Dream House Or "Suitable" House?

[Deleted]

Ok, here's the situation. WE're looking at buying a house in a new area. We knew going in that we'd be spending more money for a house not as nice as the current one that we live in, but we were ok with it. Here are a few benefits of the new area...

-Pre-school/gradeschool are walking distance (not that they could walk to pre-school
-Commute would go from 49 miles Round Trip for me, to 25. For my wife, 45 miles to 2 miles.
-We just had twins, so we'd be 5 minutes away from in-laws, who help out a lot.
-Overall, AWESOME school district.
-Much more centrally located. I could commute pretty much anywhere around the area.
-More options for dining, shopping, etc. Basically closer to civilization.

Ok, so that all sounds good. We thought we wanted to live in more of the "town" part of this area, but ended up walking through an open house in the outskirts (few minutes away, but different feel) that we loved. HUGE yard, everything updated, 3 fireplaces, 4 bedrooms, finished basement, bar, office in basement, nice mature trees, huge fence, and a heated garage. etc. Basically, this is the house we would live in forever. Even my dad, who is a huge cheapskate, said that he would buy that house if my mom would move. It's not a huge house, but it's nicely done.

The price tag is higher. Basically, we'd be going from a mortgage payment of $1950/month (everything) to $2600. That's after putting 20% down.

My wife is staying home next year (she's a teacher) and she has a guaranteed, board approved 1 year maternity leave. So she'll go back to the same school in August 2012.

Now if my wife was working next year, I wouldn't really worry that much. The payment would be around 16% of our gross income and total debt payments would be around 18% of our gross income. Without that, it's about 20% and 22% or so.

Now, I know that we'll have some savings built-in. We'll save on gas, wear/tear. About $80/month in tolls. And then the extra $600 would mostly be taxes/interest which we could deduct on our returns. Plus, we'd cut back in some other areas (house cleaning, bottled water delivery, etc).

We're doing ok financially. After the downpayment, here's what the picture will look like. I won't bother getting into a detailed budget since we've never had problems with credit cards or anything and I know we'd make adjustments if needed on the small stuff. Anyways, here's the balance sheet numbers.

Age--32
Liquid--$43K
401k (combined)--$140K
ROTH IRA--$90K
*Wife has 10 years into an IL teachers pension.
529 Plan--$38K (Kids age are 3, and 2 newborns)
Only debt is a car payment.
Health Savings Account--$9K


What do you think? We could scale it down a notch and get a house that would lower our payment by about $100-$200. Realistically, it's not even the jump from $1950 to $2650. Mentally, I knew we would never live in our current town. It's more the jump from $2400 (expected) to $2650.

So would you spend the extra $250 month to get the dream house? Or would you just be content and get a house that would suit the family fine?

[zibazinski]

$250 extra for the dream house? Do it.

[kgb18]

Congratulations on the twins!! And cutting down on the commute will be wonderful for you. I just went from a 37 mile commute each way to a 3 mile commute. It's wonderful.

DH and I bought a house three years ago that was suitable. Even though we could have afforded more, we were nervous about it. We're probably looking at moving in a couple of years, after we save a down payment, because as our family is growing the house is getting too small. If you can afford it, I would go with the larger house that would be a place you could stay forever. But only if you can manage the payments and are comfortable with it.

[yogiii]

I would do it, I do have a question...

Is the liquid your DP, or will you have that after the DP?

I took a 6 month maternity leave and had saved 6 months salary for it. It ended up that we didn't use any of that money. Not working really did save some money in commute and other small expenses and as you know since you already have 1 kid, they can be as expensive as you want. I think tightening things up for a bit 1 year will be worth it in the end.

Just FYI our mortgage is about 18% gross in a HCOLA with no other debt

[dancinmama]

For the price difference, I would definitely go with the "dream home" that you know you will be happy in forever, especially if you're pretty sure that you'll stay there forever. Interest rates are historically low and over time you SHOULD be able to absorb that extra $250 without too much problem.

DH and I bought our dream retirement home at the peak of the market and I am soooo glad. He will be retiring next year and even though the home's value has sunk like a boulder, we are thrilled with where we are, so it doesn't really matter to us cuz we're here for the long haul. Luckily, we did not buy it as a monetary investment, but an investment in our lifestyle.

