How To Know How Much House You Can Afford
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- Опубліковано 27 вер 2024
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Does the 25% house payment amount recommend include all expenses associated with home ownership (property taxes, utilities, property insurance, condo fees?) Or just mortgage?
@@luckyandblessed no
Was approved for a mortgage of 300k at the age of 22, but decided to only spend 220. Still live in this home 5+ years ago and love it. The monthly mortgage payment (with property tax) was only 20% of my monthly income. Didn't want to be house poor and wanted to travel (which I did) and very glad I went this route.
Now doing foreclose property management, we see A LOT of people who bought more then they needed to feed their ego's. It's sad to see but they put themselves in that situation. Be smart.
How did you get approved? I'm 23 and plan on start saving for a down payment. I want to increase my chances of getting approved! Currently, my FICO score is 748 and my Transunion score is 754.
@@avapilsen Probably makes a lot more than you do
Me too. I was approved for $300K CDN but house a house for $125000K CDN instead
lucky. nowadays 220K cant even get you an RV.
At this rate, I think I'll probably retire with a mortgage payment of $1000 a month. That's about the best I can do I think.@@NK-vw4ms
Reality : Average home price in USA is now $400K. Rents are skyrocketing. People are paying $1500 to $2K in monthly rent but cant qualify for a $1700 mortgage. The Industry is insane.
That’s why you don’t listen to this idiot who couldn’t control himself and build credit
What example do you have of this disparity? Honest question, because that makes no sense.
Also, the median (not average, which is misleading) capped at 480k in Q4 2022 and has dropped sharply since then.
@@nwj03a Go knock on 1000 doors then tell me how many could qualify for a $430K Mortgage today. Young people today, are screwed.
Answer the question.
@@nwj03a Are you really baffled that many people are paying $1500 in rent but can't qualify for a similar sized mortgage ?
Here's why :
1. Down payment
2. Credit Score
3. Debt to Income ratio
4. Income doesn't meet Bank's requirements.
5. Length of employment at current job.
There are a million people out there that can't qualify for a mortgage that are paying $2k or more in rent.
They are trapped.
You need to get out more.
Coming from a long term home owner. Do not let your mortgage payment with and escrow, be more then 25% of your total take home pay. You will be so much more happy in life, when you you can make the mortgage payment, and still have money to go out to eat, go on vacation, and fix things when they break.
We did not escrow ANYTHING. Our mortgage is just mortgage, we pay our own tax and insurance. Much simpler and I know that is all paid, not depending on somebody else to pay it.
Hello can you explain it with some maths please?
@@gungun8465 - figure out how much $ your household brings in per month. Divide # by 4 and that is the amount you dont want your complete mortgage payment to exceed.
Yeah you can't do that here in California so...
Not in nyc baby lol
Got a decent small house on 1 acre in Michigan for 69k, paid it off in 34 months. Yay!
Man that's cheap as chips
Nice
My sister has a 3 bedroom in Arkansas on 3acres for 52k. Her and her husband got a 30yr loan 😂🤦🏼♀️. I was like omg you could have paid that off in two yrs and still bought useless stuff on y’all income. They’ve owned it for four yrs now. (With covid now they are on unemployment and have no saving!)
Swampcrawler LS1 that’s awesome. Congratulations
@@CesarFernandez-bs2vy thanks, it wasn't easy. But now so much less bills!
I think it's best for a couple buying a house to base their purchase on only one income. That does two things: First, it limits the amount of house they can buy. Second, it makes it possible to keep the house if one of the incomes suddenly stops. Things like a pregnancy, a lost job, or an extended disability are far easier to handle if your house payment is low. If you can't make house payments on one income, then you're constantly under the threat of losing your home, and that's not a good feeling.
(edited for spelling)
Exactly what I’m doing. Don’t want to tie myself up with a huge monthly payment
Exactly what we did!
This is a really sound strategy👍🏻
Wow this is excellent advice!
