-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.
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?
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%…
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.
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?
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.
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.
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.
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.
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