[phil5185]

The biggest negative that I see is the 3 fireplaces - but that's just me.

Is this a 2-story or a 1-story? Sq ft? (not counting basement).

[dancinmama]

Jun 10, 2011 12:42:04 GMT -5 phil5185 said:

The biggest negative that I see is the 3 fireplaces - but that's just me.

Is this a 2-story or a 1-story? Sq ft? (not counting basement).

phil: You're such a kill-joy!!

[Deleted]

Jun 10, 2011 12:26:17 GMT -5 yogiii said:

I would do it, I do have a question...

Is the liquid your DP, or will you have that after the DP?

I took a 6 month maternity leave and had saved 6 months salary for it. It ended up that we didn't use any of that money. Not working really did save some money in commute and other small expenses and as you know since you already have 1 kid, they can be as expensive as you want. I think tightening things up for a bit 1 year will be worth it in the end.

Just FYI our mortgage is about 18% gross in a HCOLA with no other debt

The liquid would be after the downpayment. My father in law is going to chip in $30K for the downpayment so we can still have cash reserves And my wife said that we'll pay him back over the next 3 years. But honestly, I think he'll just say that's his gift to us. He's pretty generous in that way. But paying him back would be no problem. My business generates quite a bit of cash that we usually just save. So i could have him paid off within 6-12 months.

[yogiii]

Ok, I really wouldn't be worried then. You have 43k for the year that you could dip into were something unexpected to happen. Not to mention your Roths (in a very extreme case).

Even with the mortgage at ~20% of your gross, you'll probably be able to make a few life style changes and make it through the year. You know, maybe hold of on redecorating and stuff like that until your wife goes back to work.

[8 Bit WWBG]

Based solely on how you describe everything, it absolutely sounds like you'd be happier in the "dream" house than the "settle" house.

Just think long and hard and make sure there aren't any negatives you overlooked.

[dancinmama]

Jun 10, 2011 12:45:35 GMT -5 @davebo said:

Jun 10, 2011 12:26:17 GMT -5 yogiii said:

I would do it, I do have a question...

Is the liquid your DP, or will you have that after the DP?

I took a 6 month maternity leave and had saved 6 months salary for it. It ended up that we didn't use any of that money. Not working really did save some money in commute and other small expenses and as you know since you already have 1 kid, they can be as expensive as you want. I think tightening things up for a bit 1 year will be worth it in the end.

Just FYI our mortgage is about 18% gross in a HCOLA with no other debt

The liquid would be after the downpayment. My father in law is going to chip in $30K for the downpayment so we can still have cash reserves And my wife said that we'll pay him back over the next 3 years. But honestly, I think he'll just say that's his gift to us. He's pretty generous in that way. But paying him back would be no problem. My business generates quite a bit of cash that we usually just save. So i could have him paid off within 6-12 months.

davebo: That being the case, why are you even second guessing it. It seems as though it would be easily affordable for you. Is there something else that's bugging you about buying it?

[Deleted]

Jun 10, 2011 12:42:04 GMT -5 phil5185 said:

The biggest negative that I see is the 3 fireplaces - but that's just me.

Is this a 2-story or a 1-story? Sq ft? (not counting basement).

No way...I LOVE fireplaces! 2 wood-burning and 1 electric.

It's a one story with a full-basement. I think the SF is 1950 on the main living...plus the basement.

[alabamagal]

Based on your overall financial situation, I say go for the dream house.

[Deleted]

Jun 10, 2011 12:51:14 GMT -5 dancinmama said:

Jun 10, 2011 12:45:35 GMT -5 @davebo said:

The liquid would be after the downpayment. My father in law is going to chip in $30K for the downpayment so we can still have cash reserves And my wife said that we'll pay him back over the next 3 years. But honestly, I think he'll just say that's his gift to us. He's pretty generous in that way. But paying him back would be no problem. My business generates quite a bit of cash that we usually just save. So i could have him paid off within 6-12 months.

davebo: That being the case, why are you even second guessing it. It seems as though it would be easily affordable for you. Is there something else that's bugging you about buying it?

