Thumb rule for buying

[Anonymous]

What should be the net income per month for a family of 4 (2 working adults and 2 kids) if they need to buy a house around $1.1M? With inflation, rising cost of living in Northern Virginia, saving money for college, very high mortgage interest rates, what is that thumb rule these days on net income to afford a decent sized house in a decent condition? Assume 5-10% down payment if that low of a payment is even allowed these days. Or what is the minimum down payment norm these days?

[Anonymous]

Rule of thumb is often up to 3x your gross annual income.

But the wild interest rate changes over the past two years make it less practical to look strictly at income vs purchase price.

I prefer looking at keeping housing costs below 35% of gross monthly income. Potentially a bit lower if you have lots of kid-related expenses.

[Anonymous]

We aimed for 28% of gross income after 20% down.

[Anonymous]

Anonymous wrote:What should be the net income per month for a family of 4 (2 working adults and 2 kids) if they need to buy a house around $1.1M? With inflation, rising cost of living in Northern Virginia, saving money for college, very high mortgage interest rates, what is that thumb rule these days on net income to afford a decent sized house in a decent condition? Assume 5-10% down payment if that low of a payment is even allowed these days. Or what is the minimum down payment norm these days?

You're doing it backwards. For budgeting, the question is, "how much can I spend on a house given that my HHI is $X and I have $Y as the down payment?"

[Anonymous]

Figure out the monthly payment you can comfortably handle and work back from there. Anything less than 20% down and you’ll have to factor in PMI if you’re getting a conventional mortgage.

[Anonymous]

If you put only 5% down it may be difficult (especially if a popular home) to actually win your bid on the house. So I would, at a minimum put 10% (makes it a lower risk that, at the end of day, for whatever reason, the lender denies you).

Assuming a $1.1m place with 10% down, your monthly payments in total (tax, insurance, interest, principal, pmi) will be around 7500 at a 7% rate. To be comfortable, I would say this should, at most, be 40%-45% of your take home pay (your monthly pay after 401k contribution, insurance, taxes), ie you should be taking home between 16600 and 18750 a month to make this doable, in my book.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What should be the net income per month for a family of 4 (2 working adults and 2 kids) if they need to buy a house around $1.1M? With inflation, rising cost of living in Northern Virginia, saving money for college, very high mortgage interest rates, what is that thumb rule these days on net income to afford a decent sized house in a decent condition? Assume 5-10% down payment if that low of a payment is even allowed these days. Or what is the minimum down payment norm these days?

You're doing it backwards. For budgeting, the question is, "how much can I spend on a house given that my HHI is $X and I have $Y as the down payment?"

Op here. That's right, I am working backward. Nowhere in Fairfax County around good school districts do we see 4 bed 3 bath houses under $1M. If there are a few, they are really too old and would need a lot more maintenance costs than usual.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:What should be the net income per month for a family of 4 (2 working adults and 2 kids) if they need to buy a house around $1.1M? With inflation, rising cost of living in Northern Virginia, saving money for college, very high mortgage interest rates, what is that thumb rule these days on net income to afford a decent sized house in a decent condition? Assume 5-10% down payment if that low of a payment is even allowed these days. Or what is the minimum down payment norm these days?

You're doing it backwards. For budgeting, the question is, "how much can I spend on a house given that my HHI is $X and I have $Y as the down payment?"

Op here. That's right, I am working backward. Nowhere in Fairfax County around good school districts do we see 4 bed 3 bath houses under $1M. If there are a few, they are really too old and would need a lot more maintenance costs than usual.

Every house we looked at in MoCo went for $50-200k over asking. So if $1M is the maximum you can pay you will need to look for starting prices lower than that. If you find an old house that doesn’t look fancy but also doesn’t need expensive repairs don’t automatically rule it out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:What should be the net income per month for a family of 4 (2 working adults and 2 kids) if they need to buy a house around $1.1M? With inflation, rising cost of living in Northern Virginia, saving money for college, very high mortgage interest rates, what is that thumb rule these days on net income to afford a decent sized house in a decent condition? Assume 5-10% down payment if that low of a payment is even allowed these days. Or what is the minimum down payment norm these days?

You're doing it backwards. For budgeting, the question is, "how much can I spend on a house given that my HHI is $X and I have $Y as the down payment?"

Op here. That's right, I am working backward. Nowhere in Fairfax County around good school districts do we see 4 bed 3 bath houses under $1M. If there are a few, they are really too old and would need a lot more maintenance costs than usual.

If that is the case, as another person said, if looking at SFH you may have to look at stuff thats a little cheaper (in case it goes over list) and b) you may also want to consider either looking further out, or even looking in another state (Rockville tends to be a little cheaper, but I do understand if kids have to remain in the same school you may not have that option). There are some things available but not much I am seeing. For example, here: https://www.redfin.com/VA/Fairfax/3720-University-Dr-22030/home/12027064

Another option that you may have to consider is Townhouses (which, if they have some backyard, and/or are a corner unit, may not be such a bad compromise either imo).

At the end of the day though, like some others said, determine what is your absolute max monthly payment, and go from there. Like I said earlier, I would not recommend more than 40/45%% of your monthly take home but with this market, that may be tough to actually pull off, especially if you want SFH (TH I think its still doable well under 1.1M in Fairfax, biggest issue is lack of inventory atm)

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:What should be the net income per month for a family of 4 (2 working adults and 2 kids) if they need to buy a house around $1.1M? With inflation, rising cost of living in Northern Virginia, saving money for college, very high mortgage interest rates, what is that thumb rule these days on net income to afford a decent sized house in a decent condition? Assume 5-10% down payment if that low of a payment is even allowed these days. Or what is the minimum down payment norm these days?

You're doing it backwards. For budgeting, the question is, "how much can I spend on a house given that my HHI is $X and I have $Y as the down payment?"

Op here. That's right, I am working backward. Nowhere in Fairfax County around good school districts do we see 4 bed 3 bath houses under $1M. If there are a few, they are really too old and would need a lot more maintenance costs than usual.

The three bath requirement eliminates a lot of houses. If you go down to 2 ba or 2.5 ba you’ll find more at a lower price. There’s a fair number in Burke and the surrounding areas.

[Anonymous]

Anonymous wrote:Rule of thumb is often up to 3x your gross annual income.

But the wild interest rate changes over the past two years make it less practical to look strictly at income vs purchase price.

I prefer looking at keeping housing costs below 35% of gross monthly income. Potentially a bit lower if you have lots of kid-related expenses.

More than that if you have no student debt and no children. That's a dated formula.

[Anonymous]

“Thumb rule.” Lol

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:What should be the net income per month for a family of 4 (2 working adults and 2 kids) if they need to buy a house around $1.1M? With inflation, rising cost of living in Northern Virginia, saving money for college, very high mortgage interest rates, what is that thumb rule these days on net income to afford a decent sized house in a decent condition? Assume 5-10% down payment if that low of a payment is even allowed these days. Or what is the minimum down payment norm these days?

You're doing it backwards. For budgeting, the question is, "how much can I spend on a house given that my HHI is $X and I have $Y as the down payment?"

Op here. That's right, I am working backward. Nowhere in Fairfax County around good school districts do we see 4 bed 3 bath houses under $1M. If there are a few, they are really too old and would need a lot more maintenance costs than usual.

West Springfield, Burke, and parts of Fairfax would provide you options for 4 Br/ 3Ba in good school districts.

[Anonymous]

No more than 45% gross take home

[Anonymous]

Anonymous wrote:No more than 45% gross take home

I meant no more than 45% a month of your gross income