What percent of your take-home pay is your mortgage?

[lilymaid]

My husband and I had an original goal to save up and pay cash for our home. But with the market being so good, and there being a house that we really quite like...we now think we're going to join the millions of Americans who have a mortgage.

Dave Ramsey says to put 10-20% down, get a 15-year fixed rate mortgage and to make sure that your mortgage is no larger than 25% of your take-home pay. DH and I can put 25-30% down, we're going to get a 30-year fixed rate, but our payments are still looking to be about 32% of our take-home pay. We lead a very low consumption lifestyle, and I honestly think that we will be financially fine. I know our habits (both good & bad), and we've been crunching numbers with a calculator that my DH made using Excel.

We have never been in debt before, so we're both a little nervous. But excited! We would keep enough money for an "emergency fund" of about 6 months worth of expenses. If we bust our butts, putting extra on the principle every month, we could get the house paid off in 10 years.

So, what's your opinion? Any advice from those who have current mortgages. Would you take out a loan if it consumed almost 33% of your take-home pay? Too risky? We're planning on actually putting about 50% of our take-home pay onto the loan to pay it off early. I'm looking for feedback.

I'm also including a poll so I can get a feel for what other HCW members mortgages look like. Thanks! =)

Jill
lilymaid

[melodyjg]

Right now....We have no mortgage, We paid off our home in 8 years!! We made it our goal to take what extra we made in our business at the end of the year, pay the taxes and put all of it against our mortgage and we did it in 8 years!!!

You sound like you have a game plan and you are very realistic with your figures....If you are pretty sure with your jobs and their security I would say GO FOR IT!! Now is the time to do it!

[tuckyrn]

Just keep in mind.. Things I wish I would have know before purchasing.

1. Even if you can afford it now.. add in kids.. 1, 2, 5?

2. Whatever the bank says you can afford, try to go below that.. Just because you can afford a $300k house, doesn't mean you should spend $300 K.. My bank said I could afford $125k, I went 100, and still had rough times occasionally!!!

3. Can one of you afford it if the other were ill, sick, out of work for any extended amount of time? (illness, maternity leave, injury, death)

4. Keep the best insurance you can afford.

5. Have your house inspected by an private inspector aside from mortgage company. Look for hidden costs, problems, potential probelms (cracks in foundation, how old is the roof, if its an older house, is the electrical outdated, leaks in the basement, asbestos tiles or insulation?)

6. Make sure theres no left question marks. Ask ask ask ask, question, and when you think your done, ask again.

7. Also, make sure you have 6 months of mortgage payments in a savings account (build up to it if you need to) just in case one of you is unable to work for some time.

OK
Now that im done.. I know I sound semi negative.. but I'm just sharing what I wish someone would have sat down and told me before I purchased my house!!! it would have saved me a lot of headaches, tears, money, and frustration over the last decade!!!

All that being said.. Right now is a GOOD time to buy!! its a buyers market!

[ChrisLeigh]

But with the market being so good, lilymaid

Umm... sorry to rain on your parade and be a little sarcastic... but have you seen what the stock market is doing lately? have you seen how many homes are being foreclosed on?

I don't know alot about your situation... but I would hang tight and not do anything until after the turmoil in the market settles down.

I'd really look at the numbers... you said you are planning on putting 50% of your take home against the mortgage... Are you currently saving this 50%?

You said you and hubby initially wanted to save up and pay cash for your home.... why the change now?

[purplefdu]

We are looking at purchasing our first home as well. We would rather have waited out the stuff going on right now but have little choice. Since I am currently a stay at home mom to two dogs I don't qualify to get a bigger mortgage. We're looking at staying 10-20k under the amount, being only 1008k based on just my husband's pay. WE have already looked at a couple homes before the bank started being slower than sludge and wish we hadn't. It sucks to watch them go under contract without having anything you can do to prevent it.

That being said once our pre-approval finally comes through we are aiming at 80-90k before closing costs with a 3% downpayment (car repairs and helping out my parents and cleaning up our debt has eaten into the savings we did have). Fortunately prices are still dropping on the dozen homes we've perused online in our general range. Which means once we get our approval we can call our buyer broker and put in an offer immediately (with contingincies for inspection if need be).

This will leave us with a mortgage payment of 30 percent or something higher than all the financial gurus suggest, on my husband's income alone. which means when we finally have an address and I can determine what town is closer for work it should come down to closer to 10-20% with both of us working. I'd be concerned if the payment was 30% of both incomes. Assuming you both make roughly equal pay its 60% of one person's pay...scary numbers.

But if you really know the house is "the one" for you and you think you can make it work, head to the bank and talk to them about it. They can do a mortgage calculator for you and show you whether a financial institution thinks you can afford to make the purchase.

Either way good luck, there are alot of homes out there at the moment at some really nice prices if you can afford to purchase.

[Jenn8702]

Never more than 1 paycheck worth

[Tiffany]

Ours is 34%.

[TheWoman]

22% but that doesn't include insurance or taxes.

[Frugalfox]

Can you survive on one income if the need arises?

[thickbluebug]

If you still have some saving left after the 25% down then yes. If it will strap you to make the higher down pmt, no.

Rainy day funds are necessary for houses.

We had a bad spell, and everything happened in about 6 weeks

central ac needed freon and a service call
stove went out, ended up wires were burnt out
fridge died, compressor - fridge had to be replaced
microwave, died needed replaced
convection toaster oven died
vacuum, motor died
hot water tank, had burned an element out and was only lasting 5 minutes.

Something always happens when you are a home owner.

Our house was built new and was at 15 yrs when all that happened. Wasn't hit by lightening or anything like that. It was just a bad spell.
Of course dh was laid off.
Our paid for cars were on their last leg.
Things happen.

Now the house is paid for, and just needed a washer a few months back.

Another bit of advise.
Appliances are not built like they use to be. Our first washer lasted something like 20 yrs. First fridge lasted like 15 yrs.
We went through 3 washers in about 4 yrs after that.
2 Fridges in about 2 years.
Now we "waste' the money on appliance warranties.

I have been told 15 yrs is normal for shingle roof replacements, which we had just done when all that happened.