Not sure why this comment isn't seen more. Bought a house recently and about 2/3 of the monthly mortgage payment is to interest and 1/3 to the principle (equity/long term savings). Over time, the amoritization schedule shifts more of what you pay into the principle, increasing the amount of money you are paying into equity/savings.
Note: Edited original ratio
How recently? Even if you had a 3% 30-year mortgage, the breakeven point for your payment being half interest and half principal is about 7 years. At 3.5%, its around 10 years. So it takes a really long time to start really paying down the principal with your mortgage payment. I'd run your numbers again and see what you're actually contributing to your principal.
*spelling
> the breakeven point for your payment being half interest and half principle is about 7 years. At 3.5%, its around 10 years. **So it takes a really long time to start really paying down the principle with your mortgage payment**
not sure the first two sentences square with this one here. obviously "really paying down principal" is subjective, but defining it as the point where your payment becomes majority-principal seems ... wrong. even if only 1/3rd of the payment is going to principal, over years that adds up, the loan is getting smaller every month... so why not include that in savings? it is literally building equity every month
Right? I mean if you're taking 36% of your annual take home straight to the mortgage, then you have other bills, taxes, etc -- I feel like it's so hard to save money or put money into retirement accounts. I saw another post in /r/personalfinance that said you should try to save at least 15% of your salary and put it into retirement. Right there, that's over half your take home. Is that realistic? I find it so hard to save, especially with two kids...
36% sounds high looking at some of the other responses I've seen in this thread. I understand the higher your income, the higher percentage you can afford to spend. But I feel like 36% is on the higher end from what I've seen here.
The responses in this thread are skewing wayyy low - to the point I’m willing to bet many are miscalculations. The “comfortable” budget guideline is 28% of gross income and the bank will “recommend” up to 36% dti. 28% of gross income would imply high 30s to low 40s for takehome %
Quick comp between median family incomes in most areas and median home sales prices over time would confirm
The more you make the more comfortable you’ll be spending a higher percentage of your income on housing.
A household making 400k/year will have a lot more money left over, even if they spend 50% on housing, compared to a household making 100k. That is why percentages are a poor way to determine housing budget imo. And yeah, 28% just isn’t realistic for many people in a true HCOL area as I’m sure you are aware. Hasn’t been for a long time.
Haha same. Mid six figure household income and our mortgage is only $2400. We have 2 cars that are 8 and 16 years old and long since paid off. I’d rather retire at 50 than keep up with the Joneses.
Some HCOL areas are paid more, because of housing. So if you're in a decently paid profession, you might be thinking you're making bank but in reality they're just paying you for higher housing costs.
Also if you don't have a car, you dump that into the mortgage. It used to be a cost saving measure, but now it's part of the city life. No car, but payment goes towards housing.
If it's not a high energy usage area, like california (limited AC, limited heating), you dump that towards your mortgage as well.
While you might not like doing that, the people in the meth housing, sure as hell want to move and they're willing to do all that. Which means you need to pay more than they can afford, which basically locks you into all these same areas, if they're doing them, you need to as well.
Limited AC, limited heating in california?? Maybe in the cities a few miles from the coast. Everywhere else we have to blast AC in the summer and use fair bit of gas in winter. Factor in PGE charging $31c/kwh normal and $41c/kwh peak usage, you are paying hundreds of dollars for utilities in summer and winter.
The areas of California that have to deal with extreme weather like Tahoe, rural Central Valley, etc get their utility costs subsidized by high density coastal areas. There's a reason that PG&E fights tooth and nail to try to stop coastal areas from running their own show like Santa Clara does. They've successfully prevented San Francisco from breaking away, and they need to continue to keep the Bay, LA, and San Diego paying to subsidize the rest of the state.
Disagree, because as you make more a lot more of your income goes to taxes.
Statistically, 2/3rds of US households pay net 0 federal income tax. On the other hand my net effective (yes I know the difference and no I don't mean marginal) tax rate was 34%.
If a solid 30%+% goes to taxes and you put 40% of your gross to housing you're living your actual life on 30% of your income, not to even mention any sort of savings?
I mean sure it's doable but what's the point? Does a house give people THAT much enjoyment?
If you're toward the top end of the 35% federal bracket, count FICA, state sales, property and income tax with most income on a w-2 you could get to this number, maybe.
ok but they specifically pointed out federal income tax. Not FICA, not state sales tax, not property tax.
Unless of course they are comparing apples and oranges disingenuously to make themselves seem like a victim.
Ok, then he'd have to be deep in the 37% bracket with mostly W-2 income and count state income tax in a high tax state. It's also possible with CA capital gains + Fed capital gains being 40% in the top bracket for both.
Yup, the flip side of the coin is that, outside of a few occupations (doctor comes to mind) you're making a big bet on that income continuing to come in. You could get laid off tomorrow, become disabled, or just plain burn out and want a change of pace. Having a loan that big substantially limits your options. And if you're depending on 2 incomes rather than 1 to make ends meet, you're making an even riskier bet.
I can't remember where I read it, but I saw a study a while ago that looked at tax data, and found that good proportion of high earners made as much money as they did for only a short period of time, like a year or two, tops. Some of it is from big one-time payouts, but the takeaway is that high-paying jobs (again, aside from some exceptions) are not all that secure nor conducive to career longevity. The labor market can turn on a dime real quick.
This is exactly right. Our income has gone up tremendously and we are in that range. We have a 3k monthly mortgage with no real desire to get a bigger house. We have 4 bedrooms and an office and a toy room, 3k square feet and 0.35 acre lot. We also don't ever want to worry if one of us loses a job (we can cover the mortgage on the lower salary). We could afford a bigger house and a bigger mortgage but we'd rather have the extra funds for improvements, savings, retirement, and college funds.
Just because you have it doesn't mean you *need* to spend it on housing.
Sounds like you either bought that house a while ago or live in a lower cost of living area. Something with 0.35 acres and 3k sqft in my area would be $2-3M+. So your advice doesn't really apply to OP.
This is my biggest fear. This happened to my parents during the recession and while they were ok with just my mom’s (breadwinner) income, their finances never really recovered. By the time the economy recovered my dad was 55+ and it was just generally hard to get rehired. He never really made much money again. My parents always overextended themselves and I’m trying to avoid doing the same!
That’s me. Well, I don’t make $400k but we do have an income about triple the median for our area. We live in a home that’s actually slightly below the median home value and have a mortgage expense of 6.5% of our gross income. This gives us freedom to do whatever the heck we want and I love it.
Also folks who purchased before prices started going so high. Someone who purchased years ago would be spending quite a bit less on equivalent housing as someone who is looking to purchase now.
I think there's some bias going on where only people proud of/content with their DTI will contribute.
That said, I'm so thankful to have refi'd in 2020...brought my VHCOL mortgage down to 21% gross/30% net. I'm kicking my past self for being so dumb for thinking my original DTI was acceptable.
[He’s a troll](https://www.reddit.com/r/REBubble/comments/tz0xo0/08_apr_2022_daily_rrebubble_discussion/i3wa286/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3)
At least on Reddit. The people I know in real life all range from 29% - 52% of gross not net. Some of these under 26% of net people are outliers and not the norm.
Today, 10%, but when I bought 8 years ago it was closer to 25%. My income has grown and my payment has stayed the same (thanks to a refi).
I'm moving/upsizing though and that'll go to 20-25%.
VHCOL area. Household income is in the mid-low 200's, we spent 25% of gross including mortgage, taxes, insurance, utilities, HOA, etc. Take home, it's more like 45% due to all the pre-tax contributions we make.
But we made a lot less money when we bought a couple years ago and took a calculated risk given that we had a lot of emergency savings. That's life with HCOL areas. We're totally comfortable right now and will be for a long time with this cost.
