How much, is too much when it comes to home buying.?

Question

over 500k too much? Let's say I make around 100k a year?

Answer 1

Over 500k is WAY TOO MUCH. At 100k per year your mortgage should be between 200k and 300k. Add in your downpayment and you have a great idea what to spend.

Follow the other answerers advice. Find some mortgage calculators and calculate the payments using a 30-year fixed (or a 20 or a 15 and watch your affordability shrink down).

Another good idea is to figure out your PITI payment and then put the difference between that number and your current rent in a savings account for a few months to see if that payment is 'affordable' for you.

The payment on a loan of 400k (30 year fixed at 6%) is $2400 (and that is just principal and interest). Assume your house was $500k with $100k down so there is no PMI (which can run hundreds of dollars per month) and 1.5% per year in real estate taxes (could be high, and could be low -- I've paid between 0.75% and 4% per year) and $1000 per year in insurance (could be high, could be low) and the payment would now be a little over $3100 per month. That's pretty steep on a 100k salary (37.2% of your gross income -- many banks won't do that anymore).

Better numbers for $100k per year... Housing payment of $2333 per month (maximum). $1800 per month in PI gets about a $300,000 loan on a $375,000 house (80% Loan-To-Value, no PMI). Add in the 1.5% taxes per yeara and still close to $1000/yr for insurance brings the payment to $2335 per month. Right where you need to be (you'll still feel house poor!!!).

Obviously, no or a low downpayment shrinks this even further...

good luck!

ps - the previous assumed that your other monthly obligations were low enough not to exceed 36% of your monthly income when the mortgage is added in. So all other loans (car, student, minimums on credit cards, etc.) have to be under $670 a month!!

Answer 2

I would first calculate 20% of the value of the home you are interested in. You should put this amount of money down before you purchase a home. If you pay 20% down then you will not have to pay mortgage insurance. Also you will not need to escrow your new home. I would also use the home buying guide with the mortagage. I tend to be more careful with my money. I would not get more than a 20 year loan. I would only go 30 years as a last resort. If you can get a 15 year loan that would be the best since you will be paying more of the principal.

Answer 3

The builder should have explained this to you while you were writing a contract .If you haven't written the contract, I will forgive them. If they have written a contract for you already, then this is another reason why buyers need THEIR OWN agent even in new home purchases. Typically all new appliances are included and, also typically, the developer already has the appliances picked out and has negotiated price. You may have a choice of two colors: white or black, or SS or black, something like that. There may be a "deluxe" upgrade available to you for not just appliances but perhaps a few other surfaces: counter top materials, flooring materials. You can pay for your upgrades in cash at closing as a part of your closing costs. You typically can add it to your mortgage. Your down payment percentage stays the same regardless of which way you pay. I hope you haven't written your contract yet because those are usually not changed as you go through the building process. My general opinion of builders is that most are good and most are cookie cutter. That isn't necessarily a bad thing but they won't have 500 choices for you with respect to cabinets, knobs, carpet, floor, tile, etc. Good luck! Write your contract to protect the full return of your deposit should the developer delay or slow down construction for any reason.

Answer 4

The rule of thumb is 1 month mortgage = 1 week paycheck.
(assumes escrow is paid with mortgage)
Its not flawless, but l think its still a good guideline to go with.
In my opinion, you bought too much house, if you went over this rule on a 30 year mortgage.

Answer 5

Write down your current obligations (expenses) - and take those against your current salary (income). That will give you a basis of what your current level of discretionary income is (ie. income exceeding expenses).

Once you have that all listed out, you can then play around with housing expenses, replacing your current expense (ie. rent) with the combination of a mortgage, insurance and property taxes.

That will tell you how high you can go with respect to purchasing a home.

Answer 6

Go to one of the many mortgage calculators available online and you can get an idea of monthly payment vs. mortgage amount.