Post # 31
We built our home and we were approved for 500k, we also sold our condo in an very popular area for 495k so we basically took the sale money and used that for our home. We are also closing on a home for my mother next week, we budgeted 140k for it and the house is 130k; we plan to do another 10k for the safety hazards on the home, hoping this budget doesnt get blown.
Post # 32
dianaj17 : maybe I screwed it up but we spent more than the calculator says even though our income was lower then. We are very easily able to afford our home. We are only paying about 400 more than we were in rent and have a 15 year loan (we are 1/3 of the way done, yay!) and we often pay more to reduce interest. I would never buy out if my ability so I can only assume something went wrong with the calculations – maybe because that advanced section had info I know nothing about?
Post # 33
dgirl715 : I had the same reaction! On my salary alone the the calculator said we could be looking at a 1M home — which is INSANE! Now my husband earns the same as me so we both have good salaries but still we didn’t feel comfortable going anywhere NEAR that amount! It would have meant we were scraping by with nothing left over to put towards savings….erm no thanks!!
No wonder so many Americans are in financial distress/insane debt when this is the type of financial guidance they get when making their largest purchase/expense outflow decisions!!
Post # 34
Wow, this is the most inflated calculator I’ve seen. It says we could afford a 700k house with 0 down on a 150k combined income, or a 900k house with a 100k downpayment. Meanwhile the real estate rule of thumb I’ve always heard is to buy a house no more than 2-3x your annual income, which is much more in line with what we feel we can afford. We’d like to buy a 300-400k house; we’ll just have to move to a more affordable area of the country before we can do that. A million gets you a modest 2 bedroom apartment in my city…
Post # 35
We bought in the low end of the recommended range on a calculator, but it was a calculator from our lender (small local business) not one of these inflated online. We definitely topped out our budget a bit and and are a bit house poor…. but a modest 2 bedroom home where we live is easily 350,000+ and if we waited to do the “shouldn’t be more than 2-3 times your annual income” lol we would literally never even get a condo. We are still saving 20% of our income a month, using 10% for personal spending, and finishing our backyard. It also depends on the rest of your situation, we have ZERO debt. Nothing. So we could push it a little more.
Post # 36
I couldn’t do the calculator to see were Darling Husband and I rank thanks to work filters, LOL.
Darling Husband and I fell in that “we spent what we knew we could comfortably afford” range. Honestly, we were probably borderline “more than we could afford” BUT in our defense, our home was a good investment. Also, in our area our mortgage is less than what it would cost us to rent a place similar to our house and we would rather invest that money than just throw it away in rent each month and have nothing to show for it.
We absolutely did not max out our loan and instead opted for a lesser loan w/ a 20% down payment instead and I’m sooooooooo glad we did that. The only thing we did do was lump closing costs into our mortgage because we planned to spend the few grand that would have cost us out of pocket for renovations. By doing that I think it only added like $12/month to our mortgage each month.
Thankfully for us though, we bought an out-dated home plus land, our lender even told us that we essentially only paid for the land since the home was older and it didn’t provide much value. Now though, we’ve invested and updated it and know that we could sell our home and land for twice what we bought it for because the housing and land market is booming in our area… which we never plan to do, but it is reassuring to know that unless we hit some major, MAJOR recession again, we will get more out of our place than what we paid for it.
Post # 37
- Wedding: December 2017 - Courthouse
I think the idea of buying under your budget is similar when you get preapproved as well. A lot of people get approved for more money than they can afford so I would also recommend to stay under the preapproval amount too.
When we were looking for a house we did a few things that made me feel better about our purchase.
1-We calculated what we could afford based on the mortgage payment NOT total home price. Some neighborhoods have a ton of taxes so they might sound cheaper but your actual payment is lower.
2-I made a list of exactly what we spend every month including bills, debt, groceries, fun spending, etc. I wanted to be 100% sure we could afford all of this with a mortgage and still have money left over to save.
3-Think about your future! We always preferred that I would be a stay at home mom when we had kids or work part time. When we were looking for a home, we strictly were using my husband’s income as our budget.
Hope this helps!
Post # 38
We spent maybe 15-20% less than the calculator said we could, but we also put a LOT down from the sale of my first house so our mortgage is only 415K when we were pre-approved for closer to 700K.
