Gross anatomy: Home price vs salary

[Mary_From_Georgia]

Right now, I'm looking at homes that are 2.3 - 3x my annual gross salary?

What are your %'s and do you believe in the "buy as much house as you can philosophy?

Any regrets...one way or another---i.e. should have gone up, down, etc.

 

[Niko]

Right now, I'm looking at homes that are 2.3 - 3x my annual gross salary?

What are your %'s and do you believe in the "buy as much house as you can philosophy?

Any regrets...one way or another---i.e. should have gone up, down, etc.

When we bought our house in December 2006, the mortgage was 2.42x our salary. The housing expenses were over twice our rental expenses (including utilities, taxes, etc.) But the quality of life increase was unquantifiable.

At first, we noticed the hit pretty hard. We were never close to missing a payment, but we still felt it. However, we still maxed out my 401K and IRA, eliminated some debt, and stashed some more other places. This year, we should be able to max out my 401K (and I will also start making some Roth 401K contributions), my Roth IRA, her Roth IRA, and pay down a fair amount of debt.

Based on a lot of the calculators I used, we were stretching it with our mortgage payments, but in the end it all worked out well. Now I have a fixed housing payment I know we can afford, and the payments will only get easier as time goes on.

I'd suggest living on your estimated housing budget for a while (saving the extra $$ to apply at closing) to make sure you can afford it. If so, go for it.

 

[TickTock]

1.8x

I don't believe in buy as much house as you can.

 

[kcowan]

Only overbuy to avoid a future essential upgrade because of the cost of selling and moving. Otherwise just buy enough to be comfortable after purging of unnecessary stuff.

 

[Hamlet]

When I bought my house, my mortgage was about 2.5x my annual salary (including the second mortgage to avoid PMI). However, I bought the house with the general plan that I would share it with my SO other at the time, and that she would pay some rent.

We eventually got married, and if you include her salary in the calculation, our mortgage balance is at about 1.25x our income (we paid the 2nd off pretty quick).

I could have afforded the house at 2.5x alone, but it would have cut back significantly on my savings.

 

[brewer12345]

When we bought our place, the house was 2.7X my income, 2X that of DW and mine combined. Since we knew she would drop out of the labor force at some point, we based our ability to carry the mortgage on my income alone. It was kind of tight at times, but we are fine now 5.5 years later. There are a few things I wish the house had, but no deal breakers unless we unexpectedly have a third child (no present plans forthat) and find ourselves short of a bedroom. But I am not sure if we would move even then. We could have stretched farther, but it would have been outside my comfort levels.

 

[waltwill8]

Historical perspective

First house (1970) $14,900 about 3x
Next

 

[growing_older]

First house just under 1x, with almost nothing down, but then mortgage rates were nearly 18%. Appreciated nicely.

Second house almost 3x with 20% down. Sold at a loss 4yrs later.

Both worked just fine with budget at the time.

 

[kumquat]

1973 - 1st house: 4 X salary, 10% down
1978 - 2nd housse: 2.5 X, 50% down
1998 - 3rd house: 1.5 X, cash

In my location, salarys grew much faster than houses inflated.

 

[dex]

Right now, I'm looking at homes that are 2.3 - 3x my annual gross salary?

What are your %'s and do you believe in the "buy as much house as you can philosophy?

Any regrets...one way or another---i.e. should have gone up, down, etc.

What is your mortgage to net income ratio. It is probably a better indicator.

 

[Charlotte]

When we purchased the house, our mortgage was 3x my husband's salary. We were both working at the time, though, so my salary has fed our retirement savings and paid for the niceties in life, while his salary covers all the basics of living.

We were determined that if one of us ever lost of our jobs, that we'd be covered and able to live off of one salary.

Could we have bought a much larger house? You bet, or at least the bank said so. But I sleep much better at night knowing we're not over-extended.

 

[lazygood4nothinbum]

this house was about twice my salary but i put three times as much work into it.

 

[Maurice]

My starter home (in Chicago) was only 1.5x my salary.

My 2nd and current home (in NYC) was about 2.9x my salary, but I put down 30% so the mortgage was more like 2x. It'll be paid off in 14 months, if I ever buy a third home it'll be a cash transaction.

 

[ChemEng]

We just bought our first house in fall of 2006, but here are the stats.

First house $99k. Income $79k.

 

[SecondCor521]

Price / gross salary was about 2.8.
Mortgage / gross salary was about 2.2.

I'm a believer in the "buy as little home as you need" philosophy. I probably bought a little too much house than was ideal, but I did get a good deal and it met all of my other requirements.

2Cor521

 

[Walt34]

First house was about 2.5 x then combined income for me and first wife. Second was 2.5 x my own income by myself. It was VERY tight for a while, I considered having a roommate or taking a 2nd job to keep it because Reagan raised taxes. A "big night on the town" was sending out for pizza and a bottle of wine. Probably what saved my butt was that I had virtually no employment-related expenses. My employer furnished a car and equipment. Also I had about as secure a job as one can find - law enforcement - so layoffs were something I read about in the newspaper.

But I knew I was scheduled for raises and was confident that being "house poor" was a temporary condition. Three years later all was good. Had it paid off in 14 years. But I have a frugal lifestyle - not much for high-end restaurants, far-flung vacations, etc. and I brown-bagged lunches for years. The only "weakness" was radio control airplanes and associated tools. Overtime (which I never counted on) paid for that.

I could have found something less expensive but I wasn't comfortable in those neighborhoods.

Hint: Stop by the local police station and ask about the area you're thinking about. If you get a blank look, that's a good sign. If they start rattling off war stories, rethink that location. Appearances can be very deceiving in that regard. Some expensive neighborhoods were not very nice places to live.

 

[Rustic23]

House is valued at 3.8 times income. However, mortgage is 1 times salary. This is our last home not the first.

 

[cute fuzzy bunny]

Never actually thought about it, but dang near 3x on every home I ever bought until I retired.

Another thought...break out the megans law web site and look for sex offenders in these neighborhoods. Seems theres a direct correlation between serious sex offenses and places people dont really want to live.

 

[Salaryman]

2x my salary. 1.2x of our combined salary.
wanted something that one of our individual salary could support.

 

[starter82]

What I'm looking at is 3.5-4.5 income. Given that I can put down a lot, it doesn't seem to be too much. Although, I am planning on getting a roommate after I move in (mostly because I can't fathom living alone).

 

[W2R]

I bought my house in 2002 for 2.62 times my salary. So, with a little diligence, LBYM, and a head start due the 20% down, it was easy to pay it off in four years.

Now, it is probably worth 2.48 times my salary. That would be due to the combined effects of a housing slump and a promotion.

 

[eridanus]

I bought at 4x salary, 0% down, but had a roommate. The mortgage is now about 1.5x salary.

 

[Sandy]

My first house - about 2.5X gross salary

Current house: initial purchase: 1.6X gross salary for both DH and I (excluding alimony)Refinanced and pulled $$ out, and the refinance was 2.1X. I wouldn't go higher than that, since it leaves me feeling too house poor with no flexibility in the budget. These figures are straight mortage to income ratios and exclude escrow costs.

The current mortage (initial and refinance) were based on my salary alone - DH is not on the mortgage - long story. The refinance was 3.9X my salary. If I were the lender, I wouldn't have lent the $$ at that level, but it was Countrywide - and you know what kind of trouble they are in - I am definately one of their better customers.

 

[brewer12345]

Hint: Stop by the local police station and ask about the area you're thinking about. If you get a blank look, that's a good sign. If they start rattling off war stories, rethink that location. Appearances can be very deceiving in that regard. Some expensive neighborhoods were not very nice places to live.

Not a bad idea. Somewhat by accident, we ended up buying in a neighborhood that had the mayor's relations, the town's head detective, and the captain of a local volunteer fire company. If I ever moved, I would seriously think about finding out where the local cops and firemen live since A) they are generally nice people and good neighbors, B) they usually live a reasonable middle class existence, and C) you never really have to worry about safety or emergency response times.

 

[cute fuzzy bunny]

I thought that was the case when I moved into my old neighborhood, where we had a highway patrolman, a couple of sheriffs deputies, a fireman and my neighbor was the shift supervisor for the ambulance service.

The highway patrolman had his house robbed while he was out of town in his RV. Took all his guns, badge, bulletproof vests and so forth. I think they caught the guys that did it.
One of the sheriffs had his truck broken into while it was sitting in front of his house. Several other home robberies happened and a couple of cars got stolen.