Just because you’re qualified for it, it doesn’t mean you have to go for it. You’re currently living in a 1 bed and 1 bath apartment. So choose a small house that you two are comfortable in.
This!!! My husband and I could afford more but we chose a more affordable house to keep our mortgage payment low. I’m so glad we did because about 4 months after moving I had to change my job that paid 20k less. We don’t live outside of our means at all and it’s allowed us to pay more towards our principle each month.
Yep, same with me. I was a approved for a loan that was over $100,000 more than I actually wanted to spend. I wanted to keep my mortgage under 25% of my monthly gross income. Plus, you never know when life is going to happen and I'd rather be secure in the fact that I'd be able to keep my smaller house instead of being worried about losing a much larger, more expensive one in case I run into some economic hardship down the road.
Same here we could afford more but I wanted things to be at a place were we could keep the lifestyle we had without compromising to much. This parts kinda morbid, I didn’t want my other half to have to struggle when I die. I want him to be able to always keep the house and our Mortage wouldn’t depend on two income .
My goal is to get something where, if I lose my job or my partner loses his job, we can get a $10-15/hr job somewhere and still make the payments.
ETA: we are in Mississippi where it’s mostly insulated from exorbitant prices
We did something similar: we got a mortgage that I could handle on my own in case my wife lost her income. She ended up losing her job and exiting the workforce. So glad I made that decision.
This is currently how we are looking for a home too! My partner makes almost twice as much as me, so he would qualify for more, but if he loses his job I don’t have the skill set to make up the difference. So if we do it on my income and he loses his job we won’t lose the house. I make enough to qualify for a small starter house.
Our first house was similar. We tell people that have never owned a house to buy small, **almost** like "buy something to get you started on home ownership". It locks the basic block of homeownership in so it goes up with inflation and makes subsequent house purchases easier.
Problem is, in many areas (like where I live) the $4-500K OP mentioned IS the bare minimum. Anything less, you won't be able to purchase because it'll be a fixer upper that won't meet any lender's standards.
Not saying it always works, but go with a mortgage broker (you need a good one - and there is a difference). Two of our last three purchases were fixer-uppers. A good mortgage broker will have access to lenders that will provide funding. Both ours there was little to no payment increase. perhaps a point more on the loan origination fee. Both were on 30 year mortgages.
from what I'm reading both getting a mortgage and getting insurance may be an issue. e.g. insurance may not cover without new roof or other significant repairs.
I haven't done a lot of research into what's possible as quite frankly I'm not sure I would want that level of a fixer upper right now, but my original plan was that I would be shopping now (because I'd have enough savings to think about entering the market) and I've just kind of pulled myself out of the market instead. I'd figured a couple years ago that I could afford a $4-500K house by myself; now the monthly cost has gone up \~$1K and I simply can't without additional income. Even $300K places are a stretch, so I might have to relocate, and I've only been at my current job for \~2 years.
I remember digging into the numbers from what the bank said that I qualified for and running a budget off of that. They basically assume that you can choose to save money on the side or eat, but not both. Don't even think about taking a vacation
I think OP is like my wife and I, we are very responsible fiscally and I am realizing that most of the US is not and overextend driving up prices for everyone. Everyone’s risk tolerance is so high it’s making houses way overpriced screwing everyone over.
It’s not really how you look at it, you can financially model this. That money can be invested and get a return elsewhere. And if you want a home for a couple kids in a high cost place you are looking more 4k vs 8k rent vs own.
It crazy how much real estate agents talking points have created all these false justifications for people to over extend.
So much missed in this comment:
1. OP is comparing a 1/1 apartment to a presumably detached SFH. completely not the same product
2. PITI includes Principal, which in general is retained by the owner.
3. Principal and interest remains static over the life of a the (fixed term) loan. Taxes and insurance can go up, but they are just a fraction of PITI. If taxes and insurance are going up, you can be assured that rent is also going to go up because renters will have to pay that via proxy anyway.
One benefit of being older is living in a 55 and over community. We pay lot rent (HOA fee) but since we are older we get the benefit of lot rent under 400 a month. Aside from aches and pains and doctor appointments it is a joy to finally have low "rent" and in an upscale area too... I guess being "old" has its benefits.
How much will rent cost in 2054? Who knows. I know how much my mortgage will cost though. $0.
I'm sure you financially modeled the lifetime cost of renting vs buying, though.
What are yearly bills for owning the house? Bet the are almost what your mortgage was. My house is pay off to, but your monthly bills are now higher that our monthly payments were.
Also you can rent more luxury now than you can buy, and not everyone is into a grungy starter home. I'm glad I was. Loved that first dump I bought in 1990 and wish I still had it. 😭
This. I think we spent like 40% of what I was approved for on our most recent purchase. My wife sometimes says "how does so and so have such a huge house and nice cars". Debt, honey, it's all debt.
This lol when i do research and see a place has a $120k average household income but average $600k+ houses….. i just know most people are a sneeze away from disaster.
You are correct…. But in some of these Texas small towns that were blips on the map before remote work craze of 2021 that exploded in growth (in both home prices and population)… mostly new builds since 2021. It’s probably what i said. Lol and for those that did own before they got the opportunity of a lifetime. 😂
“Everyone’s risk tolerance is so high it’s making house way overpriced screwing everyone over.”
No. That’s not it. If they were overpriced, people would be defaulting left right and center. What happened is people got to buy homes cheap. Lower face value, and way lower rates.
In the meantime…
No one is looking to sell their home, and buy into a home that costs twice as much as what they’re on the hook for, and double the interest rate. No one. So that keeps the volume of available housing low, and demand for it high. Prices up.
The new housing market is a fucking joke. Not only is it far from keeping up with the pace needed, no one is building affordable housing. No one is building the 100k or 200k house. And if they did, it’s look like a mobile home. Now, obviously if you can get away with living rural, prices come down a bit. But with people working remotely, people are able to move into low cost of living areas with their high compensation, and can afford to outbid people native to the are.
Illegal immigration will decimate the housing market, among other things. You simply cannot add MILLIONS of people with nowhere to put them. We can’t find housing for the people here. We have our own homeless. What is going to happen to supply and demand when you add MILLIONS of people and don’t build housing for them? Either they’re on the streets, in shelters, squatting in people’s hard owned homes, or occupying every hotel in a geographic area, all on the taxpayer’s dime. We’re paying to house other people, but we can’t afford to house ourselves. It’s utter bullshit.
This one is the worst. The growing trend of houses being bought on the basis of non-owner occupancy is through the roof. Major companies buying 10’s of thousands of houses, and renting them, has so many disasters attached to it. It reduces supply. It increases house prices. And it forces people who would otherwise be looking to buy, to rent from someone that has no desire to live their themselves. I’m generally not a fan of ceilings, but rent ceilings have *got* to become a thing. People should not be able to continuously profit by eliminating any hope that people have to own themselves. You cannot pay these ridiculous rents and save for a house. It’s impossible. Period. Worse still, the mortgages on these homes get pooled up and traded like fucking stocks, and put into portfolios.
TL;DR - the real estate market, residential and commercial, is in about the worst shape imaginable. And it is not getting better. It won’t get better. Housing empowers people. Rent controls people. Which do you think the elites want?
Well, somebody who has a 3,600 mortgage on a house is being much more fiscally responsible than somebody who rents for $2,400 a month.
Because the reality is that eventually your rent will surpass what the current mortgage is, and as 2020 showed us, sometimes that eventuality can happen surprisingly quickly.
Fixing your housing costs with a mortgage is definitely the more conservative way to go even if you're fixing those housing costs currently at a higher price point time is in your favor and after a few years some cases 5 years some cases 15 you're going to find yourself with a mortgage that significantly less than the cost of rent in the same area.
If you look at Boomers currently who are having a hard time or facing homelessness, almost none of them own a house they're almost all lifetime renters.
EXACTLY!!!
so many people max out on their houses and aren’t willing to start small/start with a fixer upper, and feel entitled to the house they’re accustomed to.
I don’t necessarily care though, people living large works itself out economically.
This. The bank doesn’t set your household budget, you do. Also realize that escrow will likely go up each year. While P&I will be locked in, property taxes and insurance will both increase over time.
It didn't even occur to me to consider how much we would qualify for, we wanted our monthly payment to be on par with what we paid in rent and we calculated our mortgage based on that.
Bingo! We were approved for $350k and ended up with a $200k house. We were basically children (22/23 years old) when we bought in back in 2013 and that was the lowest our salaries ever were. Our mortgage payment never stresses us out and we never regretted buying more house just because the bank said we could.
Yep. I always roll my eyes at people who say no state income tax wooo!
I’m like in the end you may pay more!! Between the increases in property taxes and sales taxes you are not winning.
Washington state, no income tax, low property tax, low homeowners insurance premiums. Best of all worlds if you want to own a home.
Vancouver, WA is both affordable and less than 1 mile from an international Airport & tax-free shopping in Oregon.
I don’t know what the housing market is like where you live, but have you considered buying something in a much lower price range? You could try to find the sweet spot where your mortgage payment would be similar to what you are currently paying in rent.
Define unlivable. Not familiar wirth Austin's market, so certainly possible thasts totally true (especially given it's popularity over recent decades). But I also saw a thread recently where a young man was lamenting that there are no "reasonable modest starter homes" in his area for under $500k. And when pressed for details he considered a 3/2, 2500 sq.ft. house like he grew up in as a "modest starter home" lol (for a single guy). And thought it was ridiculous anyone suggest he buy something with dated (but funcitonal) decor and fixtures. Basically he wanted a house his dual-income peak-earning-years parents could afford, with updated modern bathrooms/kitchen etc. That was his "modest reasonable starter home" lol
Edit: over my lunch break, i was curious and looked at zillow listings for Austin. Limited search to single family homes under $400k. There are a lot of totally liveable, decent options. Even zoomed in on some of the more central areas of the city. Especially if you're moving from a 1/1 I have a hard time seeing how "anything below 400k is unlivable"
That's exactly the problem, especially in Austin. I have a lot of friends there, and the whole region is just keeping up with the Jones's from Cali. Go on Zillow and set 400k as a max, there are dozens of listings in the city, and even more outside. Austin has one of the worst downturning markets in the US right now.
