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Homebuyers: income versus expenses



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amother
Wine


 

Post Thu, Dec 01 2016, 6:29 pm
Hi All,

We just got pre-approved for a mortgage and are seriously looking for our first home.

My husband just finished schooling and now has a degree as a professional. On average, people in his career earn 150k. I work too and I earn 45k. We have three children. As of now, in his early career, we estimate that my husband will earn 70-90k in the coming few years.

We are trying to see what we can realistically afford for a monthly mortgage payment. We also have his student loans to repay.

Can you please advise what kind of income/expense ratio you had and what your monthly mortgage payments were?

I feel like so many people around me have bought homes and are managing with more kids than I have and less money that I have.

Am I being too responsible? Should I just jump into it?
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MagentaYenta




 
 
    
 

Post Thu, Dec 01 2016, 6:36 pm
Why not wait until your husband gets a job and you have some real numbers to work with?
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amother
Wine


 

Post Thu, Dec 01 2016, 6:40 pm
He has a job. It's not a salary, he gets paid per client, but like I said, he should be bringing in upwards of 70k this year, God willing with growth each year.
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SixOfWands




 
 
    
 

Post Thu, Dec 01 2016, 6:49 pm
The general rule of thumb is that no more than 36% of your pre-tax income should go to paying loans, with no more than 28% being a mortgage payment. So you could, at least on paper, afford a mortgage of $2,800 a month. But chances are, your expenses are higher because you're paying tuition. So you need to factor that in.
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MagentaYenta




 
 
    
 

Post Thu, Dec 01 2016, 6:51 pm
amother wrote:
He has a job. It's not a salary, he gets paid per client, but like I said, he should be bringing in upwards of 70k this year, God willing with growth each year.


Then why not wait a year and see what his actual income is? I don't know what field he's in but lots of markets change in a year.
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amother
Wine


 

Post Thu, Dec 01 2016, 6:54 pm
Thanks for your response.

Our student loans are also a factor here.

With an income of let's say 100k, at least this year, what can we afford for a mortgage plus our 1300 monthly student loan payments?

We pay tuition for one child.
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amother
Wine


 

Post Thu, Dec 01 2016, 6:55 pm
MagentaYenta wrote:
Then why not wait a year and see what his actual income is? I don't know what field he's in but lots of markets change in a year.


We really need to move. We're outgrowing our current quarters.
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MagentaYenta




 
 
    
 

Post Thu, Dec 01 2016, 7:02 pm
amother wrote:
We really need to move. We're outgrowing our current quarters.


That's understandable. What's your current budget? Food, housing, insurance childcare, savings etc?
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amother
Wine


 

Post Thu, Dec 01 2016, 7:05 pm
MagentaYenta wrote:
That's understandable. What's your current budget? Food, housing, insurance childcare, savings etc?


Thanks. We pay 1000 a month in food, housing will change because we are looking for a house, insurance will also change once we are homeowners but now we pay around 155 for two auto policies and renters insurance, tuition is aroun d400 a month, I currently pay 600 a month in babysitting
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amother
Floralwhite


 

Post Thu, Dec 01 2016, 7:08 pm
I know this has been said many many times but you don't know what is going on with "yenem" It is not uncommon for parents, grandparents, inheritance to be how people can afford to buy a house.

In terms of expenses homeownership can be expensive. We just paid 1,000 to remove a dying tree from our backyard before it fell on our house.

don't only find out the cost of the house but also how much taxes are, which can be a lot!
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amother
Wine


 

Post Thu, Dec 01 2016, 7:11 pm
amother wrote:
I know this has been said many many times but you don't know what is going on with "yenem" It is not uncommon for parents, grandparents, inheritance to be how people can afford to buy a house.

In terms of expenses homeownership can be expensive. We just paid 1,000 to remove a dying tree from our backyard before it fell on our house.

don't only find out the cost of the house but also how much taxes are, which can be a lot!


Yes that's a good point.
We are able to swing the down payment at this point
My question is if we can afford month to month in a house
Taxes are around 7k for the specific area we are looking at
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SixOfWands




 
 
    
 

Post Thu, Dec 01 2016, 7:18 pm
amother wrote:
Yes that's a good point.
We are able to swing the down payment at this point
My question is if we can afford month to month in a house
Taxes are around 7k for the specific area we are looking at


http://www.bankrate.com/calcul......aspx
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MagentaYenta




 
 
    
 

Post Thu, Dec 01 2016, 7:23 pm
amother wrote:
Thanks. We pay 1000 a month in food, housing will change because we are looking for a house, insurance will also change once we are homeowners but now we pay around 155 for two auto policies and renters insurance, tuition is aroun d400 a month, I currently pay 600 a month in babysitting


But you have other expenses, food, medical insurance and/or copays, utilities, cell phones, gas. The point I'm trying to make is, once you have a big picture of your current budget and at least anticipated income, you can use some of the advice given here about what per cent of you income can go to housing. Then you can figure out what kind of a cushion you need for home repairs, the tree that was mentioned earlier, a burst sewer pipe etc.
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justforfun87




