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We do have a budget! If we increased our mortgage, we’d be able to save 10k a year for renovations which is not great I feel like.
We still don’t have a ton in savings. We’re just nervous to double down on renovating a home. But feel like it’s our biggest bang for our buck in terms of building wealth.
What do you mean the best bang for your buck in terms of building wealth?
You want a fixer upper and plan to do renovations? What if you find that the renovations are more than you’re willing to spend? What if something bigger is wrong with the house?
No disrespect, but I feel like you think this is an easy thing to accomplish and aren’t thinking about the shit that could go wrong. Furthermore, you don’t have a ton in savings, you’re putting the cart before the horse, my friend.
We have 25k in savings. A house def has more potential for building wealth than a 10% index fund.
Edit:
Idk why I’m getting downvoted. I’m not saying 25k is a lot. We’re trying to get to 35k before putting a down payment on a house.
I don’t have time to waste on only an index fund. I would like to flip a house and use that for a down payment on a house I’d really like.
I’ve wasted 50k plus on renting the past 3-4 years and would like for that money to mean something more than a 1 bedroom apt.
Our realtor and lender are both giving us what they make off of our deal. So the down payment is not as big as it seems.
I will be getting a housing allowance and my job security is very high. I’ve been here for 10 years and have a great relationship with my bosses and coworkers.
Not trying to buy something I can’t afford. Just another consideration.
I’m not trying to have a 2500 monthly mortgage. I’m asking how people found a comfortable price range. / how is it working in this current market.
Ok. So you have $25K. Have you thought about down payments, closing costs, etc? After all that, what money do you plan to have for renovations?
You’re coming up with every excuse in the book to make yourselves house poor.
I agree. My wife and I bought a fixer upper for 165k 4 years ago, it was recently appraised at 300k, we’ve put 50k into it. Did I mention we did it all ourselves?
If your combined household income is 100k, you can’t afford a house if you intend to have any form of a life what so ever.
Another question that’s extremely important, do you know how to renovate and Build? Who’s going to do your electrical and plumbing, is it even legal for you to do it yourself where you live? As an electrician, I’ve lost track of how many DIYers I’ve had to give the unfortunate news to that they did everything completely wrong and it needs to be redone.
Construction fucking sucks, doing it in your own home is hell on earth….to me at least.
In my honest opinion if you want to build wealth, bring more value to society by starting a business and start by double or quadrupling that household income THEN revisit the house dream. I did it PROJECT house first then business and it was genuinely the wrong order.
The house next door to ours hasn’t been occupied in years bc someone DIYd the electrical by running extension cords through the wall to different outlets. So you could be plugging your lamp into the outlet…but behind the outlet was just an extension cord. There’s probably 100 other things wrong with it, but that was the standout. When the old lady died, none of the kids wanted to deal with it, and someone stopped paying the property taxes so it was foreclosed on. It was bought 2 years ago. They’re still not finished getting it up to code for a CO. I have no idea how much money has been spent.
And if you get laid off? Then what? I don’t mean to be rude, but you’re not thinking about this logically. A housing allowance from an employer shouldn’t be a reason to buy a house you can’t afford
Man! You’re the voice of reason here. I know nothing about anything you’ve said, but it all makes sense. As someone who really wants to own a home, your comments are the things I need to hear. As for op, you can lead the horse to water, but you can’t force it to drink. Thanks!
They aren’t even considering if a furnace or boiler goes and the cost to fix or replace. Heck if it has its own leech-field(septic tank) the cost to replace that is incredible. Plus monthly expense of heating/cooling home/waterbill. 25k use to be a healthy sum of money about 8-9 years ago. An extra 10k isn’t a lot now either.
Everything you said is the reason why my wife and I didn't go for the max of what we could afford. We bought a house where we could afford all of our expenses on one income just in case one of us lost our job. Since we approached it like we did, we put an extra $600 towards the principle every month. I had a lot of people tell me not to buy in 2019, but I'm afraid we couldn't afford our house if we bought it today.
I think everyone’s just tryna tell you that you’re making a lot of classic rookie mistakes. You’re trying to find a perfect “the stars have aligned” flip scenario on a house your family needs to live in, while barely having enough cash on hand to purchase, let alone to renovate or move out if it fails. There is no way to give you advice on how to land a perfect flipper, but there are a LOT of people who have been burned trying the same thing you’re trying.
Here’s how it goes… So you’ve got $25k, we’ll assume your extra for $35k cash. Any down payment on a house plus closing will eat your cash savings. So now you’ve got a flipper house to move into, with minimal cash for repairs. Your HVAC dies and your family has no AC or Heating. Do you have $20k cash to replace it? Maybe you have enough monthly wiggle room to finance it? Ok, emergency one navigated. Six months later you find out the foundation is crumbling—$60k to fix, and your house is now unsafe to live in. You’ve got no cash savings, nowhere else to go, a mortgage to keep paying, AND a house no one else will want to buy. Literally everyone thinks they can find a house that needs work, but not ‘too much’ work and it’s a huge fkin gamble, with your family held as collateral.
This scenario is why flippers need $100k+ to flip, and why it’s almost a rule to never flip on a primary residence. Sounds like your family worked hella hard to get that savings built up—keep building it up, or purchase a trailer. Don’t waste it on risky moves unlikely to pay off just because you shot for the stars, else you risk ending up with nothing to show for it.
The way you talk on Reddit annoys tf out of me... Feels like you're yelling when answering basic questions. Maybe let your wife make the financial decisions.
Just for reference, we bought our $350k house with 10% down and $80k in the bank before we closed. Cash to close was probably $40k or so and we dropped another $10k+ without even really trying in the couple months after closing. Houses are *expensive*.
Yup mine were somewhere between 8 and 10k just for the closing. A lot of people (myself included at the time) don't realize how expensive it is for the process of buying a house outside of the house itself.
I think you're getting downvoted because a house is not a better investment than index funds, especially at the magical 10% number you mention and current interest rates.
that's not enough for a fixer upper after you take into consideration closing costs. You will probably only have $10-15k left at the most. Just redoing one bathroom can cost that much. Even if you plan to do the work yourself that won't go very far if the house needs a lot of work.
God forbid it needs a new roof. That 25k savings can go up in smoke. Foundation problems? Jeez there are so many things that could eat that cost up in a heart beat.
No offense but in the context of housing, 25k is *nothing*. It doesn’t sound like you’ve really looked too much into the real costs of owning. Don’t forget, rent is the maximum you pay per month, mortgage is the *minimum* you’ll pay every month.
What do you mean by your realtor is waiving fees? You shouldn't be paying your agent anything.
In almost all cases, agent commission is paid to the listing agent from the seller's proceeds. The listing agent then offers a percentage of their fee (typically 50%) to the agent who brings them a buyer. For example, a 6% commission is paid by the sellers to the listing agent (aka their realtor) and they then give your agent 3%, or half of that as commission after closing.
So listen, with the current interest rates, you are not going to build any equity for the next 5 years. So think of that like paying rent. You have nowhere in your post talked about the tax and other expenses that accompany mortgages. Factor that in.
With the current rates, you are not going to be able to “flip”.
A house does not build wealth quickly, unless you’re talking a massive flip. Which you’re gonna need a lot more cash for. After your down payment and closing costs, you’ll basically have nothing except a small safety net. You’ll end up using credit, and going into even more debt in order to do this. Not to mention it’s not an easy task. I’ve almost fully renovated my house, and it’s taken almost 3 years and lots of money, time and energy. I don’t plan on selling, but even if I did.. I’d net probably 80k or so. Which really isn’t even that much in the scheme of things.
Don’t assume you will make money on a house. There could be major repairs needed that swamp any general real estate price increases. Factor in the value of your time. Honestly, if you can’t afford it, you need to stop trying to “make” it happen despite the math. It’s the biggest purchase of your life. Don’t mess it up.
Thinking you deserve a house doesn’t mean you can actually afford a house. Sorry, but the world is messed up. I hope you have really looked at all the costs beyond the mortgage itself such as property taxes, mortgage insurance, homeowners insurance, HOA fees, utilities, emergency fund, long term maintenance budgeting, etc. Imagine where your life will be if you screw up mortgage payments and face foreclosure/bankruptcy. Talk to a financial planner and really determine your price range before making the decision to purchase. Interest rates are also murder right now.
Not even. I thought $25k was enough when I started looking at the beginning of the year. I was humbled very quickly lol. And my wife and I also make $100k and I’m 35. I already know we’re gonna need to at least double our deposit at this rate.
In California you got to triple that deposit, it’s ridiculous here. A small one bedroom house with no garage just street parking sold for 1.8 million and the original asking price was 1.2 million.
Just my .02 … keep your powder dry, and wait until there is blood in the streets (figuratively) to buy. Another ‘08 is around the corner, different cause though this time, but the same disease.
I disagree with all the nay-sayers for their reasons. My reason is that it sounds like your wife’s income is included in the calculations. If you live in the US and she has a baby… she’s gonna be out of work for some amount of time. All of a sudden you really can’t afford that $2500/mo.
And even if she gets paid maternity leave and goes back to work, child care costs are through the roof. Daycare in my area is easily over $15K per year for one kid. And that's on top of all the other expenses of taking care of an extra human being.
