How much would you have to make to buy a $250,000 house?

[loulou]

So how much would you have to make to feel comfortable with a $250k house? I'm curious.

[sweeps]

Not enough information. How much are you putting down? What are your other expenses? How much is in the bank? (If I had $2 million in the bank, I might not need any income.)

[momof1in150]

The old formula is about $83K (A simple formula for affordability is 3 times your annual salary). That is part of the problem with the housing market came in - people were buying houses 4-7 times their annual salary and getting an ARM so that it seemed like they could afford it until the ARM adjusted.

[arthurb999]

depending on how much debt and what kind of lifestyle you have... 100k seems about right for that.

[lennygaudy]

We make about $120k as a couple and were able to buy a $280k house. Granted the house does have an income property which we rent for $500/month which really helps. But we also made less money than we do now 5 years ago when we bought it. Like arthurb999 said it will all depend on your other expenses and lifestyle. For example, we don't have any car payments because both of our cars were bought used and paid off so that also keeps our monthly expenses lower than most people's.

[thekid]

Fully dependent on your cash down, savings and other living expenses.

Especially the cash down, I mean the purchase price isn't really relevant for affordability calculations, it's the amount financed.

[tripods68]

Good rule to have: Debt to income ratio should be 36% or below.

[MonkeyMama]

I have to agree - depends depends depends.

Fixed rate interest rates are very low though. Which increases the affordability factor. Down payment and other debt are pretty large factors. Rents & home prices in your area are another factor. Property taxes? How will it affect your income taxes? Is it a fixxer upper?

In some instances, $70k income may be more than plenty. (We bought 2 homes in the $260k range - different times - averaging $70k income. The mortgage payment is only 15% of my gross income today - not exactly a stretch). For one, the mortgage and property taxes decrease our income taxes to virtually zero. It's not exactly apple to apples as far as renting and paying a ton more income tax. I wouldn't have spent so much on a home that neede fixing though, either. There can be a lot of hidden costs with a home. (But yeah - we put a lot down. Thing is if you can put a lot down, generally you can afford a bigger mortgage more easily).

[creditcardfree]

We make about $86K and I would NOT be comfortable with a $250K home. I would probably have the 20% down...but I still wouldn't be comfortable.

I'm realizing as I get older that I'm less likely to want to take out a 30 year mortgage, next time we move. So, borrowing at 15 years is a much larger payment than on a 30 year term.

I agree...it all depends.

[disneysteve]

Originally Posted by momof1in150

The old formula is about $83K (A simple formula for affordability is 3 times your annual salary).

Call me old-fashioned, but I agree. 2-1/2 to 3 times annual income is the limit in my mind. So a minimum of about $83,000. Personally, I think that can still be pushing it depending on circumstances, but I wouldn't argue with that.

[sheridan15926]

I think it all depends on your financial picture as a whole. We are a single income family, with that single income being in the low six figures. We just bought a house for $430K, but we put 20% down. Our payment will be less than $2300 a month, and that is extremely doable for us. But, we also have no car payments or student loan payments, and we pay our one credit card off in full every month.

You have to look at the whole picture...how much you have to put down, how much your take home pay is, and how much other debt you have.

[kork13]

Originally Posted by MonkeyMama

Fixed rate interest rates are very low though, which increases the affordability factor.

What I'm NOT looking forward to is when the pendulum swings the other way... inflation goes nuts, fed rates go high, and mortgage rates right along for the ride..... With my luck (btw, happy St. Patrick's day everyone) those factors will be peaking right as I'm finally ready to buy a house myself.... hahaha


As to the main topic, rules of thumb (such as the 3x your income one) are completely rough estimates. this one, however, it's not bad.... When I buy (5-10 yrs from now?), I'll probably take that into heavy consideration.

[mnpqrd]

This calculator could help you figuring out if you can afford it or not.
realestate.yahoo.com/calculators/afford.html

[mnpqrd]

Here is another calculator. This one estimates property tax and insurance but it's for 30 year loan.
cgi.money.cnn.com/tools/houseafford/houseafford.html

[whitestripe]

DF and I borrowed $304k and we make $84k combined per year.

[Caoineag]

For me personally, we would need to make $150k, we are pretty cheap when it comes to buying a house. I am just not a big fan of paying a lot for a place to live.

[reptile411]

We make about $85K a year with a debt to income ration of about %20. I am told they want it under around %46. We put nothing down on our house and paid no closing costs through the USDA first time buyer plan but it was a very hard sell so I would say in this market in California at least you would want twice our income to get twice the house "ie 160K for a 250K house" BTW our house was 125K however the loan was approved at 200K so maybe my twice the pay for twice the house idea is not accurate. Where are you located? If close to Sacramento California I can get you in touch with the best broker in the business "as far as I am concerned" if not contact any local mortgage broker and ask about the USDA first time buyer loan and they can give you exact numbers.

[MonkeyMama]

I've never been a fan of the 3-year rule, maybe because I live in California and that is pretty impossible.

BUT I do admit, in the long run, I would never BORROW more than 3 times my income - no matter what the interest rate. So the rule is probably pretty sound. (Maybe considered in my young 20s - our first home purchase was aggressive - but how much of my income I would be willing to owe on my morgage decreases rapidly with age. I think age can be a pretty huge factor).

[MonkeyMama]

Originally Posted by kork13

What I'm NOT looking forward to is when the pendulum swings the other way... inflation goes nuts, fed rates go high, and mortgage rates right along for the ride..... With my luck (btw, happy St. Patrick's day everyone) those factors will be peaking right as I'm finally ready to buy a house myself.... hahaha


As to the main topic, rules of thumb (such as the 3x your income one) are completely rough estimates. this one, however, it's not bad.... When I buy (5-10 yrs from now?), I'll probably take that into heavy consideration.

Ah, well, it's all relative. We bought our first home in 1999 when interest rates were over 8%. But considering rate history, they were considered to be "low rates" back then. Our parents on the other hand had 13%+ interest rates on their mortgages.

I'd say 8% is pretty doable. If that's what we were stuck with, we were fine. I really wouldn't sweat it unless we swung back into 10%+ territory. I can't even imagine!

& honestly, if we came into our first home in these times, I would not base my purchase ability solely on interest rates. Things can happen that can force you to refi or move. So, certainly a good point, and good thinking.

[kork13]

Originally Posted by MonkeyMama

Our parents on the other hand had 13%+ interest rates on their mortgages.

That's what I'm talking about.... especially with all the gov't spending going on right now, it's all gonna have to come back to balance at some point, and when it does, rates are gonna be nasty, like your parents' 13%+ kind of nasty. It's just a nagging feeling I've got....