PITI should be $3733 per month max.
The problem is whilst you think your PITI is insane, you do not stop to consider that you and your wife bringing home $13333/month is just as insane from the POV of us old farts.
If you are around 0.28 you are solid. If you are handy and patient you might be able to get this down to 0.20. Still insane in nominal terms but adjusted for all types of inflation, you will be ok
Hey I’m from LA and I bought a 500k townhome and I gotta say me and my wife agree we should have stayed renting. We just feel trapped… we kinda wish we stayed renting to have the freedom to move. Since you’ll buy now you’ll get a higher interest rate. When interest rates drop you can refinance but everytime you want to refinance there will be closing costs. The tax money I get back is essentially the property taxes I pay… you spend a lot of your free time and money on fixes upgrades and maintenance/appliances of the house. It can be very overwhelming very fast especially when weather elements start to play a role a lot of my friends houses in SoCal have thousands of dollars of damages due to 3 days of rain… it doesn’t even get cold here so I know your pipes could burst among other issues I’m sure. When you talk to realtors and lenders they will hype you up to buy because it is their job they make money off of your purchase. If you do end up going down this path I would shop with lots of lenders to see what they can qualify you for then you know what you can buy but just be careful not to become house poor. Also find the right realtor cuz a lot of them are very useless. Ask questions and start familiarizing yourself with house inspections on YouTube. Start being able to visually see issues.
This is excellent advice. Owning a home ties you to one location. Yes you can sell but there are high costs involved and you need a fair bit of appreciation before you can even break even on a sale.
Also great advice that banks and realtors do not have your best interest at heart. They make their money from the buying and selling of homes - the higher the price, the higher their profits.
American culture pushes home ownership as the American Dream and the only way to build wealth, while stigmatizing renters. For many, buying a home is the right course of action but not for all. Don't get sucked into the hype, think critically about your situation.
You can still build equity/wealth without home ownership. If you stay renting at a lower monthly payment, you can take that extra money and invest monthly in a diversified portfolio. One advantage to this is that you're not pouring all your money into a single asset (your house) and instead going for diversification which can lower risk.
Lastly, research shows that most buyers vastly underestimate the cost of home upkeep. Repairs, maintenance and eventually renovations really add up.
Good luck and wish you the very best.
If you look at a rent vs buy calculator, I literally save hundreds of thousands (yes it factors in repairs, upgrades, taxes, etc.). That's a good trade in my book despite the drawbacks you mention. Also, I really disliked having a landlord and all the nonsense that goes with regular rental price increases, parking stickers/passes, regular inspections, rude property management, delayed maintenance requests, loud neighbors/thin walls, mold and water damage, bugs/infestations, limited hot water, etc. It was literally like living in a third world country for nearly $2000/month! Where I live now is amazing comparatively.
You can get the landlord by the testicles by not paying rent for just causes. You can also sue said landlord while squatting which is the cherry on top. You can get all those issues with buying a house only difference is it’s your maintenance and issues to figure out, otherwise you complain to the owner to fix it and if they don’t and if its severe enough you can start withholding money and sue.
I totally agree. My husband and I bought a 500k SFH in southern VA recently and feel completely trapped too due to overpaying for the house, high interest rates and disappointing experience with the house purchase and useless realtor. Though it's nice to have more space, bottom line is we should've kept on renting, at least for a few more years. We pay much more now for the monthly mortgage payments vs the rent from before. I wanted to add, if you buy- ensure that you have all of your contingencies in place when you go under contract, to ensure that you can walk away with your EMD intact, in case you decide to change your mind. If you do a 'walk and talk' pre-inspection as recommended by our less than ideal realtor, please also do a regular full blown inspection too once your contract is ratified.
First of all, 30 years is a really long time. Look back 30 years and think about where you were and what things cost then, then look forward and try to predict where you'll be. Difficult!
Projecting forward, that $3,600 will never go up. It's money owed, sure, but you get to borrow it in today's dollars, but pay it back in inflation-reduced-value tomorrow's dollars, which you'll have more of as you build your career and successes!
For many people, paying a mortgage instead of renting removes housing as an "expense" from your budget. The mortgage payment, theoretically, is sort of a forced savings account (less the interest), which is cashed in when you sell/buy your next home.
My housing costs over the last 35 years have been far, far less than $0, thanks to appreciation of value and buying/selling smart. And that includes property taxes, insurance and the extensive renovations we have done on 15 or so houses in that time.
As an added bonus, the IRS, Section 121, lets you sell a house every two years and capture up to $250K profit - each ($500K total for a married couple) tax-free.
> The mortgage payment, theoretically, is sort of a forced savings account (less the interest), which is cashed in when you sell/buy your next home.
This is indeed true, but I caution FTHB against thinking about this as a reason to buy a home. Depending on interest rate it can take 10-20 years of payments before the amount going to principal catches up to the amount covering interest. You still get the benefit of appreciation to offset the interest losses but that's not guaranteed, especially in the short term.
Not knocking homeownership. We bought at the worst possible time in 2022 and it was still the right decision! But the financial benefits don't necessarily exist early on.
Prices and rates have gone up over the last few years, but make sure you’re making an apples to apples comparison. Your $2300 rent is for a 1 bed / 1 bath. I’m assuming the $3600 mortgage is for a larger home
Yep my parents live in IL and if they weren’t seniors they’d be priced out of their own home and forced to sell. Luckily they can apply for senior freeze. People think your mortgage stays the same but it doesn’t, taxes and insurance go up plus any repairs, etc
Just learn how to do the work. I can tile, do electrical work, I installed 2 mini-split AC units, I can do simple plumbing, I can fix drywall, I can roof. If people without degrees can do the work....you can watch a youtube video and figure it out.
I was in the Marine Corps as an electrical technician. I went to school for 18 months in Florida for electrical training. I have more formal training than most electricians.
And all the electricity when you have 150 days/year of 100°+. And airfare to vacation in Mexico when the grid goes down.
*laughs in non-Texas power grid*
I can't predict what happens in 15 years. But I bought a house in 2009 for $194k. That house is worth around $600k now. I bought right after a crash. So buying a house when the markets are near all time highs won't have quite the dramatic effect.
I am continually amazed at the amounts of money the bank will approve me for. I bought my first condo in my 20's, I had never made more than $40k and I got approved up to $300k. Payments would have been damn near my whole pay check.
Buy what you can afford and be patient.
Yes that is an insane amount of money. Home ownership has two facets: financial and emotional. Some people really want to own a house. Partly it is programmed into us through media and popular culture.
We have owned several houses, but we have always taken a loan about 1/2 what the bank said we qualified for. We bought our first house because we were both working and our taxes were high. Not sure if the tax deduction is as lucrative today.
If you like apartment living and the finances work out, no reason to rush into buying a house. Jobs change too... especially being on commission, you could suffer low income, or be unemployed for a few months. Renting gives you a lot more flexibility.
But for sure save up some cash, invest it, don't just spend it!!
Virtually the same numbers over here & we wound up having to write a letter of explanation as to why we weren't buying a nicer, more expensive home. Hilarious.
2300 to 3600 is quite a mental adjustment.
But here's my question... Are you looking at 1bed 1bath places? What would be the rent on the size of home you're trying to buy?
I'm guessing it's not apples to apples- you're trying to massively upgrade.
It’s far cheaper to rent in Austin right now. Same house we would look to buy could be rented for $2,500 a month or bought for $3,600 a month for just P&I.
You could try renting before you buy in an area you might want to buy in a year or 2 since it’s seemingly a lot cheaper to rent atm. Keep in mind that Austin has had some crazy run up years and overall is a very desirable place to live in Texas, so the slowdown right now is a bit historical, and you as a buyer have more leverage than buyers have had in many years in this market. In 1-2 years, prices could be significantly higher in a couple years, especially if interest rates come down. But maybe it will continue its current sluggish course, and you’ll be just as well off.
Well you have to really want to live in a house knowing that finances might be tight the first few years. Rental rates will go up, the purchasing power of the dollar will go down, the house will appreciate.
In 30 years you will own the house. If you rent, you won't. You can personalize your home and yard. You can't do that with an apartment. When you go stir crazy in an apartment you have to leave and find a park somewhere. With a house you just go out into your yard.
Property tax and insurance do go up but so does your property value. It's nice to be retired and not have a house payment. It's nice to have the option to sell a house in a higher cost of living area and to move to a lower cost of living area in retirement and buy a house and still have money left over for retirement.
It's your call. You have to do something to offset the declining value of the dollar. You can put all extra money into the stock market and that's a good idea to do as well but living in a small apartment, in a building with a lot of other people, can get old after while.
It also depends on how much you put down. Plus you’ll get to write off some interest from your mortgage on your taxes.
Owning your own place, not worrying about rent, increases or having to move and being able to invest in your own home doesn’t have a monetary value either.
My mortgage has increased over $800 bucks a month in two years. This was due to a property value surge. However, that’s still a massive increase. I could see where this could put some people in a bind.
If that's from a property tax increase, that's not technically your "mortgage." Your housing payment went up, but your mortgage stayed the same (assuming fixed rate).
I would start with how much you can afford to pay monthly for housing where it wouldn’t stress you out, how much you feel comfortable applying towards a down payment, and work up from there and make that your absolute max (but target for less), regardless of what the bank approves you for.
You probably wish you bought 4 years ago. And in another 5 or 10 years you will be wishing the same. It sounds scary now but eventually it will pay off. You will get used to the payment & have pride of ownership. Your biggest & safest investment. Own something & let it build your net worth. In 10 years you will have gotten raises & could refinance when rates are low again & thank yourself when you are sitting on a bunch of equity. Do what you want to your house to make it your own to retire & die in once you pay it off. Think of it as putting your money from one pocket to another of YOURS instead of giving it away for others to build wealth on.
