How much house can we afford?

[Anonymous]

That is DH's salary as well and we are looking at a 500-550k mortgage. With that said I have a part time job that brings enough to pay the whole mortgage myself so really I would say our income is closer to 225k before taxes, not really sure since my job is new. We are living on his salary and pretending mine doesn't exist for now.

[Anonymous]

Given interest rates are low..on $600k mortgage (i.e. high 700s to 800k house) a 30-year fixed you could probably swing a payment of $3500 including tax, less on an ARM (depending on your situation these can still be appropriate instruments depending on your time horizon and situation). That's doable on your income, but may well be your stretch if you want to prioritize living close in etc.

May want to consider a TH in Arlington given your budget range...decent trade-off as you will get more space than an SFH in your price range.

[Anonymous]

You may want to reach out to a bank and see what you are approved for instead of guessing. With the current housing environment, banks are no longer just handing out loans. You need to qualify and pretty much have excellent credit and paperwork to get the rates published. You can get preapproved but not act on it. It's better to know beforehand than fall in love with a house and find out the bank won't approve you for that amount. You would also want to keep your loan to value below 80% to avoid PMI plus it's standard now for 20 % to be required as a down payment in this environment.

If you both work, you should also see if you can swing the mortgage on one salary (stay in that range). This way if something happened (divorce or loss of employment) you can still afford your mortgage payment. As others mentioned, it's expensive to live here especially once the kid's are in activities.

[Anonymous]

Anonymous wrote:Given interest rates are low..on $600k mortgage (i.e. high 700s to 800k house) a 30-year fixed you could probably swing a payment of $3500 including tax, less on an ARM (depending on your situation these can still be appropriate instruments depending on your time horizon and situation). That's doable on your income, but may well be your stretch if you want to prioritize living close in etc.

May want to consider a TH in Arlington given your budget range...decent trade-off as you will get more space than an SFH in your price range.

You must be stuck in 2005 to think a north arlington town house cost b that much, you can get a sfh for that price.

[Anonymous]

I don't know what kind of logic they're using to program those calculators. I just used one today myself, and on a HHI of 250K and with a 100K downpayment, the calculator said we could afford a house of just over $1M. HA!!! As it stands now, our mortgage is just under $400k - it's about $2500/mo, and after paying for daycare, aggressive retirement savings and college savings, there is less to go around than I would have thought. I'm not joining the typical DCUM complaint of feeling stretched at $250k, just saying I wouldn't want to have an obligatory $3k in additional mortgage expense. That would require much more penny pinching (we currently don't have to do any). I wouldn't be comfortable with a mortgage above $3500. Maybe $4k if I really loved the place and it didn't require any updating.

Also, something I think people may not consider when purchasing a house (if it's your first purchase, at least) is not just the cost of home maintenance, but what you might end up spending to make the place really feel like your HOME. Granted, it's hardly required spending, but for me, getting my furnishings and decor to the place that I want it is important and has been an added expense these first few years in the house. Especially around here where so many of the homes are older and may not have been updated in at least a decade or two.

[Anonymous]

I find those calculators only work if you put in net income, even though they all specify gross....

[Anonymous]

Go for the Max with a gov backed. They've bailed us out and we are right now actually paying much less than the market

[Anonymous]

i think you should focus on monthly payment and work backwards from that.
With an income of $165k I would keep your full payment (taxes, insurance, etc) at a max of $3K.

We make $225K with a payment of $3500 and we live very comfortably--very middle of the road but we're not stressed about money and we don't get thrown for a loop when unexpected expenses arise. If we were making $165K it would be a different story (and it was when we made almost exactly that during the first 2 years we owned this house).

For your own piece of mind, don't stretch too far! This area and it's high expenses continue to surprise us and we're so thankfully that we're not overly leveraged on the house.

