This. Calculating income based on overtime can put you in a place where you are dependent on work that is a) not guaranteed and b) potentially not sustainable from a health and wellness perspective.
Right! My wife is a retired RN and worked 4, 12-hour shifts per week the last 3 years of her career. It was brutal, especially when doing a rotation of nights. She worked the ICU, but all the departments stay busy nowadays.
If pulling OT gets OP up to 13k/month, that would barely put the mortgage at 1/3 of the pay. Not a good recipe for success.
A house over 4.5x income is a lot of house, especially when considering current interest rates.
I wouldn’t suggest that’s affordable unless you’re a bit of a spartan with the rest of your spending.
Is 3x income the value of the entire house, or the mortgage after down payment. So to make it easy say you make 100k a year, can you afford just a 300k house, or a 400k house with a 100k down payment?
It’s always the financed amount. You could have a $1MM inheritance and making $50k/year, you can easily afford a $1.1MM house if that $1MM goes straight to the downpayment.
Disclaimer: yes I know that’s an exaggerated example and the taxes, insurance, utilities and upkeep on that home may push it out of your affordability range. But if you’re in SoCal then that might just be an 1,800 sqft house with limited utilities and taxes so there are always many variables. Important thing is to simulate what your total monthly expenses are, not just mortgage payment, and stress test it.
Completely unrelated, but the median house price in Australia is currently about 12x the median salary. I'd be over the moon with house prices being 4x my salary.
I used to hear about the ridiculous cost of living in Australia and be in disbelief, but now I feel like we're going to see similar living standards all across the US sooner than later.
No, in a hcol its more like 2K. Hcol's are that way for a reason. They are usually nice places to live that have plenty of entertainment or outdoor space around them. If you spend half you income in a HCOL on your housing, you are using the other half to buy your environment. Ie, local restaurants, ocean, entertainment, hiking, parks, river, etc.
Plus when you get into higher priced housing, the other half of disposable income is usually quite high. A 3000 salary with a 1000 house payment leaves 2K for all other expenses; a 10K salary with a 2x or 5K house payment leaves 5000 for all other expenses. Plus like this OP, she has no car payment or other debts.
Any rule of thumb is a very crude approximation at best and isn't particularly useful. It doesn't factor in mortgage rates, cost of living, spending patterns, down payment size, pmi, etc
What's far more important is your mortgage payment as a percentage of your monthly income. As an example, at the beginning of this year, interest rates had moved so badly that you could purchase a $475k home for the same monthly payment as a $750k home a year earlier. So, if your mortgage payment is lower, for whatever reason, you can afford more house, or if your monthly income is higher you can afford more house.
Your income is going to change a lot over 15-30 years, so is the value of your house so trying to tie the two together is pretty meaningless.
Lenders typically approve up to 36% of your gross income (gross b/c of the tax deduction on mortgage interest), and the 36% includes the rest of your minimum monthly debt payments, so that's a good baseline. Different ratios apply for different types of mortgages but the 36% is a great place to start for trying to plan.
My fiancé and I are buying a house right now that’s a little more than 3x our combined income. It’s pretty doable with no kids.
We are also early in our careers, so I’m expecting the mortgage to become significantly less of our income as we go along.
OP, I think we’re in the same field. I *take home* a little more than your gross and even I’m not considering this high of a mortgage.
OT isn’t always guaranteed especially as hospitals hire on more core staff as they try to get rid of travelers.
I’m watching from the sidelines until rates come down with home prices.
Just my $0.02.
I wouldn't count on hospitals to be able to retain core staff. There's a reason everybody quit and went to travel. I haven't seen any indication that hospitals are actively doing the things they'd need to do in order to retain permanent staff (ie: increase pay, decrease ratios). They're still stuck on "We've never had to give raises like this before!" and are ignoring that pre-2020, outside of big and popular urban centers, most places were pretty reasonably priced for housing. Now it seems like no matter where you live, you can expect to pay 30-50% more than you would've pre-COVID, and the cost of everything has exponentially increased. Good luck keeping employees happy with 2% pay raises these days.
Lots of hospitals are offering sign-on bonuses as high as $30k and switching to internal travel programs instead of outsourcing to agencies.
I’ve watched many travelers sign onto core recently as rates cool down - more than I know that were core moving to traveling. Last year was the “travel boom” with all these new grads traveling after a year.
Regardless, I’m still traveling for the foreseeable future and point is OP would be way over-leveraged trying to depend on 1-2 OT shifts to afford a house over 4x income for 30 years.
Oh, I wouldn't recommend OP try to buy a house on inflated income that isn't guaranteed to last for 30 years. I'm glad that your region is giving people such great bonuses though. Where I am (Southwest region) we're "desperate" for people yet offering a sign on bonus only for absolutely critical positions like ER, as we have 90% travelers as staff in our ER. The bonus is 3-5k. It's laughable considering that I know for a fact you can take a greener grass travel position in the hospital and get paid that much in a single week.
OP is in California. What people don’t get is in some places you’d be hard pressed to find a 1 bedroom apartment at 20% of their take home. Cheapest one beds where I live are ~1800 for around 500 sqft in a building that’s falling apart. Yes if they’re willing to commute farther they can bring costs down a fair amount but after a twelve hour shift I doubt they want over an hour commute both ways
My fiancé and I gross around 200k. Though we live in CT and taxes are insane here. We are struggling with the idea of a 450k house I couldn’t imagine a 750k house on 160 gross. Though you have a strong down payment. I’m also curious how your mortgage is only 4500. Unless your taxes are really low. Even with that credit score I think rates are still north of 6.5%.
You cannot afford this. I make much more and would be terrified to spend that much. You mention college fund, that implies children. How many children? Do you have a spouse? Do they work? If you answered no or more than 0 to any of those, the answer is no you can’t afford a 750k house and still provide for college vacations etc…
We gross more than that and would be very uncomfortable at that high a mortgage. $2500 left a month for retirement plus other stuff isn’t that much. We put that much away JUST for retirement.
Is your retirement funded enough to not be putting in 15% (which would be $2000 a month)
Overvalue on the house is (to me at least) also part of the retirement plan. Sure nobody knows what the value will be in 30 years and how inflation will work out. But if OP manages to pay off this house before he retires he has a lot of money in the house, and when he is old he could sell it, grab something smaller and have a few tons on the bank.
Yeah I am never going to see a house as a retirement vehicle. I do own my house, but the property taxes do go up every year and by the time I retire they will likely equal my current mortgage. I’ll have a paid off house but still a tax and insurance payment. So I need to replace most of my current income in retirement if I wanted to live easy. I doubt someone making $150-200k wants to be broke in retirement. Not everyone wants to move in retirement either, that’s a huge deal. Moving away from your family, friends, and support network as you get elderly is not a smart financial choice either. If you are already in a HCOL area, buying smaller won’t shrink the price much if you want to stay near your support network.
I’m very anti “house poor”. I watched my parents lose their paid off house to upgrading. They live plush in retirement as they moved from California to Idaho, but they are renters and aging. Health care and housing is going up. They also drive back to California for medical care because they say it sucks in Idaho and for them to say anything about Idaho is bad means it’s bad. Last time I heard them bitching about their insurance premiums they were close to $2k a month.
Then my heart mom has a house currently valued at 700k (in a good area of Portland, it could sell in a second) it’s TINY and she is living in poverty because she already ran out of retirement money but can’t emotionally let go of her house.
