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Old 05-01-2015, 09:42 AM
J24 J24 started this thread
 
Location: Portland, OR
448 posts, read 654,165 times
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I've never purchased a house or had a mortgage, only rented, so I'm really new to the whole thing. My question is... what income level would you feel comfortable having if you were buying a $300k house? There would probably only be ~10% put down, maybe slightly less. I don't even know what kind of a monthly payment a mortgage of that size would be.
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Old 05-01-2015, 10:24 AM
 
Location: Boise, ID
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Well if you are putting $30k down on a $300k house, your mortgage would be $270k. That is 2.5x $108k. So if you wanted to buy no more than 2.5x your annual salary, which is a common standard, you would want to be making no less than $108k. gross. Another common standard is 3x, which would be $90k gross annual income.

If you have debt you are making payments on (credit cards, car, student loans, etc), you'll probably want more cushion.

Your payment will depend on what rate you get, and what your taxes and insurance cost. I can only make guesses. Looks like a 30 year loan is between 3.75 and 4% right now and rising. Let's say you end up at 4%, for easy math. That would make your principal and interest payment about $1290.00. Your Taxes and insurance could be anywhere from $150 a month to $1200 a month on top of that, depending on where you live. Most likely is somewhere in the $400 range for that price range of house. So say somewhere around $1700/month would be my guess without knowing anything else.

Incidentally, if your interest rate was 3.75%, it would take around $40 off your monthly payment.

Oh, I forgot about PMI. If you aren't putting 20% down, you will likely have PMI on top of everything else. The rules keep changing on that, so I can't say for sure, but it would most likely be a couple hundred more, raising your payment into the $1900 range.


Someone else please jump in and tell me if I'm wrong. I'm not a lender.

You really need to go talk to a lender, who can look at your finances, credit, and the loan YOU are going to qualify for, and taxes and insurance for your area, and give you a much closer estimate. I could be off by a couple hundred either way, fairly easily.
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Old 05-01-2015, 10:30 AM
J24 J24 started this thread
 
Location: Portland, OR
448 posts, read 654,165 times
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My fiancee and I (getting married this Sept) will have a combined income right now of about $90-95k, however she's set to get a promotion here shortly which will put us over $100k, possibly around $110-120k+ depending on her commission structure.

We have no debt other than her $350ish/mo car payment. We currently pay $1500/mo for rent, and we're having no trouble with that at all. We obviously would prefer to be around that, but we can certainly afford a higher monthly payment.

I expect we will have PMI on that since we aren't putting 20% down, we've braced ourselves for that. I haven't researched to see what that typically runs though.
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Old 05-01-2015, 10:49 AM
 
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A mortgage of $300k is right around $1450 per month not including escrow or pmi.
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Old 05-01-2015, 10:50 AM
 
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You can't just compare the rental payment to the mortgage. Unless you were renting a house before, you will have some sticker shock with the monthly utility cost - electricity, oil/gas, water. You also need to factor in a budget for maintenance when stuff breaks, and save up for the big ticket items, such as HVAC or roof replacement. A common rule of the thumb states between 1%-3% of the property value annually, and I've found that to be a pretty good approximation during the first year of owning a home. That is going to add another $250 to $750 monthly to your housing expenses, on top of the higher utility bills.
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Old 05-01-2015, 10:55 AM
J24 J24 started this thread
 
Location: Portland, OR
448 posts, read 654,165 times
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Quote:
Originally Posted by KrischiDe View Post
You can't just compare the rental payment to the mortgage. Unless you were renting a house before, you will have some sticker shock with the monthly utility cost - electricity, oil/gas, water. You also need to factor in a budget for maintenance when stuff breaks, and save up for the big ticket items, such as HVAC or roof replacement. A common rule of the thumb state between 1%-3% of the property value annually, and I've found that to be a pretty good approximation during the first year of owning a home. That is going to add another $250 to $750 monthly to your housing expenses, on top of the higher utility bills.
Understood. We actually are renting a house (same size as what we'd be looking to buy, 2100ish sq ft), so we won't be shocked by the utility bills - in fact a newer home might even come out less, as the house we are renting is older and poorly insulated. Obviously the maintenance stuff is something we don't have to worry about right now, that's definitely something we'd consider and make sure we had money for.

