Homebuying, mortgage help needed!

May 1, 19 17:27

Post #1 of 27 Views: 1825

-Wife and I are in our late 30's
-2 kids age 1 and 4
-No debt except for current mortgage
-Each have been at our jobs for over 10 years
-Pre-tax household income is 180k

What mortgage range would you consider to be
A) affordable
B) stretching it a bit
C) getting stupid

We're looking to buy a home that we'll likely live in until the kids move out and we retire. Found the perfect house but it's over what our original ceiling is and I'm trying to get different opinions as to where the line is between stretching a bit and getting stupid.

Edit to add...Boston suburbs so things are extremely expensive. Anywhere affordable within a decent commute involves a place with terrible schools.
We have about 118k in savings not including retirement
Sale of our current house will net us about 267k more for down payment.

We will be staying in town with a great school system so will not be paying for school.

Last edited by: Triocd: May 1, 19 18:02

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 1, 19 17:30

Post #2 of 27 Views: 1821

How much do you have saved? Is school a factor?

You could easily afford a place 4-5x your salary. If you are not going to have to pay for school and have 20-30% for the down payment.

Re: Homebuying, mortgage help needed! [patentattorney] [ In reply to ]

May 1, 19 17:37

Post #3 of 27 Views: 1796

patentattorney wrote:

How much do you have saved? Is school a factor?

You could easily afford a place 4-5x your salary. If you are not going to have to pay for school and have 20-30% for the down payment.

!!!!!!! The 2 houses I have bought were never more than twice my income. That gave me great cash flow as I got raises. Nothing is worse than being house poor. What would 25% of your take home get you?

Re: Homebuying, mortgage help needed! [tigermilk] [ In reply to ]

May 1, 19 17:41

Post #4 of 27 Views: 1784

tigermilk wrote:

patentattorney wrote:

How much do you have saved? Is school a factor?

You could easily afford a place 4-5x your salary. If you are not going to have to pay for school and have 20-30% for the down payment.

!!!!!!! The 2 houses I have bought were never more than twice my income. That gave me great cash flow as I got raises. Nothing is worse than being house poor. What would 25% of your take home get you?

+1

4-5x salary seems firmly in the "getting stupid" category. You're working for your house at that point, and any setbacks like illness/injury/pregnancy/unemployment will really put you in a squeeze. IIRC, back in the day the rule of thumb was 2.5x salary was the upper limit of what you could comfortably manage for a mortgage

EDIT: Granted, that 2.5x was when mortgage rates were over 8%...

"100% of the people who confuse correlation and causation end up dying."

Last edited by: MOP_Mike: May 1, 19 17:49

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 1, 19 17:48

Post #5 of 27 Views: 1761

Dave Ramsey say 25% of your take home pay on a 15 year mortgage. I think Dave is pretty good at what he does.

Re: Homebuying, mortgage help needed! [MOP_Mike] [ In reply to ]

May 1, 19 17:49

Post #6 of 27 Views: 1759

if you can put 30% down on your house it really isnt that bad. If you are in a city, get a decent yard out of it + good public schools, close to work, somewhere with low property taxes, etc. it makes sense.

You get the money back + some when you end up selling anyway.

Re: Homebuying, mortgage help needed! [patentattorney] [ In reply to ]

May 1, 19 17:50

Post #7 of 27 Views: 1756

We have about 118k in savings not including retirement
Sale of our current house will net us about 267k more for down payment.

We will be staying in town with a great school system so will not be paying for school.

Re: Homebuying, mortgage help needed! [patentattorney] [ In reply to ]

May 1, 19 17:51

Post #8 of 27 Views: 1753

patentattorney wrote:

if you can put 30% down on your house it really isnt that bad. If you are in a city, get a decent yard out of it + good public schools, close to work, somewhere with low property taxes, etc. it makes sense.

You get the money back + some when you end up selling anyway.

Are you talking about house *value* at 4-5x income, or *mortgage* at 4-5x income? If the latter (like OP asked about), what difference does the percentage down make?

"100% of the people who confuse correlation and causation end up dying."

Last edited by: MOP_Mike: May 1, 19 17:53

Re: Homebuying, mortgage help needed! [Spiridon Louis] [ In reply to ]

May 1, 19 18:00

Post #9 of 27 Views: 1722

Spiridon Louis wrote:

Dave Ramsey say 25% of your take home pay on a 15 year mortgage. I think Dave is pretty good at what he does.

