Other Talk "Otterville" plus Religion/Politics

Income vs. Mortgage

Old 03-12-08, 12:25 AM
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Income vs. Mortgage

So, what percentage of your income should a mortgage be?
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Old 03-12-08, 01:28 AM
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I thought it was like 28%....of course that depends on what your other obligations are..
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Old 03-12-08, 07:12 AM
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The traditional ratios are 28% of your gross monthly income for the principal and interest on the mortgage and 36% of your gross monthly income for all your credit combined including the mortgage.

Clearly given the situation we are in, these ratios were thrown out with the lunch trash.
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Old 03-12-08, 08:20 AM
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Originally Posted by D.Pham00
So, what percentage of your income should a mortgage be?

Irrelevant!

You know what your bills are in a month.

The tax break for mortgage interest should be easy enough to figure out so can estimate and calculate your monthly take home pay.

Now figure out what YOU are comfortable spending on PITI.

Just make sure you research it and don't leave any expenses out of the equation.

Also keep in mind that as a home owner, you will have unexpected expenses (like plumbers, heating cooling repair, appliance replacement/repair, painting, carpet, etc, etc) come up more often than you think, so leave a little buffer.

If you want to be able to have a little fun in life and eat more than mac-n-cheese 3 nights a week for dinner, you will not go for the highest amount a lender is willing to lend you (although, that might not quite be so high in today's market)
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Old 03-12-08, 08:26 AM
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I thought there was a thread alraedy out there on this.

http://forum.dvdtalk.com/showthread....me#post8514650
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Old 03-12-08, 11:07 AM
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Mine is 30%, but I have a 15-year mortgage (with only 10 years left), should this make a difference?
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Old 03-12-08, 11:15 AM
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Mines about 40-45% depending if I get OT or not. A family of 3 living on one income.
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Old 03-12-08, 11:29 AM
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I would say ours is about 33% or so, maybe a bit higher.

We got our mortgage when i had a job, and now my income is less than half of what it was.

The hard part will be getting a new mortgage, since I will be moving for a job, but my previous income is low.
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Old 03-12-08, 11:36 AM
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I'm at 43% (PITI).
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Old 03-12-08, 11:49 AM
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Being in the market for a home in about 12 months, I came across a stat showing 32% of your monthly gross income. This 32% should only include Mortgage, taxes, and Electricity/Heat. Thought it was odd that insurance wasn't part of that.

I find it strange in why they take your gross income and not do a percentage based on your monthly net income. That would make more sense to me.
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Old 03-12-08, 12:36 PM
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Here in upstate we have the luxury of very low housing costs. We don't have the meteoric appreciation but we also don't have the market corrections either. We just plod along.

What's nice is that we get more house for money. After working on Long Island for a the last 7 months I realized people do make more downstate, but most are house poor. I have a 2000 Sqft home in the suburbs with a 1/4 acre lot valued at $160,000. This same house would have been at least $500,000 on L.I.

My mortgage has been refinanced a couple times but we owe about $60,000 on the house and have a payment PITI of about $700 PI and $450 taxes. Yes our taxes are some of the highest in the country per $1000 of value.

As 2 professionals we generally make around $120,000 combined incomes so our mortgage is only around 15% maybe less.

It's actually a great time to buy. Just buy a little less house to save money for improvements.
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Old 03-12-08, 01:08 PM
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Originally Posted by ElementZ
I find it strange in why they take your gross income and not do a percentage based on your monthly net income. That would make more sense to me.
It's just a rule-of-thumb, and gross is easier than net to figure out quickly. Most people know their salary off-hand, but net gets confusing when you start to throw in things like 401K, medical savings plans, annual tax refunds/payments, etc.
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Old 03-12-08, 01:32 PM
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I wouldn't be comfortable with more than 20%, but they'll sure loan you more.
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Old 03-12-08, 01:36 PM
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Originally Posted by JimRochester

As 2 professionals we generally make around $120,000 combined incomes so our mortgage is only around 15% maybe less.

