Compared to your gross, what factor (1.5x, 3x, etc) did you roughly end up with?

5/21/2009 9:42:01 PM

Old School called and it wants its thread back!

5/21/2009 9:44:11 PM

You think you're better than me?

5/21/2009 9:46:48 PM

You think you're better than me?

5/21/2009 9:47:13 PM

5/21/2009 9:47:31 PM

You think you're better than me?

[Edited on May 21, 2009 at 9:49 PM. Reason : my house is about 2.25x annual salary, no problems with payments at all.]

5/21/2009 9:47:43 PM

Quote :

"Compared to your gross, what factor (1.5x, 3x, etc) did you roughly end up with?"

It doesn't really work like that.
Figure how much extra income you have and go from there.

For example, a person making $32k per year who spends $28k per year (not including housing) only has about $4k left over to work with. A person making $36k per year who spends $28k per year has $8k extra to work with. As a percentage, there isn't much difference between $32k and $36k; but the person making $36k can effectively afford twice the mortgage of the person making $32k.

Savings works this way too...For a lot of people a $5k raise ($2.50 an hour) would allow them to save twice as much as they currently do. Twice the savings compounded over years means retiring years earlier.

[Edited on May 21, 2009 at 9:49 PM. Reason : o]

5/21/2009 9:48:39 PM

lol @ right hand rule ITT

i mean i know its not a purchasing rule i was just curious as to what the factor was after the purchase

[Edited on May 21, 2009 at 9:50 PM. Reason : EDIT srs post above]

5/21/2009 9:49:06 PM

ours is a little less than 2x of our yearly gross

5/21/2009 9:49:15 PM

^^^ are you saying that someone with an extra $8000 spread out over 12 months can double the mortage payment they can make?

5/21/2009 9:50:54 PM

$8,000 = 2 x $4,000; doesn't it?

That's obviously an overly simplified example. Nobody wants to allocate every penny to their mortgage.

5/21/2009 9:53:41 PM

you look at payment (% of income) amount

ie you can afford more house if you get a lower interest rate or buy your interest rate down enough

total housing cost (principal, interest, taxes, insurance, & pref hoa dues) should be less than 28% of your take home pay.

5/21/2009 9:54:54 PM

Jesus Christ. Find an amortization calculator online. Determine the total cost of a house; determine how much excess cash you make.

There's an old school thread about how people spend their paychecks. Look in there to see how their bills add up.

5/21/2009 9:55:04 PM

oh i guess I was totally reading that wrong.


cause who spends 4k a year on their mortgage payments?

5/21/2009 9:56:03 PM

edit, nm

[Edited on May 21, 2009 at 9:57 PM. Reason : nm]

5/21/2009 9:56:18 PM

Quote :

"cause who spends 4k a year on their mortgage payments?"

Who doesn't

5/21/2009 9:58:59 PM

i meant "only 4k a year"


but I didnt feel like editing to add that

but I guess I should have cause I wouldn't be making this post

5/21/2009 10:01:24 PM

5/21/2009 10:03:10 PM

Just messing with you.

5/21/2009 10:03:12 PM

typically banks want to see under 30% of your take home pay to go to your home expenses...mortgages, taxes, insurance

5/21/2009 10:06:05 PM

Quote :

"Skack: It doesn't really work like that. Figure how much extra income you have and go from there."

that's interesting. i've never heard anybody state it in those terms.

[Edited on May 21, 2009 at 10:08 PM. Reason : ^ that's more in line with the traditional advice i've seen]

5/21/2009 10:06:21 PM

OmarBadu and humandrive are the only ones who have answered the question

5/21/2009 10:08:43 PM

My house was about 2.5x my annual pre-tax salary. I don't see how that helps. Monthly payment + escrow for insurance and tax is about 70% of one biweekly paycheck. All of my bills fit into one paycheck.

I save the other paycheck each month.

5/21/2009 10:24:00 PM

i was just curious to see (in retrospect) after making an educated purchase where these numbers end up.

im not purchasing a house any time soon, just curious

[Edited on May 21, 2009 at 10:26 PM. Reason : sp]

5/21/2009 10:25:30 PM

when we bought the house it was 2.5x

now its 1.25x

yay for being a DINK

5/21/2009 10:27:27 PM

Being a SINK works well enough. The wife just needs to find a job

5/21/2009 10:29:22 PM

Quote :

"oh i guess I was totally reading that wrong. cause who spends 4k a year on their mortgage payments?"

