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Looks like out the door price will be around $3.4k month. Maybe I lower my 401k contributions to get more back on my check.
This is also the first time I’m buying a home, would the interest be the only thing I can deduct on my tax return?
You should call into Dave Ramsay, that way I can hear him scold you on my tik tok
Coach
So you have a down payment of $470k. You can easily afford this
And there is no investment you can make that will guarantee 6.250% ROI so down payment is probably a better investment than brokerage
Great job building wealth so far. Looks like you are a saver. What % downpayment. At a minimum you need emergency fund liquid. What does the 517k buy in your market? Are we talking bare minimum for a livable structure? Or could you go down to 300k which is closer to where I think you should be and buy an out dated place and put in some sweat equity. You’re an investor and sweat equity is a great way to improve your appreciation. I don’t know your exact take home pay, but that payment appears to be about 60% of salary. Also I know that interest is very cheap on the car loan, but debt to income is also a factor in afforability. I’d pay it off, but I also don’t carry debt of any kind unless that debt is making me a profit.
You can deduct property taxes and interest. I think that tax savings on year 1 is the larger than normal because you pre-pay property tax into escrow. The less likely taxes are maybe some solar projects, energy savings. In a very narrow case you can get home office deduction (which you can also get in a rental if you qualify). They’ve really locked down that home office deduction because it was a huge tax break. You may have some state tax incentives as well.
Subject Expert
Is the 6.25% rate with buying any points? And 20% down? You may want to ask if the rate is better for 25% or 30% down. A little bit of converting your brokerage money into padding your down payment could drastically help your monthly affordability.
Subject Expert
Rates will go lower, but you only have the closing credit once, so you’ll have to burn your own cash to buy down to the same level.
If putting another $25k into the down payment brings the rate down by another 0.25% at close (plus reduces your principal), that helps your affordability now AND helps with getting you a better rate when rates drop as you will have more equity, which makes buying points cheaper when that comes around.
Your original question was around affordability. A larger down payment helps with affordability both in the short term and in the long term. It may drop your payment by $200 or $300 per month. Even if ~$3.4K is affordable to you, that extra cash could go right back into either buying down additional principal (again, which helps you get a lower rate due to higher equity when you refinance) or go into the market, which might grow faster than your mortgage rate (S&P 500 grew 22% in 2023. If rates drop as expected, the market may see another high growth year).
You asked a question about affordability, I gave you a possible solution. Even if you plan to refi, it may be worth the extra cash infusion at closing.