Does this Dave Ramsey recommendation assume any amount of debt?

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 1, 19 18:20

Post #10 of 27 Views: 1691

Without calculating what the actual pricing would be. I would feel comfortable putting around 200 down on a 700-800 house on a 30 year mortgage while putting more down each month.

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 1, 19 18:20

Post #11 of 27 Views: 1691

Triocd wrote:

Spiridon Louis wrote:

Dave Ramsey say 25% of your take home pay on a 15 year mortgage. I think Dave is pretty good at what he does.

Does this Dave Ramsey recommendation assume any amount of debt?

No

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 1, 19 18:31

Post #12 of 27 Views: 1679

what is cost of house and bedroom yard look like? 600+ with 4 bed 3 bath on .5 acre...?

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 1, 19 18:36

Post #13 of 27 Views: 1675

What type of loan are you planning to go with?

We just went through this and budgeted our house to be below 28% of our income and ended up going a fair bit lower. Part a great deal and part we didn't need to hit our budget. But we want less house and more travel/experience.

I guess to answer your question how much cash flow do you want and will your potential "pushing it" and mortgage still allow for that. That's really a question only you can answer.

Re: Homebuying, mortgage help needed! [patentattorney] [ In reply to ]

May 1, 19 18:45

Post #14 of 27 Views: 1664

patentattorney wrote:

How much do you have saved? Is school a factor?

You could easily afford a place 4-5x your salary. If you are not going to have to pay for school and have 20-30% for the down payment.

No.

Taxes taxes taxes.

How much can you pay per month total including TAXES. Good school means high TAXES that go up.

House 1.

1MM bucks 12K a year of taxes monthly payment lets call it 4500 all in

House 2

750K bucks 24K in taxes all in monthly payment lets call it 4500 bucks

Monthly payment is the key, not the amount of the mortgage

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 2, 19 2:27

Post #15 of 27 Views: 1544

That's pretty meaningless. Putting 400k down on 800 is different to putting 400 down on 2m

What percent down are you looking at. What monthly are you looking at?

Were pretty Conservative. Out mortgages were never more than twice combined income.

My first mortgage was three times my own salary. Now I'd not do more than double. I'd rather put money in to investments

How much of your savings will you keep aside?

Re: Homebuying, mortgage help needed! [windywave] [ In reply to ]

May 2, 19 2:30

Post #16 of 27 Views: 1543

It is all monthly.

I think at peak I could have borrowed millions, such a stupid amount as to be insane, but you look at the monthlies and its bonkers, more so when things go wrong.

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 2, 19 5:25

Post #17 of 27 Views: 1465

Triocd wrote:

A) affordable
B) stretching it a bit
C) getting stupid

a - Cheapest house in Hopkinton
b - anything in Concord
c - not a teardown in Wellseley

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 2, 19 5:38

Post #18 of 27 Views: 1452

Put me in the camp of stretching, but it does depend on how stable your job is. If you are one of those that likes to move from one job to the next, then less stretch. The kicker is that you have a healthy pot of money in savings in case things go sour so you can take more risk.

There are those that say to avoid being house poor. But with two kids, you probably aren't going to be doing a lot of travel in the next few years. Youa re going to spend a lot of time in the house with the kids and they are going to be going to the schools you choose now. Your probably already have a monthly budget for child care and monthly savings for college (or not if Warren is elected) so you should be able to figure out what sort of monthly house payment you can handle taking into account the potential for mortgage deduction.

Re: Homebuying, mortgage help needed! [Andrewmc] [ In reply to ]

May 2, 19 5:47

Post #19 of 27 Views: 1446

Looking at putting 350k down, borrowing 500k for a mortgage which equals a 41% down payment.

This works out to a monthly payment of 3300 including mortgage, taxes, insurance. Monthly income before taxes is 15000 so monthly payment would be 22% of pay the first year

Last edited by: Triocd: May 2, 19 6:42

Re: Homebuying, mortgage help needed! [scorpio516] [ In reply to ]

May 2, 19 6:04

Post #20 of 27 Views: 1433

scorpio516 wrote:

Triocd wrote:

A) affordable
B) stretching it a bit
C) getting stupid

a - Cheapest house in Hopkinton
b - anything in Concord
c - not a teardown in Wellseley

HAHAHA, you are 100% correct in your assessment!

