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I'm trying to get a house that's towards the top of my qualifying level & my mortgage payments would be almost 50% of my income. Right now its just me with a job, FI is in school & when he's done (end of May), he will be contributing as well.
My question to you is, how much of your income goes towards your rent/mortgage payment NOT including house bills? I made a pole so if its too personal, you could just vote & no one would know ;).
I work in the mortgage business
You really shouldn't go over 31% of your gross income
**EDIT**
And most banks will not approve (originate) a loan for you if does exceed 31%
When FI gets his job, it changes our percentage to around 35% of our combined income. So that will be good, but for the first 2, maybe 3 months it'll just be on me.
& as a couple, your combined income, I'll update my poll question :)
We still split the rent 50/50 because the FILs help R out in addition to the pay he gets for working, so my rent is right around 40% of my paychecks for the month. It's not ideal, but I'm a broke college student and I need a roof over my head! Rent's really expensive in the city.
I'm approved for the loan already, thru the bank & they have all my finances & say I qualify for the house that's 50% of my income... actually, if I pay off this 1 bill that's about 50/month then I qualify for houses that are 70% of my income. No way would I take that house, even thou I'm approved for that, its completely unrealistic... I mean, what would I eat? Wallpaper? Then i'd have to go buy more...
@serabell
Now when you say "mortgage payment" you're talking about the whole payment right? Not just the P&I ? Alot of first time buyers are just focused on the house payment alone and dont also realize to factor in escrow
Ours is pretty low while we rent and save for a house. Renting can be pretty cheap in my city, but buying is very expensive!
But I agree with WendyS328 that banks will not usually approve a loan where the percentage of income you put toward your mortgage is greater than 31%-35%. And if they do, the interest rate on the loan would be really high. So you might have to wait until your fiance has a job so that his income would qualify you---I doubt they would count projected income :(
The rent I have now (with roomies) is 15% & its wonderful! But when I get married, I have to move out of the place I'm at. Rent around here is super expensive & NO ONE allows a dog over 25 pounds & mine's 55. No way could she loose that much weight!
The paper I have says the total monthly payment, for the loan. That includes all insurance & taxes & closing costs & the house inspection & my house payment, its everything with a FHA loan.
Actually my IR is approved at 5%, fixed & for 30 years.
That's a great interest rate!
Sounds like you have a pretty good loan.
With the way the market is right now, you should have had the sellers pay for all closing costs and inspections for you.
Yay thanks!
Its a short sale, they won't do all my closing costs but they'll do about half or so, I think... I got a verbal contract today & I get the official papers tomorrow.
I suppose I'm a little concerned that the bank said I could get a house that's at 75% of my income level. With so many foreclosures, I didn't want to go in over my head, even if I'm told it'd be ok. But 50% for a few months sounds doable, even if FI didn't get his "guaranteed job", I'm pretty sure things would be fine.
@Serabell
Well good luck. I would highly recommend not going over 50% at least, and even that is really high for DTI (debt to income ratio)
I mean right now, I'm working on a Gov't program to get peoples' DTI AT 31% that was raised due to a job loss when the economy went bad.
25% of our combined monthly income goes toward our mortgage. I would not recommend getting a mortgage that costs you 50% of your income. It would be very hard to make it in my opinion. Things can go wrong in homes and you will need to have money to fix them. You aren't giving yourself a lot of extra money if 50% of your income is going toward your house. Utilities, food, medical bills, cars, and insurance will take up your other 50%. Where is your fun spending money and your money for emergencies then?
I took a finance class in college that said your "must have" expenses should never take up more than 50% of your income. Must have includes mortgage/rent, insurance (health, car), and utilities (not cable/internet). Food actually belonged in another category but I think it is pretty necessary and "must have" :p
Please be careful because there is always a chance your FI won't get a job (even if he is "guaranteed" one upon graduation) and then you will be stuck paying 50% of your income just to your mortgage. It sounds okay now, but what if emergencies come up or you want to go on vacation but just don't have the money?
Good luck with your decision!
(The book is called "All Your Worth" by Elizabeth Warren if you want to look it up!)
personally my rent is 30% of my income, with FH factoring in its 19%...
(meaning if i had to i can carry the rent, but FH pays half)
honestly you shouldnt go above 30% of your take home income. its not safe and you will be screwed if something happens to your income. i get where you are thinking ahead of what yall WILL be good for, but live for now not the future when it comes to expenses. its better to not spend money thatyou dont have.
My rent is 20% of my income. When I get my house my payments will be $0, not including home insurance, property taxes, utlilities, etc. (I'm paying for my house in cash)
Our rent is about 25-30% of our monthly take-home (which is a huge coup with Manhattan prices where it's generally expected to pay a higher proportion). That doesn't factor in FI's bonus which is general 100% of his salary or mine which is about 20%. Of our yearly take-home all-in, and factoring in our 1 month free incentive, our rent is roughly 10% which is AWESOME!! It took us 4 months to find this kind of deal for a place we would actually live.
