Home Buyers Q+A on a Hot Summer Night

[@nickelfrizz]

So I'm trying to figure out how much house I can afford... But according to my calculations we can only afford a $187,000 house. They say to use 25% of the net income which comes out to be 1870 a month. But the gross income recommendation is 28% which is 2900 a month. How does that work? We make around $125,000 together and we can only afford 187,000? That just doesn't sound right. For clarification, we assumed 10,000 for a down payment, 6.9% interest, and a 15 year fixed rate. We're in an apartment and we have two kids on the way, so we're looking for what we can afford.

[@thehungrysage]

How much do you take home monthly? Gross income doesn’t include the taxes and deductions for benefits and retirement plans so it’s safer to use the net income. Basing it off gross income puts you in a riskier scenario depending on how much is taxed/deducted. I’m personally using net income because either one of us loses a job, we can still stay afloat with one income for a certain period of time.

[@nickelfrizz]

@@thehungrysage I estimated 7,400 a month. That's only after taxes and before medical insurance or 401K contributions, and that's both me and my wife working full time. Then 25% of that is 1870.

[@thehungrysage]

@@nickelfrizz how did you get 187,000?

[@TopVillain]

I think it’s your down payment that’s really screwing you over. Realistically at you take home income you can make 2500 a month payment which is around 300k home. Since you will have to pay mortgage insurance premium.

[@TopVillain]

You honestly don’t have enough down payment in this economy. Save more money. I’m putting down 150k on my next home and my payment will be 4450 a month on a 650k home. Next thing I would do is call the bank speak to a mortgage broker you better not have any debt at all that will ruin your approved amount as well.