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Just because a bank or mortgage company has a formula that says you can afford a $200,000 house, doesn't mean you can. What are YOU comfortable paying per month? Remember to include not only the mortgage payment, but taxes, other local assessments, insurance and utilities. Plan on saving a little every month for unexpected expenses like roof repairs, furnaces, appliance repairs, etc.
My entire childhood, my Dad, now 87, taught us that you never buy a house that cost 'more than 2.5 times your yearly income'. Probably outdated advice, but I still live by it. Having parents that grew up in 'The Great Depression', I learned alot very early about financial planning, saving and thrift.
What are you, and your family, comfortable with for a total monthly payment on housing?
I'm waiting that to take another price cut so if it goes around 280,000 if i do a mortgage for 30 years it will be like $1300 a month not too bad i take home $1500 every 2 weeks i don't have kids.
The real estate taxes are $600/month.
The good news is gas not oil for heating.
well OP i make a little over 50k currently and i am looking at houses in the 100k range! that being said, i live in an area where one can find a house in liveable condition for 100k. i know that is not the case elsewhere. i would hold off for a while if i were you. the easy solution of course is to look at your monthly budget and do a conservative estimate of how much you can afford.
With typical debt, you need to figure out if you're typocal or not, I always tell my buyers a good rule of thumb is 3.5 times your salary. At $50k, that would be $175,000. Other factors are also how much you plan on putting down. The more you put down, the higher the price can go. The more debt you have, the lower the price will go. It's all about debt to income ratios. You need to look at your monthly debt.
Some of it are not that important in my openion because if you are planning to buy smaller house/rent, you still will be responsible for utility bills or taking care of lawn, but yes, I agree people need to factor all these...
I think it's wise to purchase a house you can afford base on 1 salary if 2 people are working. So if there are 2 people in the family where 1 is making 50K annually and has no other debts and very good credit score, than he/she might be able to afford 200K house considering other important expences like taxes, HOA/CDD (or both!), insurance, PMI if downpayment is less than 20%...
If it's a sigle person with single income of 50K a year, than 200K might be not a smart move and the road to being house poor.
I would never assume a mortgage of 1x to 1.5x my annual income. If you have a 20K down payment, I would not buy anything over 95K. If you have 0 down, nothing more than 75K.
I am very conservative in my "rule of thumb". Most say 2x or 3x your annual income. My bank said 3x my annual income, and they were insane.
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Taxes, utlities, etc.
