Can I really afford a $250k house?

[96Firebird]

I was bored on my lunch break so I decided to throw some figures in these little "How much house can I afford" calculators, and it told me my girlfriend and I can afford a $250,000 house...

I used $80k income ($50k from me, assumed $30k from my girlfriend when she graduates in May), monthly debt of $800 which includes student loans, bills etc..., and a 30-yr mortgage at 4.5%, $15k down, and $4k in taxes/insurance. Yahoo says we should be able to afford a $265k house...

Now there is no way I would spend that much on a house, but it this why there are so many foreclosures out there? Other calculators show about the same, can I really afford to spend that much on a house? Just seems ridiculous...

 

[Gothgar]

Usually the lenders want you to max out what you can pay, cause they'll make more then

 

[DesiPower]

You payment after Escrow and everything will be close to $1800 a month atleast... you do the math yourself and see if you can afford.

and yes, thats exactly the reason, its sucks

 

[ponyo]

You got to figure out what you're comfortable with. Some people are comfortable living month to month, pay check to pay check.

It's like buying a car. They'll try to upsale you. Just because you can buy a Ferrari doesn't mean you should.

 

[vi edit]

There's a difference between "afford" and "make payments on". The calculators tell you the later.

 

[Baked]

I'm still trying to figure out WTF are people thinking when they do the zero down shit. You ain't got no money man! If one of you is out of the job, you're fucked.

 

[SearchMaster]

People generally 'qualify' for much more house than they can afford. I remember when I bought my house I was looking in the $150K range (15 years ago, mind you) but I qualified for >$250K mortgage. I would probably have bankrupted myself if I'd spent that much at the time.

 

[Golgatha]

Yahoo is smoking crack. You can't begin to "afford" a $265k house unless you want to be in debt and miserable living paycheck to paycheck for the rest of your life.

 

[Texashiker]

I used $80k income ($50k from me, assumed $30k from my girlfriend when she graduates in May)

That is where you messed up, you probably maxed out your loan.

With your income of $50k a year, that breaks down to $961 weekly. After taxes, health insurance and other deductions you bring home in the $700 range?

I think you should look at homes in the $75,000 range and below.

 

[GotIssues]

It's the maximum you can afford/what the bank will be willing to lend you, not what you have to buy. It's not a suggestion, it's a limit.

 

[vi edit]

That is where you messed up, you probably maxed out your loan.

With your income of $80k a year, that breaks down to $961 weekly. After taxes, health insurance and other deductions you bring home in the $700 range?

I think you should look at homes in the $75,000 range and below.

Now that's some fuzzy math.

 

[bobdole369]

The calculation is typically 33% of your gross income(absolute max that is). So - (80,000/3)/12 = $2222. Should factor mortgage, insurance, taxes, basic maintenance repairs (Not new fridge and garbage disposal, but cleaning supplies and snowshovels) into this.

 

[rcpratt]

That is where you messed up, you probably maxed out your loan.

With your income of $80k a year, that breaks down to $961 weekly. After taxes, health insurance and other deductions you bring home in the $700 range?

I think you should look at homes in the $75,000 range and below.

I would expect closer to $1000/wk after taxes, 401k, etc. on an $80k income. And actually a bit more considering that it's two separate incomes...less taxes.

And I'm not sure where you pulled that last line from.

 

[Corporate Thug]

You payment after Escrow and everything will be close to $1800 a month atleast... you do the math yourself and see if you can afford.

and yes, thats exactly the reason, its sucks

with 10%, it will be closer to $1600

 

[Corporate Thug]

I'm still trying to figure out WTF are people thinking when they do the zero down shit. You ain't got no money man! If one of you is out of the job, you're fucked.

does anyone even offer zero down anymore?

 

[Texashiker]

Now that's some fuzzy math.

My personal opinion, too many people buy homes based on either a combined income, or based on the highest wage earner in the home.

I think the home price should be with the incomes averaged, not combined, and certainly not based off the highest wage earner.

My wife and I bought a home that was well within our limits. When she lost her job, we never missed a beat. We cut back, but were able to pay our bills with just one income.