It was just an example. The actual numbers are irrelevant.

Quote :

"that's interesting. i've never heard anybody state it in those terms."

Nor have I.

My example is assuming you don't raise your expenses with every raise you get which might not happen for a lot of people.

I'll try another example...Take two guys with the exact same car payment, insurance payment, student loan payment, and similar expenditures for food, clothes, entertainment, etc. One guy makes $40k per year and the other makes $28k per year. The guy who is making $40k per year might be able to save $1,000 a month, but the guy making $28k per year might be lucky if he saves $100 a month. While $40k guy is only making 42% more money he has 1000% the expendable income. At the end of Year 1 the $40k guy has $12,000 in the bank and the $28k guy has $1200 in the bank. Again, a massive increase in buying power by comparison to the percentage of difference between the two incomes.

5/21/2009 10:51:54 PM

me and DeeMarie are gonna be THINKERs

two healthy incomes, no kids, early retirement

5/21/2009 10:54:05 PM

I'll add that using a percentage of your income to figure your mortgage payment would work if everything else could be factored that way. Unfortunately you can't just decide to eat 42% less food or use 42% less energy (well, some people could, but I'm assuming you're living a reasonably sensible lifestyle already.) A Honda Civic is going to cost the same amount whether you're making $40k or $28k. You could buy a used car, but you'd just have to replace it sooner so it would be an apples-to-oranges comparison. Etc, etc, etc.

Find out the true cost of your lifestyle, figure out how much you actually bring home, and you'll know how much you can truly afford to spend.

5/21/2009 11:02:41 PM

rule of thumb, 2.5 times

5/21/2009 11:10:56 PM

^that seems good

6/4/2009 4:27:14 PM

I recently went to State Employees Credit Union and found out that I personally pre-qualified for up to 182k. Keep in mind, I have no debt at all, with the exception of a car loan that I'm almost done paying for.

6/4/2009 4:32:46 PM

wow, I have $20k in debt and I was potentially good for 180k, settled for 165... letter for 120k

I will barely be able to afford 115k with my current lifestyle

[Edited on June 4, 2009 at 4:39 PM. Reason : i make <50k too]

6/4/2009 4:38:54 PM

I financed around 3x after putting 20% down.

[Edited on June 4, 2009 at 4:45 PM. Reason : .]

6/4/2009 4:43:25 PM

Quote :

"typically banks want to see under 30% of your take home pay to go to your home expenses...mortgages, taxes, insurance"

this was traditionally true, but banks did get to the point during the height of the boom where they were fine with 50% of take home. I have a letter from countrywide saying that they would give me up to that amount because they do their own funding so its okay.

as far as how much home you can afford, its about a debt to income ratio and when being evaluated by a bank they generally use your gross income. < 35% of a monthly debt to income ratio is required, as such x percentage of or times your income isn't appropriate. If you have a car payment and student loans you could afford significantly less house than if you had none of those things.

just because 35% is the max doesn't mean that is what you should do, unless you want to be house poor. My total debt to income ratio is 25% of my gross.

i think its dumb that they focus on your gross, though.

[Edited on June 4, 2009 at 4:57 PM. Reason : gross vs. net.]

6/4/2009 4:51:11 PM

contact a realtor

6/4/2009 4:51:35 PM

we bought slightly more than 2x our gross

6/4/2009 5:02:20 PM

Call me old fashioned, but this thread makes me think of beating a woman with a stick.

6/4/2009 5:03:52 PM

my rule of thumb is 1/2 of what the bank wants to give you


i was around 2.5 though, and i feel like i didn't spend very much on my house

6/4/2009 5:15:19 PM

Mine was less than 2x. Didn't want (or need) a larger house, and would rather put money towards other things.

6/5/2009 12:32:53 AM

Go metric. Double it and add 30.

(actually my house in Raleigh cost a bit less than double my gross base)

[Edited on June 5, 2009 at 12:39 AM. Reason : actuals]

6/5/2009 12:36:07 AM

half as much as you think that you can.

6/5/2009 12:41:15 AM