I make decent money as I work in tech ($140k/year after bonuses and RSUs), so I’m not too worried, though of course I could get laid off and that would throw a money wrench into everything. We make $160k and have a $335k house and honestly, it feels tight. Hey everyone. But that meant we only went on one trip last year. We take home 5,200 per month after all taxes, health insurance, and retirement. Due to home price appreciation, many people I know have effectively lived for free over the decades. Anything is possible folks. As of September, I have been making 7,200$ per month after tax (stable job, stable income). Take advantage of record-low mortgage rates. Whats your gross income? It's only partially about how much you can afford. How do you get by on $500/mo on groceries for a family of 4...? Obviously there is variance but in this market it's a pretty good estimate. The goal is to follow all three home-buying rules. A $300k mortgage at 4% would cost about $1700 per month. I hope all is well. Haha well not that far. This of course doesn't necessarily scale 1:1 when you go up the pay scale. For those of you who are looking to achieve financial independence sooner, follow the FI home buying rule. We all picked off the 555 menu, had water and used a coupon. I agree with this! NY Times published to most comprehensive tool I have ever seen, but it was disguised as a rent vs buy calculator. No offense taken. At the very least, please follow my 30/30/3 home-buying rule before making one of the biggest purchases of your life. Use this simple rule to help you figure out how much you can comfortably afford. 2) For more stable investment returns, take a look at Fundrise, a top real estate crowdfunding platform for non-accredited investors. Basically it comes down to, you can have it all but not at once. Obviously there is variance but in this market it's a pretty good estimate. I have zero debt. We don't want to buy a house and move again in 5-10 years and plan on living there until kids are grown, so we're going to stretch it a little in the beginning so that we can buy the house we want. It seems like almost everything in San Jose, Milpitas and Fremont starts at $500k for 1 bed condos and 600-700 for 2 bed/2 bath condos and townhomes (SFHs and anything up the peninsula are fantasies, and anything in the Tri-Valley or further north than Fremont would make for an unappealing commute). If you are planning on buying a home within the next six months, keep at least the 20% down payment in cash. Even the nicer cities in the county like Saratoga and Los Gatos, the median income is still $150k. I don’t buy any new clothing expect essentials (like if socks get holes). Looked at the sidebar, didn't see this anywhere. I totally agree. We also have to max out HSA because of labor and delivery costs and health expenses that may crop up. What do you mean? Eat ramen noodles for the next six months to save money. Additionally, since buying the house 2 years ago, we are now having a baby so $1,000 a month in child care. If you are able to meet the first two home buying rules, then you can tie it all together with the final home buying rule. It is only logical that interest in real estate has increased. The single most important - and most difficult to predict - input number is "future home price growth rate". You make $120,000 a year and have $100,000 in cash saved at 32 years old. Mortgage rates are down to all-time lows. I just bought a house a couple years ago using a VA loan and learned a few things that you may or may not know. How much house could I safely afford? I even think 30% of gross income towards your mortgage payment is a little high, although my perspective is skewed by living in an area where home prices are very affordable (partly by choice). My total payment (mortage + taxes + insurance) is < 10% of my monthly gross, and I'm using this margin to pay down the loan in 5-6 years. I am a fellow Bay Area resident, almost 2 years into my first job as a chemical/environmental engineer at a small consulting/design firm in Santa Clara. I'm going to get slayed for this one, but I am a believer in stretching yourself now (within reason) if you anticipate your salary will go up in the near future. Finally, we’re all spending way more time at home. I like to include things like lease severance, buying new furniture, and new vehicle registrations, etc. Again, with mortgage rates collapsing, housing affordability has gone up. HOA fee is typically indicated on the listing. You'll see the 3x income rule here likely but I'd recommend going a bit lower if you can. But warren buffett seems to be willing to overpay. Do you think that is reasonable or too much money to spend on a house. However, during times of maximum uncertainty, it’s better to have a larger financial cushion. Hi Sam, what about using RV ratio to see if a home is a good buy or not? Way too many homebuyers overextended themselves during the 2008-2009 financial crisis. The household requirement would therefore be $167,000 for a $500,000 house. Hi Sam, I feel comfortable how things are. Quick about me: Never bought a house before. The best home buying rule I can offer you is my 30/30/3 home-buying rule. I’m saying for a high cost of living areas, you can stretch to five times your annual household income to my house, especially with interest rates so low. Borrowing the downpayment from the Bank of Mom is pretty common nowadays. That's not really that much of a stretch. 350k? The people most at risk of breaking the first rule of home buying are middle income to lower income people. But in that case, the vast majority of people living here shouldn’t be buying homes. Those are everywhere online. Many people buy a house because they fall in love with certain features like the bathroom faucets or hardwood floods, says Sethi. For example, a $150,000 house to some one making $50,000 a year is very different than a $750,000 house to some one making $250,000. I bought a house for $240k and it was the best decision I made. What is the contradiction that you are seeing? Sure. You make $100k after taxes, round down to $8,000 per month to be safe. We live in a low cost area though so this is possible. ), other stuff (do most houses come with refrigerators, and if not, is that like a $2k expense I should plan for?). But, even then, don't go above 90% of your max. Already up 40% on the home value from the purchase price, and looking at "up and coming" areas to invest in real estate (Idaho, Utah, etc.). With Personal Capital, you can track your cash flow, x-ray your investments for excessive fees, and make sure your retirement plans are on track. I personally believe the best way of going about figuring out how much house you can afford is to first figure out what monthly payment you are comfortable making. Those calculators are pretty much useless. For example, if you have $1,000 of monthly debt and make $3,500 a month, then your debt-to-income ratio would be .28. I think you’ll be surprised at how many people were buying $1.5 million homes are making between $400,000 to $500,000 as a couple. I basically broke the rules but I think it worked.
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