TammyinTN Posted November 19, 2009 Share Posted November 19, 2009 I just paid off all of our credit card debt. Gosh that felt good. :D All we have now is car loans and monthly living expenses. We will be saving around 3000 to 4000 a month from January until June when we move back to the states. How do you figure out how much home you can afford? We will most likely be moving to a high cost of living area and I would love to find a nice home that is below our means so we can do a lot of sight seeing and traveling and of course saving for retirement. Where do I look for easy to understand information on this. Thanks bunches!:D Quote Link to comment Share on other sites More sharing options...
Osmosis Mom Posted November 19, 2009 Share Posted November 19, 2009 They usually say the mortgage payment shouldn't exceed 1/3 of your monthly income so a lot wold depend on your down payment which for a first time homebuyer is min. 20% of the price. Also, when you are in the market then you ask to get pre-qualified by a loan office (not necessarily the one you'll go with) and that'll give you the numbers you are looking for (what you'll get loaned). Quote Link to comment Share on other sites More sharing options...
In The Great White North Posted November 19, 2009 Share Posted November 19, 2009 That is the entire monthly payment including the actual mortgage, all fees and insurance (mortgage and house). Quote Link to comment Share on other sites More sharing options...
Ottakee Posted November 19, 2009 Share Posted November 19, 2009 When looking, make sure to realistically figure in TAXES and INSURANCE as those can really up your payments. Quote Link to comment Share on other sites More sharing options...
DawnM Posted November 19, 2009 Share Posted November 19, 2009 I personally would like to get a house that I can pay 25% of Dh's income towards, including tax and insurance, on a 15 year loan. We have a 15 year loan, but it is more than 25% of DH's income per month. wish we had done this plan earlier. Dawn Quote Link to comment Share on other sites More sharing options...
2squared Posted November 19, 2009 Share Posted November 19, 2009 I don't look at any of the bank numbers. I make a detailed budget for us and figure out how much we can comfortably afford for mortage, taxes, utilities, etc. That way we know how our lifestyle choices impact each other. Then, when we go to the bank, I know the exact $ range for the mortgage we want. I'm an accounting nerd so I also run numerous dream budgets where we pay off the mortgage early. :) Quote Link to comment Share on other sites More sharing options...
ConnieB Posted November 19, 2009 Share Posted November 19, 2009 I personally would like to get a house that I can pay 25% of Dh's income towards, including tax and insurance, on a 15 year loan. We have a 15 year loan, but it is more than 25% of DH's income per month. wish we had done this plan earlier. Dawn We took out a 30 year loan but are paying it based on the 15 year payment table. The interest rate was .25 higher for the 30 year loan but I figured that way if life got rough our minimum required payment would be very reasonably do-able.....and am grateful because there was a stint where funds got low for a few months and we reverted to the 30 year payment schedule. We still will have it paid off in 16 or 17 years instead of the 30 years. (Caveat, be sure to check your mortgage contract carefully to be sure there is not a penalty for paying off early!!) General wisdom seems to be that your housing costs (mortgage, insurance, taxes) should not exceed 30-35% of your income and that your overal debt (meaning the car payments, credit card etc) should not exceed 50% of your debt. So if you are top heavy in other debt payments than your mortgage should be less than 30-35% so as to bring your total debt down to 50%. If your income is not set in stone....i.e. commissions, overtime, etc, than it's best to consider your income to be the minimum you can ALWAYS rely on receiving. We never consider overtime pay when calculating income....that way it's the "extra" that everyone always needs in their budget. It means that we have a smaller house in a little less fancy neighborhood than my DH's workmates.....but then again, we have no credit card debt because we can afford to buy the things we want instead of charge them, and many of his workmates are heavy in debt because their mortgage and fancy car payments are killing them, lol. Even high cost of living places have "lower" areas....and honestly in the higher cost of living towns we've found that the low areas are actually just as safe (not so in regular cost of living places, the "low" tends to be unsafe). To me, safe neighborhood is a bigger priority than square footage....I'd rather be safe in a small house than unsafe in any size. Quote Link to comment Share on other sites More sharing options...
