Post # 1
I know this is kind of personal, so feel free not to answer. I can’t put a poll up because there are too many components to the question.
DH and I are house shopping. We had a couple we LOVED and made an offer on one, but they didn’t accept. We ultimately decided that was for the best, because the city it was in was pretty far from our jobs. So, we’re deciding what we want to keep our budget at for when we start looking again.
We make about $72000 annually (combined) and we are approved for a home up to $340000. That is WAY too high, and neither of us are comfortable with a mortgage payment that steep. We’re thinking we’d prefer a mortgage payment around $1000-$1200, and with a 20% down payment, we should be able to get that for a house that costs $180,000-$220,000. We could go higher, but I don’t want to be house poor. Right now we pay rent of $750, all utilities included. I don’t want to shock our finances by doubling our monthly amount we pay for dwelling. However, I know you can also “grow into” your mortgage payment, and that it might be tight for a few years. I don’t want to get a house for “cheap” just to have smaller payments, and then want to move after 3 years. Also, we could put more than 20% down, but if we go over $50 or 60k, we’ll be significantly dipping into our savings, which makes me nervous. I like my money where I can see it!
So: how much do you make combined, and how much are your payments? Do you feel comfortable with them? Would you recommend a nicer, longer-term home with huge payments to grow into, or a smaller, possibly shorter-term home with tiny payments so you can still maintain a nice lifestyle?
Post # 3
Are you factoring in insurance and taxes into your monthly payment? Make sure you do – it adds a substantial amount.
We bought a $476,000 townhome in the San Fran area in November. Our mortgage payment is about $1600, but with taxes and insurance, it is about $2150. We make about $185,000 a year combined. It’s well within a comfortable range for us.
I think you should only buy what you can afford now. You don’t know what will happen with your jobs in the future – I think it is unwise to bank against raises and promotions that may never happen to bolster the affordability of your home.
Post # 4
@crayfish: Thanks! That’s my line of thinking, too. With the economy the way it is (and just in general), I feel uncomfortable paying more than 20% of my income to my mortgage every month. Plus, in the midwest, $200,000 will buy you a lot.
And yes, we were factoring approximate taxes and insurance into our monthly amount. It’s crazy how high that can be!
Post # 5
You’re definitely asking the right questions and a house can be risky if you don’t look at the long-term picture. We were also approved for a crazy high figure ($380k i think) and we knew we did not want to use that. Combined, we make about $110k and we bought a house for $175k. Our down payment was 10k, which was less than 10% of the house’s value. I was a little concerned about the payment because I wanted to put more in, but we wanted to get a mortgage while the rates were so low. We actually did the math and realized that for us, waiting another year for a larger payment would not have a significant benefit. We got a 20-year mortgage instead of a 30-year, and our payments are just under $1200 per month. Our rent was originally $950 so the home payment wasn’t a huge stretch for us, and we save money elsewhere with utilities and commuting together. We feel comfortable because the payments are very manageable for us and we’re building more equity in these early stages. In a worst case scenario where we could not afford payments, we could refinance to a 30-year to reduce them.
One option you may want to consider is a cheaper, smaller home with a shorter term mortgage, because you’re building more equity now that can be used towards an upgraded home later.
Post # 6
we make about 115K together and our house was about 175K we put 5% down because we wanted to put money into the house as well. our mortgage is only like 740 but taxes are really high in our area so with taxes and insurance we pay 1300 a month. we first started looking at houses in the 220K Price range and i didn’t want a payment to be into the 1600- 1700 range just too high for us, my husband still has a car payment and we have some credit card debt that we are paying off… stay where you are comfortable! You can always sell later when you both make more money, this home is not our forever home but maybe a 7 year plan…
Post # 7
We bought our starter home for $82k (2bd, 2bth, 1200 sq ft). Our mortgage is $506 a month with taxes and insurance included and we put 20% down for a 30 year fixed loan. We painted and put new floors in and raised the value to 115k. We are both full time college students in our senior year. We make about 40k combined right now but both have job offers of 65K+ so we will have combined 140k most likely next year. We will stay in this house for about 5 more years and save to buy our next home (likely in the 150-200k range).
Post # 8
- Wedding: August 2013 - Rocky Mountains USA
You’re smart to ignore your approval number and just try to figure out what number YOU’RE comfortable with!
When we bought our house last year, I made ~$50,000 pre-tax and my FI was still in school. We purchased our house for $130,000 with 10% down – it’s a small 2 bedroom 850 sq foot house that’s perfect for the two of us. Our mortgage + tax + insurance payment is $725/month, which is about 20% of my pre-tax income. However, my FI just started his job which also pays ~$50,000, so our mortgage will only be ~10% of our income.
We’re very happy to be able to pay our mortgage with such a small chunk of our income. However, we wanted to buy a “starter home”, not a “forever home”, which would obviously change things. Our philosophy was, why pay for a lot of extra space that we don’t need??
