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Posted: 8/15/2007 6:30:21 AM EDT
[#1]
There's some 28%/36% standard out there. IIRC that was on gross income. If you applied that to net income you'll probably be OK as long as you keep away from credit card debt or other monthly credit payments like autos. I bought one home in the 80's with a good size down and NO JOB. Real estate was hot and greed was in. The wife and I bought our first house when credit was tight and interest rates high and they did everything but an anal probe to check us out. We wanted a $200K home at the time but settled for a $158K home that was in default. Still we would have saved a lot of gas money with the $200K home as it was a stone's throw from her parents that she visited on the way to work or back nearly every day.
Mortgage interest is still the major deduction for taxpayers. A payment of $1200 per mo. is effectively 25% lower, or $900 per mo. after the mortgage tax deduction is applied to your federal (and State) income tax return. One thing that has kept me from being too interested in a new home are real estate taxes and that's what's keeps the State so happy about inflated home prices. As prices drop and the credit balloon derflates, taxes will still accumulate on these bloated prices and unless the taxes are appealed they'll still go up as prices decline. |
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Posted: 8/15/2007 6:37:22 AM EDT
[#2]
26% of my take home pay. That percentage includes property tax and homeowner's insurance.
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Posted: 8/15/2007 6:43:53 AM EDT
[#3]
And Ric Edelman says buy as much house and you can and never pay it off. It all depends if your goal is to be debt free or to build personal wealth. If you are a regular sucker and have credit card debt, or want to feel good about yourself for owing nothing but taxes, listen to Ramsey. If you have discipline, can budget and want a financial future building wealth, listen to Edelman. Note: I'm not saying that MrClean4Hire is a sucker with credit card debt. I'm sure his plan is best for him. |
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Posted: 8/15/2007 6:44:49 AM EDT
[#4]
I am at 30% of my monthly take home (almost 10% of my annual take home is not monthly - so factoring that in, then 26%. It is unpleasant with a wife and 3 kids, and 15% going to car/insurance..
--- In your income bracket, the amount of the mortgage interest/tax you will probably be paying will barely cover the standard deduction - there will be little to no tax benefit for you (if you are married, a little better if you are single). |
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Posted: 8/15/2007 6:48:08 AM EDT
[#5]
My mortgage payments are about 1/4 of my take-home pay now.
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Posted: 8/15/2007 6:50:30 AM EDT
[#6]
Im in the mortgage business. 6 years.
Most lenders will go up to 50% DTI ( debt to income ratio ) on a home. This means the total payout you have on creditcards, auto loans, personal loans... ( anything that shows on a credit bureau ) note: utilities etc.. dont show on a credit card and are not counted towards your DTI. This DTI calculation is on your gross income and not your net just so you know. Whats funny is. When i take an application I ask the customer " How much do you have budgeted or how much do you think you can afford out of your income to go towards a mortgage payment? 99% of the time it is within 100$ within their 50% DTI calculation the bank allows. So those saying that the bank is always trying to loan you more than you can afford is false. Now, it may be true that we all are outliving our means.. But i think this is a symptom of Americans being underpaid considering the cost of living increases we are all enduring. Of course we all know why this is. And many if not most here on the board are in support of this f$%^ your worker scam the bankers and corporations have put upon us. Im unsure where it comes from. Its like everyone thinks they are a lawyer.. Well they all think they are economists as well. |
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Posted: 8/15/2007 7:12:03 AM EDT
[#7]
A) even renters are paying a mortgage-- their landlord's mortgage, that is.
B) Forget the percentages, because they don't take into account your individual expenses. Just be sure not to get into a deal that you can barely pay the mortgage payment and can't save money. If you lose your job, you want to have a few months of payments and other living expenses saved up (as opposed to immediately going bankrupt and/or running up debts by living on credit cards until you can find another job.) I went with a 30 year mortgage simply because there were lower mandatory payments. I paid a little extra early on to build up my equity to 20% so I could remove the PMI. The downside is a slightly higher interest rate than a 15 year note (about 0.5% at the time.) |
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Posted: 8/15/2007 7:38:47 AM EDT
[#8]
I didn't do the Dave plan on buying a house. 
