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Old 12-27-2012, 09:16 AM
 
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Tell me what it usually goes by.
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Old 12-27-2012, 09:18 AM
 
Location: Austin
7,191 posts, read 17,771,078 times
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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.
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Old 12-27-2012, 09:20 AM
 
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No. You should buy a house you can afford and only buy a house you can afford. 50K a yr is not a lot money...not when you carrying 200K in debt.
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Old 12-27-2012, 09:20 AM
 
Location: NJ
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You should get a house you can afford and that you are comfortable with. You certainly shouldn't spend more just because you can.
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Old 12-27-2012, 09:38 AM
 
Location: Boise, ID
8,043 posts, read 23,700,006 times
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That is totally not enough information to answer the question.
Many things figure into it:
How much are you putting down?
How stable is your job?
Is that one income or 2?
How much do you have in emergency savings?
How much debt do you have?

Personally, I wouldn't recommend someone buy something that they couldn't afford to keep if one earning member of the household (you if you are the only earner, you or a spouse if you are married) loses their job for a year. And I wouldn't recommend someone buy something that leaves them unable to save.

If you have no other debt, no kids and no plans to have kids, and that is 2 stable incomes, and emergency savings on top of your down payment, I would go no higher than $150k (loan value, so add on whatever you are putting down to get your purchase price).

If you have debt, no emergency savings, if you have kids OR (not and) if that is just one income, I would aim even lower. personally, on a $50k/year income, if any of the above are true, I wouldn't go above $100k loan value.

I've always thought the 3.5x rule was too high. Hubby and I make about $65k, have no kids, are frugal, and our loan value was $108k (so about 1.6x our income). The first few years were still tough, because we had other debt. And when hubby got laid off with no unemployment benefits for a full year, we got by, but only just. If we had bought a house at 3.5x our income, we would have lost it that year, and even if we hadn't, we would have no money in savings or retirement today (10 years later). 3.5x is ok if you are 100% ready in every other way (no debt, great emergency savings, 2 extremely stable jobs, at least 20% down, etc), but in mind, it is too high if any factor isn't 100% perfect.
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Old 12-27-2012, 09:43 AM
 
Location: Austin
7,191 posts, read 17,771,078 times
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Quote:
Originally Posted by Lacerta View Post
I've always thought the 3.5x rule was too high. Hubby and I make about $65k, have no kids, are frugal, and our loan value was $108k (so about 1.6x our income). The first few years were still tough, because we had other debt. And when hubby got laid off with no unemployment benefits for a full year, we got by, but only just. If we had bought a house at 3.5x our income, we would have lost it that year, and even if we hadn't, we would have no money in savings or retirement today (10 years later). 3.5x is ok if you are 100% ready in every other way (no debt, great emergency savings, 2 extremely stable jobs, at least 20% down, etc), but in mind, it is too high if any factor isn't 100% perfect.
You're comparing apples to oranges. The 3.5 "rule" is fairly new as rates haven't been this low, ever. It's not even a "rule" just a guideline for quick estimates. If you bought the $108k house "years" ago, the rule was probably closer to 2 times your salary at that time. As rates go down, payments go down, so you can buy a higher priced home and have the same payments. It's simple math. If you received one of today's rates compared to your rate a few years ago, your payments would be a lot less and you would not have struggled as much.

You can't compare a comment of 3.5X today to what people would have advised you to do 2 years ago, 5 years ago, etc...
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Old 12-27-2012, 09:50 AM
 
2,719 posts, read 4,398,964 times
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Quote:
Originally Posted by FalconheadWest View Post
The 3.5 "rule" is fairly new as rates haven't been this low.
Quote:
You can't compare a comment of 3.5X today to what people would have advised you to do 2 years ago.
Quote:
I always tell my buyers a good rule of thumb is 3.5 times your salary
When did the new 3.5 * annual salary rule of thumb start?
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Old 12-27-2012, 10:00 AM
 
8,617 posts, read 19,042,500 times
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your house payment/or rent payment shouldn't exceed 24% of your monthly income.
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Old 12-27-2012, 10:27 AM
 
Location: Austin
7,191 posts, read 17,771,078 times
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Quote:
Originally Posted by MeInDenudinFL View Post
When did the new 3.5 * annual salary rule of thumb start?
My lenders, plural, told me to start using that number when rates hit 4%. Now that rates are even lower than that, borrowers can borrow even more money and have the same payment, closer to 3.75x, but I still use 3.5x because the math is easier to compute without a calculator. With excellent credit and very little debt, many people are going to 4x their salary, but that always scares me, and I would never tell one of my clients they should be looking that high unless they have a plan for a larger down payment.

And this 3.5x is used mostly for the 3.5% down FHA or 5% down Conventional. As I mentioned, if you're putting more down like 10% or 20%, the number is different.
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Old 12-27-2012, 10:39 AM
 
Location: Eastern Colorado
3,768 posts, read 4,635,308 times
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Before you even start looking for a house you should sit down with a good mortgage broker/loan officer and go over the payment differences and the tax rates in the areas you are looking for, plus they will be able to give you an idea of what insurance will run. that will give you an idea of the difference in payments, and what you feel comfortable handling without stressing you or your finances. After that you can go look at houses you can afford without falling in love with one that is going to leave you house poor.
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