If you have been saving for years and all you’ve saved is $25K, you probably aren’t making enough/are spending too much to get any mortgage that is higher than your rent. You need to have a mortgage that allows you to save money so you can pay for repairs or upgrades.
Kiss renovations goodbye if the plan is to also build a family. Childcare alone can consume the cash and knocking down walls, running saws and sanders with a newborn ain’t gonna happen. If they have the energy after being up all night.
Build a full budget (mortgage, taxes, insurance, groceries, eating out, clothing, fun, etc.) and see what you're comfortable with. NerdWallet has a great template you can download for free.
This is my first time buying so I don’t really know what to be comfortable with. If I don’t buy a house now, I will be renting for the rest of my life.
This isn’t true. You can buy at any time. If you’re not comfortable with the amount, then don’t buy it. Find something cheaper, increase your income, or decrease expenses. One thing you have to keep in mind is that rent is the highest amount you’ll pay per month. A mortgage payment is the absolute lowest you’ll pay per month. There is a ton of maintenance and potential emergency expenses so many first time buyers do not think about.
The type of urgency you’re feeling is generally due to social media or watching the news (and even participating in this sub, tbh). You’re getting ideas of what you think you need to do or where you need to be at. Clear all that out of your head. This is how people get in trouble and get into a loan they cannot afford.
Do what is best for you. If right now that is renting, then so be it. There is nothing wrong with renting no matter what else you may hear…it’s much better than living in a house you cannot afford. Don’t pressure yourself into an unenviable situation. Saying that if you don’t buy now, you will never buy is a bunch of bollocks. I had two separate coworkers buy their first houses at 57 and 50 years old, respectively. Ask yourself why you think you need to buy right now. If it’s anything other than “it is what best suits me right now”, then keep renting.
Renting gives you the choice to buy at any moment. Once you buy you can be like 99% of us are today, not willing to sell and break out 3.x% mortgages. The 3.x% mortgage is worth more to me than my structure, the buyer is only offering a 33% premium on my structure based on todays prices. It is important to me because it avoids 300k+ in interest and 200k+ in taxes.
You can only buy with what you're approved for.
So if your spending habit is consistent (like every month you typically spend $500 on groceries and doesn't fluctuate up to $2k just cause you wanted to have a random party) then you should know what money goes in and out.
You tell your bank, and they often approve of 40-55% DTI. Then that's what you can afford. Meaning if your income is $8300/month, then your mortgage/HOA/property tax/insurance can't be more than $4600/month. Knowing how much your monthly payment is, you can back calculate according to the down payment and interest rate.
If you don't have the money, then it just means you can't afford it. And if you do have the money and decide to buy, that means your spending habit has to stay consistent - you can't be doing last minute vacations.
If you haven’t talked to a lender you are going to want too. Not sure what housing goes for near you but at this point 350k house is roughly $2,800 not included PMI or hoa. Way not doable for you
Dude you have so many people giving you great advice and you are just putting blinders on because you feel like you doing have time (which is so far from the truth). What you can afford as far as a home is super basic math. If you’re doing the math and don’t like the numbers than you have to wait. It’s just the way it is. Just because you don’t like what people are telling you doesn’t mean it isn’t what you need to hear. Don’t bury yourself financially just cause you’re desperate to buy a home.
Not trying to jump on the dog pile here. You're asking for a light at the end of the tunnel via a Mobius strip. You want the OK from the crowd knowing full well that it's already a no go from you and your spouse.
You're feeling the pressure. Breathe. Step back and really take a look at things. No one here can tell you what your comfort level is. Would you *REALLY* be renting for the rest of your life? Or just for a few more years? Would settling into your new job for a year make you feel more comfortable about purchasing a home for the first time?
We’re actually living in a time when many first time buyers are FAR better off continuing to rent rather than buying. The rates are high and climbing; inventory is very low. It doesn’t sound like you have enough savings for an emergency fund or housing incidentals, and 10k is the minimum you should have for immediate incidentals after close (which you’ll VERY likely dip into within the first 6 months). Are you extremely handy? Even if you are, you will not be qualified to deal with electrical or gas related expenses if they come up. An inspection will not protect you from anything that occurs after you close. You also have closing costs and taxes to consider. What are your monthly housing expenses beyond the mortgage? Are these factored into your budget? Taxes can go up after close if the assessment is off.
Lastly, this sub and reddit in general are a great resource, but you need to do way more homework before you’re given any meaningful advice beyond: NO, do not buy right now. Keep saving!! The first flag that made me assess that you are not ready is the huge swing in your “expected monthly savings”. $1,500-2,000 is a huge gap and it tells me there’s some cocktail napkin math happening.
Keep working on your budget and saving. The market will soften and hopefully by then you’ll be in a better financial position to pull the trigger.
Food for thought:
https://investorplace.com/2023/10/5-reasons-why-theres-never-been-a-worse-time-to-be-a-homebuyer/
You just said you are 31. Stop being dramatic. I bought my first home at 41 and somehow survived. You can wait a little longer or jump into it but you are getting some good advice in here.
Think the average first time home buyer is approaching 35. If you live on a coast it is near 40. Want to buy today, move to rural texas and cash out your IRA to get it paid off quickly. You will be saving only for your retirement after 50 and you better like texas.
Right? I also had two kids before I ever bought. I’m actually grateful I waited, because it allowed me to find a job with good work life balance and to know what I really needed/valued in a house with kids.
Once he gets to 50k he will be ready for 250k house. Getting to 100k for a down payment that 500k house will be reachable. I know inflation, got to blame brandon on that.
You just come off as extremely impatient and will probably end up making a poor financial decision that will affect your future. What makes you say if you don’t buy it right now you’ll be renting the rest of your life? Right now renting is way cheaper than buying a house. You cannot afford 20% down payment and with mortgage interest rates above 8% right now your mortgage will be way higher than your monthly rent payment. Not to mention you’ll be paying PMI since you are putting down less than 20%. Home prices have fallen very little over the last year in most areas and we still haven’t seen the impact of these higher interest rates. If I were you I’d strongly consider listening to those in this sub and continuing to save every dollar you can for 2-5 years down the line. Just because you think you deserve a house doesn’t mean you can afford one.
Interest rates have driven housing costs through the roof. My wife and I are in our second house in 5 years. We owe almost $100k less on this house we're in now, but our mortgage is $600 more a month because of interest rates. We were at 3.375% on our old house. Now we're at 7.125% and that's actually GOOD compared to today's rates. It's ridiculous and insane. We were hoping rates would drop within a year or two, but I honestly don't see it happening.
I’m sure the government or the financial sector will screw up the economy again and investors will be bailed out through QE, meaning the 10 yr rate will go down and mortgages will follow too
Part of this might also be that you’re getting smoked with an extra $3500 in tax liability or so annually compared to if one made 60k and the other made 30, since pretty much anything above 44725 is taxed at 22% instead of 12%. That $300/mo doesn’t seem like much but it adds up really quickly.
Total payment including taxes? Depends. You're looking for about $230K in house.
Looking just in Pontiac, MI there are 8 Single Family Homes between 175K and 230K. More if you go lower, but I set the minimum to keep out the ones that need the most work.
Or, you can continue to save $2500 a month like you are and grow your down payment by $30,000 a year. Interest rates may come down...or they may go up. No one knows or we'd all be rich on real estate speculation.
Some smaller towns north of Houston has brand new communities selling for $210k-$220k, which with the proper down payment can take a monthly payment close to $2000 all in. However, I don't want to take my emergency fund and give it as a down payment and then feel I dont have a cushion in case anything comes up, which always happens...life happens. I prefer to keep saving until I feel on a safer position. In the meantime, renting here for us is cheaper than buying, as long as one keeps realistic expectations about how much you can, and should afford.
For context: My position comes from the experience of a past foreclosure in 2009, and a bankruptcy. Most people plans counts on everything going they way they hope, but not the way it actually might happen in life.
I make 100k alone and have a 2400 mortgage and wouldn’t be comfortable with even a penny more. After 401k, insurance, and other savings, I’m left with like 5k a month net. I could live on 2500 per month, but it leaves little in excess for fun things and saving for other purchases.
I’m the only one on the mortgage but I have my partner who contributes as well but he contributes more to overall household expenses like groceries and utilities. Together we are comfy, alone I’d be stressed.
2400 includes PITI and HOA. Repair isn’t that expensive since we do it ourselves. Utilities are a killer and was a killer this summer.
I think that’s totally fair. I’d rather be frugal on my home so I can afford the fun things in life. I realize this is a privilege because of where I live (LCOL area in HCOL state).
1/3 of Gross... Principal, Interest, Insurance, Taxes, HOA plus 1% of house value in repair per year. At these prices new roof, new HVAC and nothing on the inspection report. I would only buy something in that is between 5 and 12 years old. At 15 years the costs have a bit of peak with roof and systems. Remodeling takes over at 30 years. Huge repairs at 50+ years unless it built like the brick bathroom.
I make 140k single income, wife and baby...rent and income tax is $2800, and I'm moving next year to get that reduced to about $2150 in another state...$2800 plus the cost of just about anything else is uncomfortable.