But for a lot of people who buy at the upper end of their limit, if one person loses their job, they lose everything.

I would expect closer to $1000/wk after taxes, 401k, etc. on an $80k income. And actually a bit more considering that it's two separate incomes...less taxes.

And I'm not sure where you pulled that last line from.

I used $50k, not $80k.

 

[spidey07]

If you want to be in a really good spot, no more then 25% of your take home of one salary. This equates to generally around twice your income (NOT BOTH, ONE). Puts you in a real good spot.

And your right, that's why there are so many foreclosures out there. People were just one paycheck away from financial ruin and typically it was because they bought more house than they really should.

 

[GotIssues]

That is where you messed up, you probably maxed out your loan.

With your income of $80k a year, that breaks down to $961 weekly. After taxes, health insurance and other deductions you bring home in the $700 range?

I think you should look at homes in the $75,000 range and below.

Unless there are 83 weeks in a year, 80k/#weeks in a year = 1538.46. But most non-retarded people do their finances by the month since, well, bills are paid once/month.

Assuming $500/mo medical (which is pre-tax dollars), that brings him to 6166.66 gross, roughly $4600 net. Take out other expenses (food, utilities, student loans, etc), he'll be down to probably around $3000, but lets just assume $2500. A $250k loan will fall around $1800/mo, leaving him $700. Not the margin of safety I'd prefer, but if all goes according to plan, then it's affordable.

However, in this case, I'd suggest going for the $125k-$150k range houses.

 

[Sho'Nuff]

Good rule of thumb is that your PITI (principle interest taxes and insurance) payments should total less than 25% of your net income, less than 20% if you want to be really comfortable with the payment.

 

[Doppel]

80k/year on a house like that is ok if your property taxes aren't insane like they are in some states and you're not otherwise stupid with your money. It follows the basic 3Xincome rule for house purchase, or pretty close to it.

That is where you messed up, you probably maxed out your loan.

With your income of $80k a year, that breaks down to $961 weekly. After taxes, health insurance and other deductions you bring home in the $700 range?

I think you should look at homes in the $75,000 range and below.

Your math is severely fvcked up.

Don't buy a house with a girlfriend, though. Buy it with a wife or buy it yourself. I never get how some people cannot commit to a marriage but buy a house together!

 

[bignateyk]

250K is affordable on an 80K income. The problem is that you are depending on two incomes to get that 80K. Ideally you should buy a house assuming you will only have one of your two incomes.

 

[Doppel]

My personal opinion, too many people buy homes based on either a combined income, or based on the highest wage earner in the home.

I think the home price should be with the incomes averaged, not combined, and certainly not based off the highest wage earner.

My wife and I bought a home that was well within our limits. When she lost her job, we never missed a beat. We cut back, but were able to pay our bills with just one income.

But for a lot of people who buy at the upper end of their limit, if one person loses their job, they lose everything.




I used $50k, not $80k.

Then it would still be a $150k/house, not $75k. I agree with you that budgeting based upon continued income of all sources is extremely risky and/or stupid, though. Many do it and it's a massive mistake.

 

[PingSpike]

I'm still trying to figure out WTF are people thinking when they do the zero down shit. You ain't got no money man! If one of you is out of the job, you're fucked.

Meh, they can always just walk away. Not like any of their actual money was invested in the house.

A better question is: What was the lender thinking?

 

[Texashiker]

Unless there are 83 weeks in a year, 80k/#weeks in a year = 1538.46. But most non-retarded people do their finances by the month since, well, bills are paid once/month.

Do you know with 100% certainty that both people will be employed 100% of the time?

My personal opinion, buying a home with both incomes combined is stupid. It maxes out you limit and leaves no buffer room.

 

[ElFenix]

My personal opinion, too many people buy homes based on either a combined income, or based on the highest wage earner in the home.

I think the home price should be with the incomes averaged, not combined, and certainly not based off the highest wage earner.

so if i'm single making $100k per year you'd use that but if i have a wife making $50k per year on top of that you'd only use $75k? how does that work?