No. of Recommendations: 9
Hey chop suey:

A) Let me offer you a rec AND kudos for being possibly the first person in the history of the internets to come to a discussion board asking for advice on an issue, get a bunch that flies in the face of your initial thoughts, and then actually TAKE THAT ADVICE AND THANK PEOPLE FOR IT!!! As you likely know from reading the boards, most often people come for affirmation and when they don't get it they sulk and get all petulant. You've got a better head on your shoulders than most. If your GF is anything like you, you've got a great life ahead of the both of you.

B) Re: unknown options, you never know what might happen. I'll comment more on this shortly.

C) Re: cheaper the further out you go (all other things being equal), this is a constant in virtually every urban area. Also, as you have likely noticed, newer construction is almost always (again, all else being equal) larger than older construction. Look thru lots of listings, make your "wish list", discuss it often with your GF (hopefully soon to become your DF and then your DW), and by the time you're ready, you'll have a very clear idea what you want and what the prices are for everything.

D) interest rates, Dave Donhoff and a few others have already commented on that. They are what they are. When they go up on loans they'll also go up on savings, so although you do lose a bit as you'll be leveraging to buy a house, you will likely also see some impact on home prices and of course your down payment $ will grow a bit quicker.

E) "The Spreadsheet". I could engage in a bit of "my spreadsheet's bigger'n yours" here. :-) THBS, I would recommend two things on your spreadsheet:

First, try to put in variables so you can get very close to actual PITI. Insert the appropriate formulas to calc property tax in your area so they will automatically adjust the taxes as you change home price (I realize that different areas have slightly different rules, but you don't need "exact", you just need "close enough"). You may also want to put in a LOOKUP table for PMI rates (you can google and download PMI rate cards from various companies and/or just talk with your local friendly mortgage broker to get PMI rates. They're all generally in the same ballpark), insert some estimate for homeowners insurance (get some quotes for different home prices and rough in a formula) and add that to you Principal and interest calc (also, be sure to bump up your mortgage rate by about a quarter point if you go jumbo [>417K]. You can then adjust this to see where you stand on front end and back end ratios (if you include your GF's stuff on the assumption you'll buy when you're married, you may need that back end calc as well).

Second, set up a calc to determine your AFTER-TAX income if you can (my spreadsheet has a basic "income tax return" that adjusts the itemized deduction amount depending on mortgage interest and property tax calc'd depending on overall home cost) and then rough in a bunch of expenses to determine if it'll work for YOUR budget. I can tell you from my own experience that a 28% front end is a hefty chunk of change by my reckoning even when I go "upscale", but everyone's mileage may vary. Constructing that also gives you and GF lots of opportunities to work out your own financial future.

Last thing on the rates and home and all that. My own personal experience was that we bought in 2004 because we were about to have a kid. We bought "less" house than we "could" have because we're both like that, plus I assumed no home price appreciation at all for the next five years (back when everyone was talking Big Increases). Now I joke about being so optimistic that our house would maintain its value. We started with a 5/1 ARM on the grounds that we'd likely not be in the house more than 7-8 years, tops. Then after about a year we figured "ya know, we're not moving unless something great happens", so we refi'd to a 30 year FRM and locked literally on the day it hit its low for the year. Well, fast forward, and interest rates went so low I would've been better off with the 5/1 ARM. So, even well thought-out and well executed plans sometimes don't go perfectly. It happens. We're still doing pretty darn well, though. We reduced our risk exposure overall.

Last, remember that 7-8 years? Well, several months ago I got an Offer I Couldn't Refuse, so we're now in the midst of relocating (to somewhere I never would've guessed I'd move to. At ALL!!) There's a lot of moving parts, but we're muddling by, in large part because we (figuratively) got our house together long ago and have stuck by a plan.

You and GF are saving money, you're planning things out, and you're level-headed and rational. You should do fine, even if you wind up paying 4.875% on a 30 year FRM instead of 4.375% and even if the "perfect house" you see sells now. Get everything else in order and lots of other opportunities will be available. Don't take on a risk you don't need to. Yeah, I would've loved to have the lower rate my 5/1 ARM would've handed me, but if this offer hadn't come along and rates went up, I'd be in a Bad Place right now.

Mitigate the risks, and keep progressing on. You'll do great. Now, get to work on an awesome marriage proposal! And no matter how much you bludgeon the numbers, don't forget to follow your heart.

-synchronicity, number-bludgeoner who still does some things because they Just Feel Right
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