Can I afford a $725k house?
Just looking for a sanity check on whether I can/should buy a $725k house.
I’m 35 and looking at buying my first home. Purchase price would be around $725k. I’d be targeting a mortgage around $500k, so putting roughly $225k down. 800+ FICO and rates I’ve been quoted recently are around 6.125%-6.25%, which puts the estimated PITI at about $4,250/month.
Financial picture after the down payment would be roughly:
$70k left in a taxable brokerage / liquid-ish
$100k in IRA
$250k in 401k
Paid off newer vehicles
No other debt at this time
My W-2 income is around $175k ($25k of that is a pretty reliable bonus). I think my job is relatively stable but who knows these days. I’d like to keep maxing retirement if possible.
I’m not married yet, but I have a long-term girlfriend who earns around $110k. We would be buying the house in my name only for now, but she would likely contribute around $1,500/month toward housing costs until combine finances after getting married.
So my effective monthly housing burden would probably be closer to $2,750/month after her contribution, but I’m trying to make sure I could still survive this on my own if needed.
We don’t have kids yet, but we’d like to have 1–2 in the near-ish future, so daycare / child expenses are definitely on my mind.
A few other details: The house is in an area I like and I think it should hold value reasonably well, but I’m trying not to justify a stretch just because I like the property.
My main questions:
Is $4,250/month PITI too aggressive on my income, even with no debt?
Is having around $70k left after closing enough cushion, or would you want more?
Would this prevent me from continuing to max retirement comfortably?
Ive done the math multiple times and it seems like it is right at or above the conventional rules of thumb for affordability for me alone, but should be easily doable with GFs income. I know this is ultimately personal/risk-tolerance dependent, but I’d appreciate honest feedback. I’m trying to figure out whether this is a reasonable stretch for a good house/location, or whether I’m setting myself up to feel house poor. Also having a tough time seeing past the 7-10% I could make a year parking that $225k in the market. I could probably rent a comparable home for around $3,650, but we’re tired of renting.