How To Know How Much House You Can Afford

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[BrookeEli]

Was approved for a mortgage of 300k at the age of 22, but decided to only spend 220. Still live in this home 5+ years ago and love it. The monthly mortgage payment (with property tax) was only 20% of my monthly income. Didn't want to be house poor and wanted to travel (which I did) and very glad I went this route.
Now doing foreclose property management, we see A LOT of people who bought more then they needed to feed their ego's. It's sad to see but they put themselves in that situation. Be smart.

[harleydarling]

General rule of the thumb:

Don’t spend money you don’t have and assume you will have.

[CarlosRodriguez-hbvq]

Big unspoken problem with home buyers is not budgeting for home maintenance. Plan on about 1-2% of your home value. HVAC units break. Fences fall down. Plumbing leaks. Paint fades. Plan on it.

[matthooper]

Reality : Average home price in USA is now $400K. Rents are skyrocketing. People are paying $1500 to $2K in monthly rent but cant qualify for a $1700 mortgage. The Industry is insane.

[swampcrawlerls]

Got a decent small house on 1 acre in Michigan for 69k, paid it off in 34 months. Yay!

[Ben-kbvs]

Coming from a long term home owner. Do not let your mortgage payment with and escrow, be more then 25% of your total take home pay. You will be so much more happy in life, when you you can make the mortgage payment, and still have money to go out to eat, go on vacation, and fix things when they break.

[tiffanyn]

I just found Dave and I appreciate that he’s brutally honest!

[nephetula]

I think it's best for a couple buying a house to base their purchase on only one income. That does two things: First, it limits the amount of house they can buy. Second, it makes it possible to keep the house if one of the incomes suddenly stops. Things like a pregnancy, a lost job, or an extended disability are far easier to handle if your house payment is low. If you can't make house payments on one income, then you're constantly under the threat of losing your home, and that's not a good feeling.

(edited for spelling)

[dc]

Buy the smallest decent house that doesnt have a bunch of extra stuff you dont need/use in a good neighborhood. I have a 2br/2ba apartment that I paid cash for, even though I can afford much, much more. I took the difference and invested it. One of the best decisions I ever made. I feel such releif and security by having a small, affordable, paid- for home.

[roedub]

I think it varies per situation. I started out at 40% for years and now at 35%. I have no debt and am very responsible with money so I've been fine and am half way to paying off the house. I think the most important thing is you have to be disciplined when it comes to money before you can even think about owning a house.

[danielsan]

Eh, I just buy based on whether we can afford on one income...plus 20% down is a must. Pre approved for $500, 000, house we bought was $225, 000.

[bravehats]

I have been waiting for 6 years to buy a house. Waited for my fiance to finish school, got married, had kids, kids are now 5 years old and we are ready to buy. During those years of waiting, been able to save a 20% down for a 🏠; Have one year emergency fund; built my credit to low 800s. My advice is to wait till she is done with school before buying. You want to walk into a house knowing exactly what you are operating with financially. Not saying it will happen, but she can fail some classes and what would have taken two year to graduate will take 4 years, therefore costing you more money.

[vaderwashere]

Thank you for the video Dave! We got our 1st house at 23 and bought what we could afford at the time, while I was still at school and working a restaurant job. We were still house poor, but didn't have any extravagant expense. I was even able to save up for a small car on her finger when I proposed on my graduation day. After I graduated, we bought another house and still kept (and still have) that house as an income property (in Seattle). Make due in a smaller house now, then that house can be an income generator when she graduates and you have kids. You will be upgrading/moving into another house in an average of 3-5 years anyway.

[CycleThePuck]

As a 23 year old looking to buy a house soon, this video came out at the perfect time

[MiMiOrt]

At a great time this came up because I've been trying to figuring out, how much of a house I can buy with my income ? GREAT INFO. Today Dave's Titles/videos are ON POINT.

[tomj]

My wife and I built our modest ranch house 26 years ago and at the time the PITI was 34% of our income. We felt comfortable with this at the time because we're so frugal in other areas of our budget. Despite many jobs losses, injury and even serious illness we never had a problem making a single mortgage payment, even during a 50 week unemployment stretch during the great recession and paid the mortgage off 5 years early. If you're frugal, you can stretch that 25% but ONLY if you're willing to think outside the box with other expenses.

[outkegi]

We were house poor for 15 years 80% of our salary goes to our mortgage and property taxes. We lived with just the basics and sometimes our salaries were not enough, there are times our cellphones would get cut for non payment and finally year 2018 we paid off our mortgage. We have a fully paid house 20 mins away from San Francisco Golden Gate Bridge, I wouldn’t say I regretted what we did especially during this covid19 pandemic. We feel secure that we wouldn’t be homeless

[richardramfire]

Dave is 100% right. Don’t go too high on your mortgage. I made this mistake 10 years ago.

[masonr]

I really appreciate videos like this, that explains the logic behind the advice. Thank you.

[AngeloCarlos]

Just the video that I’ve been looking for. First time home buyer. Thanks Dave 😀