Can I really afford a $250k house?

[Texashiker]

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?

No, if I was single, I would probably reduce the number even more.

Worse case situation, you get laid off and draw unemployment for 6 months. What kind of house note could you pay with unemployment?

I just believe in living well within your means.

Your math is severely fvcked up.

I used $50k to figure the income, not $80k.

 

[Doppel]

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?

I assume he'd cut back so that you can save a lot, maybe base it on an income of $60k or something. It's certainly intelligent not to buy a house relying upon continued income at all times, such that if it's severely curtailed you are screwed.

 

[manimal]

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.

People have been complaining about upward mobility in the current economic climate instead of trying to find ways to beat it. Its really simple like spidey says above. Nothing will hold you down and drop you down the economic ladder faster than debt.



My wife left her full time job that actually payed us more a year since my earnings I keep very low since I am a small business owner. Guess what? Didnt matter since we carry very little debt and payed off our house when we bought it.

If we have moved into that bigger house the wife was dying to get when we moved from NYC fuggetaboutit....

 

[rcpratt]

I used $50k to figure the income, not $80k.

Don't act like it's everyone else's fault that you said $80k in your post before the edit.

 

[mvbighead]

It all depends on your situation. When you say that your GF "should" make 30k out of college, that right there says you "should" take her income out of the equation. Never focus on anything that isn't reasonably certain.

For me, it is a matter of where you are at in life. Are you looking to get out of an apartment? Are you looking for a place to raise kids? Are you looking for what could potentially be the last home you'll ever live in?

If you're looking to get out of an apartment, you'd be better off heeding the advice of some in here and getting a modest place well below what those calculators suggest you should be able to do. If you're pulling in 50k solely, and there is no guarantee that your GF is going to be legally required to make payments on the house, you should figure with that income and your expenses alone.

Then, at 50k, you figure that you should be able to cover a monthly mortgage (tax and insurance included) bill with one bi-weekly paycheck. I'd say you'd be more realistically looking at no more than 200k, and probably less than 180k. You must also take into consideration your vehicle situation. Are you a car loan/lease kinda guy, or a buy it with cash kinda guy? Then you should consider the age of the house and its current condition. If relatively new and in good shape, just plan on having 3-5k available for any surprise expenses. If older and in need of repair, you might consider doubling that amount available.

There are a lot of variables to consider. But it all depends on how you choose to spend your remaining income. If you go out to eat often, have high car payments, etc., you'll want to go a lot lower than what you can "afford." And if this is going to be a house you have for 3-5 years, you should consider buying a fixer upper (not too broken down mind you) to help you learn the ways of home ownership/repair.

 

[swanysto]

I have always been told that 2 weeks paycheck should cover the mortgage/rent and necessity bills(i.e gas, electric). However, I have never been in debt, so I don't have school payments or the like. I make in between your 50k and your combined 80k, and I have been pre-approved on around 200k. However, I think it would be more if my credit was higher(I didn't have any credit till I opened a credit card last year, and financed a car 6 months ago).

They told me my payment on a 200k house would be right around $1800.00 with taxes and home owners insurance packed in. They put those in cause of my lack of credit.

When my gf and I get married, I am sure it will go up a bit cause that would put us into six figures, and her credit is better. However, I plan on buying a 70-100k fixer since I have the ability. In this economy I would not spend much on a house, cause I highly doubt you will get what you put into when you go to sell. If you buy a fixer at 100k and put 50k into it, you should not have a problem getting that money back.

 

[Gothgar]

This thread got popular

 

[vi edit]

Not sure about anyone else, but when I bought a house I already had one kid in daycare, and a second expected. That was a mortgage or more in itself. If I lost my job it was almost a net even on the deal, less retirement benefits I got from work.

I already had one paycheck ruled out when factoring in payments. When kids are out of daycare it's like an immediate raise of $1,500 a month more.

 

[ElFenix]

No, if I was single, I would probably reduce the number even more.

Worse case situation, you get laid off and draw unemployment for 6 months. What kind of house note could you pay with unemployment?

I just believe in living well within your means.

well, ok, but then just do the math differently rather than picking some arbitrary number for income.

 

[GotIssues]

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

I know, with 100% certainty, that $80k/52 is $1538+change.

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

All situations are different. If I had $500k in savings/available funds, but making $80k/year with two incomes, I'd be in a much different situation than someone with $0 in savings/available funds and making $80k/year.

 

[spidey07]

I know, with 100% certainty, that $80k/52 is $1538+change.



All situations are different. If I had $500k in savings/available funds, but making $80k/year with two incomes, I'd be in a much different situation than someone with $0 in savings/available funds and making $80k/year.

Not really. It's not much different. It's all about the money in vs. money out. Now you could include the returns of the 500k if you wanted but that's not really income and should remain reinvested for wealth building.

Eitherway, the money in/money out doesn't really change.

 

[Fingolfin269]

Lots of factors to consider here. Obviously no situation is cookie cutter at all. What if the family looking for a home has no kids and no plans to have kids? What if they already have 2 kids? 4?

Cash flow definitely varies from situation to situation.

 

[rcpratt]

Not really. It's not much different. It's all about the money in vs. money out. Now you could include the returns of the 500k if you wanted but that's not really income and should remain reinvested for wealth building.

Eitherway, the money in/money out doesn't really change.

If you had $500k cash you could screw the mortgage altogether and just buy the house.

 

[Texashiker]

I know, with 100% certainty, that $80k/52 is $1538+change.

The op does not make $80k. He makes $50k.

 

[Doppel]

Not really. It's not much different. It's all about the money in vs. money out. Now you could include the returns of the 500k if you wanted but that's not really income and should remain reinvested for wealth building.