I think because I mentally prepared myself for a $2400/month payment and now I've got a $2650. I was like this with my first house and it worked out. I think it's just the stress of lots of cash going out at once, combined with a higher payment, combined with wife staying home for a year.

But I do, in my head, realize that it's a good move. I'm a worrier by nature when it comes to big purchases. Just being closer to our work will be huge for us. My 4-year old car has 70K miles on it. So I should be driving about 30% less. My wife will be driving a minuscule % compared to what she was.

[tskeeter]

dave, one of the things I would look at is the relative appreciation in the value of the two homes. I'm inclined to guess that the dream home, or homes in the area of the dream home, are appreciating at a faster rate than the suitable home. I'd also think about how long I would be willing to live in each of the homes. Every time you sell a home, you give a very large chunk of money to real estate agents (it was over $50K on the sale of our So. Cal. tract home in 2006). If you can avoid "need" to upgrade, you'll keep a lot more of the appreciation in your home's value. Keep in mind that for most home owners, the appreciation you keep, rather than paying to real estate agents, is tax free money. So, if you pay 20% in income taxes, not paying $50K to real estate agents is like earning another $64K (federal income tax and FICA).

[azphx1972]

I would go for the dream house, but how stable is your job? That would be a huge consideration for me.

FWIW, I had a 10 year HEL on my place a couple of years ago. The payment was 2650 (my income is in the 120k range, and I have no other debt, or children to support), and that felt tight to me. I refi'd to a 30 year which dropped the payment to 1145, and it gave me much more breathing room.

I think you should be ok given your liquid savings and young age, but try to cut back on your lifestyle as much as you can since your housing will take a huge chunk of your income.

[dancinmama]

Jun 10, 2011 12:56:46 GMT -5 @davebo said:

Jun 10, 2011 12:51:14 GMT -5 dancinmama said:

davebo: That being the case, why are you even second guessing it. It seems as though it would be easily affordable for you. Is there something else that's bugging you about buying it?

I think because I mentally prepared myself for a $2400/month payment and now I've got a $2650. I was like this with my first house and it worked out. I think it's just the stress of lots of cash going out at once, combined with a higher payment, combined with wife staying home for a year.

But I do, in my head, realize that it's a good move. I'm a worrier by nature when it comes to big purchases. Just being closer to our work will be huge for us. My 4-year old car has 70K miles on it. So I should be driving about 30% less. My wife will be driving a minuscule % compared to what she was.

davebo: Ya, I can understand that - especially in this crappy economy, but I think you would quickly regret getting the other one.

[yogiii]

Jun 10, 2011 13:06:34 GMT -5 dancinmama said:

Jun 10, 2011 12:56:46 GMT -5 @davebo said:

I think because I mentally prepared myself for a $2400/month payment and now I've got a $2650. I was like this with my first house and it worked out. I think it's just the stress of lots of cash going out at once, combined with a higher payment, combined with wife staying home for a year.

But I do, in my head, realize that it's a good move. I'm a worrier by nature when it comes to big purchases. Just being closer to our work will be huge for us. My 4-year old car has 70K miles on it. So I should be driving about 30% less. My wife will be driving a minuscule % compared to what she was.

davebo: Ya, I can understand that - especially in this crappy economy, but I think you would quickly regret getting the other one.

I agree with this 100%.

[Wisconsin Beth]

Jun 10, 2011 12:42:04 GMT -5 phil5185 said:

The biggest negative that I see is the 3 fireplaces - but that's just me.

Is this a 2-story or a 1-story? Sq ft? (not counting basement).

And are they wood burning or gas? ETA - never mind, I saw the response.

My brother moved into his house and it had a fireplace. My SIL's family all crowed about how it was gas and good plan. We all said "Gas? Bummer."

[thyme4change]

Financially, it seems doable to get the dream house. If square footage makes you happy - knock yourself out.

However, I'll give you a different take. I was raised in the land of huge houses. I could never understand people that were in small houses. But now, I live in a small house right in the middle of town. I love our place for a couple reasons. #1 is the ability to actually walk to things. We walk to restarants and shops. It is a totally different world than I was raised in where people would get in their cars to drive down the driveway and get the mail.