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Posted: 8/15/2007 7:43:01 AM EDT
[#9]
hey guys random question, this is my first mortage, and my first large deduction on taxes being on 24 years old. My wife and I file jointly this year, and I am wondering how much more in taxes we will get back with the $25k homestead deduction (Florida) and the interest deduction from our house? Do i need to drastically change my exemptions? My wife and I will probably be in the 25% tax bracket, and with the interest/homestead, i do not want the government holding onto my cash every pay period
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Posted: 8/15/2007 8:04:33 AM EDT
[#10]
I am amazed at some of the responses here.
One thing this thread has taught me is... I gotta MOVE! I work with people who's mortgage and property taxes are MORE than their monthly take-home pay. To support their families, they work side-jobs and many of their spouses work. (And these aren't dirt-poor guys... just middle-class people making between 60K and 80K a year.) Small houses in the burbs start at 300K (and they need work)... and go over 500K real quick. Taxes are usually in the 5000 to 8000 a year range. In some towns... more. This is one of the reasons that I told my GF that there's no way I'm buying a house until I retire and move out of state. |
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Posted: 8/15/2007 8:26:06 AM EDT
[#11]
I'm at about 50%, but I have money in the bank from previous real estate ventures. Unless you have lots of back up money I'd recommend 25%
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Posted: 8/15/2007 8:34:07 AM EDT
[#12]
16.7% of take home $ (after tax) for our house payment, escroll, extra payment toward principal, etc.
We are loading up our IRA's and her 401k. I am a state employee for now. We have 1 months worth of after tax take home pay in our emergency fund, and we are looking to grow that even more...plus other less liquid assests for $. We are sitting pretty: affordable house with all up to date ammenities(1,300 sq feet Cape Cod) and my wife makes good $ as a publisher/Editor with great job security. 
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Posted: 8/15/2007 10:01:59 AM EDT
[#13]
You are missing out. |
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Posted: 8/15/2007 10:10:24 AM EDT
[#14]
At the time I bought my house, I was making about $35K a year. I was approved for way more than I could afford, so I tried to find the most house to fit into as small of a payment as I could. And yes, you'll tell them 'I can pay $xxx per month'. They will say, no problem. Then, you see that your payment is actually $xxx + $xx for prop taxes + $xxx for PMI maybe + $xxx for escrow + $etc etc etc.
So, back to my personal example. When I bought my house, my final mortgage payment per month was about oh...45% of my take home!! And that was based off it 'only' being 1/4 of my take home! But, once you add in those extra costs they kind of forget to mention while they're getting you all setup... Now, a few years later, i have switched jobs, and make around $50K a year, and the payment is still the same, so NOW it is down to around 33% of my take home. Which is a good thing, cause I had to get a new car. So, I'm still broke. heh. My point is, try to get into the cheapest house you can get, not the most you can afford. |
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Posted: 8/15/2007 10:13:27 AM EDT
[#15]
I am about 65% of Net. But I have no other debt.....and live in Northern VA where even townhouses push half a million.
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Posted: 8/15/2007 10:18:56 AM EDT
[#16]
18% of gross.
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Posted: 8/15/2007 10:24:14 AM EDT
[#17]
I'm right there with ya buddy! |
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Posted: 8/15/2007 10:26:25 AM EDT
[#18]
Bet your federal tax burden is less than 10% of gross. |
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Posted: 8/15/2007 10:28:43 AM EDT
[#19]
Mortgage itself is 25% of net income.
Property taxes and insurance take it to 33% of net. A large chunk of both of those is returned in the form of tax savings, though. |
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Posted: 8/15/2007 10:36:40 AM EDT
[#20]
Don't rub it in. In any case, at least all that money that I'm not dumping into a house isn't being squandered. When I retire and move to America, I'll be able to afford something very nice for the wife and I. |
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Posted: 8/15/2007 10:29:44 PM EDT
[#21]
Thanks for teh replies.
