Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Seems like everyone has their own ideas. My formula is different for single people, partners and families. Did you know it can cost around $15k a year to raise a child? Google that
Single person, single annual income:
under $18k, spend under $20k on house
$25k, spend $30k to $50k on house
$30k, spend $36k to $60k on house
$40k, spend $50k to $90k on house
$50k, spend $65k to $115k on house
$60k, spend $80k to $150k on house
$80k, spend up to $240k on house
$120k, spend up to $400k on house
High income, spend up to 4x to 5x on a house.
If you have dual incomes, subtract $15k of house for the same income because there are two people with two expenses! Deduct another $15k each child you have. If a household with 2 children make $60k a year, spend up to $105k on a house. Probably less depending how much money is left after all the expenses. The only expense that doubles is food and cloth because you share the utilities and prop. taxes and insurance is the same still.
The higher your income, the higher percentage of income you can spend on a house because after food, cloth, gas, utilities, taxes youll have plenty money left. My guidelines are "safe" and following them will reduce your chance of ending up foreclosed or being "house poor"
Here's how Mortgage lenders traditionally figured this
Gross Monthly Income x 36% = x.
x includes
Principal, Interest, Taxes, Insurance and "consumer debt" which is not to exceed 8% of GMI.
So you'd take your GMI, and subtract your monthly consumer debt (not to include 8% of GMI)
The you'd subtract Property Taxes and Insurance which would be typical for the sort of home you're looking at, in the location you're interested in.
That leaves you an amount the bank will allow you to use for Principal and Interest. Then you'd do some Algebra (or grab your mortgage calculator) and see how much of a loan amount that sort of a payment will support.
The above is a very generic, plain-vanilla, old school "Conventional Mortgage" calculation simplified for the purpose of - Need Affordable Home's - question. And in fact the numbers are even a bit out of date. It's not going to be any substitute for a visit with an experienced mortgage originator, for 2 reasons: First, people are different. Child Support? Self Employed? First Time Home-buyer? more (or less) down? Throw this formula out the window.
The second reason is that since this formula was pretty much all there was, a vast number of new Mortgage programs have become available. Some of them are simply a mistake for almost everybody - but in many cases, the difference between being able to comfortably afford a home and simply not qualifying - is some sort of new program. It might be a no doc for a self employed person with a financial cushion, it might be a first time home buyer program available only to people of limited means, it might even be a banks own "portfolio" program.
If you want a set of numbers which will get you in the general neighborhood - there are mortgage calculators on the www. A good place to start is Realtor.com. I'm a Realtor myself, and I wish these calculators had been available when I was getting a start in 1988.
But here's the whole point - there's simply NO substitute for sitting down with a LOCAL, EXPERIENCED Mortgage professional. Trust me on this - a local professional is worth his/her weight in ...equity. Ask around and you'll find the right person to talk to. Call and ask questions and see if the person you're speaking with has mortgage programs appropriate to YOUR situation.
man,times can get tuff financially but there are ways to get it better.If you are not happy somewhere...find somewhere were you will be.
If the job isn't paying enough,go to school or learn a better paying skill.
Or,like me in the past rent a room out for some extra cash flow.Or like me now sell your house(ok thats not that easy right now) but move somewhere else.
Wishing prices of everything would go back down to the 70's prices isn't gonna help.
look man I dunno your situation but there is always a way somehow.
money and kids? looking back I was happy when my parents bought me something but really its the memories and love that I remeber most.I dont have that G.I Joe anymore but I sure do remember my dad taking me for hikes in the woods,fishing and target shooting.
check out the movie pursuit of happyness with Will Smith.
I will say this though,money doesn't always make happiness but it sure does give you security.Anybody who has had to scrape pennies to meet their bills will know that.
Seems like everyone has their own ideas. My formula is different for single people, partners and families. Did you know it can cost around $15k a year to raise a child? Google that
Single person, single annual income:
under $18k, spend under $20k on house
$25k, spend $30k to $50k on house
$30k, spend $36k to $60k on house
$40k, spend $50k to $90k on house
$50k, spend $65k to $115k on house
$60k, spend $80k to $150k on house
$80k, spend up to $240k on house
$120k, spend up to $400k on house
High income, spend up to 4x to 5x on a house.
I'm not arguing, or trying to, but those figures seem low. I realize they follow the "rule", but $40k is a pretty moderate income, and $50-90k doesn't buy much of a house anymore, so how does that make sense? Either people are all living in shacks and I don't know about it, or they're buying more then $50k on a $40k income.
Thanks for your posts. Its a good idea to go below your limits. I know a couple who made $60k household, bought a $150k house than had a child. The mother quit work so she can be there for the child. Well one income wasnt enough to pay the mortgage so they had to sell the house and rent a small 2 bedroom apartment.
There can be all kinds of other unexpected expenses so you should go as cheap as possible on the house. If there are nice houses for less, go for those instead. Dont keep up with the Jones
After paying rent to landlords all over the world while I was in the military, we finally bought our first house three years ago. We've always been pretty fiscally conservative. We borrowed less than half of what the mortgage folks told us we could. Our home is 30 years old but well cared-for by the original owners we bought from. It's slightly above the median price range for houses in our city. Even though we still feel that nothing, maintenance-wise, has been really out of line for a house as old as ours is, we've had a couple of plumbing problems and will be replacing the heat pump (13 years old) on Monday. Besides the house we own a '92 pickup truck and an '02 SUV, both of which have needed expensive repairs recently. We are socking away a fair amount in retirement savings but are somewhat surprised that we don't have as much money left over after all that as we had budgeted before we bought the house. No regrets but we think not enough folks consider ALL the costs they will be faced with before that take out a mortgage...
I keep saying it, don't buy a home more than 3X your household income...PERIOD! Anything else is pure stupidity. Bubble or not this formula seems to work for everyone who tried it.
When we bought our home we decided that my income would not be considered in how much we could afford to buy. At that time the formula was to use 25% of your take home pay for housing. That included taxes, insurance, electric, telephone and anything else that is necessary to own a home. Doing it this way would let us pay off the loan sooner if things went well, but not let us lose the house if we lost one income. If you get that first house paid for, then you can move on up to a bigger house if you want. We could now afford a larger house than we live in, but we live in a great neighborhood with good neighbors and are happy where we are.
wow it is good to see one of these old NAH threads resuscitated
That NAH boy don't need to worry, he is in Hog Heaven in Oil City, PA.
Who knows how much he spent but you can bet your bottom dollar it was not over $50K.
Kinda makes you wonder how Oil City is holding up in this down turn. Are houses now selling for $10K in perfect condition? Might still be the place to run off to and forget the rest of the World exists. Way things are going places like that will be in strong demand for future.
That NAH boy don't need to worry, he is in Hog Heaven in Oil City, PA.
Who knows how much he spent but you can bet your bottom dollar it was not over $50K.
Kinda makes you wonder how Oil City is holding up in this down turn. Are houses now selling for $10K in perfect condition? Might still be the place to run off to and forget the rest of the World exists. Way things are going places like that will be in strong demand for future.
I was just thinking about NAH the other day. Unfortunately, I don't know if his scheme to get there panned out (selling the stuffed animals).... his visitoilcity.com website, along with his chooseabstinence.com website don't seem to be active anymore.
Hope he nothing bad happened to him... living on that barrier island in Florida with all that crime and heat!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
wow it is good to see one of these old NAH threads resuscitated
I was just thinking about NAH the other day. Unfortunately, I don't know if his scheme to get there panned out (selling the stuffed animals).... his visitoilcity.com website, along with his chooseabstinence.com website don't seem to be active anymore.
