Can I afford this house?

[ScrimpAndSave]

My take home $4,000 monthly.

Price of home: 250,000
Downpayment: $ 60,000
Interest rate: 5.5 %
Yearly property taxes: $3750
Yearly homeowner's insurance: $481

Principal and interest: $1,078
Taxes and insurance: $352
PMI: $0
TOTAL: $1431.88

No CC debt
No Student Loans
Car is paid off

Experian: 779
Equifax: 767
Transunion: 771

[myrdale]

One general rule of thumb I have heard is you do not want the house to exceed x3 your yearly salary.

I am guessing you make $65,000 before taxes, so the highest you could pratically go would be $195,000. Your hefty down payment brings that down to with in the range.

Another rule of thumb is you do not want your house payment to be more than 1/4 of your monthly take home pay. Your a bit outside of that range. I am at 26% myself, where as you would be at 35%. That said I try to double up on my payments and actually put 40-50% of my pay on the house each month. I absolutely would not have a house that the real payment was that much though.

Lastly I think I would consider this, how much house do you need? Are you like me, single, no kids, and just need a place to sleep? If so you may have more house than you really need. Are you married with a couple of youngins and have out grown your current home? Then it might not be so unreasonable.

[Brokemofo]

Yes, I believe you could make it work. But, Do you need a house that expensive? I don't know where you live, so I have no idea if you could buy a decent home for less.

[ScrimpAndSave]

When I move out, I will be making $70,000 before taxes.

The following year, I will be making $83,000 before taxes.

Any houses that are under $250,000 here are crack houses. $250,000 would get me a VERY modest home.

[disneysteve]

Your PITI would be right at 36% of your take-home which is the upper limit recommended. Obviously, the increase in salary would help bring that ratio down, but what happens if the raise doesn't occur or you don't stay in that job? What kind of savings cushion do you have? Could you continue to afford everything if you found yourself out of work for a few months within a year of buying the house? Have you reviewed 6 months of utility bills for the house to know what those expenses will run (and can you afford them)? Do you have adequate savings for car repairs, home repairs, medical bills, etc.?

I think you can probably swing this but it may be rather tight early on until your income increases. You need to be willing to live really lean and maintain an adequate EF. Owning is a lot more costly than renting. As long as you feel you can afford all the costs that come with owning, now is probably a good time to be buying.

And I'm hoping that mortgage is a 30-year fixed rate.

[Cylenchar]

A general rule of thumb that I like is I want my mortgage payment, taxes and insurance (and HOA if have it) to all fit on one paycheck. If you have a spouse/significant other who also works, change that rule to fit it all on the lesser of your paychecks. That way, if one of you is laid off, you can still survive.

[ScrimpAndSave]

I actually will be married, and I am a teacher to be tenured in a few months. The salary increase WILL happen because it is within our 5 year contract.

My fiance is graduating inMay 2009...and I am basing the affordability of this house n my income alone so that we can mostly save his and pay off students loans with it as well.

So even though my annual salary will be around $70,000...our combined will be more like $120,000...but I am trying to be conservative and only consider my salary.

Yes, this si a 30 year fixed mortgage.

[Brokemofo]

I'd say you sound like a very responsible person. Go for it! Buy the house, but, don't buy it with your fiance unless you are married by then. Good luck.

[disneysteve]

I forgot the whole story. Yes, you can certainly afford this house. Good luck.

[ScrimpAndSave]

Thank you all so much.

I will NOT be buying until about 2 years after we are married.

I keep thinking...gee...if we can afford $250,000...then we should be able to afford $275,000...oh heck...why not $300,000?

It's hard to stay focused on a more reasonable number.

$250,000 doesn't get much around here...but I guess it is what we have to deal with. I would like to buy something that we are going to stay in for a while and not have to move out in 5-7 years.

If we could get something that we see ourselves in for the long term- pay it off early...that would be amazing. I know that the first few years may be tight.

Thanks all!

[disneysteve]

I fully support buying on one income, but if spending a bit more will get you in a better/safer/more desirable neighborhood and a house that you are more likely to stay in long-term, I would say to include some of your husband's income in the calculations. Moving is expensive so that has to factor in. If the 250K home would only be good for a few years, it may be worth it to spend a bit more upfront and get the "keeper" house rather than the "starter" house.

[maat55]

I think you have considerable risk starting out. Dave Ramsey would recommend that you rent for the first year of mariage and it would give you time to get your ducks in row for this purchase. In a perfect world, your senario sounds good, but we don't live in a perfect world. Use caution.

[ScrimpAndSave]

We are staying with my father the first two years of the marriage.

During this time, I hope to accumulate at least $100,000 in savings.

My fiance will be a lawyer (we have no idea what kind of job he will have).

I am a teacher that is making:
$50,000 starting this Sept
$58,000 next year
$65,000 the following year
$73,300 the next year
$82,000 the next year
Contract ends there and the union renegotiates.

I will be moving out when I am making $73,300...but we will be married or 2 years and saving while paying my father $600 rent (way less than anything you can rent around here).

My mother passed away...my dad is a fabulous guy and pushing us to stay here...and the house is large even for the three of us.

