Does anyone actually live within the 33% housing rule? - Page 2 - Mothering Forums
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#31 of 60 Old 09-21-2011, 12:17 PM
 
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I had figured more like $10,000 take home pay, after insurances and maxing out retirement contributions. Thats absolutely plenty to pay a 33% gross mortgage payment ($6500). I just often hear people say that people who make $250k+ can afford like, 45-50% gross. That's just not feasible, since that would mean a mortgage payment of $9500-$10500/month.



It's not just that the monthly payment is so unreasonable and the obvious higher associated cost like utilities, taxes, and insurance, but that many things on a house are exponentially more expensive when the house is bigger.

 

For example, getting a new roof of a ranch style track house is a major expense, but make that a 3,500 sq foot custom home with a cutesie roof line and lots of decorative gables, and the price goes way, way up. Buying new window treatments from Bed Bath and Beyond or even Target cost a chunk of change, but having a house full of non-standard size but VERY pretty windows means everything must be custom made -- for thousands and thousands of dollars. With a normal size house, if you need new carpet in just one room, you can often get a room size remnant. With a big house -- forget that. Everything is too big for that. The home owners associations dues and/or yard care is more expensive. A huge house is difficult to clean, so most couples who live in them need household help. People who make enough money to get into the house are generally working so much that little home repairs aren't something they have time for -- so the hire others to do everything.

 

And this is beside the "keeping up with the Jones" factor.

 

My DH makes a nice living -- not quite the kind of money we are talking about, but close enough that we are in those circles and go to those homes. We know a lot of couples who in spite of having massive incomes and theoretically being able to afford their homes, are struggling.


but everything has pros and cons  shrug.gif

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#32 of 60 Old 09-21-2011, 12:49 PM
 
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Our mortgage payment, which includes property taxes and insurance, come to about 20% of our combined gross income. We did not receive any help but were "assisted" by the fact that only my income qualified us for our loan (DH's income is not taxable nor reported on our 1040 (legally!)), so we qualified for less than we could actually afford. We did end up with a fixer-upper, by choice, as we felt it was a better investment for us.

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#33 of 60 Old 09-22-2011, 08:39 AM
 
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We didn't buy our house until we were 28/30. We were in apartments for a good 10 years. :/ My advice would be to bloom where you are planted. If you have to live in an apartment, do what you can to make it unique. Get rid of dorm furniture. Buy a couple of nice pieces of furniture now, don't wait for when you buy a house. For a long time, I put off doing so much for "when we have a house". In the end, I realized life wasn't worth living that way. It really sucked,  but I'm glad we waited to buy a house. 1) We couldn't have truly afforded it before, 2) the house our 20-25 year old selves would have chosen is not the type of house we actually would have wanted to live in long term. It would have been too expensive to maintain, would not have made sense for our lives etc. 


Love your story, and this is awesome advice. Took us about 8 years in this apt. to finally stop looking at it as a temporary residence. LOL!

 


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#34 of 60 Old 09-22-2011, 09:59 AM - Thread Starter
 
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OP here ... 

 

Wow! Am I seriously an idiot and the only person who can't figure out how to make this work? I cannot believe there are really two pages of replies saying they live at or under the 33%. Does anyone here live in the northeast? My dh makes about 60k per year. I knew it was bad for our hcol area but I didn't realize it was bad in general. I work per diem and odd jobs that may or may not be there so I never want to count that when making big decisions. 

We made some stupid choices when we first got married but have lived very frugally the last few years. And this isn't really about being frugal. Your income doesn't change in relation to frugality. He makes what he makes and houses cost what they cost. We spent the first seven years together in a one bedroom apartment and then upgraded to a two bedroom apartment when we had our child. It's now getting to the point that even a two bedroom rental (by no means a luxury rental at all, btw) is exceeding the 33% and I'm kind of at a loss of what to do. 


