What percent of your take home pay is your mortgage?

 I'm looking at a house right now that will be upwards of 46% of my net
income, that sounds like way too much. I'm including my taxes in that
figure. I know that I will be able to deduct my taxes and interest but
I'm curious to know what the comfortable range should be on a month to
month basis. The numbers I find on the net are all over the  board from
20-50%. I'd like to have real world examples and what type of strain is
involved with each percentage i.e. having to eat hot dogs for dinner,
no vacations, second jobs. I know everyone is tight in the beginning
but with this real estate market topping out I'm afraid it might be a
decade or so until I have the peace of mind of knowing that my home is
an investment.

  joe54345@gmail.com wrote:


Frankly, at 46% of net income and a net income of about $70K, you are
gambling.  Beyond that, you are gambling at a rotten time in the
market cycle.

Did you know that most houses require re-roofing every 20 years or so,
or that the cost of re-roofing even a small house can be above $10K?
Outside painting every ten years is a good average.  The costs vary,
depending on whether you do the work yourself, and the quality of the
paint.  Got money for that?  Have you checked the rate of increase of
property taxes lately?  Unless you live in a state that caps property
tax increases (like Florida) your taxes are proportional to the
market.  If the market continues to go up, your taxes will as well.
If the market tanks... ever hear of a municipality accepting a drop in
property tax rate graciously?

Then there is insurance.  Home insurance used to be a pittance.  With
all the natural disasters and huge claims, insurance is more
expensive.  If the stock market tanks, it gets even more expensive
because the investments by the insurance companies don't do as well.
Find out what the current insurance rate is in your area, and double
or treble it.  That is what you will be paying within five years.

Then there is the price of energy.  If gasoline prices go up, the cost
of home heating goes up.  In New York, you can drop some serious money
staying warm.  I'd figure at least $2500 a season as a safe working
figure.

I see a couple of things happening near term.  Energy prices will
continue to rise and interest rates will continue to rise.  That means
that many people who have overbought, people who used ARMs, and people
who have to commute will be looking to sell and even panic selling.
That means real estate prices will stabilize or even fall, but not for
at least another nine months when the winter has beaten wallets dry.

In your situation, I would wait at least that long and start socking
away money in preparation.  Find a listing for a house that you would
consider buying.  Then, instead of paying your $1500 current rent, set
up a house account as a savings account with EmigrantDirect.com.
Every month, you'll be adding to that account.  Immediately put in
closing costs or at least $5,000.  Put the difference between the
$1500 and $2700 mortgage payment in that account _every month_.  

Find out the utility costs on the house and put the difference between
that and what you now pay into that account.  Estimate any increased
commuting costs and put that money into that account.  Get a roulette
wheel and label the slots with common home repairs and their costs and
relative frequency.  You might have one slot for roof repairs, five
slots for plumbing problems, two for painting, etc.  Don't fill all
the slots, leave about half of them empty.  Once a month, when you are
paying in the other amounts, spin the wheel and put the designated
amount of the repair into your savings account.  

Do NOT skip any of this for any reason other than health issues, and
continue it religiously for nine months.  At that time, you'll know by
experience what cuts you have to make in your lifestyle, your wife
will have had to live with the experience and have an informed choice,
and I can almost guarantee that you'll have a substantial amount of
money socked away, money that you'll need for a cushion.  If you find
that at the end of the nine months housing prices are the same or have
dropped (as I suspect they might), your 5.15% safe and secure
investment will have easily beaten the real estate market.

IMO, to be safe when buying a house, you need at least six months
worth of mortgage payments available from some other investment, just
in case things turn sour.  That is money you don't put in the down
payment or repairs.  Those are separate costs.

If your wife won't agree to the nine month experiment, I can almost
guarantee that you don't want to be buying a house.  Houses can put
enough strain on finances and relationships that people divorce.

 
I have to chime in here on the topic of "home repair/upkeep".  We've been in
our current home 17 years. It was a "fix-r-upper" in the extreme.  Bought it
for $45k, it's worth about $120-130k right now. Our taxes have more than
doubled during that time, as has our home owners insurance.  We have put
about $30k into the house in NEEDED updates/repairs over the years.  Just
this week we had to replace 2 huge windows and repair damage done by
carpenter ants ($2,400), the roof is being redone (paid by insurance because
of hail damage), and the basement MUST be waterproofed, to the tune of
$5,200.

That, combined with "normal" repairs such as 4 water heaters over the years,
a new chimney liner, and just plain basic upkeep, all add up to $$.  You've
got to have some cushion in your budget, regardless of you income etc.
We've been able to pay for most of the smaller things out of a savings
account that we put money into each pay for just that purpose. Taxes and
insurance are also set aside each pay so we have the money to pay the bills
when they come due.  Major updates to the kitchen/bathroom/electrical were
all a part of a refinance about 9 years ago.  We were able to refinance
again when rates dropped below 6%.

All that said to say this. A house can be a money pit. If your budget is so
tight that you can only make your payments and pay other bills, with little
or nothing left over, you'll end up hating the house.  We've known folks who
bought or built new homes, and the repairs still happen. Just because you or
the bank can make it work on paper, doesn't mean it's a good idea.

Melissa

 
Melissa wrote:

That is the long term rub of owning. I still shudder at the phrase of a
house being an investment. Sure, it is a hedge against renting and
throwing money out the window, but unless you luck out and live in an
area that has accelerated home value increases or rent out housing and
have others pay your mortgages, a house is a liability.

My gut feeling is that now is not the time to buy. Add up the costs of
getting a mortgage. Perhaps the OP could send their child to a private
school for a few years in lieu of getting in a good school system?

 Thanks for this info. Here's the thing. We've already done the 9 month
thing. Actually it's been over 2 years I've been trying to hold her off
waiting for the invevitable collapse. We can afford the 2700. Anything
more will have to come out of savings which we will have at least 6
months in reserve. Housing prices haven't gone down. They have slowed
and possibly plateaued. There's no telling how much they will go down
in the next couple of years. All I know is that I'm throwing away 18k
per year on rent right now so if the house doesn't depreciate more than
that I'm ahead of the game. In the nine month test you described how is
the $13,500 in rent I will be paying factored into the 5.15% interest?


hchickpea@hotmail.com wrote: