re: Income to house cost ratio: Assuming pretax income, what is the marginal ratio?

Buy experiences, not things. My mortgage payment is $404.00. Percentage you can guess, cuz I'm not telling. And it's not a dump, quite the opposite. And the cost of living where I'm at in Iowa isn't extremely low either. After the business is paid off, my mortgage payment is going to disappear quickly. To be fair, I am single and have no children. I did have to help take care of an aging parent with Alzheimers for about a decade though, so I guess that is somewhat like supporting a spouse and children.

I also could care less what my credit score is. At one time it was almost 700. I looked after the thread a couple of days ago and one place had me at 550. Now that's some laffy for a guy who borrowed for college books before I was 21, and have never made a late payment. I'm not a huge Dave Ramsey guy, but I do agree about not caring what my credit score is. Anytime I want to borrow, my bank has never said no.

I drive a Lexus. I bought it used. It is a 2005, 0r maybe a 2008. It has over 200K miles on it. Nice car. Don't want or need a new one.

I do however take frequent vacations and eat very well. I smoke whatever cigar I feel like, whenever I feel like it, and price be damned. I travel to every away football game. At least one mini vacation a month, and my freezer is stuffed with USDA Prime grade steaks.

It's personal preference, but I'm a minimalist. I'd rather be mobile and able to do whatever I want to do. I have no interest in shiny new cars and houses.

I'm gaining weight also. Imagine that.

We were approved for $600k and I'm sweating building a house for half that

Same. My house was exactly 1.5X's my income when I got it.

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This. Paying 28% hurts if you want to have any semblance of a life.

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Make 400k in LA/NYC, drop 28% of pretax income on house, another 10% into retirement, and tell me about your woes in life.

We were approved for nearly 600k, but bought half of that. I think I was approved for 400k without selling my previous home! No way in hell I could afford that. I feel house poor sometimes and I'm at around 18% (and that doesn't include my wife's income).

I just don't understand what I'm doing wrong . I've got neighbors who are in a bigger house, so I know it costs more. The wife stays home, and they have 2 kids going to a 20k tuition private school. I think I do pretty well for my age and couldn't swing that if I tried. This guy has to be pulling in close to 300k to afford that lifestyle.

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I'm at 14% on my rent and I feel like that is as high as I would want to go.

28% would put me in one of the nicest apartments in the city and I would feel dirt poor.

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I'm at 18% on my rent. That's about the maximum I would do, too. I also live half a mile away from work, so why not.

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This. Paying 28% hurts if you want to have any semblance of a life.



Make 400k in LA/NYC, drop 28% of pretax income on house, another 10% into retirement, and tell me about your woes in life.

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Upper incomes break any of the standard % rates that apply to the average family making 50-150k.

400k puts someone in the top percentile of earnings in the country which is an anomaly.

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with interest rates so low, why waste time with a starter home and in 10 years have to upgrade and interest rates might be double or triple what they are now?

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Cause 28% hurts. It hinders your ability to save, and do stuff. Obviously its a personal choice but you are in the minority on this one. Obviously the money board is very conservative.

I am currently at 9% if you include bonuses but not investment income. Hell I think 9% hurts. A few years ago we were at 5% but we upgraded our house.

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We were approved for nearly 600k, but bought half of that. I think I was approved for 400k without selling my previous home! No way in hell I could afford that. I feel house poor sometimes and I'm at around 18% (and that doesn't include my wife's income).

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They approved us for some ungodly amount, well over a mil. I just gave the guy a blank stare when he did it. of course, he call the real estate agent and told her, suddenly she was showing us 800k homes.

This is an impossible question to answer. Home liquidity, net worth, what kind of a deal you got and how well value holds (along with many other examples) play an enormous role in this decision, not some arbitrary percentage.

Let's say you are looking at houses with the exact same specs, one in NOLA is 450k, and one in Lacombe is $225k. Lets just say this puts your mortgage at 50% and 25% of pretax income, until you lose your job and your mortgage is just a debt you can't pay either way. Would you prefer to have stretched your income more to pay for a house you can get rid of within the month? Or would you prefer to have the house that may take a year or more to get rid of?

Houses in uptown New Orleans are more expensive than houses in Lacombe, LA for a reason.

Now this example is a simplified one, and not intended to make one investment sound "better" than another. It is simply an illustration of how you can't just apply some set percentage to your income to see how much house you can "afford".

Also, IMO, never do any type of analysis like this on a pretax basis. Taxes are an expense, just like your house note, and are the one expense you can count on, you will never get out of them, and should be the first items deducted from your budget before any other expenses can be considered.

When I applied for my first mortgage, I was told I could buy a $400k house. My wife and I made $90k at that time.

I almost puked at the thought of having such a high monthly mortgage payment.

I don't have anything official, but at $90k/year, we were living okay with a $1130/month payment on a $179k house. I wish we had put down more money though.