How much should one pay (in %age) for mortgage? (foreclosure, lease)

[CAVA1990]

Originally Posted by khuntrevor

I would say 20% of gross and the house shouldn't be more than 3X and 20% down..

That'll buy you a dump around here.

[khuntrevor]

then buy a dump and fix it up. Just remember, government pay scales do not always increase. I remember people getting mortgages in the 80s because they were on GS 7-9-11 career paths. There was a likelihood of affordability in the future, but not exactly at the moment.....usually ARMs.

[CaliTerp07]

Originally Posted by CAVA1990

That'll buy you a dump around here.

Then wait until gross is higher. Those numbers are what we're looking at if I read it correctly.

A $400k house with 20% down is a $320k mortgage. That's 3x a $107k salary, which is about what the OP stated originally. You can buy a decent house for $400k here--far from a "dump". I know, because I've looked at dozens. Close in, too--Springfield, Annandale, Kingstowne, Alexandria. And those are SFH's. If you're willing to go to a townhouse, you can get a very nice TH for that price.

Sure, it won't buy you new construction with vaulted foyer or walk in closets, but in my opinion, it's smarter to go for a more modest house and have the financial security to pay for it easily than to stretch yourself and pray for a promotion.

[khuntrevor]

My 20% would not include property tax(es), so you end up getting to 30% rather quickly. The earthquake insurance people should be rearing their ugly heads at any moment. It's brutal in California, and they are pushing it in Las Vegas.

[shamrock847]

There is a huge difference between stretching to afford something with a very tight budget for everything else and not really being able to afford it without counting on a promotion or other future event which isn't guaranteed.

There's nothing wrong with choosing to be conservative with your house buying decisions, but it's also not unreasonable for other people, who can afford it, to choose to spend a higher percentage of their income on housing. There are too many variables about people's personal economic and job circumstances to say what % is right for them without a lot more detailed information.

Just to offer an example from the other extreme, at one point we were spending 40% of gross income on housing and still managed to put at least $500 in to savings each month. We had no debt and obviously made frugal lifestyle choices, but it is possible.

[vauser]

Very helpful responses (as always!) in this forum. Thanks much. Some more details, if it helps:

* Combined family income: $150K+.
* Mid 30s.
* No debts other than the mortgage on the home.
* Family of 3.

Lifestyle:
* We love eating out.
* We travel a bit.
* Do not want to be "house poor".
* Want to invest the most reasonable "minimum" in a home to benefit from tax deductions and appreciation.
* Don't need too much land or room, so long as it can fit 2 adults and a child (a single car garage townhouse is good enough, but it never hurts to get something a tad bigger).

[CAVA1990]

Mortgage rates are so low right now I think the 3x annual income is a bit on the low side. Maybe that's all you'd want to do at 7 or 8%, but not at 4.

[boyd888]

A mortgage lender will generally want to see no more than 28% of your gross income going towards the mortgage payment (including taxes and insurance), and more than 36% of your gross going towards all debt (house, car, student loans, etc). FHA is a little more lenient.

Historically this has worked out to be about 3x your gross income. With rates around 5% for a 30 year you could likely go closer to 4x maybe even 5x if you have 20% down.

[hilsmom]

I would say your best bet is to talk to a mortgage broker after you've run your numbers on some online calculators. Once you've done that, you can start thinking about what area you might want to be in and what kind of house you can afford there.

We wanted a house with a decent yard somewhere near the 7100 corridor in Fairfax County between Reston and Fairfax. Walking distance to some amenities was also important to us, most importantly the elementary school.

We actually never got an upper limit from our mortgage guy. We told him what we felt we could afford, he ran the numbers and said "go forth" We had a monthly payment we did not want to go over, and we stuck to that. Because of the dip in the rates, we actually came in slightly under our number after all (we'd locked our rate at 4.5% before the debt ceiling deal, then were allowed to re-lock at 4%)

I think it is easier to think in terms of your monthly payment affordability, to be honest.

[stp_fan]

If you lost your job tomorrow, how long could you continue to pay your mortgage and when would it start effecting your kid's lives.....

just rent a townhouse until you save more money up...