Another housing/finance question

[KillerCharlie]

If you're single, under 30, make 65k-85k/yr, live in an area with expensive housing, and have no other debts, would you buy a house that costs (including insurance/etc) 30% of your gross (50% after taxes and 401k savings) salary?

Prices are down, but that still only gets you a very very basic small house in the suburbs. I'd imagine most people in the area are paying more than 30%.

 

[HybridSquirrel]

If you're single, under 30, make 65k-85k/yr, live in an area with expensive housing, and have no other debts, would you buy a house that costs (including insurance/etc) 30% of your gross (50% net) salarty?

Prices are down, but that still only gets you a very very basic small house in the suburbs. I'd imagine most people in the area are paying more than 30%.

fuck no, id bunk in my moms basement.

 

[guyver01]

make 65k-85k/yr.... would you buy a house that costs (including insurance/etc) 30% of your gross (50% after taxes and 401k savings) salary?

Where do you live, and what kind of house, are you buying for $30k?

 

[esun]

Where do you live, and what kind of house, are you buying for $30k?

He's talking about total monthly cost of the mortgage + interest + taxes + HOAs (if applicable) and so forth. And it depends. If you can afford it and find a good deal, it can be a great financial decision, since you can basically pay about as much as you would for rent but end up with a house at the end of the day rather than nothing.

For example, at $85,000 a year, your gross is $7083/mo, a third of which is $2125. For $2125/mo you could probably get something in the $400-500k range (assuming 5 % interest and 20 % down). If you could get a two or three bedroom place at that amount and rent the extra bedrooms (amount depends on your area), your total monthly cost could be in the $1500 range. If renting a comparable place would cost you say $1000/mo, then you're getting a lot more for your money by buying (basically $500/mo extra cost to own a home, which you hope will appreciate).

I'm actually looking to do this right now (well, when I find a place, I've been looking for a month or so). Of course, if rent in your area is cheap, then it may not make sense to do something like this.

 

[highland145]

Prices are down, but that still only gets you a very very basic small house in the suburbs. I'd imagine most people in the area are paying more than 30%.

Personally, 25% of net.

And most people are stupid.

 

[SandEagle]

totally go for it. try to put 0 down if possible, that way you don't lose money if u ever decide to walk away

 

[RaistlinZ]

30% of gross is stupid. That comes to being about 45% of your net for someone making $85,000/yr. And that's even before factoring in maitenance or emergency repairs. What happens if you get laid off? 25% of net is much better, like highland145 suggested. That would be about $1,200/mo for someone making $85,000 gross.

I happen to fall into the the OP's category and I plan to save up and buy my first house with cash in the next 4 years or so. Paying twice the cost of the house over 30 years due to interest is asinine.

 

[sjwaste]

The old guideline of 25% of net would probably not get anyone anything in Arlington, VA. Our mortgage plus taxes is right around that, which makes me sound responsible until I point out that we're a two income family and our incomes are damn near equal.

I'd like for my wife to transition to a business idea she's been talking about, so we might have to rough it for a while. Then again, if it does well, maybe I can be a stay at home dad and live the dream! Haha.

Anyway, if the housing you're talking about costs half your net AFTER all expenses (including utilities) I'd go for it, if the place is a good investment. This is assuming you don't have any other large source of debt payment like a car, high student loan balance, etc. I mean, if you make 80k and even after housing HALF of your income is disposable, you're still in pretty good shape. I also caveat that you should only do this in a desirable area of a stabilizing market. That means no condos/townhouses in far out areas just because that's what you can afford, nor buying in the worst neighborhood just because that's all you've got, unless its coming at a pretty good discount. I'll pass on to you the one real estate lesson my father taught me that I actually listened to: It's better to buy the worst house in the best neighborhood.

I won't make a blanket statement that it's fine to spend half your income on housing, but I will say that if that's the only way to get into a bottomed market with a good investment, it's sometimes worth doing. Especially if your income is stable, no one depends on you, etc. But that HALF estimate better include all expenses, not just mortgage.

 

[geecee]

It used to be that lenders looked at two debt ratios, which were guidelines to how much you should spend on a house. The front-end ratio was only your housing costs (i.e. mortgage, taxes, insurance) as a percentage of your gross income, which ideally was 28% or less. The back end ratio was a snapshot of your total expenses (i.e. credit card, student loan/personal/car loans, etc) and 36% was the magic number, as a percentage of your gross income. These ratios didn't seem to apply much anymore when the housing market was hot, but these days, I would think that they are back in play, or even lower.

EDIT: If a lender is comfortable with those ratios, I would probably be as well, assuming that my job was fairly stable, and I was able to stick to a budget. Also, check to see how much RE prices in your area have fallen, and if they are continuing to fall, or staying more or less flat, or even recovering (unlikely). One other general real estate thought - buy the cheapest house in the best neighborhood, and not the other way around,.

