Comments for How Much House Can You Afford… Now? at http://www.dailyworth.com , comment 1 to 35 out of 20 comments http://www.dailyworth.com Thu, 09 Sep 2010 05:30:25 +0100 FeedCreator 1.7.3 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4503 I'm ready to buy a move up house. The interest rates are at there lowest and my house has been on the market for four months with only two showings. I have lower the price twice. Although the value of my home has went down I have a lot of equity in the property and can pay with the selling price a little. Worst case scenario I can rent it out but I am trying to avoid two mortgages although my current one is next to nothing. I have been watching one house for about two years now and have seen the price drop from about 600k to 300k. It is everything I have been looking for but in today's economy I'm only willing to pay about 150k for it. There are many comparables in the area that is nowgoing for 150-200k. Taxes are high so if they are willing to take the lower price then I'm willing to pay the higher taxes to offset. - Sheyla Wed, 01 Sep 2010 10:02:39 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4420 I bought a house (300,000)with no deposit at all in the height of the boom as it was also the height of easy credit and the only way as a middle aged single mum I would have ever got a loan. I also had huge personal debt as well (about 30,000). Luckily I did see the recession coming as it hit the other side of the world about 12 months before reaching here down under. weekly wage $1000 mortgage 470 other debts 250 so 72% of my income is in debt repayment. I manage and no longer stress about it and only sometimes regret my decision to buy. The house is shabby by comparison but my family is happy and I feel we have security. The house is now worth less than I owe so downsizing is not an option. - indebtinoz Sat, 28 Aug 2010 12:54:01 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4405 @Denise, interesting additional point. I hadn't heard the idea about mortgage/income ratio. @RS - that's a great point, calculating in ancillary costs of one's house choice, e.g., the fuel/transportation cost of commutes, car repair due to the commute miles, drive time to schools or stores, parking fees etc. - Cynthia Fri, 27 Aug 2010 16:39:21 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4393 @Cynthia, the 2.5*annual income rule is one that I heard before I went househunting in 2000. I'm not sure of the source - it was a general sort of rule of thumb. I've also read a slight variation on that in Stanley and Danko's The Millionaire Next Door: the mortgage shouldn't be more than twice your annual income. If you assume a 20% down payment, both of these lead to the same place. A person earning $40,000 should look for a place costing no more than $100,000 (2.5*annual income), and will finance $80,000 (2*annual income) after putting $20,000 down (20% down payment). For that person earning $65,000 in the example, the mortgage should be no more than $130,000. A $25,000 downpayment means that they'd be putting a bit over 16% down on a $155,000 home. A $208,000 mortgage on a $65,000 salary? That's 3.2*annual income. Thank you, no, I'll pass on that one. - Denise Fri, 27 Aug 2010 09:57:08 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4392 @Mariah, just wanted to back you up that these numbers are tough to match in high priced housing markets. I live in Seattle and it is (or was before the crash) truly difficult to find something affordable in a decent neighborhood. This is especially true for us single gal homeowners. Also I wanted to point out that it's worth factoring in money saved in shorter commute when determining what you can afford. I purchased my townhome in 2008 and spent a little more than suggested here (35% of gross monthly income) but in doing so I was able to buy close enough to town that I can take the bus to work, saving thousands per year on gas, parking, and maintenance. - RS Fri, 27 Aug 2010 09:49:12 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4380 Wish I would have known years ago what I know now. I wouldn't have bought as much house nor taken a load against it which I see now was totally inflated due to the bank crisis. I am now trying to refinance and if that fails go talk to bankers and be one of the thousand of foreclosures. If they would have given people money and not the banks money would have been flowing. Only in America do the dirty players get rewarded-your banks. Kathy - kathy Fri, 27 Aug 2010 08:38:14 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4337 @Paula ... I wonder if we read the same article? If we did (or didn't), then I'd encourage you to root around on the Get Rich Slowly blog. One of the contributors has a piece of land and some of their family members are in construction, so they're building their house over the course of a few years. I think she was debating the pros/cons of building all at once or a little bit at a time. There were some interesting comments concerning changing building costs and costs of materials. I don't know if that will help in your situation or not. Good luck with that anyway. :) - Jaime Thu, 26 Aug 2010 07:47:35 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4336 I guess I live far below our means since our house payment is only 12%. But that's where I'm comfortable since it gives us the freedom to live on one income if need be and still cover the costs of a new roof or furnace if ours dies. I think when purchasing a house one needs to remember to factor in the expences associated with the house and remeber that it isn't an investment until you've lived in it over 5 years. (At 5 years you've generally just got enough equity above your initail 20% down to cover closing costs) - carrie Thu, 26 Aug 2010 06:12:56 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4335 @YourBarefootBooks, I disagree that 208k loan on 65k income is what got us into this mess. That sounds like a fully amortized loan which one could reasonably pay. I know a woman who makes 40k and bought a 460k home with nothing down with a negative amortization adjustable loan. I know a second woman who makes 27k who bought a 450k home with 150k down, also with a negative amortization adjustable loan. THAT'S what got us into this mess. Disclaimer: I live in one of the foreclosure hot spots, the central valley of California. - Petunia Thu, 26 Aug 2010 05:25:20 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4334 I would sell my house in a heartbeat. In fact, we are in the process of doing just that. Right now, our house payment is $1,500 including an HOA fee. After we sell, we plan on renting a place for awhile for not more than $1,000 a month. We are looking forward to the joys of not living paycheck to paycheck. - Nancy Thu, 26 Aug 2010 05:08:22 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4333 @Jaime: Thanks for your honesty with the numbers. I read a similar article about financial honesty and it's