We are both really good at saving and finances in general, so I'm not too concerned about having money set aside for things like that. Though the down payment will eat our savings, we'll be able to build it back up fairly easily.
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Old 05-01-2015, 11:12 AM
 
Location: Austin
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Quote:
Originally Posted by J24 View Post
I expect we will have PMI on that since we aren't putting 20% down, we've braced ourselves for that. I haven't researched to see what that typically runs though.
Are you guys good at saving money and might possibly have a little extra to pay towards your payment? If so, you should look into an 80/10/10. With 10%, you get a mortgage for 80% and another for 10% and then you have no PMI. Typically, the interest rate on the second 10% is less than what PMI would cost you, plus the interest is a tax deduction. Also, if you can pay the 10% off fairly quickly, then you'll only have the 80% to worry about for years to come.

Second liens like this will be amortized over 30 years, but due in 15 years, which is why it's best to pay it off as quickly as you can so you don't have that balloon payment at the end... unless you want to spend more money refinancing it later all into one lien when you think you have 20% equity into the house.
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Old 05-01-2015, 03:01 PM
 
5,445 posts, read 4,393,490 times
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Quote:
Originally Posted by J24 View Post
My fiancee and I (getting married this Sept) will have a combined income right now of about $90-95k, however she's set to get a promotion here shortly which will put us over $100k, possibly around $110-120k+ depending on her commission structure.

We have no debt other than her $350ish/mo car payment. We currently pay $1500/mo for rent, and we're having no trouble with that at all. We obviously would prefer to be around that, but we can certainly afford a higher monthly payment.

I expect we will have PMI on that since we aren't putting 20% down, we've braced ourselves for that. I haven't researched to see what that typically runs though.
Just my .02, don't budget for a house by factoring in potential promotions. If you are making 90-95K now, budget with that income. This way, if for some strange reason, she doesn't get the promotion, you aren't strapped for cash. You never want to be house-poor.
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Old 05-01-2015, 03:22 PM
 
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Very interesting question. Normally, people ask how much of a house they would afford for a given salary, not the other way around. How did you come up with 300K figure? Is that the value for the house you are renting now and want something similar?

I think taxes and insurance are the wild card for you to get an exact answer from people that are not in your neck of woods. If you are asking how much you can borrow, then there is a number for that the bank will use, which probably you don't want to buy that much of a house. If you are looking how comfortable are people on their housing expense, you probably need to search for a thread (probably in personal fiannace) where people mentioned the percent of their house payment from their net income. Working off of gross income is so unreliable and really won't mean much as different people have different debt profile and different deduction, such as additional saving for retirement. So it would be very diffucult to give you generalized advise that will be on target for you but keep asking. You are in the right track.

If I were you, I would start from the amount I am comfortable paying per month and work my way to house value and look for that house.

Good luck!
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Old 05-01-2015, 03:32 PM
J24 J24 started this thread
 
Location: Portland, OR
448 posts, read 654,165 times
Reputation: 892
Quote:
Originally Posted by headingtoDenver View Post
Just my .02, don't budget for a house by factoring in potential promotions. If you are making 90-95K now, budget with that income. This way, if for some strange reason, she doesn't get the promotion, you aren't strapped for cash. You never want to be house-poor.
We probably won't be purchasing a house until next year at some point, so we definitely wouldn't be buying before said promotion happens. We wouldn't be buying without having something set. We're not going to buy based on an expectation of a pay raise, I'm not looking to be in the hole.

Quote:
Originally Posted by Pragmaticus View Post
Very interesting question. Normally, people ask how much of a house they would afford for a given salary, not the other way around. How did you come up with 300K figure? Is that the value for the house you are renting now and want something similar?

I think taxes and insurance are the wild card for you to get an exact answer from people that are not in your neck of woods. If you are asking how much you can borrow, then there is a number for that the bank will use, which probably you don't want to buy that much of a house. If you are looking how comfortable are people on their housing expense, you probably need to search for a thread (probably in personal fiannace) where people mentioned the percent of their house payment from their net income. Working off of gross income is so unreliable and really won't mean much as different people have different debt profile and different deduction, such as additional saving for retirement. So it would be very diffucult to give you generalized advise that will be on target for you but keep asking. You are in the right track.

If I were you, I would start from the amount I am comfortable paying per month and work my way to house value and look for that house.

Good luck!
I came up with 300k just by looking at the cost of homes in my area, and the type/size of home we'd want to purchase. $250-300k is the price range of the homes we are set on getting.

I appreciate the advice! We would be comfortable paying anything up to $2000/mo, so it sounds like we should be doing alright. Like I mentioned above, we're not looking to buy right away... I'm just kinda scoping it out and seeing if a house of that price would even be in our range, or if we should lower our expectations.
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