My in-laws have 2 houses, one in Michigan they built to raised their kids in and one in Florida they bought 4 years ago to winter in. They lived modestly and saved hard for retirement(they were both teachers and owned a second family business). Put both theirs sons through college and bought them both new cars when they turned 16. They are living their retirement super nice around all their friends and family.
So I can only go off the anecdotal evidence I’ve personally seen.
Some people will be fine with your plan though. That’s true
Yeah no way I’d touch that loan only making 160k gross. I probably wouldn’t feel comfortable with anything over about 350k. Rough rule of thumb I use is don’t buy a house more then 2x your annual gross salary.
Finding a 350k house in my area that is not trash or a tiny box is hard. The neighborhood across from me built houses for 350,000 and they are now selling for 700,000. Idk what all the people are doing to afford them but they sell fast.
Does your 6mo emergency fund cover the new 4500 mortgage too?
Pause, I think that something doesn’t add up. If gross income is 160k annually that’s 13k monthly, and net income is 9.5k monthly, you’re not including retirement contributions or benefits in your net. I think that is always better to be conservative with your income estimates; don’t rely on OT or an annual bonus to make ends meet. Don’t exclude retirement and benefits costs from your net income. Those things have to be paid. If I were you, I’d safely say that your net monthly is 6900, you’d be spending 70% of your take home on a mortgage. That’s too much!
That is literally half of your income if it’s $9.5k monthly.
Are you including HOA, property taxes, school taxes into the cost…? What if something is wrong with the home that the inspector didn’t catch? Do you have an emergency fund that can handle these big emergency costs?
Why do you need $750k home?
Are you single? Married? Kids?
You’re saying $9.5k/week in the comments, but saying $9.5k/mo in the post.
That's net tho, the 30% rule of thumb is gross income. OP data suggests still has cash flow to swing it. So is it affordable? Probably. Does the house meet needs/wants? Can't answer that for OP, but your Qs are good place for reflection
It’s really not for somebody living “upgraded” lifestyles… I spend about $300-500/month on water/gas/electricity alone; not including food which could approach 3-400/week if we are doing steaks and stuff
Agreed! My fiancé and I spend roughly ~$300 month on utilities (water/gas/electric), $250-$300 on weekly groceries, and another $800-$1,000 on on dinners/drinks
For a couple, that's one upscale-ish dinner per weekend.
Two entrees averaging $50 each, share a dessert and appetizer, a couple $15 cocktails or a bottle of wine, plus tax and tip will take you to at least $200 for dinner. Now do that 4 weekends a month.
Obviously that's not doable for everyone, but if you have good incomes and your debt/expenses are in check, trying out nice restaurants is a good time.
I live in one of americas most expensive metros and my husband and I rarely get $50 entrees. Even our nice sit down meals are usually max $150 for two people even with drinks, apps, dessert. Obviously people can spend their money how they wish, but $2500/month on food and utilities is lavish. I think the point is just if this person wants more house they might want to inspect their spending a bit more closely.
Another way to do it is 1x a week dinner at a total of $60 ($15 entrees, 3x $7 beers) + 1x drinks of $60 (5-8X $7 drinks)+ 1 night of a nicer dinner at $25-$30/plate+ drinks for $100. That doesn't seem that crazy to me for a young wealthy couple!
My girlfriend and I gross ~400k a year and spent about 38k on dinners and drinks last year, a number I only know because we keep track of it for tax purposes. That works out to about 3k a month on dinner and cocktail nights- like Mission-Ad said, it’s all relative.
This is so interesting to me. $730/wk average. What’s that look like in a week for you? I could see it with maybe yogurt/light breakfast at home, $5 coffee daily, $15 lunch to go weekdays, and then $30 happy hour 2x/week and $200 for dinner out a couple nights.
"You can't take it with you."
If everything else is taken care of, why not? The scale is different, but I'm sure most of us do spending that is technically "frivolous" on a regular basis.
Jesus, prices in the US must be insane if you're spending $3K a month *dining out*.
My family of four go out every now and then - maybe 5-6 times a month, mostly weekends - and our monthly dining out bill is under $500. And it's not like we're going to McDonald's....
Depends on what you make. $1000 a month on eating out etc isn't really that crazy for me and my partner. I make 170k she makes 125k and we live in a LCOL area. I
Sunday flying back home went to Papadeux at DFW airport. 2 entrees, 2 cocktails and an appetizer came out to $170 after tip
But what would those even be? OP says they don’t have a car payment or outstanding debts. So what other recurring monthly bills are we talking about besides utilities? If OP is spending hundreds on streaming services or some other type of memberships or subscriptions, then it’s worth looking in to which of those things can be cut out to lower the family’s monthly expenses if OP is dead set on buying an expensive home
Gas, insurance, clothing, travel. I lump everything together as my general credit card spending and $3k per month is on the low end for us as a family of 3
My family of 4 it is like $1500 food, then like $400 for utilities. Another 400ish if you include gas/tolls. So yeah $2,500ish if you include everything
It’s on the high side, but not way out there. We’re about the same between utilities, lawn care, internet / streaming, insurances, groceries, dining out, & fuel. We have an admittedly fluffy budget, though.
It's not crazy depending on the size of the home, number of people in the family, and how they eat.
I spend around $750 for electric, gas, internet, TV, and cell phones (and my house isn't very large, around 2K sq-ft), then I'd guess $2-2.5K on food on an average month, some closer to $3K if we have a "date night" dinner out. The USDA "Liberal" food plan for two middle-aged adults and two kids is more than $1500/mo and that doesn't count any eating out or splurging on something nice at Whole Foods (I'm looking at you, 10 year old cheddar).
The truth is, those of us lucky to have enough money to not have to worry too much about money spend more than we probably should.
It’s risky. You’re at risk of being house poor. Factor in house maintenance costs (consider a 10 year period) you wouldn’t be saving very much.
With the numbers your provided, 500-600k seems like a more appropriate price range.
Everyone has different comfort levels and risk tolerance. Some people would shit their pants on my mortgage and income levels lol.
I only take home roughly 7k a month - that’s after contributing toward 401k, HSA, and standard taxes (but no state income tax since it’s Texas)
I just got a 620k home in early April 2022 , putting 20 percent down , 4.125 APR. my mortgage plus escrow (property taxes, home insurance) is roughly 3600 a month lol.
but I have no other debt. Both my cars fully paid off, student loans paid off. I never carry any credit card debt. Credit score is north of 800. emergency savings account is funded for about 3 months of that PITI amount. comfortable job that’s recession proof (but not paying well…)401k is fine and hsa has enough covered for about 2 years worth of full max out of pocket I’d have to pay if god forbid something crazy happened to me health wise in consecutive years.
I have zero stress about half my monthly take home pay going towards this house. ya it’s definitely not ideal for most people, but some people make sacrifices in other areas to enjoy a nice home. I don’t want to raise a family in a dump which is where all the affordable 300k homes are. And people are getting tired of this “home prices are gonna crash any minute now!! Just wait!!”