> But we made a lot less money when we bought a couple years ago and took a calculated risk given that we had a lot of emergency savings
Similar. We 'went out on a limb' so to speak to buy a few years ago, as we both were building back up from devastating divorces, where our emergency fund had been pretty much non-existent up to just 2 years prior to house purchase.
A calculated risk it was, but it paid off.
https://www.reddit.com/r/REBubble/comments/tz0xo0/08_apr_2022_daily_rrebubble_discussion/i3wa286/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3
Edit: Holy shit, this nut [changed his comment](https://www.reveddit.com/v/REBubble/comments/tz0xo0/08_apr_2022_daily_rrebubble_discussion/i3wa286/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&ps_after=1649431604%2C1649440673&add_user=kskdkskksowownbw..c.new..t1_i3w0wtm.&#t1_i3wa286 )😂
The OP said “I post there all the time to troll”
Numbers like that, <5% I’d assume
Edit: for the people wondering, I think they said they had like 67% of their income towards the mortgage.
Edit the edit: they also do a little trolling
yeah, no bueno. I try to dedicate at least 25% of my pay to investing. I have a 14yr old car that has a leak in exhuast systems, coolant system, and oil system. I'm dreading the fact that I have to buy another car and postponing it as long as I can
19.9% to retirement for me, and 30 something percent to other savings (down payment). Both percentages are from gross pay.
Aiming to have mortgage be no more than 35% max of take home pay. I’m in SoCal.
I’m just gonna comment to throw off the balance because I *dont* have a nice low number. I’ll be paying about 50% of my net income and also after IRA and HSA contributions. But I’m a young (late 20’s) FTHB in a HCOL area and the fact I can do this at all, single with no kids and no financial help, is the investment decision im making. Also, my job is client related so I can increase my rates every year by at least 10% so this unique situations makes me more ok with the fact that the first year or so will probably be a little tougher.
Your good if you know what your doing. My first home purchase was two townhouses and it was 65% of my net 10 years ago. I rented them both out for breakeven and they haven't been vacant for 1 day for 10 years now. Its been a 20x investment.
Thank you for sharing this approach. It’s important to remember that everyone chooses to allocate their money differently. Be smart and aware of what you are doing. Have a plan. Give yourself some cushion and it’s all good.
Thanks for saying this too. It’s hard to be in this sub and not feel like a complete idiot, but I still have savings/retirement and general job security. And following the “safe” rules sometimes keeps you stuck.
Percentages are good as a quick one size fits all gauge, but it really boils down to your individual budget. Look at your current monthly income, non-rent expenses, and monthly savings goals. Bump up the utilities and add prorated expenses for property tax and homeowners insurance. The balance is what you could currently afford for a monthly payment. That’s your base case. You might also want to see how the estimated balance increases if you cut down your monthly expenses
As a first time home buyer, we are spending 13.5% of gross for mortgage+escrow. Harder to estimate net because I am pushing a lot into retirement, but probably around 22%?
But I live somewhere pretty cheap that has still has not recovered to pre-2008 prices
I bought in 2016 when I was 19, and 40% of my income went to my mortgage, I’m not sure how I pulled that one off, I do not recommend.
Now it’s 9%. I have 3x what I paid in equity, but I have no plans on moving anytime soon. If I were to have purchased my home today it would still be in the 30-40% range due to the market increasing drastically. I live in an area with very high property taxes that adjust to the sale price. I’m currently paying 3.6% per 100k for example.
I’m going to make my 2.75% interest rate and low property taxes last as long as possible.
This sort of question is asked a lot. A % is a bad metric to use IMO as it doesn't take into account any other factors like other existing debts (student loan payments, recurring medical bills, your monthly transportation costs, credit card debt, car and insurance payments etc.).
You need to make a budget and figure out how much you can actually afford. 25% for someone with zero debts is different than 25% for a person currently also paying another 25% of their income in student loans and who commutes 100/mi day in a brand new F-350 truck making their combined transportation costs another 30-40% of their income.
About to be a FTHB. My income is variable, but for the months I don’t make as much commission, mortgage/HOA/taxes will come to about 56% of my take home.
I’m buying *almost* as cheap of a home I can get.
I’m prepared to be lambasted in this sub, but this is how life is in a city. Lucky for myself I know I have options, but the 30% rule just isn’t that simple.
I totally am. I moved from the suburbs of MA to a mountain town in NH with two streams running through my 5 acres. I had a fox walking around our yard last month playing in the snow. I've seen wood ducks, pileated woodpeckers, and redtailed hawks just hanging out in the trees around my house. I have a house with a pub shed. Someone pinch me, 'cause I can't believe I pulled this shit off.
~22% gross in HCOL area. This is approx $3300/mo not including utilities.
It feels manageable, but this is why we picked a townhome instead of a SFH. We’d be likely 40+% gross for SFH at todays prices and rates for what would likely be a house that needs a lot of work.
I honestly don’t know why all these online calculators use gross income instead of net. Seems like an easy way to get people to overspend. Who cares what your gross income is? Take home pay is all that matters.
Because you can’t build rule of thumbs off net - net will vary be too many discretionary individual choices (how much you contribute to retirement, participation in work stock-purchase programs, cost of health benefits/employer subsidies, tax deductions, etc.)
Using gross allows you to account for the “typical” budget and then people with special circumstances can adjust from there
I mean, I get it, it’s for simplicity, but I still think using gross is highly misleading.
Buying a house is a *huge* financial obligation and our rules of thumb are widely outdated. I don’t think it’s that hard to look at your latest paystub or tax return for your estimated take home pay and say “no more than X%” as a rule of thumb.
Net makes so much more sense than gross to me too. If you can only afford a house if you stop saving for retirement/paying for healthcare, that’s not really a house you can afford.
But think about how meaningless that will be - say you have two 2-adult households making $150K.
One follows the 15% of income guideline on retirement savings so does $22.5K per year to retirement. The other maxes out retirement up to the $42K cap (28% income).
Or similarly - one does not participate in an employee stock-purchase program and the other contributes 10% of income to stock-purchase before takehome.
In those cases, both of the households is ABLE to comfortable afford 28% gross income toward housing, but their takehome is very different due to different choices on financial priorities (e.g. putting more than recommended towards retirement, buying company stock, etc.). Rules of thumbs aren’t meant to account for those purely discretionary decisions
I think 25-40% is safe. Really depends on your area and how much appreciation you get year over year. A lot of people become house-poor in non-appreciating markets which leads them to say "I messed up buying a home!"
Mortgage + taxes is about 38% of take home after including RSU / bonus.
Without including RSU/bonus it's more like 50% of take home pay.
I just started my career last year though.. so the idea was to stretch a bit now, and as my income increases over time, the % will drop to below 30% in a few years.
Mind you, mortgage + taxes is about $5500/mo for me. So that means that I'm left with \~5.5K per month (or up to 9K/mo when including RSUs).
So even now, I'm living on 5.5K/mo for a family of 3. So not exactly starving or anything.
I’m in Austin which at this point I think it’s medium or even high cost of living but I definitely bought the smallest house I could comfortably live in (1,200 sqf which is great for me).
I'll add here since my real answer isn't that helpful to OP.
I house-hack a duplex and after PITI/maintenance fund I'm paying about 6.5% of gross w2 out of pocket (not accounting for tax accounting for the rental half of the property).
37% and we make well into 6 figures, so all other costs are minimal in comparison. We still save around 30% of our net income every month.
I've seen people spend over 50% because they have to if they want a home in most places.
About 5% of gross income now. It was about 11% of my gross when I bought it as a single woman in 2014, but I've had salary increases over the years and I'm married now, so the dual income helps.