Using 30% of Net income, I can't afford to buy the house I've been looking at. I've got it calculated at 42% of my net. Basic numbers, I make $40K gross, figure in minus 30% for taxes, etc. and I'm down to $28K net, and am looking at $900/month with everything (assuming taxes don't go up another 11% again) for a 15 year mortgage. From what I'm reading, it sounds like you guys ahve found cheap property, or that I'm not making enough money ( I think it's teh $$ part  ) In order to reduce monthly payment, naturally, I'd have to take a longer loan, but would end up paying a lot more in interest.
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Posted: 8/15/2007 10:32:48 PM EDT
[#22]
... Do your own accounting and budgeting. Who else knows better than you what you can afford?
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Posted: 8/16/2007 12:09:59 AM EDT
[#23]
You can't find anything worth a shit for less than $6,000/month here. That's why all the people who own are DINKs.
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Posted: 8/16/2007 12:31:39 AM EDT
[#24]
Less that 25% of take home, everything included... cheaper than local rent in a small apartment.
Between that and no car payments...no ramen noodles for me ! 
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Posted: 8/16/2007 12:50:51 AM EDT
[#25]
Including property taxes and insurance, About 20%-25% of my take home, this dose not include the wifes income.The only debt we have is the house and car.We live well and within our means.
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Posted: 8/16/2007 12:52:21 AM EDT
[#26]
That's my rule. It's a difficult one to follow in many parts of the country, but doable here in rural NW Ohio. |
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Posted: 8/16/2007 1:13:32 AM EDT
[#27]
Ouch, %25 of take home would mean having to live in teh bad parts of the bad parts of town.
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Posted: 8/16/2007 1:17:09 AM EDT
[#28]
You jus need to move up nort, der. |
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Posted: 8/16/2007 4:08:57 AM EDT
[#30]
We bought a house last year for much less than we were approved for. Our payment is about 20% of our take-home pay. We live very comfortably, but we don't owe anyone except the cars and house. Look at what you can afford payment wise, not what you were approved for. Leave yourself some room to breathe. Houses seem to have unexpected expenses. You'll be much happier if you can have nice TV's and FIOS in your house than if you're sitting on the floor of a house you can't furnish. |
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Posted: 8/16/2007 5:16:16 AM EDT
[#31]
Those guys are on the razor's edge. I think you're doing a good thing by waiting. To give you a very timely example, I just got a letter from the tax people saying my home was being reassessed and my property taxes would be going up. For me, it's nothing because the $100/yr increase is not a huge deal -- and mostly because my mortgage payment is <25% of my net take home.* What happens to your co-workers if that happens? Hard to control the .gov when it comes to reassessing property taxes. Point is that one cannot always assume the monthly payment (which your budget should include an allotment for property taxes) will always stay the same. Even with a 30 year fixed like mine. So always leave some breathing room. *: I am not going to contest the tax increase because their new assessed value is less than 1/3 of what places in my development are going for  |
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Posted: 8/16/2007 5:22:35 AM EDT
[#32]
Buy all the house you can. You'll be able to afford it easier later.
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Posted: 8/16/2007 5:28:02 AM EDT
[#33]
About 10%
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Posted: 8/16/2007 5:39:34 AM EDT
[#34]
I am at about 35% of net. I had been at about 25% net, which was fine, but I switched jobs to get quality of life. While the switch was good for quality of life, and I have some free time to enjoy the house, it has made things a little tighter.
