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

[bettymae1121]

DH and I make just a bit under $100k and we bought a home for $185k with 20% down. We have enough "wiggle room" to meet our other expences and savings goals and still have fun. I can't imagine having a mortgage payment almost double what we currently pay, we could do it but we wouldn't be able to afford to have fun anymore (no vacations, no eating out, no extras of any kind)! Plus we'd be up a creek if our income took a sudden cut (which these days isn't exactly unthinkable). As it is now we could live on one income if needed, though of course we'd rather not have to.

 

[ilovemk76]

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.

Bold is way off. So you don't count the monthly condo fee? It could be just a $100 or so per month or could be $500 per month. If the homeowner puts that money away for home repairs..

If your condo needs a new roof if the condo does not have the money in the bank they will assess the condo owners for the repairs.

 

[Handbag Lady]

One thing you are not taking into consideration is the availability of homes in the price range you can afford.

There are no houses in our area (and I mean an hour's drive from our work in traffic in a neighborhood where you won't die) that are less than $400k. So, we don't have the luxury of finding a house to buy in our price range given our meager salaries based on the general math presented here.

So, some have picked to buy the expensive house and struggle. We chose not to buy.

 

[ols386]

I've always had a house that's much much below what a mortgage company said I (we) could afford. I just never want to be house-poor. I'd rather live in a less expensive and smaller house, and be able to actually afford to go out and see some of the country and/or world (course the last few years, I've only been seeing Disney World..I need to broaden my horizons a bit more. Does walking through the World Showcase count as seeing the world, lol).

 

[kirstenb1]

I'd say 150-200k per year at least. I like being able to know I'm going on a nice vacation or 2, not stressing about monthly expenses, budgeting etc. So I'd prefer a decent salary/less expensive house, than the opposite.

 

[Buckeye Princess]

I think it varies from person to person and situation to situation. The home we are about to move into falls into that range. However I'm a stay at home and my husband is going to be a surgical resident. Not a big income. But we have significant savings even with purchasing this home will have enough in there to pay off the entire mortgage and live on for a few years if something catastrophic were to happen. I'm sure many would think we are overstretching but they may not know the background and that we are actual in a very secure place. We also spend very little month to month. (Used cars, used clothes, cook everything from scratch, no fancy cable, etc).

 

[dizluvah]

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

ITA

 

[bellarella]

First, I think it's a bit gutsy to try to convince someone of how much home they can afford.

Interest rates are low right now. The likelihood that they will stay this low is not very good.

The more money you make, the more discretionary income you have. Someone who makes $200,000 can have a much easier time affording 50% of their take home pay than a person making $50,000 could afford 25%.

Do you know how much this person has in savings? They may be much more comfortable with a tight budget if they have a large cushion?

Do you know how long they plan to stay in the home? What interest rate they are getting? What other debts they have? How much property taxes are? What tax bracket they are in? How much rent they will be paying if they don't buy? What the market is like where they live? What their tolerance for risk is?

Banks use formulas as a way of quickly sorting on the basis of the risk parameters they are comfortable with. There is no formula for how much this person should be comfortable with. If they can afford the house on their take-home pay and afford the other financial priorities in their life, and are comfortable with the risk going forward, then that is their decision.

 

[punkin]

One thing you are not taking into consideration is the availability of homes in the price range you can afford.

There are no houses in our area (and I mean an hour's drive from our work in traffic in a neighborhood where you won't die) that are less than $400k. So, we don't have the luxury of finding a house to buy in our price range given our meager salaries based on the general math presented here.

So, some have picked to buy the expensive house and struggle. We chose not to buy.

Around here there are really no cheap houses either. The cheapest house currently for sale in my zip code is listed at $449,000 and is 4 Bed, 2 Bath 1,320 Sq Ft. Not exactly a mansion. This is after the huge drop in prices over the past two years as well. In some areas it is just not feasible to get a cheaper house.

 

[hopemax]

I would say the $150K range. At least, that's what I think I would want to make to feel comfortable. A person could probably do it with lower, like $125K depending on their other costs (big difference between having no kids vs having 5). In an area with high cost of living, probably even less, as there is a group of people that are used to spending 30, 40 and now even up to 50% of their income on housing. But that would be too tight for me.

