Determining how much house you can afford

[tfinch2]

Originally posted by: Fmr12B

Originally posted by: spidey07

Originally posted by: Fmr12B
So under your logic a $100K earner can only afford a $200K house?

yep. Or a bigger downpayment. Many say 2.5 times gross however if you want to stretch it.

Wait, a $200K mortgage is only $1,300/month. $100K salary is $5,833/month after a 30% take for taxes. That would leave a person with $4,500 a month to pay for other crap.

I think your logic is completely wrong. :disgust:

Why not live comfortably a save a bit?

 

[spidey07]

Originally posted by: Fmr12B
Wait, a $200K mortgage is only $1,300/month. $100K salary is $5,833/month after a 30% take for taxes. That would leave a person with $4,500 a month to pay for other crap.

I think your logic is completely wrong. :disgust:

Why not build wealth and retire by 50? It's not logic. It's called smart financial planning.

That "other crap" makes me think you forgot things like bills, insurance, vacations, "stuff", retirement, food, entertainment. Oh and Gambling.

 

[3NF]

40% is way too high. Go with something like 25% and live comfortably. Keep in mind you'll either need to set aside or put into escrow, the taxes for the property.

 

[flot]

I'll chime in and say somewhere between 2x and 3x your annual salary, if you want to retain a comfortable standard of living.

Here in South Florida, a $300k home (which hardly exist anymore btw) would set you back approx $2500 a month after taxes and insurance. If your gross income is around $100k a year, $2500 a month still represents almost half of your take home pay. Add in an average car payment and your normal assortment of bills, and you'd probably be left with only $1000 a month of "spending money." (where did the money go - suddenly your $100k turned into $12k of "spendable" cash)

The tax break is nice, but conisdering that the standard deduction you get anyway is pretty high, it doesn't kick in as much as you might hope.

A better way to judge the sticker shock, assuming you are renting now, is to work from that number, figure how much MORE you could pay each month and what it would mean to your lifestyle and savings.

 

[KK]

What are your future plans. Wife in a few years, kids? When I was shopping for homes, I was married but no kids. So we bought a 3 bedroom house for just alittle under 1x our annual salary. Now that we have 2 kids, I'm feeling the mistake we did in not planning ahead. Sure we could move, but thats a big hassle. If we would have spent 2x we could had a nice size house. Our house is alright, but in the price range we were looking at, none had basements. And that's my biggest thing I could kick myself in the nuts for not getting.

Main thing is to think your purchase and options over thoroughly, do not get infacutuated with finding a home that you just gotta have. If you do then you'll probably let your guard down and thats when you'll regret it. It's a big purchase, take your time.

As far as what you can afford, depends on your spending habits. No one will be able to tell you a exact amount.

 

[IronWing]

Aim low, live happy. Visit friends w/ big houses and small houses and really look at how they live. Think about the utility of extra space. Having an extra 50 sq ft in the bathroom gets folks what? More floor to wash and a longer walk to the lou.