If we were able to swing a $300,000 house - I think we could probably stay in it for over 25 years and pay it off (as long as we stay in the area). Of course, we would need to save closer to $130,000-$140,000. I might sound crazy, but I really think it is possible to do by the end of 2011. I am already saving $700-$800 a paycheck now and I get paid 26 times a year.

You are all so great - thank you for helping me!


<------ HUGE Dave Ramsey fan. I hope he would approve.

[maat55]

Originally Posted by ScrimpAndSave

We are staying with my father the first two years of the marriage.

During this time, I hope to accumulate at least $100,000 in savings.

My fiance will be a lawyer (we have no idea what kind of job he will have).

I am a teacher that is making:
$50,000 starting this Sept
$58,000 next year
$65,000 the following year
$73,300 the next year
$82,000 the next year
Contract ends there and the union renegotiates.

I will be moving out when I am making $73,300...but we will be married or 2 years and saving while paying my father $600 rent (way less than anything you can rent around here).

My mother passed away...my dad is a fabulous guy and pushing us to stay here...and the house is large even for the three of us.

If we were able to swing a $300,000 house - I think we could probably stay in it for over 25 years and pay it off (as long as we stay in the area). Of course, we would need to save closer to $130,000-$140,000. I might sound crazy, but I really think it is possible to do by the end of 2011. I am already saving $700-$800 a paycheck now and I get paid 26 times a year.

You are all so great - thank you for helping me!


<------ HUGE Dave Ramsey fan. I hope he would approve.

I think your plan is great. Of course, Dave would say: Live with your dad two more years and pay cash for the house. But he can't argue that your plan is excellent, otherwise.

[ScrimpAndSave]

Haha, thanks!

Hmmm...that would be pretty amazing though.

It is all going to depend on what we can save.

My plan for the next few years is to save:

2008: $15,000
2009: $25,000
2010: $30,000
2011: $35,000

That will total: $105,000

This is not counting my husbands income. I am hoping he can contribute $600 a month. That would be in 2010 and 2011 which would add up to another $15,000 on top of my $105,000.

Plus I am a teacher...so this is not counting any summer job I can snag.

And where am I right now? Haha...


I have $4,300 saved up. But it isn't too shabby since I just opened up the ING account on March 1st!

[jIM_Ohio]

There will be tax benefits when you move into house- your take home pay would increase relative to now, or you would get a HUGE tax return the first few years in the house.

Factor that into calculations.

[maat55]

Originally Posted by ScrimpAndSave

Haha, thanks!

Hmmm...that would be pretty amazing though.

It is all going to depend on what we can save.

My plan for the next few years is to save:

2008: $15,000
2009: $25,000
2010: $30,000
2011: $35,000

That will total: $105,000

This is not counting my husbands income. I am hoping he can contribute $600 a month. That would be in 2010 and 2011 which would add up to another $15,000 on top of my $105,000.

Plus I am a teacher...so this is not counting any summer job I can snag.

And where am I right now? Haha...


I have $4,300 saved up. But it isn't too shabby since I just opened up the ING account on March 1st!

Remmeber to be patient, you have the ingredients to build a fantastic future, don't mess it up on, instant gradification.

Read The Millionaire Next Door and Financial Peace. These books will give you perspective on the many decissions you will have to make, along the way.

[LuxLiving]

Also don't forget to shop in the market a little higher than what you think you can afford. Say you both want to buy a house and spend NO MORE THAN 300,000. Shop the 310-315 range and offer less than 300. See if you can't get yourself a bit more house for your dollars by negotiating a good deal. Who knows? They may take your first lowball offer.

Just stick to your financial plan when you get out shopping. I know this can be difficult to do if one of you fall in love with a house. Make a plan and keep each other to the original plan. Go away from the house and sleep on it a night or two. Go back over the financial plans BEFORE you make any offer. Pinky swear to make each other stand strong long before you get to the shopping or negotiating part! IOW, don't be the downfall to your own best plans.

There is always another house!!

Oh, and not to be indelicate, but what kind of health is your father in? Is there a likelihood that you will inherit the family home?

And, I'd also be making a Plan B if once you all move in together if the family harmony situation is not idillic for your new hubbie. You may need to make a faster move than you are now planning.

[ScrimpAndSave]

Thank you all so much.


So you think $300,000 does sound like a reasonable amount that we will be able to afford?

Also, When we move out...I will be making around $70,000 and my (future) husband will probably be around $60,000-$70,000 (we hope!). But..he has $140,000 in student loans (darn law school). He insists on taking care of the student loans himself.

We both of 2001 Hondas...I have an Accord and he has a Civic...we are hoping they will last a looooong time.

As for my father...he is 74 and in fabulous health (thank you God). He has a lot more energy than I do and can run circles around me. I know that he has $400,000 invested in different stocks and mutual finds and the house is worth about $325,000 right now. That will all be split up between 4 children. So yes - at sometime in the future, I will be getting a somehow sizable inheretance.

[noppenbd]

I would decide how much you want to borrow rather than how much house you want, since you do not yet have your down payment saved up. That way the amount you want to borrow (say $170K) is fixed in your head rather than the purchase cost. Then if you end up not being able to save as aggressively for the down payment you will not end up overborrowing.