mortgage and budget question

[LivingAlmostLarge]

For couples who bought a home is your PITI % of combined o
Income or just one? Did you buy the house on one income or based on two? What's the reason behind the decision? Did anything like a job loss or pay cut ever occur since you bought and how did it work out? If you only counted one income what % would your PITI be if you didn't base it on one income.

For couples with kids do you bank the entire second income? Are you able to afford daycare on one salary? Or did you wait until there wasn't child care expenses.

We need to consider moving but go back and forth on how much to spend. I wanted to see what most couples do when buying a home. One income or two? We've never bought with two incomes and I know we could afford a lot ,ore home I just was wndering if most peole do consider the second income or just one?

[MonkeyMama]

When we bought our home we only bought what we could easily afford on one of our incomes. We were more concerned with overall price and costs than "percent of income." Living in a high cost area I am sure the "percent of income" for our mortgage was quite high, but we also were used to the high cost of living and knew we could easily afford on one income.

My spouse was furloughed about a year after we bought our first home and was laid off about 9 months after we bought our second home. It's been 100% *shrugs* A complete non-issue. In fact, we owned both homes at the same time for about 4 months. With my spouse unemployed, my own maternity leaves were also a complete non-issue. There is probably 12 months in there that neither of us was working.

We always banked his income when he worked (which is part of the reason his lack of employment mattered so little - lots of savings). But, this would have been impossible with the high cost of daycare here, with kids. That said, daycare is a pretty temporary expense. We are getting well past that with two kids in elementary school. {Maybe not for summer, but is easy enough to cash flow summer care if I can just work my work schedule around public school the rest of the year. In just two years they will be a solid latchkey age - and they wouldn't be alone very much since they get out of school so late - schools cater more to working schedules in this day and age - their school is more year-round-ish}.

When we bought both our first and second homes the monthly mortgage payments were at about 18% of our combined income, which made it about 36% of my own income. {Er, our income was way lower when we bought first home with same payment, but like I said, we were used to the high cost of living - it might have been 30% of our combined income, but I knew I could handle it alone. We were young and income had nowhere to go but "up."}. Today with lower interest rates we only pay about 14% of income. I am not including PITI. So, if my spouse had income that figure would be less. Maybe 10% or less of our combined income if he found a basic low-skill/full-time job. Is more likely he will be working part time in the nearer future and I am sure he will make a lot more money in the long run.

Why did we only buy homes we felt we could only afford on one income? Probably primarily because we planned to have kids and be home with them. But I think we would have done this anyway - just to be able to weather financial storms more easily. We both have seen our parents deal with unemployment, while growing up. They weathered unemployment fine, and we learned from that, but just to say we never really took steady employment for granted.

[siggy_freud]

We bought on one income. House is actually being built currently. The GF is about to start an internship with IBM that will pay 18/hour and should lead to a full time job in 3 months that will pay well. It's all pretty assured, however nothing is 100% so we wanted to play it safe and ensure we could afford the home on one income.

Once she gets the full time gig we'll be able to bank pretty much all of her salary plus some of mine. After paying down some student loan debt we'll probably start picking up some rentals, provided long-term rates stay reasonable.

[Blessed]

This our second home and a cash purchase so no %'s there. We had a mortgage on the 1st one though. We did one weeks take home pay as our top mortgage payment. We based it one dh's salary . I have no idea what the actual %'s were back then. We knew when we had our child I would only be working a few hours a week so it was a safe estimate. I'm glad my father advised me to do this because the bank and the Realtor sure wanted us to buy more house!

We had several hardships over the years we had our first mortgage. I ended up on 100% bed rest during most of my pregnancy so we lost 100% of my income and dh got laid off twice over those years. I cut back to 10 to 12 hours a week also when we had kids so there would be no daycare. Dh also had 12 weeks unpaid off for knee surgery once. If we had not had a good emergency fund we sure would have been in trouble.

[MonkeyMama]

I'm glad my father advised me to do this because the bank and the Realtor sure wanted us to buy more house!

The figures the mortgage calculators and the mortgage brokers threw out at us always struck me as totally absurd (as to what we could afford). I think this also is a huge reason why we decided to come up with another way to figure what we felt comfortable with.

[cardtrick]

I was told that I was pre-approved for $350K. Ended up spending $158K for mine. I make $100K a year. It was still way way more than what we were looking at. Our first offer was on a place that was selling for $90K. My former idiot mortgage broker took 2 weeks to get the preapproval letter sent to me, so the house went under contract by the time we made our offer.

