Mortgage question

[mharr7]

I'm looking to buy a house. The house I really want will be approx. 50% of my TAKE HOME monthly income.

Is this a bad idea? I'm preapproved already.

Example: Mortgage will be $1000 monthly, take home is ~$2000 monthly minimum, more when i pick up overtime shifts.

Thanks for any help guys.

 

[racolvin]

Definitely a bad idea

 

[Deeko]

Being 24 and not owning a house, I don't actually know, but isn't the traditional logic that your mortgage shouldn't be more than 1/4 of your monthly take home pay? Basically a week's paycheck?

 

[OCGuy]

That is not enough information.


Seriously, do the numbers. It is was you are comfortable with. That is completely fine, because it goes off of your gross.


You will get both sides here. Figure out your budget yourself.

 

[OCGuy]

Originally posted by: Deeko
Being 24 and not owning a house, I don't actually know, but isn't the traditional logic that your mortgage shouldn't be more than 1/4 of your monthly take home pay? Basically a week's paycheck?

No.

 

[Gunslinger08]

Depends on your lifestyle, but I wouldn't feel comfortable with it. Only $1k a month for food, car payment (if any), car insurance, home owner's insurance, fees that aren't included in your mortgage estimate (property taxes, PMI, HOA, etc.), utilities, entertainment, savings, and anything else. That's not nearly enough for me.

 

[joesmoke]

sounds like a bad idea. after car/insurance/gas/utilities/food/etc, youre not really leaving much for emergencies. also, ive heard horror stories about supplemental property taxes...

 

[bananapeel42]

Definitely not, that's just not enough man... all your bills will increase, electricity, gas, water, etc. are going to double from that of an apartment....

It's possible, depending on what you have saved, but you don't give nearly enough information for anyone to really tell you one way or another.

 

[ViviTheMage]

If you are alone, yeah .. id go for that, as long as you don't have any large monthly payments you need to pay off...car, or other large $$ obligations.

Just do the math, and if you are comfortable with the money you have left over for gas/fun/food/savings, then go for it.

 

[MrChad]

Don't forget to factor in insurance and property taxes, which may add several hundred dollars to that payment. Also, keep in mind that there are a lot of things to buy for a house in the first couple months/years, like furniture, home improvement supplies, etc.

 

[Deeko]

Originally posted by: Ocguy31

Originally posted by: Deeko
Being 24 and not owning a house, I don't actually know, but isn't the traditional logic that your mortgage shouldn't be more than 1/4 of your monthly take home pay? Basically a week's paycheck?

No.

That's what I was told - your response is so detailed and informative though, thank you for educating me with your 3 character answer!

 

[PaNsyBoy8]

i think it depends on what your income is? if you made $2000/month, it'd be hard to spread $1000 on living expenses along with utilities, insurance, property tax, but if you make like $10000 a month, $5000 gives you a little more breating room.

 

[spidey07]

Originally posted by: Deeko
Being 24 and not owning a house, I don't actually know, but isn't the traditional logic that your mortgage shouldn't be more than 1/4 of your monthly take home pay? Basically a week's paycheck?

1/4 of take home is a really good place to be. It allows you to build wealth in other avenues besides a house that has to be sold for gains to be realized.

Some people will swing half of their take home, but that is a troublesome spot to be in and normally wind up a pay check or two away from financial ruin.

 

[DeadByDawn]

I'd say no as well.

Prop tax, insurance, utilities, lawncare, REPAIR & MAINTENANCE!

Upkeep is expensive.

 

[mharr7]

Originally posted by: joshsquall
Depends on your lifestyle, but I wouldn't feel comfortable with it. Only $1k a month for food, car payment (if any), car insurance, home owner's insurance, fees that aren't included in your mortgage estimate (property taxes, PMI, HOA, etc.), utilities, entertainment, savings, and anything else. That's not nearly enough for me.

its 1k a month, which includes insurance, PMI and taxes...does not include utilities though.

 

[Noirish]

i think the question is, can you be approved for such a loan first.
the loan you are questioning already put you at 50% debt to income.
most banks don't like that.

 

[mharr7]

ya this was the feeling I was getting...that it wasnt a great idea.

more details:

Single, its a 3/2, so I will prolly be renting out one of the rooms to my brother(although not for very much, as he doesnt make a whole lot, so it would sorta be based on what he can afford, prolly only 200-300 a month)
I have a car payment that is close to being off, but still, I have one right now.

