Home price comfortability

[brooke77]

I am generally comfortable at 2.5 times annual income. We have no other debt (and no more $$$$$ daycare!), but are a little behind on retirement. Our next home purchase will have a mortgage of a little less than 2 times our annual income.

[shakinros]

We went 2x HHI for the sale price but we’re in an area with high property taxes. So the monthly payment was the relevant data point. HHI at the time was about $150K, mortgage of $240K. We escrow our property taxes and insurance and the monthly payment breaks down to be about 55% mortgage, 45% escrow.

[wildrice]

Sept 17, 2022 10:46:59 GMT -5 cherry1111 said:

Sept 17, 2022 0:44:18 GMT -5 jewel said:

How will your new payment compare to your current? Does it feel like your budget will actually be stressed? Or is it more of just sticker shock?

We had a similar sale/purchase a few years ago. We put around 45% down on $600k, with a 10 year mortgage on the remainder. Our income is just barely over half of yours, and I still feel quite comfortable. But we don’t have daycare, student loans, or any other significant bills. So, the monthly mortgage payment, taxes/insurance rates, and all of your other bills/spending can make a huge difference in what you feel comfortable with.

I think it would increase by about $2k. Currently our payment is under $2k all in. We bought our current home for $150k when we made $70k. We refinanced to a 15 year mortgage about 8 years ago. On paper it should all work but mentally a mortgage payment that size is scary to me. Property taxes are on the higher side here because no state income tax.

This I definitely understand. I am not as bothered by a 650k house as I would be by a 4k mortgage payment. You make about 50% more than us but I think I'd feel a little pinched by that mortgage payment too (see my earlier comment about really preferring the current flexibility that we have).

It's crazy how the details can make such a difference. Our house was 270k (with 5% down) and our 20 year mortgage is only about $1800, including taxes, insurance, and city fee. But our property taxes are pretty reasonable (IMO) and our mortgage is at 2.5%. It's insane that you'd have double our payment for only 80k more of mortgage! I would be struggling mentally over that, too.

[purplepenguin7]

Sept 17, 2022 10:46:59 GMT -5 cherry1111 said:

Sept 17, 2022 0:44:18 GMT -5 jewel said:

How will your new payment compare to your current? Does it feel like your budget will actually be stressed? Or is it more of just sticker shock?

We had a similar sale/purchase a few years ago. We put around 45% down on $600k, with a 10 year mortgage on the remainder. Our income is just barely over half of yours, and I still feel quite comfortable. But we don’t have daycare, student loans, or any other significant bills. So, the monthly mortgage payment, taxes/insurance rates, and all of your other bills/spending can make a huge difference in what you feel comfortable with.

I think it would increase by about $2k. Currently our payment is under $2k all in. We bought our current home for $150k when we made $70k. We refinanced to a 15 year mortgage about 8 years ago. On paper it should all work but mentally a mortgage payment that size is scary to me. Property taxes are on the higher side here because no state income tax.

If I have all the details right, you bought a house at $150k and are selling for somewhere around $400k+? It’s tough to swallow the $650k house that was $375k 2 years ago….but at the same time you likely would have not pulled $300k of profit out of your house back then.

I really do get it. I never thought I’d be spending $650k either or if I did, I
Imagined a must nicer, larger house than I ended up with. But all in all it evens out in the end.

Also, are you looking for another 15 yr? 4K monthly sounds high for a $350k loan.

[redheadk]

We stick to a mortgage that is equal to our yearly income and prefer a 15-year mortgage. We have high property taxes here so lower than we might be ok with elsewhere.

[jewel]

Sept 17, 2022 10:46:59 GMT -5 cherry1111 said:

Sept 17, 2022 0:44:18 GMT -5 jewel said:

How will your new payment compare to your current? Does it feel like your budget will actually be stressed? Or is it more of just sticker shock?

