How much house should I buy?

[temeculaguy]

Cog, you will be fine and you have a good plan. Factor in the bride to be and lack of income if you have kids, the kid will cost what her schooling does, so another wash. Just stay conservative because there is a lot of stuff that can and will come up as life changes but you have good handle on it. Try to get closer to 2500 piti, the market where you are looking will meet you at your goal sometime in 2008.

Paramount, I never did get that apology. I think there aren’t too many people lying about their financials here, some may fudge a little like their weight on a drivers license but for the most part the people that find it entertaining to discuss math on a Friday night are not normal people anyway, yours truly included. Six figures is usually 100-150k and in so cal, that doesn’t make you rich and still makes you priced out of most markets, which is precisely why we are in a declining market.

[patientrenter]

” ‘CogSciGuy, if you could get a loan for $1 million at a PTI of $2500, would you take it?’

Sure, probably. Wouldn’t you? If I’m purchasing a property with a PITI of $2500/month, I bet I could rent it out for many multiples of $2500/month.

Or was there a different point you were trying to make?”

CogSciGuy, I assumed you were talking about buying your own home, not an investment property. Let’s make that assumption.

My point is that you seem to calculate affordability based solely on the monthly payment, not the purchase price. If you buy a house for, let’s say, $1 million, then my point is that you can only REALLY afford the house if you can expect to earn, net of taxes etc, $1 million in excess of your other needs and wants over your lifetime. Looking at it that way forces you to understand that the price of the house is going to have to compete with some other long-term goals you may not want to sacrifice now. Do you really want to buy a $500K house if it means you may have to retire no earlier than 65, or limit your spending from now until you die to your current abstemious budget?

For years now, most buyers didn’t do the kind of analysis I’m describing, becaase they just assumed that if the price of the home became too much to bear, they would sell it and get a gain, or at least their money back. At today’s prices, that’s not a slam dunk assumption, regardless of your monthly payments.

Do you see what I’m getting at?

Patient renter in OC

PS
CAN SOMEONE TURN OFF THESE ITALICS, PLEASE?

[patientrenter]

” ‘CogSciGuy, if you could get a loan for $1 million at a PTI of $2500, would you take it?’

Sure, probably. Wouldn’t you? If I’m purchasing a property with a PITI of $2500/month, I bet I could rent it out for many multiples of $2500/month.

Or was there a different point you were trying to make?”

CogSciGuy, I assumed you were talking about buying your own home, not an investment property. Let’s make that assumption.

My point is that you seem to calculate affordability based solely on the monthly payment, not the purchase price. If you buy a house for, let’s say, $1 million, then my point is that you can only REALLY afford the house if you can expect to earn, net of taxes etc, $1 million in excess of your other needs and wants over your lifetime. Looking at it that way forces you to understand that the price of the house is going to have to compete with some other long-term goals you may not want to sacrifice now. Do you really want to buy a $500K house if it means you may have to retire no earlier than 65, or limit your spending from now until you die to your current abstemious budget?

For years now, most buyers didn’t do the kind of analysis I’m describing, becaase they just assumed that if the price of the home became too much to bear, they would sell it and get a gain, or at least their money back. At today’s prices, that’s not a slam dunk assumption, regardless of your monthly payments.

Do you see what I’m getting at?

Patient renter in OC

PS
CAN SOMEONE TURN OFF THESE ITALICS, PLEASE?

[patientrenter]

” ‘CogSciGuy, if you could get a loan for $1 million at a PTI of $2500, would you take it?’

Sure, probably. Wouldn’t you? If I’m purchasing a property with a PITI of $2500/month, I bet I could rent it out for many multiples of $2500/month.

Or was there a different point you were trying to make?”

CogSciGuy, I assumed you were talking about buying your own home, not an investment property. Let’s make that assumption.

My point is that you seem to calculate affordability based solely on the monthly payment, not the purchase price. If you buy a house for, let’s say, $1 million, then my point is that you can only REALLY afford the house if you can expect to earn, net of taxes etc, $1 million in excess of your other needs and wants over your lifetime. Looking at it that way forces you to understand that the price of the house is going to have to compete with some other long-term goals you may not want to sacrifice now. Do you really want to buy a $500K house if it means you may have to retire no earlier than 65, or limit your spending from now until you die to your current abstemious budget?

