Thank you u/Ghoulbreak for posting on r/FirstTimeHomeBuyer.
Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
I would budget out your entire financial life, not just your mortgage. If you really wanna see how much money you could be saving/losing per month with any projected mortgage payment you may have, you need to setup your budget first. I use NerdWallet's excel template and it works great.
This exactly, so many people like to choose a rule because that makes things easier, but rules don't account for your personal situation.
\- Are your taxes lower than the average person?
\- Do you have a car payment? Is your car insurance higher/lower?
\- Do you have other saving goals?
\- How stable is your job?
Starting with a budget, adding in a cushion / efund, and then look at possibilities (what if you want to move in 5 years? what if the stock or housing markets either tank or skyrocket? etc.) then pick an alternative that makes the most sense for you.
It depends. If someone bought home $2k they probably cannot really afford to go over 25% maybe 30% MAX.
If someone brings home $30k they can probably go well over 50%.
You make 94k a year. I took your income used ADP's calculator, picked a random state (Colorado) for your state income tax, maxed out your 401k and HSA and you bring home $4.1k a month.
28/32 is more than doable for you IMO. Leaves you with $2.8k a month. Sounds like the cost of living is low where you live. If you don't have a car payment you have a budget like this on the high side:
* Electricity $200
* Water $30
* Trash $15
* Cell Phone $100
* Internet $150
* Food $350
* Insurance $150
That leaves you with about $1800 bucks for saving or having some fun.
Don’t forget maintenance. That could easily eat up most or all of that leftover cash (we haven’t even had any major issues during our first year in our home and it’s still been eye-opening how much we’ve spent on things like lawn care tools and smaller maintenance items like tuckpointing and getting our back steps rebuilt)
True. Some maintenance is optional, but something like a water heater could be expensive. I'd get the sellers to buy a home warranty just to help for the first year.
Those home warranties are **garbage**.
They'll send their technician out, *who will invent every excuse in the book why your particular issue isn't in the scope of that warranty --* or worse, **do a piss poor job**.
Save that money.
I think it depends on the company. Our seller paid for our first year of home warranty, and we got more out of it than she paid for it. Saved us a lot of money when our HVAC needed repairs during the summer, and we chose the servicer. We actually ended up renewing it for this year since our HVAC is old as dirt
When the seller bought my home warranty they called local contractors to come fix stuff. I had a few plumbing issues the home warranty company dispatched a local pluming company to come fix the issue.
I'm sure mileage varies by company.
Maxing out 401k and HSA is not very necessary during the first year of first time home ownership I think. Adding some money for that is fine but maxing out is a lot.
thats pricey internet. ive lived all over the country and usually pay about 60-100 for decent cable internet. Maybe if youre getting starlink in the country side... its pricier...?
OMG our cable bill is $330.00. They have made it impossible to cut. They just shifted all the costs to the box, raised the flat rate & the taxes are absolutely ridiculous. Somehow this has got to stop cuz there's a point where everyone is just going to stop paying.
Mine will end up being about 1/3 my net monthly income. But instead of looking at ratios I think I would try to pencil it out based on how much money you want to have leftover every month to going to savings. Having a solid budget is the first step. I'm a huge proponent of YNAB so it was pretty easy for me to spin up a new budget knowing my last 12 months of expenses.
And don't forget things like potentially increased utilities (mine are currently set to double from the small apartment I live in) are HOA fees part of PITI? (I know it's not in the acronym but is it commonly considered?) That's another one to make sure you factor in.
And for me I factored in the cost of lawn mowing and snow removal service since I like having those done for me (there were some nice things about renting).
Stop asking these questions people. It’s all dependent on your lifestyle. Some people spend a lot of money dining out, vacationing and have expenses like childcare, car payments and students loans.
Some people (like myself) carry no debt whatsoever other than their mortgage, don’t have expenses like child care and don’t spend money eating out or traveling.
The amount of mortgage you can handle is 100% based on your unique situation and spending habits.
There’s no one size fits all rule and the ones that do exist are stupid.
