If you live in a $350K-$450K Home:

[The Pink Cupcake]

What do you think your household salary should be?


Banks are still giving silly offers to people that shouldn't be purchasing certain homes in certain price ranges Trying to reason with somebody about this.


20% will be put down.

Very interested in what your opinion is.

 

[horseshowmom]

What do you think your household salary should be?


Banks are still giving silly offers to people that shouldn't be purchasing certain homes in certain price ranges Trying to reason with somebody about this.


20% will be put down.

Very interested in what your opinion is.

I've always heard that you can buy a house that is 4 times your annual income, but I think that's too much personally. My daughter is about to graduate from pharmacy school which will increase their income tremendously, and they are preparing to buy a house. She has been shocked at how much some the calculators "say" they'll be able to afford. Fortunately, she doesn't agree with them.

 

[DrCavin]

IMO you should not spend more than 25% of your TAKE HOME PAY on a mort/taxes/insur

 

[scrapquitler]

These are the 'rules' that I remember, they came from this website: http://www.fha.com/calculator_afford.cfm
1. Your gross (pre-taxes) monthly salary must be greater than 28% of the sum of the monthly mortgage and monthly tax payments.
2. Your gross (pre-taxes) monthly salary must be greater than 35% of the sum of the monthly mortgage, monthly tax and other monthly debt payments.

So based on this, a person buying a $300K house should have an income somewhere over $100K.

 

[NaLisa]

We bought a house last year and the banks pre-approved us for more than twice what we felt comfortable paying. We had no desire to be house poor. Should one of us lose our job, we can still pay our mortgage.

 

[Frantasmic]

That is about $4000 per month to purchase the home.

Your mortgage shouldn't be more than 25 percent of your take home income, I hear. So, you should be making at least $16,000 take home which would put your gross between $22-$24K. So, I'd say you should be making between $275 and $300K per year to afford that house.

 

[addicted_to_WDW]

I've heard that your house should not cost more than 3 times your annual income, so somewhere around 150k should do the trick.

We bought a house a couple of years ago and it was crazy what we qualified for. I can see how less rational people can get themselves into a lot of trouble financially.

 

[Liberty Belle]

I've always heard that you can buy a house that is 4 times your annual income, but I think that's too much personally. My daughter is about to graduate from pharmacy school which will increase their income tremendously, and they are preparing to buy a house. She has been shocked at how much some the calculators "say" they'll be able to afford. Fortunately, she doesn't agree with them.

There's no way we could afford what the bank would be willing to lend us. Our home cost about 3x our annual income.

Then again, I think it depends on what your income is.

 

[Carly_Roach]

I think the old-school rule of thumb was that the house shouldn't be more than 2 and 1/2 times your annual income. It's a very old rule. So if you make $50k a year, your house shouldn't be more than $125K.

I'm not in the mood to do math the right now, so someone else will have to figure out what the exact $350K or $450K house price equivalent is for that. Somewhere in the neighborhood of gross pay of $200K per year?

If you're going on monthly payment, your mortgage payment (just principle and interest) should be less than 25% or 33% of your monthly gross. Again, a very old rule that harkens back to when banks were interested in actually getting the money repaid to them instead of the fast cash of the fees generated by creating a mortgage followed by the profit in selling that mortgage to someone else.

 

[Pakey]

When I worked for a home builder, the rule of thumb was 3X your gross or 4X your net, whichever was lower. That would mean, in this instance, about $117,000 annual salary gross for $350,000 house.

No way would I do that much.

 

[Big Cuddly Bear]

That is about $4000 per month to purchase the home.

Your mortgage shouldn't be more than 25 percent of your take home income, I hear. So, you should be making at least $16,000 take home which would put your gross between $22-$24K. So, I'd say you should be making between $275 and $300K per year to afford that house.

Your numbers are way off base.

I just moved from my $350K house. We could easily have afforded it - and did - on $125K a year ( though we made more than that ) And we went on vacations, bought new cars..... our monthly mortgage with taxes was ~ $1700 a month. We did, however, out more than 20% down.

 

[punkin]

Let's see...$400K- $80K (20% down) leaves $320K, amortized over 30 years at 5% is about $1700 without taxes and insurance monthly...lets say $1800 all in. at 33% of gross income you should be making $5400 which becomes $$65,000 (approximately).

