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Mortgages: How Much?


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63 replies to this topic

#1 of 64 OFFLINE   Patrick Larkin

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Posted March 10 2003 - 06:30 AM

Any financial planners in the houses? So, I'm looking for a new house and plan to make a significant change in mortgage amounts.

What percentage of a salary should be going to a mortgage? Obviously, as little as possible but I'm wondering what people think is an acceptable percentage.

#2 of 64 OFFLINE   MikeAlletto

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Posted March 10 2003 - 07:22 AM

Well mine is 23% but they approved me for a max of what ended up being 33% but I was very uncomfortable with that large of a monthly payment. In the end though its what you feel comfortable with paying. When I was in an apartment I was doing 21%.
Michael Alletto

#3 of 64 OFFLINE   Jim J

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Posted March 10 2003 - 07:29 AM

33% is possible to obtain as stated above. I too would be uncomfortable with that amount.

I think the general rule is 28%-ish (including principal and interest, real estate taxes, insurance) of your GROSS income for a housing payment monthly. they also consider other long term debt (like car payments and credit card minimums), which combined with the housing amount should not exceed 33% (ish)

Good Luck.
My wife and I are also considering selling a moving again (we just bought 1st time almost 2 years ago). We just haven't 'clicked' into the house, or with the neighbors.

Jim J

#4 of 64 OFFLINE   Jared_B

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Posted March 10 2003 - 11:01 AM

Back when I was married, the percentage was close to 30%. Now that I have the house to myself, I'm closer to 42%. Yup, I'm strapped. I also realize that if I can hold on to the house for another year or two, I'll be able to make some really good money from selling it. If I did so now I wouldn't even break even, so I might as well deal with it.

#5 of 64 OFFLINE   Micah Lloyd

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Posted March 10 2003 - 02:24 PM

I think a major factor, too, is how much you have in non-utility monthly bills (Car payment, credit card, etc.) The more of those you have, the less of a house you can afford. My mortgage is close to 40% but I don't have a car payment and I don't carry balances on my credit cards so it isn't an issue for me.
Have you checked out your credit score and confirmed the items in it? You can't start too soon...
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#6 of 64 OFFLINE   Patrick Larkin

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Posted March 10 2003 - 04:26 PM

Yes, credit isn't a factor. I'm just trying to get used to the idea of doubling my mortgage payment with the new house.

I probably come in at 28% or so. We have a single car payment, no credit card debt, and the usual utility expenses. We do have some daycare and student loan expenses that will be ending soon ...

As long as others are paying 25% of their gross, I don't feel so bad. Posted Image

#7 of 64 OFFLINE   MikeAlletto

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Posted March 11 2003 - 02:52 AM

Credit card debt isn't what they look at, they look at the minimum payment for the card. Even if you have no balance there is still a minimum payment on the card for when you charge something. So if you have 20 cards open each with a minimum of $20 that looks really bad even if you have no balance on any of them.
Michael Alletto

#8 of 64 OFFLINE   Wade

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Posted March 11 2003 - 03:04 AM

I picked up the book "100 Questions Every First-Time Home Buyer Should Ask" over the weekend and just read the section pertaining to this last night. The general rule of thumb is 28% of gross for mortgage, insurance and taxes and 36% of gross for your total debt. It should be what you feel most comfortable with though. I will probably stick close to those numbers or even a little less because I don't like stretching myself to thin.

Wade

#9 of 64 OFFLINE   Patrick Sun

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Posted March 11 2003 - 03:34 AM

I'm seriously under-housed. I'm at 17% (of my gross salary) after re-financing my mortgage last September.
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#10 of 64 OFFLINE   MarcVH

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Posted March 11 2003 - 03:47 AM

That doesn't mean you're under-housed; part of the whole idea of home ownership is that, over time, your income rises but your house payment stays more or less the same. Reduced interest rates can make that change even more dramatic. But, if you feel under-housed, you could either upgrade or borrow against current equity to upgrade/expand the house you got.

#11 of 64 OFFLINE   Charles J P

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Posted March 11 2003 - 03:49 AM

My wife and I have are only at 14% of our combined gross salary, and we still have no money. So definately take into account the rest of your debt. We have two car payments ($850 a month) a $250 a month bill for furniture (24 months no interest which has my wifes living room set and my LCD projector on it) $100 a month cell phone bill, $100 a month cable/phone/cable modem, $50-$100 utility bill, $50 student loan payment, etc. So our "other bills" is actually significantly more than our mortgage. Now on the other hand, in two years one of the cars and the furniture payment will both be gone and our salaries are both rising consistently, so if we can make it until then....

#12 of 64 OFFLINE   Jim J

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Posted March 11 2003 - 03:56 AM

But your payment does go up a little too. As time goes on, the amount of interest you are paying diminshes, therefore your tax write-off goes down.

It's all complicated really ...

Jim J

#13 of 64 OFFLINE   Matthew Todd

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Posted March 11 2003 - 04:00 AM

My wife and I are building our first house, which will be done in about one month (Yea! Posted Image )

We are figuring the mortgage is going to be about 18% of our gross income, but we are planning to pay double the monthly payment (36%) and pay the whole thing off in 7 years.
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#14 of 64 OFFLINE   Mark C Sherman

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Posted March 11 2003 - 04:28 AM

Save as much as you can for a good down payment and get rid of any Credit card Debt that you have that way you can look at a better payment. and the rates right now are almost rock bottom. I just did a REFI which paid of my car and cards now I have one payment a month with extra money left over.



good luck
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#15 of 64 OFFLINE   Erik_C

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Posted March 11 2003 - 05:31 AM

Here's my question. I just bought my first house last week. My mortgages will run a bit under 20% of my gross. Here's what confuses me. They want me to take out two mortgages (I think it's called an 85/15 or something). I'll have a regular mortgage for like $2400/month, and a second for $300 a month. That $300 a month is only interest and no principal. Why do they want me to do it that way? I know I get a huge tax deduction, but what's the purpose of the second mortgage, and will it affect my ability to get a home equity loan/ second mortgage (or third, I guess) if I need money in the future?
-Erik

#16 of 64 OFFLINE   Patrick Larkin

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Posted March 11 2003 - 05:44 AM

i could be wrong here (my eyes glaze over with this stuff) but the 85-15 thing may be so you can, in effect, put 20% down and eliminate the MPI charge. You put 5% down in real money and pay the other 15% in a separate loan...

I may be totally off base though.

On a side note, all this talk of refinancing has me thinking. I didn't know you could do that for other debt. should I refinance my student loan (which is 9%)? It only has 2-3 years left, however.

#17 of 64 OFFLINE   Patrick Larkin

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Posted March 11 2003 - 05:46 AM

also, does it really pay to have a giant down payment when money is so cheap right now???

#18 of 64 OFFLINE   Patrick Sun

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Posted March 11 2003 - 06:02 AM

Well, PMI is just money thrown away on a monthly basis, so, unless you have a high aversion to throwing money away, getting to the magical 20% downpayment number is the way to go.
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#19 of 64 OFFLINE   Patrick Larkin

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Posted March 11 2003 - 06:16 AM

whats the difference between throwing the PMI away and throwing away $2000 in interest per month? Posted Image

#20 of 64 OFFLINE   Wade

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Posted March 11 2003 - 06:34 AM

Well Patrick you could always buy the house outright and not throw any money away Posted Image. That's assuming the housing market didn't tank right after you bought the house. Actually I've read somewhere that you shouldn't buy the house outright. Don't know why that is though. I'd consider doing it if I had the cash to spare. I hate having monthly payments for anything but I guess a house payment is unavoidable unless your rich.

Wade