To max out your purchasing ability or not?

[jimmyle]

Right now I am justing sitting on the sideline and enjoying the price fall. However, I and my wife are watching the homes in several areas in anticipation of our future purchase perhaps in one year or two.

This will be our first time and most of the advice we get is that we should max out our purchasing power. The argument is something like you guys are young and your incomes are increasing so max out on a home in a nice area and after struggling for the first few years your income will go up and the payment will be easy.

Right now we are looking at homes with two price ranges, $450K-$500K and $550K-$600K, which we think with a 10% decline will go down to $400K-$450 and $500K-$540K.

I and and wife love the more expensive homes but we know making payments for the cheaper ones will be much more comfortable.

To those who have experience owning homes could you please give us some advice.

Right now we have no children but we want to have two in the next several years. Our annual income before tax is $140K with $75K in cash. Thanks.

[NotCranky]

“The argument is something like you guys are young and your incomes are increasing so max out on a home in a nice area and after struggling for the first few years your income will go up and the payment will be easy.”

Yeah besides that the more expensive they are the faster they appreciate! Just kidding.

I would take that advice with a grain of salt but am looking forward to seeing other opinions. If the people giving you the advice are going to pay for your house, if you can’t, you might consider taking it..

[NotCranky]

“The argument is something like you guys are young and your incomes are increasing so max out on a home in a nice area and after struggling for the first few years your income will go up and the payment will be easy.”

Yeah besides that the more expensive they are the faster they appreciate! Just kidding.

I would take that advice with a grain of salt but am looking forward to seeing other opinions. If the people giving you the advice are going to pay for your house, if you can’t, you might consider taking it..

[NotCranky]

“The argument is something like you guys are young and your incomes are increasing so max out on a home in a nice area and after struggling for the first few years your income will go up and the payment will be easy.”

Yeah besides that the more expensive they are the faster they appreciate! Just kidding.

I would take that advice with a grain of salt but am looking forward to seeing other opinions. If the people giving you the advice are going to pay for your house, if you can’t, you might consider taking it..

[NotCranky]

“The argument is something like you guys are young and your incomes are increasing so max out on a home in a nice area and after struggling for the first few years your income will go up and the payment will be easy.”

Yeah besides that the more expensive they are the faster they appreciate! Just kidding.

I would take that advice with a grain of salt but am looking forward to seeing other opinions. If the people giving you the advice are going to pay for your house, if you can’t, you might consider taking it..

[Eugene]

It’s obviously a bad idea to stretch yourself and count on future salary raises to bail you out. But that’s not your situation. With 140K pretax income you should have no problem making payments on a 500k or even a 600k house.

[Eugene]

It’s obviously a bad idea to stretch yourself and count on future salary raises to bail you out. But that’s not your situation. With 140K pretax income you should have no problem making payments on a 500k or even a 600k house.

[Eugene]

It’s obviously a bad idea to stretch yourself and count on future salary raises to bail you out. But that’s not your situation. With 140K pretax income you should have no problem making payments on a 500k or even a 600k house.

[Eugene]

It’s obviously a bad idea to stretch yourself and count on future salary raises to bail you out. But that’s not your situation. With 140K pretax income you should have no problem making payments on a 500k or even a 600k house.

[an]

IF housing is cyclical and IF you buy it at the bottom or when it start to trend up, I think I will stretch a little to buy. Obviously, stretch for me might be very different than stretching for other since I max out my 401k and Roth. Stretching for me would be only saving 500-1000 month in cash after all expenses instead of $2k/month. Those people do make a good point though. If you’re young and you believe your salary will go up not only because of inflation but because you advance in your career, what you think is a stretch now might not be a stretch in 5 years. That’s just my 2 cents.

[an]

IF housing is cyclical and IF you buy it at the bottom or when it start to trend up, I think I will stretch a little to buy. Obviously, stretch for me might be very different than stretching for other since I max out my 401k and Roth. Stretching for me would be only saving 500-1000 month in cash after all expenses instead of $2k/month. Those people do make a good point though. If you’re young and you believe your salary will go up not only because of inflation but because you advance in your career, what you think is a stretch now might not be a stretch in 5 years. That’s just my 2 cents.

[an]

IF housing is cyclical and IF you buy it at the bottom or when it start to trend up, I think I will stretch a little to buy. Obviously, stretch for me might be very different than stretching for other since I max out my 401k and Roth. Stretching for me would be only saving 500-1000 month in cash after all expenses instead of $2k/month. Those people do make a good point though. If you’re young and you believe your salary will go up not only because of inflation but because you advance in your career, what you think is a stretch now might not be a stretch in 5 years. That’s just my 2 cents.

[an]

IF housing is cyclical and IF you buy it at the bottom or when it start to trend up, I think I will stretch a little to buy. Obviously, stretch for me might be very different than stretching for other since I max out my 401k and Roth. Stretching for me would be only saving 500-1000 month in cash after all expenses instead of $2k/month. Those people do make a good point though. If you’re young and you believe your salary will go up not only because of inflation but because you advance in your career, what you think is a stretch now might not be a stretch in 5 years. That’s just my 2 cents.

[kev374]

maxing out your purchasing power is a horrible idea. You are taking into account the IDEAL scenario, that is really bad planning. Whoever told you this is a novice.

You should always account for stuff like job loss, emergency maintainence on the property, unanticipated expenses etc. that can eat into your budget. If you spend everything on the mortgage you will end up using credit cards and you know where that leads! Not a good road.

People have stretched to the max and now are losing their homes because of it.

[kev374]

maxing out your purchasing power is a horrible idea. You are taking into account the IDEAL scenario, that is really bad planning. Whoever told you this is a novice.

You should always account for stuff like job loss, emergency maintainence on the property, unanticipated expenses etc. that can eat into your budget. If you spend everything on the mortgage you will end up using credit cards and you know where that leads! Not a good road.

People have stretched to the max and now are losing their homes because of it.

[Author]

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