How much house can I REALLY afford?

I’d have to know what region of the country you are referring to. Generally, your housing payment ration (mortgage, real estate taxes and insurance) should be around 25 percent of your gross income. Some people say higher, but I like to play it conservatively.

How much $1500 to $1700 can buy you will depend on where you live. In Cleveland, you can get a great house for that. In Los Angeles, not so much.

@Adirondackwannabe has given you a good estimate. I would even be more conservative and say 20%, but that’s just me.

Ah yes, good point. I am close to Cleveland. 2 hours south. Columbus, Ohio.

Here is one portal for the Columbus MLS

Here is a monthly payment calculator.. Based on this, you’re looking at a purchase price of roughly $200,000—$225,000.

Looking at the MLS, there are thousands of houses in that price range.

(and, wow, are houses cheaper in Columbus than in Portland, OR, where we are looking- and Portland was so much cheaper than San Diego, where we live now! )

First thing you need to do is create a budget. See how much money you make, how much money is going out each month and how much is left for a house and incidentals. You should have enough money left over to put in savings each month so you are not wiped out if something huge happens, like a new roof or a new sewer needs installed. Do not go by what the bank or mortgage company tells you that you can afford. They do not take into account the fact that you may want to go on vacation, gasoline will be five bucks a gallon, you eat out six days a week, etc. You should also start out with at least 4 months of payments in reserve in case of an emergency.

Write a list of all your expected monthly expenses and also figure your monthly net pay. Give yourself a nice cushion for unexpected expenses and some savings. The rest left over is what you can afford in a mortgage payment.

The calculators you are using are partly a guide, and partly what banks will be willing to loan you based on your income. But, the calculations cannot estimate your comfort level, or unusual expenses or hobbies you might have or want to do, or know your saving goals.

My rent is 1100 now, and I still have a lot of extra cash that I normally save . I figure the market is down right now, so I can afford to go up a few hundred.

I have no debt, and my car is paid for.

@mowens There’s an old saying that is very important when it comes to real estate: Real estate is easy to buy, but hard to sell. I always liked that.

I’m going to have to make some assumptions here, but with a 15 year mortgage, 5% down, and a 4.1% rate suggest $212,000, BUT that does not factor in property taxes, hazard insurance, mortgage insurance and any other cost that would be paid with your mortgage. Without knowing the property tax rate of where you live I cant calculate that.

@mowens That sounds good. Just remember your utility bill might go up if the new place is bigger. Maybe gas for your car goes up or down depending on the change in commute (and gas has been going up again lately) and you will have to fix things if something breaks. Possibly pay for exterminating services. Also add in home insurance, and property taxes.

You may look into HUD homes also. I bought a 1920 craftsman home, 2200sf finished with a full unfinished basement and a good sized lot, with all wiring etc., updated. It cost me $97,000, and that was three years ago when housing prices were higher. I had it apraised for $179,000 recently, and that was before I started remodeling more rooms. Good luck!

@stevenb

That’s almost exactly what I want to do in Portland- buy a neglected old Craftsman bungalow and restore it…where did you buy?

I also will have a roommate to help out. If it comes time for him to move out, I can always get another one.

@Adirondackwannabe That is a very good point. My parents back in 1990 tried to sell their house for a year so my dad could move to his new job in Chicago. However, they could not sell it. Fast forward 10 years, my neighbor put his house up for sale in my parents neighborhood, and got what he was asking for in 5 days as long as they moved out in a month. Different time, different market.

@Season_of_Fall That is what I am talking about. How do I figure what all that crap costs?

Also, is there a way to find a house that was foreclosed on that someone didn’t rip to pieces? I am a lazy man, if I say I will fix up a house I never will.

I am Irish, I will put up with anything.

@mowens Go to the property appraissers, might be called property assessor site for your county (I’ll help you search fpr it if you want to reveal the xounty and state you live in) and it will tell you the millage rate (basically the percentage of tax charged) some county websites have a calculator where you enter the estimated value of the house and it tells you what your property tax would be. You can see what each person pays for their property taxes by entering their name or address on the same site, it is all public record. The property tax on a house you are looking at might get adjusted, or reevaluated when you buy it, based on the selling price.

