Our annual house hold income is about 0,000. We would like to be able to save for our kid’s college fund and travel once every year. Our income will get slashed pretty badly after tax and we are looking to move to SoCal (for work) where the housing prices are very intimidating.
I used an online housing affordability calculator and it says we can afford a house range from 1.7-1.85 mil, but according to some of the mortgage brokers on yahoo, I should only spend 2.5 times gross salary on a house which will be about 1 million. We don’t live in a luxury lifestyle and have no debt. We currently live in a low COL state.
Just how much money I should spend on a house?
How much should I spend on a house?
3 Responses to How much should I spend on a house?
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just taking real estate courses now, so i try to answer this. your mortgage payments for a 25 yr amortized home can be roughly $9000 (i wish i had that….lol) incl. property tax/month at 7%, so that puts you in a position to buy a house around 1 mil to 1.5 mil depending on property taxes. now you are maxed out on those payments and in case something bad happens you risk loosing your home.
if you don’t need all of that – you said you don’t need a luxury lifestyle, which also would be better for your child(ren), growing up more ‘normal’, now you can save more money for their education, for fun vacations, etc. plus you have peace of mind that – whatever happens – you’ll be able to afford your home and not be foreclosed upon.
right now the prices for homes are still low so you are in a great position to buy a nice home (i heard that a lot of places still are at 64% of former market value, so that’s excellent).
we own a fixer upper that we bought for $158,000 and has a market value of ~$400,000 now. we are very happy spending the money we saved into renovations and truly making this home ours plus we have that afore mentioned peace of mind that whatever happens, we will always be able to afford our home. so i’m a shitty realtor so far trying to get you to spend less money…lol
good luck and lots of fun house hunting!
From experience I know that (for example) if you earn $40,000 then you should, to be comfortable and stay out of trouble because of maintenance and your needs, buy a house that is $40,000.
The calculator is bogus and favors the mortgage company. I suggest you rent if you can for a while rather than committing yourself in a poor economy. You didn’t say the kind of work all of you do but here in Florida you can get a super nice home for $400,000, and even more for your dollar since this is a state that was injured in the mortgage crunch. The question would be "what kind of work do you do" and can you work from home and travel if necessary?
i would say get a house that has JUST what you need, no extras. why would you wanna buy a house that expensive? get something smaller so you can do things you want with the extra money )like save for the kids, extra vacations, etc.)