From: krw 
Newsgroups: misc.consumers.house
Subject: Re: Overextending ourselves on our first home?
Date: Tue, 6 Feb 2007 17:52:36 -0500

In article <1170792139.092374.8850@l53g2000cwa.googlegroups.com>, 
dharrington1982@gmail.com says...
> Hi all -
> 
> We are a soon to be married couple looking for our first house.
> Though we make decent money, its still hard to find anything we'd want
> to live in as we're looking in an expensive area, Fairfield county,
> CT.
> 
> We think we've found our "perfect home" selling for about $400,000
> (about $50,000 more than we can 'comfortably' spend/most banks would
> want to loan us).  The mortgage payment would be $2500/mo (we don't
> have perfect credit), PMI would be another $93/mo (we don't have any
> equity) and real estate taxes another $500/mo (ouch).  This would
> bring our total payment to $3100/mo.  Factor that in with the fact
> that we pull in a combined $5500/mo after taxes and we have a
> situation where we will be undoubtedly strapped for cash.

How much do you make gross (before taxes)?  I doubt that anyone 
will go too much above 35% without some horrendous interest.

BTW, $500 taxes on a $400K house isn't at all high.  Mine are $5500 
on an assessed valuation of $183K.

> We
> understand we would be living "poor" for a while but we are optimistic
> that our salaries will increase nominally over the next few years.

"Poor" isn't the word.  As others have said, one glitch (and there 
will be glitches) and you could be in a world of hurt.
  
> The plusses of the house are that it is the absolute BEST VALUE we've
> seen in this price range, and we've been looking for several months.
> It is also the type of place that with a little sweat equity, we could
> really raise the value of the house (which isn't true with most
> starter-ranch homes).

You've convinced me that it's a nice house, but It's still out of 
your range, IMO.
 
> I have two questions:
> 1) Are we jumping into financial suicide?, and

Quite possibly.

> 2) How will tax benefits work?  Assuming $2000/month of our mortgage
> payment will go to insurance and another $500 to taxes, does that mean
> we would have a VERY LARGE tax return to the tune of $600+/mo?

Likely less than $500.  BTW you can adjust your W4 so you don't 
have that money withheld.  You don't need to wait until the end of 
the year to file for a refund.


> How
> heavily should we factor this into our overall financial picture?

Money is money.  If you're not paying the tax it doesn't exist.

-- 
  Keith