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I wanted a few people's opinions on me and my wife's financial situation:

Current Gross salary between both of us: 98,000/yr
Of that 17.5% goes into 401k
Take home NET income (after taxes) is $4880/month
Our current average monthly expenditures are $3000 (average over the course of a year) - that includes everything, utilities, food, insurances, cellphones, eating out, etc, and 850 in rent.

So we are looking at homes and our we are considering a mortgage with a PITI of 1650/month - so 800 dollars more than current rent. This leaves us with about $1000 left over in the bank each month.

Does that sound like a good amount to be saving? Would we be stretching our budget too thin at that point? How much does everyone else save per month? Given this is our first house, and its a big investment, im just a little apprehensive about writing a check for 1650 a month, heh.

Thanks!

smithsussane · Posted: Mon Feb 07, 2011 9:27 pm Post subject:

Hi HomeBuyersYAY!

Welcome to forums!

The amount that you'll save is quite a good amount. You can check out the given calculator in order to find out how much house you'll be able to afford: http://www.mortgagefit.com/calculators/howmuch-afford.html

Feel free to ask if you've further queries.

Sussane

jveenstra · Posted: Tue Feb 08, 2011 8:19 am Post subject: First Time Buyer

The monthly PITI is 20% of Gross Income, which is what the lender uses for the mortgage qualification calculation.

If we use gross income after the 401k deduction, the debt ratio is 25%.

If we use the net income after taxes the debt ratio is 34%.

Since mortgage qualification is targeted at 33% based on Gross Income, I would have to suggest that 34% using the most conservative figures is certainly doable and makes sense.

Also, your net after taxes will be higher because you know have tax deductible items, property taxes and mortgage interest.

Comparable to your rent, the mortgage equivalent is probably about $1,200 a month. Net effect, your monthly payment is going from about $1,200 to $1,650.

crichter · Joined: 28 Dec 2010 Posts: 34 8.56 Dollars($)

That's one of the best first time home buyer posts that I have ever seen.

You are asking the right questions. Using that max qualification method is about the fastest way remain house poor. A lender could probably approve you into a $4,000-4,500/month total debt.

For savings...you're way over the norm, but so am I and I don't think that is bad. Two things...
--401k...are you matched on all of that from you and the Mrs.? I have that down as roughly $1500/mo.
--Current liquid...Am I accurate that you're saving +/- $1800 cash/month?

That's roughly 33% savings on gross. That's exceptional.

If you are looking at going up $800/mo, it's coming from somewhere. The first $300-400 is easy. That's tax deductions and you don't have to wait to file to get that---just update your W4 at work.

A $200k loan @ 5% averages $275/mo principal in first 5 years. If you look at that as a form of non-liquid savings, you're really not that far off from maintaining that high savings rate.

Just my $0.02, but you're looking well within your means,

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