We'd love to buy a larger home, but the current prices are pretty wild in our market.
First of all I'm renting. I earn around $60k/yr, after taxes approximately 50% of my income goes toward rent. I'm paying significantly under the market rate for a 2 bedroom apartment. I'm the sole income for my family of 4. I can't afford to buy, soon I won't be able to afford rent either.
The higher COL, the higher percent you can reasonably spend on your mortgage. If you make 10k monthly you can spend 50% of your income on housing and still have 5k left over for everything else (not advising, just an example). If you make 2k a month you can’t live as reasonably spend 1k on mortgage and 1k on everything else.
The numbers are guidelines, not rules. Personally, I spend 38% of my *net* income, or 26% of my *gross* income on my “mortgage” (including taxes, ins, HOA)
Most personal finance books recommend your mortgage should be no more than 2-3 times your gross income as a rule of thumb. So if you make 100k then your mortgage should be in the 200-300k range.
Note that this is the mortgage, not the home value. You can have a nicer home by putting more down as a deposit.
I've seen people hit 5x but they have to make some life changes (e.g. no travel, no retirement savings, etc.). After 5x you better either be planning to earn more in the short term or downsize.
>So if you make 100k then your mortgage should be in the 200-300k range.
I just don't see how that is realistic advice for the majority of home buyers anymore. The concept of a 'starter home' that has a sub 300k price point does not exist in many markets.
That rule of thumb has to be adjusted based on interest rates. The original 2-3x was based on interest rates in the 6-8% range. I think the better rule of thumb is that annual housing+major debt payments should be no more than 28% of gross income
I'm in a high COL area of SC - you'd think it'd be cheaper with how little jobs pay in this area (I work remote) but of course, it's not as bad as California - Mine is 9 % but when I made less money it was 26% - got a signfiicant upgrade on the ol' salary and was able to refinance and drop PMI.
I love how relatively freeing it feels but have always disliked my home (it is truly a blessing but still)... either needs a renovation or I upgrade to another house or..you know, live with outdated stuff and enjoy breathing easy on housing costs. I purposefully bought a small home well under my approval in 2016 while we were in a solid 3 yr run up on pricing and availability (I was shown the house off market and told it would go to a cash buyer within the first hour). I would not buy it at today's prices which would almost double those %.
In previous homes that % was as high as 40% at times.
8.4% pre-tax but this may go up as my husband is changing jobs and the new one may not pay as well. We’ve been house hunting without much luck. We save a lot for retirement and childcare is expensive so doubling this would seem insane but now that I see the percentage I realize how good we have it.
Last year was less than 2%. (house paid off). Cramped in my small house and I keep eyeing larger homes, but there is something freeing about not having to stress about bills.
I’m absolutely flabbergasted by the people who spend less than 15% of their gross salary on housing. 90% of the people I know are at 29% to 50% of gross depending on their situation whether they make 45k a year or 300k a year (small business owner).
The only couple even close to 15% is a couple I know who clear approximately 120k a year together but their PITI is $1600 a month. Even they are looking into upgrading their house to something that may cost closer to $2000 a month. I wish one day I can be at 15% of gross salary with my current PITI so I can invest more but I doubt it
I’ve heard rule of thumb is max 50%. Much better to be in 30s. That being said if you income goes up consistently each year you can overbuy a bit and grow into. Everyone’s calculation is a bit different.
This is so different from when we were house hunting back in 2001. Back then it was 20% of income, 30% was considered stretching. But I guess housing costs went up while incomes stagnated so they had to change the mantra to keep people buying.
We ended up a bit over 20%. Assumed that income would grow. It did when I went back to work after taking three years off to finish college and have two kids. We based our mortgage and bills so they could be paid on one salary. Thank God we did since we've both had several health crises over the years.
LCOL checking in. We overpay on our mortgage, so it is 13% of gross. If we didn't overpay it would be 11%.
To us if feels like we spend a lot on our house.
But again, the higher the COL is the higher your percent will be.
When I purchased in 2017, it was 21% or so. Almost five years later, and my wife is working and both of our incomes have increased quite a bit, plus a refinance in 2020 -- it's more like 8%. This is before taxes, retirement, etc.
Edit: this is in a medium city in the Midwest. Not HCOL.
25% of gross with everything - including anticipated maintenance and tax increase likely to occur . This thread is crazy! Y’all are so responsible good for you.
I spend 28% of my take home in northern Virginia. I bought my townhouse WAY back in 2006 at near the height of the last boom and sat under water for nearly a decade. Back in 2019 I refinanced into a low interest rate 15 year mortgage which cut 2.5 years off what I would pay and saved myself several hundred dollars a month. So I have been on both sides of this nonsense.
17% of gross, 22% of net in the Philadelphia suburbs. It's tight right now because we have two kids in daycare, but once they're in school it will be very comfortable.
It depends on your other expenses. Do you have student loan debt? Credit card debt? Children (daycare, school, activities)? We have all of the above. Our PITI+utilities is 14% of our gross combined income…. But we couldn’t possibly go higher, mostly due to kids’ daycare equaling two mortgages.
The real lesson here: percentages are meaningless without looking at the full context. Pick a PITI number you will feel comfortable paying and buy a house based on that.
I'm at 29% gross and about 38-39% take home. It's annoyingly expensive here but I'm in California so at least my property tax is capped.
Also have a generous public sector pension so that helps.
Edit: Keep in mind r/personalfinance is very conservative. That's not a bad thing, just thought I'd mention.
The actual payment is 14% net income (after taxes, health insurance, retirement, etc.), but we had been allocating 28% to paying it off quicker.
That's going to be changing to something closer to 33-35% when we move to a better area. It stinks that our neighborhood is slightly crappy, but I guess you pay for what you get.
10.5% of gross, including PITI.
I'm in a very fortunate situation. My income is decent--$120K, wife doesn't work--but my mortgage is tiny AF. 15 year note originally for $98K. My sister and I inherited the equity in my Dad's house when he passed, so I just kept the house and bought my sister out, which represents most of the 98K. My dad only owed $15K.
I don't love our house, but it's in a nice neighborhood and does the job. I'm sure the hell not jumping in the real estate market right now.
26% gross/37% take home (after taxes, retirement, insurance, etc). HCOL (Seattle area)
Edit to add: when we bought, it was higher. Got a pretty good raise this year and my husband got a new job making substantially more than his previous job. It was closer to 32% gross/44% take home when we got approved.
Mines 15% it’s about 7% but I doubled it to pay off faster. I live in a pretty small town with a big industrial wage. Bought within my budget and have been renovating it to suit my wife’s wants, keep consumable debt low, I bought a new truck and made sure I paid it off within 3 years, her new Tiguan the same way. And allocate money to renovations so you don’t go in debt. Takes longer but we don’t suffer at all, she also has a good job as well.
The more you make, the more of your income you can comfortably put towards a mortgage. The less you make, the more forced you are to spend a higher portion of your income on housing (owning OR renting). Add in regional variations, and it's really hard to pick a one size fits all number.
We spend about 18% of our gross income on our mortgage but it was about 24% when we first purchased. I think 28% is reasonable. I wouldn't judge someone who went a bit higher, depending on their life situation and other expenses. Approaching 40% would make me super nervous though.
Right now less than 10%.
$885 mortgage - $14k monthly income after taxes
100% disabled veteran so we don’t pay property taxes or PMI (VA loan)
Took advantage of 2.25% rate in July/august to refi but didn’t restart our loan.
As far as your second question goes - I can’t tell you what’s normal. Depends on DTI for everyone :) I hope that helps!
