Mortgage question...

[ScrimpAndSave]

I just read that if you are debt free, you can afford a mortgage payment that is $341 for every $10,000 that you make.

That sounds really high to me!

If I make $70,000 when I move out...it means I can afford a payment of $2,387?


Yikes. I plan on paying at LEAST $1,000 less than that per month.

[sweeps]

Consider the source. If it's a mortgage company telling you you can afford a certain amount, don't believe them. *You* need to draft your budget and determine what you can comfortably afford.

[gamecock43]

I agree with Sweeps...only you know what you can afford. For me its pretty accurate. I am not following any pre-made formula...my fiance and I long ago determined the mortgage payment we are comfortable with. My fiance and I make a combined income of almost $30,000 a year and we are planning to get a mortgage of about a thousand dollars a month.

We are not following conventional wisdom to only spend 25% of your income on housing- but we'll see how it works out.

[bjl584]

I see those type of "formulas" for figuring out how much mortgage you can afford all the time. Usually they are calculated by mortgage brokers. Theoretically, they are right in saying that you can afford that much mortgage based on that much income. ($341 for every $10000) However, that also assumes that you don't need to eat, pay the electric bill, drive a car, pay taxes, make any repairs, or anything else that you may want to do in the course of living a normal life.

[meatloafkend]

Well, depending on the economy and the whole bail-out...I don't know if anyone will be able to get a mortgage with a ratio that high.

[Madwand]

Conventional loan rates are usually 28/36

$70,000/12=$5833 monthly income

A. $5833 x 28% = $1,633

B. $5833 x 36% = $2,099 - monthly debts (revolving credit, child support, alimoney etc) Not utilities or insurance

Go with whatever is lower A or B

But most important make sure it fits in your budget.

I am not a mortgage person but have 15 years experience with helping people get home loans as a realtor. You should consult your accountant or financial advisor.

[Troyrb]

My mortgage is about 13% of my monthly income. I have a very nice 1700sqft house but it is in a area where the average mortgage is only 130k. The bank where My mortgage company kept trying to talk me into a house that was 500k but I'm self employed and money can fluctuate at times. I'm very glade I kept my mortgage low now that the economy has gone south and money is tighter.

[irmanator]

i fired my first real estate agent, she was trying to sell me houses over what i was preapproved for. I didn't go by any formula i just knew that if i pay xxx amount for rent then i should pay a little less for mortgage. That has worked for me so far. I have been in my house 3 years.

[ScrimpAndSave]

There are just SO many formulas. I know that when I get married, I want to base the price of the house on what I can afford on my income only...which will be $70,000 and about $7,000-$8,000 more each year.

[disneysteve]

Originally Posted by gamecock43

My fiance and I make a combined income of almost $30,000 a year and we are planning to get a mortgage of about a thousand dollars a month.

How can you possibly afford that? Is that 30K gross or take-home? If it is take-home, a $1,000/month mortgage would be 40% of income. If the 30K is gross, the mortgage is an even higher percentage. Will that leave you enough money to save 15-20% of income, pay all of your bills and have something leftover for occasional fun, vacation, gifts, etc.?

[disgruntable]

That sounds really really high. I make around 100k and the 2k/mo mortgage (PITI) is all I care to handle. According to that I could afford 3400 which I definitely could not handle.

[jIM_Ohio]

That worked well for my gross pay and what we pay.

That calculation did not include wife's income though.

[MiikeB]

Household income is 5800 a month and my mortgage is 1120, which equals to about 19% of net pay.

I went very conservative though because only my name is on the house, so I need to be able to afford it on just my take home (2800 a month) in case things don't work out with my SO (at the time I bought the house we had only been together a year) and the roommates bail. I also have a large amount of debt to pay (2 car payments totaling $590 and I pay $400 a month to my parents because they pay for both our schooling).

In 3-4 years when the cars and school is paid off I figure maybe we can afford 1800 a month with no roommates (so 5k a month net) assuming are income does not increase at all.

[DebbieL]

Gamecock,

I would think VERY hard about getting such a large mortgage on your small incomes. DH and I currently NET approx $5900/month and pay $925 rent. If we were to get a mortgage, I wouldn't want to pay more than about $1,500/month or so. Spending more than that takes away from other things in life (saving, vacations, etc). I wouldn't ever want to be totally house poor like that.

[gamecock43]

yes- we have been thinking about it carefully and watching the RE market for a long time. We can do a thousand a month- we have been averaging a thousand dollars a month that we put into savings- we've been able to save up a large down payment by doing this for the past several years.

[GREENBACK]

Mortgage companies are great for getting you to stretch your dollars to their benefit. I pay 11% of my gross and am very comfortable in my home. It was unbelievable what the banks and realtors tried to show me that was "well within my means". It's hard for me to concieve of going much above this and I'm not going to become a slave to a mortgage payment. Were seeing in the housing market where that attitude leads.

[JinCO]

We are at about 13% of gross and 26% of net and it seems about right.

[Cylenchar]

Actually, this is a slightly scary figure, but investor guidelines still allow us to get conventional loans approved at a 55%-60% back end ratio (so if you made $1,000 a month, $550 to $600 PITI if debt free). FHA are slightly tigher 53% ($530) for the same example.

[TBH]

Our payment was around 17% of our monthly net the last time I calculated it. Our house is old and requires a lot of maintenance, and I like to save and travel, so I like to keep large fixed expenses like our mortgage down.

Income fluctuates a lot, so I always look at last year's figures for stuff like this. I won't know until the end of the year how much we made this year.