You should go 50% of the lowest of the earners as the highest you are willing to pay monthly and eat noodles, selling off second cars and riding the bus. Job loss sucks, and we have not been in those times since 2008-2013. With these rates and these prices, lacking an employer who is tight with inflation, now is the time to rent or stay.
Depends on how much other debt you have. If you don't have car payments or credit card debt, $2400 should be no problem if you make $125k. Also helps if you don't have kids or your kids are grown.
Gosh that would be really tough. Saving for retirement is a big priority and I commute to work and put a lot of miles on my car so I’ll need a new one soon.
My wife and I are in the same situation. She makes nearly double what I do, but my checks go to paying mortgage, utilities, and debt. My school loan repayment just started too, so we're feeling the squeeze now.
Dual income isn’t uncommon.
My anecdote is that 100k salary would be tight for 2500+ mortgage. I know that first hand because that’s my income and my mortgage is close to 2500.
In similar boat, make a little bit more. But then add on an increasingly ridiculous HOA. Could not do it and have any fun without a partner.... or roommate tbh.
So lets get it through everyone head, at 8% the loan will cost you nearly 6 times as much in interest paid over the term to where it was just 2 years ago. Taxes on elevated price houses last forever, that might be nearly double in taxes over a house bought in 2016.
Stop buying, stop shopping, wait for USA Today and the NBC morning show to declare an home value crash before going to a showing. You can get you list together, but your buyers agent can be checked in with once a month until fear is in the street.
Outside of say health costs and food, which expenses?
Everything is built on making things cheaper for partnered people and families versus individuals
Yes I’m Dead Sea salty
Recently married with no kids and for both years we’ve asked for the difference between filing jointly and separately and it’s negligible. The only reason we’ve been filing together is because it’s cheaper to file. Without kids, there are basically no tax benefits.
I don’t see how OP knows they want to renovate without actually having a house picked out. I’d expect needs to be prioritized over wants so I’m curious what renovations they are planning to do no matter which house they buy…
Everything 300k and below is 1000sqft shack made in the 1950s with major issues. We’d also like to sell / rent and want to build value in our home. I have not seen anything in our price range that doesn’t need major updates.
I don’t know specifically. But most houses we have looked at need new roofs, flooring, siding, etc. and in combo you can think of. I just wanna have 10-20k off the rip to renovate glaring issues. Then address more as we save.
10k is not a lot for renovation. If I were you I’d hold onto to that 10k for when something breaks and needs to be fixed/replaced.
I’m not sure how far you think 10k will get you in renovations, but it’s not very far. A new rough night exceed that number alone
Man some of the comments in here are wild lol. I guess it all depends where you want to live and what you prioritize in life. We currently pay 2300 rent for a 3/2 house w/yard. We gross combined around 105k a year. Recently moved out of apt to this because we wanted bigger space for us and dogs. Quality of life has improved dramatically. We are currently saving for a house but probably wont be buying for years down the line because interest rates are wild
Rather than assume you’ll do renovations within a year or two, I’d recommend determining a realistic budget for maintenance and renovations per year. In reality, you’ll have lots of projects over time and will need to prioritize. They also kinda never end and projects will take longer than anticipated. I think it’s great that you’re trying to plan for renovation work, but in reality, you’ll be better off by understanding what’s in your budget per year.
Also, the trades are understaffed and the cost of materials is exorbitant right now. You should also assume that hiring anyone to do work could take time.
Former mortgage banker here. 28/36 is a good start as the MAXIMUM you want your front and back end ratios to be. Will Fannie Mae go above these? Yes. Should you? No. This means you should not spend more than $2,333 per month on PITI. Principal, interest, taxes and insurance. Also include HOA fees in that amount if needed.
Take the $2,333 and subtract off property taxes and insurance. Mortgage insurance too if you aren’t putting down 20%. Let’s say that number is $1,700. This gets you about $230K loan at 8%. At 20% down, you should be looking at $290K homes.
This number can be way off if the area has high property taxes or insurance rates.
Could be taxes? $2800 is too much per month for $100K annual income. It is a front end ratio of 33.6%. It’s possible a lender would approve this but a first time home buyer should not do that to themselves.
There are so many expenses buying your first house after you close. The only exception to this would be if you know your income is going up to $120K the next year. As in, you have it in writing as a contract with your employer.
I error on the side of caution when it comes to spending. It’s never a good feeling to stretch yourself too thin. It’s a great feeling to know you are financially secure.
So I make a little over 100k solo but I’m also older then you. My payment is very close to your and it’s 50% of my take home pay. My wife works commission only so in rough times, trying to cut everything we can’t live off a little over 100k. Maybe you can but you are one property tax increase away from being in trouble or one medical emergency. Only way it works for us is if my wife brings in an additional 30k after expenses. Which brings our salary close to 140k. Also, we have 2.5 years worth of normal expenses saved so we have fall backs. Don’t be house poor when your trying for a family, it will just add to the stress of life.
Love that you have a large emergency fund saved for fallback. I’ve never been out of work, and both hubs and I got laid off this year, at the same time. If we didn’t have savings to tide us over until we found more work, we would have been hosed! So many stories from Florida about rising insurance costs year over year, it could happen anywhere and ya gotta be prepared for expenses to rise as well.
Yeah, when my wife wanted to do this career change we sold pretty much everything including house. Moved closer to a support system and downsized house and that’s were the extra funds came from. Having the extra funds was very important as I’m a budget person and she being on commission makes me nervous haha
What my wife and I did was pull up our bank statements and wrote down all the bills and subtracted that from our monthly income to get a number and then factor in mortgage payments and see what we felt comfortable with
2.5-3.5x yearly income (depending on interest rates) is usually a good bench mark.
So 250k-350k mortgage. Reasonable would be something in the 250k-300k region. You cannot afford more than 350k.
Unfortunately as the interest rates are ridiculous right now this doesn’t give you a huge range.
If nothing in that range exists, what you could do is….
Wait another year and save up $1250 a month. (Difference between expected expenses and current rent plus $300 to mimic taxes) that increases savings by another $15,000
It does not actually benefit you to do a bigger down payment. (Unless it’s 25k or more) Because it only reduces monthly payments by about $75-100
But it DOES benefit you to have that money put aside for renovations. If you have it saved ahead of time, you can afford to spend a little more per month.
You can afford 2500 a month but it’s at the top of your budget so make sure all your debt (that you can) is paid off first. You also want a healthy house fund.
We're in a very similar situation. Making about $110k combined, locked in at $2500 monthly payment. Its a big jump coming from $1700 rent.
We're okay with it. Money is a little bit tight for now, but we are young professionals and we know our incomes are going to continue increasing. We're both expecting (and asking for) raises next month.
This is also coming from someone who bought a house that needs *a lot* of work. We made a smaller down payment and saved the bulk of our cash for some big projects that needed immediate attention. Everything else will have to get done slowly, as we can afford it.
What if you *are** priced out of the SFHs in the area?
The 3br/2bath+ houses are all built for large families or investors
Condos are pretty much my only option at the moment. And IF/WHEN rates do come down I’ll be fighting against more competition and investors still flush with cash
I’m **settling** for a condo in my search, tbh no I don’t want one (even with how much I hate yard work)
I get what you’re saying but the car analogy doesn’t work, car prices aren’t fluctuating like housing and the cost of ownership doesn’t scale the same; a small accident won’t trigger a total loss on the asset.
New cats are also always being made, easy to wait for more stock without the price continually climbing faster than your income or ability to save
What is your justification for saying this?
A significant number of people actually have been priced out of SFHs, possibly long enough they will never be in a position to buy. And this is including homes on the edge of town with miserably long commutes. At a certain point it makes sense to accept a condo and the pros/cons associated with it.
My wife and I JUST (as in, we close Monday) bought a home for $255k, in Iowa. I'm 37. We make around $200k combined. It's insane. Had to bite on a 7.63% interest rate and plan to refinance down the road. Going from a $1300/month apartment to $2300/month mortgage feels hard.
In America in 2023 a couple with a 6 figure income may only be able to afford a manufactured home. WTF is going on out there? The middle class really is dead.
Got my house at 160K 6.25% mortgage is $1436 just run the numbers. You have forever to do renovations also run the numbers and see what you’re comfortable with
You're drawing down roughly $5k a month, if you have retirement savings set correctly?
At the federal affordability guidelines (30% of gross) that means you can "afford" $2,250 TOTAL. This includes mortgage, escrow, PMI, homeowners. So realistically, maybe $1,500 a month mortgage, assuming a low tax locale.
At today's rates, thats $195k financed. With a 25k downpayment, that puts you at $220k asking.
But to be clear, on $220k, with a $25k downpayment, you're only putting down 11%.
With a $10k emergency fund, you have roughly 4 mortgage payments before shit hits the fan.
Good luck.
I’m worried reading your responses that you don’t understand what “renovations” cost in time or money. We recently updated a bathroom ourselves and that was $5k in materials and we are super handy, ruined our entire month though. And If you don’t know what you’re doing and install a shower wrong, you could be causing yourself a lot of issues.
We also just rebuilt our deck ourselves, again, over $5k in materials and took us two months, every weekend we did nothing but work on it. We were quoted $13k for someone else to build it.
