How Much House Can I Afford?

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How Much House Can I Afford?

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Fortunately for me, I've lucked out. My first home was 2.5x my total income, when I got married, our first "big home" was 2.5x earnings. If I were to look at houses today... we'd have to go 4x earnings lol. I feel for anyone trying to get that first hurdle done.

fredmeyer

Living in LA. Making 100k/year. Only thing in my price range 300-400k is a small studio/1 bedroom apartment in North Hollywood. HOA’s $200-600/month. Bank only approved for a 300k mortgage. Freaking ridiculous. They don’t want to loan money to people. 800+ credit score, no debt. Did everything right for the past 10 years, only to find the barrier to entry is moved when you “get there.” Now I’m just saving and going to buy a house in Texas for cash.

AT-cyuh

I think the scary part is that for the average middle/upper middle class first-time buyer, you are forced to throw financial wisdom out the window if you want to buy a home. It is extremely unlikely in a hot market that you can get a house by putting 3-5% down, require inspections, and not stretch your budget too thin.

Woopigmavs

My first rate was 6 percent, i refianced a few years later to a 2.5 15 year fixed and had basically the same payment

cashcow

All housing not exceeding 25% of income. Impossible for most. The duplex and multifamily are selling at super high premiums. I'd say 35% of income for housing. Save and invest 15%. For most of us middle classes.

djpuplex

My house PITI payment is exactly 20% of my gross. I’d say that’s about as high as I want to go.

Ethernet

We now make 160k combined. Not a chance in hell we can afford a 640k house in CT with these taxes 😂😂

FastAligator

Camera work and pictures much better now good job!

Duckywucky

Uk based here. I bought my first house in 2002, I was 22 and earnt £16k a year. My house was just over 5x my salary. I couldn’t afford to do anything, I missed out on several things (trips with friends etc) but the house went up of course, my job changed, I got married and it all sort of worked out after a while. Probably not the way I should have done it but if I hadn’t done it I’m not sure i would have been further ahead

chrisharris

My place is now worth 12x my income. Prices are crazy. I’m in a coastal HCLA and prices don’t drop or even soften much here.

genxx

Good question:

1994: Went with 3x rule while making about $55k. Bought a house at $146k, so fine, but interest rates were about 7%
1998: Went with 3x rule while making about $70k. Bought a house at $168k, so fine, but interest rates were still over 6%
2007: Hot market and lower rates, plus had some equity, so I went with 4x rule on financing. Was making about $150k, bought a house at $660k, but fine as I had $120k down payment and rates were under 5%.

Today: I still own that house and built an addition. Today it's worth about $1.2 million, ...but...I have $530k financed after doing a $300k+ addition. Even though $1.2 million is closer to 6x income, it's fine because the financed amount is still in the 3x range.

My advice today. Wait it out if you possibly can. If not, buy as small/inexpensive of a home as you can stand. Wall Street is paying too much for houses. A small increase in interest back to above 3%or certainly 4%, or a resolution of supply chain issues (say in 18-24 months) and the market will have to adjust downward.

Buy when the market returns to normal, pay off your house and use your small/inexpensive home as a rental in the future.

andrewdiamond

I look at it as how much house I can actually afford with my income using a comfortable DTI ratio, minus the equity I could lose if there's a downturn. With my current income, I can afford a $380, 000 house, but I'll probably have to stomach a $60, 000 equity loss if the market goes down. So, for me, that means I'm comfortable buying a house up to $320, 000 only. And here in Atlanta that's practically nothing since our house prices literally doubled in our area the past 5 years or so. So, in conclusion, I'm not buying a house and my only option is to move where I can find the exact house I'm looking for for the $320, 000 I calculated.

That's the conclusion I made for myself. I set up a bunch of If Then scenarios and plan Bs. None of this makes sense for most, but I sleep better at night and my investments and savings keep growing while I wait it out.

AB-fqmr

I'm planning on using my VA home loan to purchase a multifamily unit in Northern Ca. The prices are insane though ...

gaflyer

Housing is insane. I bought my house in Louisville KY. (in a nice area) for $165k in early 2019. Today the value is about $225k. Neighbors homes are selling north of $230k and there are a lot of new homes being built. Granted larger than mine, but they are being sold for $400k+

tkid

6:00 - "Monthly Housing Service" what does that include? Mortgage payment, taxes, insurance?
Also, 25% of what? Gross? Net? After 401k and health insurance payments?

dirtymike

The thing is that a large down payment helps make the monthly mortgage rate affordable.

jujusoccer

Crazy. Been watching you guys for over a year and now just realized I haven’t been subscribed to the channel. Add me to the growing list of people. You two deserve Dave Ramsey level of subscribers

Michael-jcnq

Downsized from a $405k home to $260k, lowering out mortgage by $80k so we can pay off the home within 6 years then be able to save like wildmen.

Wrong question. Don’t ask how much house you can afford, ask what the minimum home you can buy to be comfortable for your family. Address your needs, not your wants if you want to get ahead

wan

I wonder how this changes for those with VA Home Loan

mikemichaelson

Should mortgage be no more than 25% of combined NET or GROSS income?

karlaflorero

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