Call your insurance to get an estimate on home insurance, and I recommend flood insurance also. Flood is typcially very inexpensive, unless you live near a major body of water.

@JLeslie, most assessors sites are online these days. Great advice about paying attention to where it could be going.

If you purchasing higher than what the assessor values it at, it will likely be raised over the next few years. Use the higher of the two to determine how much you’ll be paying couple years down the road. Know that there is a difference between a tax appraisal and an assessment. Usually calculated like this: $100,000 house is assessed at 25% of appraisal ($100,000 X 25% = $25,000 tax assessment). The taxes are based on a rate of $4.00 / every $100 of assessment. Therefore in this case it would be $25,000/100 X $4.00 = $1,000 per year. That $4 is the millage rate Jleslie is talking about.

If your down payment is going to be as low as you say you will likely have to have mortgage insurance. I think you would have to get a quote from your lender, devide by 12 and add to mortgage.

Hazard insurance (if the house burns down), quote comes from regular agent.

All of these cost will be rolled into your payment. Lender does that to make sure they get paid.

JLeslie, below is a link for free look up of FEMA flood maps. Mowens will need to be in a municipality that participates in the FEMA program, otherwise wont be able to get it. Gotta run, not spell check applied.

http://www.msc.fema.gov/webapp/wcs/stores/servlet/CategoryDisplay?catalogId=10001&storeId=10001&categoryId=12001&langId=-1&userType=G&type=1&dfirmCatId=12009&future=false

I know people who get their entire monthly mortgage payment from their roommate’s rent payments. Is that a cushy way to buy a house, or what?

@wundayatta, Knew a college guy that did that and now owns 150 units.

Some really great advice here. I too would say do up a budget and be brutal. Don’t fudge it. Spend a month writing down EVERYTHING you spend. That cup of coffee, that magazine you couldn’t resist at the supermarket. Everything and see what you are spending a month. How much can you REALLY afford?

Also, yes 25% is a good guide as a maximum commitment. I live in Australia though and many people are committing to much more than 25% of their income to get into the property market. In truth though, if you are already going .. “ouch, that would hurt”, you know you won’t or don’t feel comfortable committing to that amount. So don’t sign up for it.

If you can get a good property, in the right location for the repayment per month you feel comfortable with, go with that. Don’t overcommit. A bank may have a guideline for what people can afford per month, but we are all different. You have to be guided by your own lifestyle and spending habits. If you know you want to go out every Friday and Saturday and/or you like to buy expensive shoes and handbags or whatever the equivalent is for a guy, there is little point signing up for a mortgage that is going to cramp your style and leave you feeling miserable and like you have a mill stone round your neck. You want to enjoy your house.

Over here, to help pay off those big mortgages, people sometimes rent out a room. Is that an option? Might allow you to get a better property but not have to find the whole payment on your own every week. Of course you should borrow only what YOU can afford and any rent is just icing that makes it a bit easier because there may be time when you have to fly solo.

Hope it works out.

Helpful hint: I charge everything, so I can easily tell how much I really spend a month outside of bills. I am not one to track everything, or right down every time I spend some money, so this is much easier for me.

You are going to need to factor in taxes, insurance, savings for maintenance and upkeep. Realistically, you should try to find a house where the principal and interest is about the same as your rent for a 30 year mortgage.

Use this CCN calulator which gives you an idea for both conservative and aggressive borrowing.

You really want to make sure that you are able to save for house expenses and pay the mortgage.

I made my children pay me the amount it would cost them to live (rent, food, utilities and other outgoings) for three months before they moved out on their own. I put it away in an account and gave it them back when they moved out. My philosophy was, after three months they would have a good idea whether they could afford the rent plus expenses or not. Perhaps try doing the same? Include all the things Bill and others have suggested though. Make it realistic. It will also help you save for a deposit perhaps.

@crisw, Spokane. I love the place. Good neighborhood, close to everything, easy to find, and sooo much character.

Be sure to understand that you housing budget has to include all the utilities and taxes, not just the monthly mortgage payment. Don’t buy based on projected future value. We bought a house that was considered below our means, but with rising prices we are not nearly as comfortable as we used to be.