It's actually a great time to buy. Just buy a little less house to save money for improvements.
But 2 professionals in Upstate NY make an average of $50-$70K normally. I think you and your wife are just a little above normal for upstate. (I'm from Syracuse, with family still living in Albany, Cuse, and Rochacha). They're all college educated and don't make nearly $100K combined.

But yes you can get a lot of bang for your buck up there. Good to see at least someone is doing well up there.
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Old 03-12-08, 01:46 PM
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Only you can know what you can afford (based on your income, bills/expenses, savings, etc). Don't rely on the bank to tell you what you can afford.
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Old 03-12-08, 01:48 PM
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We're at about 13%.
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Old 03-12-08, 01:54 PM
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I wouldn't go over 25% of gross but using gross income is silly. You should really use net income. It's more true as to how much you will have left each month. As someone pointed out, be prepare to have emergency funds. Since I got my house last August, even though the house is consider in good condition, I have to replace the water heater, main sewer line clogged twice, now the boiler seem to short cycling. Just be prepare.
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Old 03-12-08, 02:55 PM
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Originally Posted by 4KRG
Irrelevant!

You know what your bills are in a month.

The tax break for mortgage interest should be easy enough to figure out so can estimate and calculate your monthly take home pay.

Now figure out what YOU are comfortable spending on PITI.

Just make sure you research it and don't leave any expenses out of the equation.

Also keep in mind that as a home owner, you will have unexpected expenses (like plumbers, heating cooling repair, appliance replacement/repair, painting, carpet, etc, etc) come up more often than you think, so leave a little buffer.

If you want to be able to have a little fun in life and eat more than mac-n-cheese 3 nights a week for dinner, you will not go for the highest amount a lender is willing to lend you (although, that might not quite be so high in today's market)


You need to be decide what your budget is. The bank is using a formula that has been designed for the broadest possible scenarios. Just because some formula says you can pay $X,000 per month on a mortgage doesn't mean you should.

Use your head.
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Old 03-12-08, 03:14 PM
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Originally Posted by The Bus
Use your head.
Simply brilliant! You could really go places with advice like that, soooooo many people use their arse or ballsack to think instead of their heads these days

hmmmm, I make $60k/year I can easily afford a $500k house I guess I shouldn't laugh, I know someone in this exact situation that is about to lose his house.
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Old 03-12-08, 03:18 PM
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I still laugh when I ask people what they've come up for as far as a budget and they look at me like I have the answer. I usually ask them something along the lines of, "Well, say the bank said you would be approved for a house payment of $5500. Are you OK with that?"
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Old 03-12-08, 03:36 PM
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About 45% for me.
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Old 03-12-08, 07:49 PM
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Less than 10%...I guess I really need to buy a better house!
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Old 03-12-08, 08:26 PM
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I'm sitting at just about 10%. But that's only because I make $9.2 million per year. I would spend more, but Jessica Alba likes to spend most of the weekend on my yacht.

By the way, did I mention that I have a perfect SAT score, have an IQ between Einstein's and Stephen Hawking's, a FICO score of 851, and an NFL QB rating of 158.4?

(i.e. posting your personal ratio is pretty pointless on an anonymous message board, since everyone who posts with inevitably exhibit one extreme or the other)
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Old 03-12-08, 08:32 PM
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Originally Posted by 4KRG
Irrelevant!

You know what your bills are in a month.

The tax break for mortgage interest should be easy enough to figure out so can estimate and calculate your monthly take home pay.

Now figure out what YOU are comfortable spending on PITI.

Just make sure you research it and don't leave any expenses out of the equation.

Also keep in mind that as a home owner, you will have unexpected expenses (like plumbers, heating cooling repair, appliance replacement/repair, painting, carpet, etc, etc) come up more often than you think, so leave a little buffer.

If you want to be able to have a little fun in life and eat more than mac-n-cheese 3 nights a week for dinner, you will not go for the highest amount a lender is willing to lend you (although, that might not quite be so high in today's market)
But it's hard to come up with a budget if you've never owned a home before. The 28% is good for a rule thumb to help people start a budget.
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Old 03-12-08, 08:42 PM
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Mine is going to be at about 50% for right now, until I get a raise over the summer which may lower it down to about 35%

But I don't have any kids, credit card bills, or a car payment to deal with.
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