 

[BarkingGhostar]

Personally, 25% of net.

And most people are stupid.

How are you qualified to make this conclusion?

 

[DesiPower]

You are single and young, go for cheap housing, something equivalent (Mortgage+tax) to the rent of a 2 bedroom appt. If you have to buy in a cheap neighborhood, so be it. Later few years down the line, after you get married and stuff, when you are ready for children move to nicer neighborhood, maybe your wife will be working too and you can get a good house at that point!! AND then you can rent the house you buy now. DO NOT spend 50% of your take home, save the fvck up.

 

[highland145]

How are you qualified to make this conclusion?

I see stupid people.

 

[highland145]

You are single and young, go for cheap housing, something equivalent to the rent of a 2 bedroom appt. If you have to buy in a cheap neighborhood, so be it. Later few years down the line, after you get married and stuff, when you are ready for children move to nicer neighborhood, maybe your wife will be working too and you can get a good house at that point!! AND then you can rent the house you buy now. DO NOT spend 50% of your take home, save the fvck up.

Had a friend that worked as a nuclear engineer in the late 80's. Lived in a flop house for a couple of years and saved his $$.

 

[Vette73]

If you REALLY have no other debts and your job, as far as you know, is secure; then go ahead and look. If something really nice jumps up look into it. But also make sure to have some money as down payment saved and also a couple k or more for repairs/setup.

Also if young get a roommate and try to pay off mortage faster. That and get a good rainy day fund.

 

[SearchMaster]

No, don't do it. You're asking for trouble.

 

[soulcougher73]

How are you qualified to make this conclusion?

Perception?

 

[sjwaste]

If you REALLY have no other debts and your job, as far as you know, is secure; then go ahead and look. If something really nice jumps up look into it. But also make sure to have some money as down payment saved and also a couple k or more for repairs/setup.

Also if young get a roommate and try to pay off mortage faster. That and get a good rainy day fund.

Haha, you can really tell by our responses that we live in the same market.

 

[thepd7]

I wouldn't do it

 

[tk149]

Don't end up like this guy.
http://forums.anandtech.com/showthread.php?t=2079207&highlight=

Since you quoted a salary range, I'd guess that you're either partly on commission or relying on a bonus. Neither of those are guaranteed. Calculate your budget based on the lower end.

As a homeowner, I can tell you that lots of unexpected expenses can crop up. Make sure that you have enough money socked away for those. Some repairs can wait, but some can't.

Personally, I'm also single and at 24% Mortgage+Tax to Income (Post-tax, post 401k). I feel very comfortable with this ratio - I can still save extra money and buy toys.

 

[Vette73]

Haha, you can really tell by our responses that we live in the same market.

Yea I almost quoted yours as there is no way to buy a place on 25% of income here and live alone.
Heck even with my pay and my wifes my MiL lives with us. The house she was at, think VERY small and old place in Falls Chrch, had 7 people living there with 1 bathroom that does nto really work anymore.

 

[KillerCharlie]

Don't end up like this guy.
http://forums.anandtech.com/showthread.php?t=2079207&highlight=

Since you quoted a salary range, I'd guess that you're either partly on commission or relying on a bonus. Neither of those are guaranteed. Calculate your budget based on the lower end.

As a homeowner, I can tell you that lots of unexpected expenses can crop up. Make sure that you have enough money socked away for those. Some repairs can wait, but some can't.

Personally, I'm also single and at 24% Mortgage+Tax to Income (Post-tax, post 401k). I feel very comfortable with this ratio - I can still save extra money and buy toys.

I don't have bonuses, I was just showing approximately what I make.

25% after taxes/401k would be approximately $1200/month. Here, that will get you a 1-2 bedroom apartment.

 

[highland145]

I don't have bonuses, I was just showing approximately what I make.

25% after taxes/401k would be approximately $1200/month. Here, that will get you a 1-2 bedroom apartment.

Soooooooo glad I live in S.C.

 

[edro]

I was in a similar situation a few years back.
I broke even recently after I sold it.

If I had to do it all over again, I would have rented.

Buy a house when you get married.

 

[vi edit]

I have to ask...how nice of a place can you rent for 25% of your income? That's what I'd do if in your situation. You never know if you'll wind up getting married in a few years...decide to start a family and decide you want something bigger.

Then you are coughing up tens of thousands in realtor fees to get out negating any gains you had.

If you think you'll be single for years to come and think you'll be staying put job wise for the 5-10 years then maybe it's not so bad. Otherwise I'd stay liquid, bank some money and let somebody else deal with the upkeep.

 

[Gibson486]

buying is kind of meh when your single unless buying ends up much more cheaper than renting.