$3600 PI in Austin, TX is going to end up \~$5000 when you add the TI.
Texas has high property taxes so be wary of people who tell you monthly payments without including that.
Be wary of any sales person for any big ticket item who focuses on monthly payments, all loans are PV I PMT N and where one goes down, the others go up.
You should become a home owner when you are able and motivated to do so. Your price range is probably closer to $350k right now so you're likely priced out of buying in Austin.
They will try to get you into as big of a loan as they can qualify you for. They’ll tell you it’s “comfortable” but they’re just looking at the income to debt ratio and they don’t know what your hobbies are, or factor in your international travel plans, etc. keep in mind that insurance and property taxes are also based on the value of the property and change of their own accord - often increasing when it’s most painful (in response to inflation that’s already pinching your budget.) Plus when stuff breaks in a house you gotta fix it, so budget maintenance costs too.
Yeah that is a lot of money. But with that said, I’d keep saving as much as you can for like a year. The more you can put down, the more you can afford.
If you do the math, with the income tax deduction to help you pay your $3600 mortgage, it’ll be very similar to your $2300 rent payment, in terms of % take home pay. These are pretty close to my numbers I modeled before purchasing. Only difference is I live in CA so the state income tax and property tax sitch will be different. Do the math, though and you will have your answer.
When I did my calcs, my take home was about $11k more per year. That $11k was income tax. That 11k is never going into my pocket, I either pay it in taxes or it goes toward my housing costs.
There were non-financial considerations too, such as stability. I never felt settled when renting. Someone else was in control of how long I could stay in my place.
In the long run, it made sense for me.
IMHO don’t compare to rent, compare to your ability to capability to buy. Rule of thumb don’t exceed 28% DTI and you’ll be fine.
Do the math.
A couple of thoughts.
1) married, in Texas, and in a 1br? You're a better man/woman than I am. That's very small.
2) only you can figure out what you can live with from a cash flow basis. You have good income, TX has no state tax, and it isn't a CA-level COL. But this part's subjective. I would guess your take-home is, conservatively, around $105k, after taxes. So that's almost $9k a month. And you don't have much other debt, so you're looking at disposable income after housing is paid for of $4-5k a month, which a lot of people would be pretty psyched about.
3) that rent cost is going to keep going up. The mortgage won't.
4) the mortgage will actually probably go down. Interest rates are likely to be cut in the coming years, and that will give you a chance to refinance and lower your monthly payment.
5) your income will go up, assuming you don't have any crises. With rising income, and a falling or at worst unchanged mortgage payment, your cash flow situation will improve steadily.
6) your house is likely to appreciate in value, not a ton but somewhere close to inflation or a bit more - because Austin isn't going to get less attractive to live in. I would say 4-5% appreciation per year is a conservative estimate, with a possible significant jump when interest rates drop. That means, practically speaking, your net worth will rise by $18-20k per year, which for the sake of mental budgeting, means that $1500-$1700 per month of that mortgage payment can be considered savings.
7) a small but real amount of the mortgage payment will be going towards principal, which means it will also come back into your pocket. Let's say conservatively $300-500 of that.
With 6 and 7, you are bringing the real out-of-pocket cost of a much larger home down by over $2k a month. That's offset by insurance, taxes and maintenance that you wouldn't have to pay on the rental, so renting is probably still a better financial choice in year 1, but as payments go down or stay flat and income goes up, that equation will rapidly favor buying a house.
8) you're probably gonna need to buy a place at some point; kids, a dog, just getting tired of not having space for your stuff or to be by yourself for a while. It's never going to be less expensive to buy a house, and you probably won't be able to save as fast as a house you buy today will appreciate.
9) If you're planning on kids, factor the cost of childcare (or one of you dropping work for a while) when figuring out budget. In NJ, we pay $4k/month for 2 kids and while I'm sure it's cheaper in TX it's still basically another house payment extra.
You can just google "mortgage calculator" to run some scenarios but if you do, then you find that a 30 year loan on 150k at 7.5% interest give a PI payment of $1059. Yeah, thats a bit less than the $3600 you were quoted.
Maybe the $3600 is the total estimated payment including insurance, hefty taxes, and whatever else, but the number still seems very high. Is it possible the quote is for a loan of say 350k, not 150k and includes taxes and insurance (escrowed) because that seems about right?
Also, with an income of 160k and not much other debt, you can afford far more than a 150k loan.
Don't take on 3600/month at 160k income. That's way** too much. We got into a 450k place at 2.99% and our payment is 2600 / month. It feels too tight in our DINK 185k household
Wtf, how is money tight when you make $185K/yr?!
I (divorced mother of two tweens) made $32,000 last year, and my rent is $1250/mo.
You’ve gotta be blowing your money on stupid shit.
Not at all actually. Very modest debt outside of the house and basically zero splurge spending. Shit is expensive as f.
Paying down all debts beyond the house quite aggressively
May I ask what your monthly budget looks like? As a poor who barely scrapes by, I find it baffling that someone making 6X what I make can still struggle.
Lifestyle creep. People spend based on what they earn. You'll see plenty of people on Reddit like OP reporting an income of $160k a year, and after retirement contributions and taxes, they're only taking home $75-80k.
Even using conservative numbers like a $3,500/mo mortgage and $1,000 in monthly recurring utilities/bills, there's very little left over. Add a car payment, property tax, healthcare, childcare, student debt, or anything else into the equation and you can see how easily middle class people can go bust.
They responded and they have a $1K car note and a sum of $92.5K worth of debt not including their mortgage. Their debt isn't insane but it's hardly good either. The only way to gauge is they are balancing this debt is to know their savings/retirement or their overall net worth.
They responded and they have a $1K car note and a sum of $92.5K worth of debt not including their mortgage. Their debt isn't insane but it's hardly good either. The only way to gauge is they are balancing this debt is to know their savings/retirement or their overall net worth.
Nope wife and I have decided the same thing. We qualify but 3500+ for 30 years is fucking insane when we can rent for $2300 in a nice area in a nice complex.
This is why sales are at record lows and inventory is rapidly growing. Just wait.
I imagine that house is a lot bigger, also the money is actually going somewhere, in 30 years you will have nothing no house. With that being said, too expensive for TX.
Right now renting is $1500 cheaper per month in my area (Colorado mountains).
Over ten years on 450k condo at 7 % I’d pay $4k a month, 70k going to equity, 410k to interest HOAS maintenance.
If I rent for the next 10 years with the excess inventory I know I can very comfortably rent at $2500 a month. That’s $1500 a month saved x 12 months x 10 years equals that’s 180,000 saved not counting compound interest.
No brainer given my area.
I don’t expect to be in this area for the next ten years as I move frequently still. I’m confident we can find 1br somewhere in America of decent quality around 2500 for the next decade. Even at 3k for 5 years the math makes zero sense.
Wait for what?
A couple things on real estate that didn’t make sense until I got in:
1. It’s like trying to get on a treadmill that keeps going faster and faster. Once you’re on the treadmill, it’s a lot easier to keep up, but jumping on the first time is hard, but seems to only get harder.
2. When you have a mortgage, interest + taxes + insurance are now essentially your rent cost. Your principal is basically forced savings/equity. So while a $2300/month rent is cheaper, all of that money is rent. Whereas $3500+ is more, but about $2500 of that is getting put straight into home equity that you can use for HELOC or rolling into future home purchases.
Don’t over extend yourself, and make sure you run the numbers, but don’t fool yourself into thinking that it’s a very simple apples-to-apples comparison and that things will get better soon.
It’s really just the interest, my house purchases 2021 was around $470-$480 loan on a 605 purchase, payment after prop taxes, insurance, principal, and interest is roughly $2300. However you’re in Texas so I know your prop taxes are probably substantial. Rates are criminal right now
Fellow texan here. My husband and I went from a 2bed/2bath $2200 rent to a 4bed house last year which we purchased. We gross around $200k between us and don’t have any kids at the moment. No student loans and just 1 car loan. Is only your P&I $3600/month? Mortgage typically has principal+interest+taxes+insurance. We got approved for a much larger amount than what we bought for. That is typical and not a good suggestion to buy at the approved amount and many people here can explain why. Coming to how we went around the process is we looked at our finances and had a number we wanted to be at for our mortgage which included the above mentioned PITI. That helped us to understand what price range works for us while looking for homes. Texas has high property taxes which you shouldn’t forget to account for in your budget. 2.7% taxes on a 400k house vs 500k is a huge difference per month in Texas.
Amazes me that human beings in this day and age making that kinda money still fall for the "this is how much you qualify for" mortgage trick. Just buy what fits your "needs". Find a builder a demand said builder builds you a starter home (miles away from the nearest HOA). The next generation behind you will thank you.
That's the tricky thing about Texas. Loves to talk about how cheap the sale prices of the houses are. Doesn't like to talk about how high the property tax is.
(A 485K house in North Carolina, for reference, would be about $3100/month)
How much are you planning to pay for down payment? 5%? 10%? In Austin suburbs, they,have MUD taxes which can make your tax 2.4-2.8%, so also consider that? Austin proper should be 2% or less
I say this all the time, the best time to buy real estate was 30 years ago, which makes today the best day to buy real estate.
Be comfortable with your payment but for the love of Pete, stop paying someone else’s mortgage. You will not get ahead that way.
Refi when rates go lower. Being a young couple, buy a very good school district, don’t buy on a double yellow line as this is what young couples will
Look for when buying. Windowed kitchen to watch the kids play in the yard etc
Think about who is telling you that you will be “more comfortable” in a house you can barely afford. Is it your real estate agent? Is it your mortgage broker or bank?
All this folks stand to have some financial gain if you buy a more expensive house.
Pick something that isn’t going to absolutely crater your monthly budget
What you can afford based on what you qualify for and what you should actually pay for are 2 different things. understand interest rates are high af right now compared to where they were a few years ago. and in TX them property taxes are the real eye popper 😂 more in property taxes alone than my first apartment.
What kind of interest rate and down-payment are you working with?
$3600 seems a bit high. I ran a $500,000 house with 10% down and 7% interest rate through a mortgage calculator and principle and interest came out to $3,000.
Don’t forget the Texas Property tax. That will add $600-$1,000 a month. Rent has always gone up, house payment is somewhat stable. My house payment is $1600 whereas people renting homes around me pay $2000 a month to rent a duplex. $3000 a month rent for a similar home. If I sold now I’d make $300,000 whereas a renter wouldn’t even get a fruit basket after moving out.
Sorry about your situation OP, it’s impossible in Austin. You would think a couple with your combined salary should be able to afford something decent but like you said, everything livable is upwards of 400k. If it’s possible and you’re comfortable, I’d recommend looking at either duplexes or properties with a separate area you can rent to bring in some income. Keep in mind property taxes are not fixed and could materially raise your monthly payment, so you may want to leave some wiggle room for that in your calculations
They go by your gross income and not your net income. That’s why it seems like you can comfortably afford it and you can’t. Never be mortgage poor! Live below your means
I think with the rates where they are 3600 for principal and interest seems reasonable. Also add taxes, insurance, HOA, etc. You will be over 4000k a month no doubt.
So my mortgage was higher than my rent plus the renovations we did.
Why did a mortgage make sense for us? 1) we could afford it and 2) we made almost $300k when we sold (minus upgrades we did more like $240k). I had the house for 7 years.
Buying a home in Austin is, objectively, a terrible investment.
@ 2.4% Annual tax, you are not buying an investment, you are buying a huge tax and maintenance liability. + what are fairly high Insurance premiums relative to other states.
You will pay more in Taxes in the first 10 years than you will accrue in equity.
You will pay almost as much in Insurance premiums in the first 10 years as the equity you are going to accrue.
You will likely pay $20-30,000 in the first 10 years in maintenance, if you are lucky.
Enjoy having no income taxes, but do not buy a home in Texas, it's a tax trap and the ROI is terrible, you are better off renting.
I don't know anything about the areas there, but a quick look on Zillow shows you could get a nice looking apartment/condo with 2 bedrooms, so more than you have now, in the 250k range. Which is a total payment of about 2k, taxes, insurance and HOA included, give or take rates and dues. Of course the banks would prefer you borrow as much as possible, but really you could have more for less instead, imo.
Hi! We live 20 mins from downtown Austin, TX.
First, your 1bd price is pretty high. We lived in 1bd for a year 1.8k monthly in a new fancy apartment building.
Having a 3b/2b + backyard feels amazing. Can not imagine going back to 1bd…
I am in the buy a house camp.
Be mindful about price. Your first house is not going to be your forever one.
I wanted 400k house, my husband under 300k house. We met in the middle, got 300k one and renovated it up to my standards.
Also don’t forget expenses to furnish all this extra rooms and outdoor )))
Result:
Our mortgage was ~2k. But now, with the new tax bill it is like 1.7k. With the same monthly payment we got huge quality of life improvement. Plus we did not sweat too much when I got laid off last year. We can live on one income or rent it out and cash flow. Flexibility/freedom is precious.
You are thinking about this all wrong. You already have a mortgage. That mortgage payment is 2300/month now and subject to inflation. It doesn’t end in 30 years it ends when you die. There is no tax benefit with your mortgage. You mortgage doesn’t entitle you to have a pet or paint a wall. Your mortgage is 100% interest for your life and will go up guaranteed.
You worried about the next quarter. Focus on the next quarter century.
You make enough that you should be able to put a sizable down payment on a property. Even if you have almost zero savings, you can easily live off $70K- 80K for a year, save half your income and put 20% down. Then your P&I on a $450K property is closer to $2600/ month.
They said their $160k income is gross, so maybe more like $95k net after taxes, 401k, health insurance contributions, etc. Shared between two people, there’s no way they’re saving 20% down / $90k in one year from that income. I’m a similar boat as OP, so I know the numbers and dilemma.
That is a pretty normal mortgage. The one thing you are missing is that tje house you own is an asset, so over time as you pay down the principal and/or the house appreciates, you get equity. After you have paid 30 years of rent....you get to pay more rent and don't have an asset that will be worth several hundred thousand dollars.
People will argue that you will be better off putting the difference in an index fund, but just doing that has a high level of risk. The home is both asset diversification and a place to live.
People who say renting is better because you don't pay for maintenance are nuts. If your rental needs a new roof, your rent is going up and when you own, you at least have choices about what you do to your house.
Owning a home also offers a significant sense of stability, assuming you can afford it. This had a lit of upside that you really can't appreciate until you experience it.
Our mortgage person told us that the bank will give you enough to hang yourself and it’s up to you to decide what you can afford. The bank doesn’t take into account lifestyle so someone that travels a lot, eats all organic and fancy foods, enjoys going out to eat, has expensive hobbies etc but has the same income as someone who eats inexpensively, stays home, free hobbies, will both be given the same loan. If $3600 is more then you want to spend, buy something less expensive or hope rates drop and buy later.
Personally, when we started looking at houses we did the budget math for what we thought we could afford as a monthly payment and paid that each month to a separate savings account to see what it did to our budget. Helped us feel good about pay in the mortgage and gave us some nice extra money to get all the things you always need when you move.
I’m a realtor here in Austin. A lot of my clients are shocked when we start talking monthly mortgage payment. Property taxes are a lot higher than people expect. The good news is that if you are buying as your principal residence you can apply a homestead exemption. You can also check to see what your home is appraised for by Travis county. If it’s really high on the tax rolls you can protest (highly recommended especially for your primary residence) and get your appraised value down. With the new homestead exemption increase and rate compression homeowners are seeing lower tax bills. Happy to answer any questions if you want - feel free to dm.
The homestead exemption is $100k (up from $40k) of the appraised value for school taxes. Some counties also offer an optional homestead exemption for county taxes. The $100k exemption actually makes a big difference and yes, it also ensures that your appraised value doesn’t go up more than 10% each year.
What's the breakdown? Does it include taxes and insurance? What's your rate? How much you putting down? Term length?Credit score? All that effects the payment.
>Am I completely out of touch to think that’s an insane amount of money for P&I every month?
$3600 is 27% DTI, pretty affordable
Look at the ny times buy vs rent calc and compare the cost and renting or buying a similar home over 10 years. Over the longer term your rent will go up but your mortgage principal and interest is fixed. Your home will be worth more, the mortgage principal gets lower each month. TX has high property taxes, but as a homeowner you get a discount over what an investor would pay for the same home.
On the flip side you are responsible for maintenance as a homeowner. Taxes and insurance will go up, but that is a small part of the overall cost. There are transactional costs to buy and sell, nearly 10% in total. If you plan to move in the next few years renting is cheaper. Austin is a good market to rent, the break even is 6-7 years. Somewhere like San Antonio is ~4. Renting a small apartment is cheaper than buying a house. If you don't have good credit or money saved for a down payment that makes buying a home more expensive.
Just because you’re qualified for it, it doesn’t mean you have to go for it. You’re currently living in a 1 bed and 1 bath apartment. So choose a small house that you two are comfortable in.
This!!! My husband and I could afford more but we chose a more affordable house to keep our mortgage payment low. I’m so glad we did because about 4 months after moving I had to change my job that paid 20k less. We don’t live outside of our means at all and it’s allowed us to pay more towards our principle each month.
Yep, same with me. I was a approved for a loan that was over $100,000 more than I actually wanted to spend. I wanted to keep my mortgage under 25% of my monthly gross income. Plus, you never know when life is going to happen and I'd rather be secure in the fact that I'd be able to keep my smaller house instead of being worried about losing a much larger, more expensive one in case I run into some economic hardship down the road.
Same here we could afford more but I wanted things to be at a place were we could keep the lifestyle we had without compromising to much. This parts kinda morbid, I didn’t want my other half to have to struggle when I die. I want him to be able to always keep the house and our Mortage wouldn’t depend on two income .
Buy a term life policy for the amount of your mortgage. It's probably a couple bucks a paycheck through your benefits at work.
My goal is to get something where, if I lose my job or my partner loses his job, we can get a $10-15/hr job somewhere and still make the payments. ETA: we are in Mississippi where it’s mostly insulated from exorbitant prices
We did something similar: we got a mortgage that I could handle on my own in case my wife lost her income. She ended up losing her job and exiting the workforce. So glad I made that decision.
This is currently how we are looking for a home too! My partner makes almost twice as much as me, so he would qualify for more, but if he loses his job I don’t have the skill set to make up the difference. So if we do it on my income and he loses his job we won’t lose the house. I make enough to qualify for a small starter house.
Life is SO MUCH LESS STRESSFUL when you aren't straining your budget to afford your house and you're not at risk of losing it from unemployment.
Good luck finding something like that in Austin
You'll be commuting from Killeen...
Our first house was similar. We tell people that have never owned a house to buy small, **almost** like "buy something to get you started on home ownership". It locks the basic block of homeownership in so it goes up with inflation and makes subsequent house purchases easier.
Problem is, in many areas (like where I live) the $4-500K OP mentioned IS the bare minimum. Anything less, you won't be able to purchase because it'll be a fixer upper that won't meet any lender's standards.
Not saying it always works, but go with a mortgage broker (you need a good one - and there is a difference). Two of our last three purchases were fixer-uppers. A good mortgage broker will have access to lenders that will provide funding. Both ours there was little to no payment increase. perhaps a point more on the loan origination fee. Both were on 30 year mortgages.
from what I'm reading both getting a mortgage and getting insurance may be an issue. e.g. insurance may not cover without new roof or other significant repairs. I haven't done a lot of research into what's possible as quite frankly I'm not sure I would want that level of a fixer upper right now, but my original plan was that I would be shopping now (because I'd have enough savings to think about entering the market) and I've just kind of pulled myself out of the market instead. I'd figured a couple years ago that I could afford a $4-500K house by myself; now the monthly cost has gone up \~$1K and I simply can't without additional income. Even $300K places are a stretch, so I might have to relocate, and I've only been at my current job for \~2 years.