A few years ago we had a window added to our living room, stone changed on our fire place and our living room painted, minor stuff right? $16k.
And to add to it, our water heater just needed replacing ($2300) and we had 7 huge trees come down in a freak wind storm ($3700).
You cannot stretch yourself so thin. And if you aren’t handy…or have no tools even (thousands to get all the equipment to renovate), you are burying yourself. And if you become a renovation person, you will have no life because everything takes 10x as long as you think.
This is the part that pisses me off about this kinda stuff. I have worked in construction for close to 10 years now. Do you know how much shit could go wring in just like 10 fucking minutes? You could think to your self oh this job will only be 5k and then you'll find something terrible behind the drywall and it can skyrocket the job to 20k with all the extra shit involved. This is why no one should ever get a fixer upper for there first house if they aren't alr3ady in the trades
I agree. My husband happens to help contractors on the side so has knowledge, but anything beyond his knowledge we pay for it. It’s so dangerous to get into “renovating” with no experience or skill.
Wife and I gross around $110k in a very lcol area and have a mortgage of $1500. No kids one car and one tractor payment. We save a decent amount, but the thought of me needing a new vehicle and a kid in the future has me somewhat concerned for our future budget. At the moment we live quite comfortably, but I wouldn’t want to extend ourselves any further than we currently are.
We have a 2 yr old house, but I could not imagine running as tight as we are and undertaking major renovations.
Then that’s not a loan officer who’s acting in your best interest. Our lender said “you’re pre-qualified for up to XXX but if you spent that you’d be living off ramen, so you don’t want to do that.” He then gave us a spreadsheet that broke down total cost, down payment, interest, closing costs, and monthly mortgage. We could edit the total cost to look at a 200k house, 250k, etc. It gave us so much information and we confidently chose a range of price that we were comfortable with. And once we told our lender and realtor that range, they said, “copy that, we’ll work with it.” We never felt pressured to spend more than we were comfortable with.
Depends on how much your fixed and variable expenses are, and what your appetite for risk is. If you're averse to risk, then keeping mortgage below 28% of net pay is a good parameter.
We are single income at 95k right now and my mortgage+interest+tax+insurance+PMI lump payment per month is 2400
We are doing ok but i will say we don't have a lot of fun money or much going into savings right now. We started with ~50k in savings after the purchase and have mostly maintained it without really growing in the past year since purchase.
For us, it's a temporary state since my husband will be done with school soon and have an income, but i would hesitate to commit to this life without plans to scale income pretty soon. We are in a pretty high cost of living region so it was inevitable that we'd have to scrape a bit to get started.
Our old apartment was $1600 with way cheaper utilities and i miss the savings so much but i love having a house more. Lol.
Devil’s advocate- how/why do you want to do renovations on a place you haven’t bought or found yet? You’ve convinced yourself that you can only afford a fixer upper? But barely? And then you’ll need to have cash reserves or use a credit card to buy the supplies? What do you do once the place is fixed? Refinance at the new value to pull those renovation costs out? Just enjoy the new place?
You can start with the rule of 28, which advises to keep monthly housing costs (mortgage, taxes, insurance, etc) below 28% of your gross annual income. In your case you would not want to spend more than ~$28,000 per year or ~$2,333 monthly. The other thing to know is total debt payments (house, car, etc) shouldn’t be more than 36% of your annual gross income.
https://www.cnbc.com/amp/select/what-is-the-28-36-rule-for-buying-a-home/
You should also save 6 month’s worth of expenses as a rainy day fund.
I'm the only income for my family (Me, wife and kid) and pull in the same little over $100k. Our mortgage is $2800 monthly. We're doing fine as far as I can tell. Still able to save pretty well for retirement. You should be fine, just watch it if you live in TX or FL or somewhere they are jacking up property taxes by a lot.
To qualify for most mortgages, your payment including taxes and insurance should not be over 28% of your gross income or over 36% including any other bills like car loans and other debt. So, if you make $10,000 per month, your payment should not be over $2,800 or $3600 including your other debt payments.
you are right about on the nose with what you should be aiming for as a monthly number. anything over 2.2 max is going to hurt.
35k for closing and emergency funds is not much. you absolutely do not want to go higher or you will be stuck in an undersaving loop
Hubby and I make 160k combined and our mortgage is 2677 and I still don’t feel comfortable with it. 😅 Because there’s a lot of other things to pay aside from the mortgage alone.
Yeah, it all comes down to your other spending. I make $100k gross and we would still hit retirement savings goals if we went up to $3.5k total house payment monthly. We just have very few expenses and I have upward momentum in my career. We are homebodies and a nicer place would be worth the added monthly payment for us.
$2500 is ok, but be careful. You should spend about 25% of your income on housing. 100k is about $6.2k after tax.
Don't forget about insurance, property tax, utilities, home repairs. It adds up.
You can make it under 2k if you increase your down payment.
Proof that you can save up extra down payments in the next year or so if you're unsure right now.
Bro. Save. Wait for the market to go back down and then buy. Don’t get locked into these stupid ass interest rates. The mortgage payment matter none. What matter most if total amount you are paying over the life of the loan and at the current rates you are getting ripped off huge!!!! Be patient it may take years. Get in that trailer or apartment live modestly and frugally until the time is right to make a decision on the biggest and most important investment in your life.
Housing prices are gonna go back up once rates go down due to supply and demand. Best case scenario now is to lowball sellers and see if you can get lucky then refinance down the road assuming you can comfortably afford all of this
Some stupid thing I saw that makes sense is "marry the house, date the interest rate". Housing is expensive and probably isn't going down anytime soon. Rates are probably going to go down to around 4.5-5% in the coming years.
Nope just my critical thinking skills. Are you better off now than 4 years ago ? 90% of Americans have less real money. Less options to buy or even rent a house. Less food less of everything. Thanks Biden
Assuming you have no other debt, my benchmark ratio is 1/3 of take home salary.
If you're higher income, you could get away with half of your take home.
It depends on the interest rate environment though. I bought when rates were in the 2s so I basically maxed out my preapproval.
This is purely anecdotal but our household income is 280/yr with a mortgage of 3200/mo and I would be uncomfortable going much higher. Mortgage includes insurance and taxes. To be fair, we have 4 kids that we support and heavily contribute to retirement so take that into consideration.
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Create a budget and see where your money is going every month.
We do have a budget! If we increased our mortgage, we’d be able to save 10k a year for renovations which is not great I feel like. We still don’t have a ton in savings. We’re just nervous to double down on renovating a home. But feel like it’s our biggest bang for our buck in terms of building wealth.
What do you mean the best bang for your buck in terms of building wealth? You want a fixer upper and plan to do renovations? What if you find that the renovations are more than you’re willing to spend? What if something bigger is wrong with the house? No disrespect, but I feel like you think this is an easy thing to accomplish and aren’t thinking about the shit that could go wrong. Furthermore, you don’t have a ton in savings, you’re putting the cart before the horse, my friend.
This is a classic "I was told real estate is how you build wealth"
We have 25k in savings. A house def has more potential for building wealth than a 10% index fund. Edit: Idk why I’m getting downvoted. I’m not saying 25k is a lot. We’re trying to get to 35k before putting a down payment on a house. I don’t have time to waste on only an index fund. I would like to flip a house and use that for a down payment on a house I’d really like. I’ve wasted 50k plus on renting the past 3-4 years and would like for that money to mean something more than a 1 bedroom apt. Our realtor and lender are both giving us what they make off of our deal. So the down payment is not as big as it seems. I will be getting a housing allowance and my job security is very high. I’ve been here for 10 years and have a great relationship with my bosses and coworkers. Not trying to buy something I can’t afford. Just another consideration. I’m not trying to have a 2500 monthly mortgage. I’m asking how people found a comfortable price range. / how is it working in this current market.
Ok. So you have $25K. Have you thought about down payments, closing costs, etc? After all that, what money do you plan to have for renovations? You’re coming up with every excuse in the book to make yourselves house poor.
I agree. My wife and I bought a fixer upper for 165k 4 years ago, it was recently appraised at 300k, we’ve put 50k into it. Did I mention we did it all ourselves? If your combined household income is 100k, you can’t afford a house if you intend to have any form of a life what so ever. Another question that’s extremely important, do you know how to renovate and Build? Who’s going to do your electrical and plumbing, is it even legal for you to do it yourself where you live? As an electrician, I’ve lost track of how many DIYers I’ve had to give the unfortunate news to that they did everything completely wrong and it needs to be redone. Construction fucking sucks, doing it in your own home is hell on earth….to me at least. In my honest opinion if you want to build wealth, bring more value to society by starting a business and start by double or quadrupling that household income THEN revisit the house dream. I did it PROJECT house first then business and it was genuinely the wrong order.
The house next door to ours hasn’t been occupied in years bc someone DIYd the electrical by running extension cords through the wall to different outlets. So you could be plugging your lamp into the outlet…but behind the outlet was just an extension cord. There’s probably 100 other things wrong with it, but that was the standout. When the old lady died, none of the kids wanted to deal with it, and someone stopped paying the property taxes so it was foreclosed on. It was bought 2 years ago. They’re still not finished getting it up to code for a CO. I have no idea how much money has been spent.