So I would be looking at, with no roommates(worse case scenario), about 1k left for car payment, utilities, food, car insurance, cell phone payment, and the basic upkeep (House was built in 2002, so should be in pretty good shape for a while.

Car payment:224 month
Car insurance: 90 month
Utilities: ? perhaps 80-140 depending on usage? Not really sure, but its not all that much here
Cell phone: 50 month
Then however much for food and all other expenses....

oh I have no debt, other than the few thousand left on car payment



Sounds a bit too risky huh?

 

[mharr7]

Originally posted by: Noirish
i think the question is, can you be approved for such a loan first.
the loan you are questioning already put you at 50% debt to income.
most banks don't like that.

Well im approved cause ill be putting like 20k down....I make like 3300/month gross, but take home is like 2100ish, sometimes more when i get overtime. I put a good bit into retirement each month.

Thats why im asking...because I am pre approved, but I'm not sure how smart it is or not...I'm guessing after everything is said and done each month, only a few hundred left over??? A bit tight I'm thinking....

 

[DeadByDawn]

Originally posted by: mharr7
ya this was the feeling I was getting...that it wasnt a great idea.

more details:

Single, its a 3/2, so I will prolly be renting out one of the rooms to my brother(although not for very much, as he doesnt make a whole lot, so it would sorta be based on what he can afford, prolly only 200-300 a month)
I have a car payment that is close to being off, but still, I have one right now.

So I would be looking at, with no roommates(worse case scenario), about 1k left for car payment, utilities, food, car insurance, cell phone payment, and the basic upkeep (House was built in 2002, so should be in pretty good shape for a while.

Car payment:224 month
Car insurance: 90 month
Utilities: ? perhaps 80-140 depending on usage? Not really sure, but its not all that much here
Cell phone: 50 month
Then however much for food and all other expenses....

oh I have no debt, other than the few thousand left on car payment



Sounds a bit too risky huh?

How many sq feet?

That utility bill looks low to me. You can ususally go to the utility company and pull up bills for the last year to get a good idea on what you will be paying.

 

[QurazyQuisp]

Why not pay the car off? And once that's done start looking for houses. $224 in the bank every month can help a lot with maintenance and such.

 

[EMPshockwave82]

I would continue renting. Unless this house is an incredible deal and you are just incredibly in love with it I would pass it by for now. If you use 50% of your house payment you might be over extending yourself. You probably want to develop equity and stop throwing your money into a never ending rent pit. The problem with doing it is that it doesn't sound like you are leaving much savings for emergencies. If you can afford it most of the time you will be fine most of the time. However, that one time your car breaks down or the furnace breaks you throw a thousand bucks towards repairs and your worse than broke.

I pulled it off with a 1/2 of my take home pay was going to rent for nearly 2 years because I had no student loans, no car payment, very cheap insurance, and I walked to work. This is obviously not a normal situation. I still managed to put back a few thousand but I had to go through some "poverty weeks" as I called them. I also played WoW back then so I didn't go out to the bars very much and had very little social life.

 

[OCGuy]

Originally posted by: Noirish
i think the question is, can you be approved for such a loan first.
the loan you are questioning already put you at 50% debt to income.
most banks don't like that.

DTI is based off of gross, not take-home.

55-65 is still possible, but first time home buyers generally want to stay 55% max if they have at least 10% down.

Your DTI also figures in everything on your credit, along with property tax, insurance, and HOA if applicable.

 

[mharr7]

Originally posted by: QurazyQuisp
Why not pay the car off? And once that's done start looking for houses. $224 in the bank every month can help a lot with maintenance and such.

Only reason is because the prices of the houses here are as low as they've been in forever(ofcourse because economy)...

problem is, i have a feeling its not going to get better anytime soon, but who really knows?

I'm gonna wait and see what gets passed in the stimulus package for home buyers....

But ya, would be much easier without car payment...my car is a 2006 sentra, so its gonna be reliable for some time I hope...only 30k, miles...

 

[mharr7]

Its 1300 Sq Ft.... And I am first time home buyer...

 

[FP]

I would say no.

The % is compared to your gross not your take home generally. Your mortgage-to-income ratio should be below 25% of your gross income. Yours isn't.

They also look at other debts (car, credit cards) etc... To total amount of your debt-to-income shouldn't exceed around 35%. Your isn't.

EDIT: I used conservative percentges. You will probably qualify for higher but I would be very careful before doing so. How much do you value vacations, gadgets etc?