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What can I afford
Hi ladies
I am new here. I am active on the Bump, but DH finally agrees we should start to save for a house. We will be moving into another apartment closer to his work for a year or two to save for a down payment. The rent around his work is typically $1k-$1300 per month. I just feel silly giving that to a landlord when we could be investing in a house.
I would be looking to spend $1400 or so a month on a mortgage (total with fee's, insurance...blah blah...). I have been searching online for a calculator that lets you put in your monthly payment amount and tells you what you can afford as far as a house and CANNOT find one! Anyone know of any websites I can use? We would rather build but we dont know if we can afford that.
TIA for any help :-D
Re: What can I afford
It will be different for everyone. The taxes and insurance vary across the country plus there is PMI. You will need to also factor in money for repairs and maintenance. My house was 115k and my payment is $850.
Good Luck!
Try this one:
http://www.bankrate.com/calculators/mortgages/new-house-calculator.aspx?ec_id=m1115756&ef_id=UQGRFQAAU1ymGF6s:20130517173403:s
It automatically assumes you can use 28% of your income towards the house, so in that top part if you put in $5,000 for wages, that will give you $1,400 for an available mortgage payment (it will say that at the bottom so you can double check). Then make sure to get a good idea of what home insurance and taxes will be and fill those in. Then it will spit out at the bottom the amount you can afford based on those inputs.
There is no PMI if you put 20% for the down payment.
So, OP, I would highly suggest saving up so you can put down 20%, otherwise, you would be stuck paying this PMI (a waste of money), and I believe they changed the rules now so the PMI stays for the duration of the mortgage. So imagine throwing 2-300$ extra a month out the window for 30 years.
totally agree! My brother has to pay this but in IL you get that money back annually if you are in good standing. We are planning on saving $20-30k in the next 2-3 years.
I feel the need to clarify something here.
The amount you are approved for and what you can afford are often two different numbers.
For example, DH and were approved by our bank for a $500k home. We could afford at most $330k.
To figure out how much you can afford you do not need an online calculator. All you need is a solid understanding of your current and future expenses (once you own a home)...as in, your monthly budget.
People should not be spending more than 25-28% of their take home (after tax) pay on housing in LCOL or MCOL areas, and around 30% in HCOL areas, on housing. For a home this means interest, principal, taxes, insurance and major utilities all need to fit into this number.
An example...with a made up income amount...
You earn $50k after taxes. The housing cost to you should be no more than $1,041 per month (at 25%), $1,167 (at 28%), $1,250 (at 30%).
Once you know these numbers, your COL area type, and how much of a DP you are making (ideally 20%), then you find homes in this price range.
That is how you determine how much you can afford.
HAH! Yes, this too! Almost forgot this one very important thing....seems the banks still have not learned their lesson - we were actually told by a person at our bank that we could afford 450k mortgage, when the reality was, there was no way we could. Maybe, if we didn't want to eat, or take a vacation, and just be completely house poor, THEN we could have afforded 450k mortgage. But you need to factor in all of those things. It helps to put it all down on paper to see what money you currently spend now, vs how much you can save, etc etc....then you will have a true idea of what you can truly afford. I would actually suggest trying to save some money by taking out a smaller mortgage (like buy a cheaper house) that way you have extra left over to put into savings and can do things like take a vacation, or just to have a cushion in case something goes wrong with the house and you need to have money to fix it....you def do not want to be house poor.
Agreed. Not more than 25-30 % of your monthly income should be spent on a mortgage and all the associated costs, regardless of what a bundled tells you.
please remember, you should tried to view your actual mortgage as a product, and your mortgage lender as a salesman who gets a pretty high commission (interest). The more you spend, the more they make. Whether you can truly afford it or not. If you get in over your head they don't care if you sacrifice groceries, medical treatments, splurges for your kids etc as long as they get their money. The bank is selling you a product, and it is in the bank's best interest to get you to spend more. You should always know what the most you can afford it before you ever look at an online calculator or talk to a bank.
dont decode how much you can afford based on how much rent you pay right now, because it is not an equal comparison. Say you pay $1500 in rent. That 1500 will need to account for not only the cost o the home, but also pmi, homeowners insurance, taxes, etc. which means if you want to stick to a 1500 budget your actual house mortgage will need to be no more than 1000 in order to pay all those other monthly expenses.
Instead, as PP's have suggested, start with your monthly income and work backwards. Subtract out taxes, take 25% of that number and that is what you should be spending, but don't forget that number needs to include all those other expenses as well. And this assumes you dont have any other major outstanding debts (student loan, credit card etc)- otherwise you probsbly should consider an even smaller housepayment. If you don't like how the numbers add up, and if you feel "there is no way that could work, the homes in my area cost more than that, we will need to budget for more than that"... Then that means you can't afford a house, or you realllly need to readjust your wish list of what you are expecting in a home.
not to mention you should expect to have a minimum of $3000-$10000 saved for closing costs and other upfront expenses, even if you plan on making no/low down payment. Until you have this much saved, and a hefty emergency fund saved, don't consider buying a house, because if you don't have some sort of down payment and emergency fund, then again, you can't afford a house.
One other thing I'd like to add...when you do calculate your expenses, be sure to do it based on what you are bringing in AFTER taxes. This is another issue I have with the banks....they tell you what you can 'afford' based on your gross income before taxes. So really think about this too and base the numbers on what you actually have going into your pocket.
And just revisit your expenses and everything else during the course of this process. When we were planning to buy the house, at least once a week we sat down together and went over everything just to make sure we were on target for savings and still were comfortable with what we could afford. Perhaps a little anal, but with a purchase as big as this one, it's an absolute must to be on the same page and know what you're getting into.
Yea, but why waste the extra $80 a month if you don't have to? I feel like the whole PMI thing is a sham and just money out the window. Especially now that the PMI will last the duration of the mortgage and not go away - you are just throwing that extra money away when you could be using it towards something else. In the end, I guess people just do whatever they need to do, but if you can't even put down 20%, then I feel like you really should not even be buying a house because then you have to factor in all of the other expenses that go along with buying a house too - if you can't even put down 20%, then how will you have extra money to cover things if there is an emergency or if you want to do things like buy furniture or stuff you need for the house? Anyway, just my opinion...my H & I would have never thought of buying a house if we did not have the money to cover these things though....
This is great for you but obviously not everyone agrees with you. I do not think that everyone needs 20% down to own and that is my opinion that I do not force on you. My rent was $1350 a month. I now pay $850 so $500 goes into savings everything month. I also took a roommate that is an additional $500 a month. I am able to save $1000 a month that I couldn't before and it costs me $80 in PMI. Just because you can see only one way to buy a house it does not make it correct or the best decision for everyone. We are all in our own boats and some need to be rowed differently than others.
Go back and read what I wrote - I clearly stated that it was MY OPINION. Just as you have YOUR OPINION. Just because I do not agree with you, does not mean you are wrong. I simply do not agree. And I am perfectly entitled to not agree with you just as you are to not agree with me. I am only pointing out the 20% down thing because people get this false sense of 'well, I don't have to put 20% down so screw it.' When you really should be trying by any means necessary to put that down so you are not stuck wasting money on a PMI that you will never get back.
Wow you seem pretty upset. I think everyone should go into buying a house financially stable but I do not agree on the 20%. You can get conventional loans with 5% and no PMI. Also, some people may want to hold onto the savings (like me) and be okay with paying some PMI. Not all PMI is for the life of the loan. I have only heard about it on FHA loans and only for new loans at that. But maybe you should take a breather. This is just a forum.
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