For years now, most buyers didn’t do the kind of analysis I’m describing, becaase they just assumed that if the price of the home became too much to bear, they would sell it and get a gain, or at least their money back. At today’s prices, that’s not a slam dunk assumption, regardless of your monthly payments.

Do you see what I’m getting at?

Patient renter in OC

PS
CAN SOMEONE TURN OFF THESE ITALICS, PLEASE?

[patientrenter]

” ‘CogSciGuy, if you could get a loan for $1 million at a PTI of $2500, would you take it?’

Sure, probably. Wouldn’t you? If I’m purchasing a property with a PITI of $2500/month, I bet I could rent it out for many multiples of $2500/month.

Or was there a different point you were trying to make?”

CogSciGuy, I assumed you were talking about buying your own home, not an investment property. Let’s make that assumption.

My point is that you seem to calculate affordability based solely on the monthly payment, not the purchase price. If you buy a house for, let’s say, $1 million, then my point is that you can only REALLY afford the house if you can expect to earn, net of taxes etc, $1 million in excess of your other needs and wants over your lifetime. Looking at it that way forces you to understand that the price of the house is going to have to compete with some other long-term goals you may not want to sacrifice now. Do you really want to buy a $500K house if it means you may have to retire no earlier than 65, or limit your spending from now until you die to your current abstemious budget?

For years now, most buyers didn’t do the kind of analysis I’m describing, becaase they just assumed that if the price of the home became too much to bear, they would sell it and get a gain, or at least their money back. At today’s prices, that’s not a slam dunk assumption, regardless of your monthly payments.

Do you see what I’m getting at?

Patient renter in OC

PS
CAN SOMEONE TURN OFF THESE ITALICS, PLEASE?

[patientrenter]

” ‘CogSciGuy, if you could get a loan for $1 million at a PTI of $2500, would you take it?’

Sure, probably. Wouldn’t you? If I’m purchasing a property with a PITI of $2500/month, I bet I could rent it out for many multiples of $2500/month.

Or was there a different point you were trying to make?”

CogSciGuy, I assumed you were talking about buying your own home, not an investment property. Let’s make that assumption.

My point is that you seem to calculate affordability based solely on the monthly payment, not the purchase price. If you buy a house for, let’s say, $1 million, then my point is that you can only REALLY afford the house if you can expect to earn, net of taxes etc, $1 million in excess of your other needs and wants over your lifetime. Looking at it that way forces you to understand that the price of the house is going to have to compete with some other long-term goals you may not want to sacrifice now. Do you really want to buy a $500K house if it means you may have to retire no earlier than 65, or limit your spending from now until you die to your current abstemious budget?

For years now, most buyers didn’t do the kind of analysis I’m describing, becaase they just assumed that if the price of the home became too much to bear, they would sell it and get a gain, or at least their money back. At today’s prices, that’s not a slam dunk assumption, regardless of your monthly payments.

Do you see what I’m getting at?

Patient renter in OC

PS
CAN SOMEONE TURN OFF THESE ITALICS, PLEASE?

[Coronita]

20% down is a nice ideal, but life is not always ideal. I would say at todays prices 5% should be a minimum.

Thanks, paramount. I hadn't explicitly 'fessed up to my inclination to not hold off until I have the good old fashioned 20% ready. That comment makes me feel less guilty about it.

You make a 120k? I always seem to notice that people on this board state these incredible incomes, and yet in my own life I know very few people who make anywhere near 100k.

Yep. And it's amazing how little it is, in the face of attempting to purchase a home that doesn't suck. If you're expressing skepticism, I guess I can share that. I've seen a lot of people glibly dropping big numbers for income that makes me wonder what they do for a living (and why I'm not doing that!)–or whether they're lying.

</i>

I can probably offer some viewpoints.

1) A lot of us are probably referring to household income, and not individual.

2) Two professionals in a household, and that is a couple of times above the average income quoted.

3) Regardless of how much it is, with a W-2, it stinks after taxes.

4) A lot of us are already in their mid thirties, some forties, and are probably not going to see much more as a W-2. If you're in your twenties and are doing this, you're already doing pretty well.

