Random Mortgage question

iVillage Member
Registered: 05-09-2002
Random Mortgage question
13
Wed, 06-07-2006 - 3:14pm

So, I am no where near ready to buy a home around here but posting that a "starter" home around here would be about $300,000 on the what I WISH I spend money on post got me thinking...I have no idea what kind of salary could afford that. And how do you even figure out what you CAN afford when you factor in debt?

I was thinking that my bf and I make about $100k combined, but we both have student loans and debt. (And obvioulsy we would do ALOT better living together and sharing expenses but I don't want a home with him unless we are married, but i just started to get curious. We both feel broke on our own lol) .

I don't want too much home at all - I would rather have a smaller place with money left to eat out and go out in the city if possible and of course, get of of the debt hole but its super expensive here. And I am sure expenses I never dreamed about will come up. A townhome would be $200k and a home home would be alot more. We both have good vehicles so I would want to get rid of one of them and be a one car unit. I have no idea the first thing about mortagages...at all. And this is the first time I've thought about marriage and I am 30.

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iVillage Member
Registered: 12-01-2003
Wed, 06-07-2006 - 3:27pm

The best way to get an idea is go to a real estate website such as www.realtor.com and look for homes in your area. then you can go to www.dinkytown.net and use the calculator link to "mortgage calc" and you can input your variables such as total home price, interest rate on loan, and down payment. You can also run in the reverse way and put in how much you could put towards a monthly payment and it will give you a total home price.

Hope this helps!

iVillage Member
Registered: 05-09-2002
Wed, 06-07-2006 - 3:30pm
Thank you so much. This is wonderful! Maybe my wish of what I want to spend money on is on its way to someday becoming a reality.
iVillage Member
Registered: 05-10-2006
Wed, 06-07-2006 - 4:11pm
Just wanted to mention that a lot of places (realtors, banks, etc) will try and tell you that you can have a much larger house than you can actually afford. Make sure the payment isn't more than 25% off your income (I use net income) because there will be taxes, insurance, broken water heaters and repairs and if your monthly payment is too much then you can't afford the upkeep. When I was house shopping years ago, I was approved for 250,000 for a house. I figured out that was half of my take home pay and cut the number down to 100,000.
iVillage Member
Registered: 05-09-2002
Wed, 06-07-2006 - 4:19pm
Thats a really good point. Bf's father is head of a small town bank in the area so hopefully he wouldn't advise us to take more than 25% calculation if we ever do end up taking the plunge with a marriage and a home! I don't have good credit. Boyfriend does. Even if married, could we go on just his credit?
Avatar for 2locachicas
iVillage Member
Registered: 05-14-2003
Wed, 06-07-2006 - 4:25pm

Remember, while a Townhouse may be cheaper you will have monthly assessments that can get steep(around here they can be up to $400 a month) and they can go up yearly if the association has a need.

Not to lure you away from TH because we own one and love it but it was a lesson to us.

iVillage Member
Registered: 05-09-2002
Wed, 06-07-2006 - 4:31pm
Thank you. Since townhomes are about $200k, I might consider moving farther out of town and pay about 50k more for a single family home. I don't want to be a part of any association so that is a wonderful point.
iVillage Member
Registered: 05-30-2006
Wed, 06-07-2006 - 5:43pm

When we bought our house 2 years ago we were told its all in who you deal with. Different compaines will want different things. We went thru a mortgage broker to find something right for us. We ended up with a company who made a deal with her that she would give them $1 million more dollars of business in the next year if they approved us. We were a hard case tho. I credit was ok to get a loan but our debt to income was horrible. Because my income is non verifiable we had to go just off of dh's income. So with our van payment and our house it puts us at a 51% debt to income ratio every month....ALOT higher than they like to have, but understood we were a hard case.

We were always told that aprox 3 times your yearly salary is what you can afford. Or 33% of your monthly income.

I am sure things have changed in the last 2 years....GOOD LUCK!

iVillage Member
Registered: 01-25-2006
Wed, 06-07-2006 - 6:23pm

I just wanted to say sticking with a payment 25% of your net income could be a pretty conservative number. I am not one to advocate being house poor but I also hate to see people waiting any longer than necessary to get themselves in the housing market. Renting is just such a money pit for most people. I would use 25-30% of your gross for an upper limit and I would also warn against buying something you know is inadequate (in size or quality) with the thought that you'll upgrade sooner rather than later. It is very expensive to sell property so unless it is really necessary, you want to hold property as long as possible. If you buy something you know isn't going to work in the long run to stay to that conservative payment amount, it might cost you more in the long run to upgrade when your salary increases. Of course, everyone has their own issues and comfort levels. If you know your job is always somewhat dicey or you have a real low tolerance for financial stress, you might want to move more towards the very conservative numbers but if you have a stable job that you can expect reasonable raises in salary over the next few years, I think that a mortgage is one place to stretch your limits because soon, it won't be a stretch at all.

Peg

iVillage Member
Registered: 05-10-2006
Thu, 06-08-2006 - 12:40am
I guess it definitly depends on your comfort level. I was approved for a loan of 5x my gross yearly income 8 years ago and the monthly payments would have been 50% of my net unless I opted to drop my health insurance and 401K payments (min amount). Anymore so many companies only pay 1/2 to 3/4 off your insurance premiums that I would not want to base any financing on gross. If you make 2800 a month and pay 250 for health insurance and then you have 20% in taxes you will only bring home 1990.00 a month. A 30% payment off of the gross is 840.00 or 42% of your net. If you have a car payment or kids in day care, you may not have enough left to pay all of the rest of your bills. I am always a bit more conservative with things like this since a mortgage is around a long time so it is a major commitment. Of course I also had almost no help from my spouse in paying bills (some of which were determined from when both of us were working)since he didn't like to work. I really try and keep a bit of a cushion between what I make and what I will be paying in case of Murphy visiting or a bill being higher than expected.
iVillage Member
Registered: 05-09-2002
Thu, 06-08-2006 - 9:58am
Thanks for all the wonderful advice! I do like the idea of sticking to 25% - it will be difficult around here with the housing costs, but hopefully my salary goes up and housing goes down lol. I don't want too much home at all and the homes around here are so old there is alot of upkeep. It is smart to think about getting "enough" home though. I have debt, but I should have EVERYTHING paid off in three years. Personal loan, Visa, Student Loan and Car Loan. GONE. Done! Hopefully. I refuse to use any credit cards anymore and actually not only are they all cut up, the are also cancelled so its not like I'll get back in debt there. (I know not great for the credit, but good for me to not have any more believe me). Once the debt is gone I should be in really good shape. I don't have children and I am not sure if I want children but if I do, I don't want to have any for 5 more years...so I should be in good financial shape for a home in a few years...I hope...we'll see....

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