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Old 08-04-2009, 03:32 PM
 
631 posts, read 676,403 times
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Hi All,

Just wondering if my wife and I are setting the right budget for purchasing a home. We make 140,000 in base salary a year, and 10,000 - 15,000 extra in bonus and overtime
We have $121,000 saved in the bank and only payments we have is car payments at 775 a month... no other CC debt or student loans. So the question is how much do we spend on a house (or what should our max monthly payment be with tax and insurance)? and how much do we put down??

Thanks in Advance!!
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Old 08-04-2009, 09:18 PM
 
249 posts, read 817,061 times
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Default How much

Most of the time it would be 3 times your income.For you about 420,000.They will not include your overtime or bonus' as they are not guarenteed.Your agent can give you the tax information on any home you are interested in purchasing.You can also do a tax record search on the internet your self.
Good Luck!

Last edited by JMC49; 08-04-2009 at 09:25 PM.. Reason: more info
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Old 08-04-2009, 09:58 PM
 
Location: Martinsville, NJ
6,162 posts, read 12,095,996 times
Reputation: 3978
Quote:
Originally Posted by mikeym81 View Post
Hi All,

Just wondering if my wife and I are setting the right budget for purchasing a home. We make 140,000 in base salary a year, and 10,000 - 15,000 extra in bonus and overtime
We have $121,000 saved in the bank and only payments we have is car payments at 775 a month... no other CC debt or student loans. So the question is how much do we spend on a house (or what should our max monthly payment be with tax and insurance)? and how much do we put down??

Thanks in Advance!!
Still too much missing info for anyone to give you a number. A person who makes $140k and cooks budget meals at home, taking leftovers for lunch, can afford a much higher mortgage payment than someone who makes $140k and goes out to eat so often they didn't notice the refrigerator was not installed in their house. Is your car payment for one car or two? If you move, will you need to buy a different car? Will your commuting costs change? What sort of lifestyle do you lead? If your credit rating is great, and you can get an interest rate of 5%, you can afford more house than if you can't qualify for anything better than 6%.

Prevailing wisdom says you can usually afford to spend roughly one third of your gross income on housing. (Note that some people will say this is too much, and too aggressive. You have to look at your own spending & saving, decide what you are comfortable with.) So, with your income of $140k, you might look at a monthly house payment (which should include principal, interest, taxes and insurance) of about $3,800. If you want to spend $3,800 per month, and if we assume $9k per year in taxes, $1,000 in home insurance, and a down payment of $100,000, you can borrow roughly $500k, with an assumed interest rate of 6%, for a total house purchase price of $600k.

Remember, this is genereal info. Not specific advice to you on what you should do.
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Old 08-05-2009, 06:36 AM
 
Location: Montgomery County, PA
2,771 posts, read 5,885,403 times
Reputation: 604
Quote:
Originally Posted by mikeym81 View Post
Hi All,

Just wondering if my wife and I are setting the right budget for purchasing a home. We make 140,000 in base salary a year, and 10,000 - 15,000 extra in bonus and overtime
We have $121,000 saved in the bank and only payments we have is car payments at 775 a month... no other CC debt or student loans. So the question is how much do we spend on a house (or what should our max monthly payment be with tax and insurance)? and how much do we put down??

Thanks in Advance!!
That car debt is going to hurt -- it's like paying property tax twice over. You'll be better off if you pay off the car, save, and then buy -- prices aren't going up any time soon.

I'd say you put 20 down. Less than that and there are penalties. More than that and it eats into potential emergency savings.

Start with what you are prepared to spend on your monthly payment and work from there. I think 1/3 of gross is too high. I'd use 1/3 of take home or 1/4 of gross, excluding bonus/overtime.

Don't forget to take property tax into account ! Do this carefully (they are high in NJ, most calculators assume a lower rate) You should be able to work out property tax from looking at GSMLS listings.

//www.city-data.com/forum/10086167-post70.html

A payment of 3000 a month (which should be about 1/3 take home or 1/4 gross) will get you about 435k worth of house with a 2% property tax rate (with respect to market value)

If you subtract the car payment out of that (3000-770) you end up with ~340k.
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Old 08-05-2009, 06:39 AM
 
250 posts, read 639,553 times
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Best websites to research before buying a home
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Old 08-05-2009, 07:01 AM
 
1,983 posts, read 7,079,095 times
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Quote:
Originally Posted by mikeym81 View Post
Hi All,

Just wondering if my wife and I are setting the right budget for purchasing a home. We make 140,000 in base salary a year, and 10,000 - 15,000 extra in bonus and overtime
We have $121,000 saved in the bank and only payments we have is car payments at 775 a month... no other CC debt or student loans. So the question is how much do we spend on a house (or what should our max monthly payment be with tax and insurance)? and how much do we put down??

Thanks in Advance!!
You should be looking around $500K, the mortgage payment will be reasonable based on your income, at 20% down on 500K purchase you still have $20K in the bank, 10K of that will be for closing costs. If you wanted more money in the bank after purchase, then negotiate something in the high $400Ks.
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Old 08-05-2009, 08:21 AM
 
1,930 posts, read 3,181,007 times
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Just my opinion but if I were you I would hold off a bit if you could and add to your savings. I would not feel comfortable with "10 or 20k" in the bank. Thats just me as I am a very conservative person but it has worked so far.
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Old 08-05-2009, 08:37 AM
 
Location: Montgomery County, PA
2,771 posts, read 5,885,403 times
Reputation: 604
Quote:
Originally Posted by bababua View Post
Just my opinion but if I were you I would hold off a bit if you could and add to your savings. I would not feel comfortable with "10 or 20k" in the bank. Thats just me as I am a very conservative person but it has worked so far.
Not only that -- I think their buying power would greatly improve if they paid off their car loans.

Without their car payment, they could afford about 100k more house, and they are looking at a price point where 100k or so would make a huge difference to their options.
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Old 08-05-2009, 09:05 AM
 
Location: NJ
12,284 posts, read 33,605,080 times
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you people are way too liberal with your numbers for my liking. LOL

what if they have kids and then need to spend ~1000K a month for childcare? Or, one parent stays home and they lose 35-40% of their income?
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Old 08-05-2009, 09:07 AM
 
234 posts, read 765,948 times
Reputation: 239
If you want to put 20% down, a 500K house will kill your savings not leaving much emergency fund......and you will have closing costs, moving costs, and updating costs to consider.

The 30% rule, is usually AFTER taxes, so if you bring home about 95K, that would mean you can spend about 2700. Figure 8-9K for taxes, that leaves about 2000 left for your mortgage which is about 360K. Add 90K downpayment and you are in the 450K range, so look for homes listed in the 475-500K range.

Your carpayment is HUGE, and the monthly payment represents over 100K of buying power on the 30 yr mortgage.....just something to think about!
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