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 2, 19 6:15

Post #21 of 27 Views: 1423

So you basically wipe out all cash reserves?

I'd not do that, I'd put down less, keep cash in reserve and over pay so that in the event things went pear shaped you have money to cover it

I'd probably do 30% down

You can always overpay, but once the money is in, it's more expensive to get it out

Re: Homebuying, mortgage help needed! [Triocd] [ In reply to ]

May 2, 19 6:20

Post #22 of 27 Views: 1419

Triocd wrote:

Looking at putting 350k down, borrowing 500k for a mortgage which equals a 41% down payment.

This works out to a monthly payment of 3300 including mortgage, taxes, insurance. Monthly income before taxes is 8800 so monthly payment would be 37.5% of pay the first year.

In 10 years the monthly payment would be about 27% of monthly pay.

I thought you said you household income was 180k? How does that work out to 8,800 a month before taxes?

I wouldn't put all of your savings into the down payment. You have nothing left in case tragedy strikes next year. Plus paying off a 4% mortgage instead of investing isn't the best financial decision unless you have a strong fear of debt.

Re: Homebuying, mortgage help needed! [Andrewmc] [ In reply to ]

May 2, 19 6:26

Post #23 of 27 Views: 1411

Andrewmc wrote:

So you basically wipe out all cash reserves?

I'd not do that, I'd put down less, keep cash in reserve and over pay so that in the event things went pear shaped you have money to cover it

I'd probably do 30% down

You can always overpay, but once the money is in, it's more expensive to get it out

We would be keeping 55k in cash as an emergency fund in case of job loss. There’s a lot more money available in retirement savings that could be used in an ABSOLUTE emergency

Re: Homebuying, mortgage help needed! [torrey] [ In reply to ]

May 2, 19 6:30

Post #24 of 27 Views: 1409

torrey wrote:

Triocd wrote:

Looking at putting 350k down, borrowing 500k for a mortgage which equals a 41% down payment.

This works out to a monthly payment of 3300 including mortgage, taxes, insurance. Monthly income before taxes is 8800 so monthly payment would be 37.5% of pay the first year.

In 10 years the monthly payment would be about 27% of monthly pay.

I thought you said you household income was 180k? How does that work out to 8,800 a month before taxes?

I wouldn't put all of your savings into the down payment. You have nothing left in case tragedy strikes next year. Plus paying off a 4% mortgage instead of investing isn't the best financial decision unless you have a strong fear of debt.

Oops, 8800 is monthly income AFTER taxes.

Pre tax we bring in 15k. 3300 monthly payment would be 22% of pre tax income

Re: Homebuying, mortgage help needed! [windywave] [ In reply to ]

May 2, 19 6:38

Post #25 of 27 Views: 1404

Taxes overall don’t matter too much on what you can afford. It is going to great matter on what is the better investment long earn but not what you can afford.

If property tax is 3% but with no income tax vs 2% with a 5 % income tax. On a million dollar home (10g difference in tax) and making 200g a year (10g difference in tax), there is no effective difference on what you can afford.

Obviously the investment sides of things matter.

Re: Homebuying, mortgage help needed! [patentattorney] [ In reply to ]

May 2, 19 7:10

Post #26 of 27 Views: 348

It is really complicated. I do know that in expensive markets the % of income used on housing is way higher than say in the Deep South or Midwest. I think you need to figure out where you want to live then figure out a way to check the boxes to get there. The realtors all say location, location, location and they are probably not far off from being right. With the big chunk you can put down and wanting to keep the house for a long time you can probably spend more than your original ceiling.
My personal advice is not to get too house poor and can't be able to enjoy the other parts of life than home ownership. Good luck.

Re: Homebuying, mortgage help needed! [patentattorney] [ In reply to ]

May 2, 19 8:25

Post #27 of 27 Views: 298

patentattorney wrote:

Taxes overall don’t matter too much on what you can afford. It is going to great matter on what is the better investment long earn but not what you can afford.

If property tax is 3% but with no income tax vs 2% with a 5 % income tax. On a million dollar home (10g difference in tax) and making 200g a year (10g difference in tax), there is no effective difference on what you can afford.

Obviously the investment sides of things matter.

Yet in the same town it makes a huge difference, n'est pas?

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