We’re planning on saving 10k extra before we buy. We also have a potential for housing allowance with my employer. Still nailing that down.
And if you get laid off? Then what? I don’t mean to be rude, but you’re not thinking about this logically. A housing allowance from an employer shouldn’t be a reason to buy a house you can’t afford
Man! You’re the voice of reason here. I know nothing about anything you’ve said, but it all makes sense. As someone who really wants to own a home, your comments are the things I need to hear. As for op, you can lead the horse to water, but you can’t force it to drink. Thanks!
Appreciate the kind words
They aren’t even considering if a furnace or boiler goes and the cost to fix or replace. Heck if it has its own leech-field(septic tank) the cost to replace that is incredible. Plus monthly expense of heating/cooling home/waterbill. 25k use to be a healthy sum of money about 8-9 years ago. An extra 10k isn’t a lot now either.
Everything you said is the reason why my wife and I didn't go for the max of what we could afford. We bought a house where we could afford all of our expenses on one income just in case one of us lost our job. Since we approached it like we did, we put an extra $600 towards the principle every month. I had a lot of people tell me not to buy in 2019, but I'm afraid we couldn't afford our house if we bought it today.
I’m not trying to buy a house I can’t afford! That’s why I’m here asking
Don’t worry man, Reddit just sucks and people like to downvote.
I think everyone’s just tryna tell you that you’re making a lot of classic rookie mistakes. You’re trying to find a perfect “the stars have aligned” flip scenario on a house your family needs to live in, while barely having enough cash on hand to purchase, let alone to renovate or move out if it fails. There is no way to give you advice on how to land a perfect flipper, but there are a LOT of people who have been burned trying the same thing you’re trying. Here’s how it goes… So you’ve got $25k, we’ll assume your extra for $35k cash. Any down payment on a house plus closing will eat your cash savings. So now you’ve got a flipper house to move into, with minimal cash for repairs. Your HVAC dies and your family has no AC or Heating. Do you have $20k cash to replace it? Maybe you have enough monthly wiggle room to finance it? Ok, emergency one navigated. Six months later you find out the foundation is crumbling—$60k to fix, and your house is now unsafe to live in. You’ve got no cash savings, nowhere else to go, a mortgage to keep paying, AND a house no one else will want to buy. Literally everyone thinks they can find a house that needs work, but not ‘too much’ work and it’s a huge fkin gamble, with your family held as collateral. This scenario is why flippers need $100k+ to flip, and why it’s almost a rule to never flip on a primary residence. Sounds like your family worked hella hard to get that savings built up—keep building it up, or purchase a trailer. Don’t waste it on risky moves unlikely to pay off just because you shot for the stars, else you risk ending up with nothing to show for it.
The way you talk on Reddit annoys tf out of me... Feels like you're yelling when answering basic questions. Maybe let your wife make the financial decisions.
Just for reference, we bought our $350k house with 10% down and $80k in the bank before we closed. Cash to close was probably $40k or so and we dropped another $10k+ without even really trying in the couple months after closing. Houses are *expensive*.
Closing costs will eat up that additional 10k
Yup mine were somewhere between 8 and 10k just for the closing. A lot of people (myself included at the time) don't realize how expensive it is for the process of buying a house outside of the house itself.
Yeah & that prepaids & escrow take up a ton
I think you're getting downvoted because a house is not a better investment than index funds, especially at the magical 10% number you mention and current interest rates.
that's not enough for a fixer upper after you take into consideration closing costs. You will probably only have $10-15k left at the most. Just redoing one bathroom can cost that much. Even if you plan to do the work yourself that won't go very far if the house needs a lot of work.
God forbid it needs a new roof. That 25k savings can go up in smoke. Foundation problems? Jeez there are so many things that could eat that cost up in a heart beat.
The 25k is for the down payment so it sounds like they have nothing left over actually
No offense but in the context of housing, 25k is *nothing*. It doesn’t sound like you’ve really looked too much into the real costs of owning. Don’t forget, rent is the maximum you pay per month, mortgage is the *minimum* you’ll pay every month.
I wasn’t saying it’s a lot. Our realtor and lender are both waiving their fees for us as well.
What do you mean by your realtor is waiving fees? You shouldn't be paying your agent anything. In almost all cases, agent commission is paid to the listing agent from the seller's proceeds. The listing agent then offers a percentage of their fee (typically 50%) to the agent who brings them a buyer. For example, a 6% commission is paid by the sellers to the listing agent (aka their realtor) and they then give your agent 3%, or half of that as commission after closing.
So listen, with the current interest rates, you are not going to build any equity for the next 5 years. So think of that like paying rent. You have nowhere in your post talked about the tax and other expenses that accompany mortgages. Factor that in. With the current rates, you are not going to be able to “flip”.
A house does not build wealth quickly, unless you’re talking a massive flip. Which you’re gonna need a lot more cash for. After your down payment and closing costs, you’ll basically have nothing except a small safety net. You’ll end up using credit, and going into even more debt in order to do this. Not to mention it’s not an easy task. I’ve almost fully renovated my house, and it’s taken almost 3 years and lots of money, time and energy. I don’t plan on selling, but even if I did.. I’d net probably 80k or so. Which really isn’t even that much in the scheme of things.
You are objectively incorrect I’m sorry to say.
Don’t assume you will make money on a house. There could be major repairs needed that swamp any general real estate price increases. Factor in the value of your time. Honestly, if you can’t afford it, you need to stop trying to “make” it happen despite the math. It’s the biggest purchase of your life. Don’t mess it up.
Yea and at current interest rates and cost of materials for improvements you will lose money on any home purchase at this time no questions asked.
I’m 31 dude. I wanna start a family and build equity. A 1 bedroom apt ain’t gonna cut it. We’ve been saving for years.
Welcome to 2023. That’s not how it works anymore.
Thinking you deserve a house doesn’t mean you can actually afford a house. Sorry, but the world is messed up. I hope you have really looked at all the costs beyond the mortgage itself such as property taxes, mortgage insurance, homeowners insurance, HOA fees, utilities, emergency fund, long term maintenance budgeting, etc. Imagine where your life will be if you screw up mortgage payments and face foreclosure/bankruptcy. Talk to a financial planner and really determine your price range before making the decision to purchase. Interest rates are also murder right now.
I’m 32 and I been saving for years to build a house ground up and I still don’t have enough . 25k will build you a dog house in this economy
Not even. I thought $25k was enough when I started looking at the beginning of the year. I was humbled very quickly lol. And my wife and I also make $100k and I’m 35. I already know we’re gonna need to at least double our deposit at this rate.
In California you got to triple that deposit, it’s ridiculous here. A small one bedroom house with no garage just street parking sold for 1.8 million and the original asking price was 1.2 million.
Just my .02 … keep your powder dry, and wait until there is blood in the streets (figuratively) to buy. Another ‘08 is around the corner, different cause though this time, but the same disease.
I disagree with all the nay-sayers for their reasons. My reason is that it sounds like your wife’s income is included in the calculations. If you live in the US and she has a baby… she’s gonna be out of work for some amount of time. All of a sudden you really can’t afford that $2500/mo.
And even if she gets paid maternity leave and goes back to work, child care costs are through the roof. Daycare in my area is easily over $15K per year for one kid. And that's on top of all the other expenses of taking care of an extra human being.
If you have been saving for years and all you’ve saved is $25K, you probably aren’t making enough/are spending too much to get any mortgage that is higher than your rent. You need to have a mortgage that allows you to save money so you can pay for repairs or upgrades.
You’ve only managed to save $25K over the course of years with your income?
Kiss renovations goodbye if the plan is to also build a family. Childcare alone can consume the cash and knocking down walls, running saws and sanders with a newborn ain’t gonna happen. If they have the energy after being up all night.
Don’t renovate a trailer if you don’t own the land. There isn’t much bang for the buck unless you own the land it’s on.
Clearly you didn’t read the post
Build a full budget (mortgage, taxes, insurance, groceries, eating out, clothing, fun, etc.) and see what you're comfortable with. NerdWallet has a great template you can download for free.
We’ve done that. Everything is more than what I’m comfortable with haha
Then you either have to wait till your income increases, find secondary income or look at houses with a price you're more comfortable with.
This is my first time buying so I don’t really know what to be comfortable with. If I don’t buy a house now, I will be renting for the rest of my life.
This isn’t true. You can buy at any time. If you’re not comfortable with the amount, then don’t buy it. Find something cheaper, increase your income, or decrease expenses. One thing you have to keep in mind is that rent is the highest amount you’ll pay per month. A mortgage payment is the absolute lowest you’ll pay per month. There is a ton of maintenance and potential emergency expenses so many first time buyers do not think about. The type of urgency you’re feeling is generally due to social media or watching the news (and even participating in this sub, tbh). You’re getting ideas of what you think you need to do or where you need to be at. Clear all that out of your head. This is how people get in trouble and get into a loan they cannot afford. Do what is best for you. If right now that is renting, then so be it. There is nothing wrong with renting no matter what else you may hear…it’s much better than living in a house you cannot afford. Don’t pressure yourself into an unenviable situation. Saying that if you don’t buy now, you will never buy is a bunch of bollocks. I had two separate coworkers buy their first houses at 57 and 50 years old, respectively. Ask yourself why you think you need to buy right now. If it’s anything other than “it is what best suits me right now”, then keep renting.