Post # 9
How much do you make combined? 150k
How much are your payments? House was 240k, put 12k down, payments are 1800 (that’s including taxes and insurance)
Do you feel comfortable with them? Yes
Would you recommend a nicer, longer-term home with huge payments to grow into, or a smaller, possibly shorter-term home with tiny payments so you can still maintain a nice lifestyle? I’d definitely recommend a smaller short-term home over a house with bigger payments to grow into. I’ve seen too many people get in over their heads with homes and I wouldn’t want that stress. There are too many unexpected expenses that come up that you need to have extra money for, so you don’t want to be just getting by every month- even if you think it will be temporary.
ETA: I just noticed your combined income is about half of ours and I think it is crazy that your approval is for 100k more than the house we bought. I would not feel comfortable with a mortgage of 340k and we don’t have any other debt! In my opinion, banks continue to be really irresponsible with mortgage approvals. It is no wonder that there are so many homes in foreclosure or going through short sales!
Post # 10
@QueenOfSerendip: We make about $80K combined. We bought a home for $155K, and our montly payments are approx. $950. We bought a 3 bedroom, 2 bathroom split level home, which we wnated to make sure would be big enough for us and two kids.
I absolutely hated moving, so I would chose a long term home rather than short term. We knew we wanted a house that could accomodate future kids and pets, so we made sure to look for the right stuff when house hunting.
Post # 11
We make about $250k combined. We bought our $525k house with a $225k downpayment and then a 2.3% 5 year variable mortgage on the $300k. Our monthly payments are $1300 and we have the ability to double them, as well as pay off an extra 15% of principal each year. We are quite comfortable with that – we make our payments as well as pay about $25-35k extra each year – we have had our house 2 years now and our mortgage is already down at $190k.
Our other monthly house costs (property taxes, home insurance, utilities, etc) are probably around $700.
I would recommend payments that you are easily comfortable with – where we are now we could still afford everything even if one of us got fired/sick/died etc.
Post # 12
@QueenOfSerendip: depending on the interest rate you get, you are probably better keeping more money in your pocket. put the 20% down but don’t go over than unless you need to have a smaller mortgage payment.
when i bought my house last year, the guy told me the monthly mortgage payment decreases $20 for every $1000 you put down on top of the 20%.
he told me it wasn’t worth it and i got a 4% interest rate.
Post # 13
We currently make a combined $130k.
When we bought our home 2 years ago, I was still in pharmacy school, so we based everything solely off of DH’s income ($78k). Our home, which is a rather large (~2200 sq. ft.) townhome in a nice area of a major city in the Southeast, cost $225k (we were approved for about $300k but would NOT have been comfortable with those payments).
Thanks to my family’s generosity, we were able to put down 20% and take out a loan for $180k. We originally financed for 30 years since that’s all we could afford. I was barely making any money at the time, and we were still paying off my husband’s car and student loans. We were recently able to re-finance for a 15-year mortgage at a much lower interest rate! I think our monthly mortgage is about $1200, plus our HOA and insurance.
A couple thoughts about the process:
I am so glad that we are able to meet all our payments (mortgage, insurance, etc.) on DH’s income alone. It really takes the pressure off of me since my current residency is for one year, then…??? I’m not sure what kind of salary I’ll have, since I may do another year of residency or try to work part-time. Or take some time off to have a baby! I know this isn’t a possibility for everyone, but it’s something to consider.
Since we’ll be staying in this home at least another 5 years if not more, I think it was definitely smart to buy when we did. We really enjoy being home owners and like that we’re building equity. We would like a little bigger stand-alone home with a yard someday, but for now our townhome is perfect and could feasibly work even when we have 1-2 little ones.
Our home was a bit of a fixer-upper (hence the low price), so we’ve definitely had to put some money into it along the way. For us, that has worked better than being locked into a higher mortgage for a move-in ready updated place, since we can spend money on projects as we’re able to. Last year we decided to take a break from house projects and go on a nice trip to Europe! The flexibility of having an affordable mortgage is very nice.
Post # 14
Combined, about 150K. The house was 176K. Payments (with escrow) $1400. We put 20K down on the house.
Post # 15
You’re wise to not go near the max. I remember watching one of those My First Place shows and the man kept on saying, “We were approved for $(insert high amount) so we should look in that range. Banks know what they’re doing.” I wanted to reach in the tv and slap him.
Post # 16
DH and I never did a preapproval when house shopping. We told them what we were comfortable spending and didn’t want to know what the preapproval would be because thats one reason how this whole housing crisis started.
We make roughly 85k/yr combined. Our house was 210k and our payments are 1300 (principal/interest/taxes/ins). We were renting for 725 but it didnt include any utilities, plus I didnt contribute then it was all him. Our utilities are substancially higher now than in the apartment.