With our monthly income, how much can we pay for a house? (foreclosures, insurance)

[hm2562]

Hi everyone! So, I posted a question on this forum a few days ago and got some great advice from you all - thank you for that!


I need your help again! Can you recommend some good mortgage calculators online? Thanks, all!

[jennifw]

I am guessing you might have a typo unless you really make $410,000 per month :-)
Google Mortgage Calculator - you can run all kinds of scenarios


Good luck.

[hm2562]

Originally Posted by jennifw

I am guessing you might have a typo unless you really make $410,000 per month :-)
Google Mortgage Calculator - you can run all kinds of scenarios


Good luck.

Whoops! Just edited the post. We definitely do not make that much...I wish we did! Hah! We've tried a bunch of mortgage calculators online but always get different estimates. Do you have any recommendations? I edited my question, too.

[lepoisson]

This is an excellent one: Mortgage Calculator with PMI, Taxes, Insurance - PITI Calculator

You really want to factor in property taxes and insurance as well. An $1000 mortgage can easily turn into a $1300 mortgage with tax & insurance.

On another note, I'm not sure what your income is, but most lenders like for your income to be at least 3x the mortgage amount. When I eventually buy a home, I'm aiming for slightly less than 1/3 of my income to go towards mortgage.

[TurtleCreek80]

You need to build your own budget, not rely on online calculators that don't take into account lifestyle or debt. Someone with $5,000 take home income each month could have two completely different financial needs & goals. Ie,

Family 1
2 car payments @ $800/mo total
1 student loan @ $200/mo total
Likes to eat out every weekend @ $600/mo total
This family would be pushing it financially to have a mortgage greater than $1300/mo, including taxes & insurance. That's a $200k house with 20% down.

Family 2
No car payments
No students loans
$800/mo daycare
Frugal...eats at home, not "spendy" on clothes or gadgets
This family could afford a $300k home with 20% down, or maybe even go up to $325k or so because of their frugal habits. This is a mortgage in the $1800-1900/mo range with PiTI

Family 3
1 car payment @ $300/mo
1 student loan @ $100/mo
Moderately spendy
This family could afford a $350k home with 20% down. This is a $2,000/mo PITI.

Same income. Different spending habits and debt loads. The difference in what they can afford is $150k between highest and lowest price homes. Calculators spit out a "one size fits all" home price. You really have to do a deep dive on your own finances to determine what you can afford.

[numbersguy100]

Originally Posted by hm2562

Whoops! Just edited the post. We definitely do not make that much...I wish we did! Hah! We've tried a bunch of mortgage calculators online but always get different estimates. Do you have any recommendations? I edited my question, too.

I have never found a calculator online that estimates accurately. They all overestimate how much mortgage you should take on (likely owned by companies like banks that make more money if people buy larger homes with more financing). I've always stuck to the idea that you should be able to put 20% down, and that the home price shouldn't be more than 2.5-3x annual income unless you're putting more than 20% down.

[UnfairPark]

Do your math but know that there are many hidden and unexpected expenses in homeownership so don't buy more than you can easily chew, even if source of income comes at pause for few months for some reason. You don't want to be house rich and cash poor. It's not a good place to be and often pushes people into foreclosures.

[Soh Cah Toa]

There's a wide range of recommended affordability estimators. You have some conservative recommendations like Dave Ramsey's 25% of take home pay on a 15 year fixed mortgage (incl tax and ins). There are others that say up to 37% of your gross monthly income on a 30 year loan.


When I shopped, I targeted 25-30% of my take home pay on a 30 yr loan.


Most of the only strict affordability calculators online are very high IMO.


You'll have to decide what you can afford, since every scenario is different.

[stephwin]

And think about the future too if you're young. For instance, we bought our house before we had kids. Now with kid #2 on the way, we'll be shelling out almost as much for daycare as we are for our mortgage.

And on top of that, our property taxes have jumped up a bunch in the past 7 years. Right after we bought the house in 2009, you know when prices were at their lowest, our property tax bill was right at $7k. Now it's almost $9500.

[Grainraiser]

25 to 33% of your take home income is what I recommend. What additional debt you have determines if you should be on the low or high end of these percentages.