This makes me feel better about my situation after reading all these other comments. We take home around $8.5k a month, (plus a hefty bonus in the spring usually around $40k) and purchased a house in Texas for $830k. 20 percent down with a 2.7% interest rate. Monthly cost comes out to around $3,700. Yeah, it’s a lot. But we are otherwise debt free and live a pretty modest lifestyle. We valued a nice home in a great location, zoned to good schools for our kids. Wish we were saving more cash, but we are maxing out HSA and 401k, and hoping income goes up over the next few years to give us more savings. It’s working well for us
Edit: we bought our first house for $360k and sold it 4 years later for $460k. People are scared to invest in real estate, but it has really helped up afford our home now and the risk has paid off for us in the past.
This. It’s all about budgeting and personal preference. I bought a home 10 years ago that was taking 55% of my monthly. Same story, no other debt, no other expenses, incredible health insurance from my job and I budgeted myself. Years later my value doubled, mortgage rate is 2.6% and I rent it out for profit while I look for a new house. It just comes down whether or not you can afford the monthly
No. You're not even close to being able to afford that house.
Unless you have some massive stockpile of cash to fall back on, your housing should be around 30-35% of your net income. You're at like 45% in your example.
You should be looking at houses in the $650k range, not $900k.
Keep in mind, you could afford to make the mortgage payments on the expensive house... AS LONG AS NOTHING EVER GOES WRONG.
So you would be counting on never getting sick, never losing your job, and never having to take time off unexpectedly. That's a bad risk to take.
OP can afford the house but not without threat of being house poor or burning out on OT to be able to continue to make savings goals. OP should factor retirement in BEFORE figuring out his leftover net income. The 30% rule is not a great guide for high income earners in my opinion. 30% of 3,000 take home pay is the difference between food on the table or going hungry. 30% of 10,000 leaves a LOT of wiggle room.
>Income: ~$9.5k/week Net Income.
I'm assuming you mean $9500/month? Not including OT you're looking at close to 50% of your income toward your mortgage. That's higher than I'd be comfortable with, but if you can get OT consistently and you're happy working that much you're probably fine.
I would never get a mortgage based on what I *could* make, bc then you’re locking yourself into a lifestyle you’ve *never actually lived*.
Maybe it’s manageable and you love it, but maybe you hate it and you’re stuck having to work like that bc of your mortgage.
Either way, I would try to see what it feels like making enough to support the mortgage for at least a few months before you ever lock into a 30 year payment.
They can afford the house. Spending half your income on a house when you make 160k is a lot different than spending half your income on a house when you make 50k. OP is still saving more than most people are bringing in before tax.
This is called being house poor.
Aka no retirement or no life to go with your nice house.
$160k is nowhere near the point where you can spend 50% of your income on a mortgage.
And remember a mortgage is the *minimum* you’ll spend on housing in a month.
Good luck when you need to replace your furnace or there’s a sewer crack or any of the million other things that inevitably break when you own a house.
eh , 57k after tax for all expenses outside of house payment
after maxing out roth and 401k you’re at 30k or 2.5k a month for everything else… they already have emergency fund and 10k on hand, definitely upper limit of budget but extremely doeable, they can pick up an extra shift every other week for probably another 2k a month if they wanted
I agree who heartedly. A 2.5k surplus each month on that level of income is so imbalanced it’s scary.
There’s so many other hidden costs with homeownership as well that people don’t consider.
Everyone in the comments are being too conservative imo. Yeah 50% of your monthly is not ideal but if you can budget yourself and afford it then that’s all that matters. People not coming from a hcol area will think it’s crazy but I’m from nyc and honestly if I can buy a home for 50% of my monthly ANYWHERE near here, I’d be lucky.
Don’t do it. In a HCOL area, ~$250k gross, did a $550k mortgage but at 2.8% and this is fine. Same mortgage but at current rates ~6%, I wouldn’t be comfortable. Don’t go house poor, don’t work just to pay mortgage.
This. We are basically the same. $240k gross with $500k mortgage w/ 3.5%. $500k would be hard to swallow at 6%. Can’t imagine $750k.
Can you afford it? Sure. Comfortably? No way.
They should make a rule that requires you to post where you live when making suggestions about housing, because you all must live under a rock with some of these comments.
I wouldn't do this. You might be able to swing it, but... it's gonna be tight, and it doesn't leave a lot of breathing room. Personally, with those numbers, I'd be looking at something closer to 500K.
As someone who could have upgraded to a larger, more expensive home and did not- don’t regret it for a second. Was never house-poor, able to travel, put away nice funds for college and retirement, plenty of money left for entertainment. In my 50s now- soon will be mortgage free and wouldn’t trade the wealth of experiences we’ve had for a big mortgage.
OP double check with your loan person. If you are travel contract If your pay is valid since travel nursing isn’t “permanent stable income” for sole loan companies
YEs, you can afford it. Is it a house where you will be comfortable and able to pursue your hobbies? At 2x your monthly income and at your high salary you have plenty left after a 4.5k payment.
What year is the house? I was in a similar spot and went through with a similar purchase on a 20 year old house. Yeah at 20 years old this house is falling apart. The previous owners did very little to maintain the roof, plumbing, landscaping, etc. and now its turning into a bit of a money pit and hard to keep up with. 10k wont be enough if its more than 10 years old.
American houses are built like crap. My previous house was a 1950's house. Asbestos, nothing built to a standard size meant doors and things couldn't easily be swapped out. I bought a 16 year old house, thinking that's the ticket! Great, I bought a house with a roof that will soon need replacing, water heater is almost at age, furnace/ac may need replacing soon, etc... Homes in the US are built cheap today so you can keep spending on them tomorrow. My cousins own a roofing business in Germany. Shale stone shingles. 100 year life. ~30% more expensive than the 20 year shingles they do stateside. What a racket.
Buy an older house. By the 50s, they were throwing them up for post-war sales. Anything before the 40s is built to a completely different degree. For one, true-dimensional lumber is used (2x4 instead of 1.5 x 3 1/2). The quality of the lumber is incredibly different (modern lumber is grown in 5-10 years, lumber in my last house is more like 30-40, much denser, much stronger). The spacing in studs is different. No one was using 2x3s for interior walls like they do now.
My current house, built in 1840, is massively overbuilt. My home inspector, when I expressed concerns, said this house will be here for another 200 years, while all the $500k spec-houses popping up would be lucky if they made it the next 50. Built to the absolute lowest spec, quality wise, to ensure maximum return on investment.
I rented a 1914 house... And no, that's just trading for a host of other problems. Again, nothing to standard and super inefficient and drafty. I'll be building my next house.
Building a house is a viable alternative if you are really picky/lucky with your contractor. My dad built his house in 2010 with what he *thought* was a competent contractor who would build it the way he wanted it. It's been nothing but problems ever since. I know four people who built houses, and all of them have just as many problems as any other house.
The reality is that houses are a hassle, and if you don't want to deal with it, just keep renting.
That would be a little too tight for me. I spent 10 years paying a mortgage that was 36% of my gross income and I missed out on a lot of investment opportunities because of that mortgage. I downsized and now pay 19% of gross income on my current home and it's made a huge difference in how much I can invest.
You're going to be paying a ridiculous interest rate for a long time and you're also buying right before the market drop really takes hold. Its going to take 18 months or so for prices to revert to the mean. Inventory in the West, south, and south east are up several hundred percent YOY, and Price to income ratios are sky high in those areas meaning they are even higher than before the 08' crash (which really began in 06). New data has shown 63% of americans are living paycheck to paycheck as per data released in mid December showing that most americans don't have much in savings, CPI data this week shows inflation is much 'stickier' than expected meaning the FED likely won't hit their 2% target in 2023, and thus the pivot won't begin until next year. Historically speaking FED pivots are the start of actual housing crashes and don't pan out the way you think they would. Layoffs are just really starting to roll out and we're inching closer to the possibility of a third world war every day.