Yes! This is how my husband and I live. Your monthly bills should reflect one income and don't waste the others income on garbage.
I just found Dave and I appreciate that he’s brutally honest!
I think it varies per situation. I started out at 40% for years and now at 35%. I have no debt and am very responsible with money so I've been fine and am half way to paying off the house. I think the most important thing is you have to be disciplined when it comes to money before you can even think about owning a house.
We were house poor for 15 years 80% of our salary goes to our mortgage and property taxes. We lived with just the basics and sometimes our salaries were not enough, there are times our cellphones would get cut for non payment and finally year 2018 we paid off our mortgage. We have a fully paid house 20 mins away from San Francisco Golden Gate Bridge, I wouldn’t say I regretted what we did especially during this covid19 pandemic. We feel secure that we wouldn’t be homeless
Couldn't you have been secure with a house that didn't take up 80% of your income ???
P Tc 👍🏼😊
perotal we don’t make a lot of money as we were just Baristas in a coffee shop making $12.00/hour plus tips. For a few years I sold items on eBay and became top rated seller selling north face jackets.that was year 2012 i would use the income to pay for our property taxes. i didn’t even have the capital so I would just go to the outlet tell them to hold some items then would list them when I see my items sell I go back to the outlet and pay for them with credit card then ship to the buyer. Life was really hard for us but it was all worth it and exciting
P Tc awesome, how much is your house worth?
Deeken Wheeler it’s about 600k it’s a small 2 bedroom 1 bath waking distance to UC Berkeley and with no traffic can go to Golden Gate Bridge in 20mins
As a 23 year old looking to buy a house soon, this video came out at the perfect time
How much do you have saved? Just curious because I'm looking also but not sure I should have saved before I do purchase.
Facts
@Backcountry Bobcat That's not throwing money away. That's buying time. If you pull the trigger without 20% now you're dealing with PMI. Then once you're in the house your monthly expenses will certainly average more than $900. Take your time
I have 8 thousand savedtrying to buy a 68,000 house with fha pmi won't be much I'm still looking at 600-700 month morgage or less
@@javontedonuts1034 Where the heck can you buy a 68k house? Is it in shambles?
General rule of the thumb:
Don’t spend money you don’t have and assume you will have.
In my opinion, if you can get a home payment at 25% of just your income, if your wife is going to stop working for a while, that would be good. Beyond that, I think choice of home should be based on what works for your lifestyle, location, and needs. For example, someone who moves a lot would likely be better off renting. Someone who has a big family will likely need a larger house. A house near where you work is usually good.
Definitely agree to be more conservative with all this uncertainty, but this could also bring opportunity to get a great deal on a home!
Once you see Warren buffet buying up real estate then it's time to buy!! Xd
The deals will most likely be better later on.
Wait 1.5 to 2 years the deals REAL deals havent to begin. I KNOW.
@@TRADINGTHEGOLD so true. I made the mistake of buying at the end of 2008. I closed on January 8th 2009 if I had waited another six months the same house I bought was $60,000 less
Your beautiful.
I would base off the low income. Our income has increased over the years and we did not upgrade cars or house. Just save. Don’t spend money you don’t have yet.
Depending on country you live in, if you plan on having a baby or two then simple max house payment is when you can live off one single monthly income (for example man works and woman stays home with kids). For some reason vast majority of my peers buy a real estate they cant afford to pay when they decide to have a baby.
Earlier today I went to the bank and asked for a cashiers check withdraw to the sum of $440,226.70 paid to the title company on my first home. It was tough, while sitting there waiting for the bank teller to go get that cashier's check as I logged onto my bank app and see my savings of $449k drop down to a little over $8k remaining, BUT good to know I don't owe on a monthly mortgage and lose out on interest over X-years. Good feeling to know I DEFINITELY have a roof over my head for life during "trying times". That said, house is paid for, 2014 Honda Accord is paid for, an "emergency fund" of about $160k. I think I'll be fine 😜👍😂 ,,,
That's great, but I really hope you didn't have $400k+ sitting in a checking account for years earning near zero interest. Remember, inflation is always happening so if you're not earning interest you're effectively losing 2-3% per year.
elmateo77 Had it sitting in a Money Market account and was making about ~$250/month ... something is better than nothing I guess
Nice story. I could feel the pain of you describing throwing that money ar your mortgage and also the joy that comes with it.