We had a similar sale/purchase a few years ago. We put around 45% down on $600k, with a 10 year mortgage on the remainder. Our income is just barely over half of yours, and I still feel quite comfortable. But we don’t have daycare, student loans, or any other significant bills. So, the monthly mortgage payment, taxes/insurance rates, and all of your other bills/spending can make a huge difference in what you feel comfortable with.

I think it would increase by about $2k. Currently our payment is under $2k all in. We bought our current home for $150k when we made $70k. We refinanced to a 15 year mortgage about 8 years ago. On paper it should all work but mentally a mortgage payment that size is scary to me. Property taxes are on the higher side here because no state income tax.

I don’t know how many details you want to share (like what your monthly take home is, or other major bills), but based on your income, I don’t think $4k a month is really that bad. I’m assuming you’re doing a 15 year mortgage again?

We take home around $8k per month and I currently pay around $3600 for PITI. It feels perfectly comfortable for me, but we are also pretty conservative in other spending.

But, housing costs are also very high here, comparable to income. I imagine I’ve been well-conditioned to expect to spend a big chunk on housing. For comparison, median income here is around $75k. An average 2 bedroom apartment rents for at least $2k per month. A decent sized 3-4 bedroom house rents for closer to $3k. Anyone renting or entering the market to buy within the last 8 years or less is going to be putting a huge portion of their income towards housing.

[arehopsveggies]

When we made $45ish combined we bought for $75k ish

Next house was HHI of $50k and home price of $160k but we had a good down payment that time.

Both times it was tight but significantly less $ than renting. A one room studio/guesthouse or run down single wide would cost more than our mortgage- and wouldn’t fit a family comfortably.

But our HHI just hit $80k for the first time ever and that is pretty darn well off for the area, but seems poor on this board… so my opinions might be skewed.

[sadlebred]

arehopsveggies I feel poor by this board's standards, too. (Several of us do; you aren't alone.) I also don't think most of us are dealing with house prices of $160K or even $250K where we are now. A house that was $250K here (assume good condition with some updating but no major renos and 2200+ sq feet) is now $425K. They were going for $450K+over sales price, but things have cooled here just a bit. I'm priced out of my suburb now unless I got a 2BR/1BA Condo in a decent complext.

[arehopsveggies]

Sept 18, 2022 19:09:52 GMT -5 sadlebred said:

arehopsveggies I feel poor by this board's standards, too. (Several of us do; you aren't alone.) I also don't think most of us are dealing with house prices of $160K or even $250K where we are now. A house that was $250K here (assume good condition with some updating but no major renos and 2200+ sq feet) is now $425K. They were going for $450K+over sales price, but things have cooled here just a bit. I'm priced out of my suburb now unless I got a 2BR/1BA Condo in a decent complext.

In all fairness, both my houses were absolute pits and we have updated slowly. Not everyone can do that. We were very lucky that my husband has those skill sets - because that was the only way we were able to get the houses we did.

[cherry1111]

Sept 18, 2022 16:04:54 GMT -5 jewel said:

Sept 17, 2022 10:46:59 GMT -5 cherry1111 said:

I think it would increase by about $2k. Currently our payment is under $2k all in. We bought our current home for $150k when we made $70k. We refinanced to a 15 year mortgage about 8 years ago. On paper it should all work but mentally a mortgage payment that size is scary to me. Property taxes are on the higher side here because no state income tax.

I don’t know how many details you want to share (like what your monthly take home is, or other major bills), but based on your income, I don’t think $4k a month is really that bad. I’m assuming you’re doing a 15 year mortgage again?

We take home around $8k per month and I currently pay around $3600 for PITI. It feels perfectly comfortable for me, but we are also pretty conservative in other spending.

But, housing costs are also very high here, comparable to income. I imagine I’ve been well-conditioned to expect to spend a big chunk on housing. For comparison, median income here is around $75k. An average 2 bedroom apartment rents for at least $2k per month. A decent sized 3-4 bedroom house rents for closer to $3k. Anyone renting or entering the market to buy within the last 8 years or less is going to be putting a huge portion of their income towards housing.

