The biggest financial decision in this process was deciding exactly how much I could afford. There are two parts to this: 1) how much I can afford upfront and 2) how much I can afford monthly.
When I opted to buy a condo instead of a townhouse, I decided that I was going to put only 20% down, to allow myself to keep more in cash reserves post-transaction.
The upfront costs I have seen include:
- Loan closing costs and prepaids – I looked at loans from several credit unions, with the closing costs and prepaids varying to the tune of $5,000!
- 20% down payment
- Purchasing appliances, if the place is missing them (around $700 to $1,500 each, depending on desired quality) – one place I looked at was missing ALL appliances and would have cost me $10,000 to replace them.
- Moving costs (renting a U-Haul van and paying friends with food or hiring movers, moving your utilities over, etc.)
- Various move-in fees related to the Home Owner’s Association (HOA)
I added up the funds in my down payment savings account, in my car replacement savings account, the value of stock shares in my taxable account that I wanted to sell and some that were at a loss, and the funds that my parents promised me. I took a look at how much I would need to borrow from my emergency reserves and decided that I was comfortable with my emergency reserves going down to $6,000. My job is pretty secure (my manager regularly tells me how awesome I am) and that would cover around 2 months of my current expenses in addition to the buffer from budget categories that I keep in my checking account.
This meant that I could afford the upfront costs on a place up to $350,000.
I added up my monthly housing expenses that would change if I bought a place (rent, water, renter’s insurance, hot water, sewer, trash, and electric) ~$1,400.
This means that if my monthly housing expenses don’t change then my mortgage payment (principal & interest), property taxes, and insurance difference would add up to that amount. I currently have about $1,000 in buffer room in my budget each month, so my housing expenses could at the very most be $2,400.
To keep my monthly costs the same or less, assuming condo fees of $350/month, I would be looking somewhere between a low end of $210,000 and
- $440,000 for a condo where I can bus to work
- $345,500 townhouse if I can bus to work
- $305,000 townhouse if I have to drive to work
In the end, I realized that, life-wise, I wanted a two bedroom/two bathroom condo within busing distance to work (20 minutes or less). With that in mind, I was able to fine tune my price range to under $350,000 and managed to find the perfect place! Now I am patiently in the middle of the waiting process to see what happens. I am under contract with the seller and the loan looks good.
My monthly housing costs are going to be about $1,900 including principal and interest, property taxes, and HOA dues. This will leave me about $600/month to save beyond maxing out my 401(k), vacations and car replacement ($250/month each), which I think is perfectly fine. (I max out my Roth IRA using my bonus income since it is what could/would push me over the income limit.)