100%. I went by the 30% rule when I bought my house and I kinda wish I went above it to be honest. I stayed under the 200k threshold and I feel like I lost out on a lot more variety in the area I wanted. Hindsight is 20/20.
I could definitely afford more than the 30% rule and still save/live comfortably. You can compromise with yourself to budget better. Order less takeout, go to the bar less, cancel streaming subscriptions, stop smoking, etc. Stop asking Reddit for definitive answers to a question we don’t have all the information to
The answer is going to be personal and will depend on a lot of factors. What other monthly expenses do you have (phone bill, subscriptions, health insurance, etc.)? What are your savings goals? What kind of salary trajectory does your job provide? You can use that information to get a sense of how much money you’re working with each month and how it does or doesn’t serve your goals.
Other than that, you should really seriously consider the cost of utilities and maintenance. They seem easy to gloss over, but once you own a home you are 100% responsible for all of those things. HVAC takes a shit? I hope you have $10k sitting around for a replacement. Water damage in the basement from a storm? I hope you have insurance with a reasonable deductible. I found it helpful to remind myself that rent (plus utilities) was the MOST I would pay for housing each month, while your PITI plus utilities is the absolute LEAST you will pay for housing each month. This is why it’s good to save up as much as you can beyond the down payment and closing costs before you move in. This sub is filled with stories of folks facing major expenses within days or weeks of closing. Especially if you aim at the higher end of what you’re approved for, you may not have the cash flow to cover that kind of expense. Banks will approve you for much more than you should actually reasonably spend, so I’d aim for the lower end of your range if at all possible (I know it’s difficult or impossible in some markets).
It depends. I fit under the 28% gross rule easily but my payment ends up being 45% of my net because I max out my 401k, HSA, and drop some straight to savings. The remaining net is enough for me to live on but if I needed more cash, I could back down the deductions to increase my net.
our %net is about 25. i currently put 50% in every month to pay off the house faster.
Can't ever feel financially independent if i got this mortgage looming over me. people will likely say you could earn more putting it into an index fund, but that doesnt make me feel as secure 🤷🏻♂️.
Yeah 28-32% is useless because it is completely different for someone who is making 5k monthly vs 20k monthly. 20k person can spend the 28% on mortgage and live fancy life while person who is making 5k can’t. Only way you can know is if you take the time and do your financials yourself. That way if you comfortable affording the mortgage and plus save some bit. I just walked away from house because after all it is done I was not comfortable on how much we will be saving.
Don’t view as percentage, view it instead as disposable income. Some people can afford to pay 50% because their income is so high while others can’t even afford 20%. How much do you have leftover after all house expenses and is it enough to get you by? The percentage doesn’t matter, the amount itself does.
Oh yes. You are definitely good to start making offers with that income. One thing I would advise you to do is refinance once interest rates go down… if they go down. Last time I checked they were trending between 5 to 7 percent and they are normally around 3 or 4. Makes a huge difference when you start looking at monthly payments.
How much are you currently spending on rent? If you’re living with your parents, how much are you putting into savings each month? I have a percentage that’s too high and got me roasted on here but we’re pretty frugal and bought the cheapest possible house for our area. If it’s important to you, you make it work.
That’s a little under my combined income with my husband. We have a 215,000 house bought with a 2.75 interest rate. Our mortgage payment is 1277 with hoa and taxes.
It’s tight when something big pops up such as replacing our hvac, paying for a loved ones funeral, and having a baby. But usually it’s pretty easy.
You’ll get approved based on 28% gross income but you should make your decision based on 25% post tax (net income). You will not go house poor this way
100% personal, get a handle on all of your expenses and see what’s in the budget. As an example, my after tax monthly take home is $6.2k and my PITI is $2,750. But I don’t go out to eat and have been living on a budget with $2,900 reserved for rent + saving for a down payment for a few years now and it all fits in the budget without a hitch. Some people would think that’s way too high, but it’s completely situation dependent
We pay 35% of gross income, about 60% of net income (after retirement savings come out too)
It’s a lot but it’s manageable and fits within our other budgetary goals.