5) A lot more of it has to do with what you keep, not how much you earn. There are plenty of people that make huge salaries but can't save if their life depended on it.

 

On topic,

CogSciGuy. I hope your not carrying large balances on CC's. If you are, I'd consider paying those off before tacking on more debt. Your previous post eluded to CC balance. I wasn't sure if you meant you just paid your balance off in full or if you maintained a balance. The entire frontend/backend percentages are great as a guideline. But I think you also need to make sure you're expenses and outstanding obligations are in check.

[Coronita]

20% down is a nice ideal, but life is not always ideal. I would say at todays prices 5% should be a minimum.

Thanks, paramount. I hadn't explicitly 'fessed up to my inclination to not hold off until I have the good old fashioned 20% ready. That comment makes me feel less guilty about it.

You make a 120k? I always seem to notice that people on this board state these incredible incomes, and yet in my own life I know very few people who make anywhere near 100k.

Yep. And it's amazing how little it is, in the face of attempting to purchase a home that doesn't suck. If you're expressing skepticism, I guess I can share that. I've seen a lot of people glibly dropping big numbers for income that makes me wonder what they do for a living (and why I'm not doing that!)–or whether they're lying.

</i>

I can probably offer some viewpoints.

1) A lot of us are probably referring to household income, and not individual.

2) Two professionals in a household, and that is a couple of times above the average income quoted.

3) Regardless of how much it is, with a W-2, it stinks after taxes.

4) A lot of us are already in their mid thirties, some forties, and are probably not going to see much more as a W-2. If you're in your twenties and are doing this, you're already doing pretty well.

5) A lot more of it has to do with what you keep, not how much you earn. There are plenty of people that make huge salaries but can't save if their life depended on it.

 

On topic,

CogSciGuy. I hope your not carrying large balances on CC's. If you are, I'd consider paying those off before tacking on more debt. Your previous post eluded to CC balance. I wasn't sure if you meant you just paid your balance off in full or if you maintained a balance. The entire frontend/backend percentages are great as a guideline. But I think you also need to make sure you're expenses and outstanding obligations are in check.

[Coronita]

20% down is a nice ideal, but life is not always ideal. I would say at todays prices 5% should be a minimum.

Thanks, paramount. I hadn't explicitly 'fessed up to my inclination to not hold off until I have the good old fashioned 20% ready. That comment makes me feel less guilty about it.

You make a 120k? I always seem to notice that people on this board state these incredible incomes, and yet in my own life I know very few people who make anywhere near 100k.

Yep. And it's amazing how little it is, in the face of attempting to purchase a home that doesn't suck. If you're expressing skepticism, I guess I can share that. I've seen a lot of people glibly dropping big numbers for income that makes me wonder what they do for a living (and why I'm not doing that!)–or whether they're lying.

</i>

I can probably offer some viewpoints.

1) A lot of us are probably referring to household income, and not individual.

2) Two professionals in a household, and that is a couple of times above the average income quoted.

3) Regardless of how much it is, with a W-2, it stinks after taxes.

4) A lot of us are already in their mid thirties, some forties, and are probably not going to see much more as a W-2. If you're in your twenties and are doing this, you're already doing pretty well.

5) A lot more of it has to do with what you keep, not how much you earn. There are plenty of people that make huge salaries but can't save if their life depended on it.

 

On topic,

CogSciGuy. I hope your not carrying large balances on CC's. If you are, I'd consider paying those off before tacking on more debt. Your previous post eluded to CC balance. I wasn't sure if you meant you just paid your balance off in full or if you maintained a balance. The entire frontend/backend percentages are great as a guideline. But I think you also need to make sure you're expenses and outstanding obligations are in check.

[Coronita]

20% down is a nice ideal, but life is not always ideal. I would say at todays prices 5% should be a minimum.

Thanks, paramount. I hadn't explicitly 'fessed up to my inclination to not hold off until I have the good old fashioned 20% ready. That comment makes me feel less guilty about it.

You make a 120k? I always seem to notice that people on this board state these incredible incomes, and yet in my own life I know very few people who make anywhere near 100k.

Yep. And it's amazing how little it is, in the face of attempting to purchase a home that doesn't suck. If you're expressing skepticism, I guess I can share that. I've seen a lot of people glibly dropping big numbers for income that makes me wonder what they do for a living (and why I'm not doing that!)–or whether they're lying.