ANTHONY N. How old are you?
Ferlydai 41-1/2
Least expensive house in the best neighborhood. It’ll hopefully appreciate and you can turn a profit if/when you sell it.
The wife and I bought a duplex and live in it. The mortgage payment after rental income is 25% of 1 WEEK of our take home pay. If the tenant for some reason isn't paying rent, the mortgage is 75% of 1 WEEK take home pay. Its a very very relaxing lifestyle.
This is what I want to do.
@@meymay11 we just started but it is already a easy easy way to live. We just looked around and found a duplex that costed a little over what we make in a year. We still have to complete baby step 2 but the plan is to have this place paid off and be totally debt free in 4-5 years.
Guys, if you go even lower. Do 20% POST mortage+propertytax+insurance. In my first year and OMG it feels good not to be home poor.
Can you please explain further? I'm 23 and plan on starting to save for a down payment.
I bought half the house I qualified for. I could have made the full amount work but glad I didn't. Don't regret it in the slightest.
Yeah but who lives in the other half of it? Kidding. Living below your means is the way to go. Especially in 2020 and the foreseeable future..
25% for a 400,000 CONDO in Southern California is 100k downpayment. That’s significantly harder to save for not even a house, a condo.
dave's teaching excludes socal lol... even with 100k/yr it's hard
So I make $25+ an hr full time and by Daves math I can afford a small shack in the middle of a corn field in Montana somewhere on 1/15th of an acre.
Exactly. You can then commute to work in Canada and your money will go a longer way.
It sucks that you can't afford anything where you live. Where I live you could buy a pretty decent place with that income.
It depends where u live.
@@thecatnextdoor12 LOL
@@thecatnextdoor12 😂😂😂
At a great time this came up because I've been trying to figuring out , how much of a house I can buy with my income ? GREAT INFO. Today Dave's Titles/videos are ON POINT.
What about 33% of take home pay? I want to continue living in CA...so 33 % feels like my most realistic option. 25% feels out of reach here.
I agree.. here in the SF area I could only afford to rent a bedroom for a quarter of my income and I have a great job. I’d have to go to Stockton to find something in that range 😬
@@kimberlyjennings618 and I wouldn’t want to go to Stockton...lol
Pretty straightforward answer. With changes in income and with kids coming in a few years that will probably cause you to move anyway, hold off on a house purchase until your situation is more stable. For now, just live in what you need/can afford with your current situation.
My house payment is less than 25% and I’m totally fine with that. It gives me more room to save
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Is that 25% net or gross
I wish the average house payment in California is $3000 that’s 60% of my net monthly income
Same rule for renters but almost no one follows that rule. In my market you’d have to make $3,600/month to rent a typical 2 bedroom apartment. The people that earn that much aren’t interested in the $900 apartments. They want the $1,200 apartments.
Quincy Lockett I’m right on 25% renting but net not gross.
Dave I would like to call in to get some advice from you, but I live in the UK. Would that still be possible?
A few years ago, I was approved for a loan that would've been ~110% of my take home pay w/o ot... I basically ran out of that place. I was making a little over 40k and they offered me a mortgage for a house in the 300s
Mannymd that’s part of what caused the housing crisis in ‘08. They call it predatory lending, which it is, BUT there were also people stupid enough to think taking the money was smart. You were very smart to run out of the place.
Wow
we must of had the same loan guy
$300,000 is NOTHING in California. Houses easily go for like $700,000 here. My parents bought a house for 250k in 1997. It's now worth 850k. There is no hope for anybody here. I'll have to move out of state for sure.
