re: Mortgage Amount 2-2.5x Annual Income

I work with a lot of millennials, many are purchasing homes for the first time. Yes they are buying more expensive homes, but they have their reasons. The biggest is inflation.

Quality neighborhoods cost more than ever before, and they also believe they will be making more money in 5-10 years. Some are also counting on their student debt being forgiven.

"It will be tough at the start, but its a 30 year mortgagee and we will be making more in the future"

Too many other variables to just compare mortgage amount to income. At 6% on a 400,000 loan you’re looking at 2,400 a month but drop that to 2.5% and it’s about 1,580. Property tax varies greatly from state to state along with insurance and things like HOA fees. I’d start with monthly note (including all of the above) vs monthly net income minus other debt

My mortgage to annual income ratio is a little less than 1

When I bought my house, the. banks were willing to lend me far more than what I considered reasonable. Instead, I stuck with the range that you mention in your post and I ammdamn glad I did. I was able to afford that house payment and live comfortably. I have even been able to add to my principal payments and now am able to pay it off early if I choose.

Like many here have said, too many factors to count.

We elected to skip the traditional starter home. That said, we're working on a deal right now that is 2.5-2.75, and I admit it's a bit out of my comfort zone, but it comes with living in a high cost of living area. Generally speaking, our incomes will continue to trend upwards, making it easier and dropping that number over the next decade.

We are still in our first home. We gross more than we paid for our home. But as others have said and I have mentioned on this board before, raising children in the Greater New Orleans area is expensive as frick.

We pay $40,000 a year for a nanny.
$18,500 next year for PK4. Only going up from there.
We also pay more to student loans each month than we do for our mortgage.

This isnt really a good way to do it without accounting for other revolving debt.

I.E. take 2 young couples both making $100k/yr

Couple A has no debt at all
Couple B has 2 car payments, revolving c.c debt and student loans totaling about $1.5k/mo

Couple A can afford way more house than couple B

All about total debt to income monthly, banks use 36-43% DTI to come up with your mortgage you can 'afford'

IMO, if you can keep thing at 25% or lower, it's most ideal in terms of being able to enjoy other things and build wealth. The people who go out and get a $2500 mortgage with $1500 monthly recurring other debt and bring in $6.5k a month after tax are under some serious stress. IF you just have that mortgage and no other debt, same couple bringing in $6.5k a month after tax have a bit more room to breathe, although it's still not an ideal scenario, $4k to work with is a lot better than $2.5k.

It depends on interest rates. But it is and will always be a good rule of thumb to follow really. We bought at 2x our income. It’s at about 1.5x our income now. But still not planning on moving for quite a while!

That’s because if you ask the average person they have know clue what the rule of thumb is! So they aren’t calculating it.