Eitherway, the money in/money out doesn't really change.

Of course it's not all just money in vs money out, that's absurd.

 

[the DRIZZLE]

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.

That's a good philosophy and I'm conservative with these things as well but you are ignoring the effect liquid savings. If you have 50k in the bank (outside retirement accounts) you can deal with one of you being unemployed for a long period.

 

[the DRIZZLE]

Not really. It's not much different. It's all about the money in vs. money out. Now you could include the returns of the 500k if you wanted but that's not really income and should remain reinvested for wealth building.

Eitherway, the money in/money out doesn't really change.

It changes it because it gives you a buffer against unemployment. Given how things are today I think people should have one year of expenses and mortgage payments in liquid savings above the down payment before they buy a house.

 

[96Firebird]

Haha, whoa, I was just bored during lunch and decided to get an idea of income vs. mortgage. Then I was shocked at how much it told me, and decided to post about it...

To be honest, I am not ready to get a house, but am sick of living with dirty roommates and am probably going to find a place to rent with my girlfriend this coming spring. But the more I look at places to rent, the more I think about how I could be putting that $1200/month rent towards an actual house...

It just took me by surprise because my parents own a $100k house, and my girlfriends parents own a $100k house as well, and I'm not sure if I have ever been in a $250k house... But we are simple people, with simple needs, who own $3k cars and consider going out to eat as the 2 for $20 at Applebees.

Good info in this thread though, I'll be sure to come here when I really decide to buy a house.

 

[GotIssues]

Not really. It's not much different. It's all about the money in vs. money out. Now you could include the returns of the 500k if you wanted but that's not really income and should remain reinvested for wealth building.

Eitherway, the money in/money out doesn't really change.

I was not including any interest or other gains from the $500k. It's the fact that the person with $500k has an incredibly large safety net to fall back on should one lose their job or have another unexpected expense, one so large that it pretty much negates the risk of losing their job and almost all other reasonable cashflow negative surprises (assuming they find work in the next 10 years).

The point was, since it was obviously missed, is that overall financial health affects affordability, not just one simple aspect.

 

[GotIssues]

The op does not make $80k. He makes $50k.

Household income will still be $80k, dipshit.

He plugged in $80k into a home affordability calculator and questioned the results. At an $80k income, it's the upper limit on what is deemed affordable and the max you are likely able to secure a loan for.

 

[slayer202]

if your expenses are in check, yeah you can afford it. I could manage payments on that with my lower salary, though I'm short on a down payment(isn't 20% the norm? idk where you got 15k from).

A house at that price would have a mortgage not too far from a 1br apt in my area. Throw in the extra expenses and it would be worth the equity. Not sure where you guys are throwing money at if you don't think the OP can afford the house

 

[thegimp03]

I would not factor your girlfriend's projected future salary into your calculation, as her name probably isn't going on the mortgage. You don't want to buy a $250k house thinking you have $80k a year total income unless it's a sure thing. I'd either buy a cheaper place at about ~$150k or rent for awhile to save some money. I think housing prices are going to continue to remain low for quite awhile.

 

[mvbighead]

Haha, whoa, I was just bored during lunch and decided to get an idea of income vs. mortgage. Then I was shocked at how much it told me, and decided to post about it...

To be honest, I am not ready to get a house, but am sick of living with dirty roommates and am probably going to find a place to rent with my girlfriend this coming spring. But the more I look at places to rent, the more I think about how I could be putting that $1200/month rent towards an actual house...

It just took me by surprise because my parents own a $100k house, and my girlfriends parents own a $100k house as well, and I'm not sure if I have ever been in a $250k house... But we are simple people, with simple needs, who own $3k cars and consider going out to eat as the 2 for $20 at Applebees.

Good info in this thread though, I'll be sure to come here when I really decide to buy a house.

Hell, if you can put 1200 towards it, you may as well look. At least with a house, your interaction with neighbors is mostly up to you. My only times living in an apartment were not experiences I really cared for. Smoking neighbors below you whose stench creaps right into my closet and onto my clothes? No thank you.

If I was simply dating, I'd at least find a decent looking fixer upper. Gotta get started somewhere.

 

[spidey07]

if your expenses are in check, yeah you can afford it. I could manage payments on that with my lower salary, though I'm short on a down payment(isn't 20% the norm? idk where you got 15k from).

A house at that price would have a mortgage not too far from a 1br apt in my area. Throw in the extra expenses and it would be worth the equity. Not sure where you guys are throwing money at if you don't think the OP can afford the house

Savings, retirement, wealth building. A big percentage of your income devoted to a house payment really prevents you from doing a lot of that properly.

There's a big difference between "make the payments" and "make the payments and save/invest a substantial amount of your income so your money prints income for you".

 

[GotIssues]

Haha, whoa, I was just bored during lunch and decided to get an idea of income vs. mortgage. Then I was shocked at how much it told me, and decided to post about it...

To be honest, I am not ready to get a house, but am sick of living with dirty roommates and am probably going to find a place to rent with my girlfriend this coming spring. But the more I look at places to rent, the more I think about how I could be putting that $1200/month rent towards an actual house...

It just took me by surprise because my parents own a $100k house, and my girlfriends parents own a $100k house as well, and I'm not sure if I have ever been in a $250k house... But we are simple people, with simple needs, who own $3k cars and consider going out to eat as the 2 for $20 at Applebees.

Good info in this thread though, I'll be sure to come here when I really decide to buy a house.

If house prices are $100k and you are shelling out $1200/mo in rent living with roommates, I would advise going out and getting a $100k house and renting a bedroom out to one of your roommates for $400-$500/month (a little less than the predominant one bedroom prices). You'll come out way ahead on that deal. Way ahead.