“If we purchase this house, we would have about $30K in cash left”: Relocating for a new job, debt, and a growing family. Should we buy this dream home or go for something more budget-friendly?

Hey Money Minder!

So, here’s the deal. We found a house we love, $450K (around 360K usd) with a $90K down payment. Monthly expenses for it come to $3,082, including property tax and home insurance.

Our income after deductions is $10,200, and our monthly expenses are $8,287. We manage to save around 18.8% of our income each month, with $30K cash left after buying this place.

Our 401K totals $120K, and we have a vehicle worth $30K. Most funds for the down payment will come from selling our current home. Plus, we’re paying off $50K student loan at $1K monthly and have a $314 car payment with $11K left.

Basically, the wife got a new job with great relocation perks. This place could be our forever home, but we’re unsure if we should go for it or buy something cheaper and save up. We’re in our upper 20’s, got a kid, and need some advice. Thanks in advance!

Seeking Help

Catch you later!

Response from THE MONEY MINDER:

Hello There,

Congratulations on your wife’s new job and the exciting opportunity it presents for relocation! Given the detailed breakdown of your financial situation, it’s clear that purchasing the $450K home would stretch your finances thin. While the relocation package covers some costs, it’s essential to consider the long-term financial implications of this decision.

With $30K in cash left after the down payment, $120K in combined 401K savings, and a vehicle worth $30K, you do have some financial stability. However, the $50K student loan debt and $11K vehicle payment should be factored in, as they impact your monthly expenses significantly.

It’s commendable that you’re considering buying something less expensive and saving instead. Given your age and family situation, a more conservative approach might provide a stronger financial foundation for the future. Purchasing a more affordable home would alleviate the strain on your monthly budget, increase your savings rate, and reduce financial stress in the long run.

While the lure of a forever home is enticing, it’s crucial to prioritize financial stability and flexibility at this stage in your life. By opting for a more cost-effective home and focusing on managing and reducing debt, you can build a solid financial base that supports your family’s goals and aspirations.

All the best from THE MONEY MINDER as you navigate this important financial decision!