 

[LuvOrlando]

MY comfort zone, 1/2 the value of the home because money to burn is nicer than a big house IMHO. I'd never want to be house poor, not my style.

 

[Mrs. Ciz]

Someone in my family bought a $420K house on an $85K salary. They had a large down payment due to selling their first home for a nice profit so the monthly payment (P & I) is $1800. They seem to have plenty of money left over each month because they had the yard professionally landscaped, built a deck, finished off the basement, bought 6 rooms full of new furniture, a new minivan, and put granite counters in all the bathrooms over the last few years. Not sure, but we all think someone may be helping them financially because no one else can afford to spend what they spend.

 

[SpecialK]

Let's see...$400K- $80K (20% down) leaves $320K, amortized over 30 years at 5% is about $1700 without taxes and insurance monthly...lets say $1800 all in. at 33% of gross income you should be making $5400 which becomes $$65,000 (approximately).

Those are some really low taxes you're adding in there. Taxes and insurance here would add a minimum of $900 per month.

 

[punkin]

Those are some really low taxes you're adding in there. Taxes and insurance here would add a minimum of $900 per month.

OK, I really didn't take taxes and insurance into account, but I will take your numbers. In that case, you would have a payment of $2600, which would require a gross yearly salary of $93,500.

 

[tvguy]

Well, checking Google Mortgage Calculator, a $450,000 house, with 20% down ($90,000), loan balance of $360,000, 30 year fixed mortgage at 4.5 % (borrow may qualify for a rate as low as 4.25%), payment would be $1824 a month.
For payment to be 25% of gross take home, monthy income would need to be $7,296, annual income would be $87,552.

Figuring 20% of monthly income, gross monthy income would need to be $9120, or $109,440 a year.

I can only say that way back in 1983 when I bought my house, I put only 5% down, and the payment was exactly 25% of our gross take home pay, and that was a pretty tight financial situation. So tight that when I refinanced 4 years later....with the same bank....the loan officer didn't believe we only put 5% down because "we don't write mortgages with only 5% down"......then he pulled our file and was shocked to see I was right.

 

[BCDisneyFanatic]

Well, if they are putting 20% down, then they are looking to borrow between $280,000 and $360,000. With an interest rate of about 5%, that would make for monthly payments of between $1500 and $1900. If a person earns $120,000 a year, their gross monthly income would be $10,000. Assuming 40% went to taxes, etc., that would leave them with a net income of $6,000. The question would be, could they live on the remaining $4100 to $4500 a month? A lot of people survive on a lot less than that...and still pay for rent!

*I do realize, though, that property taxes are much higher in a lot of states than what I pay in Vancouver. This could make or break the ability to comfortably pay the mortgage.

 

[Buckalew11]

It was crazy what they were willing to give us when we were building 1 1/2 yrs. ago. Just crazy. And we told the bank that. And they replied with, "Just let us know when you want it." *sigh*

So, we chose another house plan and went with what we felt comfortable with.

That said, when the house was done and everything was being settled, we were not to owe a single dime in any CCs. They weren't OK with it just showing on the statement as zero--it had to be showing on the credit report.
I charged something at Christmas that year that was a little over 20.00 I paid it off before WDW Marathon weekend. The bill showed a zero balance but the CR took until MARCH to show 0.00 and we actually had to call CHASE to ask when the heck they'd take care of that.
That part was a lot stricter than in the past.

 

[GrnMtnMan]

A raw home price is not that useful in doing this analysis. Both the size of the mortgage and the actual construction value of the home are far more important.

Take for example, a $500 K home in my area. That buys you a good condition, not perfect, twenty year old two bedroom condo in a nice neighborhood of Washington DC, with a parking spot. A $500K home outside of Dallas might buy you half an acre and 3 or 4 thousand square feet of beautiful newly built home.

The condo will have zero dollars of monthly upkeep, outside of the monthly condo fee, and might need a handy man for some minor issues every few months for some minor issues. The large home in Dallas has tens of thousands of possible unexpected expenses (waterproofing, replace roofing, busted water heater, furnace, or AC compressor).

So in DC, income doesn't have to be as high to 'afford' the same house, because the actual value of the house is pretty low....the land that condo sits upon is far more valuable than the housing unit. But if you go out to where land is cheap, you'd better be able to pay for the repairs that that home might have....those bills, for the same total value home, will be much larger.