What multiple of your income did you spend on your house? - Page 2

34saving · #21 (**permalink**) 12-10-2006, 06:37 PM

Our first house was about 2x our annual income. However, our income went down (I say home now) and housing values went up, so our current house is 5x income. To make it more complicated our first house (which we paid off) appreciated to a higher level than our current house, so in some ways our current house is 0x income . . .Hmmm . . .

asmom · #22 (**permalink**) 12-10-2006, 08:35 PM

When we purchased our home in 1998, it was about 2x our annual income. Since then, our incomes have risen but not very much while the value of our home as appreciated 50%, so we are still at about 2x our annual income.

BCHGRL · #23 (**permalink**) 12-10-2006, 09:17 PM

Our house is almost exactly 2x our income. We bought in 2005. The value increased about 25%, only to drop by 20%.

humandraydel · #24 (**permalink**) 12-10-2006, 09:36 PM

Quote:

Originally Posted by disneysteve

If you are older and selling a home for a substantial profit, you can afford to spend a lot more on the next place.

Well, the answer to this is to list the MORTGAGE multiple instead of house value multiple. Really, that's what is more important since payments are based on mortgage, not home value.

LivingAlmostLarge · #25 (**permalink**) 12-10-2006, 09:59 PM

thanks, sorry I was not thinking earlier, we should have done mortgage multiples because some people have DP and others 100% financing.

creditcardfree · #26 (**permalink**) 12-11-2006, 10:08 AM

I just calculated it for our first home and this new one. Both were 2.47x our income. I only used the mortgage amount. We had equity in the first that transfered to the 2nd home.

tinapbeana · #27 (**permalink**) 12-11-2006, 10:49 AM

our house was mortgaged for 0.8x our current annual income

Lonewolf · #28 (**permalink**) 12-11-2006, 11:14 AM

We purchased about 5 years ago, and it was about 1.75 X our income. 5 years later we are much better off, and It is tough sometime to fight the urge going to friends houses who easily have done the 4 and 5X the income and think, maybe we need "more house." It's just a matter of financial goals, where I think my wife and I are thinking more long term goals (of maybe having that beach house in the future) and our friends want everything now. Right now, there is a room for each of us (my wife and two little ones) and I remember growing up sharing a room with my brother, so it keeps us grounded that maybe having "more house" just means more cleaning.

I'll keep the mortgage that is 1X salary now, and bank the rest and not worry having to scrimp for bills because we are house poor.

Wolf

Elgin526 · #29 (**permalink**) 12-11-2006, 02:53 PM

The house cost 1.85 times our income, and we put 20% down. The mortgage left is about 1.5 times our income, but we've only been here 15 months!

sakigt · #30 (**permalink**) 12-11-2006, 02:57 PM

Worth: 5.1
Mortgage: 4.1

But Im 23 and make hardly any money. Those calculators are great for the average person, but sometimes when you do the math, waiting to buy to fit into their profile simply does not make sense

lrjohnson · #31 (**permalink**) 12-11-2006, 08:42 PM

I live in CA.

A starter home in my town, in a rural county with high unemployment, is over five times my income. I make $40k, which is very good money for my area. But a cheap house is $230k. If I'm willing to spend a ton of money and time I can find under $200k.

I have recently decided to remain a renter for a bit, and keep socking money away for a down payment. When the choice is $800 rent for a huge place, to $1600 mortgage plus every utility and fixit for a funky place, the whole building equiry thing doesn't sound so appealling. I can, and do, put that $800 in savings, so I got that money already working for me.

Darned CA.

Snoopy2645 · #32 (**permalink**) 12-11-2006, 10:23 PM

When I bought my house 60k it was 3 times my income but I did have money down so I only owed 2 times my income & at this time we owe under 15k we are trying despereratly to pay off we now make a year what the home is worth 60k and I would love to get something bigger & newer but will wait for this one to be paid off.

cptacek · #33 (**permalink**) 12-11-2006, 11:41 PM

When I bought my first house 5 years ago, I bought it for 1.5x my income.

I rented a room to a friend of mine for about 8 months (which was really a storage space...my roommate only stayed in his room 4-5 weekends the whole 8 months) for $400 a month.

I sold that house this year and it had gone up 18% in value (with a lot of elbow grease, I might add).

I bought my second house in June for about .82x my income, and am renting out a room to my cousin for $300 a month plus half the utilities.

I paid off the second mortgage by putting the equity from my old house towards this one, so the current mortgage is about .66x my income.

MonkeyMama · #34 (**permalink**) 12-12-2006, 07:24 AM

I live in a VERY pricey area so I don't think the rules really apply. As a general rule, yes, but only 10% or so of the population could follow that rule. The benefit of taking on more risk is that in 5 years of home ownerships our has doubled in value - for a while it was beyond that. AND it is WAY cheaper than renting. Probably not the norm for most of the country. For this reason we were willing to take on more, BUT way more conservatively than most people I know around here. For us the rule was we could afford our mortgage on 1 income and we had to be able to afford a fixed loan.

Our first home we made 70k and house cost 260k. Our loan was 210k, so our mortgage was exactly 3 times our income. Within a year our income was up to 100k, so we fell within the rule pretty quickly and the mortgage was chump change to us. This is why we got a condo right out of school, to get in the market and at least not throw away all that money on rent. IT was seriously rent our condo for $3k+/month or buy it and have a $1500/month mortgage. WIth all the tax write-offs, we came out miles ahead. YEah, we were 22, right out of school. All our friends that were waiting for the prices to fall then are now looking at $500k minimum for the same small condo, after shelling thousands on thousands on rent these last years. Sometimes you just got to take some risk...

We moved 2 years later and paid about 290 for a house. So it was about 3 times our income. The loan was only 220, so still only about 2.2 times our income. We bought the house because we felt comfortable with payments and living on 1 income of $50k/year. For a while our mortgage was 5 times our income when dh quit working and we had kids. Today the mortgage is about 3.5 times our income. IT is dirt cheap compared to any alternative around here today. (The same house today is worth 8-9 times our income). The thing is dh could get a job if needed and it the mortgage would be less than 2.5. So overall I agree with this rule. I would not consider much more.

we have looked at houses in the $500-$600k range, but our mortgage would be the same. Just as a lateral move. That would be way more than 2.5. Many factors in affordability besides cost I think. Oh yeah - but that reminds me - the loan company was pushing a 500k+ loan on us when we were looking. Downright crazy if you ask me... (7 times income???). Silly me, worried we would not qualify for a loan now that we were applying on 1-income. This was fixed-rate. I said no ARMs flat out, I imagine in the mortgage companies eyes we could afford a $1 million house or something if we were willing to do an ARM. *shudders* I would not trust their assessment of what we could afford in the least. So it is good to have some general rules. Overall I don't think the 2.5 rule is bad.

P.S> we moved so we could afford a house and avoid paying 5 times+ our income. To us paying that much was never an option. Unfortunately almost everyone we know is in WAY over their heads. Starter homes back home are 700k+, we know quite a few people who paid that much this last year.