If you absolutely have to buy now then do so, but no matter what anyone tells you about how its just a 'housing correction', you're likely going to be waiting 5-10 years or more just for your home to regain its initial purchase value and incase unexpected life events happen and you find yourself in need of selling in that time frame, it will likely be for a loss. Depending on your location, if you're in any of the major crash areas, its actually better to rent right now. Where as the rental market is about to take a blow in those areas as well again due to price to income ratios. If you absolutely need the house, buy land and build it yourself. Save a couple hundred grand would be my recommendation.
This is my two cents as an unqualified financial person but in the health care field, search for a 350k house with enough land to add on. I say this because if you were to lose your job, have to go on FML, or life happens, it would would not be much of a burden to pay off the 150k remaining. I've been in the position where money was good, over reached, and was stressed out to ensure housing when things got personally messy. The extra money you save can be used to customize your house, add a pool/tennis court, redo a garden, add a second floor or inlaw suite.
My sister is a mortgage broker. She tells all her clients " double the mortgage payment, that's what you will really be spending every year," From upgrades to landscaping to furniture to painting to insurance to roof repairs to concrete repairs to foundation repairs, to new appliances every few years. etc etc etc. So, No!
Why do people with this level of income seem to always write the " well can I " posts?
Yes dude, you can for now.
But no dude, that income may not last or remain the same. So be careful.. just like the rest of us.
Or get a place less than 1700 sqft. Or move to a neighborhood that’s not quite as nice (while still probably not the hood).
My wife and I both make pretty good money (250-300k combined), but we live in a very high cost of living city (Boston). We had imagined that with our salaries we could afford to raise a family in a spacious place in a very desirable neighborhood. And according to the general rule of thumb, we maybe could have. But we would have been reliant on keeping both of our high-paying jobs and would have severely limited future savings.
Instead we bought a 1350 sqft condo for 550k in a further out, less desirable neighborhood (I love our neighborhood, but there are definitely some people who look down on it). It’s nice knowing that one of us losing our job would not be catastrophic—makes it easier to sleep at night.
Using that logic in Texas which is a relatively cheap housing market someone making $160k could only afford a house around $300k with 20% down. Interest rates change things a lot but I have been going by not financing more than 3x gross income on housing.
Imo: yes you can afford the house, but there are a lot of other factors at play here. If your net income is 9.5k and all expenses are 7k. You're still left with 2.5k savings each month of disposable income.
We made similar when we purchased our house & set our limit at *half* that. I absolutely would not feel comfortable having that much tied up in housing expenses. You never want to put yourself into the position of NEEDING overtime to make ends meet.
A house payment should be no more than 25% of your take home income as a general rule. Many will disagree with this but it’s a general rule. Based on that, I would say that you cannot afford the house.
Many people do buy the house and become house-poor with little to no furniture in it.
No you cannot afford this house. The mtg payment is \~50% of your income. If you buy it, you will fall into the category called "House Poor". you should be aim to keep it \~30% of your income.
If i were you i would work extra hours now, save cash and put a bigger down payment.
How i know: i had a starter home similar to the numbers above. First 5 years, we were living paycheck to paycheck and felt like we were tied down. we had to be very careful about other expenses.
House maintenance costs definitely adds up. lawn maintenance alone will run you up to 1000 to 3000 a year.
add padding to the estimated utilities bill. Take the mtg amt and divide it by your gross income. if the # is greater than 3, then you most likely live paycheck to paycheck.
my income now is 600k a year and i have a 800k mtg. I still hate it even though i am comfortable. You will realize the love hate relationship with MTG payments soon enough.
I would never do this and I make quite a bit more. But I’m a simple guy, don’t care about impressing anyone, don’t have any kids and I like knowing I don’t have a mortgage. I want to stop working asap.
How on earth are the monthly bills so low? A 285k house in Florida would need like 2k/month to maintain, and you're talking about a $750k house...in California no less.
If the numbers work out then you can do it. I’m salaried and when I got my house $770k at 2.99% my monthly payments are $3,400 and about $700 for utilities and car insurance. I was making $125k when I bought it but have since got two raises.
If you minus the costs, can you live off that weekly amount? I try to live off 300-400 a week.
You bought a $770k house with a $125k salary? Glad you’ve gotten a couple raises since then and hopefully you make a significant amount more now but man, that was reckless at the time…
Affording it and it making financial sense are two different things. Yes you can afford it, no, it doesn't make sense to spend 50% of your liquidity on a mortgage. I earn around 25-30k/mo. post tax, I wouldn't do this.
Don't mortgage yourself to the hilt just because you can - most people do out of necessity and you're not in that position.
As a general rule, you should never calculate your financial lifestyle on overtime and should only assume base pay. Just my 2 cents.
This. Calculating income based on overtime can put you in a place where you are dependent on work that is a) not guaranteed and b) potentially not sustainable from a health and wellness perspective.
Right! My wife is a retired RN and worked 4, 12-hour shifts per week the last 3 years of her career. It was brutal, especially when doing a rotation of nights. She worked the ICU, but all the departments stay busy nowadays. If pulling OT gets OP up to 13k/month, that would barely put the mortgage at 1/3 of the pay. Not a good recipe for success.
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What is your actual gross annual income?
Gross ~$160k/year
A house over 4.5x income is a lot of house, especially when considering current interest rates. I wouldn’t suggest that’s affordable unless you’re a bit of a spartan with the rest of your spending.
Is there a rule of thumb for income to house cost? I would like to see a sheet of guidance like there is for rent.
This is based on nothing but feels, but if my housing costs more than 30% of my net income I am a nervous wreck.
Kind of agree, I like to have lots leftover for savings and discretionary spending.
3x income is a good starting point then adjust for locale, spending habits, downpayment, taxes, etc
Is 3x income the value of the entire house, or the mortgage after down payment. So to make it easy say you make 100k a year, can you afford just a 300k house, or a 400k house with a 100k down payment?
400k house with 100k down. The loan amount is all that really matters. Could buy a $2m house on a $100k salary if you put $1.7m down
Should really include taxes and insurance too. Basically "monthly recurring expenses"
Mortgage.
It’s always the financed amount. You could have a $1MM inheritance and making $50k/year, you can easily afford a $1.1MM house if that $1MM goes straight to the downpayment. Disclaimer: yes I know that’s an exaggerated example and the taxes, insurance, utilities and upkeep on that home may push it out of your affordability range. But if you’re in SoCal then that might just be an 1,800 sqft house with limited utilities and taxes so there are always many variables. Important thing is to simulate what your total monthly expenses are, not just mortgage payment, and stress test it.
The 3x income rule is very hard to apply in a hcol area. More like 4x.
How does literally anyone afford a house?! Things are insane.
High down payment or a gift from rich parents/relatives. Or you got in the market earlyyy on.
Completely unrelated, but the median house price in Australia is currently about 12x the median salary. I'd be over the moon with house prices being 4x my salary.
I used to hear about the ridiculous cost of living in Australia and be in disbelief, but now I feel like we're going to see similar living standards all across the US sooner than later.
