"I don’t want to be house poor": How can I find the balance between buying a home and living freely on a $220-280k income in Houston?

Hey Money Minder, I need your help! My name is Joe – I’m 27, married, and have one little kiddo. We’re living in Texas, specifically the Houston area, and we’re a single-income household. Here’s the deal – neither my partner nor I grew up in financially savvy families, so we’re a bit worried about not going overboard with our first home.

Currently, I’m bringing in around $220-280k (that’s $110k salary + bonuses usually ranging from $110-160k). After taxes, I take home about $7k per month from my salary, plus whatever bonuses come my way (which can be anywhere from four to five figures). I like to pretend my bonuses don’t exist, so I try to stick to my guaranteed monthly salary of $7k.

We’re lucky to not have any student loans, credit card debt, or car payments. Our rent is $2400 monthly, and we’re comfortable, with another $2-3k in living expenses. We’re eyeing houses in the $5-600k range with a 2.5% property tax and $1500 annual HOA fee. Realtors and lenders say we’re good to go, but we don’t want to be tied down by our house and miss out on enjoying life and saving for fun stuff.

So, are we aiming too high with a $5-600k house, or should we be checking out options in the $3-4 range?

Thanks a bunch for any advice you can give us, Money Minder!

Farewell, Joe

Response from THE MONEY MINDER:

Hello There,

Firstly, congratulations on recognizing the importance of financial responsibility and seeking advice to avoid any future pitfalls. It’s commendable that you are thinking ahead and wanting to ensure financial stability for your family. Considering your current income and financial situation, it’s wise to take a very practical and realistic approach when it comes to purchasing a home.

Given your guaranteed monthly income of $7k and your desire to not rely on variable compensation for living expenses, it would be prudent to lean towards a more conservative approach when determining the price range for a house. While realtors and lenders may assure you that a $5-600k house is manageable, it’s crucial to factor in all expenses and maintain a comfortable buffer for unexpected costs or savings.

Taking into account your monthly living expenses and other financial commitments, aiming for a house in the $3-4 range seems more aligned with your income stability and desire to live freely, save, and potentially vacation without feeling financially constrained. This range allows you to comfortably cover mortgage payments, property taxes, HOA fees, and other homeownership costs while still having enough room in your budget for savings and enjoyable experiences.

By opting for a more modest home within your financial means, you can set a strong foundation for your family’s financial well-being and future. It’s essential to prioritize long-term financial security over the allure of a larger, more expensive house. Remember, a home should be a place of comfort and security, not a source of financial stress.

Best of luck in your home buying journey, and feel free to reach out for further guidance or support along the way. Take care and wishing you all the best!

Farewell from THE MONEY MINDER.