Could I afford a 270k house?

Question

I bring home roughly 4k a month after taxes. I have no car payments.
Student loan - $200/month
Car insurance - $100/month
I really have no other big expenses other than your daily living things...could I buy the house without straining my finances?

I actually gross around 100k a year, but after taxes and 401k I left with around 4k a month take-home.

I don't own a home right now and I have 50k as a down payment saved up.

Yeah, the property tax is $300/month, HOA fees about $150/month. Then I have utility bills on top of that.
It would be hard to do the 20% since the closing costs are around 12k...

I guess it would just be tough to save for retirement if I bought the house? I would probably have to cut back on my 401k and IRA.

Still pretty hesitant about it...

Answer 1

OK - even with your last update, you still shouldn't have any problem affording a $270M house.

Assume a down payment $50,000 and a 30-year fixed rate loan at 6.5% - then your interest and principal payments would be $1,391/month. Adding property tax of $300, HOA of $150, PMI of $59, and about another $50/month for homeowners insurance, your total house payment would be about $1950/month, which would be about only 23% of your gross income. This is well below the 28-33% limit recommended by lenders. Your back end ratio (including the student loan) is only 26% - again, well below lenders' recommended 38% or so.

Believe me - unless you reasonably think your income is going to decrease significantly in the near future, then you're fine - buy the house. Most people aren't in nearly as good a situation as you, and they still buy. I've paid a higher mortgage payment on significantly less income myself.

Additionally - your after-tax benefit, if you itemize your interest payment deduction, is going to directly benefit you by probably more than $400, depending on your marginal tax bracket. So unless you can rent the same house for a lot less than $1500/month, you don't have any reason to not buy.

Regarding your retirement savings - if you're saving at least 12% of your income (i.e., currently more than $1,000/month) over a period of more than 30 years, you should be fine. Keep in mind that the biggest expense in retirement will be rent - unless you own your home outright. Bottom line - if want to stay a renter, no one can talk you out of it. But over the course of several decades, you'll almost always be much better off by buying.

Answer 2

Don't buy a house based on your current finanicial situation. What if you decide you need a new car or other large expense. You'd be hurting. Also, you need to add up all of the other bills you have. If you haven't owned a house before, the bills are much more than at an apartment and you will need extra income to save for remodel or emergency in case the furnace goes out or the roof leaks.

So in simple words, 270k is probably way too much for 4k/month. Less than 200 is likely do able.

Answer 3

Most lenders are going to look at your gross income not your net. Your car insurance will not be counted against you in determining the loan amount. The general rule is that you can typically borrow up to the point of your monthly payment reaching 28% of your gross monthly income. They also generally also state that your monthly payment + monthly debt payments (credit card, loans) can not exceed 38% of your gross monthly income.

To be honest, it seems like you would be spreading things very thin. You may be able to secure funding (depending on the amount you plan to put down and your past credit history) but you may not be leaving yourself any wiggle room in the event of an emergency. Not sure if you are already a homeowner, but if not, you will quickly find that the cost of ownership is much more than just the house payment.

Answer 4

If you want financial Independence then only purchase a home that is worth 2 years of your income. You need to be ready for maintenance and emergencies when you are a homeowner. Being smart with your finances will only make life better !!~!

: )

Answer 5

If you have excellent credit and your job is on a steady long term basis,then that would be very easy for you to afford, so if you are ready to buy start now to speak to a builder or real estate agent and see what happens.

Answer 6

According to Ditech.com:

$4,500 monthly income
$300 monthly payments

15 yr loan = 7.5% interest $142,393
30 yr loan = 7.5% interest $188,783

So I'd say you are WAY OVER THE TOP at $270,000

Answer 7

no....300=student loan....and car insurance.....utilities in a 270,000 house=800-1,000....food 400.00....home owners insurance depending on where you live=?....car upkeep and gasoline=?....living expenses,such as books,entertainment,clothes etc=?....(see where this leading?)...you would be a bankruptcy waiting to happen

Answer 8

yes, it might be true but it depends