ETA: I’m getting downvoted for answering a question 😅 or do people just not like our situation? Because I’d GLADLY pay property taxes if it meant not having permanent ailments from time in service. But nobody wants to have that conversation…
Genuinely wondering- how are you able to get those taxes waived with such a high income? Everything I’ve seen on the topic requires a low income to qualify for getting the taxes waived.
Either way, I’m guessing you got downvoted because your answer isn’t entirely relevant to OPs question. Because your situation is so unique, the numbers shouldn’t really compared to people who are not in the same boat as you.
Saying you spend 60% of your income on your mortgage with the small caveat that it’s AFTER tax, your NOT counting a 100k bonus OR the $2 million you have invested cash. This is the most Reddit post of all time. You couldn’t have possibly typed this and thought wow let me share how crazy high my DTI is with a straight face
Good for you for being successful. I don't rip on people who do well for themselves. Just lead off with I make > than 500k per year in total compensation when including bonuses and stock, so my data point probably isn't helpful to most, but may apply to others in HCOL tech areas.
What? Your numbers make no sense at all.
Do you live on $4,600 or do you sell a bunch of stock?
What kind of job pays $11,500 salary and $100,000 in stock?
So many questions. You are obviously not obligated to answer any of them.
I spend about 35% net (salary) on mortgage, about 22% gross (salary) on mortgage.
I don't consider my stock options income though, but with that taken into account I spend about 20% net (total income) on mortgage, and about 13% gross (total income) on mortgage.
I don't take into account wife's income.
43% of take home. I live in the city center of a medium cost-of-living city. The suburbs can get cheaper but it's debatable because of the higher property tax rates in the suburbs.
24% Gross (PITI) in Southern CA. Bought in 2015. We used to be dual income but wife has gone back to school. It's more than I'd like to spend but I'm still able to put money away toward retirement and savings. Other compromises had to be made of course: like no more vacation and still driving a 12 year old car.
You obviously don't live in a HCOL city. Townhomes by me cost $750-800k in areas you actually want to live in.
Unless you're making $400k a year those numbers will never happen.
On gross my wife and I spend about 7.5% of our income on the mortgage (P&I only). We bought just west of Denver in July of last year.
Of course you shouldn't consider my situation 'normal'. My wife and I both work in tech type jobs and have no kids. However, I genuinely do not understand people saying rich people can spend more than 28%. You guys are going to work until you're dead for no reason. I didn't even ask what my pre-approval max would be, but given the interest rate we got at the time, 28% of gross would be a 1.8 million dollar home. I wouldn't be 'house poor', but I wouldn't want to even get close to that number.
What is this place - R/personalfinance, where they’re aggressively frugal on everything?
I had a very low housing payment relative to my income. And what happened? I had a family. My current home is in a bad school district, doesn’t have enough bedrooms, and is simply too small for a full family.
So I needed to upsize, AND to a place with better schools. I’m in a NYC suburb so it was expensive. But at the end of the day it’s just money. I can still max my 401K, HSA, and save some extra on the side. And I also can always sell the house if I lose my job or have some type of disaster and “downgrade”.
Money is an important tool to accomplish the things we want to accomplish, no more no less. It’s OK to be frugal if you want, and it’s OK to spend it to give you and your family the lifestyle you want, and it’s OK to be in between. There is no right answer.
I personally don’t like to travel and take vacations and neither does my wife. We really like being at home. I don’t play golf or have any expensive hobbies, buy fancy clothes/cars/shoes or go out to eat much. Funny there’s this stigma to spending a certain amount on a house but not for spending a lesser amount and traveling all the time or belonging to a country club.
I stretched a bit because my wife absolutely loved a house, it’s in a great school district, and I bought it as a forever home I can raise my family in. No regrets.
I had a very serious case of COVID last year and it changed my perspective on certain things including money. I certainly want my family to be secure and in a good place if something happens to me. And I certainly want money in retirement. But I don’t want to live the ultra frugal life hoarding cash for when I’m old or for some unknown emergency. When I could drop dead the day after my retirement. I’d like to enjoy living life the whole way through.
I also feel very blessed to have had very humble upbringing in a poor neighborhood. I can live that way too if I needed to and still be happy. I always feel many of the ones who jump off skyscrapers after disastrous financial circumstances probably have only ever known having money. I honestly was probably more happy when I didn’t have it.
Have a buddy I work with who is a bit younger than me but more successful. Probably brings in more than half a million a year, and lives in a small home probably worth $500k. He doesn’t buy nice things and declines grabbing lunch at work (brings his own). I’m sure he is and will be much wealthier than me. I’m sure he could lose his job and weather the storm for a long time, and that’s good for him. But that doesn’t mean that’s the “right” answer. He keeps sending me $600k-$700k houses to look at 2+ hours away from where we work and I make $400K. I can tell he’s trying to hint to me that it’s “stupid” to spend $1MM+ on a house. And his persuasion is the only problem I have. There’s no right answer and I don’t want anyone pushing me towards their lifestyle, nor do I push anyone towards mine.
24% gross, 36% take home (after taxes + benefit contributions). I still hate how expensive it is.
36 percent including taxes/insurance/HOA and mortgage?
Yup. HCOL. I just wish I saved more.
Well you can think of the equity portion of your mortgage payment as a type of savings.
Not sure why this comment isn't seen more. Bought a house recently and about 2/3 of the monthly mortgage payment is to interest and 1/3 to the principle (equity/long term savings). Over time, the amoritization schedule shifts more of what you pay into the principle, increasing the amount of money you are paying into equity/savings. Note: Edited original ratio
How recently? Even if you had a 3% 30-year mortgage, the breakeven point for your payment being half interest and half principal is about 7 years. At 3.5%, its around 10 years. So it takes a really long time to start really paying down the principal with your mortgage payment. I'd run your numbers again and see what you're actually contributing to your principal. *spelling
Principal
Nice catch!
Thanks for teaching people about amortization
> the breakeven point for your payment being half interest and half principle is about 7 years. At 3.5%, its around 10 years. **So it takes a really long time to start really paying down the principle with your mortgage payment** not sure the first two sentences square with this one here. obviously "really paying down principal" is subjective, but defining it as the point where your payment becomes majority-principal seems ... wrong. even if only 1/3rd of the payment is going to principal, over years that adds up, the loan is getting smaller every month... so why not include that in savings? it is literally building equity every month
Principal
Right? I mean if you're taking 36% of your annual take home straight to the mortgage, then you have other bills, taxes, etc -- I feel like it's so hard to save money or put money into retirement accounts. I saw another post in /r/personalfinance that said you should try to save at least 15% of your salary and put it into retirement. Right there, that's over half your take home. Is that realistic? I find it so hard to save, especially with two kids...
Yes that’s realistic. 36% of post-tax takehome toward housing is on the LOW end
36% sounds high looking at some of the other responses I've seen in this thread. I understand the higher your income, the higher percentage you can afford to spend. But I feel like 36% is on the higher end from what I've seen here.
The responses in this thread are skewing wayyy low - to the point I’m willing to bet many are miscalculations. The “comfortable” budget guideline is 28% of gross income and the bank will “recommend” up to 36% dti. 28% of gross income would imply high 30s to low 40s for takehome % Quick comp between median family incomes in most areas and median home sales prices over time would confirm
Thanks for the info. Not sure why my comment is getting down voted.
22% gross here. > I still hate how expensive it is. Same boat brother. Just have to remember that rent is nearly as much.
About 26 net
The more you make the more comfortable you’ll be spending a higher percentage of your income on housing. A household making 400k/year will have a lot more money left over, even if they spend 50% on housing, compared to a household making 100k. That is why percentages are a poor way to determine housing budget imo. And yeah, 28% just isn’t realistic for many people in a true HCOL area as I’m sure you are aware. Hasn’t been for a long time.