Mannymd 😳
I can afford a shoebox 🤣
don't forget property tax
Sometimes I wonder if my wife and I made a mistake buying a house too young and unprepared (we were 20 years old, 25 now) but now we have 90k in equity so I’m thinking we made not such a bad choice
the 25% rule is ridiculous, especially in CA. the rule of thumb is 36% of your GROSS pay on a 30 yr mortgage, not 25% of take home pay on 15 yr mortgage lolol
It’s so different here in Europe..
rarely people use credit cards, banks dont allow credit if you already have 1-2 cards (amount of 1-2 monthly salaries). We dont have store cards, where you can get in debt.
Our schools are 500-2000€ per year (“normal” college). And you can be without degree to have a good job.
where in Europe my friend ?
I'm on my way !😁
I’m debt free rebuilding my emergency fund and saving for a downpayment. I can’t wait till I’m able to purchase real estate in full and build my net worth 😩😩😩
dusty maloney thank you it’s tough I’m sacrificing a lot but I know it’s for the greater good just that sometimes I get discouraged. I’m 22 working 2 jobs debt free
@@ludens1526 keep going u can do it. it is worse to work two jobs and do not make it.
Same! I'm 23 and will start working full time in January for $48k! It will be my first real job ever, and I plan on saving a very big down-payment!
Just bought my first home in Canada, although his advice is sounds the real world is quite different right now. Houses in my city often go for 100-250k over asking and the AVERAGE detached home price in my city is 750K. Advice to navigate this type of situation would be interesting.
Move to rural Alberta.
I hate to say it but math is the real world. If your house payment is eating up your income, it's eating up your income. As Dave says and it's true, you don't get a pass on math because your certain situation.
Sure you can creep up to 30-35% of your income but life happens, something breaks, a worldwide pandemic cuts down on your OT at your job, whatever and now what used to be 30-35% is now 50-60% and you're staying up at night moving money around to try and make ends meet....
“You’re going to be okay” .....unless a recession becomes a reality? Right????
There will always be recessions and contractions
Why buy when your wife is in school? Wait 2 years and after your wife gets a full-time job.
Exactly! What’s the rush?
For real! Its probably the wife bitching and pushing about getting a home quick
I was thinking the same thing. Buy after she’s done with school and starts working
If they’re renting, they are wasting a rent payment x 24 months.
@@Josh-px6xb because they can be qualified for something better. Can take time and feel the market.
Bought a house a couple of weeks ago and I’m scared. But I was so used to live in a small apartment with low rent. But the house came down in price after appraisal and I have good savings since I didn’t spend it on stuff at all. I’m probably too cheap
What’s ur Instagram?
I want this exact question answered today.
25% is comical. Good luck! Here in the northeast, if you want shelter over your head and aren't making 180k you're looking at 80% of take home going to these nonsense mortgages.
Do not buy a house based on a dual income in this situation. Base it on his income. They are in their 30s. They will need to start their family relatively soon. When kids come around, she may want to stay home or they will be strattled with the extravagant cost of childcare for babies/toddlers. Don’t limit your options where you feel you can’t be with your babies if you want to because of the house you bought.
Me: "This is my dream house"
Real Estate Agent: "Alright, that's awesome"
Me: "No literally, except in my dream it was about half this price!"
more like 1/3rd
I didn't have Dave Ramsey when I was young so I established my own strategy soon after I got married at 19 and was broke (still married) my rule has been NEVER buy a house that cost more than you make in one year !!!!!! We lived in a house trailer in a mobile home park to start, learn to make more money!!!!!!!!!!! you can do it!!!! As you make more money nothing wrong with upgrading your house for your family.
Always remember property taxes. Even if you own your own free and clear, if you don't make your tax payment, you will eventually lose your home.
