How much house can we afford? what would the monthly mortgage payments look like?

Anonymous
OP, I'm in a much lower income bracket, so maybe I'm just thinking small time here....

But I would advise anyone to buy significantly less than they can actually afford. My husband and I qualified for our house on just one of our salaries, and we each make about the same amount. It just feels so much better to not be chained to a big mortgage payment.

I've read so many threads on this site where people are struggling to make ends meet, despite their high salaries. Its usually the mortgage that is eating up their money.
Anonymous
I'm the PP who said that $650K house is your max if you want to keep house payments (PITI) to $3,000 or less a month. To 17:23, I think you can currently get a 3.75% on a jumbo conforming loan amount (above 417K below 625.5k) for a 30-yr fixed if your credit is good enough. To OP: You can't get a 650K mortgage and keep house payments at $3,000 per month or less, unless you want an ARM instead of 30-year fixed. If you want a 30-yr fixed and PITI of $3,000 or less, your maximum loan amount is probably around 520k.
Anonymous
OP here - the low mortgage interest rates are so appealing and if we wait too long, I feel as though we may miss a great opportunity. Tell me about the rates - is there some general formula. Like for every 1%, there is a difference if $x in monthly interest payments? Right now we have a 30 year fixed on a $400k loan @5.25%. Home is easily worth $650 - purchased 10+ years ago.
Anonymous
21:14 - sensible advice, but in some cases, buying on only one salary may mean that the buyers have to buy much farther out than planned, or buy in a not-very-good school district. I'm not sure I'd take on a long commute or put my kids in bad schools just to save $500/month or whatever. In certain markets like North Arlington or Bethesda, buying on one salary isn't going to buy anything. But yes, I'd try to stick closer to $700K than $800K. You won't get an amazing house around here for that, but in a lot of areas you can get something nice.
Anonymous
There is no formula, in part because rates change by amount. In the DC area, the cheapest rates are on mortgages less than $417,000. These are called conforming mortgages. The next cheapest rates are for mortgages between $417,000 and $625,500, called jumbo conforming mortgages. Above $625,500, you will need a pure jumbo mortgage.

As of right now, for a 30-year fixed, I believe you can get 3.75% or less for a conforming mortgage, 3.75% or 3.875% for a jumbo conforming, and 4.125% or higher for a pure jumbo, if the borrower(s) have credit scores of 760 or higher. If your credit is less than that, the rates will increase.

There is no exact relationship between loan and mortgage amounts because of (i) the higher rates as loan amounts get higher; (ii) principal increases as you borrow more; and (iii) property taxes and insurance usually go up with more expensive houses. (DC assesses property taxes at .000875 per dollar of assessed value. So a $1m house will have taxes of $8,750 per year (minus the homestead exemption). For a $600K, $700K, and $800k house, I think the following is a good general approximation (assuming a 3.875% interest rate):

House price: $600,000
Loan Amount: $480,000
Property Taxes: $5,500
Insurance: $750
Principal + Interest + Taxes + Insurance = $2778

House Price: $700,000
Loan Amount: $560,000
Property Taxes: $6,300
Insurance: $850
PITI = $3,229

House price: $800,000
Loan Amount: $625,500 (to stay as a jumbo conforming)
Property Taxes: $7,200
Insurance: $950
PITI = $3,621

You can lower your payment if you get an ARM, but that imposes risks of the rate increasing in the future.

Anonymous
OP, you keep asking the same question as though you're expecting a different answer... the point made by the PP is that with a $200k downpayment (contingent on a house sale) and virtually no other liquid assets, the mortgage on a $800k house will put you over what you described as your limit for the monthly payment. I get that this is a wonderful time to buy etc etc etc. But that doesn't justify buying a house you can't afford.
Anonymous
OP here. Much appreciated, PP. that helps a lot! The best scenario for us is right in the middle and if we happen to net more on the sale of the TH then we would put more down as down payment or save to build up emergency fund. Thanks!!
Anonymous
PP, is your only "savings" the equity in your current townhome? If so, I wouldn't suggest a higher payment than $3000.00. We are just buying a home (closing this week). We take home a bit more than you do and after running a generous budget, decided that a lower payment $2500 was in our best interest so we could do everything we want with out money. We are actually putting 25% down, which got us an even lower interest rate; it looks like you would be doing that as well, but you last comment leads me to believe you have no emergency fund. Perhaps you should save some of the money you expect to get from the sale of your TH as an emergency fund and spend less on a home.
Anonymous
Op, our monthly take home is about the same (we don't do mch 529 but will once the nanny is out of the picture). We currently have a mortgage of 400k, have about 200k in equity, and have about 100k in cash/investment account. We are looking to move, but looking at houses in the 600-700k range. At first we were looking in the 800k range, but realized it ws going to be a huge stretch with no contingency for emergencies (like having to take on an aging parent, which may happen soon). We don't want to increase our monthly payment by much at all, so we are moving from DC to silver spring, most likely. House won't be bigger, but hopefully new/more renovated house with decent schools. We'd rather not be stretched monthly and be able to max out retirement and contribute more to college (we are also older parents).
Anonymous
OP here. To 15:32- yes we do have an emergency fund and other savings but it's only 10 months worth so thinking of boosting it is all I meant. Agree we would likely make downpayment of much more than 20% from the sale of TH so our mortgage payments are lower. PP - Yep, the DCUMs collective wisdom has shown me the light that $800k is too much of a strech. Thanks all
Anonymous
Hello all, not to stray away from the topic, I actually found it to be a very informative read. To me it's more of a fact that with getting a loan for a home these days it a crap shoot that you will get a satisfying deal.

Something good now may not be so good later because the market is so unstable. I went out and found a mortgage calculators that may help.
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