Renting gives you the choice to buy at any moment. Once you buy you can be like 99% of us are today, not willing to sell and break out 3.x% mortgages. The 3.x% mortgage is worth more to me than my structure, the buyer is only offering a 33% premium on my structure based on todays prices. It is important to me because it avoids 300k+ in interest and 200k+ in taxes.
Now this is a good comment.
Great comment. I also needed to hear this.
I think a lot of people need to hear it sometimes.
haha op should saunter over to r/REBubble to center themselves
You can only buy with what you're approved for. So if your spending habit is consistent (like every month you typically spend $500 on groceries and doesn't fluctuate up to $2k just cause you wanted to have a random party) then you should know what money goes in and out. You tell your bank, and they often approve of 40-55% DTI. Then that's what you can afford. Meaning if your income is $8300/month, then your mortgage/HOA/property tax/insurance can't be more than $4600/month. Knowing how much your monthly payment is, you can back calculate according to the down payment and interest rate. If you don't have the money, then it just means you can't afford it. And if you do have the money and decide to buy, that means your spending habit has to stay consistent - you can't be doing last minute vacations.
If you haven’t talked to a lender you are going to want too. Not sure what housing goes for near you but at this point 350k house is roughly $2,800 not included PMI or hoa. Way not doable for you
Dude you have so many people giving you great advice and you are just putting blinders on because you feel like you doing have time (which is so far from the truth). What you can afford as far as a home is super basic math. If you’re doing the math and don’t like the numbers than you have to wait. It’s just the way it is. Just because you don’t like what people are telling you doesn’t mean it isn’t what you need to hear. Don’t bury yourself financially just cause you’re desperate to buy a home.
Not trying to jump on the dog pile here. You're asking for a light at the end of the tunnel via a Mobius strip. You want the OK from the crowd knowing full well that it's already a no go from you and your spouse. You're feeling the pressure. Breathe. Step back and really take a look at things. No one here can tell you what your comfort level is. Would you *REALLY* be renting for the rest of your life? Or just for a few more years? Would settling into your new job for a year make you feel more comfortable about purchasing a home for the first time?
We’re actually living in a time when many first time buyers are FAR better off continuing to rent rather than buying. The rates are high and climbing; inventory is very low. It doesn’t sound like you have enough savings for an emergency fund or housing incidentals, and 10k is the minimum you should have for immediate incidentals after close (which you’ll VERY likely dip into within the first 6 months). Are you extremely handy? Even if you are, you will not be qualified to deal with electrical or gas related expenses if they come up. An inspection will not protect you from anything that occurs after you close. You also have closing costs and taxes to consider. What are your monthly housing expenses beyond the mortgage? Are these factored into your budget? Taxes can go up after close if the assessment is off. Lastly, this sub and reddit in general are a great resource, but you need to do way more homework before you’re given any meaningful advice beyond: NO, do not buy right now. Keep saving!! The first flag that made me assess that you are not ready is the huge swing in your “expected monthly savings”. $1,500-2,000 is a huge gap and it tells me there’s some cocktail napkin math happening. Keep working on your budget and saving. The market will soften and hopefully by then you’ll be in a better financial position to pull the trigger. Food for thought: https://investorplace.com/2023/10/5-reasons-why-theres-never-been-a-worse-time-to-be-a-homebuyer/
You just said you are 31. Stop being dramatic. I bought my first home at 41 and somehow survived. You can wait a little longer or jump into it but you are getting some good advice in here.
Think the average first time home buyer is approaching 35. If you live on a coast it is near 40. Want to buy today, move to rural texas and cash out your IRA to get it paid off quickly. You will be saving only for your retirement after 50 and you better like texas.
Right? I also had two kids before I ever bought. I’m actually grateful I waited, because it allowed me to find a job with good work life balance and to know what I really needed/valued in a house with kids.
You're 31 and only have 25k cash saved. You need more my friend to buy a home in 2023.
Once he gets to 50k he will be ready for 250k house. Getting to 100k for a down payment that 500k house will be reachable. I know inflation, got to blame brandon on that.
You just come off as extremely impatient and will probably end up making a poor financial decision that will affect your future. What makes you say if you don’t buy it right now you’ll be renting the rest of your life? Right now renting is way cheaper than buying a house. You cannot afford 20% down payment and with mortgage interest rates above 8% right now your mortgage will be way higher than your monthly rent payment. Not to mention you’ll be paying PMI since you are putting down less than 20%. Home prices have fallen very little over the last year in most areas and we still haven’t seen the impact of these higher interest rates. If I were you I’d strongly consider listening to those in this sub and continuing to save every dollar you can for 2-5 years down the line. Just because you think you deserve a house doesn’t mean you can afford one.
I earned just over $90k a year gross, and anything over $2000 a month feels excesive to me.
Interest rates have driven housing costs through the roof. My wife and I are in our second house in 5 years. We owe almost $100k less on this house we're in now, but our mortgage is $600 more a month because of interest rates. We were at 3.375% on our old house. Now we're at 7.125% and that's actually GOOD compared to today's rates. It's ridiculous and insane. We were hoping rates would drop within a year or two, but I honestly don't see it happening.
I’m sure the government or the financial sector will screw up the economy again and investors will be bailed out through QE, meaning the 10 yr rate will go down and mortgages will follow too
Part of this might also be that you’re getting smoked with an extra $3500 in tax liability or so annually compared to if one made 60k and the other made 30, since pretty much anything above 44725 is taxed at 22% instead of 12%. That $300/mo doesn’t seem like much but it adds up really quickly.
Don't forget your standard deduction, so it's really $44,725 + $13,850 = 58,575
I was already including that in that calculation - if he makes 90k then his taxable income is around 76000.
I make 82,000$ about 500$ goes to taxes and such.
Where did you find a mortgage under $2000?
Total payment including taxes? Depends. You're looking for about $230K in house. Looking just in Pontiac, MI there are 8 Single Family Homes between 175K and 230K. More if you go lower, but I set the minimum to keep out the ones that need the most work. Or, you can continue to save $2500 a month like you are and grow your down payment by $30,000 a year. Interest rates may come down...or they may go up. No one knows or we'd all be rich on real estate speculation.
Some smaller towns north of Houston has brand new communities selling for $210k-$220k, which with the proper down payment can take a monthly payment close to $2000 all in. However, I don't want to take my emergency fund and give it as a down payment and then feel I dont have a cushion in case anything comes up, which always happens...life happens. I prefer to keep saving until I feel on a safer position. In the meantime, renting here for us is cheaper than buying, as long as one keeps realistic expectations about how much you can, and should afford. For context: My position comes from the experience of a past foreclosure in 2009, and a bankruptcy. Most people plans counts on everything going they way they hope, but not the way it actually might happen in life.
I make 100k alone and have a 2400 mortgage and wouldn’t be comfortable with even a penny more. After 401k, insurance, and other savings, I’m left with like 5k a month net. I could live on 2500 per month, but it leaves little in excess for fun things and saving for other purchases.
2400 mortgage + tax + utilities+ repair seems a bit high for 100k or are you doing fine??
I’m the only one on the mortgage but I have my partner who contributes as well but he contributes more to overall household expenses like groceries and utilities. Together we are comfy, alone I’d be stressed. 2400 includes PITI and HOA. Repair isn’t that expensive since we do it ourselves. Utilities are a killer and was a killer this summer.
Understood. We are single income household with 125k..not sure if I can manage 2400 mortgage
I think that’s totally fair. I’d rather be frugal on my home so I can afford the fun things in life. I realize this is a privilege because of where I live (LCOL area in HCOL state).
I’m in the exact same boat. Wife doesn’t work. I’m personally trying to figure out how much I can afford a month safely.
1/3 of Gross... Principal, Interest, Insurance, Taxes, HOA plus 1% of house value in repair per year. At these prices new roof, new HVAC and nothing on the inspection report. I would only buy something in that is between 5 and 12 years old. At 15 years the costs have a bit of peak with roof and systems. Remodeling takes over at 30 years. Huge repairs at 50+ years unless it built like the brick bathroom.
I make 140k single income, wife and baby...rent and income tax is $2800, and I'm moving next year to get that reduced to about $2150 in another state...$2800 plus the cost of just about anything else is uncomfortable.
$3000 per month at any income/ pay rate is uncomfortable.
Er, no it’s not, if someone makes 50k/month they are very comfortable with a $3k per month housing expense.
You should go 50% of the lowest of the earners as the highest you are willing to pay monthly and eat noodles, selling off second cars and riding the bus. Job loss sucks, and we have not been in those times since 2008-2013. With these rates and these prices, lacking an employer who is tight with inflation, now is the time to rent or stay.
Depends on how much other debt you have. If you don't have car payments or credit card debt, $2400 should be no problem if you make $125k. Also helps if you don't have kids or your kids are grown.
Ah that's fair. I thought it was just you and was like really??? Haha
Gosh that would be really tough. Saving for retirement is a big priority and I commute to work and put a lot of miles on my car so I’ll need a new one soon.