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#35 of 60 Old 09-22-2011, 10:40 AM
 
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Don't be so hard on yourself.  I think the cost of living in your area is the problem.   At 60k a year, you could easily buy a modest house 3bed/2ba house where I live and be under the 33%.  It's actually cheaper to buy a house then rent--but that's partly because I live in a very small town.`

 

I'm quite a bit under the 33% but have no equity due to the housing market and need some pretty price repairs.  


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#36 of 60 Old 09-22-2011, 12:32 PM
 
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Originally Posted by ilovemygirl View Post

OP here ... 

 

Wow! Am I seriously an idiot and the only person who can't figure out how to make this work? I cannot believe there are really two pages of replies saying they live at or under the 33%. Does anyone here live in the northeast? My dh makes about 60k per year. I knew it was bad for our hcol area but I didn't realize it was bad in general. I work per diem and odd jobs that may or may not be there so I never want to count that when making big decisions. 

We made some stupid choices when we first got married but have lived very frugally the last few years. And this isn't really about being frugal. Your income doesn't change in relation to frugality. He makes what he makes and houses cost what they cost. We spent the first seven years together in a one bedroom apartment and then upgraded to a two bedroom apartment when we had our child. It's now getting to the point that even a two bedroom rental (by no means a luxury rental at all, btw) is exceeding the 33% and I'm kind of at a loss of what to do. 


No.  Not everyone can buy a home on their salary where they currently live.  If you are struggling to pay for an apartment in your area, maybe it is time to look into other options - additional education (I know, I know, it isn't free), a different employer, a longer commute, or a different geographical area altogether. 

 

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#37 of 60 Old 09-22-2011, 01:11 PM
 
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No, I didn't mean that at all. Yes, we are at/under the 33% but that's because we held out for a really cheap house when we were ready to buy and because we waited until almost 30 before we felt ready. 

 

Just out of curiosity, what are prices like where you're looking? Low end of the market here is $100,000 to $125,000, mid range would be up to $175,000. Our fixer upper was way less than $100,000 but once you add in all the reno costs it's getting there. 

 

It's probably not YOU, just the cost of housing in your area. In which case you either save for a very long time, with or without boosting income or move to a LCOL area....


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#38 of 60 Old 09-22-2011, 01:11 PM
 
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Originally Posted by Mulvah View Post

No.  Not everyone can buy a home on their salary where they currently live.  If you are struggling to pay for an apartment in your area, maybe it is time to look into other options - additional education (I know, I know, it isn't free), a different employer, a longer commute, or a different geographical area altogether. 

 


yep. We've lived all over with DH's job and the where one lives makes a MASSIVE difference.


but everything has pros and cons  shrug.gif

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#39 of 60 Old 09-22-2011, 01:27 PM
 
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When DH and I are both working, as we have been for 14 of our 16 years of marriage, our mortgage is around 25-30% of our take home pay. When he was out of work last year, things were scary. We bought our home without any help; we bought our first home with 95% financing, moved to another city, sold the house and used the equity to help buy the second one.

 

I think most older Americans see home ownership as the goal because it always has been. For one thing, if you stay in a home for 30 years (as my in-laws have done) the house is paid off when you retire. Living on a fixed income is much easier without rent/mortgage. We have it arranged that our house will be paid off two years before I am eligible for retirement (I am a teacher). These days so many people move from house to bigger house (or keep refinancing), that the benefit of having it paid off at retirement has diminished.

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#40 of 60 Old 09-22-2011, 01:28 PM
 
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We stay under the 33% rule, in a average COL area, without any outside help.  I would really love a bigger house, but I would be really anxious if we had a bigger mortgage.  The peace of mind is a good trade off for me. 

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#41 of 60 Old 09-22-2011, 01:43 PM
 
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I do think that housing costs less than 33% of household income is not only ideal, but reality for most families. Sure, there are people who pay a lot less for their home/apartment every month, and then there are plenty of people who pay more than 50% on housing - either by choice or necessity (such as job loss or HCOL area).