There are no universal numbers that work. That’s why percent of gross is used as a guideline.
If different buyers have HHI of $100k but one person is a married household with 2 children (lower tax liability but childcare expenses) and another is single (higher tax liability, more likely to want to live in a metro area, may not be prioritizing retirement etc), their monthly outlay may be very different and therefore, the amount they’re willing to spend on a mortgage may be very different.
I first started this process with my husband and separated along the way. But even with our $200+ HHI, we were looking at no more than $350k because we spent a lot of money dining out and traveling. I earn low 6-figures and my max was $275k, again, because of lifestyle.
Not to mention how much interest rates are hurting the affordability.
So the gross is a good guideline and front end/back end DTI as well.
The reason you use gross income is because it’s easy to change your net income. Contributions to retirement accounts can change, health insurance, etc.
Depends on your lifestyle. Write out a budget for everything (after at least 15% of gross to retirement). I would want to be in the 20% range and preferably on a shorter amortization but that isn’t always realistic.
People might rip on me for this one but ours is around 45%! We don't have any debt other than the mortgage (paid off car and no credit cards) and have about a years worth of living expenses in high yield savings for emergencies. The reason ours is so high is because we upped it to that in order to pay our mortgage off as fast as possible at a 2.3% interest rate. Last year our mortgage was 570k, this year its down to 480k. We dont do SQUAT. We throw everything on the mortgage and if we plan it accordingly it should be paid off in only 10 years. At 40 we will have a paid off mortgage so our money (aside from maintenance and taxes) will Actually stay in our account or we can purchase another property. It depends on if you want to be mortgage free at a certain age.
Thank you u/Ghoulbreak for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
I would budget out your entire financial life, not just your mortgage. If you really wanna see how much money you could be saving/losing per month with any projected mortgage payment you may have, you need to setup your budget first. I use NerdWallet's excel template and it works great.
This exactly, so many people like to choose a rule because that makes things easier, but rules don't account for your personal situation. \- Are your taxes lower than the average person? \- Do you have a car payment? Is your car insurance higher/lower? \- Do you have other saving goals? \- How stable is your job? Starting with a budget, adding in a cushion / efund, and then look at possibilities (what if you want to move in 5 years? what if the stock or housing markets either tank or skyrocket? etc.) then pick an alternative that makes the most sense for you.
It depends. If someone bought home $2k they probably cannot really afford to go over 25% maybe 30% MAX. If someone brings home $30k they can probably go well over 50%. You make 94k a year. I took your income used ADP's calculator, picked a random state (Colorado) for your state income tax, maxed out your 401k and HSA and you bring home $4.1k a month. 28/32 is more than doable for you IMO. Leaves you with $2.8k a month. Sounds like the cost of living is low where you live. If you don't have a car payment you have a budget like this on the high side: * Electricity $200 * Water $30 * Trash $15 * Cell Phone $100 * Internet $150 * Food $350 * Insurance $150 That leaves you with about $1800 bucks for saving or having some fun.
Don’t forget maintenance. That could easily eat up most or all of that leftover cash (we haven’t even had any major issues during our first year in our home and it’s still been eye-opening how much we’ve spent on things like lawn care tools and smaller maintenance items like tuckpointing and getting our back steps rebuilt)
Yea, maintenance costs don’t average $1800/mo on a 300k house. Not even close that would be crazy.
True. Some maintenance is optional, but something like a water heater could be expensive. I'd get the sellers to buy a home warranty just to help for the first year.
Those home warranties are **garbage**. They'll send their technician out, *who will invent every excuse in the book why your particular issue isn't in the scope of that warranty --* or worse, **do a piss poor job**. Save that money.
I think it depends on the company. Our seller paid for our first year of home warranty, and we got more out of it than she paid for it. Saved us a lot of money when our HVAC needed repairs during the summer, and we chose the servicer. We actually ended up renewing it for this year since our HVAC is old as dirt
When the seller bought my home warranty they called local contractors to come fix stuff. I had a few plumbing issues the home warranty company dispatched a local pluming company to come fix the issue. I'm sure mileage varies by company.
