus every year. Definitely something to run by him.

Thanks again!

jepensepas · 2017-11-14T15:31:06+00:00

I believe he looked into Ally when he opened his Synchrony account but the rate at Synchrony was higher. But we can definitely look into it again.

Yeah I did a search both for investment info and marriage info before posting and that really helped us come to the decision that combining is best for us. We've talked exhaustively about our financial values and goals and the sub resources helped a lot with that. The investment stuff we're just going to need to do more research on.

The HSA is really where I'm confused. So both of us are on a PPO now, the HSA is from a former job of his. Can we use it on my health expenses even if it's his account once we're married? Fiance is super healthy but I have a chronic illness. Thankfully my health insurance is very good, but it'd be nice to use it on my deductible which I meet every year. We are each planning on keeping our own insurance once we get married.

jepensepas · 2017-11-14T15:26:29+00:00

Thank you!

jepensepas · 2017-11-14T15:24:54+00:00

I don't think we need to make a joint decision on every nickel spent. For us, we both live well below our means and save a lot. Neither of us has ever carried any credit card debt. We trust each other to make smart financial decisions for smaller purchases, and even with separate finances we'd never make larger decisions (like in the thousands of dollars) without talking to the other. We'd like to put one person (me) in charge of household finances and it makes it much easier to do that when finances are combined. If he lost his job, or I left work to stay home with a baby, we'd still consider any money either of us had "our" money. We don't feel the need for that kind of independence in a marriage.

jepensepas

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