The calculator literally is only taking in to account your debt to income ratio. How much debt can you accrue on your income. It fails to account for any other monthly expenses. My advice is make a spreadsheet of your actual monthly take home income after taxes. Make line items for bills (considering that utilities will go way up with a house depending on where you’re at now – electricity on a home versus apartment, trash & sewage, etc.), savings, any other expenses you have (do you get your hair done, what is your going out budget). For example, we bought this house as an upgrade to have more space to have kids, so I needed to account for $1500 a month child care and $500 a month or so for baby expenses, and these items would not be considered in a debt to income calculator. So I used Excel to add in these future / non-existent expenses with line items for all of our bills and expenses, and figure out realistically what our max monthly payment could be, and used THAT to calculate the mortgage we could take on. I based it solely on monthly expenses and not a home price amount. I told our Realtor we needed to be at $3000 a month max with mortgage, interest, taxes and insurance and she worked the numbers.
Also, consider the fact that home ownership, while it has its perks, comes with a LOT of extra expenses you may not consider. Moving costs, changing locks, toilets, utilities, buying things like ladders and trash cans, all add up soo fast for the first few months. Then things break – the AC, the washing machine, you want to replace curtains, buy a new sofa to fit this room, the expenses are honestly never ending. So you need to have enough padding in your budget for both unwanted and wanted expenses that may come up.
FYI – where do you live?! I am jealous. $165K in So Cal would be literally a 600 square foot house or something condemned.
Post # 39
Oh that’s where I went wrong. I assumed ‘monthly debt’ meant expenses. With zero debt, I, too, can “afford” a home well beyond my means. We spent less than half what the calculator suggests. Man you could really make a bad decision based on that thing!
Post # 40
We were approved for $320,000. We ended up buying our house for $264,900. I didn’t want to go anywhere near our max. We calculated our monthly costs and how much we could comfortably afford. We kept in mind our plans of having a baby and me being off on EI. works for us
Post # 41
- Wedding: August 2018 - Location
Where do you live that housing is so cheap?!?
We paid ~$670,000 for our first home with 20% down. It’s a new build (only been here three months) so we got locked in at the price from two years ago when we reserved! We can afford the monthly payments and our house has gone up 100k since we bought it. Planning to move in the next 3 years into our “forever home”.
Also we have no other debt.
Edit: your calculator says we could afford 830k lol.
Post # 42
skunktastic : I’d say it’s actually better / more accurate if you did it that way! That’s how it should be realistically, what are your monthly expenses / needs and wants. If someone truly only does debt like the calculator is set up for, the numbers can be way off. If you research it, your debt to income ratio should be less than 30% but that really is only supposed to account for MINIMUM payments on credit cards, etc. Seems way off base to me! Especially if you do have credit debt and only look at minimum monthly payments that’ll take you 30 years to pay off the CC. That’s why I used Excel, I didn’t even use our gross income I looked at our take home paychecks and all current / future expenses and just added it up for a bottom line.
Post # 43
I would not lisyen/follow those calculators. They definitely trend towards the high side.
My husband and I just purchased a house. We went through our monthly expenses for the last year and we factored extra money in for childcare because I was pregnant at the time. We then bought a house in the higher end of what we could afford on my husband’s salary alone. We would have preferred to have spent less but we are planning on this being our forever home and we need a good school district, which in my area, you definitely pay for!
I’m all for cutting corners and finding out what you need us. What you want so I can understand not wanting to pay for a school district you aren’t using you do still need to think about resale.
For our first house that was a bug factor because we knew we would only be there for a few years. We where there for six years and sold it iness then a week. For this house that was not as much of a concern because we know we won’t really be ‘making money’ on it since by the time we sell it this area won’t be as desirable (most likely) so we were mostly focused on what we wanted and needed in a forever home as opposed to thinking about resale
Post # 44
Yikes, seeing all of these American house prices makes me feel terrible about the market where I live. The median house price in my city is about a million dollars. And that’s for something basic and not necessarily near transport/amenities.
Post # 45
The calculator says we could afford up to 1.6 million, which is more than double what we paid! It seems like it might overestimate a bit. Of course, how much you end up spending will depend a lot on the cost of living and housing market in your area. But we live in a pretty high cost of living area (California), and I still can’t imagine spending so much on a house.