I did buy a house that was in good shape in one of the better suburbs, and my father and I (he is a plumber) have upgraded plumbing, electric, kitchen and the master bedroom so I have made decent appreciation on the value were I to sell. Doing it again, I would probably suggest 25%, as you do have to factor for the other costs of home ownership (heat in the winter = $$) and for any repairs. |
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Posted: 8/16/2007 6:09:57 AM EDT
[#35]
I really don't feel like I have any choice but to wait. I simply can't imagine myself being able to enjoy a life that was on such shaky ground, economically speaking. Then too, you also has to consider the very real consequences that such a lifestyle is going to have on your future. Anyone living hand to mouth, paycheck to paycheck... is almost certainly not doing all they should be (if anything) to prepare for retirement. A recipe for disaster if there ever was one. Oh well... to each his own, I guess. |
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Posted: 8/16/2007 6:22:42 AM EDT
[#36]
When taxes and insurance are included, I am paying 30% of net, or 21% of gross. This is comfortable.
You can count on two things: unanticipated expenses and taxes and insurance rates going up. I had to replace the furnace the first year I lived in my current house. Over the following 5.5 years, I have had to replace the dishwasher and refridgerator, and am looking at re-roofing at least part of the place. This is why it is so critically important to not mortgage yourself to the hilt. You need to be able to take care of things when they crop up, and you need ot be able to save money, too. |
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Posted: 8/16/2007 6:34:12 AM EDT
[#37]
1.5 X annual salary. Dont go a penny higher.
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Posted: 8/16/2007 6:38:32 AM EDT
[#38]
We're right around 20-25% of combined take home pay right now.
We'll probably start paying extra on it once my truck is paid off in May of next year. |
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Posted: 8/16/2007 6:58:38 AM EDT
[#39]
My situation is a little different than most. My mortgage is 53% of my take home pay now, it was over 60%. My take home takes a huge hit from 401k (15.5k annually) and ESP (15% of my gross but taken out after taxes so its more like 23k annually). My mortgage is 2777 while my take home is 5240. I live at around 800 a month average the rest I split between long term IRA, short term liquid, and property improvement.
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Posted: 8/16/2007 7:56:40 AM EDT
[#40]
That is poor advice IMO. The bank would have let me buy twice the house I did. No way I could afford that month after month, year after year.
I didn't aim for that, but that is exactly how much my house was. Within $1000. Question thought - for those of us in good housing markets (like Houston  ) this is very doable as evidenced by me and I'm sure lots of other people like me.What about NY, CO, CA, where 500k gets you the type of house you'd really wouldn't even want to rent? In practical terms, how do people in these markets buy houses responsibly? Not everyone makes 350k a year. How would the guy making, say, 100k buy a house there? |
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Posted: 8/16/2007 8:10:08 AM EDT
[#41]
I've made out in the end by buying more than I could comfortably afford. I just told myself that it was an investment and put every penny I made into the house. It was hard doing that for a couple of years but then we sold the house, made a crap load of money, and are now living comfortably in a bigger house with money in the bank. I can't really recommend this to anyone because real estate is such a gamble but it worked for me. YMMV
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Posted: 8/16/2007 8:26:49 AM EDT
[#42]
You can get a 30 year note which will lower your payments albeit at a higher rate. Make 1 extra payment a year and it works out to a 22 year note. Or you can pay a little extra each month thus lowering your payoff amount and length. |
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Posted: 8/16/2007 9:42:33 AM EDT
[#43]
Nonsense. Look at median home prices in 1950, 1960, 1970, 1980, 1990, 2000 and today. A primary residence provides the cheapest leverage most people will ever have the opportunity to buy. The money you pay in interest is tax deductible. If you hold for the long term your home will outpace inflation. And when you sell your home you are shielded from the first $500k of capital gains (if married). It doesn't get any better than that. |
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Posted: 8/16/2007 9:46:36 AM EDT
[#44]
That would be telling 90-95% of people in California, "Don't ever buy a house. Period." My mortgage is over 3X my current annual salary. Payments & taxes are ~28% of my gross salary. 30 year fixed, of course. So, that 1.5X "rule" is hogwash. |
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Posted: 8/16/2007 10:05:21 AM EDT
[#45]
I live in a lower-middle-class, blue-collar neighborhood. You'd need to be making 400K a year to buy a house here, according to that formula. Folks around here aren't making a quarter of that. Median income in the U.S. is around 50K. Where can you buy a house for 75K? |
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