The reason I think it's a good standard average is because most landlords or apartment managers require you to make 3 times the monthly rent, and likewise, most mortgages will only let you borrow a certain amount depending on your income. For example, FHA makes sure that your monthly mortgage, taxes, etc., are 30% or below your gross pay, with an exception that allows for 35% if you do not have a lot of other debt. Plus, of course, it's what financial experts advise, so that way you have enough money leftover for all other living expenses and savings.

Then you have other aspects that complicate this "rule" b/c like it's been said, if you have a high income, you have a lot more money leftover even after paying whatever percentage to housing. And people in HCOL areas often have to rent indefinitely, or have a huge downpayment, or, pay a higher percent for housing. Some people are more comfortable basing the percentage on one income, even if they are a dual-income family - which is wise in case of job loss or SAHP'ing in the future.

It's obviously not a strict rule all-around, but I do think most families fall somewhere around that percentage, with outliers on both ends.

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#42 of 60 Old 09-22-2011, 06:29 PM
 
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We live in the northeast, in an average col area. My DH also makes about 60K, but then he has a side job, and I have a part-time job. Otherwise, we could not afford to live in our town. Our house is small and very average. Most of my friends are not wealthy and live relatively frugal lifestyles, but our house is smaller than all of theirs. 

 

We bought our house more than 8 years ago, and did have a 20% downpayment (with the help of relatives). At this point, even with our high taxes, we pay less per month than we'd pay to rent a 3 bedroom apartment or house in our town. (Of course, if you factor in home repairs, that would change a whole lot). 

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#43 of 60 Old 09-23-2011, 10:33 AM
 
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I think I have always lived within the 33% rule (even as undergraduate working 20 hour per week at $3.50 an hour).  That place was a serious dump.   The exception to that was as a graduate student when I essentially worked 30 per week for no pay and still had papers and assignments to write.

 

That's different than it is feasible for everyone all the time.  I also don't buy the just because your income is higher you can have large percentage to go to house.  Living in a cheaper neighborhood is one of the best ways to accumulate wealth because you are not surrounded by others showing you new ways to spend your money.

 

 

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#44 of 60 Old 09-24-2011, 03:25 PM
 
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We're at around 13% of our net. We were probably around 30% when we bought this house. We could afford a larger home but we don't need one. We live in a relatively low COL area but my DH works for a company based out of a much higher COL area and they are very good to their employees.

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#45 of 60 Old 09-26-2011, 09:49 AM
 
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We are under the 33 guideline with no outside help. However, we also are in our mid 40's and my DH has a higher than average income. We live in a medium COL area, and we opt to live in smaller house than many in our income bracket would choose to live in.

 

It is because of sacrifices that we've made for DH's career for the last 15 years that we are comfortable financially. We didn't have this comfort starting out. We've built it over time.

 

Part of it is choices about how to spend money now -- people he works with are surprised when they see our house. It's a nice house in a nice, desirable area, but it is much smaller and less impressive than they expect someone with his title and income to live in -- because the norm in our culture is to be "house poor" no matter what the starting salary!


This is us too...we built everything over time.  We rented for about 13 years before we bought.  We didn't have any outside help.  We were fortunate in that we bought our apartment right before the big housing bubble, and we opted to live in a less cool/hip neighborhood so that we could get more bang for our buck.  At the time that we bought, it was about 35% of our income, now it is about 15% of our income because we've gotten income increases in the last ten years.  I am sure there are people around us, however, who are house poor, but they choose to live in super hip neighborhoods and I'm pretty sure that they pay a significant price for that.  DH and I make a good salary but to live in something bigger and more well-appointed around here would put a definite strain on our cash flow.  Whatever we save in living costs goes to DD's schooling.  That's more important to us at this juncture in life.
 