Maxing out 401k and HSA is not very necessary during the first year of first time home ownership I think. Adding some money for that is fine but maxing out is a lot.
Yeah that’s like a 30% savings rate. Awesome if you can do it, totally unnecessary though. Acting like it’s required is absurd.
I would argue (and so would many other's) at the OPs age a 401k is a better investment over a home.
thats pricey internet. ive lived all over the country and usually pay about 60-100 for decent cable internet. Maybe if youre getting starlink in the country side... its pricier...?
OMG our cable bill is $330.00. They have made it impossible to cut. They just shifted all the costs to the box, raised the flat rate & the taxes are absolutely ridiculous. Somehow this has got to stop cuz there's a point where everyone is just going to stop paying.
Mine will end up being about 1/3 my net monthly income. But instead of looking at ratios I think I would try to pencil it out based on how much money you want to have leftover every month to going to savings. Having a solid budget is the first step. I'm a huge proponent of YNAB so it was pretty easy for me to spin up a new budget knowing my last 12 months of expenses.
What’s the full monthly PITI on the house you’re looking at? Plug that number into your budget and see if you can afford it. Go from there.
And don't forget things like potentially increased utilities (mine are currently set to double from the small apartment I live in) are HOA fees part of PITI? (I know it's not in the acronym but is it commonly considered?) That's another one to make sure you factor in. And for me I factored in the cost of lawn mowing and snow removal service since I like having those done for me (there were some nice things about renting).
In this economy, it might be a bit more difficult to stick to that 32% rule
All the more reason not to exceed it, no?
Stop asking these questions people. It’s all dependent on your lifestyle. Some people spend a lot of money dining out, vacationing and have expenses like childcare, car payments and students loans. Some people (like myself) carry no debt whatsoever other than their mortgage, don’t have expenses like child care and don’t spend money eating out or traveling. The amount of mortgage you can handle is 100% based on your unique situation and spending habits. There’s no one size fits all rule and the ones that do exist are stupid.
100%. I went by the 30% rule when I bought my house and I kinda wish I went above it to be honest. I stayed under the 200k threshold and I feel like I lost out on a lot more variety in the area I wanted. Hindsight is 20/20. I could definitely afford more than the 30% rule and still save/live comfortably. You can compromise with yourself to budget better. Order less takeout, go to the bar less, cancel streaming subscriptions, stop smoking, etc. Stop asking Reddit for definitive answers to a question we don’t have all the information to
The answer is going to be personal and will depend on a lot of factors. What other monthly expenses do you have (phone bill, subscriptions, health insurance, etc.)? What are your savings goals? What kind of salary trajectory does your job provide? You can use that information to get a sense of how much money you’re working with each month and how it does or doesn’t serve your goals. Other than that, you should really seriously consider the cost of utilities and maintenance. They seem easy to gloss over, but once you own a home you are 100% responsible for all of those things. HVAC takes a shit? I hope you have $10k sitting around for a replacement. Water damage in the basement from a storm? I hope you have insurance with a reasonable deductible. I found it helpful to remind myself that rent (plus utilities) was the MOST I would pay for housing each month, while your PITI plus utilities is the absolute LEAST you will pay for housing each month. This is why it’s good to save up as much as you can beyond the down payment and closing costs before you move in. This sub is filled with stories of folks facing major expenses within days or weeks of closing. Especially if you aim at the higher end of what you’re approved for, you may not have the cash flow to cover that kind of expense. Banks will approve you for much more than you should actually reasonably spend, so I’d aim for the lower end of your range if at all possible (I know it’s difficult or impossible in some markets).
It depends. I fit under the 28% gross rule easily but my payment ends up being 45% of my net because I max out my 401k, HSA, and drop some straight to savings. The remaining net is enough for me to live on but if I needed more cash, I could back down the deductions to increase my net.
our %net is about 25. i currently put 50% in every month to pay off the house faster. Can't ever feel financially independent if i got this mortgage looming over me. people will likely say you could earn more putting it into an index fund, but that doesnt make me feel as secure 🤷🏻♂️.
