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Message
re: Mortgage Amount 2-2.5x Annual Income
Posted on 4/13/22 at 12:20 pm to hiltacular
Posted on 4/13/22 at 12:20 pm to hiltacular
Much of this depends on future earnings growth potential and future expense growth potential. Maybe all of it.
If you make $150k a year but have pretty good line of sight to making $250k in a few years do you really want to short change yourself by buying a less desirable house?
Other side of the coin, you expect to have 2 kids over the next 5 years.
If you make $150k a year but have pretty good line of sight to making $250k in a few years do you really want to short change yourself by buying a less desirable house?
Other side of the coin, you expect to have 2 kids over the next 5 years.
Posted on 4/13/22 at 1:10 pm to REB BEER
quote:
I would never feel comfortable with a mortgage being 2-2.5X our annual income. I don't see how someone making (let's say) $100K can afford a $250K house.
My parents' neighborhood has homes selling for $500k plus right now. They bought 20 years ago as a firefighter and nurse. No way in hell that couple/profession would be able to buy in the same place now. This market feels like a death trap for first-time home buyers.
Posted on 4/13/22 at 1:18 pm to down time
quote:
Quick Google search shows median household income in USA is 70 and median home is 370.
Not everyone that has a job owns a house
Posted on 4/13/22 at 2:01 pm to OleVaught14
We are currently about to stretch to about 3.5x but the plan is to earn more money in the future so that number goes down and my wife and I are obsessive budgeters and don’t buy frivolous shite, we also value living in a nice home since we spend most our time at home with our kids. A big factor is we built up a large emergency cash reserve if it ever hit the fan.
My personal opinion is that if more people watched their budget weekly or daily they could probably afford more house than they think they can. Just takes a bit of discipline. But then again, different people have different goals, whereas I’m stretching on my mortgage somebody else may want to do something less sexy with it like put it in an index, all depends on the individual. Incomes will rise naturally with at least inflation but my mortgage payment will always be the same or maybe less if I refinance.
My personal opinion is that if more people watched their budget weekly or daily they could probably afford more house than they think they can. Just takes a bit of discipline. But then again, different people have different goals, whereas I’m stretching on my mortgage somebody else may want to do something less sexy with it like put it in an index, all depends on the individual. Incomes will rise naturally with at least inflation but my mortgage payment will always be the same or maybe less if I refinance.
This post was edited on 4/13/22 at 2:11 pm
Posted on 4/13/22 at 2:33 pm to Leonard
quote:
This market feels like a death trap for first-time home buyers.
For first time home buyers, absolutely.
What most people are not seeing though, is that those who are not first time home buyers, are probably putting a substantial chunk down on these 500k + homes and are not carrying full mortgages due to the proceeds from a previous home sale.
Ex) Bought a 200k house in 2012 with a combined income of 100k. Three years ago, (combined income at 180k) we sold that for 400k and purchased a new home for 550k. Currently appraises at 700k.
Posted on 4/13/22 at 4:23 pm to lowhound
Agreed those numbers don't mean much. Zillow has a page showing similar stats.
the low income number comes from people that bought and kept a house from 25 years ago.
the low income number comes from people that bought and kept a house from 25 years ago.
Posted on 4/13/22 at 4:32 pm to JumpingTheShark
quote:
We are currently about to stretch to about 3.5x but the plan is to earn more money in the future so that number goes down
What happens if your plan doesn't pan out?
Posted on 4/13/22 at 8:01 pm to GEAUXT
quote:
What happens if your plan doesn't pan out?
Then we keep making the same money we do now with COLA increases and we’re just fine. What do you do if a meteor falls on your house? What if you’re in a drive by? Can’t live life that afraid of risk.
This post was edited on 4/13/22 at 8:03 pm
Posted on 4/14/22 at 7:04 am to OleVaught14
quote:
Curious as to what people are seeing with the rule of thumb. Over the last year it seems like more people are really stretching this to 3-4x annual income.