The second thing I love about our place is that we know a lot of our neighbors. Because we live in an older, more established neighborhood, it has a totally different feel about it. It is old-school friendly. Because we are all walking to shops and restarants, we have become one huge fmaily. My suburb counter-parts ain't got nothin' on how our neighborhood works together. I'm sure they are glad they have an extra play-room, so their kids can be in it playing alone. In our 'hood, when the kids get on our nerves, we send them down the street. When that mom gets tired of it, she sends them back - with her kids, too.

Is my house my dream house? Absolutely not. It is small and bland and dark. But there is no building material that could entice me out of my neighborhood.

And, another thought - I am really, really glad I don't have too much extra space. As a working mom, cleaning up yet one more room - not worth it. Not only would I rather not spend the time cleaning, but I would much, much rather take that $3k per year and travel.

So, money isn't the only thing to consider. You mentioned walking to school, and such - but that goes away. You mentioned not being in the sticks, but now you are on the outskirts. Are you sure you aren't being dazzled by the house, but missing out on something else?

At the end of the day, it is a deeply personal decision. And, if you move into an "okay" house and hate it, it will cost you a bundle to move up. I just like to advocate for a more simple lifestyle - less space, less to clean, less grass to mow, more money in the bank, more time to do what you want. It is absolutely not the American way, so I'm sure I represent a minority interest. I also live in a city where the kids can play outside just about every day - so I tend to forget the value of the outdoor space we have.

[Deleted]

Jun 10, 2011 13:58:27 GMT -5 thyme4change said:

Financially, it seems doable to get the dream house. If square footage makes you happy - knock yourself out.

However, I'll give you a different take. I was raised in the land of huge houses. I could never understand people that were in small houses. But now, I live in a small house right in the middle of town. I love our place for a couple reasons. #1 is the ability to actually walk to things. We walk to restarants and shops. It is a totally different world than I was raised in where people would get in their cars to drive down the driveway and get the mail.

The second thing I love about our place is that we know a lot of our neighbors. Because we live in an older, more established neighborhood, it has a totally different feel about it. It is old-school friendly. Because we are all walking to shops and restarants, we have become one huge fmaily. My suburb counter-parts ain't got nothin' on how our neighborhood works together. I'm sure they are glad they have an extra play-room, so their kids can be in it playing alone. In our 'hood, when the kids get on our nerves, we send them down the street. When that mom gets tired of it, she sends them back - with her kids, too.

Is my house my dream house? Absolutely not. It is small and bland and dark. But there is no building material that could entice me out of my neighborhood.

And, another thought - I am really, really glad I don't have too much extra space. As a working mom, cleaning up yet one more room - not worth it. Not only would I rather not spend the time cleaning, but I would much, much rather take that $3k per year and travel.

So, money isn't the only thing to consider. You mentioned walking to school, and such - but that goes away. You mentioned not being in the sticks, but now you are on the outskirts. Are you sure you aren't being dazzled by the house, but missing out on something else?

At the end of the day, it is a deeply personal decision. And, if you move into an "okay" house and hate it, it will cost you a bundle to move up. I just like to advocate for a more simple lifestyle - less space, less to clean, less grass to mow, more money in the bank, more time to do what you want. It is absolutely not the American way, so I'm sure I represent a minority interest. I also live in a city where the kids can play outside just about every day - so I tend to forget the value of the outdoor space we have.

Those are valid points. The town vs. outskirts conversation is probably one that we've had the most.

The "town" feel would only be important to me if it was walking distance to either my in-laws house OR the downtown of this area. The problem is that it's an expensive area so the number of houses in our range were limited, plus the houses just didn't fit our needs (older). Things like only 1.5 baths and 2 bedrooms on one level and another on the main level just don't seem practical. Or another thing is just really long/steep stairs that probably wouldn't be up to code if built now. Plus, because the area of town that fits those needs is historical, it has higher taxes.

