Tuesday, May 30, 2006
My Home: The Budget Is Set
Taking a deeper look into my future home purchase, I realized I need to think about specifics...the financial specifics. I wrote about my realistic dream home earlier, but with my current income and savings, what can I really afford to purchase without affecting my standard of living, my emergency fund, and being able to fund home improvements and other fees associated with home ownership? Considering my current liquid assets of about $100,000, I'll make an assumption that I can save about $30-50k more in a years time--when I plan to purchase. This is less than my current year-end goal of $100k, but I'm going to assume I don't make my goal to be conservative. This means I should be able to comfortably afford a downpayment within the range of $110-130k. This would leave me $20k of cash on hand. One of my requirements is a 20% down payment, so the homes I can purchase would be $550-650k. In Honolulu, HI, that doesn't leave me much to choose from. During my prequalification, I was given the okay to purchase a home up to $700k with a $70k deposit assuming I use a 80/10/10 loan. 1st Mortgage: $560,000 (30yr fixed) 2nd Mortgage: $70,000 (15yr fixed) Deposit: $70,000 There's no way I'm going to do that. In some ways, I wish I didn't see this loan because it makes the "bad decision" even more possible. So the bottom line is I know the price range of homes I can afford, which is $550-650k. I'm going to stick to this range. Unless some ridiculous mansion is available for 800k...then maybe I'll stretch.