Just wondering if anyone maxed out their budget (or went over!) when they purchased their latest home, and how you figured out how to afford it?? Vote below!! Comment if you did something else that I'm not thinking of, and I'll add it to the poll too.
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We went under.
Because we accounted for home renovations.I really won't go over your budget if it sets you in a bad spot financially..
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@regberadaisy: that's where we are right now... we just can't max out our budget because there's no way we could squeeze more money out of anywhere, and our expenses are about to go up with LMW going into daycare! Just wondering what other people do and how they get creative if they fall in love with a budget-busting place!
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We went over our original budget but the original number we set was well below what we could comfortably afford so we didn't really have to make any of the adjustments you mentioned. We just put a little less into savings now than we would have if we bought a cheaper house.
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@mrs. wagon: both of us have been working our side gigs as much as possible!
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We were right on target. My parents gifted us some money, so that had to be accounted for in a gift letter at closing. We definitely used 80% of our savings for it, but it made our mortgage manageable. We're also on a 15 year mortgage instead of a 30 year based off of our credit and rates at the time (4 years ago).
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So we bought our house 8 years ago with a zero-down-payment, interest-only loan. And we bought at the top of our budget. Stupid. After 5 years, we hadn't made a single dent, and the loan rates had dropped so much, so we took a loan from my parents to refinance. At least now we are making payments on the principal, and the payments are a bit lower, but still. It wasn't the smartest decision we made. We aren't housepoor, but we're close. And some months we come a little too close to just breaking even for my comfort.
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We purposely didn't look at houses over a certain purchase price, because I knew I would fall in love with something and we'd have to go for a higher monthly payment.
We basically got approved for the loan on just one salary, in case we want to reduce hours and we put something like 25% down. We saved for our down payment by banking my entire salary for three years.
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Well, I voted scrimp and save, but we haven't done anything too drastic. Just cut back on eating out and vacationing. I am also pretty careful when shopping for groceries, baby products, etc. - I always compare prices and use coupons when I can. We went over our inital budget by about 50k. Our initial budget may have been a little conservative though. Our mortgage+insurance & taxes is about 16-17% of our gross income (before taxes/retirement savings)... it is obviously a much bigger chunk of our take home pay.
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DH got approved for way more than we what could afford. It was crazy the amount they "allowed" us, but for him being the sole income and us needing to eat and diaper our kid, we went 50k below what we were approved for, at a mortgage payment (including taxes and insurance), that we knew we could afford. We still paid just under 100k for our house, but that's not unheard of for our area. I would never want to get into a house we couldn't afford, and believe me there were some nice houses we looked at online! Never good to be house poor
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Our new budget is a lot higher than what we originally planned on spending. We're able to afford the higher budget though.
If we couldn't afford it, we wouldn't go over budget.. but! I would probably scrimp and save and cut unnecessary things like data plans, cable, eating out, etc. -
@mrs. wagon: ask parents? I know a lot of people that have done that and it's really common in Asian cultures.....
I mean if you really LOVE this house and it's in a great district. -
We asked the lender to approve us for about $50k lower than we actually qualified for, and then went another $30k under that. We wanted the payments as close to our rent as possible. We knew we'd have kids one day and just in case one of us lost our job, we wanted to be able to make the payments on one salary.
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We went over a little bit. We say our max was a certain number and the house we loved was $1k under. Then someone tried to purchase the house and added a lot of upgrades, but it went back on the market for $5k over our budget. We ended up purchasing the house for $8k over because the builder was only willing to pay half of closing costs so the rest were wrapped in our loan.
We got pre-approved for quite a bit more but in no way would it have been able to afford more than what we are paying.
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Our tentative budget was 30k less than what we could really afford. We wanted to leave some room for renovations and upgrade (if needed). In the end, we ended up purchasing a home at the +30k amount that needed renovations. D'oh!! We've been slowly working on those renovations, but it was a home we prefered over the homes we looked at that were cheaper.
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We bought our house at the top of our budget 6 years ago. The mortgage payment was tight for a few years, but then we started moving up in our careers (bought at 24 years old) so our incomes went up, and last year we refinanced via the HARP program (for underwater mortgages). Now we make 1.5x more than we used to, and our mortgage payment is 25% lower, so we're comfortable, finally.
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I'll be totally honest, our purchase price was within the range we set but there have been surprises. We budgeted for some renovations and knew about the property taxes. What took us by surprise though was the insane maintenance this house required. We bought in a neighborhood where homes are very well kept up, and within the last year we've had to do a new roof, rip out and redo the whole irrigation system, redo our deck, reseal a balcony, and redo our front landscaping. It didn't devastate us, but we've had to watch our budget and we probably could have done another round of IVF by now if we didn't have those expenses.
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We didn't go over budget, and didn't even look at homes over budget so I wouldn't fall in love with something we couldn't really comfortably afford.
We also bought what we could comfortably afford on only one income; layoffs are too common these days and we didn't want to stretch ourselves too thinly with kids.
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We were waaaayyyy under budget on our latest house purchase - it was part of the reason we moved back to our hometown - lower cost of living, while keeping our comparatively good-paying jobs as work from home.
on our first house though, we both took out 401k loans, and got a $5k gift from his parents toward down-payment. Obviously we regret those decisions considering that we went the complete opposite way this time
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We bought a house that was under our budget but we had a ton of renovations that we needed and we ended up borrowing money from our parents for that. If you can borrow it without issues from your parents, maybe you can do that. But if not, I definitely would not raid from your 401k. You NEED that for your future, you don't NEED a house out of your budget right now. That's Suze Orman's first tip: differentiate between needs and wants.
