Can a 21-Year-Old Couple Earning $70k Afford a $700k House?

Financial Feasibility of a $700,000 House

• 🏠 A young couple, aged 21, earning approximately $70,000 annually, is considering building a $700,000 house.
• 💰 They plan to put down $100,000-$130,000, with their wealthy parents matching their down payment, totaling $260,000.
• ⚠️ The primary concern is whether this is financially feasible, as the mortgage payment would consume about half of their take-home pay, leading to being "house poor."

Rationale for Building Now

• 👨‍👩‍👧‍👦 The couple wishes to start a family early and sees renting as not building wealth, preferring to invest in a home.
• 🏡 They aim to build a home in the suburbs to minimize maintenance issues and establish a long-term residence.
• 📈 They have stable jobs and project significant income growth through commissions and a business, believing they can afford the mortgage.

Expert Financial Advice

• 🛑 The advisor suggests slowing down and prioritizing steps: getting engaged, married, renting, and then saving for a house when financially ready.
• 📊 The current plan is deemed too risky, as it relies heavily on future income growth and parental support, leaving no room for error.
• 🎯 A more prudent approach involves increasing income and savings first, aiming for a mortgage that is a smaller percentage of their take-home pay, ideally around 25%.

Alternative Housing Strategy

• 🏡 An alternative suggested is to purchase a less expensive home, perhaps around $400,000, with a smaller mortgage that can be paid off quickly.
• 📈 This allows for building equity and the possibility of upgrading later as their financial situation and family needs evolve.
• ⏳ The advice emphasizes doing things in the right order and at the right time, rather than rushing into a lifestyle they cannot yet comfortably afford.

Importance of Budgeting and Planning

• 💡 The couple is encouraged to use budgeting tools like Every Dollar to gain clarity and control over their finances.
• ⚠️ Relying solely on projected income increases and parental matching funds for a large purchase at a young age is a high-risk strategy.
• 🌱 It's healthy to acknowledge that it's okay for it to take time to achieve certain financial milestones and lifestyle goals.