truly amazing how much we would all benefit from removing the judgment and emotion tied to how much we earn, what we own, how much we spend, etc. It's also helpful to see that options are available for (almost) anyone that takes a realistic look at costs, no matter what their income level. It's just a matter of choices. The talk here is all about houses - does anyone have experience with buying and financing rural property, i.e. unimproved or almost unimproved land? My husband and I are just getting started in our search and the loan landscape is somewhat different. We need to think not just about the land, but what the improvements will cost. The 2.5x income ratio seems to be a good benchmark for the "completed" project, though. And we're just using my income to do the figuring (that's our "under our means" trick). - Paula Wed, 25 Aug 2010 23:52:16 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4328 The mortgage calculators are VERY generous. According to both of them we bought anywhere from $50k-$150k what we could "afford". I still think 2.5x your income is the good measurement and well under what the calculators recommend. $208k loan on $65k a year is what got us in this mess. - YourBarefootBooks Wed, 25 Aug 2010 20:02:47 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4326 @Jamie - using net over gross is a great point. I need to think about that - it makes sense in thinking about how much we have to work with in the first place. @Arlene - what do you recommend? We're all for hearing criticism, though we would prefer you included your own solution as a counterpoint. Thanks! I love hearing all of you living under your means. I wish there had been a DailyWorth when we bought our house (I hadn't yet gone through enough financial stress to warrant creating it) - we probably would have bought a house 1/2 the size and 1/2 the price. I encourage all first-time home buyers to use some of these commenters as roll models - if you could buy a home on 25% of your NET income - do it. You don't need that much house to feel comfortable :) - Amanda (DailyWorth Founder) Wed, 25 Aug 2010 18:43:41 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4325 Hi I thought there was some 'old school' notion that you shouldn't buy a house that was more than 2.5x your annual income, e.g., 100K income means a house of no more than 250K. Does anyone know where that came from or has anyone else heard this? Our mortgage payment is about 12% of our gross monthly income (I take the point of the previous poster that you should use net, but I don't konw that off the top of my head). But, 12% is high enough; I feel like we have a lot freedom to contribute to our 403Bs, 529s, do home improvements, travel etc. I think people should look at historical house sizes; there has been outsized growth since immediately post-WWII when average houses were somethign like 1200sq ft, and that was fine! - Cynthia Wed, 25 Aug 2010 16:36:07 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4324 I'm a married twenty-something living in the Southeast with no kids (yet), and apparently my husband and I are living far below our means. Our mortgage payment is currently 12% of our gross monthly income (which includes PMI and escrow payments for taxes and insurance). Add in utilities and it's 19.7%. Our total debt-to-income ratio excluding utilities (which includes a car loan and two student loans) is 20.3%. We live in a relatively small, older home purchased with 100% financing. At the time, our gross income was almost 20% less than what we make now. According to the above article and links, we could now easily afford twice the house we currently live in. While that would be awesome (our kitchen is tiny!), my job situation is less than ideal and I'm considering a quarter-life career change. Going back to school would cut our income in half, so for now, we'll just continue to sock away our savings. - Melanie Wed, 25 Aug 2010 16:31:55 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4321 Well, I paid 231k for my current house, and I made 42k when I bought. I make 48k now. I also receive 6k child support. I have been in the home for almost 3 years, and I am managing just fine. I put down 20% plus closing and have a 5.25% 30 year fixed mortgage. Of course, I wish I was buying now instead of 3 years ago, but I can't change that. - Petunia Wed, 25 Aug 2010 13:14:38 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4318 Hell YES! I would sale in a heartbeat to have less debt. At the end of 2007 my husband and I were presented with an offer we couldn't pass up. Man how I wish we had! We purchased a home that appraised for over 375K for 325K. We put 40K down... Yet somehow the bank wouldn't accept the shop improvements as part of the appraisal, which brought it down to 335K. That meant we did not have 20% equity and were required to get PMI. It gets better...We already owned a home with a debt of 205K, but it appraised for 240K. We were able to qualify without saling first. Thinking we wouldn't have a problem selling, the house was completely renovated two years prior, we dove in. We signed papers in January, the bottom fell out in March! Now we have 2 mortgages worth almost 4500 a month and my husband works for himself and the economy went to crap. Now we struggle every month to stay caught up. I've talked about selling, but my husband is very against taking a 40K hit just to keep from struggling. Hind sight! - Denise Wed, 25 Aug 2010 11:58:54 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4315 Interesting. I am suffering from extreme FRUGAL FATIGUE but still so glad that I haven't gone out on a limb. Having been without a job for over 2 years, I have lived very carefully to continue in my DEBT FREE lifestyle. I own a condo with a paid off mortgage, no car debt, no credit card debt, and am happy. Yes, I'd be happier if I could replace my 7 year old BMW and would love to have a bigger place to live but I sleep well at night. - Designgirl1100 Wed, 25 Aug 2010 11:38:39 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4314 There's an interesting article on msn today about homes costing less than a new car in some markets. Take a look. Foreclosures, short sales, desperate sellers. A tough time for sellers, a hot time for buyers who do their homework first. - jodi Wed, 25 Aug 2010 11:37:32 +0100 http://www.dailyworth.com/blog/512-how-much-house-can-you-afford-now#comment-4312 I live in Texas and along with my boyfriend, we purchased a short sale home for $140 and together we make about $70k. Neither of us have car payments, and one credit card has $500 on it. We also have the added bonus of renting out spare bedrooms to a friend (I am 24 so it makes sense seeing as we do not have or want kids in the near future) and with all of that said I would say we are at just the right amount for a house payment to live comfortably. Short sales make a nice investment if you have time/patience to deal with the hassle. - Sarah Wed, 25 Aug 2010 10:01:27 +0100