Should I back out of a new home and buy something cheaper?
I currently have a new 4:2, 2,050sqft with a 3 car garage under contract for $389k in the last part of Phase I of a 3-4 phase community. This neighborhood butts up to a community that has new homes selling for $500k+ and is right down the street from a community selling $650k+ homes. Due to high property taxes, my monthly PITI is expected to be in the $2,600-$2,900/mo range.
We just had our first child and are a one income family. My income the last two years has been higher because of travel nursing during COVID, but now I'm really thinking about what I really want to spend per month on a home. Not including any rental income, my monthly take home if I were to quit travel nursing would be around $6k/mo.
Should I back out of the deal and try and find a smaller home that meets our needs and brings our total monthly payment closer to $2k or less, or should I stick with this property in hopes that the value of the home will increase faster?
#3 Managing Your Property Contributor
If this is for you to live in, go through with the purchase and then live there for a bit or just sell it right away. If you bought it for $389K and houses are now selling a lot higher than that, you will make money off the sale. Then go and buy a less expensive home. Look at what the other homes in the same development are listed for.
If you are asking the question, you are likely thinking it is too expensive (personally, I’d agree that spending nearly half of your pay on housing is too much). If the property appreciated between the time you signed the contract and the time is built and ready to close, you can just resell it (maybe even without closing on it) and pocket the difference. Then move on to a property that better fits your budget
We went "cheap" with our house - bought it for about 1/3 of what people in our income range seem to be spending. Doing that has left us with the funds to take advantage of opportunities that have come along since. It's also enabled us to pay our house down much faster than a typical 30 year note.. we're only about 6 years in and it's already half paid.
Assuming value growth in both your new home and the neighborhood, I would stay there for 2 years, sell and take the tax free money and go elsewhere. Or if you really like living there, bring in more income so you have more investable funds.
It doesn't have to be either/or, but if you have no investments it probably wasn't a wise use of your money. Nevertheless, if you've bought in at a low cost and you've already got equity, and you have no other investments, it may not make sense to just give it away to someone else because of buyer's remorse, but instead figure out how to make that equity work for you by either staying and getting free capital gains or using the equity to cover your down payment and now use the down payment for investments.