After we discovered that the A-District wasn't within our reach, we moved to our backups. Still a "town" feel, but not walking distance to the downtown. Kinda similar thing there. Small yards, small houses, and little things that didn't appeal to us. One of our friends wanted us to move to a place around there that has more of a "town" feel by telling us that it's great. Lots of young families and all the parents get together, drink, and have BBQ's while the kids sleep. And honestly, that's not necessarily the environment we want our kids to be growing up in. We like more of a balanced neighborhood.

Then we ran into this house. The SF really isn't much different than we have now. I definitely don't consider it excessive. We DEFINITELY were wow'd by the house, but also other things that made the little difference. For example, one of the things we thought would be easy to find was a kitchen that had a door that led to a patio. My wife could be inside, kids could be right outside and she could keep an eye on them. Apparently that's hard to come by for these houses!

But also other little things. My wife likes to run and we have a treadmill. But all the older houses we looked at had no room for a treadmill. Small bedrooms and the basements cielings were too low. This house could accommodate that. And finally, when our kids do go into Daycare, this particular school by us has a pre-school attached. So they go from daycare, to pre-school, back to daycare in teh same building. It takes the pressure off finding someone to pickup the kids or have a nanny drive them there.

Those are valid points you bring up though. I've been playing devils advocate with my wife just to make sure that this is what she wants.

[Deleted]

Jun 10, 2011 13:30:28 GMT -5 Wisconsin Beth said:

Jun 10, 2011 12:42:04 GMT -5 phil5185 said:

The biggest negative that I see is the 3 fireplaces - but that's just me.

Is this a 2-story or a 1-story? Sq ft? (not counting basement).

And are they wood burning or gas? ETA - never mind, I saw the response.

My brother moved into his house and it had a fireplace. My SIL's family all crowed about how it was gas and good plan. We all said "Gas? Bummer."

They preferred the gas logs and you guys preferred wood burning right?

I actually didn't necessarily rule out houses that didn't have a wood-burning fireplace, but it was definitely a strike against them. Our big ones were 3 beds, 2 full-baths, and easy access from the kitchen/family room to the yard.

I kinda felt petty when I ruled houses out for, seemingly, minor things but we have lived with things in our house that I hated and felt we should just get it right this time. One of the things our current house has is a "Lookout basement". Basically the basement is slightly above grade. That seems great, but then you either have to build a deck off the kitchen (more expensive) and a deck kinda limits the ability to overflow into the yard if it gets crowded. Plus, my mom/aunt have bad knees so that was always a pain.

Another thing was that the back of our house faces an open field and it's West facing. Being a first time homeowner, I didn't see this as being a problem. But a newer neighbhorhood and no trees meant that the sun BEATS down on the back of the house. It's totally brutal! We set our air at 70 and the lowest it can get on hot days is 78 or 79. brutal.

[thyme4change]

Lots of young families and all the parents get together, drink, and have BBQ's while the kids sleep. And honestly, that's not necessarily the environment we want our kids to be growing up in. We like more of a balanced neighborhood.

This sounds like an awesome neighborhood. But, now you know what is important to me

As I said - it is very personal. You really have to decide what makes you happy. $250/month is enough that you may have to make choices between this house and eating out. Or this house and travel. Or this house and new cars. Or whatever. Just make sure the trade-off is worth it, and you will be so happy.

[Wisconsin Beth]

Jun 10, 2011 15:10:41 GMT -5 @davebo said:

Jun 10, 2011 13:30:28 GMT -5 Wisconsin Beth said:

And are they wood burning or gas? ETA - never mind, I saw the response.

My brother moved into his house and it had a fireplace. My SIL's family all crowed about how it was gas and good plan. We all said "Gas? Bummer."

They preferred the gas logs and you guys preferred wood burning right?

Yep.

I actually didn't necessarily rule out houses that didn't have a wood-burning fireplace, but it was definitely a strike against them. Our big ones were 3 beds, 2 full-baths, and easy access from the kitchen/family room to the yard.

I kinda felt petty when I ruled houses out for, seemingly, minor things but we have lived with things in our house that I hated and felt we should just get it right this time. One of the things our current house has is a "Lookout basement". Basically the basement is slightly above grade. That seems great, but then you either have to build a deck off the kitchen (more expensive) and a deck kinda limits the ability to overflow into the yard if it gets crowded. Plus, my mom/aunt have bad knees so that was always a pain.

