As Girl Ninja and I inch closer towards starting the house hunting process, we’ve been contemplating how much house we think we can afford. We thought maybe a mortgage pre-qualification calculator could help us out. Here was what we got when we ran the numbers based on our current financial situation…
Is this real life?
A half a million dollar home would be considered a conservative purchase for us? A nearly $700,000 home would be aggressive, but not unreasonable?
IT ALL MAKES SENSE NOW!
I totally get why there was a housing bubble. People actually thought the amount of money they were approved for was the amount of money they should spend. What a crock! Heck, even if we eliminate Girl Ninja’s income from the equation (for when she becomes a stay at home mom) we still get a conservative purchase price of $421,000, and an aggressive list price of $500,000.
No. Freaking. Way.
When Girl Ninja and I figure out how much house we can afford, we actually don’t even think about house price. Instead, we have decided on a maximum monthly payment we’d be willing to stomach.We can then take that number and plug in some other variables (cash available for down payment, interest rate, and estimated property taxes/insurance) to see how much house we can buy.
We are personally comfortable with a monthly payment (including taxes) of about $1,500/month. That means, with today’s rates, we are looking at a maximum house price of about $350,000. That’s $200,000 less than the CONSERVATIVE calculation for our income. Can you believe that?
Seriously, who wants to put ALL of their take home pay in to a house… for thirty straight years? That sounds miserable and stressful.
$1,500 is the exact rent we paid for our 600sqft, one bedroom apartment in San Diego two years ago. My/our income has gone up since that time and we know we can get by just fine with that size payment. Here’s how that number breaks down as a percentage of our pay…
1. 16% of OUR current GROSS pay; or 23% of MY current GROSS pay
2. 25% of OUR current NET income; or 33% of my NET income
So for now our budget is set at a $350,000 max purchase price. The only situations where we would possibly up the budget is if we a) bought a house near Green Lake in Seattle or b) bought something that had a rental unit attached. Living in Green Lake would be sweet, but as we learned during our open house-ing not even $400,000 goes very far there.
So reader, how much does the roof over your head cost each month? What does that work out to as a percentage of your household pay? Be sure to put a general geographic area so we have some perspective.