Happy Posted November 19, 2009 Share Posted November 19, 2009 Be careful of bank numbers...they've always qualified us for mortgages that would be waaaaay out of our budget if we did them. The industry and mortgages have changed significantly so that may no longer be the case, but you are warned to be wary any way. Happy house hunting when the time comes! Quote Link to comment Share on other sites More sharing options...
gingersmom Posted November 19, 2009 Share Posted November 19, 2009 You should also budget for home repairs. Things magically break or need to be replaced as soon as you move in. Quote Link to comment Share on other sites More sharing options...
Guest Alte Veste Academy Posted November 19, 2009 Share Posted November 19, 2009 (edited) How do you figure out how much home you can afford? We will most likely be moving to a high cost of living area and I would love to find a nice home that is below our means so we can do a lot of sight seeing and traveling and of course saving for retirement. Where do I look for easy to understand information on this. Your checkbook. Seriously. :001_smile: Because of the following wonderful advice... I don't look at any of the bank numbers. I make a detailed budget for us and figure out how much we can comfortably afford for mortage, taxes, utilities, etc. That way we know how our lifestyle choices impact each other. Then, when we go to the bank, I know the exact $ range for the mortgage we want. Be careful of bank numbers...they've always qualified us for mortgages that would be waaaaay out of our budget if we did them. When we applied for a mortgage, the bank did approve us for a crazy number. I remember laughing like a maniac, thinking these people really needed to take a look at my checkbook and grocery bills. :lol: Then the whole housing market fell out and I thought, "No wonder, people! You had no business handing out such huge mortgages that people had no breathing room or ability to save." (Off soapbox.) Tammy, is your DH retiring? Our plan is for DH's retirement to completely cover our mortgage, utilities, gas, insurance and groceries. Basically, his retirement would be covering the essential stuff so that if unemployment or a health crisis should strike, we wouldn't be out of our homes or have to change our lives too drastically. This is so important because we'll be retiring with dc who will be 11, 10, and 8 and I'll still be in the trenches of homeschooling for years to come. As it is now (with five years left until retirement), our mortgage (including those high TX property taxes and insurance) is 16% of DH's take-home pay. I personally think 30% is crazy high. I have a friend here who just bought a house and is closer to that 30% mark and is having to be so careful with individual purchases and grocery trips. Emergencies stress her out. She shrieks at her DH and kids over lights left on. I just think if she hadn't taken on so much house, she would be a happier person, you know? More money to save, to spend on a $5 pineapple here and there. Life is better living beneath your means, so kudos to you for aiming for a lower mortgage and for paying off your bills. In the end, it's really that simple. Your mortgage equals the cost of the house, the property tax and the insurance. See what you can afford every month and don't let the realtor take you to anything over that. Also, be aware that adjacent cities/counties can have vastly different tax rates so look carefully. Do be aware that annexations can cost people big though. People get annexed around here left and right. They go from paying very low country-folk property tax to sky high city tax. I don't really think that's fair but the only protection would probably be moving to the boonies. Something to watch out for though. Ask your realtor. Have fun house hunting! ETA: Your blog makes me miss Germany so much! DS6, DD5 and I were all born there (and I spent most of my childhood there as my dad was in the Army). DD5 was an October baby and I remember the weather was unusually warm that year too. I would sit out on the patio with her, enjoying the view and the weather. I would love to go back before retirement! Edited November 19, 2009 by Alte Veste Academy Quote Link to comment Share on other sites More sharing options...
TammyinTN Posted November 19, 2009 Author Share Posted November 19, 2009 Tammy, is your DH retiring? Our plan is for DH's retirement to completely cover our mortgage, utilities, gas, insurance and groceries. Basically, his retirement would be covering the essential stuff so that if unemployment or a health crisis should strike, we wouldn't be out of our homes or have to change our lives too drastically. This is so important because we'll be retiring with dc who will be 11, 10, and 8 and I'll still be in the trenches of homeschooling for years to come. We have 2 years left, but we are thinking of going 30 years. We really love this lifestyle and with only 1 kid basically left at home(12 year old) seems like the thing to do. We aren't really ready to put down roots yet...kwim? We are also working to build a hefty emergency fund. I don't want to have to worry anymore as it feels wonderful not to owe a ton of money to anyone!:D Quote Link to comment Share on other sites More sharing options...
Guest Alte Veste Academy Posted November 19, 2009 Share Posted November 19, 2009 We have 2 years left, but we are thinking of going 30 years. We really love this lifestyle Yes, except for the giant issue of frequent, long deployments, I would definitely vote to stay in for 30 years. If they would shrink the deployments (both frequency and duration), DH and I will consider staying in. We'll see... :001_smile: Quote Link to comment Share on other sites More sharing options...
