Any rules for affordability and renting?

[stoney508]

Ok im looking for a new apartment and hopefully trying to move in by the end of november early december at the latest and I was wondering is there a way to check for affordability?

Is there a rule of thumb on percentage of income for rent? We will more than likely only get internet and maybe netflix and hulu plus or amazon prime for our entertainment purposes unless we can get basic channels which I doubt many places have antennas on there roofs anymore. This will leave our expenses on the minimum side of things until we can figure out our budgets.

I will be moving to a new positon at work and my fiance will be finishing college and looking for a second part time job as well as full time employment when she gets done in december.

We will gross probably 65,000 together but will have between 38,000 and 33,000 in student loans combined. I dont know her payments just yet so its up in the air on that. We are kind of just looking at what range we should be looking into. She will probably have the 6 months to find a job and have her loans on forbearance and she will probably be able to reduce her payments a little if she needs to by doing income based payment and I may be able to reduce mine by doing the graduated payments. We would still pay more towards our loans if we could to try to bring them down but it would also help to free up some cash monthly.

Sorry my post is a little lengthy and I thank anyone that posts in advcance.

[disneysteve]

The usual rule of thumb is for housing expenses to not exceed 28% of income.

A good general budget plan is 50/30/20. That's 50% for needs, 30% for wants, 20% for savings. You can play with those numbers a little so that if housing is a little high and you can trim wants down, that works. Just try not to eat into savings to get your wants or to live beyond your means in the needs category.

[dczech09]

This is a widely argued topic. I do not think there is really a uniform rule of thumb as rent can vary as far as what type of amenities and utilities it includes.

A home mortgage percentage of 25% (principal and interest) or 28% (principal, interest, tax, and insurance) is the "rule of thumb" for that.

Renting, most people say 25%.

My view is a little different...

If you are going to rent for the rest of your life (and never buy a house) then you could probably afford a little higher rent (28% to 30% of your income).

If you are going to save up a 20% down-payment for a house while renting, then you should limit your rent to 20% to 21% of your income.

If you are going to save up a 100% purchase for a house while renting (like I am), then you should limit your rent to 14% to 15% of your income. I know my rent is about 13% of my income.

This is all based on gross income since net income has too many variables.

[dczech09]

We will gross probably 65,000 together but will have between 38,000 and 33,000 in student loans combined. I dont know her payments just yet so its up in the air on that. We are kind of just looking at what range we should be looking into. She will probably have the 6 months to find a job and have her loans on forbearance and she will probably be able to reduce her payments a little if she needs to by doing income based payment and I may be able to reduce mine by doing the graduated payments. We would still pay more towards our loans if we could to try to bring them down but it would also help to free up some cash monthly.

With a roughly $40k student loan debt, your payments will probably be around $400 per month. That is less than 10% of your monthly income, so you are not over-extending yourself there.

I don't know if I would go for income based repayment or graduated payment. Simply get out there, get good work, and knock out the loans as quickly as possible. The problem with specialized loan repayment systems is that you run the risk of "staying the course," and that course sucks. With a specialized system, you run the risk of being in debt longer. Like I mentioned before, your student loan payments will be less than 10% of your income (assuming the $65k income) so you are not over-extending yourself.

Get a modest mortgage. Set aside a small emergency fund. Then attack your loans with all of your might!

[debtfreeme]

With a roughly $40k student loan debt, your payments will probably be around $400 per month. That is less than 10% of your monthly income, so you are not over-extending yourself there.

How do you figure that payment? That equals 1% of the loan at base without interest added (and not knowing what their interest rates will be with very high interest rates thanks to Congress).

That is a lot higher than any student loan payment I have seen without consideration for interest (including mine and I owe more than that). Curious as to your analysis?

[stoney508]

actually my student loan payment a month was close to 1,000 per month and I have cut it in half to and it currently is around 400 a month for my loans at 23000.

[Brandon216]

I'm considering the same thing pretty much!

that rule of thumb is cool but considering i want to take a big chunk out of my student loans in 2014 I don't know how much it applies to me.

curious to see what people have to think or offer though!

[snafu]

Stoney, if I were walking in your shoes I'd be looking at ways to reduce expenses and pay extra each month on SL so that I was also paying directly on principal along with required sum. I don't know where you live but I'd seek accommodation as close to work as practical. You are in a huge period of change. Is your GF moving in right away? As a student her income is not established. Perhaps she can share expenses based on income. I suggest exploring a suite rental in a house. So long as it has a galley kitchen, private bath with shower, bedrm, separate utilities and parking it would suffice for the short term.

I'm bewildered by couples who need stainless appliances [horrid amount of upkeep] and tons of square footage to look after in a rental if they have a long term plan to buy a home. This solution gives you breathing space to work out what you will be able to afford when you marry and are ready to buy a home of your own.

[dczech09]

How do you figure that payment? That equals 1% of the loan at base without interest added (and not knowing what their interest rates will be with very high interest rates thanks to Congress).

That is a lot higher than any student loan payment I have seen without consideration for interest (including mine and I owe more than that). Curious as to your analysis?

I did say "around" $400, which means it was an estimate.

I was assuming the 6.8% unsubsidized APR for federal student loans when I made that reply. I was also assuming a 10 year pay-off. Obviously, rates have changed and the OP could have private loans too. But under the 6.8% and 10 year payoff, the average payment is a bit over 1% (like 1.15%), I also liked using 1% as a rough estimate. So for the OP, the payment would have been about $460 under the assumptions that I layed out, but of course I did not know all of the information. I was on the fly

[funlol]

Whatever u do, dont use a broker/agent to help you find your apartment. They will try and squeeze every penny they can out of u.

[Jerry91]

Well, I haven't heard of specific rule of thumb for renting. But I agree that your housing expenses should not exceed 28% of your income. You should be careful enough to maintain this percentage in order to be on a safer side in regards to your finances.

[dczech09]

[QUOTE=Jerry91;371974]Well, I haven't heard of specific rule of thumb for renting.[QUOTE]

There is really a "one size fits all rule" for renting. I would say 25% is a good figure. If you are going to rent forever, then you can go a little higher. If you want to save for a house, then go lower.

Most property managers out there will not approve an applicant if the rent payment will be more than 1/3 (33.33%) of their gross income.

[stoney508]

Well it took a while but I finally got back on the forum. I have read your responses and thank you for them.

I am currently done looking for apartments and found one for 555 a month including everything but electric and cable/internet. My fiance will be moving into the apartment in the middle of the month and we do plan on spliting the expenses I will probably take more of the internet and electric bill and she will be paying the phone bill and her half of the rent. We are saving for wedding first house second.

The house is years down the road and she will be looking for full time employment but she will be making decent money with her part time job getting around 25-30 hours a week and in the middle of wisconsin 14.50 an hour for a part time job is pretty good.

I think with making around 45k a year my student loans down to 22k and paying about 150 extra a month on them while saving for my wedding in august is a good start. We are going on the cheaper side trying to hit the 5k target maybe less or a little more depending on decorating and small details. If I plan things right I will be having my student loans paid off in 3 years maybe less depending on the job. That will put me at paying the SL back in about 6 years. My focus now is paying for rent saving for the wedding then building up my Emergency Fund which is light because of the apartment hunting.