House Buying Question

[Appias]

I've spent a lot of time reading up on this same subject. The best advise I've found is in the NOLO books (publisher of mostly legal books in lay terms). Think about how much you can put down, but don't forget to also factor in closing costs. I believe the rule of thumb is 2-3% of the purchase price. That can be quite a chunk of money! If you can put down 20% think about doing it so that you can avoid PMI. Remember to factor in property taxes and insurance into your calculations. Lenders traditionally liked to keep total debt to income at under 40%. That debt includes everything from student loans to credit cards to car payments. The more debt you have, the less of that 40% you have left to put towards your house. On the other hand if you have no debt then banks get worried because they like to see a track record of on time debt payments. Little to no debt will also cause you to have a lower credit score which could result in a higher interest rate.

[SweepTheLeg]

Originally Posted by Sawdustmaker

No nickel from me toward your house fund. You can't buy a decent home, in a decent area, for $450K in MY part of central Jersey.

Monroe, to me, is more south/west of central Jersey.

Monroe is in Middlesex county. Monroe is approximately 10 miles away from new Brunswick, the county seat of Middlesex county. Monroe is in the 732 area code, and it's north of 195 and 295. By all tests to find the mythical North/Central/South Jersey borders, IT'S CENTRAL JERSEY.

Are you just arguing just because you got called out and proven wrong?

Are you seriously implying that a gated community by Forsgate isn't a "decent home in a decent area"?

Oh wait...

I don't talk out of my ass. I'm in the business of real estate.

I'll take oxymoronic statements for 100, Alex!

[Sawdustmaker]

Originally Posted by SweepTheLeg

Monroe is in Middlesex county. Monroe is approximately 10 miles away from new Brunswick, the county seat of Middlesex county. Monroe is in the 732 area code, and it's north of 195 and 295. By all tests to find the mythical North/Central/South Jersey borders, IT'S CENTRAL JERSEY.

Are you just arguing just because you got called out and proven wrong?

Are you seriously implying that a gated community by Forsgate isn't a "decent home in a decent area"?

Oh wait...

I didn't look at your links, when you said Forsgate and "Monroe" I thought you were a little confused so I didn't bother. So you learned me something. Good job!

I was talking about Monroe Township. In Gloucester County. South Jersey. Which is why I said South Jersey.

You were talking about the Township of Monroe in Middlesex County.

And if you would go back and READ my posts I said "You can't buy a well-kept house in a decent neighborhood for $400,000 in the area of NJ I live in". Which means where I live and I don't live in Middlesex County or Gloucester. I even said I wouldn't know about anything in No. Jersey because I don't live there and do not do business in that part of the state.

I'll take oxymoronic statements for 100, Alex!

And how'd that work for you? Did you win big? ; )

[armx]

ordinar:

Although your intent may be admirable but your numbers leave something to be desired. For example, .. a person who earns 100k a year and having a mtg pmt of $2K a month has a take-home pay of $7000+ (Pub.15T directs about $650 in Fed Taxes) and not $5K as your numbers game purports.

Once you correct that number you "may" come to a different conclusion - perspective. These posts are for the benefit of the OP and no ego-trips are necessary.

Lenders traditionally and routinely use the 28% threshhold for mtgg. payment because that is the number determined statistically for the benefit (safe expenditure) of the borrower. During the boom years lenders were letting the borrowers get to 38% and with option ARMs - that is why that deck of cards crumbled.

So there were some excesses during that time but without knowing what happened (actually) just extra-polating on the results of those mistakes and beating the drums for the gloom and doom - and potentially misguiding the OP - does not serve any good purpose, IMO.

[elflord1973]

Originally Posted by armx

ordinar:

Although your intent may be admirable but your numbers leave something to be desired. For example, .. a person who earns 100k a year and having a mtg pmt of $2K a month has a take-home pay of $7000+ (Pub.15T directs about $650 in Fed Taxes) and not $5K as your numbers game purports.

You're not counting state tax, payroll, health insurance and retirement fund contributions. Whether or not you wish to count these, as a tax paying 6 figure income earner, I can assure you that these are withheld from my biweekly paycheck.

Ordinar's numbers are on the conservative side, but they are more accurate than yours.

[sholden]

Originally Posted by armx

ordinar:

Although your intent may be admirable but your numbers leave something to be desired. For example, .. a person who earns 100k a year and having a mtg pmt of $2K a month has a take-home pay of $7000+ (Pub.15T directs about $650 in Fed Taxes) and not $5K as your numbers game purports.

I have a monthly pay slip in front of me - for an abnormal month so it's not very revealing and I've given all this info away before anyway.

Total Earnings (so the gross): $9500 (so a tiny bit north of $100k a year)
Amount deposited (so the take home): $5150.

Just the social security + medicare withholdings are higher than your number for "Fed Taxes".

[CaptainNJ]

Originally Posted by armx

For example, .. a person who earns 100k a year and having a mtg pmt of $2K a month has a take-home pay of $7000+ (Pub.15T directs about $650 in Fed Taxes) and not $5K as your numbers game purports.

this doesnt seem accurate.

[millsan1]

Yeah, if $100K was $7k take home, I would be happy. I make a $150k Base and take home $8k

[ordinar]

Originally Posted by sholden

I have a monthly pay slip in front of me - for an abnormal month so it's not very revealing and I've given all this info away before anyway.

Total Earnings (so the gross): $9500 (so a tiny bit north of $100k a year)
Amount deposited (so the take home): $5150.

Just the social security + medicare withholdings are higher than your number for "Fed Taxes".

Thanks sholden.

It is simple to calculate the house price you can afford :deduct from your take home payment your monthly expenses (food, clothing, entertainment, car, phones etc) and savings (for retirement, as 401K is not enough, emergencies, college funds, and other future expenses) the rest is what you can afford. Don't fall prey for the stinking advice and "standard" percentages from irresponsible lenders and realtors.

Why does a lender care if you find yourself with a debt that leaves no margin for other expenses and savings? If you fail to pay, the taxpayer (ie me and you) will bailout the lender. Why does a realtor care if you find yourself with a debt that leaves no margin for other expenses and savings? As soon as you buy he/she is after the next victim. Unfortunately there is no responsibility or incentives for responsibility in this market anymore.

Deutsche Bank has just released a prediction of further 39% decrease of NY area housing prices. So my "conservative" housing allowance might just buy you a better house soon.

Document Pull

[sholden]

Originally Posted by ordinar

Thanks sholden.
It is simple to calculate the house price you can afford :deduct from your take home payment your monthly expenses (food, clothing, entertainment, car, phones etc) and savings (for retirement, as 401K is not enough, emergencies, college funds, and other future expenses) the rest is what you can afford. Don't fall prey for the stinking advice and "standard" percentages from irresponsible lenders and realtors.

That's only one half the equation. That's whether I can afford the carrying costs - obviously buying something I can't carry would be stupid. But there's also the "diversity" and "risk" factor - how much of my wealth should be in just one single asset.

Even if I can afford the carrying costs putting too many eggs in one basket isn't wise either, especially when those eggs leveraged. That's not really a factor of income though - if my income is $60k but I have $10 million in the bank a million dollar house isn't too many eggs, if my income is $300k but I have $10 in the bank a million dollar house likely is too many eggs...