Susan in TN Posted November 19, 2009 Share Posted November 19, 2009 One other thing I factored in is the difference between money we actually "see" that gets into our monthly budget. This is lower than dh's net salary, because we have health insurance, 401K, and other things taken out automatically. We also give 10% of our income to our church, so that cuts out a large chunk of "available" money. So while we would have "qualified" for a $275K loan (on the *gasp* high end), we needed to budget for a much lower amount. I think 1/4 of your "take home" pay is a good place to aim for. Quote Link to comment Share on other sites More sharing options...
Scarlett Posted November 19, 2009 Share Posted November 19, 2009 One other thing I factored in is the difference between money we actually "see" that gets into our monthly budget. This is lower than dh's net salary, because we have health insurance, 401K, and other things taken out automatically. We also give 10% of our income to our church, so that cuts out a large chunk of "available" money. So while we would have "qualified" for a $275K loan (on the *gasp* high end), we needed to budget for a much lower amount. I think 1/4 of your "take home" pay is a good place to aim for. Me too. Dave Ramsey has this as his guideline and I find it to be reasonable. He does 'allow' (for lack of a better word) a tad higher % for HCOL areas. Quote Link to comment Share on other sites More sharing options...
DawnM Posted November 19, 2009 Share Posted November 19, 2009 Yeah, when the bank told us what we "qualified" for I started laughing and told him that I like to EAT! :lol: Dawn Quote Link to comment Share on other sites More sharing options...
Crimson Wife Posted November 19, 2009 Share Posted November 19, 2009 Be careful of bank numbers...they've always qualified us for mortgages that would be waaaaay out of our budget if we did them. The industry and mortgages have changed significantly so that may no longer be the case, but you are warned to be wary any way. Unfortunately, so long as you've got at least 20% down, the banks still will qualify you for a much higher monthly payment than many folks can actually afford. Somebody we know got approved for a $850k house on a $225k income. Going by the old standard of 3x income, they should be buying a house in the $675k range. Quote Link to comment Share on other sites More sharing options...
Mommyof4ks Posted November 19, 2009 Share Posted November 19, 2009 As others have said look at your monthly expenses and how much you want to spend on your mortgage and go from there. Once you figure out how much you have to put down and how much you want to pay a month, then just plug those numbers into http://www.mortgagecalculator.net/affordability/ That will give you an idea. Quote Link to comment Share on other sites More sharing options...
alpidarkomama Posted November 19, 2009 Share Posted November 19, 2009 I personally would like to get a house that I can pay 25% of Dh's income towards, including tax and insurance, on a 15 year loan. We have a 15 year loan, but it is more than 25% of DH's income per month. wish we had done this plan earlier. Dawn :iagree: That arrangement indeed makes life more pleasant. We did a 30-year on this house, but are hoping to move soon and do a 15-year. If one can't quite swing a 15-year mortgage, I would definitely do only 25% of takehome pay, and pay every 4 weeks so you get a couple of extra payments in during the year. Many people will advise you to buy a little more house than you think you can afford because you'll be able to afford it more and more easily as you go (yeah, in theory...). The median house size in the 1950s was around 1,000 square feet, and the occupancy per house was bigger (something like 3.5 instead of 2.5 like it is today). So... we're hoping to downsize from our 1600-square-foot house (for the 6 of us), live somewhere with a lower cost of living, and get a 15-year-mortgage. Now we've just got to find that job in Other City, USA! Quote Link to comment Share on other sites More sharing options...
DawnM Posted November 19, 2009 Share Posted November 19, 2009 And Crown Financial says 1.8 times your income for the actual loan portion! And a min. of 20% down. So, your friends should have actually looked at a loan of $405K and a downpayment of $506K roughly. Back in 2002 we were approved for a loan 5 times our salaries and zero down! We still took out a loan for 2.5 times our salary, but we lived in SoCal and there weren't many houses to be had for less than that. Dawn Unfortunately, so long as you've got at least 20% down, the banks still will qualify you for a much higher monthly payment than many folks can actually afford. Somebody we know got approved for a $850k house on a $225k income. Going by the old standard of 3x income, they should be buying a house in the $675k range. Quote Link to comment Share on other sites More sharing options...
