How did you go about figuring how much you could afford?

DH is stressing over this big time. He wanted me to ask if anyone met with a financial planner when deciding how much of a mortgage you could affiord. I have sat down and gone through the monthly bills to figure out how much we would have left over. However DH doesn't feel this is enough.

Can you please share how you figured out how much you could afford to pay? Thanks!!

Re: How did you go about figuring how much you could afford?

there was a thread a few months ago that people were talking about their home bills.

I made an excel spreadsheet - with our takehome salary - then took away a mortgage, all the other expenses, our personal expenses, additional spendng $$ - and whatever we are left with is our savings - so it depends on what u are comforable with

if you want, FM me your email address and i'll send u the spreadsheet

Re: How did you go about figuring how much you could afford?

Re: How did you go about figuring how much you could afford?

If your DH is anything like mine, no matter what anyone tells him, its never enough. My DH is used the days when our condo payment and bills totalled $2000 a month and we saved a ton. Now we barely put anything away and its driving him nuts.

Message edited 11/1/2006 2:20:38 PM.

Re: How did you go about figuring how much you could afford?

on average, it's about $600-$700 for every $100k you borrow from the bank. so for instance, a $400k house with $6k taxes would be about $2900/month mortgage. do what the other girls did and make a list of how much your bills are and factor in spending money on food and other necessities. if there's money leftover for a house then congrats! if not, look for a 2 family or something else with an income. good luck!

ETA: i had a buyer once that really wanted to buy a house. i asked her to get a mortgage approval before i took her out to see houses, this way she knew what her monthly mortgage payment would be a certain price points. she said "NO! i know how much i can afford and i have no problems getting approved!" She was so adamant about it that i bent my own rule and took her out to see a few places. she like one and made an offer, it was accepted so i told her now she HAD to get an approval. she talked to a mortgage broker and it turns out her credit was shot to $hit and she instead filed for bankruptcy! so my advice, speak to someone before you go see houses. if not a financial planner, then at least a mortgage person!

Message edited 11/1/2006 3:31:30 PM.

Re: How did you go about figuring how much you could afford?

Re: How did you go about figuring how much you could afford?

I made a spread sheet on excel with all my bills- I should do a total one

Jake just figured it out in his head and gave me a number- I trust him- it's what he does for a living-

it sounds right- the payment would be not that much more then our rent

the one thing I am worried about is the utilies or the maintance if we buy a condo- b/c that will be my responsiblity to cover

( Jake pays the rent and will pay the mortgage and then I pick up the household expenses)

Re: How did you go about figuring how much you could afford?

it definitely varies! it depends what your priorities are.

the "rules" say that you can realistically afford a monthly mortgage of 1/3 of your monthly *gross* salary. that is not how we figured it out at all. we wanted to have more $ to set aside each month for savings or whatever... so we lowered the bar on what we could afford.

Re: How did you go about figuring how much you could afford?

The nuts and bolts are to make a list of everything you pay per month and subtract it from your net salary.

We came up with a number that we could afford although it was scary even though we could afford it. It was double our rent payment and then add utilities etc..

So once the mortgage payment was figured we figured out how much house that bought us doing certain mortgages with certain interest rates. We had x amt in the bank for a downpayment and closing fees.

We got pre-approved and went looking. We asked people how much their utility bills were..etc..so we got an idea how much more those would be.

We talked to our accountant and asked what we could safely deduct to allow for more money in our paychecks..we came up with a total of 3 more deductions that allowed us some extra to play with each month. (This is why they use gross salary on most of the calcuators) We did it this way so we could see the actual itemization instead of just saying 30%..

My original spreadsheet is long gone but you get the idea. I will say it always looks worse on paper. It's scary no matter what.

Re: How did you go about figuring how much you could afford?

Re: How did you go about figuring how much you could afford?

When we bought our house they figured out a mortgage to be double the amount of your gross yearly income. Now they do it differently though.

Re: How did you go about figuring how much you could afford?

Re: How did you go about figuring how much you could afford?

Well, as a starting point, we took a good look at how much $$ we were spending when we were living separately in rental apartments.

Re: How did you go about figuring how much you could afford?

Re: How did you go about figuring how much you could afford?

Re: How did you go about figuring how much you could afford?

We first decided if we were going to buy on based on one income or two (planning on whether to stay home or not plus there is always a risk on one person not working for X reason.) Then we looked at take home income and partitioned out the bills. We did not choose based on an interest only loan, we did not figure in raises, we did not plan on any money we didn't already have--to me all those things are risky and not a good way to go about it.

Re: How did you go about figuring how much you could afford?

There are also mortgage calculators available online - they're helpful to give you a frame of reference.

Re: How did you go about figuring how much you could afford?

We based everything off of one salary - looked at how much we were saving and how much we were spending each month...and how much we wanted to save & spend each month...and went from there. We wound up buying a house on the low end of our range and it gave us a nice cushion for additional savings as well as money to spend on travel and expenses.

Definitely do not rely on what the bank says you could afford - do your own research.

Re: How did you go about figuring how much you could afford?