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re: House = (x)household income
Posted on 8/12/15 at 10:46 am to TexasTiger34
Posted on 8/12/15 at 10:46 am to TexasTiger34
quote:
my goal, however, is to try and afford everything on just my salary so that if one of us loses our job or we have a kid and we lose her income for a year or so, we'll still be fine.
I tell everyone to do this
2
Posted on 8/12/15 at 10:54 am to yellowfin
quote:
my goal, however, is to try and afford everything on just my salary so that if one of us loses our job or we have a kid and we lose her income for a year or so, we'll still be fine.
My wife will start teaching again this year for the first time since we had our first child. 100% of her income after taxes and benefits will be going towards savings and debt paydown. We will continue to operate off of my income and will have a little extra since I don't have to pay the super high health insurance anymore. By this time next year I should be debt free with the exception of my house and then we will look to upgrade a bit.
Posted on 8/12/15 at 10:59 am to yellowfin
quote:
I tell everyone to do this
you're a smart man
Posted on 8/12/15 at 11:04 am to Janky
The percentage is going to vary greatly depending on your child situation and if they are in private school. I also feel like there gets to be a point where if I have a big enough house, I would use the extra money to retire early rather than putting it on a bigger house.
Posted on 8/12/15 at 11:11 am to TexasTiger34
sometimes
Posted on 8/12/15 at 11:18 am to LSU1018
quote:
The percentage is going to vary greatly depending on your child situation and if they are in private school. I also feel like there gets to be a point where if I have a big enough house, I would use the extra money to retire early rather than putting it on a bigger house.
We get private school education at a public school price here. Definitely affects but helps justify the cost of real estate here
Posted on 8/12/15 at 11:36 am to ItNeverRains
quote:
my goal, however, is to try and afford everything on just my salary so that if one of us loses our job or we have a kid and we lose her income for a year or so, we'll still be fine.
I tell everyone to do this
This is what we have always done. My step father gave me really good advice, and I am so glad I have (mostly) followed it. He said never give yourself a raise. I gave myself my first raise since 2000 last year, everything else we have saved. Its been really effective at boosting our savings rate.
quote:
Probably why I'll never be disgustingly wealthy. With my lifestyle & 200k/yr disposable income, the last thing on my mind is what % of my gross income is housing. I have more important things like fixing my mid-iron game at that point.
You will never get disgustingly wealthy from a 200k/yr in income. I am happy just being comfortable.
Posted on 8/12/15 at 12:30 pm to TexasTiger34
We made sure we can afford everything on just my salary, but we'd have to cut back on paying off her student loans if we went back to that lifestyle. We figured in the student loan note into what we could afford on my salary, but while she is working, we try to throw as much at them as we can. My wife stayed home for about 7 months after my son was born. She just really wanted to work, so she went back. It's nice to have the extra 50k or so a year, but now that my son's getting a little older and the thoughts of a second child are on the horizon, I don't expect to have the 50k available much longer. Hoping a few bonuses and some decent spending habits can knock a huge chunk of her loans out this year, and losing that long with daycare costs, would pretty much nullify her not working anymore.
Posted on 8/12/15 at 2:29 pm to Hawkeye95
quote:
You will never get disgustingly wealthy from a 200k/yr in income. I am happy just being comfortable.
I agree. I'd also agree that even with disposable income of 200k, my original statement, would not be disgustingly wealthy either. But at 200k/yr "disposable" income, I would pump the brakes on wealth and focus my energy on other things, my kids and 3i-6i most notably.
Posted on 8/12/15 at 4:02 pm to Toula
This might be another stupid question, but is this based off of your take home income or total income before taxes, insurance, etc.
Posted on 8/12/15 at 4:05 pm to Mark Makers
I think all the metrics you see here are for gross pay. Certainly mortgage professionals start with those numbers.
Posted on 8/12/15 at 5:00 pm to Hawkeye95
So what's the most amount of home a person that grosses 6k per month should live in?
Posted on 8/12/15 at 5:05 pm to Ric Flair
quote:
Conservative--2x I'd feel that 3x would be stretching it. 2.5 would probably be my absolute max.
This hits the nail on the head. Even as a guy who likes to live above my means, I'd feel uncomfortable at 3x. 2 is comfortable and right where I feel like I should be, leaving ample money for big toys and awesome vacations. 2.5 isn't unreasonable, but I'd much rather have 2x at 15 years over 2.5x at 30 years for similar payments. 2.5 would definitely be my max. I've been in my current house around 12 years. A few years ago when the rates dropped significantly, I refinanced my 30 year and turned it into a 15, which gave me about the same monthly note but cut around 6 years off my loan. I REALLY wish I had gone 15 from the start.
Posted on 8/13/15 at 10:57 am to dragginass
quote:ROT used to be 2.5X annual income. In fact, 2.5X was the lending limit in many instances. But that was also with lending rates in the 8% range. With lower rates it makes sense the max loan-to-income ratio would increase, at least some.
House = (x)household income
What number are you comfortable with?
quote:You're right.
I realize the safe answers would skew at lower incomes
However, whereas "the safe answers" at lower incomes should skew down, they likely skew up. As home buyers, lower income individuals are incentivized in several ways to purchase at upper end of price range. School districts, neighborhood safety, historic rates of ROI, etc. all tug their price upward.
Unfortunately while those skew home costs upward, there is a big difference between a 25% annual income cost-of-carry for a $40K/yr family vs a $400K/yr family. Obviously even after taxes, the $400K family is left with far more disposable income.
Needless to say, the other major consideration is job stability, and risk related to the resell market. The higher the risk, the lower should be the price tolerance.
Posted on 8/13/15 at 4:36 pm to Coach Guidry
quote:I am assuming that you mean property tax is included in you 25-28% figure...
25-28% of take home pay...no longer than 15 years.
Thats just my personal method.
If you have zero debt other than mortgage...I see no reason why you cant stretch it a little if you find something you really like.
Just doing some rough calculations- let's assume you take home $7500/month between two salaries. 25% of $7500=$1875. Let's assume $500 of that is property/school tax (roughly 6000/year yeah NY sucks). At $1375/month, for 15 years, with 3.5% interest, that comes out to a Present Value of $192,339. With a 20% down payment, that means you'll be able to buy a roughly $230k house with a take home pay of $7500/month.
I am all for buying low and saving money in the long run, but that buying capacity figure seems low to me. Did I miss something?
This post was edited on 8/13/15 at 6:39 pm
Posted on 8/13/15 at 4:44 pm to NYNolaguy1
Only that the math changes significantly if you take a 30 year mortgage, as the vast majority of first-time homebuyers do. Fifteen-year mortgages are great for older people (no one wants to be paying off a mortgage in retirement), or people with big downpayments (which again tends not to be first time buyers). But that doesn't mean that they're the best option for everyone.
Posted on 8/14/15 at 12:30 am to Cold Cous Cous
These numbers mean nothing without knowing how much disposable income remains after necessities.
I could use 60% of my income on a mortgage/property taxes and if I make seven figures then I am fine regarding available cash/disposable income.
If I make $45K HHI, then 60% mortgage means I live on ramen and may or may not be able to afford gas.
What you have left over afterwards > a random percentage or ratio of home price to earnings
I could use 60% of my income on a mortgage/property taxes and if I make seven figures then I am fine regarding available cash/disposable income.
If I make $45K HHI, then 60% mortgage means I live on ramen and may or may not be able to afford gas.
What you have left over afterwards > a random percentage or ratio of home price to earnings
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