We were paying $725 in rent with heat included. : ) And I wanted to keep my house payment at or only slightly above that. It was a 1 bedroom apt with barely any space, but we had so much money left over every month. Sucks that I didn't put a nice chunk of it in retirement/investment accounts.

We ended up with a nice 1600 sqft condo that we're currently paying $915 on, including everything except for taxes. We have a tax appeal pending and we're expecting it to drop to $220 per month from about $420. Either way, our neighbors are renting their unit for $1600. So, we would be making money on the unit, if we were to rent it out!

[phantom]

You know, even though it was only 4 years ago when my husband and I bought our house, I'm not entirely sure what we were thinking when we decided how much house we could afford. We knew we wanted it to be possible for me to be a stay at home mom at some point, yet we bought a house that we couldn't easily afford without both of our then salaries. We didn't think about percentages, but I want to say that the monthly payment was about 22% of our combined income and about 42% of just my husband's. I know we crunched a bunch of numbers, but in the end I think we just decided to get the house we wanted. Sure, we left ourselves a good buffer to prepare for the unexpected. But, I'm not certain we fully thought through how the house payment might get in the way of my ability to stop working.

Right after we bought the house, we faced some serious setbacks. I thought I had a raise coming, but the company I was working for ran into financial trouble, froze salaries, and eventually gave me a pay cut. Then my husband was laid him off. We had enough of an emergency fund in place to handle several months of expenses, so we didn't worry. But, we had a large buffer in our budget, and my husband received enough from unemployment and contract work that we never even had to touch the emergency fund. We just didn't get to make all the extra mortgage payments we'd been hoping to make.

Eventually, my husband found a permanent position and I found a new job, putting our salaries where we wanted them to be, albeit a bit later than expected. We still don't really think in terms of percentage of our salaries, but PITI is currently at 31% of just my husband's salary and 17% of our combined salary. What matters is that we could almost manage on just my husband's salary, but not quite.

I definitely wish that we'd given more thought to what it would be like to pay for our house on just my husband's income, especially knowing that we didn't want mine to be necessary. But, we love our house and aren't ready to sell it in favor of something less expensive, so we'll make it work.

[~bs]

If you can buy a home, and be able to live off of 1 of your incomes, this is more conservative, and the best bet. It means if one of you loses your job or isn't working for whatever the reason, job loss, child birth, disability, whatever, you can still afford your monthly expenses without draining your savings.

Needing the dual income is risky becuase if even one of you loses your job, it means you will be in the hole... which is why us single guys need to be conservativve.

[disneysteve]

We bought based on my income at the time with the anticipation that once we had a kid, DW would be a SAHM. I was making 65K and we bought for 142K. We also knew that my income would be going up significantly as it was my first year in practice.

[TBH]

There was no way we could have bought on only one income when we bought our first house. We had a new baby, and after health insurance was taken out of DH's pay his take-home pay was $700 a month. Yeah. So I worked part time, and we managed to buy a very conservative first house that was easily affordable for us. Then we started making more money, got overconfident, and bought a bigger house. We can afford the payments. It's the utilities and maintenance that are tough. We're doing okay, still managing to save, but it was not the best decision ever.

[Caoineag]

We chose to buy a house that was affordable on one income, preferably the lower income. We just didn't have any faith that we would both always have steady income; life happens. Which is good because we definitely had periods of unemployment afterwards and we have only been in this house for 4 years. 2 years later when we refinanced, PITI was 37% of my gross income (I am the lower earner) and they did the refinance using only my income (which they did because his was unsteady at the time). We have a 15 year mortgage. Now the PITI is 9% of our combined gross income (be both got big raises recently).

I have to say, having the PITI at that level especially during the years when one of us was unemployed, underemployed or took a big pay cut (yes all of those apply) was huge for keeping stress down. I still remember my husband coming home the first time he was laid off, upset and telling him not to worry because we would be fine. I also didn't panic when I was laid off without a new job lined up because I knew we would be okay. Fortunately, there is one miracle we managed to always pull off, only one of us at a time suffered a job loss/transition.

[~bs]

We chose to buy a house that was affordable on one income, preferably the lower income. We just didn't have any faith that we would both always have steady income; life happens. Which is good because we definitely had periods of unemployment afterwards and we have only been in this house for 4 years. 2 years later when we refinanced, PITI was 37% of my gross income (I am the lower earner) and they did the refinance using only my income (which they did because his was unsteady at the time). We have a 15 year mortgage. Now the PITI is 9% of our combined gross income (be both got big raises recently).