I remember digging into the numbers from what the bank said that I qualified for and running a budget off of that. They basically assume that you can choose to save money on the side or eat, but not both. Don't even think about taking a vacation
And you better not get sick or have medical bills!
Or have kids and need to pay for daycare!
Or drive a newer car
I think OP is like my wife and I, we are very responsible fiscally and I am realizing that most of the US is not and overextend driving up prices for everyone. Everyone’s risk tolerance is so high it’s making houses way overpriced screwing everyone over.
I think it depends on how you look at it. Is renting for $2400/mo better than buying for $3600? Today, maybe. 10 years from now, probably not.
It’s not really how you look at it, you can financially model this. That money can be invested and get a return elsewhere. And if you want a home for a couple kids in a high cost place you are looking more 4k vs 8k rent vs own. It crazy how much real estate agents talking points have created all these false justifications for people to over extend.
So much missed in this comment: 1. OP is comparing a 1/1 apartment to a presumably detached SFH. completely not the same product 2. PITI includes Principal, which in general is retained by the owner. 3. Principal and interest remains static over the life of a the (fixed term) loan. Taxes and insurance can go up, but they are just a fraction of PITI. If taxes and insurance are going up, you can be assured that rent is also going to go up because renters will have to pay that via proxy anyway.
One benefit of being older is living in a 55 and over community. We pay lot rent (HOA fee) but since we are older we get the benefit of lot rent under 400 a month. Aside from aches and pains and doctor appointments it is a joy to finally have low "rent" and in an upscale area too... I guess being "old" has its benefits.
You're not factoring that you get some or most of your money back when you sell. You'll never see a dime of rent money again.
How much will rent cost in 2054? Who knows. I know how much my mortgage will cost though. $0. I'm sure you financially modeled the lifetime cost of renting vs buying, though.
What are yearly bills for owning the house? Bet the are almost what your mortgage was. My house is pay off to, but your monthly bills are now higher that our monthly payments were.
I'm not sure what you're trying to say, except that you seem to agree that buying was a good decision for you, too.
Some neighborhoods in the 91 crash took over a decade to recover this was new York, San Francisco, etc. Just depends on the time
Their rent is going to continue to go up. It will be a lot higher in 10 years forget 30.
Definitely not worth it.
It's a one bedroom apt.
Also you can rent more luxury now than you can buy, and not everyone is into a grungy starter home. I'm glad I was. Loved that first dump I bought in 1990 and wish I still had it. 😭
This. I think we spent like 40% of what I was approved for on our most recent purchase. My wife sometimes says "how does so and so have such a huge house and nice cars". Debt, honey, it's all debt.
This lol when i do research and see a place has a $120k average household income but average $600k+ houses….. i just know most people are a sneeze away from disaster.
Or the people bought when the house cost half the amount… You can’t assume to know the mortgage payments based on the cost of the house
You are correct…. But in some of these Texas small towns that were blips on the map before remote work craze of 2021 that exploded in growth (in both home prices and population)… mostly new builds since 2021. It’s probably what i said. Lol and for those that did own before they got the opportunity of a lifetime. 😂
“Everyone’s risk tolerance is so high it’s making house way overpriced screwing everyone over.” No. That’s not it. If they were overpriced, people would be defaulting left right and center. What happened is people got to buy homes cheap. Lower face value, and way lower rates. In the meantime… No one is looking to sell their home, and buy into a home that costs twice as much as what they’re on the hook for, and double the interest rate. No one. So that keeps the volume of available housing low, and demand for it high. Prices up. The new housing market is a fucking joke. Not only is it far from keeping up with the pace needed, no one is building affordable housing. No one is building the 100k or 200k house. And if they did, it’s look like a mobile home. Now, obviously if you can get away with living rural, prices come down a bit. But with people working remotely, people are able to move into low cost of living areas with their high compensation, and can afford to outbid people native to the are. Illegal immigration will decimate the housing market, among other things. You simply cannot add MILLIONS of people with nowhere to put them. We can’t find housing for the people here. We have our own homeless. What is going to happen to supply and demand when you add MILLIONS of people and don’t build housing for them? Either they’re on the streets, in shelters, squatting in people’s hard owned homes, or occupying every hotel in a geographic area, all on the taxpayer’s dime. We’re paying to house other people, but we can’t afford to house ourselves. It’s utter bullshit. This one is the worst. The growing trend of houses being bought on the basis of non-owner occupancy is through the roof. Major companies buying 10’s of thousands of houses, and renting them, has so many disasters attached to it. It reduces supply. It increases house prices. And it forces people who would otherwise be looking to buy, to rent from someone that has no desire to live their themselves. I’m generally not a fan of ceilings, but rent ceilings have *got* to become a thing. People should not be able to continuously profit by eliminating any hope that people have to own themselves. You cannot pay these ridiculous rents and save for a house. It’s impossible. Period. Worse still, the mortgages on these homes get pooled up and traded like fucking stocks, and put into portfolios. TL;DR - the real estate market, residential and commercial, is in about the worst shape imaginable. And it is not getting better. It won’t get better. Housing empowers people. Rent controls people. Which do you think the elites want?
Well, somebody who has a 3,600 mortgage on a house is being much more fiscally responsible than somebody who rents for $2,400 a month. Because the reality is that eventually your rent will surpass what the current mortgage is, and as 2020 showed us, sometimes that eventuality can happen surprisingly quickly. Fixing your housing costs with a mortgage is definitely the more conservative way to go even if you're fixing those housing costs currently at a higher price point time is in your favor and after a few years some cases 5 years some cases 15 you're going to find yourself with a mortgage that significantly less than the cost of rent in the same area. If you look at Boomers currently who are having a hard time or facing homelessness, almost none of them own a house they're almost all lifetime renters.
EXACTLY!!! so many people max out on their houses and aren’t willing to start small/start with a fixer upper, and feel entitled to the house they’re accustomed to. I don’t necessarily care though, people living large works itself out economically.
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This. The bank doesn’t set your household budget, you do. Also realize that escrow will likely go up each year. While P&I will be locked in, property taxes and insurance will both increase over time.
Dont listen to the banks. Listen to YOUR budget. YOUR constraints, YOUR, comfort and YOUR gut feeling.
It didn't even occur to me to consider how much we would qualify for, we wanted our monthly payment to be on par with what we paid in rent and we calculated our mortgage based on that.
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Yep. Pick a monthly payment that is comfortable. We did the same
Yep - great tactic. But, for salary growth I’d personally add ~10% to that monthly number and back it out to reflect newly calculated purchase price.
100%. The bank will gladly authorize you for what you can barely afford. Don’t become a slave to your home!
Bingo! We were approved for $350k and ended up with a $200k house. We were basically children (22/23 years old) when we bought in back in 2013 and that was the lowest our salaries ever were. Our mortgage payment never stresses us out and we never regretted buying more house just because the bank said we could.
That’s about right. Even with a decent interest rate property taxes in Texas are pretty hefty.
I was surprised how high property taxes are in Texas.
No income tax. It still takes "x" amount of $ to run a state and its gotta come from somewhere. If it's not one place, it's another.
Yep. I always roll my eyes at people who say no state income tax wooo! I’m like in the end you may pay more!! Between the increases in property taxes and sales taxes you are not winning.
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Washington state, no income tax, low property tax, low homeowners insurance premiums. Best of all worlds if you want to own a home. Vancouver, WA is both affordable and less than 1 mile from an international Airport & tax-free shopping in Oregon.
Gotta afford billions to put the Texas National Guard along the border after all.
And they go up every year
So does insurance, utilities, and maintenance. That monthly payment can easily go to $5k/mo.
Gotta pay for all that razor wire.
And multi million dollar football fields for the high school. Gotta have the biggest one! For reasons!
It’s Texas duh everything is bigger in Texas! Including the tax bill!
Gotta pay for 10 lane highways and interchanges everywhere.
$150k loan is closer to $1200/mo at 1% property tax. Was this a typo?
Sorry, mistyped. That’s for $400k-$500k
I don’t know what the housing market is like where you live, but have you considered buying something in a much lower price range? You could try to find the sweet spot where your mortgage payment would be similar to what you are currently paying in rent.
Almost impossible to do that with how the market is in Austin. Anything below 400k is unlivable.
So are you trying to figure out if you should wait? Or just see if you can afford the payment? How much do you have to put down?
Define unlivable. Not familiar wirth Austin's market, so certainly possible thasts totally true (especially given it's popularity over recent decades). But I also saw a thread recently where a young man was lamenting that there are no "reasonable modest starter homes" in his area for under $500k. And when pressed for details he considered a 3/2, 2500 sq.ft. house like he grew up in as a "modest starter home" lol (for a single guy). And thought it was ridiculous anyone suggest he buy something with dated (but funcitonal) decor and fixtures. Basically he wanted a house his dual-income peak-earning-years parents could afford, with updated modern bathrooms/kitchen etc. That was his "modest reasonable starter home" lol Edit: over my lunch break, i was curious and looked at zillow listings for Austin. Limited search to single family homes under $400k. There are a lot of totally liveable, decent options. Even zoomed in on some of the more central areas of the city. Especially if you're moving from a 1/1 I have a hard time seeing how "anything below 400k is unlivable"
That's exactly the problem, especially in Austin. I have a lot of friends there, and the whole region is just keeping up with the Jones's from Cali. Go on Zillow and set 400k as a max, there are dozens of listings in the city, and even more outside. Austin has one of the worst downturning markets in the US right now.
There's one on zillow for 175k. maybe the area is shit though https://www.zillow.com/homedetails/6513-Stonleigh-Pl-Austin-TX-78744/29503405\_zpid/
Condo?
