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

[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]

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]

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....

[DebbieL]

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

Wow! DH and I make a bit more than that, and I wouldn't DREAM of borrowing that much.

[TBH]

This is super helpful, even tho I agree with MM's assessment that it depends, depends, depends. I had forgotten about that 3X income rule of thumb.

We're thinking $250K is about right for us (and will be a bit of a stretch). $225 would be better. We make about $85K with 2 incomes, 1 kid, and no other debt. Prop taxes low here (expecting around $1500 per year). We'd put 20% down, using equity in current house.

But we've looked at a lot of houses and we're starting to think $250K won't quite get us what we want. $300K would be perfect, but that would be crazy to spend that much. I am not buying another house unless I can get exactly what I want. So the current plan is wait a couple years and save a bigger down payment, and also hope our income holds steady for a while (income increased a lot in summer 08--we haven't started spending more but we also haven't had a lot of time to save the excess).

I know it would be better to save the money in cash or similar so we don't have to use equity from our house as a down payment, but I think it would be easier for us psychologically to pay down our current mortgage instead of trying to save the money in cash. That way, we'd be getting used to making higher loan payments, and we'd have our house paid off in about 5 years. At that point we could decide if we still wanted the bigger house, or if we wanted to stay in our current house and enjoy having no mortgage.

[wnlbutterfly]

I guess we did pretty good then....we bought just 4yrs ago, and while they told us we could have a $300k loan, I said no...we got $115k house, and now earn $80k a year. I knew from having a good budget that there was no way we could afford a $300k loan.

[snafu]

Since we have very secure employment, we based our housing parameters @ 33% of net income. That figure included mortgage, interest, taxes, insurance and utilities. Can't you lock in your mortgage rate... they are very low just now?

[whitestripe]

Wow! DH and I make a bit more than that, and I wouldn't DREAM of borrowing that much.

in US currency i worked out we borrowed around $209k.

for the area we bought in, $304k is very cheap for a 4 bedroom house on 1000m2. we are paying $10 more per week than our rent was previously, and we are able to apply the savings that we previously used for our deposit, now directly to the mortgage.

i get a lot of remarks that we got in with a good price, so it goes to show that different areas and different countries have VERY different values on property

[DebbieL]

in US currency i worked out we borrowed around $209k.

for the area we bought in, $304k is very cheap for a 4 bedroom house on 1000m2. we are paying $10 more per week than our rent was previously, and we are able to apply the savings that we previously used for our deposit, now directly to the mortgage.

i get a lot of remarks that we got in with a good price, so it goes to show that different areas and different countries have VERY different values on property

Hi! Actually I'm from Canada. The city where I live the average house is a ridiculous price of over $500k. We have a massive housing bubble here. I'll give you an example. I looked at a place that is basically a cabin on the water (920sf). The view is lovely of course being on the ocean. They are asking $698K. I looked up the property tax data for that property. Back in 2002 it was valued at $236K. No improvements have been done. They won't get $698K (things are starting to slowly come down here), but isn't that a stupid run-up in price over just 6 or 7 years? By the way the average HOUSEHOLD income here is under 70K, so it isn't as if we have high paying jobs. DH and I make more than the average and there is no way we would have taken the loans that some of these people must have been taking.

PS - We rent for probably half the cost of buying a similar place to what we live in. When the day comes that prices are a little more down to earth we will buy - I figure it will be 4-5 years from now before it hits bottom. Prices just started coming down.

[whitestripe]

PS - We rent for probably half the cost of buying a similar place to what we live in.

i just couldn't bear paying nearly the same in rent as we could for the min. on a 304k mortgage - and buying a house in our area is something that we have talked about and planned on for quite a while. if we were able to pay $215 a week for a three bedroom house & study with separate lounge and dining with a DLUG and a fenced yard on 500m2 block in suburbia completely surrounded by neighbours on all sides (the place we were previously renting)- we would have taken it in a jiffy and saved for another year or two - but alas, it just didn't make sense to us to be paying $420 a week to someone else for the priveledge of that. instead, we pay $430.15 weekly in min repayments plus $150 a week in extra payments, and we have double the size in land, less neighbours, and basically the same in the size of house - except a smaller kitchen and dining.

btw - the bank offered us a loan of up to $575k