 


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#46 of 60 Old 10-10-2011, 11:23 AM
 
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We have had no outside help. We are over 33%, but we live in a high COL area and live on one income.  I don't think the percentage matters as much as whether you have enough money leftover after paying your mortgage to live somewhat comfortably and save for the future - we do so I don't worry about the 33%.

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#47 of 60 Old 10-11-2011, 01:04 PM
 
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We're both 28, bought our first house in a medium COL area 4 years ago with no help from anyone (unless you count the contract we negotiated with the sellers to cover part of our down payment!). Neither of us lived at home or had any financial support from our parents/families since age 18 (or earlier). When we bought the house, we were each making about $32k/year, so our take-home pay was about $4k/mo. Our mortgage/insurance/taxes were $950/mo, so about 24% of our income. Our mortgage broker tried to convince us we could afford literally twice as much house as we bought (since we had very little debt otherwise), but we didn't want to be house-poor, and stuck to the budget we were comfortable with.

 

I lost my job about a year later, and decided to go back to school instead of finding a new job, so our housing expense suddenly took up a much larger share of our budget; taking into consideration his annual pay increases as well as a recent increase to our taxes, it's now about 40% of our household income. But because we have essentially no other debt (just student loans), we were able to make it work. We would have been unable to pay the mortgage if we'd listened to the broker about what we could afford (or I would have been forced to take another job I hated, instead of going back to school for the credentials to do what I really want to do). It's definitely tighter around here, but we get the bills paid.

 

We're looking at moving within the next year (to a smaller community, near the job I am hoping to land after I graduate) and we will probably increase our housing budget just a tad (this house was $125k, we may look at houses up to $150k) - but that's more because we want some land, than we want a bigger house! =) We're also going to both be working again, so it will be feasible while maintaining a comfortable standard of living (tight paycheck-to-paycheck is too stressful to be comfortable, so we're not interested in that). 

 

All up to what exchanges you're comfortable making. We wanted a house, so we've foregone vacations and nice cars to be able to afford one. A friend of mine leases a new car every 2 years and in order to afford this, continues to rent - I don't understand that at all, but that's how he wants to spend his money, I guess!


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#48 of 60 Old 10-11-2011, 01:46 PM
 
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Our PITI is about 12% of our take home pay.  We live in a fairly reasonable cost of living area.  When we purchased our home eight years ago, it was closer to 30% of take home but promotions and raises have lowered that substantially. 

 

DH and I do very well...as do most of our friends.  But most of our friends and coworkers have significantly "upgraded" their housing (bigger, "better" neighborhoods) and are right back to the 30% they were starting out.  Many of them are miserable in their jobs but can't leave or else they'll have to take a beating selling their amazing house to afford something smaller.  Now that we're not so sure we want to stay in this race forever, we're so happy that we didn't upgrade and have a nice house in a nice neighborhood.  We can afford our mortgage on my lower salary alone--it'd be much tighter, but doable.

 

So I agree that that 30% of a lower income for housing has a greater effect on quality of life than 30% of a higher income.  But, I do think that higher income homeowners forget that they'll always need a place to live, that you can't always easily cash out of a home, and that you may not make the big bucks forever. 

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#49 of 60 Old 10-11-2011, 01:55 PM
 
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So I agree that that 30% of a lower income for housing has a greater effect on quality of life than 30% of a higher income.  But, I do think that higher income homeowners forget that they'll always need a place to live, that you can't always easily cash out of a home, and that you may not make the big bucks forever. 


That's quite a generalization - I'm sure plenty of higher income homeowners are perfectly well aware of that. Many prepay on the capital so that the mortgage is paid off years early.

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#50 of 60 Old 10-11-2011, 02:56 PM
 
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Our payment is 30% of our net income right now. If you add in the extra $100 we put towards the principal, the $150 per month we put into a long-term house repair savings (think dead furnace, new siding, new roof, catastrophic leak), and the $50-$100 we put towards small house repairs and such it is more like 36% of our net income.