I have lived in 3 houses from 34 to age 38. I sold my first house 350% more than I paid for it. I sold my second house for 150% more than I paid for it, and my current house is worth 250% more than I paid for it. Search Bank REO's, HUD, Foreclosures, and understand that you will look at 100 houses and make 25 offers for every 1 they say yes to. My 3 yeses allow my family of 4 to live way above our means, if we chose to, because we are not house poor.
Great Dave now do a topic on how many/much kids you can afford -_-
Lol there are lots of people that are kid poor more so than house poor 😂
Yea he doesn't answer that...he believes that's a discussion with God
True. My healthcare premiums almost doubled when I had a kid (recently) and now my wife is banking 8% of our take home into a college fund. Haven't even started childcare yet. Unreal!
@@jasonharris765 right, people call in like "I'm 100million dollars in debt and my wife wants 20 kids" & Dave would be like "why not have 21 kids they don't cost anything"
Kids are cheap, it’s the wife/mother nesting that’s the problem.
Most of us wud never own a house with this 25% math especially living in NY…
I'm 30 and live in Northern California currently saving for a condo hopefully within 5 years then rent it out and purchase a bigger house to actually live in. Roth Ira is currently stacking so I'll keep this plan and see what happens
Renting is severely underrated
Just the video that I’ve been looking for. First time home buyer. Thanks Dave 😀
“The 25% rule is not magic” unless it’s the opposite and you only have 25% leftover after your house. Then you’ll magically become poor
Isn't the assumption that you are debt free and thus you should have more than 25% at that point?
Is the 25% of take-home pay recommendation supposed to include property tax and home owner insurance, or is it solely the mortgage?
I believe all of those rolled together.
I live in Sacramento where the 25% rule doesn't apply to rent an apartment. I pay around 28% of my income to rent and 60% if i decide to buy a house. What to do in this situation?
Keep renting, move, consider condos/townhouses.
We didn’t follow the 25% tip because we plan to live in this house forever and our income will likely increase. Everyone’s situation is a little different. So glad we followed Dave’s advice to have an emergency savings!
Over the years that percentage will shrink which is good. My mortgage 15 years in is just 5% of my income. Patience my friends.
I thought your entire shelter costs are supposed to be 25% of your income. Including all utilities, fire insurance, property taxes, and emergency funds for repairs as well as upkeep?
My understanding is mortgage/rent, insurance, and taxes. Your emergency fund and utilities are beyond the 25%.
25%... HA try that here in the bay area for a 2.9m house, 528k household annual income uhhh 🤔 I'm moving
When he says 25% Of your monthly take home is he also considering your tithing and your investments for retirement? Are the utilities also included in that
Journey with Cerney- Stock Videos I would assume so, yes. The 10% for your tithe & 25% for the home are taken out of what you get after taxes. If you use a 401k, that percentage would be before taxes obviously. No, utilities don't count in the mortgage calculation.
Can you do one on how much shack I can afford next?
I start with understanding what house do I need? Next, I'll look at what I can afford. If I can't afford what I need, stop. If I can afford more than I need, Hooray for me, but I really want to know why I'm going above my needs. Not start at the top just because.
We're a little above what Dave recommends. 4000 takehome every month and 1300 mortgage.
It's tight some months, other months it's not bad, but we're never moving again. Going to pay off the truck by year end, then pay back a small loan from my parents, then start whittling down the house principal.
I can't afford any house🤔
If you make as much as you can and spend as little as you can, you will soon enough.
@@Balnk1326 thanks and im working on both as we speak
Also, if you save enough you can reduce the mortgage you would get by enough for all your housing payments to be 25%
You have to move little by little, I make only $36,000 a year. I got a part time job a while ago just working at a restaurant. With that new income I make about $54,000 a year. I save about $31,000 a year, in two years I will save up a down payment of 60k. Buy a one bedroom condo for 120k. Pay the mortgage of 60k in 2 years and then sell it and move into a 180k 2 bedroom condo, rent the other room and only have 60k to pay off. Keep doing that untill I get a house or think it's enough. It is doable, people just don't want to put in the work. I work 70 hour work weeks though, Monday through Sunday.
