Who: Eric Rosenberg, 29, a senior financial analyst, blogger and web designer (who also owns Denver Flash Mob, a flash mob planning company), and his fiancée, Jennifer Nadel, 34, a property management and real estate professional.
Location: Portland, Oregon
What They Want to Buy: We’ve lived together for over a year, and with our upcoming wedding on May 18, we’re looking forward to buying a house in Portland where we’ll start a family together.
We want a place that’s comfortable enough for family to visit and to handle our own growing family (when it comes), but nothing so expensive that it makes us “house poor” or puts us under serious financial pressure.
We moved to Portland last December and have a one-year lease on a rental. We want to avoid making two payments at once, so we’re currently getting a feel of the market and hope to make a purchase around the end of this year or very early in 2015.
Location is one of the most important features for us. We want to live in an area with walkable restaurants, shops and entertainment. I work in a Portland suburb, and we want to have amenities nearby while minimizing my commute. We need a home with three-plus bedrooms, two-plus bathrooms and a yard for the dogs (we have two).
Where They Stand Now: We have about $20,000 in cash that we can quickly tap into, but once the condo I own in Denver sells, we’re expecting to have at least $100,000 saved for a down payment.
We know we’re living in a hot market with low vacancies, and understand we’ll have to spend a big chunk to get what we want. We’re looking at homes in the $300,000 to $400,000 range, based on our savings and spending goals. I’d love to save enough to buy in cash, but at the very minimum we want to have 20%—or $60,000, on the low end—saved to avoid private mortgage insurance.
Our combined income is currently around $100,000 per year.
We’ve worked hard to pay off all of our debt other than the mortgage on my condo in Denver, which is currently for sale. The condo mortgage has a balance of about $93,000. It’s currently under contract, so if the sale goes through, I’ll be 100% debt-free by the end of April.
We have about $60,000 in retirement savings. Most of that was accumulated in employer 401(k) plans, but the majority of the balance is now in a rollover IRA and Roth IRAs.
“My one concern is that the home could cause Eric and Jennifer to be unable to contribute the appropriate amounts to their retirement accounts. They should make sure that their future mortgage payments are between 30 to 36% of their net income.”
In addition to the retirement accounts above, I have an investing account with about $7,000 in it. The balance has been higher in the past, but I sold almost everything when I bought the Denver condo to make a down payment.
We have a savings account with about six months of living expenses that could cover us in case of an emergency.
What the CFP® Says: What a great job Eric and Jennifer have done to get prepared to make a home purchase. They’ve paid off almost all of their debt and have a sufficient emergency fund ready in case the unexpected occurs.
My one concern is that the home could cause Eric and Jennifer to be unable to contribute the appropriate amounts to their retirement due to an expensive mortgage. This couple should work to make sure that their future mortgage payments are between 30 to 36% of their net income.
In order to meet this goal, they may need to sacrifice some of their list of wants such as location, size or amenities or push out their timeframe to save more. The great news is that it seems they’ll have a sufficient down payment of at least 20%, but they should make sure that the mortgage payment is not too large for their monthly budget.