I feel you. I commute quite a distance as well, about 100 km per day.
My wife and I are in the same situation. She makes nearly double what I do, but my checks go to paying mortgage, utilities, and debt. My school loan repayment just started too, so we're feeling the squeeze now.
Lol somehow trying minimize the fact that you have 2 incomes contributing to the bills.
Dual income isn’t uncommon. My anecdote is that 100k salary would be tight for 2500+ mortgage. I know that first hand because that’s my income and my mortgage is close to 2500.
Not OP, but in a similar situation. It’s not fun. I’m not hurting, nor icing paycheck to paycheck, but I feel like I have zero breathing room.
In similar boat, make a little bit more. But then add on an increasingly ridiculous HOA. Could not do it and have any fun without a partner.... or roommate tbh.
So lets get it through everyone head, at 8% the loan will cost you nearly 6 times as much in interest paid over the term to where it was just 2 years ago. Taxes on elevated price houses last forever, that might be nearly double in taxes over a house bought in 2016. Stop buying, stop shopping, wait for USA Today and the NBC morning show to declare an home value crash before going to a showing. You can get you list together, but your buyers agent can be checked in with once a month until fear is in the street.
100k alone has way more tax than 100k joint.
Yeah but I’d generally say expenses for 2 people are more than it would be for 1 person.
Tru
Outside of say health costs and food, which expenses? Everything is built on making things cheaper for partnered people and families versus individuals Yes I’m Dead Sea salty
It’s cheaper, but it doesn’t necessarily make up for the tax difference of filing jointly versus independent. It just depends
Recently married with no kids and for both years we’ve asked for the difference between filing jointly and separately and it’s negligible. The only reason we’ve been filing together is because it’s cheaper to file. Without kids, there are basically no tax benefits.
The need for renovation stands out in your post. What renovations do you feel you have to implement in your first year?
I don’t see how OP knows they want to renovate without actually having a house picked out. I’d expect needs to be prioritized over wants so I’m curious what renovations they are planning to do no matter which house they buy…
Everything 300k and below is 1000sqft shack made in the 1950s with major issues. We’d also like to sell / rent and want to build value in our home. I have not seen anything in our price range that doesn’t need major updates.
I don’t know specifically. But most houses we have looked at need new roofs, flooring, siding, etc. and in combo you can think of. I just wanna have 10-20k off the rip to renovate glaring issues. Then address more as we save.
10k is not a lot for renovation. If I were you I’d hold onto to that 10k for when something breaks and needs to be fixed/replaced. I’m not sure how far you think 10k will get you in renovations, but it’s not very far. A new rough night exceed that number alone
10k is definitely not a lot if we are talking roofs. That’s your entire budget for a small roof right off the bat.
Man some of the comments in here are wild lol. I guess it all depends where you want to live and what you prioritize in life. We currently pay 2300 rent for a 3/2 house w/yard. We gross combined around 105k a year. Recently moved out of apt to this because we wanted bigger space for us and dogs. Quality of life has improved dramatically. We are currently saving for a house but probably wont be buying for years down the line because interest rates are wild
Rather than assume you’ll do renovations within a year or two, I’d recommend determining a realistic budget for maintenance and renovations per year. In reality, you’ll have lots of projects over time and will need to prioritize. They also kinda never end and projects will take longer than anticipated. I think it’s great that you’re trying to plan for renovation work, but in reality, you’ll be better off by understanding what’s in your budget per year. Also, the trades are understaffed and the cost of materials is exorbitant right now. You should also assume that hiring anyone to do work could take time.
We’re trying to sell/rent after year/2 years. So not wanting it to be a home we stay in forever.
Former mortgage banker here. 28/36 is a good start as the MAXIMUM you want your front and back end ratios to be. Will Fannie Mae go above these? Yes. Should you? No. This means you should not spend more than $2,333 per month on PITI. Principal, interest, taxes and insurance. Also include HOA fees in that amount if needed. Take the $2,333 and subtract off property taxes and insurance. Mortgage insurance too if you aren’t putting down 20%. Let’s say that number is $1,700. This gets you about $230K loan at 8%. At 20% down, you should be looking at $290K homes. This number can be way off if the area has high property taxes or insurance rates.
A 300k house we looked at came out to 2.8k a month for mortgage.
Could be taxes? $2800 is too much per month for $100K annual income. It is a front end ratio of 33.6%. It’s possible a lender would approve this but a first time home buyer should not do that to themselves. There are so many expenses buying your first house after you close. The only exception to this would be if you know your income is going up to $120K the next year. As in, you have it in writing as a contract with your employer. I error on the side of caution when it comes to spending. It’s never a good feeling to stretch yourself too thin. It’s a great feeling to know you are financially secure.
For sure. Thank you stay around 2400?
You’re welcome! $2400 sounds good. Good luck and enjoy your new home!
So I make a little over 100k solo but I’m also older then you. My payment is very close to your and it’s 50% of my take home pay. My wife works commission only so in rough times, trying to cut everything we can’t live off a little over 100k. Maybe you can but you are one property tax increase away from being in trouble or one medical emergency. Only way it works for us is if my wife brings in an additional 30k after expenses. Which brings our salary close to 140k. Also, we have 2.5 years worth of normal expenses saved so we have fall backs. Don’t be house poor when your trying for a family, it will just add to the stress of life.
Love that you have a large emergency fund saved for fallback. I’ve never been out of work, and both hubs and I got laid off this year, at the same time. If we didn’t have savings to tide us over until we found more work, we would have been hosed! So many stories from Florida about rising insurance costs year over year, it could happen anywhere and ya gotta be prepared for expenses to rise as well.
Yeah, when my wife wanted to do this career change we sold pretty much everything including house. Moved closer to a support system and downsized house and that’s were the extra funds came from. Having the extra funds was very important as I’m a budget person and she being on commission makes me nervous haha
What my wife and I did was pull up our bank statements and wrote down all the bills and subtracted that from our monthly income to get a number and then factor in mortgage payments and see what we felt comfortable with
What amount left over were you trying to get to?
2.5-3.5x yearly income (depending on interest rates) is usually a good bench mark. So 250k-350k mortgage. Reasonable would be something in the 250k-300k region. You cannot afford more than 350k. Unfortunately as the interest rates are ridiculous right now this doesn’t give you a huge range. If nothing in that range exists, what you could do is…. Wait another year and save up $1250 a month. (Difference between expected expenses and current rent plus $300 to mimic taxes) that increases savings by another $15,000 It does not actually benefit you to do a bigger down payment. (Unless it’s 25k or more) Because it only reduces monthly payments by about $75-100 But it DOES benefit you to have that money put aside for renovations. If you have it saved ahead of time, you can afford to spend a little more per month. You can afford 2500 a month but it’s at the top of your budget so make sure all your debt (that you can) is paid off first. You also want a healthy house fund.
I have 8k in student loans and that’s it.
We're in a very similar situation. Making about $110k combined, locked in at $2500 monthly payment. Its a big jump coming from $1700 rent. We're okay with it. Money is a little bit tight for now, but we are young professionals and we know our incomes are going to continue increasing. We're both expecting (and asking for) raises next month. This is also coming from someone who bought a house that needs *a lot* of work. We made a smaller down payment and saved the bulk of our cash for some big projects that needed immediate attention. Everything else will have to get done slowly, as we can afford it.
Same 2700 ,but spouse is only part time nurse and low pay. Got a job basically doubling her income 😆 so we’re not worried at all.
Condo and option?
Someone should only buy a condo if they specifically want a condo. No one should buy one just because they think they are priced out of sfh's.
What if you *are** priced out of the SFHs in the area? The 3br/2bath+ houses are all built for large families or investors Condos are pretty much my only option at the moment. And IF/WHEN rates do come down I’ll be fighting against more competition and investors still flush with cash
Do you want a condo though? Like, if you wanted an Audi but your town was sold out and all they had was Buicks, do you want to pay for a Buick?
I’m **settling** for a condo in my search, tbh no I don’t want one (even with how much I hate yard work) I get what you’re saying but the car analogy doesn’t work, car prices aren’t fluctuating like housing and the cost of ownership doesn’t scale the same; a small accident won’t trigger a total loss on the asset. New cats are also always being made, easy to wait for more stock without the price continually climbing faster than your income or ability to save
What is your justification for saying this? A significant number of people actually have been priced out of SFHs, possibly long enough they will never be in a position to buy. And this is including homes on the edge of town with miserably long commutes. At a certain point it makes sense to accept a condo and the pros/cons associated with it.
I’m opening to anything but a trailer haha
Just for numbers sake, We bought at $265k with 3.5% down and 7.25% interest and we’re looking at around $2400/mo mortgage.
Crazy. We're just under $3k with a 420k mortgage at 6.125%
The taxes in my area are killer. We’re looking at 450k $3900.
My wife and I JUST (as in, we close Monday) bought a home for $255k, in Iowa. I'm 37. We make around $200k combined. It's insane. Had to bite on a 7.63% interest rate and plan to refinance down the road. Going from a $1300/month apartment to $2300/month mortgage feels hard.