Did the banks tell you? Because if you pay rent for an apartment, usually you can afford a house, or condo at least.
My mortgage is less than 25% but, I lived in a not so good neighborhood. House are to the roof right now. Any new home at a 15 year fixed rate even with 140000 of equity that I have will be higher than 25%.
Dave says monthly payment 25% of your salary? Is he talking about just principal and interest or it includes home insurance and property tax??
Just the house payment. In other works the combination of the principal, interest, taxes, and insurance.
I paid cash, so I could afford it. Even though the numbers said I couldn't by my income.
It's been cheaper owning a free and clear house for 16 years than it would have been to pay rent for less than half the square footage in an apartment.
The power of paying cash is huge.
This market it crazy . We can’t find anything we want for what we’re qualified for . I want to move up the ladder , not go down .
Bank gave me approval letter for 1mil to buy a house in Texas this year. What a joke. They will approve you to get into debt till you cant breathe but that doesn’t mean you should.
Also take your time when buying a house. Though our payment is just 2k and little over the rent we were paying for the apartment but I still feel I bought bigger house than we really need. This is our first house and I can tell you that emotions can really do a number on your buying decision. Good thing is that it is 1/4 of my take home pay.
Just get a 50 year mortgage for a house worth 10 times your income, I'm sure it'll be fine :P (they're actually doing that in California though)
Thanks for sharing this.
🎩🐇 Buying a home is just like Magic 🎩
Now you see it 🏠
Now you don't
Don't buy a house in this current market. Crazy inflated!
The issue in 2023, is house prices are higher because of the demand, the interest rates are in the 7% range, so if interest rates were lower, sure, could afford higher price, but now have to look lower house value due to those rates. Then agents are saying buy now, refinance later. Get the dream house later.
My first house was 15% of my income.. 25% makes sense
There's a lot of variables? If the market is in your favor, maybe get the bigger house and it'll payoff later. If it's going to take a while to make the income... Maybe wait until she's done with school.
I just closed on a home.. 2.85 on a 30!..
Personally I would wait till after she graduates and when she gets a job see where your at. Going to school and big investments are a gamble unless he makes well and good and take care of things.
Should just wait 3 years for this housing bubble to pop. Sorry Boomers, we're not buying your assets at the top.
@John Lennon I thought you died in 80'?
@@ChrisMFlorida 😂😂
@John Lennon is this Yoko using John's old account?
Don't delay buying property (or buy property for that matter) because you are speculating on a future event, buy because you are ready and your numbers work out.
You might think that, but millennials are now buying using inheritance from their deceased boomer parents.
That's Good Stuff Brother Dave!!!
That makes perfect sense Dave, thanks for information. We are looking to purchase our second home and boy is it tough with the prices of these homes today! But we most certainly don’t want to be house poor and this just gave me more perspective for sure. Thanks 😅🙌🏾😁
Just wondering...what did you decide to do?
@@neena1185I'm wondering as well, but perhaps we will never know 🤷
This is a really good question.
If tiny houses didn’t depreciate I would get a tiny house. I like small spaces and I have very little furniture...
Just make sure you can still fit in such little furniture.
lol sorry
Saying no is hard. Saying Oh No is a lot harder
I like the rule 1.5 to 2 times your annual income for mortgage. The lower the better. Obviously excludes what you put down.
In a lot of places that's just not feasible though due to high housing prices and how fast the prices are rising.
elmateo77 then you shouldn’t live in cities you can’t afford to prosper in.
@@bonnevillebagger9147 But where can I find a place where I can afford a good, clean house making $48k?
Stop thinking about college funds and teach your kids how start a business without going to college
Is it still possible to buy a house in 2022? 😅 I live in VA and even a run down townhouse is almost 400k
Just do it based off your current incomes. Nothing is guaranteed and worst case she will still be making the same income in a few years.
