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Message
re: House affordability conundrum
Posted on 4/29/15 at 11:42 am to Paul Allen
Posted on 4/29/15 at 11:42 am to Paul Allen
quote:
What if your gross monthly income combined is $6500-7000? How much house could you afford? Is 350k too much?
Depends on how much you put down, but as a general rule, if my brother was asking for advice, I'd strongly encourage him not to go that high.
1
Posted on 4/29/15 at 11:51 am to AUjim
$20,000 down (5%)
Posted on 4/29/15 at 12:06 pm to Paul Allen
First off, I'm not pretending to be a financial genius-
But, the way I personally would come up with what is affordable for me is to start with exactly what my take home pay is (assuming that you are adequately saving for retirement pre-tax, as in maxing out what you get employer match for). Then, I would write down every expense that I have or would have in the new house or any time in the next handful of years as a result of known lifestyle changes like planning to have children. Student loans, HOA fees, power, water, cable/internet, cell phones, groceries, gas, car notes, savings, tithing, clothing, life insurance, car insurance, entertainment, child care, additional retirement, college savings...EVERYTHING you can think of.
The difference is what you have left for a TOTAL mortgage payment, INCLUDING any property taxes, insurance, and PMI. Even then, I probably still wouldn't spend all of that on a house....it just depends. There are so many variables.
ETA: If that number was still higher than 25% of my net income, I'd probably still cap it at 25%....and save, save, save the rest.
But, the way I personally would come up with what is affordable for me is to start with exactly what my take home pay is (assuming that you are adequately saving for retirement pre-tax, as in maxing out what you get employer match for). Then, I would write down every expense that I have or would have in the new house or any time in the next handful of years as a result of known lifestyle changes like planning to have children. Student loans, HOA fees, power, water, cable/internet, cell phones, groceries, gas, car notes, savings, tithing, clothing, life insurance, car insurance, entertainment, child care, additional retirement, college savings...EVERYTHING you can think of.
The difference is what you have left for a TOTAL mortgage payment, INCLUDING any property taxes, insurance, and PMI. Even then, I probably still wouldn't spend all of that on a house....it just depends. There are so many variables.
ETA: If that number was still higher than 25% of my net income, I'd probably still cap it at 25%....and save, save, save the rest.
This post was edited on 4/29/15 at 12:09 pm
Posted on 4/29/15 at 3:01 pm to ItNeverRains
quote:
someone making 150k a year is gonna feel broke buying a 450k house over 30 years at 3.5%?
I would've. One wrong (or unlucky) move and $150K is suddenly $50K. Then what?
So broke, no, but stressed out, yes.
Posted on 4/29/15 at 4:10 pm to ItNeverRains
quote:I think 7-9% is the most attainable goal and outcome with a 250K house. I don't even know how I would scrape together that much cash with school loans and such. We have 7K now and hope to get 5K by next year and we have been budgeting/saving like poor college kids.
i think you could swing 300k with 20% down or 250k with 10% and be far from house poor
Posted on 4/29/15 at 4:14 pm to AUjim
quote:Ideally, I'd like to be around 23% net income to mortgage but our school loans and car note will also be around 23% of net income if I am doing the simple math correctly. Essentially, our house note and loans/car/insurance would be the same amount. So i need to be aware of how much I borrow.
All-encompassing mortgage payment of 25% of net income works well for us, and that is with 2 kids in daycare. Our total other debt load (cars and student loans) is 13% of net income
Posted on 4/29/15 at 4:18 pm to AUjim
quote:This is exactly where my head is at. I HATE the various websites that suggest doing DTI and other calculations with before tax dollars. Why? This does not take into account what you actualy bring home which is what pays the bills. Makes no sense and I refuse to budget for a house that way.
But, the way I personally would come up with what is affordable for me is to start with exactly what my take home pay is (assuming that you are adequately saving for retirement pre-tax, as in maxing out what you get employer match for). Then, I would write down every expense that I have or would have in the new house or any time in the next handful of years as a result of known lifestyle changes like planning to have children. Student loans, HOA fees, power, water, cable/internet, cell phones, groceries, gas, car notes, savings, tithing, clothing, life insurance, car insurance, entertainment, child care, additional retirement, college savings...EVERYTHING you can think of.
The difference is what you have left for a TOTAL mortgage payment, INCLUDING any property taxes, insurance, and PMI. Even then, I probably still wouldn't spend all of that on a house....it just depends. There are so many variables.
AUJIm, thanks for the good advice and input.
Posted on 4/30/15 at 10:58 am to Paul Allen
5 percent down is good IMO. Especially when rates are 4% and under.
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