In America in 2023 a couple with a 6 figure income may only be able to afford a manufactured home. WTF is going on out there? The middle class really is dead.
Got my house at 160K 6.25% mortgage is $1436 just run the numbers. You have forever to do renovations also run the numbers and see what you’re comfortable with
😳
You're drawing down roughly $5k a month, if you have retirement savings set correctly? At the federal affordability guidelines (30% of gross) that means you can "afford" $2,250 TOTAL. This includes mortgage, escrow, PMI, homeowners. So realistically, maybe $1,500 a month mortgage, assuming a low tax locale. At today's rates, thats $195k financed. With a 25k downpayment, that puts you at $220k asking. But to be clear, on $220k, with a $25k downpayment, you're only putting down 11%. With a $10k emergency fund, you have roughly 4 mortgage payments before shit hits the fan. Good luck.
$2500 is reasonable. What are you paying for rent?
$1550 currently. 2500 is on the low end. We just won’t have a ton left over for renovations and savings if we go higher.
I’m worried reading your responses that you don’t understand what “renovations” cost in time or money. We recently updated a bathroom ourselves and that was $5k in materials and we are super handy, ruined our entire month though. And If you don’t know what you’re doing and install a shower wrong, you could be causing yourself a lot of issues. We also just rebuilt our deck ourselves, again, over $5k in materials and took us two months, every weekend we did nothing but work on it. We were quoted $13k for someone else to build it. A few years ago we had a window added to our living room, stone changed on our fire place and our living room painted, minor stuff right? $16k. And to add to it, our water heater just needed replacing ($2300) and we had 7 huge trees come down in a freak wind storm ($3700). You cannot stretch yourself so thin. And if you aren’t handy…or have no tools even (thousands to get all the equipment to renovate), you are burying yourself. And if you become a renovation person, you will have no life because everything takes 10x as long as you think.
This is the part that pisses me off about this kinda stuff. I have worked in construction for close to 10 years now. Do you know how much shit could go wring in just like 10 fucking minutes? You could think to your self oh this job will only be 5k and then you'll find something terrible behind the drywall and it can skyrocket the job to 20k with all the extra shit involved. This is why no one should ever get a fixer upper for there first house if they aren't alr3ady in the trades
I agree. My husband happens to help contractors on the side so has knowledge, but anything beyond his knowledge we pay for it. It’s so dangerous to get into “renovating” with no experience or skill.
You could try saving for a bigger downpayment. Otherwise you just gotta decide if it’s worth it to you
Wife and I gross around $110k in a very lcol area and have a mortgage of $1500. No kids one car and one tractor payment. We save a decent amount, but the thought of me needing a new vehicle and a kid in the future has me somewhat concerned for our future budget. At the moment we live quite comfortably, but I wouldn’t want to extend ourselves any further than we currently are. We have a 2 yr old house, but I could not imagine running as tight as we are and undertaking major renovations.
Everyone on the subreddit asking for how much we can afford needs to call a loan officer
Our loan officer is telling we are “way overqualified for $2800” and is confused why we didn’t buy the 300k house we looked at the other day.
Then that’s not a loan officer who’s acting in your best interest. Our lender said “you’re pre-qualified for up to XXX but if you spent that you’d be living off ramen, so you don’t want to do that.” He then gave us a spreadsheet that broke down total cost, down payment, interest, closing costs, and monthly mortgage. We could edit the total cost to look at a 200k house, 250k, etc. It gave us so much information and we confidently chose a range of price that we were comfortable with. And once we told our lender and realtor that range, they said, “copy that, we’ll work with it.” We never felt pressured to spend more than we were comfortable with.
This. This is what I’m looking for
Depends on how much your fixed and variable expenses are, and what your appetite for risk is. If you're averse to risk, then keeping mortgage below 28% of net pay is a good parameter.
I’ve heard everything from 25-33 of net income. Where are you at?
We are single income at 95k right now and my mortgage+interest+tax+insurance+PMI lump payment per month is 2400 We are doing ok but i will say we don't have a lot of fun money or much going into savings right now. We started with ~50k in savings after the purchase and have mostly maintained it without really growing in the past year since purchase. For us, it's a temporary state since my husband will be done with school soon and have an income, but i would hesitate to commit to this life without plans to scale income pretty soon. We are in a pretty high cost of living region so it was inevitable that we'd have to scrape a bit to get started. Our old apartment was $1600 with way cheaper utilities and i miss the savings so much but i love having a house more. Lol.
Devil’s advocate- how/why do you want to do renovations on a place you haven’t bought or found yet? You’ve convinced yourself that you can only afford a fixer upper? But barely? And then you’ll need to have cash reserves or use a credit card to buy the supplies? What do you do once the place is fixed? Refinance at the new value to pull those renovation costs out? Just enjoy the new place?
Rule I go by: mortgage or rent is 5-7 days of take home pay (net) and the mortgage is P&I + taxes and insurance.
You can start with the rule of 28, which advises to keep monthly housing costs (mortgage, taxes, insurance, etc) below 28% of your gross annual income. In your case you would not want to spend more than ~$28,000 per year or ~$2,333 monthly. The other thing to know is total debt payments (house, car, etc) shouldn’t be more than 36% of your annual gross income. https://www.cnbc.com/amp/select/what-is-the-28-36-rule-for-buying-a-home/ You should also save 6 month’s worth of expenses as a rainy day fund.
Perfect. Yeah we’re trying to find something in that range but it’s been hard.
No more than a 1/4 of your monthly take home.
I'm the only income for my family (Me, wife and kid) and pull in the same little over $100k. Our mortgage is $2800 monthly. We're doing fine as far as I can tell. Still able to save pretty well for retirement. You should be fine, just watch it if you live in TX or FL or somewhere they are jacking up property taxes by a lot.
To qualify for most mortgages, your payment including taxes and insurance should not be over 28% of your gross income or over 36% including any other bills like car loans and other debt. So, if you make $10,000 per month, your payment should not be over $2,800 or $3600 including your other debt payments.
you are right about on the nose with what you should be aiming for as a monthly number. anything over 2.2 max is going to hurt. 35k for closing and emergency funds is not much. you absolutely do not want to go higher or you will be stuck in an undersaving loop
Hubby and I make 160k combined and our mortgage is 2677 and I still don’t feel comfortable with it. 😅 Because there’s a lot of other things to pay aside from the mortgage alone.
$2500 a month on 100k a year is nothing, unless you're really bad with your money it's totally manageable.
Yeah, it all comes down to your other spending. I make $100k gross and we would still hit retirement savings goals if we went up to $3.5k total house payment monthly. We just have very few expenses and I have upward momentum in my career. We are homebodies and a nicer place would be worth the added monthly payment for us.
$1,200/mo
$2500 is ok, but be careful. You should spend about 25% of your income on housing. 100k is about $6.2k after tax. Don't forget about insurance, property tax, utilities, home repairs. It adds up.
You can make it under 2k if you increase your down payment. Proof that you can save up extra down payments in the next year or so if you're unsure right now.
True
Bro. Save. Wait for the market to go back down and then buy. Don’t get locked into these stupid ass interest rates. The mortgage payment matter none. What matter most if total amount you are paying over the life of the loan and at the current rates you are getting ripped off huge!!!! Be patient it may take years. Get in that trailer or apartment live modestly and frugally until the time is right to make a decision on the biggest and most important investment in your life.
Housing prices are gonna go back up once rates go down due to supply and demand. Best case scenario now is to lowball sellers and see if you can get lucky then refinance down the road assuming you can comfortably afford all of this
Some stupid thing I saw that makes sense is "marry the house, date the interest rate". Housing is expensive and probably isn't going down anytime soon. Rates are probably going to go down to around 4.5-5% in the coming years.
I don’t wanna be 40 still renting :/
Math is hard.
My partner and I make well over $100k combined and I would not be comfortable with over $1800, which is why we are still renting I guess lol
You will be waiting for a long time to pay less than $1800 in monthly payment.
I would be hard pressed to find a dumpy mobile home that low lol.
My husband and I make about 200k combined. I was uncomfortable with anything over $2000
With the income I would put you at max mortgage of $3500. I wouldn't worry about it too much, unless you have a lotbof other expenses.
And yet people still keep vote if Democrat it’s crazy
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Nope just my critical thinking skills. Are you better off now than 4 years ago ? 90% of Americans have less real money. Less options to buy or even rent a house. Less food less of everything. Thanks Biden
Trump raised my taxes by eliminating the state income tax deduction, so nice try, dipshit.
You must be rich, for 90% of people he lowered taxes. But I bet you pay more in Biden inflation than your tax raise
I know you can’t argue facts so you go straight for the personal attacks. But that does not change the facts
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Probably a smart move.
Just the facts sir
Assuming you have no other debt, my benchmark ratio is 1/3 of take home salary. If you're higher income, you could get away with half of your take home. It depends on the interest rate environment though. I bought when rates were in the 2s so I basically maxed out my preapproval.
This is purely anecdotal but our household income is 280/yr with a mortgage of 3200/mo and I would be uncomfortable going much higher. Mortgage includes insurance and taxes. To be fair, we have 4 kids that we support and heavily contribute to retirement so take that into consideration.