TammyinTN Posted November 19, 2009 Author Share Posted November 19, 2009 Thank you all so much for the info. I've got lots to study up on and will be asking more questions shortly. :D Quote Link to comment Share on other sites More sharing options...
rafiki Posted November 19, 2009 Share Posted November 19, 2009 . Quote Link to comment Share on other sites More sharing options...
Crimson Wife Posted November 19, 2009 Share Posted November 19, 2009 And Crown Financial says 1.8 times your income for the actual loan portion! 1.8x income may work in a low-cost area, but here in the S.F. Bay Area that would put my friends in either a semi-ghetto neighborhood or a 90+ minute commute each way. Whereas 3x income would put them into a decent home in an okay neighborhood within a reasonable commuting distance. Quote Link to comment Share on other sites More sharing options...
Jill- OK Posted November 19, 2009 Share Posted November 19, 2009 Tammy, is your DH retiring? Our plan is for DH's retirement to completely cover our mortgage, utilities, gas, insurance and groceries. Basically, his retirement would be covering the essential stuff so that if unemployment or a health crisis should strike, we wouldn't be out of our homes or have to change our lives too drastically. This is so important because we'll be retiring with dc who will be 11, 10, and 8 and I'll still be in the trenches of homeschooling for years to come. ...this is excellent advice. We bought our current house on dh's retirement, alone (meaning we qualified, according to the bank and our own calculations, lol), and I'm so glad we did. Quote Link to comment Share on other sites More sharing options...
Scarlett Posted November 20, 2009 Share Posted November 20, 2009 1.8x income may work in a low-cost area, but here in the S.F. Bay Area that would put my friends in either a semi-ghetto neighborhood or a 90+ minute commute each way. Whereas 3x income would put them into a decent home in an okay neighborhood within a reasonable commuting distance. Good reason not to live in that area IMO...:tongue_smilie: I don't know how people get by! Quote Link to comment Share on other sites More sharing options...
Crimson Wife Posted November 20, 2009 Share Posted November 20, 2009 Good reason not to live in that area IMO...:tongue_smilie: I don't know how people get by! Well, if you want to get by on a single income, you have to live simply. We rent a modest townhouse, share a single economy car, don't have cable/satellite or a landline, etc. The only reason we're here is because that's where most of the opportunities in DH's field are. Quote Link to comment Share on other sites More sharing options...
QueenCat Posted November 20, 2009 Share Posted November 20, 2009 Unfortunately, so long as you've got at least 20% down, the banks still will qualify you for a much higher monthly payment than many folks can actually afford. Somebody we know got approved for a $850k house on a $225k income. Going by the old standard of 3x income, they should be buying a house in the $675k range. You can still qualify for plenty of mortgages at reasonable rates with less than 20% down, as long as you have a decent credit score. We wanted to put some of our earnings on our last home sale in to savings rather than down on our new house. Went with 10%, no problem, no PMI either. I personally wouldn't go over 25-30% of my net income on a mortgage payment (including taxes and insurance). Quote Link to comment Share on other sites More sharing options...
KidsHappen Posted November 20, 2009 Share Posted November 20, 2009 Most banks and finacial advisers will tell you that you can afford 30% of your total pay. That amount should include taxes, insurance and PMI. Me personally, I am more comfortable with about 25%. They told us we qualified for $325,000 but we bought at $290, 000 with a 5% interest and I would have prefered closer to $250,000-$275,000. Quote Link to comment Share on other sites More sharing options...
RegGuheert Posted November 20, 2009 Share Posted November 20, 2009 Many people don't consider alternatives to purchasing a house, but perhaps it is a good idea. I strongly recommend you read through the Patrick.net website thoroughly before committing to make a purchase. At least you will be sure you are purchasing for the right reasons. Good luck with whatever you do! Quote Link to comment Share on other sites More sharing options...
TammyinTN Posted November 20, 2009 Author Share Posted November 20, 2009 I've been looking at house prices in Frederick, Maryland...holy cow!! I don't want to spend that kinda money just yet if it's not our forever and ever home.:001_huh: I think we will look into renting...as I nearly passed out over the house prices. I want a nice comfortable home, just not one that owns me...kwim?:001_huh: Quote Link to comment Share on other sites More sharing options...
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