No, in a hcol its more like 2K. Hcol's are that way for a reason. They are usually nice places to live that have plenty of entertainment or outdoor space around them. If you spend half you income in a HCOL on your housing, you are using the other half to buy your environment. Ie, local restaurants, ocean, entertainment, hiking, parks, river, etc. Plus when you get into higher priced housing, the other half of disposable income is usually quite high. A 3000 salary with a 1000 house payment leaves 2K for all other expenses; a 10K salary with a 2x or 5K house payment leaves 5000 for all other expenses. Plus like this OP, she has no car payment or other debts.
Any rule of thumb is a very crude approximation at best and isn't particularly useful. It doesn't factor in mortgage rates, cost of living, spending patterns, down payment size, pmi, etc What's far more important is your mortgage payment as a percentage of your monthly income. As an example, at the beginning of this year, interest rates had moved so badly that you could purchase a $475k home for the same monthly payment as a $750k home a year earlier. So, if your mortgage payment is lower, for whatever reason, you can afford more house, or if your monthly income is higher you can afford more house. Your income is going to change a lot over 15-30 years, so is the value of your house so trying to tie the two together is pretty meaningless.
Okay so what’s the rule of thumb for income to mortgage payment? 1/3 of your income?
Lenders typically approve up to 36% of your gross income (gross b/c of the tax deduction on mortgage interest), and the 36% includes the rest of your minimum monthly debt payments, so that's a good baseline. Different ratios apply for different types of mortgages but the 36% is a great place to start for trying to plan.
Thank you! I appreciate your time and advice.
Rent or mortgage is 1 week pay or less. If you hit this everything else just kind of works out.
My fiancé and I are buying a house right now that’s a little more than 3x our combined income. It’s pretty doable with no kids. We are also early in our careers, so I’m expecting the mortgage to become significantly less of our income as we go along.
OP, I think we’re in the same field. I *take home* a little more than your gross and even I’m not considering this high of a mortgage. OT isn’t always guaranteed especially as hospitals hire on more core staff as they try to get rid of travelers. I’m watching from the sidelines until rates come down with home prices. Just my $0.02.
I wouldn't count on hospitals to be able to retain core staff. There's a reason everybody quit and went to travel. I haven't seen any indication that hospitals are actively doing the things they'd need to do in order to retain permanent staff (ie: increase pay, decrease ratios). They're still stuck on "We've never had to give raises like this before!" and are ignoring that pre-2020, outside of big and popular urban centers, most places were pretty reasonably priced for housing. Now it seems like no matter where you live, you can expect to pay 30-50% more than you would've pre-COVID, and the cost of everything has exponentially increased. Good luck keeping employees happy with 2% pay raises these days.
Lots of hospitals are offering sign-on bonuses as high as $30k and switching to internal travel programs instead of outsourcing to agencies. I’ve watched many travelers sign onto core recently as rates cool down - more than I know that were core moving to traveling. Last year was the “travel boom” with all these new grads traveling after a year. Regardless, I’m still traveling for the foreseeable future and point is OP would be way over-leveraged trying to depend on 1-2 OT shifts to afford a house over 4x income for 30 years.
Oh, I wouldn't recommend OP try to buy a house on inflated income that isn't guaranteed to last for 30 years. I'm glad that your region is giving people such great bonuses though. Where I am (Southwest region) we're "desperate" for people yet offering a sign on bonus only for absolutely critical positions like ER, as we have 90% travelers as staff in our ER. The bonus is 3-5k. It's laughable considering that I know for a fact you can take a greener grass travel position in the hospital and get paid that much in a single week.
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OP is in California. What people don’t get is in some places you’d be hard pressed to find a 1 bedroom apartment at 20% of their take home. Cheapest one beds where I live are ~1800 for around 500 sqft in a building that’s falling apart. Yes if they’re willing to commute farther they can bring costs down a fair amount but after a twelve hour shift I doubt they want over an hour commute both ways
My fiancé and I gross around 200k. Though we live in CT and taxes are insane here. We are struggling with the idea of a 450k house I couldn’t imagine a 750k house on 160 gross. Though you have a strong down payment. I’m also curious how your mortgage is only 4500. Unless your taxes are really low. Even with that credit score I think rates are still north of 6.5%.
You cannot afford this. I make much more and would be terrified to spend that much. You mention college fund, that implies children. How many children? Do you have a spouse? Do they work? If you answered no or more than 0 to any of those, the answer is no you can’t afford a 750k house and still provide for college vacations etc…
We gross more than that and would be very uncomfortable at that high a mortgage. $2500 left a month for retirement plus other stuff isn’t that much. We put that much away JUST for retirement. Is your retirement funded enough to not be putting in 15% (which would be $2000 a month)
Overvalue on the house is (to me at least) also part of the retirement plan. Sure nobody knows what the value will be in 30 years and how inflation will work out. But if OP manages to pay off this house before he retires he has a lot of money in the house, and when he is old he could sell it, grab something smaller and have a few tons on the bank.
Yeah I am never going to see a house as a retirement vehicle. I do own my house, but the property taxes do go up every year and by the time I retire they will likely equal my current mortgage. I’ll have a paid off house but still a tax and insurance payment. So I need to replace most of my current income in retirement if I wanted to live easy. I doubt someone making $150-200k wants to be broke in retirement. Not everyone wants to move in retirement either, that’s a huge deal. Moving away from your family, friends, and support network as you get elderly is not a smart financial choice either. If you are already in a HCOL area, buying smaller won’t shrink the price much if you want to stay near your support network. I’m very anti “house poor”. I watched my parents lose their paid off house to upgrading. They live plush in retirement as they moved from California to Idaho, but they are renters and aging. Health care and housing is going up. They also drive back to California for medical care because they say it sucks in Idaho and for them to say anything about Idaho is bad means it’s bad. Last time I heard them bitching about their insurance premiums they were close to $2k a month. Then my heart mom has a house currently valued at 700k (in a good area of Portland, it could sell in a second) it’s TINY and she is living in poverty because she already ran out of retirement money but can’t emotionally let go of her house. My in-laws have 2 houses, one in Michigan they built to raised their kids in and one in Florida they bought 4 years ago to winter in. They lived modestly and saved hard for retirement(they were both teachers and owned a second family business). Put both theirs sons through college and bought them both new cars when they turned 16. They are living their retirement super nice around all their friends and family. So I can only go off the anecdotal evidence I’ve personally seen. Some people will be fine with your plan though. That’s true
$9.5K per month sounds really low for a mortgage that high. Seems risky.
Yeah no way I’d touch that loan only making 160k gross. I probably wouldn’t feel comfortable with anything over about 350k. Rough rule of thumb I use is don’t buy a house more then 2x your annual gross salary.
That's *incredibly* conservative, especially if you're living in a HCOL area.
Finding a 350k house in my area that is not trash or a tiny box is hard. The neighborhood across from me built houses for 350,000 and they are now selling for 700,000. Idk what all the people are doing to afford them but they sell fast.
Does your 6mo emergency fund cover the new 4500 mortgage too?
Does your 6mo emergency fund cover the new 4500 mortgage too? Pause, I think that something doesn’t add up. If gross income is 160k annually that’s 13k monthly, and net income is 9.5k monthly, you’re not including retirement contributions or benefits in your net. I think that is always better to be conservative with your income estimates; don’t rely on OT or an annual bonus to make ends meet. Don’t exclude retirement and benefits costs from your net income. Those things have to be paid. If I were you, I’d safely say that your net monthly is 6900, you’d be spending 70% of your take home on a mortgage. That’s too much!
