Your Mortgage, Expenses and Salary - What's the right number
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Your property taxes are HIGH! That's about what we pay, and our home is valued at $675k.
We only paid $190k for it, but that was in 1993 and we put down $30k. Our mortgage, after refinancing twice is about $1,400/month, income about $8k/month. Home insurance, with earthquake coverage is about $2k/year.
As for other expenses, the biggest is utilities. Our combination natural gas/electric is about $100 in the spring and fall, $150 in summer with AC use, and as much as $350 in winter with the gas furnace (3,000 sf house). Water and sewer run $90-140/month. Last time we got a roof it was about $10,000, and we replaced all appliances in the last few years, for about $3,000. We are getting along just fine financially, 2-3 vacations annually, and putting money into savings but the kids are grown and on their own, that made a big difference.
Hemlock140.... Your insurance is high!! Could be your area though! For a house your size it shouldn't be more than $1300!
Taxes vary greatly state to state. Indiana caps at 1% of our property value, but when we lived in Illinois our property taxes were $10k for $350k house!
Last edited by CGab; 11-16-2016 at 08:46 AM..
Reason: Add
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by CGab
Hemlock140.... Your insurance is high!! Could be your area though! For a house your size it shouldn't be more than $1300!
Taxes vary greatly state to state. Indiana caps at 1% of our property value, but when we lived in Illinois our property taxes were $10k for $350k house!
Compared to others in our area it's about right, considering the earthquake coverage, and the high cost of construction here at $200-250/sf, which in your area is about $117/sf.
Ours is 18% of our net income after deductions for taxes, retirement and healthcare. We wanted to stay well below our means to make sure we had some flexibility and freedom should something come up. We wanted to be sure we could afford it on one salary in case one of us lost our jobs. We have no other debt and prioritize traveling and life experiences so we tried to keep some money free for that rather than dumping it all into a house.
I really think it helps to spend less on your home than you qualify to borrow. They'll lend you enough to make your life miserable, if you let them.
Reminds me of my situation.
Me: Mr. Realtor, I really only want to spend around $300k or less on a house.
Mr. Realtor: Sure, that sounds great. Let me show you these houses that are priced at around $350k.
Me:
I'm about to close on a house that's 2.3x my annual income. 1.8x my family's combined income. A couple hundred dollars less than rent per month.
Property taxes are relatively low, 1.8% of assessed value.
Oil heat, forced air even (forced air is unusual for vintage homes in New England). My apartment uses electrically heated hot water radiant heat - oil almost has to be cheaper!
I am only comfortable at spending 25% of net income on mortgage/taxes/ins. I know banks like to qualify you based on 35% of gross but that is too high for my liking. We used to live in a high COL area and at one point after a forced emergency job switch (company moved itself suddenly) our PITI was 50% of our take home and it was brutal.
I have been saving up for quite a bit and looking to purchase my first home. I am still living with my parents until i have a decent amount of money saved for my first home. I have looked online at these calculators that tell you how much you can afford, one of the factors is debt -- which i have none (besides cell phone and car insurance). I want to understand what is REALITY of owning a home. To give you background, i make $60k a year, will increase by next year (promotion lined up), want to purchase a home $225k with $6k in property tax. 10-15% DP and 775 Credit Score.
I want to understand the financials better, so can you please let me know
How much was your home?
Property Tax?
Monthly Expenses?
Annual Salary?
Are you living within your means?
We live below our means. We pretty much live on one salary and the rest goes into savings, vacations and retirement. We do not make a lot of money for the area in which we live, which is a high COLA, and we definitely made sacrifices for our first place. I did NOT want a one bedroom apartment but that's what we ended up buying. For now, it'll do. We live pretty minimally. We will make some money when we sell and our mortgage + maintenance costs less than a rental of comparable size in our area.
It really depends on how comfortable you are in terms of how much you want to spend every month.
You'll also be paying PMI if you're only putting down 10-15%.
I live below my means. My mortgage is about 6% of my gross income. Rule of thumb has been mentioned here before. Try to keep home purchase less than 3 times your yearly income. Depending on where you live that can be easy. Other places not so much.
Others made great suggestions. Just create a budget on what you can afford monthly in terms of a mortgage payment. Once you do that I would talk with a Realtor and a Lender to find out how much house that monthly payment gets you. Then I would shop accordingly.
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