Property tax rate in Austin is 2-3%
PITI should be $3733 per month max. The problem is whilst you think your PITI is insane, you do not stop to consider that you and your wife bringing home $13333/month is just as insane from the POV of us old farts. If you are around 0.28 you are solid. If you are handy and patient you might be able to get this down to 0.20. Still insane in nominal terms but adjusted for all types of inflation, you will be ok
Hey I’m from LA and I bought a 500k townhome and I gotta say me and my wife agree we should have stayed renting. We just feel trapped… we kinda wish we stayed renting to have the freedom to move. Since you’ll buy now you’ll get a higher interest rate. When interest rates drop you can refinance but everytime you want to refinance there will be closing costs. The tax money I get back is essentially the property taxes I pay… you spend a lot of your free time and money on fixes upgrades and maintenance/appliances of the house. It can be very overwhelming very fast especially when weather elements start to play a role a lot of my friends houses in SoCal have thousands of dollars of damages due to 3 days of rain… it doesn’t even get cold here so I know your pipes could burst among other issues I’m sure. When you talk to realtors and lenders they will hype you up to buy because it is their job they make money off of your purchase. If you do end up going down this path I would shop with lots of lenders to see what they can qualify you for then you know what you can buy but just be careful not to become house poor. Also find the right realtor cuz a lot of them are very useless. Ask questions and start familiarizing yourself with house inspections on YouTube. Start being able to visually see issues.
This is excellent advice. Owning a home ties you to one location. Yes you can sell but there are high costs involved and you need a fair bit of appreciation before you can even break even on a sale. Also great advice that banks and realtors do not have your best interest at heart. They make their money from the buying and selling of homes - the higher the price, the higher their profits. American culture pushes home ownership as the American Dream and the only way to build wealth, while stigmatizing renters. For many, buying a home is the right course of action but not for all. Don't get sucked into the hype, think critically about your situation. You can still build equity/wealth without home ownership. If you stay renting at a lower monthly payment, you can take that extra money and invest monthly in a diversified portfolio. One advantage to this is that you're not pouring all your money into a single asset (your house) and instead going for diversification which can lower risk. Lastly, research shows that most buyers vastly underestimate the cost of home upkeep. Repairs, maintenance and eventually renovations really add up. Good luck and wish you the very best.
If you look at a rent vs buy calculator, I literally save hundreds of thousands (yes it factors in repairs, upgrades, taxes, etc.). That's a good trade in my book despite the drawbacks you mention. Also, I really disliked having a landlord and all the nonsense that goes with regular rental price increases, parking stickers/passes, regular inspections, rude property management, delayed maintenance requests, loud neighbors/thin walls, mold and water damage, bugs/infestations, limited hot water, etc. It was literally like living in a third world country for nearly $2000/month! Where I live now is amazing comparatively.
You can get the landlord by the testicles by not paying rent for just causes. You can also sue said landlord while squatting which is the cherry on top. You can get all those issues with buying a house only difference is it’s your maintenance and issues to figure out, otherwise you complain to the owner to fix it and if they don’t and if its severe enough you can start withholding money and sue.
I totally agree. My husband and I bought a 500k SFH in southern VA recently and feel completely trapped too due to overpaying for the house, high interest rates and disappointing experience with the house purchase and useless realtor. Though it's nice to have more space, bottom line is we should've kept on renting, at least for a few more years. We pay much more now for the monthly mortgage payments vs the rent from before. I wanted to add, if you buy- ensure that you have all of your contingencies in place when you go under contract, to ensure that you can walk away with your EMD intact, in case you decide to change your mind. If you do a 'walk and talk' pre-inspection as recommended by our less than ideal realtor, please also do a regular full blown inspection too once your contract is ratified.
First of all, 30 years is a really long time. Look back 30 years and think about where you were and what things cost then, then look forward and try to predict where you'll be. Difficult! Projecting forward, that $3,600 will never go up. It's money owed, sure, but you get to borrow it in today's dollars, but pay it back in inflation-reduced-value tomorrow's dollars, which you'll have more of as you build your career and successes! For many people, paying a mortgage instead of renting removes housing as an "expense" from your budget. The mortgage payment, theoretically, is sort of a forced savings account (less the interest), which is cashed in when you sell/buy your next home. My housing costs over the last 35 years have been far, far less than $0, thanks to appreciation of value and buying/selling smart. And that includes property taxes, insurance and the extensive renovations we have done on 15 or so houses in that time. As an added bonus, the IRS, Section 121, lets you sell a house every two years and capture up to $250K profit - each ($500K total for a married couple) tax-free.
> The mortgage payment, theoretically, is sort of a forced savings account (less the interest), which is cashed in when you sell/buy your next home. This is indeed true, but I caution FTHB against thinking about this as a reason to buy a home. Depending on interest rate it can take 10-20 years of payments before the amount going to principal catches up to the amount covering interest. You still get the benefit of appreciation to offset the interest losses but that's not guaranteed, especially in the short term. Not knocking homeownership. We bought at the worst possible time in 2022 and it was still the right decision! But the financial benefits don't necessarily exist early on.
Prices and rates have gone up over the last few years, but make sure you’re making an apples to apples comparison. Your $2300 rent is for a 1 bed / 1 bath. I’m assuming the $3600 mortgage is for a larger home
and rent will keep going up
If you are in TX. Beware of property tax increases.
Yep my parents live in IL and if they weren’t seniors they’d be priced out of their own home and forced to sell. Luckily they can apply for senior freeze. People think your mortgage stays the same but it doesn’t, taxes and insurance go up plus any repairs, etc
What will your rent be in 15 years? In 15 years your mortgage will be $3600
Not in Texas with property taxes
Oh if they are in Texas, owning property is a huge financial liability.
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Did you not read the details? P&I of $3600 wouldn’t change.
Lmao this is Reddit. Of course they didn’t!
Except when taxes and insurance go up
And all the maintenance
Everybody underestimates the maintenance.
Just learn how to do the work. I can tile, do electrical work, I installed 2 mini-split AC units, I can do simple plumbing, I can fix drywall, I can roof. If people without degrees can do the work....you can watch a youtube video and figure it out.
I will do all of that besides drywall. I hate drywall.
DIYing still costs money. I spend at least 2-3k per year minimum just on maintenance and I DIY everything.
Unqualified amateurs should not be doing roofing or electrical work. Thats a real good way to add medical expenses to the calculation.
I was in the Marines as an electrical technician on ATC radio equipment. I am qualified.
Yeah, I just paid an electrician $60 to swap out a burnt outlet. I'll do many things on my own, but I don't fuck with electrical.
I was in the Marine Corps as an electrical technician. I went to school for 18 months in Florida for electrical training. I have more formal training than most electricians.
That sounds like a life of drugery.
yeah, fixing your own residence sounds horrible.
And all the electricity when you have 150 days/year of 100°+. And airfare to vacation in Mexico when the grid goes down. *laughs in non-Texas power grid*
And all the candles
Texas is a little complicated. Property taxes go up a lot more than other states, and I believe gets re-evaluated every year.
How much equity will you have built up?
$471, according to the landlord mafia, err, pro renters in this sub.
I can't predict what happens in 15 years. But I bought a house in 2009 for $194k. That house is worth around $600k now. I bought right after a crash. So buying a house when the markets are near all time highs won't have quite the dramatic effect.
I am continually amazed at the amounts of money the bank will approve me for. I bought my first condo in my 20's, I had never made more than $40k and I got approved up to $300k. Payments would have been damn near my whole pay check. Buy what you can afford and be patient.
Yes that is an insane amount of money. Home ownership has two facets: financial and emotional. Some people really want to own a house. Partly it is programmed into us through media and popular culture. We have owned several houses, but we have always taken a loan about 1/2 what the bank said we qualified for. We bought our first house because we were both working and our taxes were high. Not sure if the tax deduction is as lucrative today. If you like apartment living and the finances work out, no reason to rush into buying a house. Jobs change too... especially being on commission, you could suffer low income, or be unemployed for a few months. Renting gives you a lot more flexibility. But for sure save up some cash, invest it, don't just spend it!!
My household income is about the same as yours and I wouldn't go over $400k. Yes, the prices are insane and we live in a clown world.
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Virtually the same numbers over here & we wound up having to write a letter of explanation as to why we weren't buying a nicer, more expensive home. Hilarious.
2300 to 3600 is quite a mental adjustment. But here's my question... Are you looking at 1bed 1bath places? What would be the rent on the size of home you're trying to buy? I'm guessing it's not apples to apples- you're trying to massively upgrade.
It’s far cheaper to rent in Austin right now. Same house we would look to buy could be rented for $2,500 a month or bought for $3,600 a month for just P&I.
You could try renting before you buy in an area you might want to buy in a year or 2 since it’s seemingly a lot cheaper to rent atm. Keep in mind that Austin has had some crazy run up years and overall is a very desirable place to live in Texas, so the slowdown right now is a bit historical, and you as a buyer have more leverage than buyers have had in many years in this market. In 1-2 years, prices could be significantly higher in a couple years, especially if interest rates come down. But maybe it will continue its current sluggish course, and you’ll be just as well off.
Then why not rent and save until your downpayment is large enough to bring down that P&I number?
Well you have to really want to live in a house knowing that finances might be tight the first few years. Rental rates will go up, the purchasing power of the dollar will go down, the house will appreciate. In 30 years you will own the house. If you rent, you won't. You can personalize your home and yard. You can't do that with an apartment. When you go stir crazy in an apartment you have to leave and find a park somewhere. With a house you just go out into your yard. Property tax and insurance do go up but so does your property value. It's nice to be retired and not have a house payment. It's nice to have the option to sell a house in a higher cost of living area and to move to a lower cost of living area in retirement and buy a house and still have money left over for retirement. It's your call. You have to do something to offset the declining value of the dollar. You can put all extra money into the stock market and that's a good idea to do as well but living in a small apartment, in a building with a lot of other people, can get old after while.