</i>

I can probably offer some viewpoints.

1) A lot of us are probably referring to household income, and not individual.

2) Two professionals in a household, and that is a couple of times above the average income quoted.

3) Regardless of how much it is, with a W-2, it stinks after taxes.

4) A lot of us are already in their mid thirties, some forties, and are probably not going to see much more as a W-2. If you're in your twenties and are doing this, you're already doing pretty well.

5) A lot more of it has to do with what you keep, not how much you earn. There are plenty of people that make huge salaries but can't save if their life depended on it.

 

On topic,

CogSciGuy. I hope your not carrying large balances on CC's. If you are, I'd consider paying those off before tacking on more debt. Your previous post eluded to CC balance. I wasn't sure if you meant you just paid your balance off in full or if you maintained a balance. The entire frontend/backend percentages are great as a guideline. But I think you also need to make sure you're expenses and outstanding obligations are in check.

[Coronita]

20% down is a nice ideal, but life is not always ideal. I would say at todays prices 5% should be a minimum.

Thanks, paramount. I hadn't explicitly 'fessed up to my inclination to not hold off until I have the good old fashioned 20% ready. That comment makes me feel less guilty about it.

You make a 120k? I always seem to notice that people on this board state these incredible incomes, and yet in my own life I know very few people who make anywhere near 100k.

Yep. And it's amazing how little it is, in the face of attempting to purchase a home that doesn't suck. If you're expressing skepticism, I guess I can share that. I've seen a lot of people glibly dropping big numbers for income that makes me wonder what they do for a living (and why I'm not doing that!)–or whether they're lying.

</i>

I can probably offer some viewpoints.

1) A lot of us are probably referring to household income, and not individual.

2) Two professionals in a household, and that is a couple of times above the average income quoted.

3) Regardless of how much it is, with a W-2, it stinks after taxes.

4) A lot of us are already in their mid thirties, some forties, and are probably not going to see much more as a W-2. If you're in your twenties and are doing this, you're already doing pretty well.

5) A lot more of it has to do with what you keep, not how much you earn. There are plenty of people that make huge salaries but can't save if their life depended on it.

 

On topic,

CogSciGuy. I hope your not carrying large balances on CC's. If you are, I'd consider paying those off before tacking on more debt. Your previous post eluded to CC balance. I wasn't sure if you meant you just paid your balance off in full or if you maintained a balance. The entire frontend/backend percentages are great as a guideline. But I think you also need to make sure you're expenses and outstanding obligations are in check.

[paramount]

Because in reality most people/families live month-to-month.

Basically it comes down to this – I don’t care what the house costs, just tell me what it costs per month (that’s all that really matters for most).

For all of those people who yearn for the financial values of yesteryear, you are fighting a loosing battle.

This downturn is only temporary – and I guarantee you the financial engineers will engineer a way out of this mess one way or another.

I would not bother fighting the system, just use it to your advantage within reason.

[paramount]

Because in reality most people/families live month-to-month.

Basically it comes down to this – I don’t care what the house costs, just tell me what it costs per month (that’s all that really matters for most).

For all of those people who yearn for the financial values of yesteryear, you are fighting a loosing battle.

This downturn is only temporary – and I guarantee you the financial engineers will engineer a way out of this mess one way or another.

I would not bother fighting the system, just use it to your advantage within reason.

[paramount]

Because in reality most people/families live month-to-month.

Basically it comes down to this – I don’t care what the house costs, just tell me what it costs per month (that’s all that really matters for most).

For all of those people who yearn for the financial values of yesteryear, you are fighting a loosing battle.

This downturn is only temporary – and I guarantee you the financial engineers will engineer a way out of this mess one way or another.

I would not bother fighting the system, just use it to your advantage within reason.

[paramount]

Because in reality most people/families live month-to-month.

Basically it comes down to this – I don’t care what the house costs, just tell me what it costs per month (that’s all that really matters for most).

For all of those people who yearn for the financial values of yesteryear, you are fighting a loosing battle.

This downturn is only temporary – and I guarantee you the financial engineers will engineer a way out of this mess one way or another.

I would not bother fighting the system, just use it to your advantage within reason.

[Author]

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