How much money should I spend on a house?

Question

I make $90,000 a year and my job comes loaded with health benefits, retirement, etc. I'm single, have no car payment, no debt, and no kids. What do you think is the maximum amount of money I should spend on a house? (i.e. 200k? 300k? 400k?) I live in Las Vegas, Nevada.

Answer 1

Rule of thumb is your mortgage maximum should be between 2x and 3x your annual income or $180,000 to $270,000.

The 28/36 rule is no more than 28% of your gross income to your housing payment and no more than 36% of your gross income to all of your monthly debt obligations (either one can limit you).

One of the other answerers is right in saying to come up with the most you feel comfortable affording and figure out how much that buys you. An even better suggestion is to simulate it for a few months (putting the excess over rent into a savings account) to see if it really is what you want to spend.

Las Vegas is one of those areas that went crazy during the boom and is going bust right now. It will take quite some time until the mess is sorted out, so look for bargains and foreclosures and even consider waiting for a while for it to settle out some more.

good luck!

Answer 2

You'll get lots of people telling you the banks have 28% and 36% income rules.
Here's the thing. Just because you have no car payments or children right now, that doesn't mean you won't in the future.
What I'd do personally is determine what you want your monthly housing payment to be. Then, go to bankrate.com and use their mortgage calculator to determine how much house that would buy.
Each person has a different lifestyle. I personally prefer vacationing several times a year and enjoy eating at restaurants, so buying a smaller house for JUST ME isn't a problem. It all depends on if you're planning to be house poor or not.

Answer 3

There's no single answer for this. You need to speak with a mortgage banker and go over the details of what you are comfortable with and your plan for the future.

Think about things like this:
- What kind of monthly payment are you comfortable with?
- What will the taxes and insurance be like on properties where you are looking?
- How long do you plan on living in the home?
- Do you want to have a down payment? If so, how much?
- Are you anticipating any major financial events like weddings, children, 2nd home, retirement soon?

If your future is still undecided about things like transferring jobs, building a family, investing, etc., don't stretch yourself too far on this home. Work with a lender you are comfortable with and they will be able to custom fit a price range you will be able to live with, leaving room for all the other things you'd like to do with your life and your money.

I included a link about buying a home, but feel free to contact me directly if you have more questions. This is an exciting time in your life - buying a home is a big step. Let me know if I can help in any way.