PDQ May delete

Right now we are taking home $10,400. My H just got a $23k raise that goes into effect on 10/1 so we’ll have to see where that takes us. Maybe another $1k take home a month? I usually get 1 bonus a year but won’t count on that ever. We get $5k back in January from dependent care flex spending but the youngest just started Kinder and we are wfh so the kids come home after school therefore no aftercare expenses. I may not contribute next year just because we don’t have clear plans for summer care. And the last few years we’ve gotten about $5k back at tax time. Our only monthly debt besides mortgage is about $24,000 balance on a car loan for the car I bought in March. We pay $480/mo. The rate is very low (1.9%)

We have $100k total in cash/e-fund/CDs but would prefer not to touch any of this if possible.

Retirement is ok…we are probably a little behind for our current income because significant raises have come in the last 2 years and of course our investments are currently down with the market. If the market was as it was a year ago I wouldn’t be as concerned here but I have faith it will rebound before we need it (40 and 41 yrs old now). I max out our HSA account…we contribute to Roths which I need to reassess if we will still qualify to do so for next year. We put a couple hundred into each kids college funds a month. We could probably do better here.

We also have a small amount invested (less than $20k) that we would also prefer not to touch mainly because of the recent decline in the market.

Sooo…what do you think? I ran a few more calculators and we are looking at $3,400 for a 30 year or $4,160 for a 15 year. This is assuming a 6% rate for the 30 and a 5.5 for the 15. Taxes are about $1050/month at this home price and I’m estimating $250/mo in insurance. It just seems like such a huge chunk of money.

[aprilsails]

Your numbers aren’t that bad. We have a very similar take home right now and are paying $3500 per month PITI. We are also carrying $1200/month in childcare and $800/month in car payments and insurance (both cars are paid off this month!) we’ve been able to save for retirement and children’s education easily the past three years and put about $10,000 per year into our principal residence (it was a new build, so needed blinds, fencing, water filter, irrigation system and landscaping, some new furniture). Our monthly budget doesn’t feel tight, even with higher grocery and fuel costs.

However, we rarely eat out (we prefer to cook), we have not gone on any lavish trips, and don’t generally. Our family is all local so there’s no annual travel budget. Once we’re done with car payments and childcare we will be redirecting that money towards a basement renovation. Houses always cost more than anticipated, so please take that into account.

[ny96]

We bring home just a little bit more than you do and refinanced last year to take money out for a remodel bringing our mortgage payment from $2300 to $4300. At the time we had preschool tuition and for the year that we were paying the preschool tuition and the higher mortgage we were consistently in the red. We live in a VHCOL city and so our expenses might be higher, but it was really stressful.

[gt7301b]

I am in the camp that actual price of the home doesn't matter as much as can you afford the mortgage payment.  Obviously home prices have gone up significantly, but so has the equity that you will bring to a new home purchase.  Home prices are crazy lately and maybe that will level out, but I think some of that is here to stay.

If I were in your shoes and I wanted to purchase a new home I would go with the 30 year and pay it off like a 15.  At only a 1/2 percentage point difference I would rather have the flexibility in my life.   If interest rates go down I would then refi into a 15 year.

You guys can clearly afford the mortgage.

[goldengirlz]

I agree that you can certainly make the numbers work, so to some extent the question comes down to your financial priorities. What does your budget currently look like? Do you have a good amount of buffer room at the top? (Rhetorical questions)

You have a good amount of savings, so maybe having a cushion doesn’t matter as much. But again, it’s about your priorities and personal comfort.

[notsopicky]

When we bought our primary home, I was comfortable at 2X our yearly income. We have a 2.85% rate. When we bought our second property, it was at 1X our yearly income, also at 2.85%. Our monthly housing costs are at about 30-35% of our monthly net and we are ok with that (VHCOL). The rate makes a big difference--I really think it's all about the rate and the actual costs w/ net income.

[carrotsmakemefat]

Mortgage payment of around 2,500-2,700 a month. With todays interest rates that puts me about 450k ish with 20% down.

That’s for a over 200k in income and almost no debt.