We bought at the lower end of the price range in the area, but looked hard and found a nice, solid house with a yard, garden space, garage, and with enough charm and personality to make it feel like home. We had to give up a lot of what we wanted: acreage, lots of fruit trees, shop space, house style, and we live closer to a busier road than we would have liked. but we weren't willing to take on the financial risk of a greater debt to income ratio.
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#51 of 60 Old 10-11-2011, 03:45 PM
 
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We just purchased a home, in the last month, and we are at about 25%. DH is a pastor at a small-ish church and I stay home. We are in a small town with reasonable home prices and a lot on the market. We qualified for 1st time home buyer down payment assistance and the seller paid a lot of the closing costs, so we needed very little cash on hand, though we had enough cash saved to buy the house without either of those. We also got a low interest rate (4.125%) which helps a TON. We are actually paying about $120 less than we were in rent and our new home is bigger.

 

So much depends on the area you live in though.  


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#52 of 60 Old 10-12-2011, 06:47 PM
 
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I rent, but my apartment (with utilities, I only pay for internet directly) is about 15% of my net income. If I was able to put 20-30% down on a home, I could find a house in the local area where the payments on a 15 yr mortgage would be under 10% of my net income, but those houses are in really poor condition and the remodeling would probably cost more than the selling price of the house itself. Part of it is because I have a good salary; I'm single, just out of school living on my own but make more than the "average" income for the U.S. It's also about finding the right places. I looked at several apartments and to be closer to work and have all the amenities I wanted, it would have been 25-30% of my net pay. A co-worker who makes the same salary as I do lives just a few miles from me and pays 30% of her net income on rent, not including utilities. She lives in a 2-bedroom apartment with more amenities, I live in a bare-bones studio.  I chose to live here and save money so I'd be able to pay off my student loans within 18 months, and I'm on track to do that. 

 

In higher COL areas or with lower salaries, I can see how it'd be much more difficult to stay within those guidelines, but many people live above them out of choice. 

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#53 of 60 Old 10-13-2011, 06:16 PM
 
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Question - Are most of you basing the percentage on your take-home pay (after deductions for health insurance, 401(k), etc.)? And for housing, are you including the mortgage, school/property tax, insurance, etc.? Or are you also including monthly utilities, water, garbage, etc.? 

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#54 of 60 Old 10-13-2011, 07:16 PM
 
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I'm basing my numbers on the money that goes into our account each month.  We have no health insurance or 401k.  We do have a separate retirement account that gets paid out of money that is deposited in our main account.

 

I'm including mortgage, property taxes, house insurance, property and school taxes (which include water and garbage) and heat/electricity.  I'm not including phone/internet/cable because those aren't essential to the operation of the house.  I think I included a small amount for repairs, but we probably spend more than that.

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#55 of 60 Old 10-14-2011, 06:10 AM
 
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I base mine on dh's take home pay after all deductions (my pay is contract and variable so we never use that).

For housing cost, I include the mortgage, insurance, and all taxes. We don't pay for water or trash pick up and our fuel cost vary wildly so I don't incude the cost of oil.



 

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Question - Are most of you basing the percentage on your take-home pay (after deductions for health insurance, 401(k), etc.)? And for housing, are you including the mortgage, school/property tax, insurance, etc.? Or are you also including monthly utilities, water, garbage, etc.? 



 


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#56 of 60 Old 10-14-2011, 08:55 AM
 
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We're in the northeast, in our late 40's, both kids now out of the house, I'm a stay-at-home.  We're at under 20% of DH's take-home pay for P&I, taxes, insurance, and DS1's off-campus rent where he attends school (we are co-signers).  Our current house is custom built, but very plain with a simple roofline, 28 x 28 footprint.  We bought our land while living in our previous house and had our lot payments while paying the prior mortgage.  We're currently able to add a couple hundred per month additional principal.  What it took to get here was:

 

DH was active duty military when we were first married.  Free government housing.