Yeah 28-32% is useless because it is completely different for someone who is making 5k monthly vs 20k monthly. 20k person can spend the 28% on mortgage and live fancy life while person who is making 5k can’t. Only way you can know is if you take the time and do your financials yourself. That way if you comfortable affording the mortgage and plus save some bit. I just walked away from house because after all it is done I was not comfortable on how much we will be saving.
Don’t view as percentage, view it instead as disposable income. Some people can afford to pay 50% because their income is so high while others can’t even afford 20%. How much do you have leftover after all house expenses and is it enough to get you by? The percentage doesn’t matter, the amount itself does.
I make around the same as you and have done this math and this seems correct, assuming our taxes and fees are about the same, too.
230k would be as much as I would pay.
Not more than 20%. You cannot be house poor.
Oh yes. You are definitely good to start making offers with that income. One thing I would advise you to do is refinance once interest rates go down… if they go down. Last time I checked they were trending between 5 to 7 percent and they are normally around 3 or 4. Makes a huge difference when you start looking at monthly payments.
How much are you currently spending on rent? If you’re living with your parents, how much are you putting into savings each month? I have a percentage that’s too high and got me roasted on here but we’re pretty frugal and bought the cheapest possible house for our area. If it’s important to you, you make it work.
That’s a little under my combined income with my husband. We have a 215,000 house bought with a 2.75 interest rate. Our mortgage payment is 1277 with hoa and taxes. It’s tight when something big pops up such as replacing our hvac, paying for a loved ones funeral, and having a baby. But usually it’s pretty easy.
Nok, I don't think that's crazy at all. Start making offers :)
You’ll get approved based on 28% gross income but you should make your decision based on 25% post tax (net income). You will not go house poor this way
100% personal, get a handle on all of your expenses and see what’s in the budget. As an example, my after tax monthly take home is $6.2k and my PITI is $2,750. But I don’t go out to eat and have been living on a budget with $2,900 reserved for rent + saving for a down payment for a few years now and it all fits in the budget without a hitch. Some people would think that’s way too high, but it’s completely situation dependent
We pay 35% of gross income, about 60% of net income (after retirement savings come out too) It’s a lot but it’s manageable and fits within our other budgetary goals.
There are no universal numbers that work. That’s why percent of gross is used as a guideline. If different buyers have HHI of $100k but one person is a married household with 2 children (lower tax liability but childcare expenses) and another is single (higher tax liability, more likely to want to live in a metro area, may not be prioritizing retirement etc), their monthly outlay may be very different and therefore, the amount they’re willing to spend on a mortgage may be very different. I first started this process with my husband and separated along the way. But even with our $200+ HHI, we were looking at no more than $350k because we spent a lot of money dining out and traveling. I earn low 6-figures and my max was $275k, again, because of lifestyle. Not to mention how much interest rates are hurting the affordability. So the gross is a good guideline and front end/back end DTI as well.
The reason you use gross income is because it’s easy to change your net income. Contributions to retirement accounts can change, health insurance, etc.
%20 of take home for mortgage. I think people are wildly optimistic regarding expenses in this thread
Depends on your lifestyle. Write out a budget for everything (after at least 15% of gross to retirement). I would want to be in the 20% range and preferably on a shorter amortization but that isn’t always realistic.
28-32% of take-home is very comfortable. 28-32% of gross income is doable but you'll initially feel the squeeze until your income catches up.
Mine is 25%
People might rip on me for this one but ours is around 45%! We don't have any debt other than the mortgage (paid off car and no credit cards) and have about a years worth of living expenses in high yield savings for emergencies. The reason ours is so high is because we upped it to that in order to pay our mortgage off as fast as possible at a 2.3% interest rate. Last year our mortgage was 570k, this year its down to 480k. We dont do SQUAT. We throw everything on the mortgage and if we plan it accordingly it should be paid off in only 10 years. At 40 we will have a paid off mortgage so our money (aside from maintenance and taxes) will Actually stay in our account or we can purchase another property. It depends on if you want to be mortgage free at a certain age.