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Durkin Tactical Franklin Armory
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Posted: 6/3/2008 4:05:14 PM EDT
This is what I see being advertised and recommended as the basis for figuring out how much monthly payment you can afford.  Who comes up with this, the banks?  Maybe I'm just a tightwad, but that seems awfully high to me.  That means that if you figure your net pay is 75% (ballpark) of gross, then your mortgage payment is taking up a full 37-40% of your monthly net pay?

Now that we've got only 6 years to go to pay off our mortgage, my wife thinks it's time to look at a bigger house. The only reason I'm even thinking about it is because she found one that's in an area we really like, more square footage, 5 acres with a pole barn and a pool.  Our payment right now is currently 9% of our monthly gross.  We're both 42, college for 2 kids starts in a couple years, and I'm being told I can afford a house payment of $2,300??  We would need a monthly payment of about $1,350 for a 15-yr loan, and I'm thinking no effing way on that!  That will also put me at 57 years old before the damn thing is paid off!

So ... anyone else going through this dilemma right now? I really like the house, but they're gonna need to drop the price about $30K (asking price is $299K). The house has only been listed for a month, so maybe that will be possible. Like I said, maybe I'm just a cheapass!
Link Posted: 6/3/2008 4:09:16 PM EDT
You're a cheap ass.

Seriously, those figures are just what the bank figures you will suffer under before defaulting on the loan.  If they thought you'd shoulder 30% of gross, they'd loan you more.  Where's Admiral Ackbar?  "It's a trap!"

If you're 6 years from paying off the house, I presume you have quite a bit of equity there.  Talk to your banker and see what the payments will be on the property you want.  If it's something you (not the bank) think you can live with, great.  If the bank is telling you that you can afford it but your conscience disagrees, to hell with the bank.
Link Posted: 6/3/2008 4:11:20 PM EDT
Those numbers are delusional, unless you're buying a house next to a grocery store and train station so you won't need cars.

I have a pending deal on a house right now, and if it works, my payment will be around 20% of *net*... and that's net before my quarterly bonus.  My mortgage company sounded like I had just fallen from mars for asking for so little.

You're the one that decides what's responsible for your budget... your mortgage broker won't be called to testify at your bankruptcy hearing.
Link Posted: 6/3/2008 4:11:57 PM EDT
That is why both parents have to work and corporate daycare is raising Americas children.

My house payment is low and my wife stayed home and raised our kids, as it should be. Keeping up with the Jones will keep you busy to the point of ruination. Live below your means if you possibly can. My house payment is two days pay. The most I would ever consider would be four days pay and that would cause me much worry and loss of sleep.

Advice from an old fart.
Link Posted: 6/3/2008 4:14:43 PM EDT
Link Posted: 6/3/2008 4:15:14 PM EDT
If your kids are moving soon it doesn't make any sense to buy a bigger house. Why don't you put the money towards your retirement?
Link Posted: 6/3/2008 4:15:37 PM EDT
23% here....but that was with no vehicle loans, cheap insurance, low taxes, and zero CC debt. If you are carrying loans or plan to put a lot into escrow for taxes you may want to consider your options.

I had lenders try to tell me that 40% of gross income was a typical mortgage payment.
Add in a credit card balance and a school loan and i think you would smell disaster.
Link Posted: 6/3/2008 5:07:39 PM EDT
I always went with a more simple rule.

3x your yearly salary.

If you make $50K a year then you should be looking at houses that are $150K.  This is a simple rule that I've followed.  It works and in my opinion it is a conservative strategy.  

Now, there's a point where you can stop....i.e., you have a nice house that works for you, but your salary just doubled....don't move into a house that's also double!!!!
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