[Anonymous]

Agree with PP. Look at your current finances, compute approximately what you want to spend per month. Then go out and price mortgages (e.g. find out how much a bank is willing to loan you, and on what terms, i.e. what interest rate, how many points, etc). If you aren't sure how to shop for mortgages, then one easy way to start is going to a company like lendingtree.com and putting in your info. You'll get between 3-6 "bids" from various banks with mortgage offers. You are not obligated to use any of them (although you do get spammed by them as a result). But this will give you an idea of what types of offers you'll have. Take the rates and compare on the tables on this page:

http://www.ifitbreaks.com/afford.htm

for 30 year mortgages, which is likely what you'd want for your first purchase, unless you are borrowing a lot less in which case you might want to evaluate 15 year mortages. I don't have an easy table, but you can use regular mortgage calculators to determine based on the amount you want to borrow, and the rates that you are quoted to determine what the monthly payments would be. Anyway, from the table, you'll be able to get a ballpark of how much you're willing to borrow to keep your payment to the amount you can afford.

Oh one more thing. One thing that the table above does NOT include is taxes and insurance. That is localized and you have to find out what the local taxes are. Most mortgage lenders nowadays will escrow the money for your taxes and insurance in order to guarantee that those get paid. If that's the case, add up the amount that you would pay for both and divide by 12 and you'll get an approximation of what the mortgage lender will charge you each month. That money will get paid into an escrow account and when it comes time to pay insurance or taxes, the mortgage lender will pay it from the escrow funds. Once per year, the mortgage lender will reevaluate your taxes and insurance payments and may raise or lower your monthly escrow fee to compensate (if you were paying too much, they sometimes mail you back a check for the overage before lowering the rate). But, the escrow amount has to be included in your computation of what you can afford.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Given interest rates are low..on $600k mortgage (i.e. high 700s to 800k house) a 30-year fixed you could probably swing a payment of $3500 including tax, less on an ARM (depending on your situation these can still be appropriate instruments depending on your time horizon and situation). That's doable on your income, but may well be your stretch if you want to prioritize living close in etc.

May want to consider a TH in Arlington given your budget range...decent trade-off as you will get more space than an SFH in your price range.

You must be stuck in 2005 to think a north arlington town house cost b that much, you can get a sfh for that price.

We're talking about N Arlington and you clearly don't know the market, this isn't Herndon, and the prices in Arlington didn't really drop all that much- there are THs here (particularly walkable to the orange line stops) that regularly sell up to and over $1M. Do a simple search of redfin right now and you'll see that almost every listed TH in N Arlington is over $600k. A year ago, we bought a $875k TH in Arlington walkable to a metro b/c the equivalent priced house in the area would have been half the size.

[Anonymous]

Don't forget that Arlington homes are generally older and you're probably going to need more for repairs, upkeep, and heating/cooling costs than you may be used to.

[Anonymous]

I think a 500 K mortgage on $165 K income would be hard with 2 kids, once you account for retirement savings, college savings, before/after care for kids and summer camps. We have that same income and while we do have one child still in full time daycare, our mortgage payment is $2200 and we couldn't pay more than that without reducing retirement and college savings.

I agree with this. A 500,000 mortgage at 4% (Wells Fargo's advertised rates today) is a monthly payment of $2387.08, before taxes and insurance. Call it $3000/month, all in. $165,000 HHI gives you a monthly gross of $13,750. Assume 30% fed/state/FICA withholding; that leaves $9625. After mortgage, it's $6625. Assume you max out retirement in husband's 401k, that's $1416/month, leaving $5209. If you want to save $6000 per kid per year for college, that's an extra $1000/month, leaving $4209. So, out of $4200, you have to pay for everything else - food, utilities, travel, health insurance and other medical expenses (eyeglasses, copays, OTC medicine, etc.) non-retirement savings, home repairs, gym, cell phones car payment/savings for a new car, summer camp, kids' activities, holiday presents . . . I'm sure there are others that I'm forgetting. I know that I'm more fiscally conservative than most people, but that seems a little squeezed to me.