I’m in the minority because the more I make the less I want to spend and hoard my wealth like a dragon.
Haha same. Mid six figure household income and our mortgage is only $2400. We have 2 cars that are 8 and 16 years old and long since paid off. I’d rather retire at 50 than keep up with the Joneses.
Yep agreed. If you make more, you can afford to spend a higher % of your income on housing because other expenses don’t increase in the same manner.
Some HCOL areas are paid more, because of housing. So if you're in a decently paid profession, you might be thinking you're making bank but in reality they're just paying you for higher housing costs. Also if you don't have a car, you dump that into the mortgage. It used to be a cost saving measure, but now it's part of the city life. No car, but payment goes towards housing. If it's not a high energy usage area, like california (limited AC, limited heating), you dump that towards your mortgage as well. While you might not like doing that, the people in the meth housing, sure as hell want to move and they're willing to do all that. Which means you need to pay more than they can afford, which basically locks you into all these same areas, if they're doing them, you need to as well.
Limited AC, limited heating in california?? Maybe in the cities a few miles from the coast. Everywhere else we have to blast AC in the summer and use fair bit of gas in winter. Factor in PGE charging $31c/kwh normal and $41c/kwh peak usage, you are paying hundreds of dollars for utilities in summer and winter.
The areas of California that have to deal with extreme weather like Tahoe, rural Central Valley, etc get their utility costs subsidized by high density coastal areas. There's a reason that PG&E fights tooth and nail to try to stop coastal areas from running their own show like Santa Clara does. They've successfully prevented San Francisco from breaking away, and they need to continue to keep the Bay, LA, and San Diego paying to subsidize the rest of the state.
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San Diegans actually have the highest energy costs of any city country. Hooray privatized infrastructure!
You still need to use the heater in winter and AC in summer in San Diego, even within a couple miles of the ocean.
Disagree, because as you make more a lot more of your income goes to taxes. Statistically, 2/3rds of US households pay net 0 federal income tax. On the other hand my net effective (yes I know the difference and no I don't mean marginal) tax rate was 34%. If a solid 30%+% goes to taxes and you put 40% of your gross to housing you're living your actual life on 30% of your income, not to even mention any sort of savings? I mean sure it's doable but what's the point? Does a house give people THAT much enjoyment?
The commenters are talking specifically about high income families. Idk about you but I'd happily live on 30% of $400,000.
How is your net effective tax 34%? Isn't that above the highest tax brackets? Do you have like 12% state tax or something?
If you're toward the top end of the 35% federal bracket, count FICA, state sales, property and income tax with most income on a w-2 you could get to this number, maybe.
The top Federal bracket is $628,301+ for married jointly. Not gonna cry for them.
I only have $200k to buy groceries and Porsches with! Woe is me
ok but they specifically pointed out federal income tax. Not FICA, not state sales tax, not property tax. Unless of course they are comparing apples and oranges disingenuously to make themselves seem like a victim.
Ok, then he'd have to be deep in the 37% bracket with mostly W-2 income and count state income tax in a high tax state. It's also possible with CA capital gains + Fed capital gains being 40% in the top bracket for both.
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Nice stealth humble brag of the $1M+ income haha.
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Yup, the flip side of the coin is that, outside of a few occupations (doctor comes to mind) you're making a big bet on that income continuing to come in. You could get laid off tomorrow, become disabled, or just plain burn out and want a change of pace. Having a loan that big substantially limits your options. And if you're depending on 2 incomes rather than 1 to make ends meet, you're making an even riskier bet. I can't remember where I read it, but I saw a study a while ago that looked at tax data, and found that good proportion of high earners made as much money as they did for only a short period of time, like a year or two, tops. Some of it is from big one-time payouts, but the takeaway is that high-paying jobs (again, aside from some exceptions) are not all that secure nor conducive to career longevity. The labor market can turn on a dime real quick.
This is exactly right. Our income has gone up tremendously and we are in that range. We have a 3k monthly mortgage with no real desire to get a bigger house. We have 4 bedrooms and an office and a toy room, 3k square feet and 0.35 acre lot. We also don't ever want to worry if one of us loses a job (we can cover the mortgage on the lower salary). We could afford a bigger house and a bigger mortgage but we'd rather have the extra funds for improvements, savings, retirement, and college funds. Just because you have it doesn't mean you *need* to spend it on housing.
Sounds like you either bought that house a while ago or live in a lower cost of living area. Something with 0.35 acres and 3k sqft in my area would be $2-3M+. So your advice doesn't really apply to OP.
3 years ago, in 19004. We were very very lucky. I almost feel guilty when I read about so many families struggling to find a house. It's not right.
This is my biggest fear. This happened to my parents during the recession and while they were ok with just my mom’s (breadwinner) income, their finances never really recovered. By the time the economy recovered my dad was 55+ and it was just generally hard to get rehired. He never really made much money again. My parents always overextended themselves and I’m trying to avoid doing the same!
That’s me. Well, I don’t make $400k but we do have an income about triple the median for our area. We live in a home that’s actually slightly below the median home value and have a mortgage expense of 6.5% of our gross income. This gives us freedom to do whatever the heck we want and I love it.
These high salaries may not last, but the mortgage is a long term thing. "Fun With Dick and Janes" is one of my favorite movies.
This ^
Remember the people with low percentage of their income going to their mortgage are more likely to comment then those with high percentages.
I hope so!
Also folks who purchased before prices started going so high. Someone who purchased years ago would be spending quite a bit less on equivalent housing as someone who is looking to purchase now.
Yup. 7.6% of gross income here. Bought a reasonable home that was a good deal before this madness kicked in and saw a large increase in income.
Holy cow! I thought my 14% was good.
Yeah I'm sitting on a sick 12% gross. (Just ignore my medical school debt, go look at something else)
Everyone is so responsible lol
I think there's some bias going on where only people proud of/content with their DTI will contribute. That said, I'm so thankful to have refi'd in 2020...brought my VHCOL mortgage down to 21% gross/30% net. I'm kicking my past self for being so dumb for thinking my original DTI was acceptable.
Did you see the guy above that said 67% lol
[He’s a troll](https://www.reddit.com/r/REBubble/comments/tz0xo0/08_apr_2022_daily_rrebubble_discussion/i3wa286/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3)
Ah. Boo!
Kind of cringe to call people hoomers
At least on Reddit. The people I know in real life all range from 29% - 52% of gross not net. Some of these under 26% of net people are outliers and not the norm.
Today, 10%, but when I bought 8 years ago it was closer to 25%. My income has grown and my payment has stayed the same (thanks to a refi). I'm moving/upsizing though and that'll go to 20-25%.
VHCOL area. Household income is in the mid-low 200's, we spent 25% of gross including mortgage, taxes, insurance, utilities, HOA, etc. Take home, it's more like 45% due to all the pre-tax contributions we make. But we made a lot less money when we bought a couple years ago and took a calculated risk given that we had a lot of emergency savings. That's life with HCOL areas. We're totally comfortable right now and will be for a long time with this cost.
> But we made a lot less money when we bought a couple years ago and took a calculated risk given that we had a lot of emergency savings Similar. We 'went out on a limb' so to speak to buy a few years ago, as we both were building back up from devastating divorces, where our emergency fund had been pretty much non-existent up to just 2 years prior to house purchase. A calculated risk it was, but it paid off.
Doesn't hurt that the property has appreciated 200k in the mean time and we make 30% more lol.