 

[monkeybug]

I think it depends on more factors than just your annual income.
I would think your debt to income ratio should play into it too, and utility costs.
We could easily pay over $2,000 a month if we had to, but that's because we don't owe any debts.

 

[krnlmustrd]

We bought our probably permanent dream house less than a year ago. $433k. After 20% down, the mortgage payment is around $1800. Add in taxes and insurance and the payment is $2350. Add another $400 for utilities (on 5000sf) and we're up to $2750/month or $33k/year in housing costs alone. Because I work out of state, we couldn't use my income to help qualify for the loan and my partner secured the loan using only his income of about $100k. But we were at the upper limit of our approval.

 

[Katy Belle]

We relocate every 3-5 years with DHs job. We are always shocked at what the bank says we can afford. This time I think it was $600,000 or something crazy like that, maybe more. We have pretty high goals for college savings and retirement savings. We are a one income family and have a kid going to college in 2 years, with 2 following after him. We bought a house for $300,000.

I would say someone should make $250,000-300,000 a year to afford a $350,000-450,000 house, and still be able to meet all of your other goals.

 

[krnlmustrd]

Is that realistic? Less than 2% of households in the US earn over $250k/year. The average house price in my area is $391k.

 

[The Pink Cupcake]

First, I think it's a bit gutsy to try to convince someone of how much home they can afford.
.

“Gutsy” may have saved our nation from this horrible foreclosure situation it is in People should have been "gutsy" years ago.

Do you know how long they plan to stay in the home? What interest rate they are getting? What other debts they have? How much property taxes are? What tax bracket they are in? How much rent they will be paying if they don't buy? What the market is like where they live? What their tolerance for risk is?
.

Very familiar with the finances of this person I am being so “gutsy” (aka-HONEST) with.

It is a cousin who will wind up as a statistic if they take the mortgage that the bank is telling them they can afford It is ridiculous. They can’t afford it. No how. No way.

 

[Mrs. Ciz]

We bought our probably permanent dream house less than a year ago. $433k. After 20% down, the mortgage payment is around $1800. Add in taxes and insurance and the payment is $2350. Add another $400 for utilities (on 5000sf) and we're up to $2750/month or $33k/year in housing costs alone. Because I work out of state, we couldn't use my income to help qualify for the loan and my partner secured the loan using only his income of about $100k. But we were at the upper limit of our approval.

Thanks for doing the math. Now I know my SIL is getting some kind of financial help. She and her hubby bought a $420K house on $85K, have a payment of $1800 (P&I) a month and have done many large expensive home improvement projects. She always says her husband is just good with money. But after social security, payroll taxes, housing costs similar to yours and three kids, they'd have about $25000 left for food, entertainment, gas, cars, vacations, other monthly bills, savings AND their big projects!

 

[punkin]

Very familiar with the finances of this person I am being so “gutsy” (aka-HONEST) with.

It is a cousin who will wind up as a statistic if they take the mortgage that the bank is telling them they can afford It is ridiculous. They can’t afford it. No how. No way.

Thanks for doing the math. Now I know my SIL is getting some kind of financial help. She and her hubby bought a $420K house on $85K, have a payment of $1800 (P&I) a month and have done many large expensive home improvement projects. She always says her husband is just good with money. But after social security, payroll taxes, housing costs similar to yours and three kids, they'd have about $25000 left for food, entertainment, gas, cars, vacations, other monthly bills, savings AND their big projects!

Why is this any of your business?

 

[Mrs. Ciz]

I guess its not, but the whole family, not just me, feels like she rubs our face in it constantly and it is quite annoying. It sometimes leaves us all just scratching our heads.

 

[jsmith]

There are tons of factors in how much house you can afford-not just income. We live in a new home that on the face of it is wayyyyyyyy beyond our ability to afford-but the reallity is we carried a great deal of equity out of a previous home-and our mortgage is less than 4 percent-so the payments are in reality only 50 dollars per month more than on our previous home for which we orginially paid several hundred thousand dollars less. We also have virtually no debt so we can live here and still have fun.
how one manages finances, what savings and other assets you have and all those things factor in.

 

[msjprincess]

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.

Did you pay $350K for your house or sell it for $350K?