How much would you spend on a monthly mortgage... UPDATE post 18

[tinuviel_k]

What would your UPPER limit be for a monthly home mortgage be IF:

1. Your gross income is $63,000 annually, or $5250 month.
2. Your net income is $46,800 annually, or $3900 a month
3. Your only debt is a $75 a month student loan payment (at 2% interest)
4. Taxes, PMI, insurance, are included in the mortgage.
5. Utilities in the area are reasonable: assume no more than $200 a month in winter for heat/power.

[Mommabean]

I voted for 1400 because it is where we are at now. Plus we are in almost the same boat income wise, however our monthly debt is quite higher.

I wouldn't go above 1500 ever and you can get a GREAT house with that type of payment.

[newbymom05]

Are retirement savings factored into that? I'd worry about that just as much as a mortgage, so I"d pick the lowest mtg and put the difference into savings/retirement.

[tinuviel_k]

OP here:

I am having a bit of a housing conundrum. We LOVE our area: great school, my husband has a super job who's perks can't really be duplicated in another city, really good job security, friends, tons of organic food, close to a few big cities... we really don't intend on moving for at least 10-15 years, if at all.

We pay $700 in rent right now is a super neighborhood, but it is a very little one bedroom place and we will outgrow it soon. It is an absurdly low rent for the neighborhood and area.
To rent a 2 bedroom or 3 bedroom house in my area and school district will cost anywhere from $1000-$1300 a month. We would probably need to go that route in a year.

The housing prices in my area have dipped a bit, and I've been looking around. It looks like the MINIMUM mortgage I could hope to pay for something decent is around $1400, and it will take a lot of searching to find something of good quality in that range. It does come up, but it is rare. There are more options in the $1600 a month range.

[Drummer's Wife]

I voted $1800, which seems high, but would still leave you with $2100 leftover. I guess it depends on your monthly expenses (besides the $75 SL payment, and utilites). How much is food, fun, savings, retirement, insurance, etc. (not sure what all is taken out of gross pay)? After paying $700 for rent now, where does the rest of your money go?

It's a big jump in housing cost, though. Could you spend 6 months or so saving that extra $1k+ per month, and see how comfortable you are?

[lmonter]

Yeah, $1400-$1600/mo would scare me, even more so if it doesn't include the ever higher property taxes (I know what state you're in, and yeah, oof) and insurance. But I also worry about having hefty savings on hand for the perpetual medical deductibles and the water heater trying to explode (ah, the joys of homeownership!) or the windows needing replacing and so on. Having such a large chunk of income go to *just* housing would honestly terrify me, as I've gotten used to my "low" mortgage here, and like having the wiggle room we currently have.

I think housing prices are still going to go down as more and more of the foreclosures and such finally hit the market, but maybe that's just my gut feeling. If we end up moving to the higher COL (probably similar to your area price-wise actually) are where hubby's currently working (goofy story), we'd rent for a while to let things shake down housing-market wise.

[krisnic]

We make basically the same amount you do. Our mortage and HELOC combined is $700 a month - low COL area though. We also have a lot more debt than you do. But I say this to you because we bought an absolute fixer upper and took about 3 years to make it into something we love. And we still have the low mortgage payment. We were extremely frustrated because of how long it took, but we had to be smart about it. We depended on friends with skills other than ours (a friend who did siding, another who did our deck, another who landscaped). My father in law did all of the piping and wiring because that's his line of work. We did some exchanging of services to keep costs down. We found gorgeous granite tile on clearance at home depot and bought all of it for our downstairs bathroom even though it didn't get used for almost 2 years. But our whole house is amazing now. I would do everything in my power to keep a low mortgage/housing payment to open up money for other areas - retirement, savings, travel.

[claddaghmom]

Originally Posted by tinuviel_k

What would your UPPER limit be for a monthly home mortgage be IF:

1. Your gross income is $63,000 annually, or $5250 month.
2. Your net income is $46,800 annually, or $3900 a month
3. Your only debt is a $75 a month student loan payment (at 2% interest)
4. Taxes, PMI, insurance, are included in the mortgage.
5. Utilities in the area are reasonable: assume no more than $200 a month in winter for heat/power.

I would be happy with 1200, but I could see stretching it a few hundred over that to get something worth it (e.g. good commute, school, house, whatever).