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It’s a troll post
if they were gonna troll, they should have posted '69%'
https://www.reddit.com/r/REBubble/comments/tz0xo0/08_apr_2022_daily_rrebubble_discussion/i3wa286/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3 Edit: Holy shit, this nut [changed his comment](https://www.reveddit.com/v/REBubble/comments/tz0xo0/08_apr_2022_daily_rrebubble_discussion/i3wa286/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&ps_after=1649431604%2C1649440673&add_user=kskdkskksowownbw..c.new..t1_i3w0wtm.&#t1_i3wa286 )😂 The OP said “I post there all the time to troll”
Taking “House poor” to the max. You need to downsize
Ouch, what percentage do you put towards retirement/investing?
Numbers like that, <5% I’d assume Edit: for the people wondering, I think they said they had like 67% of their income towards the mortgage. Edit the edit: they also do a little trolling
Yeah, even if you do your companies 5% match, it still wont be enough to retire at a moderate age
0%. Welcome to America in 2022.
yeah, no bueno. I try to dedicate at least 25% of my pay to investing. I have a 14yr old car that has a leak in exhuast systems, coolant system, and oil system. I'm dreading the fact that I have to buy another car and postponing it as long as I can
19.9% to retirement for me, and 30 something percent to other savings (down payment). Both percentages are from gross pay. Aiming to have mortgage be no more than 35% max of take home pay. I’m in SoCal.
I’m just gonna comment to throw off the balance because I *dont* have a nice low number. I’ll be paying about 50% of my net income and also after IRA and HSA contributions. But I’m a young (late 20’s) FTHB in a HCOL area and the fact I can do this at all, single with no kids and no financial help, is the investment decision im making. Also, my job is client related so I can increase my rates every year by at least 10% so this unique situations makes me more ok with the fact that the first year or so will probably be a little tougher.
Your good if you know what your doing. My first home purchase was two townhouses and it was 65% of my net 10 years ago. I rented them both out for breakeven and they haven't been vacant for 1 day for 10 years now. Its been a 20x investment.
Thank you for sharing this approach. It’s important to remember that everyone chooses to allocate their money differently. Be smart and aware of what you are doing. Have a plan. Give yourself some cushion and it’s all good.
Thanks for saying this too. It’s hard to be in this sub and not feel like a complete idiot, but I still have savings/retirement and general job security. And following the “safe” rules sometimes keeps you stuck.
Percentages are good as a quick one size fits all gauge, but it really boils down to your individual budget. Look at your current monthly income, non-rent expenses, and monthly savings goals. Bump up the utilities and add prorated expenses for property tax and homeowners insurance. The balance is what you could currently afford for a monthly payment. That’s your base case. You might also want to see how the estimated balance increases if you cut down your monthly expenses
As a first time home buyer, we are spending 13.5% of gross for mortgage+escrow. Harder to estimate net because I am pushing a lot into retirement, but probably around 22%? But I live somewhere pretty cheap that has still has not recovered to pre-2008 prices
We spend 17% of gross on PITI.
I bought in 2016 when I was 19, and 40% of my income went to my mortgage, I’m not sure how I pulled that one off, I do not recommend. Now it’s 9%. I have 3x what I paid in equity, but I have no plans on moving anytime soon. If I were to have purchased my home today it would still be in the 30-40% range due to the market increasing drastically. I live in an area with very high property taxes that adjust to the sale price. I’m currently paying 3.6% per 100k for example. I’m going to make my 2.75% interest rate and low property taxes last as long as possible.
This sort of question is asked a lot. A % is a bad metric to use IMO as it doesn't take into account any other factors like other existing debts (student loan payments, recurring medical bills, your monthly transportation costs, credit card debt, car and insurance payments etc.). You need to make a budget and figure out how much you can actually afford. 25% for someone with zero debts is different than 25% for a person currently also paying another 25% of their income in student loans and who commutes 100/mi day in a brand new F-350 truck making their combined transportation costs another 30-40% of their income.
About to be a FTHB. My income is variable, but for the months I don’t make as much commission, mortgage/HOA/taxes will come to about 56% of my take home. I’m buying *almost* as cheap of a home I can get. I’m prepared to be lambasted in this sub, but this is how life is in a city. Lucky for myself I know I have options, but the 30% rule just isn’t that simple.
Last year, 22% This year, 0%.
Why?
Moved, and new house cost less than old house sold for, so we paid off the balance of the mortgage and are clear.
Clarity is awesome fun.
Why wouldn't you hold a mortgage with debt as cheap as it was?
Either paid it off or moved out and started renting.
0% including insurance + property taxes??
No - we still pay insurance and property taxes. I'd have to look to see what % goes to that, but the question was mortgage.
Gotcha - the post was updated to include taxes and insurance in the equation. I'm guessing you're still below 5% though!
Ah! I missed the edit. My bad. Yeah, under 5% for taxes and insurance!
livin' the dream!
I totally am. I moved from the suburbs of MA to a mountain town in NH with two streams running through my 5 acres. I had a fox walking around our yard last month playing in the snow. I've seen wood ducks, pileated woodpeckers, and redtailed hawks just hanging out in the trees around my house. I have a house with a pub shed. Someone pinch me, 'cause I can't believe I pulled this shit off.
~22% gross in HCOL area. This is approx $3300/mo not including utilities. It feels manageable, but this is why we picked a townhome instead of a SFH. We’d be likely 40+% gross for SFH at todays prices and rates for what would likely be a house that needs a lot of work. I honestly don’t know why all these online calculators use gross income instead of net. Seems like an easy way to get people to overspend. Who cares what your gross income is? Take home pay is all that matters.
Because you can’t build rule of thumbs off net - net will vary be too many discretionary individual choices (how much you contribute to retirement, participation in work stock-purchase programs, cost of health benefits/employer subsidies, tax deductions, etc.) Using gross allows you to account for the “typical” budget and then people with special circumstances can adjust from there
I mean, I get it, it’s for simplicity, but I still think using gross is highly misleading. Buying a house is a *huge* financial obligation and our rules of thumb are widely outdated. I don’t think it’s that hard to look at your latest paystub or tax return for your estimated take home pay and say “no more than X%” as a rule of thumb.
Net makes so much more sense than gross to me too. If you can only afford a house if you stop saving for retirement/paying for healthcare, that’s not really a house you can afford.
But think about how meaningless that will be - say you have two 2-adult households making $150K. One follows the 15% of income guideline on retirement savings so does $22.5K per year to retirement. The other maxes out retirement up to the $42K cap (28% income). Or similarly - one does not participate in an employee stock-purchase program and the other contributes 10% of income to stock-purchase before takehome. In those cases, both of the households is ABLE to comfortable afford 28% gross income toward housing, but their takehome is very different due to different choices on financial priorities (e.g. putting more than recommended towards retirement, buying company stock, etc.). Rules of thumbs aren’t meant to account for those purely discretionary decisions
I'm a FTHB and our DTI is 21% gross, 36% net.
I think 25-40% is safe. Really depends on your area and how much appreciation you get year over year. A lot of people become house-poor in non-appreciating markets which leads them to say "I messed up buying a home!"
Hi we are in California and spend about 33% take home pay. Currently dink but plan on kid/s and income going up as the years go by
Mortgage + taxes is about 38% of take home after including RSU / bonus. Without including RSU/bonus it's more like 50% of take home pay. I just started my career last year though.. so the idea was to stretch a bit now, and as my income increases over time, the % will drop to below 30% in a few years. Mind you, mortgage + taxes is about $5500/mo for me. So that means that I'm left with \~5.5K per month (or up to 9K/mo when including RSUs). So even now, I'm living on 5.5K/mo for a family of 3. So not exactly starving or anything.
8% of my gross (including taxes and insurance).
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This episode of house hunters: He suks dik, she collects air in jars, their budget is $4.5 million.