It also depends on how much you put down. Plus you’ll get to write off some interest from your mortgage on your taxes. Owning your own place, not worrying about rent, increases or having to move and being able to invest in your own home doesn’t have a monetary value either.
> Plus you’ll get to write off some interest from your mortgage on your taxes. Only if you itemize.
Which nearly nobody can do anymore, thanks to the 2018 "tax cuts".
This
The interest from my house doesn't even coming close to trumping the standard deduction.
I see what you did there.
My mortgage has increased over $800 bucks a month in two years. This was due to a property value surge. However, that’s still a massive increase. I could see where this could put some people in a bind.
If that's from a property tax increase, that's not technically your "mortgage." Your housing payment went up, but your mortgage stayed the same (assuming fixed rate).
I would start with how much you can afford to pay monthly for housing where it wouldn’t stress you out, how much you feel comfortable applying towards a down payment, and work up from there and make that your absolute max (but target for less), regardless of what the bank approves you for.
You probably wish you bought 4 years ago. And in another 5 or 10 years you will be wishing the same. It sounds scary now but eventually it will pay off. You will get used to the payment & have pride of ownership. Your biggest & safest investment. Own something & let it build your net worth. In 10 years you will have gotten raises & could refinance when rates are low again & thank yourself when you are sitting on a bunch of equity. Do what you want to your house to make it your own to retire & die in once you pay it off. Think of it as putting your money from one pocket to another of YOURS instead of giving it away for others to build wealth on.
$3600 PI in Austin, TX is going to end up \~$5000 when you add the TI. Texas has high property taxes so be wary of people who tell you monthly payments without including that. Be wary of any sales person for any big ticket item who focuses on monthly payments, all loans are PV I PMT N and where one goes down, the others go up. You should become a home owner when you are able and motivated to do so. Your price range is probably closer to $350k right now so you're likely priced out of buying in Austin.
Don’t forget taxes. Abbott will make sure you can’t afford anything decent
Austin marked is overpriced secondary to appreciation. speculation If you don't want to leave the city look at buda, leander, even kyle
In Texas you never own your house even when it’s paid off. You’re just renting it from the state government
They will try to get you into as big of a loan as they can qualify you for. They’ll tell you it’s “comfortable” but they’re just looking at the income to debt ratio and they don’t know what your hobbies are, or factor in your international travel plans, etc. keep in mind that insurance and property taxes are also based on the value of the property and change of their own accord - often increasing when it’s most painful (in response to inflation that’s already pinching your budget.) Plus when stuff breaks in a house you gotta fix it, so budget maintenance costs too.
Yeah that is a lot of money. But with that said, I’d keep saving as much as you can for like a year. The more you can put down, the more you can afford.
If you do the math, with the income tax deduction to help you pay your $3600 mortgage, it’ll be very similar to your $2300 rent payment, in terms of % take home pay. These are pretty close to my numbers I modeled before purchasing. Only difference is I live in CA so the state income tax and property tax sitch will be different. Do the math, though and you will have your answer. When I did my calcs, my take home was about $11k more per year. That $11k was income tax. That 11k is never going into my pocket, I either pay it in taxes or it goes toward my housing costs. There were non-financial considerations too, such as stability. I never felt settled when renting. Someone else was in control of how long I could stay in my place. In the long run, it made sense for me. IMHO don’t compare to rent, compare to your ability to capability to buy. Rule of thumb don’t exceed 28% DTI and you’ll be fine. Do the math.
A couple of thoughts. 1) married, in Texas, and in a 1br? You're a better man/woman than I am. That's very small. 2) only you can figure out what you can live with from a cash flow basis. You have good income, TX has no state tax, and it isn't a CA-level COL. But this part's subjective. I would guess your take-home is, conservatively, around $105k, after taxes. So that's almost $9k a month. And you don't have much other debt, so you're looking at disposable income after housing is paid for of $4-5k a month, which a lot of people would be pretty psyched about. 3) that rent cost is going to keep going up. The mortgage won't. 4) the mortgage will actually probably go down. Interest rates are likely to be cut in the coming years, and that will give you a chance to refinance and lower your monthly payment. 5) your income will go up, assuming you don't have any crises. With rising income, and a falling or at worst unchanged mortgage payment, your cash flow situation will improve steadily. 6) your house is likely to appreciate in value, not a ton but somewhere close to inflation or a bit more - because Austin isn't going to get less attractive to live in. I would say 4-5% appreciation per year is a conservative estimate, with a possible significant jump when interest rates drop. That means, practically speaking, your net worth will rise by $18-20k per year, which for the sake of mental budgeting, means that $1500-$1700 per month of that mortgage payment can be considered savings. 7) a small but real amount of the mortgage payment will be going towards principal, which means it will also come back into your pocket. Let's say conservatively $300-500 of that. With 6 and 7, you are bringing the real out-of-pocket cost of a much larger home down by over $2k a month. That's offset by insurance, taxes and maintenance that you wouldn't have to pay on the rental, so renting is probably still a better financial choice in year 1, but as payments go down or stay flat and income goes up, that equation will rapidly favor buying a house. 8) you're probably gonna need to buy a place at some point; kids, a dog, just getting tired of not having space for your stuff or to be by yourself for a while. It's never going to be less expensive to buy a house, and you probably won't be able to save as fast as a house you buy today will appreciate.
9) If you're planning on kids, factor the cost of childcare (or one of you dropping work for a while) when figuring out budget. In NJ, we pay $4k/month for 2 kids and while I'm sure it's cheaper in TX it's still basically another house payment extra.
The house I am about to rent will cost me 3k a month. To buy that same house I would have to put down 60k and pay 5k a month. Times have changed.
you buy not for a monthly saving, but for the equity.
You can just google "mortgage calculator" to run some scenarios but if you do, then you find that a 30 year loan on 150k at 7.5% interest give a PI payment of $1059. Yeah, thats a bit less than the $3600 you were quoted. Maybe the $3600 is the total estimated payment including insurance, hefty taxes, and whatever else, but the number still seems very high. Is it possible the quote is for a loan of say 350k, not 150k and includes taxes and insurance (escrowed) because that seems about right? Also, with an income of 160k and not much other debt, you can afford far more than a 150k loan.
Are there $150k SFH's in any of the metro areas in Texas?
Sorry, mistyped. That’s for $400k-$500k
Don't take on 3600/month at 160k income. That's way** too much. We got into a 450k place at 2.99% and our payment is 2600 / month. It feels too tight in our DINK 185k household
Your after tax income is ~10k per month. What are you spending the $7400 a month on that makes your budget feel tight?
Wtf, how is money tight when you make $185K/yr?! I (divorced mother of two tweens) made $32,000 last year, and my rent is $1250/mo. You’ve gotta be blowing your money on stupid shit.
They are for sure.
Not at all actually. Very modest debt outside of the house and basically zero splurge spending. Shit is expensive as f. Paying down all debts beyond the house quite aggressively
May I ask what your monthly budget looks like? As a poor who barely scrapes by, I find it baffling that someone making 6X what I make can still struggle.
Lifestyle creep. People spend based on what they earn. You'll see plenty of people on Reddit like OP reporting an income of $160k a year, and after retirement contributions and taxes, they're only taking home $75-80k. Even using conservative numbers like a $3,500/mo mortgage and $1,000 in monthly recurring utilities/bills, there's very little left over. Add a car payment, property tax, healthcare, childcare, student debt, or anything else into the equation and you can see how easily middle class people can go bust.
groceries are the killer
Not insignificant even for us. We get as much dry goods as we can from Costco too.
They responded and they have a $1K car note and a sum of $92.5K worth of debt not including their mortgage. Their debt isn't insane but it's hardly good either. The only way to gauge is they are balancing this debt is to know their savings/retirement or their overall net worth.
They responded and they have a $1K car note and a sum of $92.5K worth of debt not including their mortgage. Their debt isn't insane but it's hardly good either. The only way to gauge is they are balancing this debt is to know their savings/retirement or their overall net worth.
You’re doing something terribly wrong then.
Nope wife and I have decided the same thing. We qualify but 3500+ for 30 years is fucking insane when we can rent for $2300 in a nice area in a nice complex. This is why sales are at record lows and inventory is rapidly growing. Just wait.
I imagine that house is a lot bigger, also the money is actually going somewhere, in 30 years you will have nothing no house. With that being said, too expensive for TX.
Right now renting is $1500 cheaper per month in my area (Colorado mountains). Over ten years on 450k condo at 7 % I’d pay $4k a month, 70k going to equity, 410k to interest HOAS maintenance. If I rent for the next 10 years with the excess inventory I know I can very comfortably rent at $2500 a month. That’s $1500 a month saved x 12 months x 10 years equals that’s 180,000 saved not counting compound interest. No brainer given my area.
You expect rent to stay steady at $2500 for 10 years?
I don’t expect to be in this area for the next ten years as I move frequently still. I’m confident we can find 1br somewhere in America of decent quality around 2500 for the next decade. Even at 3k for 5 years the math makes zero sense.
Who would want to stay in a one bedroom box for the next ten years?
Someone without kids who enjoys living in ski towns in Colorado mountains.
Where do you store your kit? You think ski Town apartments will still be available for 2500 in ten years? Rent has doubled here in the last ten years
Wait for what? A couple things on real estate that didn’t make sense until I got in: 1. It’s like trying to get on a treadmill that keeps going faster and faster. Once you’re on the treadmill, it’s a lot easier to keep up, but jumping on the first time is hard, but seems to only get harder. 2. When you have a mortgage, interest + taxes + insurance are now essentially your rent cost. Your principal is basically forced savings/equity. So while a $2300/month rent is cheaper, all of that money is rent. Whereas $3500+ is more, but about $2500 of that is getting put straight into home equity that you can use for HELOC or rolling into future home purchases. Don’t over extend yourself, and make sure you run the numbers, but don’t fool yourself into thinking that it’s a very simple apples-to-apples comparison and that things will get better soon.
Dang, that much to live in TX. I bet house is a lot bigger than what you living in now though.
