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What would a household income level need to be to live comfortably in a $500k home, assuming you have 20% down? 4 children will also live in this home.
That's a $400k mortgage, so mid 100's in gross annual income at minimum, otherwise it's a big stretch (just because the bank says you can afford it does not make it so!!!). Also depends on lifestyle, property tax rates, other debt, etc.
What would a household income level need to be to live comfortably in a $500k home, assuming you have 20% down? 4 children will also live in this home.
You in Tigard? I can see you from my office in L.O. - - figure $5k in property taxes, $100 a month in Homeowners insurance just to keep the numbers round. Not sure about credit, so I'll go worst-case rate of 4.25% = $1967 Base payment + $416 Taxes + $100 Insurance = $2,483.
So the house payment is about $2500 a month. To figure qualification, add your monthly bills that are on your credit report - - the minimum payments due - add that to $2500. That number needs to be less than 45% of Gross Provable Income.
From there, "comfortably" is a relative term! You know more than me what the kiddos require, and what your financial goals are, so I can't really speak to that.
just curious because a few people we know bought homes that are seemed to be way out of their budget. Maybe they had other sources of income because I know they don't bring in $120k + per year.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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They may have had an inheritance or gift for a much larger down payment, but yes, many people have other sources of income. My wife and I for example have good full-time jobs, but also a side job each working a weekend day or two a month bringing in another $10-15k/year.
just curious because a few people we know bought homes that are seemed to be way out of their budget. Maybe they had other sources of income because I know they don't bring in $120k + per year.
Thanks for the insight.
Under my scenario above, with no other outside debt, that loan can be gotten by a borrower making like $75k a year. That is light years from my personal comfort zone, but possible.
What would a household income level need to be to live comfortably in a $500k home, assuming you have 20% down? 4 children will also live in this home.
I just did this myself.
20% down on ~ $450K
Household income: $175K/year
Last edited by BostonMike7; 11-18-2015 at 11:08 AM..
Far less than what the mortgage brokers will sign you up for.
Well, assuming you want to have (need to have?) the other commonly appreciated things.
You know a retirement, and travel, and medical care, and educated kids.
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...to live comfortably in a $500k home assuming you have 20% down?
That implies a $400,000 mortgage balance. Correct?
That's an $2000 payment (P&I at 4.5% for 30yrs) link
With taxes ($6000?) and insurance ($1200?) the PITI alone is $2026 or $32,000
Add an allowance for utilities, maintenance and the yard work and you're over $38,000
The question is how much of your NET income that $38,000 should be allowed to chew up.
Being conservative I peg a housing costs budget LIMIT at 25% of net income (Not gross).
Getting it down to 20% or even 15% of net income is an even better goal.
Meaning you would need to bring home no less than $152,000 of NET Income
(Yes, that's after taxes, 401K's, IRA's, HI, garnishments, etc.)
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...4 children will also live in this home
Four? Ouch!. Better to tighten up that number by even more.
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just curious because a few people we know bought homes that seemed to be
way out of their budget.
Too many will do this.
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Maybe they had other sources of income...
Maybe. For their sake let's hope so.
Last edited by MrRational; 11-18-2015 at 11:14 AM..
Keep in mind from the income stream deduct cost of retirement, etc. the cost of long term considerations. Do not consider the future profit of selling the house later as that would be uncertain. That type of house generally with that many children I would expect to see an income in the 300,000 range to even attempt to cover the 1 million cost for the 4 kids, etc. Do not focus on the house alone.
200k would be ideal....but 175k would probably be ok. Anything less is risky.
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