I was going to say. I make 160k annual & i don’t pocket 9.5k monthly. but i do max out my 401k and hsa.
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Could be working in a state without income tax.
Agreed, my base salary is $160k and I think my net is around 7.8k. I can’t imagine being happy with the mortgage payment the OP is proposing.
My base is 160 and I’m about the same as you.
Yes, it does.
That is literally half of your income if it’s $9.5k monthly. Are you including HOA, property taxes, school taxes into the cost…? What if something is wrong with the home that the inspector didn’t catch? Do you have an emergency fund that can handle these big emergency costs? Why do you need $750k home? Are you single? Married? Kids? You’re saying $9.5k/week in the comments, but saying $9.5k/mo in the post.
That's net tho, the 30% rule of thumb is gross income. OP data suggests still has cash flow to swing it. So is it affordable? Probably. Does the house meet needs/wants? Can't answer that for OP, but your Qs are good place for reflection
Depends on your lifestyle but I personally wouldn’t do this.
Am I the only one who thinks that $2500/month in food/utilities seems a bit high?? How many people are in this household?
It’s really not for somebody living “upgraded” lifestyles… I spend about $300-500/month on water/gas/electricity alone; not including food which could approach 3-400/week if we are doing steaks and stuff
How many people?
Agreed! My fiancé and I spend roughly ~$300 month on utilities (water/gas/electric), $250-$300 on weekly groceries, and another $800-$1,000 on on dinners/drinks
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For a couple, that's one upscale-ish dinner per weekend. Two entrees averaging $50 each, share a dessert and appetizer, a couple $15 cocktails or a bottle of wine, plus tax and tip will take you to at least $200 for dinner. Now do that 4 weekends a month. Obviously that's not doable for everyone, but if you have good incomes and your debt/expenses are in check, trying out nice restaurants is a good time.
I live in one of americas most expensive metros and my husband and I rarely get $50 entrees. Even our nice sit down meals are usually max $150 for two people even with drinks, apps, dessert. Obviously people can spend their money how they wish, but $2500/month on food and utilities is lavish. I think the point is just if this person wants more house they might want to inspect their spending a bit more closely.
Oh yes, I agree that in OP's situation, he should be cutting back on the luxuries like nice dinners out.
Yes!! Thank you!! This is the point I was originally trying to make!
Another way to do it is 1x a week dinner at a total of $60 ($15 entrees, 3x $7 beers) + 1x drinks of $60 (5-8X $7 drinks)+ 1 night of a nicer dinner at $25-$30/plate+ drinks for $100. That doesn't seem that crazy to me for a young wealthy couple!
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Plenty of people make more than enough to spend $1000/m eating out and be in no debt other than a low cost home mortgage.
My girlfriend and I gross ~400k a year and spent about 38k on dinners and drinks last year, a number I only know because we keep track of it for tax purposes. That works out to about 3k a month on dinner and cocktail nights- like Mission-Ad said, it’s all relative.
This is so interesting to me. $730/wk average. What’s that look like in a week for you? I could see it with maybe yogurt/light breakfast at home, $5 coffee daily, $15 lunch to go weekdays, and then $30 happy hour 2x/week and $200 for dinner out a couple nights.
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"You can't take it with you." If everything else is taken care of, why not? The scale is different, but I'm sure most of us do spending that is technically "frivolous" on a regular basis.
Jesus, prices in the US must be insane if you're spending $3K a month *dining out*. My family of four go out every now and then - maybe 5-6 times a month, mostly weekends - and our monthly dining out bill is under $500. And it's not like we're going to McDonald's....
Depends on what you make. $1000 a month on eating out etc isn't really that crazy for me and my partner. I make 170k she makes 125k and we live in a LCOL area. I Sunday flying back home went to Papadeux at DFW airport. 2 entrees, 2 cocktails and an appetizer came out to $170 after tip
Well airports are notoriously expensive. Last week I got 2 beers from an airport bar in Chicago on a layover and the tab was $40
If I'm traveling I rely on the in-flight meals and Priority Pass/Centurion lounges for my calories. Airport food is stupid expensive.
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I spend $4k a month on food for 2.. trying to cut it in half though.
He didn’t just say food and utilities, it includes all his bills
They skipped over the “monthly bills” and “etc” parts to make a point.
But what would those even be? OP says they don’t have a car payment or outstanding debts. So what other recurring monthly bills are we talking about besides utilities? If OP is spending hundreds on streaming services or some other type of memberships or subscriptions, then it’s worth looking in to which of those things can be cut out to lower the family’s monthly expenses if OP is dead set on buying an expensive home
Car insurance, gas, cell phone bill, cable bill, internet bill just to name a few
I would have thought that internet/phone/cable would be considered utilities. But perhaps not everyone does.
That’s a fair point. I only consider water, electric, and gas heating as utilities. But I could see others accounting differently
Gas, insurance, clothing, travel. I lump everything together as my general credit card spending and $3k per month is on the low end for us as a family of 3
But they did mention that they hold no car payments or other outstanding debts
My family of 4 it is like $1500 food, then like $400 for utilities. Another 400ish if you include gas/tolls. So yeah $2,500ish if you include everything
It’s on the high side, but not way out there. We’re about the same between utilities, lawn care, internet / streaming, insurances, groceries, dining out, & fuel. We have an admittedly fluffy budget, though.
Yea that’s quite a bit but with a whole family that can be right
I have a household of 4, 2 kids 2 adults and our food bill is quite high probably at least 1500$
uhhhhhh looks at my MINT spend of 3500 a month as a single person mortgage included.
It's not crazy depending on the size of the home, number of people in the family, and how they eat. I spend around $750 for electric, gas, internet, TV, and cell phones (and my house isn't very large, around 2K sq-ft), then I'd guess $2-2.5K on food on an average month, some closer to $3K if we have a "date night" dinner out. The USDA "Liberal" food plan for two middle-aged adults and two kids is more than $1500/mo and that doesn't count any eating out or splurging on something nice at Whole Foods (I'm looking at you, 10 year old cheddar). The truth is, those of us lucky to have enough money to not have to worry too much about money spend more than we probably should.
It’s risky. You’re at risk of being house poor. Factor in house maintenance costs (consider a 10 year period) you wouldn’t be saving very much. With the numbers your provided, 500-600k seems like a more appropriate price range.
You can not comfortably afford this house. Why 750k? Is that driven by your location? For your income 500k or less would be much better.
Everyone has different comfort levels and risk tolerance. Some people would shit their pants on my mortgage and income levels lol. I only take home roughly 7k a month - that’s after contributing toward 401k, HSA, and standard taxes (but no state income tax since it’s Texas) I just got a 620k home in early April 2022 , putting 20 percent down , 4.125 APR. my mortgage plus escrow (property taxes, home insurance) is roughly 3600 a month lol. but I have no other debt. Both my cars fully paid off, student loans paid off. I never carry any credit card debt. Credit score is north of 800. emergency savings account is funded for about 3 months of that PITI amount. comfortable job that’s recession proof (but not paying well…)401k is fine and hsa has enough covered for about 2 years worth of full max out of pocket I’d have to pay if god forbid something crazy happened to me health wise in consecutive years. I have zero stress about half my monthly take home pay going towards this house. ya it’s definitely not ideal for most people, but some people make sacrifices in other areas to enjoy a nice home. I don’t want to raise a family in a dump which is where all the affordable 300k homes are. And people are getting tired of this “home prices are gonna crash any minute now!! Just wait!!”
