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Fox McCloud
Member since Oct 2020
1853 posts
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re: What is the “normal” ratio of mortgage loan vs annual income?
quote:

single income and 6 kids.




TomRollTideRitter
Alabama Fan
Member since Aug 2016
9769 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
quote:

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


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TomRollTideRitter
Alabama Fan
Member since Aug 2016
9769 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
quote:

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.


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down time
Member since Oct 2013
637 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
If i can't pay for my place with a weeks work its too high


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fallguy_1978
LSU Fan
Half mile from St George
Member since Feb 2018
33530 posts
 Online 

re: What is the “normal” ratio of mortgage loan vs annual income?
quote:

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


Paul Allen
Notre Dame Fan
Montauk, NY
Member since Nov 2007
66492 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
I 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.


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makersmark1
Auburn Fan
earth
Member since Oct 2011
10260 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
Many 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.


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thegreatboudini
USA Fan
Member since Oct 2008
4753 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
We’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%.


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skidry
LSU Fan
Member since Jul 2009
2137 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
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.


Drunken Crawfish
USA Fan
Crushing 'skis at Tobin's house
Member since Apr 2017
3057 posts
 Online 

re: What is the “normal” ratio of mortgage loan vs annual income?
quote:

$1800 a year to $12K a couple years later.


OUCH.


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USA
Member since 2001
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dltigers3
LSU Fan
Collierville, TN
Member since Jun 2010
1494 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
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


Cblack23
LSU Fan
Da Boot
Member since Jun 2017
109 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
They’re all under 6yo. We have decent public school in our area.


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LittleJerrySeinfield
Alabama Fan
Glass Case of Emotion
Member since Aug 2013
4339 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
Dave 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.


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11
slackster
Stanford Fan
Houston
Member since Mar 2009
71531 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
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.


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DiamondDog
LSU Fan
Member since Nov 2019
3883 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
My 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%.


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TigerTatorTots
LSU Fan
The Safeshore
Member since Jul 2009
76514 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
We 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


jimbeam
US Army Fan
University of LSU
Member since Oct 2011
69622 posts
 Online 

re: What is the “normal” ratio of mortgage loan vs annual income?
I’m at 1.92. Being single sucks buying a house


redfishfan
LSU Fan
Baton Rouge
Member since Oct 2015
3761 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
Currently at 1.3. Old house bought for cheap with renovation.


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hottub
Florida State Fan
Member since Dec 2012
1998 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
quote:

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.


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Pepperoni
US Space Force Fan
Not in fear
Member since Aug 2013
1361 posts

re: What is the “normal” ratio of mortgage loan vs annual income?
quote:

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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