 

Family sold us our first home and gifted us a huge chunk of equity as part of the transaction.

 

Family gave us a hefty cash gift while our current home was under construction.

 

Lucky timing: we bought our first home when values were low, and our current lot before prices skyrocketed.

 

DH is currently active duty military; he gets a housing allowance which I include as take-home pay.

 

Our sons attend schools with very, very generous financial aid practices.

 

It took a lot of luck, a lot of time, and most of all a lot of help from people and institutions.  Our good fortune hasn't escaped us, and neither has the fragility of anybody's situation nowadays.


Empty-nesting SAHM to DS1 (1989), DS2 (1992), an underachieving Bernese Mountain Dog (2006-2014), and an overachieving mother (1930).  Married to DH since 1986.
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#57 of 60 Old 10-14-2011, 09:35 AM
 
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Our mortgage is about 10% of my monthly take home pay.  But, I do also own a condo, the cost of which is not fully covered by the rent.  Even with that, we are under the 33% guideline.  And we live in Chicago, in a house.  But not in a great neighborhood.  How'd we do it?  My husband literally went knocking on doors asking people if they wanted to sell their homes.  And he found one that said yes.  We have spent a BUTTLOAD rehabbing it.  Not sure I would do this again.  What it has saved me monthly, has cost me in other areas both financial and emotional.


Mama to add 10/05; ds 3/09, and two angels
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#58 of 60 Old 10-14-2011, 01:36 PM
 
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Quote:
Originally Posted by taubel View Post

Question - Are most of you basing the percentage on your take-home pay (after deductions for health insurance, 401(k), etc.)? And for housing, are you including the mortgage, school/property tax, insurance, etc.? Or are you also including monthly utilities, water, garbage, etc.? 



I'm calculating based on take-home pay (after taxes, insurance, 401k, FSA, etc) and including mortgage, homeowner's insurance, and property tax (as those are included in my monthly payment, with insurance & tax monies deposited into an escrow account for annual management).


Just a grad student hopelessly in love with her amazing DH and wee baby Eli (12/06/11).

 

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#59 of 60 Old 10-19-2011, 09:25 AM
 
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Ours is about between 15-20% take home pay.  I honestly don't remember the percent when we bought, probably around the 30% or so.  Dh has had raises since then- it has been 9 yrs now on the mortgage.  We live in a low col and dh does decently.  The biggest help has been that we went w/ a simple starter home that wasn't even finished when we moved in, we finished it as we could.  We had a fire 4 yrs ago and decided to make it a bit bigger and nicer on a few things but that meant that we didn't spend money on furnishings and yet again we took a few years to finish it, as we could afford to do it.   We have a bit over 5 yrs left but should have enough saved at the end of next year to pay it off but we will not be.  That will be our emergency, car and ded fund.


Happily Married to my : 11 yrs- Mama to wild-eyed monkey boy 7-04, fiery little girl 4-07, and the happy smiley baby that sleeps 11-09!
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#60 of 60 Old 10-20-2011, 12:16 PM
 
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Ours is just over 30% of our real take-home (so, after deductions, health care ins, FSA, 401K have been taken out) and about 18% of total salary (gross).  The only help we had purchasing our house was my parents paying for closing costs (we could have afforded it, but it's tradition in my family for parents to pay closing costs on their kids' first house, as a housewarming gift)  We purposely bought far less than we were "qualified" for and have chosent o stay in our small 3 bedroom, no garage-no frills home (despite having 4 rapidly growing boys, lol) because we want the security of a smaller mortgage payment, and being able to save a significant amount (for retirement and just in general) than we'd be able to do if we upgraded our house. Plus, even though the days feel long now with us all squished in here, it will be the blink of an eye before they are all out and we're alone and not stuck in a too-big-for-2-people house!

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