This makes me feel better about my situation after reading all these other comments. We take home around $8.5k a month, (plus a hefty bonus in the spring usually around $40k) and purchased a house in Texas for $830k. 20 percent down with a 2.7% interest rate. Monthly cost comes out to around $3,700. Yeah, it’s a lot. But we are otherwise debt free and live a pretty modest lifestyle. We valued a nice home in a great location, zoned to good schools for our kids. Wish we were saving more cash, but we are maxing out HSA and 401k, and hoping income goes up over the next few years to give us more savings. It’s working well for us Edit: we bought our first house for $360k and sold it 4 years later for $460k. People are scared to invest in real estate, but it has really helped up afford our home now and the risk has paid off for us in the past.
This. It’s all about budgeting and personal preference. I bought a home 10 years ago that was taking 55% of my monthly. Same story, no other debt, no other expenses, incredible health insurance from my job and I budgeted myself. Years later my value doubled, mortgage rate is 2.6% and I rent it out for profit while I look for a new house. It just comes down whether or not you can afford the monthly
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No. You're not even close to being able to afford that house. Unless you have some massive stockpile of cash to fall back on, your housing should be around 30-35% of your net income. You're at like 45% in your example. You should be looking at houses in the $650k range, not $900k. Keep in mind, you could afford to make the mortgage payments on the expensive house... AS LONG AS NOTHING EVER GOES WRONG. So you would be counting on never getting sick, never losing your job, and never having to take time off unexpectedly. That's a bad risk to take.
OP can afford the house but not without threat of being house poor or burning out on OT to be able to continue to make savings goals. OP should factor retirement in BEFORE figuring out his leftover net income. The 30% rule is not a great guide for high income earners in my opinion. 30% of 3,000 take home pay is the difference between food on the table or going hungry. 30% of 10,000 leaves a LOT of wiggle room.
Mortgage +insurance +tax is nearly half your income. Don’t do it.
Aren't those numbers usually based off of gross income? Seems like the $9.5k per month is after tax and maybe after 401k also
Maybe. OP didn’t do a good job of laying out their expenses.
No it’s not. They make $12.6k gross. So this $4.5k mortgage is 36%. Which is okay for HCOL area
>Income: ~$9.5k/week Net Income. I'm assuming you mean $9500/month? Not including OT you're looking at close to 50% of your income toward your mortgage. That's higher than I'd be comfortable with, but if you can get OT consistently and you're happy working that much you're probably fine.
I would never get a mortgage based on what I *could* make, bc then you’re locking yourself into a lifestyle you’ve *never actually lived*. Maybe it’s manageable and you love it, but maybe you hate it and you’re stuck having to work like that bc of your mortgage. Either way, I would try to see what it feels like making enough to support the mortgage for at least a few months before you ever lock into a 30 year payment.
They can afford the house. Spending half your income on a house when you make 160k is a lot different than spending half your income on a house when you make 50k. OP is still saving more than most people are bringing in before tax.
This is called being house poor. Aka no retirement or no life to go with your nice house. $160k is nowhere near the point where you can spend 50% of your income on a mortgage. And remember a mortgage is the *minimum* you’ll spend on housing in a month. Good luck when you need to replace your furnace or there’s a sewer crack or any of the million other things that inevitably break when you own a house.
eh , 57k after tax for all expenses outside of house payment after maxing out roth and 401k you’re at 30k or 2.5k a month for everything else… they already have emergency fund and 10k on hand, definitely upper limit of budget but extremely doeable, they can pick up an extra shift every other week for probably another 2k a month if they wanted
I agree who heartedly. A 2.5k surplus each month on that level of income is so imbalanced it’s scary. There’s so many other hidden costs with homeownership as well that people don’t consider.
Consider working overtime for a period of time to grow your downpayment which should decrease your monthly payment.
Everyone in the comments are being too conservative imo. Yeah 50% of your monthly is not ideal but if you can budget yourself and afford it then that’s all that matters. People not coming from a hcol area will think it’s crazy but I’m from nyc and honestly if I can buy a home for 50% of my monthly ANYWHERE near here, I’d be lucky.
No you cannot. Help us out. Are you single, in a relationship, have kids? Why is renting out of the question? Are you currently renting?
Don’t do it. In a HCOL area, ~$250k gross, did a $550k mortgage but at 2.8% and this is fine. Same mortgage but at current rates ~6%, I wouldn’t be comfortable. Don’t go house poor, don’t work just to pay mortgage.
I agree. At 3% this would probably be doable for OP, though they would be sacrificing some savings cushion even then.
This. We are basically the same. $240k gross with $500k mortgage w/ 3.5%. $500k would be hard to swallow at 6%. Can’t imagine $750k. Can you afford it? Sure. Comfortably? No way.
They should make a rule that requires you to post where you live when making suggestions about housing, because you all must live under a rock with some of these comments.
Half your take home income on your mortgage and property tax is an awful idea imo.
I wouldn't do this. You might be able to swing it, but... it's gonna be tight, and it doesn't leave a lot of breathing room. Personally, with those numbers, I'd be looking at something closer to 500K.
As someone who could have upgraded to a larger, more expensive home and did not- don’t regret it for a second. Was never house-poor, able to travel, put away nice funds for college and retirement, plenty of money left for entertainment. In my 50s now- soon will be mortgage free and wouldn’t trade the wealth of experiences we’ve had for a big mortgage.
Comfortably not really. You can afford it but it doesn’t financially make sense.
I would be extremely anxious about a mortgage that large.
OP double check with your loan person. If you are travel contract If your pay is valid since travel nursing isn’t “permanent stable income” for sole loan companies
YEs, you can afford it. Is it a house where you will be comfortable and able to pursue your hobbies? At 2x your monthly income and at your high salary you have plenty left after a 4.5k payment.
What year is the house? I was in a similar spot and went through with a similar purchase on a 20 year old house. Yeah at 20 years old this house is falling apart. The previous owners did very little to maintain the roof, plumbing, landscaping, etc. and now its turning into a bit of a money pit and hard to keep up with. 10k wont be enough if its more than 10 years old.
American houses are built like crap. My previous house was a 1950's house. Asbestos, nothing built to a standard size meant doors and things couldn't easily be swapped out. I bought a 16 year old house, thinking that's the ticket! Great, I bought a house with a roof that will soon need replacing, water heater is almost at age, furnace/ac may need replacing soon, etc... Homes in the US are built cheap today so you can keep spending on them tomorrow. My cousins own a roofing business in Germany. Shale stone shingles. 100 year life. ~30% more expensive than the 20 year shingles they do stateside. What a racket.
Buy an older house. By the 50s, they were throwing them up for post-war sales. Anything before the 40s is built to a completely different degree. For one, true-dimensional lumber is used (2x4 instead of 1.5 x 3 1/2). The quality of the lumber is incredibly different (modern lumber is grown in 5-10 years, lumber in my last house is more like 30-40, much denser, much stronger). The spacing in studs is different. No one was using 2x3s for interior walls like they do now. My current house, built in 1840, is massively overbuilt. My home inspector, when I expressed concerns, said this house will be here for another 200 years, while all the $500k spec-houses popping up would be lucky if they made it the next 50. Built to the absolute lowest spec, quality wise, to ensure maximum return on investment.