Another thing was that the back of our house faces an open field and it's West facing. Being a first time homeowner, I didn't see this as being a problem. But a newer neighbhorhood and no trees meant that the sun BEATS down on the back of the house. It's totally brutal! We set our air at 70 and the lowest it can get on hot days is 78 or 79. brutal.

I wouldn't feel bad about it at all. You need to know the dealbreakers for you (and your wife)

[qofcc]

It sounds like the dream house will be the better choice in the long run for not too much more money. If you settle for a house you're not happy with, you'll probably either end up moving and paying all of the associated fees or spending a bunch of money to turn it into what you do want.

[Deleted]

Jun 10, 2011 15:11:44 GMT -5 thyme4change said:

Lots of young families and all the parents get together, drink, and have BBQ's while the kids sleep. And honestly, that's not necessarily the environment we want our kids to be growing up in. We like more of a balanced neighborhood.

This sounds like an awesome neighborhood. But, now you know what is important to me

As I said - it is very personal. You really have to decide what makes you happy. $250/month is enough that you may have to make choices between this house and eating out. Or this house and travel. Or this house and new cars. Or whatever. Just make sure the trade-off is worth it, and you will be so happy.

Ha. You know, every once in awhile (once a month), that does sound awesome. But I'm not interested in talking to my neighbors everytime I go out to water the grass. Some peopel totally love that feel. They put the baby monitors on and all meet outside on the driveway and drink. I think I must be different, cause I just found out that my buddy from gradeschool (that I haven't seen in years) lived down the street. And he said he'd stop by one of these days and we could hang out. A part of me thought "Oh geez...somebody is just going to show up at my door".

I think I just prefer socializing on my terms. Am I a hermet? Haha

[Deleted]

Jun 10, 2011 15:17:33 GMT -5 qofcc said:

It sounds like the dream house will be the better choice in the long run for not too much more money. If you settle for a house you're not happy with, you'll probably either end up moving and paying all of the associated fees or spending a bunch of money to turn it into what you do want.

Yeah, it was funny cause right before we bought this house we were looking at the neighborhood house and I was trying to sell my wife on it. Well maintained, but definitely had an older person decor and needed updating.

As I was walking through the house trying to make light of the work that it needed, I kept thinking "Geez, this is going to be a really sucky 5 years doing all this". Space was good, but it definitely would've been a minor money pit.

This house doesn't even need paint, which is kinda nice to think about.

[thyme4change]

They put the baby monitors on and all meet outside on the driveway and drink.

It probably isn't mandatory, but your reason is valid. Some people like the anonymity of certain neighborhoods. Of course, the reasons you gave in post 25 is very different from the reason you gave in 20. If you aren't the person that wants to hang out with your neighbors, that's cool - but not wanting to raise your kids in a neighborhood like that?? Seems like a weird statement.

[kiskis]

I'm all about the dream house! I'm pretty dang cheap about most stuff, but a forever home is what you'll spend most of your life in, so you better enjoy it. Sounds like you're pretty financially healthy, so go ahead. This is what you work hard for.

..Oh, but I would probably forgo heating the garage. lol

[Deleted]

Jun 10, 2011 15:32:38 GMT -5 thyme4change said:

They put the baby monitors on and all meet outside on the driveway and drink.

It probably isn't mandatory, but your reason is valid. Some people like the anonymity of certain neighborhoods. Of course, the reasons you gave in post 25 is very different from the reason you gave in 20. If you aren't the person that wants to hang out with your neighbors, that's cool - but not wanting to raise your kids in a neighborhood like that?? Seems like a weird statement.

I want my kids to be in a neighborhood where there are other kids/families, just not so close together. Where we could sit out in the backyard, without basically looking at the 2 houses to the right/left of us and the one behind us.

Some of the houses in the neighborhood area were just too city-like for me. I grew up in the burbs where you could sit in your backyard without feeling like a neighbor is right there with you.

We'll see. We actually just agreed on a price! Closing on 7/12!