Reply to Income $176k — how much would you spend on mortgage now?

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Reply to "Income $176k — how much would you spend on mortgage now?"

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[quote=Anonymous]OP, it's a range and depends on a few factors. If you are buying in a highly desirable area, I'd be willing to go as high as 3300-3400, especially if you are in a career position where you expect your income to go up 10-20k in the next few years. It will be tight, but if you are buying in, say, a close in neighborhood with good schools where houses do not depreciate (this describes a number of neighborhoods in and around DC), it's worth the stretch initially because long run you are looking at more equity. Plus with only one kid, that simplifies your other savings (you need retirement plus one 529 plus emergency fund, which is doable and I'm assuming you have a good start on all of it). So you tone down vacations and don't eat out a few years. Worth it.

On the other hand, if you are buying somewhere with less certainty about future value and appreciation, I'd want to keep it much lower, closer to 2700. This leaves you much more room for savings, including a fund for a future trade-up house purchase.

You have to think both in terms of what you can afford (which is highly personal and dependent on your other debt load, your spending habits, and your willingness to reign those habits in to afford the house you want) AND what your potential ROI is. What you don't want to do is lock yourself into a payment at the top of your affordability range only to see a bubble pop and your house lose 20% of its value overnight. So don't stretch for the bigger mortgage on some huge far-out development of brand new cookie cutter homes, or a huge brownstone in downtown Baltimore. But a cute 3/2 in Kensington on a good street? Go for it. It will pay off. Your income catches up and your house keeps appreciating.[/quote]

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