 
 
    
 

Post Thu, Dec 01 2016, 7:27 pm
We also have three children, a lot of student loans, and dual income. I was debating whether to buy and so glad we did. Do you have the money for a down payment? If you have 20% I think you should go ahead and do it. Maybe wait a few months to really make sure he is bringing in this income, is he a lawyer? You have to make sure you are not buying in a high tax area. That could add hundreds if not a grand a month to your mortgage. We bought a house for 285 with a 20% down payment. Our mortgage is 1500 a month and I am very comfortable with that.
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amother
Wine


 

Post Thu, Dec 01 2016, 7:31 pm
justforfun87 wrote:
We also have three children, a lot of student loans, and dual income. I was debating whether to buy and so glad we did. Do you have the money for a down payment? If you have 20% I think you should go ahead and do it. Maybe wait a few months to really make sure he is bringing in this income, is he a lawyer? You have to make sure you are not buying in a high tax area. That could add hundreds if not a grand a month to your mortgage. We bought a house for 285 with a 20% down payment. Our mortgage is 1500 a month and I am very comfortable with that.


This makes me feel a lot better. We can do 12-15% of a 425k house.
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iriska_meller




 
 
    
 

Post Thu, Dec 01 2016, 8:01 pm
1. Do not buy at the max of your pre-approval.
2. Factor in taxes (mine are about half of my total monthly payment), insurance, cost of heating the house, commuting costs and make sure to set up a couple of thousands aside for repairs; even in a relatively new house something always comes up and there's no super to call
3. Closing costs can run as high as 20K
4. You will need furniture, tools and a million other things for the house and yard, which right now you cannot imagine

I would say over 400 K with 12-15% down is a big stretch for you two. Don't become a slave to your house!
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amother
Periwinkle


 

Post Fri, Dec 02 2016, 8:38 am
I think it's best to put down 20% of the purchase price to avoid having to pay for mortgage insurance.
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sky




 
 
    
 

Post Fri, Dec 02 2016, 9:07 am
You pay now 1000\month now. At the same salary - how much extra money a month to have to put toward your mortgage?
Quote:

We pay tuition for one child.

What will happen you have additional tuitions?

Can you afford the extra 1500\month once you buy a house?

figure if you put down 15% on a 425,000 house:
approx 1,712\month + taxes + home owner insurance policy.
Where I live that is an additional 600 so factor that into your monthly costs. Approx 2300\moth. + approx 280 PMI insurance for putting down less than 20%. = 2580
Will your new home have income - like a rentable basement?
What happens if the basement is empty for 1 - 2 months, can you manage that?

Also factor about $9000 minimum toward closing cost besides for the down payment.

Don't forget the monthly expenses on a home are much more than your apartment. Heating and air will be MUCH more. You want to factor that into your monthly expenses.
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gp2.0




 
 
    
 

Post Fri, Dec 02 2016, 10:41 am
SixOfWands wrote:
The general rule of thumb is that no more than 36% of your pre-tax income should go to paying loans, with no more than 28% being a mortgage payment. So you could, at least on paper, afford a mortgage of $2,800 a month. But chances are, your expenses are higher because you're paying tuition. So you need to factor that in.


Going by this line of reasoning, people who pay private school tuition can afford about 15% of their income towards a mortgage. If OPs combined income is 115k that means the monthly mortgage payment should be around $1450, including taxes. As taxes are around 600, the mortgage payment should be around $850, not including taxes.

Op you said you have 12-15% for a 425k house. That's very different than the poster who put down 20% for a 285k house. It would leave you with a mortgage of 375,000 and your mortgage would be $1000 more than hers.

Your monthly payments on a mortgage of 375,000 at 4% would run about $1790 without taxes and $2450 including taxes and insurance. Probably a little more due to mortgage insurance as another poster mentioned. That is probably $1,000 more per month than you can afford at this point. And these are low, conservative estimates. Actual expenses would likely be higher.

You can jump into it now and have immense stress and pressure about where that extra $1,000 per month will come from or you can increase income by $1,000 per month or you can wait until you have more for the down payment.
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amother
Sienna


 

Post Fri, Dec 02 2016, 12:05 pm
Actual numbers;

We make approx 140,000 \ year +5-15K depending on how some side investments do.

Currently our mortgage + taxes + home owners insurance = 2200

So its probably about 18% of our salaries.

But we really bring home a lot less. We are in a high tax bracket + health insurance + ma'aser + 401 K- takes off a huge chunk.
Plus 25K in tuition + summer expenses per year - and that will only be going up for us.
Plus we try to save for future expenses (bar mitzva, wedding, etc) about 400 per month.

At this point it is tight at that price point at the end of the month - but doable.

We do need to move to a bigger place, so we are also figuring out how much more we can afford and what we can cut. Its hard, big decisions. I too feel like we are sometimes too responsible, but I think it s better that way.
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