According to Dave’s advice, I can afford a 45,000 house! 😂
I wonder if this 25% rule goes for the single people that are trying to become house owners 🤔
So I have to find a house for $600 a month
Daniel Nielsen we are talking about owning. Good money for a single person without a crazy good job is 800 after tax (1000 before deductions) a week ...You would have to have ALOT of money saved up for a down payment to make it work.
I guess a nice trailer on an acre or two would suffice
@@TheJonOrtiz $800 a month would be $5 an hour (the $12,000 standard deduction means you pay $0 in taxes if you earn less than $1000 a month) if you're working full time. You reeeally need a better job if that's what they're paying you.
Owning a home has become a luxury in our country. Gone are the days a single person can afford a home. You can’t afford a house anywhere for $600 that’s isn’t a trailer. You need to get your income up.
The ESPN of finance
Does anyone know any good videos/articles about saving up a down payment vs. “rolling your current home equity into the next one” or potentially a mix of both? My husband and I have different ideas but I’m not well versed on the “rolling equity” method.
A lot of people rolled their equity into a new home, including Dave. He went bankrupt because of it. He talks about that all the time. Best is to not over leverage
D D so it’s acceptable, just don’t overdo it? This area is not my forte. My husband bought our current place a year before we married and I wasn’t really involved!
@@notclaire612 look over Richard Fain's videos
@@David.D3 that's not why he went bankrupt, it was the types of loans he was doing and tax code changes. Had he been using 30 year mortgages he likely would have been fine.
Great question, great answer.
Lol I can't even find rent in my expensive city for 25% of my income. I think 50% is the new reality for most people.
Wages aren't keeping up with inflation in my opinion.
@@mriphone1000 That's definitely a fact.
what I have always been told is to avoid mortgage stress your mortgage should never be more than 30% of your take-home.
Yay! Needed something like this. ✨💗
$575 is 25% of take home pay so there goes my hopes of buying my first house 🤦🏽♂️🤦🏽♂️😭
same
Base you home purchase on only one income. Chet happens.
Listen to your bank when they say you can't afford it.
Ppl should realize he is talking 25 percent max on take home pay, not gross pay, as many banks will say. Therefore, it’s really 15-20 percent of gross pay
Just leave gross out of the whole equation, dude. It confuses newbies. It’s just 25% of what goes into your bank account every month. Simple!
25% of take home pay correct ??
Correct
@@mctigmctiggy1475 Goog luck finding a 150K house in LA. Dave's advice makes sense if you live in Texas.
@@mctigmctiggy1475 That's exactly my point. The ratio is not realistic if you live in LA. Not everyone has $150K in their bank account and not everyone makes $250K in a year.
@@mctigmctiggy1475 Okay. There's a lot to unpack there.
I was referring to the other comment that said if you make $50k you can afford a $150k house. Such a house simply doesn't exist in LA. If your point is that people shouldn't be working in jobs that pay less than 6 digits, that's for another discussion. Because not everyone makes as much as you do and not everyone is married.
Why are people in such a hurry to buy a house? A house can be a nightmare, unless you are handy at fixing stuff and you can do a lot of the maintenance by yourself. When you rent all of the repairs are handled by the landlord or apartment complex. I spend at least $1k/year for repairs and at least $1k/year for yard maintenance. $9k/year for tax. $1k/year for insurance. All of this is on top of mortgage payment.
There's an easier way. Take your income and multiply it by 3. For the average person, that's how much of a house you can afford. So, for example, if you make 50k a year - you can afford a 150k house.
Buy a modest house now that has great rental property and is under what you can afford. Attack that mortgage like crazy until your wife becomes established in her new job and you have you first kid. Do a cash out refinance on that home to get your equity back and buy your actual family home. Keep that first home as a rental property.
Move to Johnstown, Pa... cheap homes easy to build wealth.
Living in a yurt is how serious I am to live mortgage and rent free.
Having a mortgage gives you equity