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@lisa1783: Totally agree with you about "needs" vs. "wants" and not raiding a 401k. If you do borrow from a 401k, you have to repay it; so you would also need to factor that into a new budget as well. It's definitely not like a savings account or "free money"!
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When we bought our apt, my parents provided the down payment and we were able to negotiate the price down enough to keep our monthlies under what we had budgeted. Haha, then we did our taxes two months later and realized that not only did we owe the IRS 1/2 of our savings - but we weren't deducting enough from our paychecks and had to completely redo our budgeting/finances. So after the fact, our 'under budget' situation became waaay over budget. We compensated by getting rid of unnecessary expenses like gym memberships, cable, etc. and now thankfully with those scale-backs and our raises this year we are doing much better.
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@regberadaisy: my parents provided our first down payment when we bought our condo 8 years ago, so we have that, but it's not an option for either of our parents to gift us money this time around.
Blowing our budget is just not feasible for us, with our expenses rising in the next 2 years for double daycare costs, so I think we're gonna stay put and take advantage of these next 2 years to really get our finances rock solid... then shop for a house with a great down payment and very little debt (only school loans)! That way we will have a definite budget that will hopefully get us what we want, and where we want it, and we don't have to worry about not being able to afford it.
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We didn't max out our budget, but I still wish we'd paid less. Our original PITI payment was about 16% of our gross income and the bank would have lent us much more. BUT the taxes went up pretty significantly the following year and are slated to go up even more next year. I expected some incremental increases but so far it seems just crazy. If we'd maxed out or blown our budget, I think we'd be heading toward a pretty unhappy situation...
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When we bought we were approved for way more than we were willing to spend. We bought based on what we could comfortably spend on one salary instead of our combined salaries, we never wanted to be house poor. We also didn't look at any homes over our price point since we knew we'd fall in love. 8 years later, we've gone from two salaries to one & have twins on the way. I'm very happy we didn't budge.
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@mrs. wagon: I think that is a wise choice.
And you should keep looking meanwhile! Who knows, something ah-mazing within your budget might pop up! You never know.
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@regberadaisy: yup! We're glad we sold so that we DO have that luxury of being able to jump if a bargain comes up. We've just now set the expectation that our budget is low now and will be higher in 2 years.
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@mrs. wagon: I think you've made a good decision. Without knowing numbers, it's hard for any of us to say what solution is the best though.
I just hope for your sake that home prices don't go up a lot in the meantime...it's beginning here, in CT. Prices are going up, not a huge amount, but enough to make a difference.
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@looch: prices are definitely going up, as are mortgage interest rates, which is why it's so difficult to make this decision. We bought at the peak of the market the last time we bought, so we really wanted to get our purchase in before things rose again. And in 2 years they might just be there again. But I guess we'll just have to re-evaluate once that time comes.
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@mrs. wagon: I hear you completely. That's what sucks, doesn't it? It's like hoping all the stars, planets and universes align at the precise moment where it all makes perfect financial sense!
Oh, and you know something, I am a pessimist, so I hate every house I've ever looked at! It's like I can see the worst in everything, totally helps keep me in check, esp. with budget and resale!
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We are at the top part of our decided apon budget, however we were way under what we could afford. We knew it was our starter home so instead of going all out with the max of what we could actually afford, we did reasonable so we can build our dream home in the near future.
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We couldn't go over our budget because we couldn't get approved for any more.
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@PurplePeony: @LMOG47: it's crazy how much the banks will tell people they can "afford" - if we bought the $$ house they think we could afford, we'd be broke as a joke.
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@runnerd: Amen to that! And our realtor repeatedly tried to persuade us to go higher, telling us "but the bank approved you for such & such." Yeaaa...no thanks!
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@LMOG47: We had the same issue (at first) with our realtor . . . he kept wanting to show us properties that we could afford, but were way more than we wanted to spend. Lol!
ETA: And while I we really could afford more house, what the heck am I gonna do with 5,ooo (or more!) square feet?!
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@MsLipGloss: Ugh so annoying! Seems to be a common theme with realtors. I understand they're commission, but good grief, they're not the ones paying the mortgage!
eta: the thought of just cleaning a house that size makes me shudder!
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@LMOG47: I know . . . conflict of interest much?! And yeah . . .cleaning . . . I don't even want to think about that! I have a tough enough time as is!
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We went over budget... well, that's not technically true as we didn't really have a budget... but we just put less down and it wasn't a problem.
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We went a little over because we could not find something in the budget I had set (which probably wasn't realistic)
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We were approved for more than what we bought our house for, but I was really concerned about our monthly mortgage so we tried to stay within budget. Definitely had help from DH's parents though, they gifted us the money and we were able to buy a nice house with a reasonable monthly mortgage in the neighborhood of our choice. I'm already thinking ahead for our next purchase (only bought this house last year) since I know this is somewhat of a starter house because of the size..
Because we accounted for home renovations.
And you should keep looking meanwhile! Who knows, something ah-mazing within your budget might pop up! You never know.
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