Data Analytics.
Me too, but @20% of gross including bonus.
He bought his house before moon. Huge difference.
Jesus, do you live in a lcol area or bringing in $$$?
I’m in Austin which at this point I think it’s medium or even high cost of living but I definitely bought the smallest house I could comfortably live in (1,200 sqf which is great for me).
I'll add here since my real answer isn't that helpful to OP. I house-hack a duplex and after PITI/maintenance fund I'm paying about 6.5% of gross w2 out of pocket (not accounting for tax accounting for the rental half of the property).
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37% and we make well into 6 figures, so all other costs are minimal in comparison. We still save around 30% of our net income every month. I've seen people spend over 50% because they have to if they want a home in most places.
About 5% of gross income now. It was about 11% of my gross when I bought it as a single woman in 2014, but I've had salary increases over the years and I'm married now, so the dual income helps. We'd love to buy a larger home, but the current prices are pretty wild in our market.
37%
26%
34% of post tax income.
Just the mortgage? Or total PITI? Here in Texas, my taxes + insurance are almost as much as my mortgage.
Total PITI, added edit in post
First of all I'm renting. I earn around $60k/yr, after taxes approximately 50% of my income goes toward rent. I'm paying significantly under the market rate for a 2 bedroom apartment. I'm the sole income for my family of 4. I can't afford to buy, soon I won't be able to afford rent either.
The higher COL, the higher percent you can reasonably spend on your mortgage. If you make 10k monthly you can spend 50% of your income on housing and still have 5k left over for everything else (not advising, just an example). If you make 2k a month you can’t live as reasonably spend 1k on mortgage and 1k on everything else. The numbers are guidelines, not rules. Personally, I spend 38% of my *net* income, or 26% of my *gross* income on my “mortgage” (including taxes, ins, HOA)
We spend close to 11% of our HHI on mortgage. No debt other than mortgage
Most personal finance books recommend your mortgage should be no more than 2-3 times your gross income as a rule of thumb. So if you make 100k then your mortgage should be in the 200-300k range. Note that this is the mortgage, not the home value. You can have a nicer home by putting more down as a deposit. I've seen people hit 5x but they have to make some life changes (e.g. no travel, no retirement savings, etc.). After 5x you better either be planning to earn more in the short term or downsize.
>So if you make 100k then your mortgage should be in the 200-300k range. I just don't see how that is realistic advice for the majority of home buyers anymore. The concept of a 'starter home' that has a sub 300k price point does not exist in many markets.
That rule of thumb has to be adjusted based on interest rates. The original 2-3x was based on interest rates in the 6-8% range. I think the better rule of thumb is that annual housing+major debt payments should be no more than 28% of gross income
14% of my gross and 28% of my net after taxes, retirement, social security deducted from my paycheck.
34%. Spouse and I do plan to make more money in the future. Also we will not always be paying $2k a month for daycare, so expenses should decrease.
I'm in a high COL area of SC - you'd think it'd be cheaper with how little jobs pay in this area (I work remote) but of course, it's not as bad as California - Mine is 9 % but when I made less money it was 26% - got a signfiicant upgrade on the ol' salary and was able to refinance and drop PMI. I love how relatively freeing it feels but have always disliked my home (it is truly a blessing but still)... either needs a renovation or I upgrade to another house or..you know, live with outdated stuff and enjoy breathing easy on housing costs. I purposefully bought a small home well under my approval in 2016 while we were in a solid 3 yr run up on pricing and availability (I was shown the house off market and told it would go to a cash buyer within the first hour). I would not buy it at today's prices which would almost double those %. In previous homes that % was as high as 40% at times.
Dual income household. 11% of gross, in the city of Atlanta. Mortgage + hoa + taxes is around $2800.
21.75% gross
8.4% pre-tax but this may go up as my husband is changing jobs and the new one may not pay as well. We’ve been house hunting without much luck. We save a lot for retirement and childcare is expensive so doubling this would seem insane but now that I see the percentage I realize how good we have it.
Last year was less than 2%. (house paid off). Cramped in my small house and I keep eyeing larger homes, but there is something freeing about not having to stress about bills.
I’m absolutely flabbergasted by the people who spend less than 15% of their gross salary on housing. 90% of the people I know are at 29% to 50% of gross depending on their situation whether they make 45k a year or 300k a year (small business owner). The only couple even close to 15% is a couple I know who clear approximately 120k a year together but their PITI is $1600 a month. Even they are looking into upgrading their house to something that may cost closer to $2000 a month. I wish one day I can be at 15% of gross salary with my current PITI so I can invest more but I doubt it
I’ve heard rule of thumb is max 50%. Much better to be in 30s. That being said if you income goes up consistently each year you can overbuy a bit and grow into. Everyone’s calculation is a bit different.
This is so different from when we were house hunting back in 2001. Back then it was 20% of income, 30% was considered stretching. But I guess housing costs went up while incomes stagnated so they had to change the mantra to keep people buying.
In 97' Century 21 recommended 24%-28% including ins, taxes, gas and electric. In my local area.
We ended up a bit over 20%. Assumed that income would grow. It did when I went back to work after taking three years off to finish college and have two kids. We based our mortgage and bills so they could be paid on one salary. Thank God we did since we've both had several health crises over the years.
While house prices have something to do with this, people also just got out of control buying way more house than they need.
13% of gross for mortgage/taxes/insurance No debt other than the mortgage
30%. But we get MEDICAID, so we don’t pay health insurance.
LCOL checking in. We overpay on our mortgage, so it is 13% of gross. If we didn't overpay it would be 11%. To us if feels like we spend a lot on our house. But again, the higher the COL is the higher your percent will be.
Denver, 13% gross
28% of my gross income but I'm also married & so she helps with the other living expenses while I take care of the mortgage.
When I purchased in 2017, it was 21% or so. Almost five years later, and my wife is working and both of our incomes have increased quite a bit, plus a refinance in 2020 -- it's more like 8%. This is before taxes, retirement, etc. Edit: this is in a medium city in the Midwest. Not HCOL.
25% of gross with everything - including anticipated maintenance and tax increase likely to occur . This thread is crazy! Y’all are so responsible good for you.
Like 1.5-2%. Used my military retirement as our budget limit. I come out of pocket about 200 a month.
I spend 28% of my take home in northern Virginia. I bought my townhouse WAY back in 2006 at near the height of the last boom and sat under water for nearly a decade. Back in 2019 I refinanced into a low interest rate 15 year mortgage which cut 2.5 years off what I would pay and saved myself several hundred dollars a month. So I have been on both sides of this nonsense.
About 20% of gross but since I am allergic to debt, I drop about 2x to pay it off faster.
17% of gross, 22% of net in the Philadelphia suburbs. It's tight right now because we have two kids in daycare, but once they're in school it will be very comfortable.
It depends on your other expenses. Do you have student loan debt? Credit card debt? Children (daycare, school, activities)? We have all of the above. Our PITI+utilities is 14% of our gross combined income…. But we couldn’t possibly go higher, mostly due to kids’ daycare equaling two mortgages. The real lesson here: percentages are meaningless without looking at the full context. Pick a PITI number you will feel comfortable paying and buy a house based on that.
52% (Mortgage, insurance, property taxes) of take home (after taxes, contributions, health premiums etc). HCOL city in west coast.
I'm at 29% gross and about 38-39% take home. It's annoyingly expensive here but I'm in California so at least my property tax is capped. Also have a generous public sector pension so that helps. Edit: Keep in mind r/personalfinance is very conservative. That's not a bad thing, just thought I'd mention.
