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‘We have 3 kids and have rented a 2 bedroom house in Mississippi for 13 years’: Should we buy a home whose mortgage payments cost 30% of our monthly income?


By Aarthi Swaminathan

“We used to pay less than $600 and now they’re asking $975 for the same apartment without having had any upgrades,” says this reader

Dear MarketWatch,

We have been saving up for a house here in Mississippi. We have three children and have been renting a two bedroom house in Mississippi for 13 years.’

We have outgrown the apartment after having three children (aged 9, 7, 2). The rent has also increased and is now out of control. In a month we have to renew our lease.

We used to pay less than $600 and now they are asking $975 for the same apartment without getting any upgrades. It has poor insulation, which makes the winters miserable and results in monthly utility bills of $300 for a roughly 900-square-foot apartment.

We have been looking for a house for years and were even under contract twice. One time we got cold feet, and the second time we got out of the contract without penalty due to a home inspection emergency.

Since then we have found a 15 year old house above our budget that meets 95% of our wish list. It’s 3,200 square feet with four to five bedrooms, it’s in a good location, and it’s a good price in my opinion. It will cost us $123 per square foot. (Two houses in the same neighborhood sold about 5 months ago for $139 per square foot and $141 per square foot.)

We have saved up for a 20% down payment and could potentially pay up to 30% of the total house costs, which would provide enough for a six month emergency fund. The bank also told us that we are entitled to an assessment exemption.

According to my husband’s calculations, we end up spending almost 30% of our monthly take home payment on the mortgage.

I have been a homemaker for about nine years, but I have an opportunity to work part time in a few months at a daycare, which makes $400 a month. It’s not much I know, but my baby would attend for free and my small income can help with mortgage payments.

When the child is able to enter kindergarten in about 3 years, I will be able to return to teaching (private school) full time, God willing. I figure I can take home at least $2,000 a month. After that, we will be able to make extra installments on the mortgage to the principal.

My question: Should we buy this house?

We might struggle for a year or two until I can contribute income, but I think it might be a good opportunity to own our first house. Some suggestions?

Mom with a plan

‘The Big Move’ is a MarketWatch column that looks at the ins and outs of real estate, from navigating a new home to applying for a mortgage.

Do you have questions about buying or selling a home? Want to know where your next move should be? Email Aarthi Swaminathan at [email protected]


Dear mother,

Being a parent is a tough job, let alone with three kids in a 900 square meter two bedroom apartment. So yes, you need to buy a bigger house. And if you have found that dream house, then yes – go for it.

If it has most of what you want in a house and the price is manageable, why not? Yes, mortgage rates are high – currently sitting at 6% – but economists expect them to fall, meaning you may be able to refinance your loan further down (albeit at a cost). You can check out MarketWatch’s mortgage refinance calculator here.

“Initially, mortgage repayments may have you in a bit of a bind, [but] appreciation and upcoming tax credits will ease the burden on the other side,” Cassandra Cummings, a financial advisor and the author of ‘Fearless Finance,’ told MarketWatch. “Not to mention, you’ll have a place to call home where you can put your own stamp on it.”

You also mentioned that you have saved enough to put 20% to 30% down on the home. I would say put down 20% and keep the 10% for any unexpected expenses. The average annual cost of maintaining a single-family home is about $6,100, said a recent report from home services platform Thumbtack. This can be maintenance work from carpet cleaning to installing the water heater or the roof.

“You don’t want to be caught off guard, financially,” Cummings advised.

You can also ask the seller if they were willing to make concessions on the home, such as fixing any problems with the home or buying down the price.

Finally, you said that considering you’re not working full-time, you’ll struggle for a year or two. If it’s manageable and you have the energy, you might also be able to pick up some freelance jobs that aren’t heavy lifting. It would enable you to balance your job while being a parent.

In the meantime, you can also start a blog or social media channel and share some of your parenting tips and hacks. Every little extra effort helps. It can help make you a more attractive candidate in the long run.

It’s great that you budget so carefully. It is very difficult to time the housing market, and it is even more difficult to know if or when prices will fall. Since you’ve found something that meets 95% of your wants and needs, go for it, buy that house.

All the best with this new chapter in your life.

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-Aarthi Swaminathan


(END) Dow Jones Newswires

01-25-23 1120ET

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