How much mortgage can we afford?

[Anonymous]

I thought as a general rule, you would get approved for 3.5 times your annual income - is this correct?
As far as monthly payments go, I believe we can afford about 4.5-5 times our annual income in mortgage. Does this sound right?

[Anonymous]

Anonymous wrote:I thought as a general rule, you would get approved for 3.5 times your annual income - is this correct?
As far as monthly payments go, I believe we can afford about 4.5-5 times our annual income in mortgage. Does this sound right?

Too many variables left out: income, other debts, etc. Talk to a banker and get a pre-approval. Then figure on actually borrowing about 70% of what they say you're eligible for.

[Anonymous]

Anonymous wrote:I thought as a general rule, you would get approved for 3.5 times your annual income - is this correct?
As far as monthly payments go, I believe we can afford about 4.5-5 times our annual income in mortgage. Does this sound right?

You're nuts to take on this big a mortgage. We bought a house 2X our income and paid it off in 12 years.

[Anonymous]

That rule of thumb is based on interest rates being substantially higher than they are today.

[Anonymous]

I was approved for 5xs but couldn't afford it. Buying at just under 3xs but could afford a little more if we didn't have two in daycare.

[Anonymous]

I'm not sure how much we were approved for, probably some ridiculous amount. Our mortgage is 2.4x our gross income and we feel pretty strapped with that plus 1 kid in daycare and 2 car payments.
It all depends on your income, though. If you have a high HHI (300k+) then 2.5 or even 3.5 income will still leave you with more money left over than someone with a 100k HHI.

[Anonymous]

OP here. Our only debts are student loans (paid off, older cars) and because our HHI isn't that high, 2x our income wouldn't be enough. We don't have kids in daycare so that eliminates a big expense.

[Anonymous]

Look at your own budget to figure out what you can afford. Are you a pack a lunch, coupon cutting, never go in trips type? You can afford more house than a restaurant going, gadget buying, traveler, etc.

If you are unsure, practice the cost. Pretend you have a mortgage with a monthly cost of $x. Take $x plus the cost of homeowners insurance. Then subtract your current rent. Take whatever the difference is and stick it in a savings account every month for a few months to "pretend" you have that mortgage. How tight does that make you? Are you comfortable with that spending level? If so, buy. And the upside is you've now also got a small savings towards unexpected house costs and repairs.

[Anonymous]

Anonymous wrote:Look at your own budget to figure out what you can afford. Are you a pack a lunch, coupon cutting, never go in trips type? You can afford more house than a restaurant going, gadget buying, traveler, etc.

If you are unsure, practice the cost. Pretend you have a mortgage with a monthly cost of $x. Take $x plus the cost of homeowners insurance. Then subtract your current rent. Take whatever the difference is and stick it in a savings account every month for a few months to "pretend" you have that mortgage. How tight does that make you? Are you comfortable with that spending level? If so, buy. And the upside is you've now also got a small savings towards unexpected house costs and repairs.

thanks for this, would comfortably be able to do 3x our income. We have kept our rent low in order to have some extra spending money, though we would be happy to put it into a house. It seems like we can afford it, but I want to be sure I'm not forgetting anything and we're not in over our heads

[Anonymous]

You want your monthly PITI payment to be approximately 30% of your monthly gross income. I prefer for this to be 30% of one salary - that way if one of us lost our jobs, we could still afford the house.

[Anonymous]

Anonymous wrote:You want your monthly PITI payment to be approximately 30% of your monthly gross income. I prefer for this to be 30% of one salary - that way if one of us lost our jobs, we could still afford the house.

Really good advice. Read Elizabeth Warren's book, The Two Income Trap.

[Anonymous]

Dumb question, but can you purchase a home with no money saved?
I have good credit, a steady job (but not well paying - $35,000/year).

[Anonymous]

Call a lender and talk through this. They can give you all kinds of information and it's totally free. Try Roger Dennis at Caliber Funding, 301-289-3131 or roger.dennis@caliberfunding. He's helped a number of DCUMs.

[Anonymous]

Anonymous wrote:Dumb question, but can you purchase a home with no money saved?
I have good credit, a steady job (but not well paying - $35,000/year).

You mean with no down payment? No, I don't think so.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You want your monthly PITI payment to be approximately 30% of your monthly gross income. I prefer for this to be 30% of one salary - that way if one of us lost our jobs, we could still afford the house.

Really good advice. Read Elizabeth Warren's book, The Two Income Trap.

Thanks PP - I did and this idea is always on my mind now when we are doing things.