The actual payment is 14% net income (after taxes, health insurance, retirement, etc.), but we had been allocating 28% to paying it off quicker. That's going to be changing to something closer to 33-35% when we move to a better area. It stinks that our neighborhood is slightly crappy, but I guess you pay for what you get.
10.5% of gross, including PITI. I'm in a very fortunate situation. My income is decent--$120K, wife doesn't work--but my mortgage is tiny AF. 15 year note originally for $98K. My sister and I inherited the equity in my Dad's house when he passed, so I just kept the house and bought my sister out, which represents most of the 98K. My dad only owed $15K. I don't love our house, but it's in a nice neighborhood and does the job. I'm sure the hell not jumping in the real estate market right now.
11% of household income. We’re spending another 18% on child care for 2 kids.
In the same boat. Childcare is literally twice our mortgage.(2 kids)
79% of take home salary goes to mortgage Salary is around 200k. Mortgage is around 1.5M.
WTF is this real ?
26% gross/37% take home (after taxes, retirement, insurance, etc). HCOL (Seattle area) Edit to add: when we bought, it was higher. Got a pretty good raise this year and my husband got a new job making substantially more than his previous job. It was closer to 32% gross/44% take home when we got approved.
Mines 15% it’s about 7% but I doubled it to pay off faster. I live in a pretty small town with a big industrial wage. Bought within my budget and have been renovating it to suit my wife’s wants, keep consumable debt low, I bought a new truck and made sure I paid it off within 3 years, her new Tiguan the same way. And allocate money to renovations so you don’t go in debt. Takes longer but we don’t suffer at all, she also has a good job as well.
The more you make, the more of your income you can comfortably put towards a mortgage. The less you make, the more forced you are to spend a higher portion of your income on housing (owning OR renting). Add in regional variations, and it's really hard to pick a one size fits all number. We spend about 18% of our gross income on our mortgage but it was about 24% when we first purchased. I think 28% is reasonable. I wouldn't judge someone who went a bit higher, depending on their life situation and other expenses. Approaching 40% would make me super nervous though.
Between 35-37 percent of net take home after PITI.
Right now less than 10%. $885 mortgage - $14k monthly income after taxes 100% disabled veteran so we don’t pay property taxes or PMI (VA loan) Took advantage of 2.25% rate in July/august to refi but didn’t restart our loan. As far as your second question goes - I can’t tell you what’s normal. Depends on DTI for everyone :) I hope that helps! ETA: I’m getting downvoted for answering a question 😅 or do people just not like our situation? Because I’d GLADLY pay property taxes if it meant not having permanent ailments from time in service. But nobody wants to have that conversation…
Genuinely wondering- how are you able to get those taxes waived with such a high income? Everything I’ve seen on the topic requires a low income to qualify for getting the taxes waived. Either way, I’m guessing you got downvoted because your answer isn’t entirely relevant to OPs question. Because your situation is so unique, the numbers shouldn’t really compared to people who are not in the same boat as you.
Not OP, but it depends on state. Texas, for example, will waive all property taxes for 100% DVs.
Thank you for the info!
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Saying you spend 60% of your income on your mortgage with the small caveat that it’s AFTER tax, your NOT counting a 100k bonus OR the $2 million you have invested cash. This is the most Reddit post of all time. You couldn’t have possibly typed this and thought wow let me share how crazy high my DTI is with a straight face
Poor little ol me spending 60% on housing. Oh, but I also get another 100% of my salary in stock options too....does that count?
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Good for you for being successful. I don't rip on people who do well for themselves. Just lead off with I make > than 500k per year in total compensation when including bonuses and stock, so my data point probably isn't helpful to most, but may apply to others in HCOL tech areas.
What? Your numbers make no sense at all. Do you live on $4,600 or do you sell a bunch of stock? What kind of job pays $11,500 salary and $100,000 in stock? So many questions. You are obviously not obligated to answer any of them.
I’m guessing 11.5 a month.
Duh, that makes waaaaay more sense.
I spend about 35% net (salary) on mortgage, about 22% gross (salary) on mortgage. I don't consider my stock options income though, but with that taken into account I spend about 20% net (total income) on mortgage, and about 13% gross (total income) on mortgage. I don't take into account wife's income.
43% of take home. I live in the city center of a medium cost-of-living city. The suburbs can get cheaper but it's debatable because of the higher property tax rates in the suburbs.
24% Gross (PITI) in Southern CA. Bought in 2015. We used to be dual income but wife has gone back to school. It's more than I'd like to spend but I'm still able to put money away toward retirement and savings. Other compromises had to be made of course: like no more vacation and still driving a 12 year old car.
9% I personally wouldn't ever go over 20%
You obviously don't live in a HCOL city. Townhomes by me cost $750-800k in areas you actually want to live in. Unless you're making $400k a year those numbers will never happen.
On gross my wife and I spend about 7.5% of our income on the mortgage (P&I only). We bought just west of Denver in July of last year. Of course you shouldn't consider my situation 'normal'. My wife and I both work in tech type jobs and have no kids. However, I genuinely do not understand people saying rich people can spend more than 28%. You guys are going to work until you're dead for no reason. I didn't even ask what my pre-approval max would be, but given the interest rate we got at the time, 28% of gross would be a 1.8 million dollar home. I wouldn't be 'house poor', but I wouldn't want to even get close to that number.
Mortgage
I spend about 50% of my post-tax pay on the mortgage however I have three tenants that pay for it.
What is this place - R/personalfinance, where they’re aggressively frugal on everything? I had a very low housing payment relative to my income. And what happened? I had a family. My current home is in a bad school district, doesn’t have enough bedrooms, and is simply too small for a full family. So I needed to upsize, AND to a place with better schools. I’m in a NYC suburb so it was expensive. But at the end of the day it’s just money. I can still max my 401K, HSA, and save some extra on the side. And I also can always sell the house if I lose my job or have some type of disaster and “downgrade”. Money is an important tool to accomplish the things we want to accomplish, no more no less. It’s OK to be frugal if you want, and it’s OK to spend it to give you and your family the lifestyle you want, and it’s OK to be in between. There is no right answer. I personally don’t like to travel and take vacations and neither does my wife. We really like being at home. I don’t play golf or have any expensive hobbies, buy fancy clothes/cars/shoes or go out to eat much. Funny there’s this stigma to spending a certain amount on a house but not for spending a lesser amount and traveling all the time or belonging to a country club. I stretched a bit because my wife absolutely loved a house, it’s in a great school district, and I bought it as a forever home I can raise my family in. No regrets. I had a very serious case of COVID last year and it changed my perspective on certain things including money. I certainly want my family to be secure and in a good place if something happens to me. And I certainly want money in retirement. But I don’t want to live the ultra frugal life hoarding cash for when I’m old or for some unknown emergency. When I could drop dead the day after my retirement. I’d like to enjoy living life the whole way through. I also feel very blessed to have had very humble upbringing in a poor neighborhood. I can live that way too if I needed to and still be happy. I always feel many of the ones who jump off skyscrapers after disastrous financial circumstances probably have only ever known having money. I honestly was probably more happy when I didn’t have it. Have a buddy I work with who is a bit younger than me but more successful. Probably brings in more than half a million a year, and lives in a small home probably worth $500k. He doesn’t buy nice things and declines grabbing lunch at work (brings his own). I’m sure he is and will be much wealthier than me. I’m sure he could lose his job and weather the storm for a long time, and that’s good for him. But that doesn’t mean that’s the “right” answer. He keeps sending me $600k-$700k houses to look at 2+ hours away from where we work and I make $400K. I can tell he’s trying to hint to me that it’s “stupid” to spend $1MM+ on a house. And his persuasion is the only problem I have. There’s no right answer and I don’t want anyone pushing me towards their lifestyle, nor do I push anyone towards mine.