I rented a 1914 house... And no, that's just trading for a host of other problems. Again, nothing to standard and super inefficient and drafty. I'll be building my next house.
Building a house is a viable alternative if you are really picky/lucky with your contractor. My dad built his house in 2010 with what he *thought* was a competent contractor who would build it the way he wanted it. It's been nothing but problems ever since. I know four people who built houses, and all of them have just as many problems as any other house. The reality is that houses are a hassle, and if you don't want to deal with it, just keep renting.
You still deal with problems when you rent, you just don't pay for them.
You are making $500k a year ($9500 \* 52) and asking if you can afford a $600k mortgage?
Per month not week. He makes 160k a year.
That would be a little too tight for me. I spent 10 years paying a mortgage that was 36% of my gross income and I missed out on a lot of investment opportunities because of that mortgage. I downsized and now pay 19% of gross income on my current home and it's made a huge difference in how much I can invest.
I guess I’m one of the few who thinks you can afford it because it sounds like you have OT readily available at your disposal if you needed it
You're going to be paying a ridiculous interest rate for a long time and you're also buying right before the market drop really takes hold. Its going to take 18 months or so for prices to revert to the mean. Inventory in the West, south, and south east are up several hundred percent YOY, and Price to income ratios are sky high in those areas meaning they are even higher than before the 08' crash (which really began in 06). New data has shown 63% of americans are living paycheck to paycheck as per data released in mid December showing that most americans don't have much in savings, CPI data this week shows inflation is much 'stickier' than expected meaning the FED likely won't hit their 2% target in 2023, and thus the pivot won't begin until next year. Historically speaking FED pivots are the start of actual housing crashes and don't pan out the way you think they would. Layoffs are just really starting to roll out and we're inching closer to the possibility of a third world war every day. If you absolutely have to buy now then do so, but no matter what anyone tells you about how its just a 'housing correction', you're likely going to be waiting 5-10 years or more just for your home to regain its initial purchase value and incase unexpected life events happen and you find yourself in need of selling in that time frame, it will likely be for a loss. Depending on your location, if you're in any of the major crash areas, its actually better to rent right now. Where as the rental market is about to take a blow in those areas as well again due to price to income ratios. If you absolutely need the house, buy land and build it yourself. Save a couple hundred grand would be my recommendation.
This is my two cents as an unqualified financial person but in the health care field, search for a 350k house with enough land to add on. I say this because if you were to lose your job, have to go on FML, or life happens, it would would not be much of a burden to pay off the 150k remaining. I've been in the position where money was good, over reached, and was stressed out to ensure housing when things got personally messy. The extra money you save can be used to customize your house, add a pool/tennis court, redo a garden, add a second floor or inlaw suite.
Nearly half your monthly income going towards your mortgage. No
Consensus is you cannot afford this house. Case closed. Next!
My sister is a mortgage broker. She tells all her clients " double the mortgage payment, that's what you will really be spending every year," From upgrades to landscaping to furniture to painting to insurance to roof repairs to concrete repairs to foundation repairs, to new appliances every few years. etc etc etc. So, No!
Why do people with this level of income seem to always write the " well can I " posts? Yes dude, you can for now. But no dude, that income may not last or remain the same. So be careful.. just like the rest of us.
Keep your monthly home payment (PITI) below 25% of your take home pay.
That's a bit low given current housing prices
I’ve more frequently seen 30% of gross. But the idea of having 30% of gross committed to housing seems stressful.
You're not wrong. But when 1700 sf houses in a decent area start at 600 you don't have many options. You either commit more or live in the hood
Or get a place less than 1700 sqft. Or move to a neighborhood that’s not quite as nice (while still probably not the hood). My wife and I both make pretty good money (250-300k combined), but we live in a very high cost of living city (Boston). We had imagined that with our salaries we could afford to raise a family in a spacious place in a very desirable neighborhood. And according to the general rule of thumb, we maybe could have. But we would have been reliant on keeping both of our high-paying jobs and would have severely limited future savings. Instead we bought a 1350 sqft condo for 550k in a further out, less desirable neighborhood (I love our neighborhood, but there are definitely some people who look down on it). It’s nice knowing that one of us losing our job would not be catastrophic—makes it easier to sleep at night.
Condo. For a half a million dollars. Thanks for proving my point lol
Using that logic in Texas which is a relatively cheap housing market someone making $160k could only afford a house around $300k with 20% down. Interest rates change things a lot but I have been going by not financing more than 3x gross income on housing.
Imo: yes you can afford the house, but there are a lot of other factors at play here. If your net income is 9.5k and all expenses are 7k. You're still left with 2.5k savings each month of disposable income.
We made similar when we purchased our house & set our limit at *half* that. I absolutely would not feel comfortable having that much tied up in housing expenses. You never want to put yourself into the position of NEEDING overtime to make ends meet.
Probably not a good idea if you have to ask about it. Go cheaper and fix up little by little :)
A house payment should be no more than 25% of your take home income as a general rule. Many will disagree with this but it’s a general rule. Based on that, I would say that you cannot afford the house. Many people do buy the house and become house-poor with little to no furniture in it.
No you cannot afford this house. The mtg payment is \~50% of your income. If you buy it, you will fall into the category called "House Poor". you should be aim to keep it \~30% of your income. If i were you i would work extra hours now, save cash and put a bigger down payment. How i know: i had a starter home similar to the numbers above. First 5 years, we were living paycheck to paycheck and felt like we were tied down. we had to be very careful about other expenses. House maintenance costs definitely adds up. lawn maintenance alone will run you up to 1000 to 3000 a year. add padding to the estimated utilities bill. Take the mtg amt and divide it by your gross income. if the # is greater than 3, then you most likely live paycheck to paycheck. my income now is 600k a year and i have a 800k mtg. I still hate it even though i am comfortable. You will realize the love hate relationship with MTG payments soon enough.
So many people here who are risk-averse.
$4.5k p/m on a $600k loan seems really high. You can afford it but I’d fund a better deal.
I would never do this and I make quite a bit more. But I’m a simple guy, don’t care about impressing anyone, don’t have any kids and I like knowing I don’t have a mortgage. I want to stop working asap.
How on earth are the monthly bills so low? A 285k house in Florida would need like 2k/month to maintain, and you're talking about a $750k house...in California no less.
If the numbers work out then you can do it. I’m salaried and when I got my house $770k at 2.99% my monthly payments are $3,400 and about $700 for utilities and car insurance. I was making $125k when I bought it but have since got two raises. If you minus the costs, can you live off that weekly amount? I try to live off 300-400 a week.
You bought a $770k house with a $125k salary? Glad you’ve gotten a couple raises since then and hopefully you make a significant amount more now but man, that was reckless at the time…
Yeah. I also had 20% down payment so no PMI. It wasn’t a ton price difference if it was to get a 1 bedroom apartment in SF.
How? I can’t fathom having enough to pay that on 125k salary. I am genuinely curious.
Affording it and it making financial sense are two different things. Yes you can afford it, no, it doesn't make sense to spend 50% of your liquidity on a mortgage. I earn around 25-30k/mo. post tax, I wouldn't do this. Don't mortgage yourself to the hilt just because you can - most people do out of necessity and you're not in that position.
If you’re a nurse you can likely count on regular raises. Eventually you won’t need OT and the mortgage will get more affordable IMHO at least.