I have to say, having the PITI at that level especially during the years when one of us was unemployed, underemployed or took a big pay cut (yes all of those apply) was huge for keeping stress down. I still remember my husband coming home the first time he was laid off, upset and telling him not to worry because we would be fine. I also didn't panic when I was laid off without a new job lined up because I knew we would be okay. Fortunately, there is one miracle we managed to always pull off, only one of us at a time suffered a job loss/transition.

glad to hear it worked out for you guys ok. IMO, it's REALLY hard for a man to deal with job loss because traditionally he's supposed to be the breadwinner, and it's a big blow to his pride to have to come home to tell you that he got laid off, and for the woman not to overreact to it. Reading between the lines, it seems like you both handled it in a mature way, which attests to the strength of your marriage.

[Redraidernurse]

We bought our home based off only one income, even though we were dual income at the time. We always saved all of my income, so that we never got used to the "lifestyle" of two incomes. Now that I am able to stay home and raise our children, I realize it was the best decision we could have ever made.

The house we bought was more house than we needed at the time (and even still now 2 kids later, and expecting #3), 3 bedroom/2bath, 1650 sq ft. We knew we hoped to have lots of children so it was a wise choice. The mortgage was still less than 30% of our take home, and we put a 20% downpayment.

6 months after we bought the house, I was staying home with a newborn baby, and my husband was laid off. We had an emergency fund & he found some short term work until he found a new permanent job, so for that I was thankful. It took him 3 months to find a new job.

[sandrark]

When we bought our first house in 1992, it included both our incomes. In the SF Bay Area, that's about the only way you can buy a house!

That first house was a probate sale, fixer-upper extraordinaire! Our combined income was $44K, the house was $150K, and with 10% down, the mortgage was $135K. So right at about 3x our gross combined incomes.

We lived there for 19 years, refinanced it several times, and one time used $90K in accumulated equity to withdraw funds then used to buy DH's business. Even so, when we sold in 2011, the mortgage was at less than 2x our annual combined incomes.

With the new house, we put down a large deposit - nearly 30% - and the mortgage is at 2x our combined gross income.

We never had kids, but having such a low mortgage relative to our income has been a terrific decision. We can invest aggressively for retirement, take nice trips, fix up the house, help out family members, accelerate our mortgage payments, and acquire a few toys. I would HATE to be house poor at this point in our lives.

As a result, I strongly advise 2-2.5X your gross income as the max mortgage amount. It gives you freedom!

[snafu]

We tackled buying our first home with a different criteria. What did we need, why did we need it, what was a deal breaker, what was the cost per sq. ft. and property taxes. We submitted our financial information to three banks, a credit union and a family trust and were approved for wildly different amounts at different rates. I don't think it matters whether you're approved including your spouse's income or not. You choose the price point to buy. Keep in mind asking price is not always selling price. I believe that agents will try to push you to the top of your mortgage approval but you needn't buy more house than You find affordable. General rule of thumb don't buy a house that exceeds 2.5 times gross income. You can afford to pay 30% all in for mortgage, taxes, utilities and HOA fees. At present our system requires 20% downpayment to avoid [PMI} mortgage insurance. You need to read and understand all terms and conditions of a mortgage and how the Amortization table works. Interest is front loaded. You need the most flexible mortgage possible so that you can make extra payments directly to principal in addition to the required payment. That put's you more in control of a very long term debt. With current low interest and thoughtful budgeting it might be realistic to pay off in 15 years.

Criteria: # 1 was location, no matter what you can't change the location. We had a preferred district and needed specific amenities that were essential no matter the specific district. We agreed to overlook decor and easily changed out appliances, countertops, taps, floor coverings etc. #2 Was price, and downpayment parameters. Life is too short to be house poor. We were very aware of property tax because in that particular city property taxes were weirdly inequitable. #3 Was layout which needed to support our lifestyle. Both DH and I did little mental exercises when viewing potential homes like imagining we just walked in the door after commute, imagine walking in with 10 bags of groceries, imagine gathering and managing laundry tasks, imagining greeting guests at the door in a pouring rain storm etc. A deal breaker was a corner lot, ratio front to backyard, bus stop within sound/visual, no garage etc. We all have our personal quirks.