That being said, we live in a low COL area and we do $500 a month with the same numbers (although our loans aren't live yet as we're both still in grad school).

[SoCaliMommy]

I voted $1400

Just going by what we plan on doing when we buy, we right now pay $1,000 in rent for a tiny 2bd 1bath in a high cost of living area. If we were to move to rent a 3bdrm the lowest i found was $1300 or higher and at that price we plan on moving when we can move into our own home and pay that much in a mortage payment instead.

[bobandjess99]

I could do 1600-1800 on that income, If it's in a pretty stable field where layoffs are unlikely. Even though it's a highish percentage of your income, you still have so much leftover....for example, our total net monthly income is about 1800, $200 in student loans and our mortgage is $550. So, after student loans an mortgage, we have only about $1000 left for everything else, utilitites, food, gas, car, clothes, etc. In your scenario, even with a 1800 ish mortgage, you have over $2000 left..or twice as much money as I have, LOL!
BUT..here's the thing..if you currently have that much extra mony....I'd sit tight and save...fund the emergency fund to a full 6 months, put extra in retirement, and most importantly, save, save, save for you downpayment...with that much discretionary income, you shouldn't even consider paying PMI/taking out a >80% mortgage..you should save up the full 20% down.

How much emnergency fund/savings do you have now?

[chezlyryan]

I voted $1200 simply because that was 30% of the net take home. Did you track your spending to see how much you spend on transportation, food, clothes, and other extra activities? (sports, festivals, gym, fun family things) Do you have an emergency savings that you are comfortable with? There are a lot of factors that could determine if you can spend more on the mortgage.

[aircantu1]

I voted $1200 because that's about where we are percentage wise and it's pretty comfortable...good enough reasoning to me.

[emaye_to_2]

I voted $1000 per month, up to $1200. I am in a very similar economic situation as you. Little debt, take home pay total is $3200 per month and our mortgage is $1150 per month including mortgage interest and taxes. This works for us, we've been in the home for almost six years.

[alicia622]

I voted 1000 primarily because I know you could get a nice house in my area for that price.

[sunnysandiegan]

I agree with a PP above who suggested saving enough to avoid PMI. If your current income is the above and your current rent is $700 and student loans are the only other debt, you could easily save enough for a good down payment to reduce that additional cost that doesn't do you any good (PMI).

Also, shop around for a good mortgage before you fall in love with a specific house.

[rightkindofme]

I'm a big fan of not having your rent/mortgage be more than 25% of your income. Stuff happens and life is expensive. I'm terrified of getting into a bad spot with money.

[Sk8ermaiden]

That income is very close to ours and our mortgage is the max we would go. So I just adjusted down a little bit and selected the $1,000. Although, when I say mortgage, I'm generally referring to mortgage+interest+insurance+taxes.

[tinuviel_k]

Thank so much for your input everyone!

After looking at our income, spending, and saving habits I've decided that I am just not comfortable with a mortgage of over $1200. With what we have as a down payment (3.5%), taxes, insurance, and PMI, and with current interest rates at my credit union (5%) we would need to find a home for $175,000.

That is just NOT happening in my area. The very few houses in that price range are about 800 sq ft, need major work, and are in questionable neighborhoods.

To get the kind of home we are looking for (1000+ sq ft, 2-3 bedrooms, safe neighborhood, in decent shape, with some yard and a garage) it looks like the minimum price we could hope to pay is about $1500 a month on a $215,000 home. The more average payment would be $1600 on a $230,000 home.

So we're waiting! We'll continue to do what we have been doing, which is to put away at least $500 a month into savings.

I imagine by the time we'll have a down payment saved the homes here will be in the $250,000 range, and we'll need to have $50,000 in cash to avoid PMI. Gulp. Supposing I get a part time job while my daughter is in school, we should be able to save $800 a month, which means we'll have our down payment in 5-6 years. That seems like such a long time.

[Sarah W]

Your numbers look pretty accurate to me. We paid $174K for our first house and the payments w/ tax and insurance are around $1270 a month. It varies a bit year to year when the amount of our tax changes.

[jentilla]

I doubt it will take you 5-6 yrs because housing prices have NOT stabilized and will drop again. Just bide your time till the tax credit expires and see how desperate some people will be to sell. Good for you for not taking on too much. We could afford a payment 3 times what we pay, but I just don't feel comfortable doing so.