Ours is around 20% of our net income (it's even less if you want to factor by gross income). That's what we were most comfortable with, and I agree with the mortgage biz bee above - I wouldn't recommend going too much higher.
Ours is 29% of MY income. But gross income? Right at about 35% Just one of ours incomes, though. Honestly, we couldn't handle a bigger mortgage--it's tight as is. My husband isn't working and it's really great to know we can afford our mortgage on just ONE of our salaries--because between me going back to school and us having kids in a few years, one salary is pretty much all that will be left. And on top of home insurance and taxes and stuff? It ends up being more in the long run.
It used to be under 20% - our landlord cut our rent from 1200 to 1000 after our lease ended because we found another place and she didn't want us to go. But FI changed jobs and now it's closer to 30%. :-/
@twalila either you guys are a)rich b)living in a cardboard box, or c) the luckiest SOBs in Manhattan! Kudos!!
45% right now but thats just me paying. I leased the place for both of us so once FH gets here (soon!) that percentage will drop significantly.
Our rent is about 31% of our income (not including any other bills). I'm not sure how you would be able to afford 50% of your income as a home payment, that seems really high.
I think 50% is too much! We pay about 25% of our take home pay (includes mortgage payment plus property taxy). I suppose if one of us lost our job, that would shoot up to 50% and we would make ends meet, but we certainly wouldn't have bought our house if one of us was unemployed.
Just because the bank approves you for it doesn't mean you should spend that much!
I would recommend basically pretending like you actually own the house already and have the mortgage payment every month. Whatever money you would spend on the mortgage should go to your current rent first, and whatever is left over (the difference between the mortgage payment and rent payment) should go into a bank account that you don't touch. This should give you some idea if you can afford a house that is 50% of your income.
We are in a different situation because I still own and pay for half of my sister's house, as well as ours. And we own another piece of land, too. With our house's mortgage, my half of my sister's house, and our property payment, we are at about 29%.
Just our house alone is around 13%, so that is probably more the number you are looking for.
And honestly, we are in the process of selling the land and my sister's house, and can't wait to get rid of them! I personally feel like that 29% is way more than we want to be spending! I would definitely aim for less than 20% of your income, especially for your first house.
Ours mortgage/tax/insurance payment will be 35% of our combined take home income. You can't always judge on what a bank would give you.
What you should do it put together a list of all your expenses not just bills. This will help you determine how much is left over for a mortgage payment. I have an excell spreadsheet that FI and I put together to figure everything out. Message me if you would like me to send it to you and I would be happy to.
Good luck!
From our combined take-home income, our mortgage is about 30%. If we went off of just my take-home pay, our mortgage would be like 90%. :) Lol, I don't make nearly as much as my husband.
Have you looked at your overall monthly budget to see if those payments are realistic for you? I could see this working if you paid little to nothing on utilities, groceries, entertainment, etc... and if you had had no debt whatsoever (no car loans, no student loans, no credit card payments, etc...). Will your FI be picking up any expenses that will lower or eliminate your other monthly bills?
Ours used to be about 40%, and that was really, really rough. After I graduated, its down to about 20%, roughly, after taxes. We intentionally bought a house that we could afford on one salary, just in case anything ever happens.
Dang! 5% is awesome! I think in about a year or so we can qualify to refinance for a lower interest rate. Or at least hopefully it'll still be this low by then! I think ours is 6.25% fixed.
My mortgage (including taxes and insurance) is about 17% of my take-home pay. I cannot imagine being comfortable with anything approaching 50%. That doesn't leave much room for error. Of course, I live in the Midwest, which makes things easier.
Right now...I own my own home and live alone with my daughter. My mortgage is around 25% of my take home pay. It works for me b/c I am working on beefing up my savings and increasing my 401K contribution.
About 32% of Take home for both of us goes to Mortgage, Taxes, Insurance and Condo Fee.
Fi and i split our mortgage (obvi)... and i'm at 26% of my wages it's comfortable and do-able for us!
I do believe you that the bank has already pre-approved you for 50% of your income. However; THAT IS WHY SO MANY PEOPLE ARE IN TROUBLE RIGHT NOW!!! The bank doesn't really care weather you can afford it or not. They want your money. If your paying any interest; they're making money. They are struggling too. It is in every book you read about never going over 30% of your income on your mortgage. Our Mortgage is only 23% of FI and I's combined income (that includes escrow & home insurance). We do not struggle but we do have to cut back in order to put some into a savings. I would definatly reccomend NOT signing up for that amount. No matter what your situation is suppose to be like in years ahead; you never know what the future holds. I know lots of people who have been without employment for YEARS now. It's tought right now. I would listen to most of the advice here telling you to re-consider & lower your mortgage amount.
We're paying 24% of our take home income for the house + property taxes.
I think we would still be comfortable at 30% though, if we had to be.
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