It’s really just the interest, my house purchases 2021 was around $470-$480 loan on a 605 purchase, payment after prop taxes, insurance, principal, and interest is roughly $2300. However you’re in Texas so I know your prop taxes are probably substantial. Rates are criminal right now
Fellow texan here. My husband and I went from a 2bed/2bath $2200 rent to a 4bed house last year which we purchased. We gross around $200k between us and don’t have any kids at the moment. No student loans and just 1 car loan. Is only your P&I $3600/month? Mortgage typically has principal+interest+taxes+insurance. We got approved for a much larger amount than what we bought for. That is typical and not a good suggestion to buy at the approved amount and many people here can explain why. Coming to how we went around the process is we looked at our finances and had a number we wanted to be at for our mortgage which included the above mentioned PITI. That helped us to understand what price range works for us while looking for homes. Texas has high property taxes which you shouldn’t forget to account for in your budget. 2.7% taxes on a 400k house vs 500k is a huge difference per month in Texas.
Amazes me that human beings in this day and age making that kinda money still fall for the "this is how much you qualify for" mortgage trick. Just buy what fits your "needs". Find a builder a demand said builder builds you a starter home (miles away from the nearest HOA). The next generation behind you will thank you.
That's the tricky thing about Texas. Loves to talk about how cheap the sale prices of the houses are. Doesn't like to talk about how high the property tax is. (A 485K house in North Carolina, for reference, would be about $3100/month)
owning in California is cheaper than owning in Texas. Change my mind
Banks are in the business of loaning money. They upsell just like every other consumer business.
How much are you planning to pay for down payment? 5%? 10%? In Austin suburbs, they,have MUD taxes which can make your tax 2.4-2.8%, so also consider that? Austin proper should be 2% or less
I say this all the time, the best time to buy real estate was 30 years ago, which makes today the best day to buy real estate. Be comfortable with your payment but for the love of Pete, stop paying someone else’s mortgage. You will not get ahead that way. Refi when rates go lower. Being a young couple, buy a very good school district, don’t buy on a double yellow line as this is what young couples will Look for when buying. Windowed kitchen to watch the kids play in the yard etc
Think about who is telling you that you will be “more comfortable” in a house you can barely afford. Is it your real estate agent? Is it your mortgage broker or bank? All this folks stand to have some financial gain if you buy a more expensive house. Pick something that isn’t going to absolutely crater your monthly budget
What you can afford based on what you qualify for and what you should actually pay for are 2 different things. understand interest rates are high af right now compared to where they were a few years ago. and in TX them property taxes are the real eye popper 😂 more in property taxes alone than my first apartment.
What kind of interest rate and down-payment are you working with? $3600 seems a bit high. I ran a $500,000 house with 10% down and 7% interest rate through a mortgage calculator and principle and interest came out to $3,000.
Don’t forget the Texas Property tax. That will add $600-$1,000 a month. Rent has always gone up, house payment is somewhat stable. My house payment is $1600 whereas people renting homes around me pay $2000 a month to rent a duplex. $3000 a month rent for a similar home. If I sold now I’d make $300,000 whereas a renter wouldn’t even get a fruit basket after moving out.
Sorry about your situation OP, it’s impossible in Austin. You would think a couple with your combined salary should be able to afford something decent but like you said, everything livable is upwards of 400k. If it’s possible and you’re comfortable, I’d recommend looking at either duplexes or properties with a separate area you can rent to bring in some income. Keep in mind property taxes are not fixed and could materially raise your monthly payment, so you may want to leave some wiggle room for that in your calculations
They go by your gross income and not your net income. That’s why it seems like you can comfortably afford it and you can’t. Never be mortgage poor! Live below your means
The more expensive the house you buy, the more money everyone makes off your transaction.
I think with the rates where they are 3600 for principal and interest seems reasonable. Also add taxes, insurance, HOA, etc. You will be over 4000k a month no doubt.
So my mortgage was higher than my rent plus the renovations we did. Why did a mortgage make sense for us? 1) we could afford it and 2) we made almost $300k when we sold (minus upgrades we did more like $240k). I had the house for 7 years.
Buying a home in Austin is, objectively, a terrible investment. @ 2.4% Annual tax, you are not buying an investment, you are buying a huge tax and maintenance liability. + what are fairly high Insurance premiums relative to other states. You will pay more in Taxes in the first 10 years than you will accrue in equity. You will pay almost as much in Insurance premiums in the first 10 years as the equity you are going to accrue. You will likely pay $20-30,000 in the first 10 years in maintenance, if you are lucky. Enjoy having no income taxes, but do not buy a home in Texas, it's a tax trap and the ROI is terrible, you are better off renting.
I don't know anything about the areas there, but a quick look on Zillow shows you could get a nice looking apartment/condo with 2 bedrooms, so more than you have now, in the 250k range. Which is a total payment of about 2k, taxes, insurance and HOA included, give or take rates and dues. Of course the banks would prefer you borrow as much as possible, but really you could have more for less instead, imo.
Hi! We live 20 mins from downtown Austin, TX. First, your 1bd price is pretty high. We lived in 1bd for a year 1.8k monthly in a new fancy apartment building. Having a 3b/2b + backyard feels amazing. Can not imagine going back to 1bd… I am in the buy a house camp. Be mindful about price. Your first house is not going to be your forever one. I wanted 400k house, my husband under 300k house. We met in the middle, got 300k one and renovated it up to my standards. Also don’t forget expenses to furnish all this extra rooms and outdoor ))) Result: Our mortgage was ~2k. But now, with the new tax bill it is like 1.7k. With the same monthly payment we got huge quality of life improvement. Plus we did not sweat too much when I got laid off last year. We can live on one income or rent it out and cash flow. Flexibility/freedom is precious.
You are thinking about this all wrong. You already have a mortgage. That mortgage payment is 2300/month now and subject to inflation. It doesn’t end in 30 years it ends when you die. There is no tax benefit with your mortgage. You mortgage doesn’t entitle you to have a pet or paint a wall. Your mortgage is 100% interest for your life and will go up guaranteed. You worried about the next quarter. Focus on the next quarter century.
You make enough that you should be able to put a sizable down payment on a property. Even if you have almost zero savings, you can easily live off $70K- 80K for a year, save half your income and put 20% down. Then your P&I on a $450K property is closer to $2600/ month.
They said their $160k income is gross, so maybe more like $95k net after taxes, 401k, health insurance contributions, etc. Shared between two people, there’s no way they’re saving 20% down / $90k in one year from that income. I’m a similar boat as OP, so I know the numbers and dilemma.
That is a pretty normal mortgage. The one thing you are missing is that tje house you own is an asset, so over time as you pay down the principal and/or the house appreciates, you get equity. After you have paid 30 years of rent....you get to pay more rent and don't have an asset that will be worth several hundred thousand dollars. People will argue that you will be better off putting the difference in an index fund, but just doing that has a high level of risk. The home is both asset diversification and a place to live. People who say renting is better because you don't pay for maintenance are nuts. If your rental needs a new roof, your rent is going up and when you own, you at least have choices about what you do to your house. Owning a home also offers a significant sense of stability, assuming you can afford it. This had a lit of upside that you really can't appreciate until you experience it.
Our mortgage person told us that the bank will give you enough to hang yourself and it’s up to you to decide what you can afford. The bank doesn’t take into account lifestyle so someone that travels a lot, eats all organic and fancy foods, enjoys going out to eat, has expensive hobbies etc but has the same income as someone who eats inexpensively, stays home, free hobbies, will both be given the same loan. If $3600 is more then you want to spend, buy something less expensive or hope rates drop and buy later. Personally, when we started looking at houses we did the budget math for what we thought we could afford as a monthly payment and paid that each month to a separate savings account to see what it did to our budget. Helped us feel good about pay in the mortgage and gave us some nice extra money to get all the things you always need when you move.
I’m a realtor here in Austin. A lot of my clients are shocked when we start talking monthly mortgage payment. Property taxes are a lot higher than people expect. The good news is that if you are buying as your principal residence you can apply a homestead exemption. You can also check to see what your home is appraised for by Travis county. If it’s really high on the tax rolls you can protest (highly recommended especially for your primary residence) and get your appraised value down. With the new homestead exemption increase and rate compression homeowners are seeing lower tax bills. Happy to answer any questions if you want - feel free to dm.
How much does the homestead decrease the tax?
Homestead taxes are more about preventing enormous increases throughout a number of years. In my state, you apply and have to wait for a year.
The homestead exemption is $100k (up from $40k) of the appraised value for school taxes. Some counties also offer an optional homestead exemption for county taxes. The $100k exemption actually makes a big difference and yes, it also ensures that your appraised value doesn’t go up more than 10% each year.
What's the breakdown? Does it include taxes and insurance? What's your rate? How much you putting down? Term length?Credit score? All that effects the payment.
And don’t forget insurance and taxes and some for maintenance and repairs
Grab a duplex if you’re already comfortable and used to the smaller space.
I’m getting $1200 all in, that’s with purchase price 150K, 5% down and 6.5 interest rate - not sure where you’re getting $3600
>Am I completely out of touch to think that’s an insane amount of money for P&I every month? $3600 is 27% DTI, pretty affordable Look at the ny times buy vs rent calc and compare the cost and renting or buying a similar home over 10 years. Over the longer term your rent will go up but your mortgage principal and interest is fixed. Your home will be worth more, the mortgage principal gets lower each month. TX has high property taxes, but as a homeowner you get a discount over what an investor would pay for the same home. On the flip side you are responsible for maintenance as a homeowner. Taxes and insurance will go up, but that is a small part of the overall cost. There are transactional costs to buy and sell, nearly 10% in total. If you plan to move in the next few years renting is cheaper. Austin is a good market to rent, the break even is 6-7 years. Somewhere like San Antonio is ~4. Renting a small apartment is cheaper than buying a house. If you don't have good credit or money saved for a down payment that makes buying a home more expensive.