As your income increases, you can allocate a higher percentage to housing costs. Most of your bills won’t scale up just because you make more money. Groceries, phone, cable, internet, gym, etc… are all the same regardless of your housing cost.
Just as an example using “easy” numbers. If you net 15k per month and allocate 33% of that to housing, you still have 10k to cover other bills, savings, and expenses. If you net 3.6k per month and allocate 33% to housing, you’re only left with 2.4k to cover other bills, savings, and expenses.
Posted on 4/14/22 at 1:27 pm to Epic Cajun
My life’s wisdom suggests expenses do rise with income, especially with a new (larger) home. No one likes empty rooms so stuff just gets bought and bought.
Trick I have found to mitigate it is to keep same house, coincidentally.
Trick I have found to mitigate it is to keep same house, coincidentally.
Posted on 4/14/22 at 2:07 pm to OleVaught14
I’m not keeping up with the Jones, I’m keeping up with the Jetsons.
Posted on 4/14/22 at 3:10 pm to Leonard
quote:
This market feels like a death trap for first-time home buyers.
It absolutely is. I was originally looking 3 years ago but decided against it because I thought there was a chance I’d be moving for work so I valued the flexibility. Didn’t end up moving and now I’m kicking myself. Even fixer uppers in certain areas are 2-2.5x my income, and I make pretty good money.
If I don’t want a house that’s falling apart or bullets flying by I’ll be pushing 3x. A 20% down payment on that is 60% of my annual income
I get so dejected looking at it that I just have to laugh.
Posted on 4/15/22 at 10:26 pm to Paul Allen
quote:Jeez, this a scary statement. My wife and and I spend $2900 a month on house, insurance and taxes. Our equity in the house is a half-million, and we have substantial combined income. But.. we are pounded by taxes, upkeep, colleges, saving for retirement and helping our parents, who live in other states, so travel is hard and expensive. I just don't see how a couple on $130k affords a $260O-$2800 house note and throws in planning/saving for their future and college for their kids.
I said 475-500k, not 700k. I don’t think a 2600-2800 mortgage note for a couple making 130k with no kids and zero debt is really going to hurt or impede any wealth building.
This post was edited on 4/15/22 at 10:34 pm
Posted on 4/16/22 at 12:11 am to HubbaBubba
quote:
I just don't see how a couple on $130k affords a $260O-$2800 house note and throws in planning/saving for their future and college for their kids.
How so? If there are no car notes or revolving monthly debt then it’s very attainable.
My example also said a couple making 130k without kids. Sure, with kids 2600-2800 a month would be tougher to manage.
Maybe they’re not maxing out their 401ks at 130k salary but they more than likely can contribute $400-$500 a month and still be comfortable.
Keep in mind $130,000 after tax breaks down into $10,833 monthly.
With zero debt and no kids, I don’t see how even a $3000 mortgage would not be doable.
Posted on 4/16/22 at 1:19 am to Paul Allen
If a couple is netting 130k it’s likely doable.
If they are earning 130k it will be tougher as you have to factor 401k and insurance costs. If your both putting 9% into 401k that’s 11,700 less a year. Taxes around 10,000 a year. Insurances is 8,000-10,000 a year. Insurance is higher even with one kid. Daycare is 10,000.
shite adds up.
Save for a down payment and then buy the house you need/want so you don’t have to finance as much.
If they are earning 130k it will be tougher as you have to factor 401k and insurance costs. If your both putting 9% into 401k that’s 11,700 less a year. Taxes around 10,000 a year. Insurances is 8,000-10,000 a year. Insurance is higher even with one kid. Daycare is 10,000.
shite adds up.
Save for a down payment and then buy the house you need/want so you don’t have to finance as much.
Posted on 4/16/22 at 9:03 am to Paul Allen
quote:
Keep in mind $130,000 after tax breaks down into $10,833 monthly.
To get 130K after taxes means they need to be earning ~175K before taxes.
Posted on 4/16/22 at 8:25 pm to lynxcat
Deleted
This post was edited on 4/16/22 at 8:29 pm
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