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re: What is the “normal” ratio of mortgage loan vs annual income?Posted by Fox McCloud 
on 2/22/21 at 9:55 pm to hottub
on 2/22/21 at 9:55 pm to hottubquote:
single income and 6 kids.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by TomRollTideRitter 
on 2/22/21 at 10:00 pm to Cblack23
on 2/22/21 at 10:00 pm to Cblack23quote:
I’m about to jump into a mortgage that is roughly 2.3 times what I bring in annually. Am I “OK” at this rate or am I forcing myself into a tough situation?
You should think about monthly payment instead.
Make a monthly budget (include saving for vacations) see how much you have for a monthly house payment. Then determine the total mortgage from there.
If your only entertainment expenses are Netflix and internet, you can afford a lot more than if you do CrossFit, like to fly planes, play golf and your kids are taking gymnastics lessons and go to private school.
2.3 times seems conservative to me, so I’d think you’re fine unless you have a bad car note, student loans, or your kids have lots of expensive activities. I’d like to know where you’re living that you can get in a good school system at only 2.3 times income.
This post was edited on 2/22 at 10:02 pm
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by TomRollTideRitter on 2/22/21 at 10:15 pm to tigersfan1989
on 2/22/21 at 10:15 pm to tigersfan1989quote:
If youre married single earner and have 3 kids then I wouldn’t consider that low that is probably around where someone would need to be
Making $100K with 5 exemptions, you’d be bringing in over $6,500 after taxes. Even with only 3% down, you’re looking at under a $1,500 payment.
Save $1K a month for retirement. Still leaves over $4K for living expenses.
I’m not gonna encourage someone to spend more, but I agree with the poster that it seems low.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by fallguy_1978 
on 2/22/21 at 10:43 pm to Paul Allen
on 2/22/21 at 10:43 pm to Paul Allenquote:
So if you make $100,000 a year your house should be only $250,000? Seems awfully low.
Correct. This was the old rule of thumb that I used. Another was that a vehicle shouldn't be more than 50% of your annual gross. So if you make 60k you shouldn't spend more than 30 on a vehicle. Obviously these were always loose guidelines and I think a lot of people go much higher now.
Eta - people are more willing to leverage themselves now with over a decade of cheap money. Consider that when this advice was relevant to me when buying my first home a mortgage was 6-7% interest rates.
This cheap money bubble will pop though and I think it will be fairly soon and it's going to be ugly for the economy.
This post was edited on 2/22 at 10:53 pm
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by Paul Allen 
on 2/22/21 at 11:00 pm to fallguy_1978
on 2/22/21 at 11:00 pm to fallguy_1978I think at 100k salary a $2,000-$2300 mortgage payment is perfectly ok and that would more than likely be for more than a 250k house.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by makersmark1 
on 2/23/21 at 5:37 am to Cblack23
on 2/23/21 at 5:37 am to Cblack23Many people look at their house as an “investment.” That is certainly a valid perspective.
I look at it as a place to live.
Your income will likely go up over the years.
Interest rates are historically low.
I don’t think you are doing anything foolish, as long as you don’t have to move for say 3 to 5 years.
Good luck!
I know others won’t like this, but if you can avoid PMI- do it.
I look at it as a place to live.
Your income will likely go up over the years.
Interest rates are historically low.
I don’t think you are doing anything foolish, as long as you don’t have to move for say 3 to 5 years.
Good luck!
I know others won’t like this, but if you can avoid PMI- do it.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by thegreatboudini 
on 2/23/21 at 6:08 am to Cblack23
on 2/23/21 at 6:08 am to Cblack23We’re hoping to buy our first home later this year and I’m not going to go over 2.5x.
Sure, some may say that’s low, but that’s where I feel comfortable starting. By the time this all happens we will have no other debt, so that helps.
I’m throttling every retirement vehicle I can, pouring money into an HSA, as well as saving for some future business investment. So while I will have no other debt, money is being diverted elsewhere which keeps me at the conservative 2.5%.
Sure, some may say that’s low, but that’s where I feel comfortable starting. By the time this all happens we will have no other debt, so that helps.
I’m throttling every retirement vehicle I can, pouring money into an HSA, as well as saving for some future business investment. So while I will have no other debt, money is being diverted elsewhere which keeps me at the conservative 2.5%.
How old are your kids? I was not prepared for the huge spike in expenses when my kids wen to high school. (My own fault for sure). My tuition went from 10K to 25K over 3 years time. My car insurance went from about $1800 a year to $12K a couple years later. We made it, but it was rough going for a while. The good thing is those are all discretionary expenses.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by Drunken Crawfish on 2/23/21 at 8:24 am to skidry
on 2/23/21 at 8:24 am to skidryquote:
$1800 a year to $12K a couple years later.
OUCH.
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re: What is the “normal” ratio of mortgage loan vs annual income?Posted by dltigers3 on 2/23/21 at 8:30 am to Drunken Crawfish
on 2/23/21 at 8:30 am to Drunken CrawfishOur house was right at 2.6 when we bought it a few years back. Now it’s closer to 2.1 with our income increases. We are also prepaying a ton trying to pay it off before our kids get out of elementary school
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by LittleJerrySeinfield on 2/23/21 at 9:54 am to Cblack23
on 2/23/21 at 9:54 am to Cblack23Dave Ramsey has always said that your monthly mortgage payment shouldn't be more than 25% of your take home. Tough for a lot of people to make happen.
quote:
Our house was right at 2.6 when we bought it a few years back. Now it’s closer to 2.1 with our income increases. We are also prepaying a ton trying to pay it off before our kids get out of elementary school
Paying a mortgage off faster than necessary has been a losing strategy for any disciplined investor for decades, but that doesn’t stop anyone from doing it. The allure of being debt free is too strong to overcome for many.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by DiamondDog on 2/23/21 at 11:31 am to Cblack23
on 2/23/21 at 11:31 am to Cblack23My situation is a bit different than yours but ours is looking to be 1.45X gross annual income. I think our debt to income was like 12%.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by TigerTatorTots on 2/23/21 at 11:33 am to Cblack23
on 2/23/21 at 11:33 am to Cblack23We did 1.8x at the time - but could certainly afford up to 3.0x. You have to run the numbers based upon your current monthly expenditures, making sure you have a nice size buffer of excess coming in
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by jimbeam 
on 2/23/21 at 11:35 am to TigerTatorTots
on 2/23/21 at 11:35 am to TigerTatorTotsI’m at 1.92. Being single sucks buying a house 
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by redfishfan on 2/23/21 at 11:46 am to jimbeam
on 2/23/21 at 11:46 am to jimbeamCurrently at 1.3. Old house bought for cheap with renovation.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by hottub 
on 2/23/21 at 12:34 pm to Fox McCloud
on 2/23/21 at 12:34 pm to Fox McCloudquote:
Fox McCloud
Wife and I made the decision early on that any amount of money we saved the government will find a way to take in the next 25-30 years. We still save, but our only hope is to reproduce and raise enough good kids to combat this crazy world.
re: What is the “normal” ratio of mortgage loan vs annual income?Posted by Pepperoni 
on 2/23/21 at 3:04 pm to kywildcatfanone
on 2/23/21 at 3:04 pm to kywildcatfanonequote:
My new mortgage is about 2.5x my annual salary.
I first misread that, I thought the payment itself was 2.5 x annual and that would be a tough spot to be in.
This post was edited on 2/24 at 2:59 pm
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