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-   -   Buying a House - Income / PITI (http://www.wakeworld.com/forum/showthread.php?t=790584)

sidekicknicholas 10-18-2011 7:13 AM

Buying a House - Income / PITI
 
Another update on the house hunt - I've got the search down to two homes (1 is front runner by far). Paperwork for loan approval is all in at the bank, and if I am given the green light it might be offer time.

I sort of bumped my budget up a bit a took a look at a home that is out of this world nice compared to the others. Certainly worth the extra little bit.

I've already set me own "top dollar" price that I would pay for the home, not that they will take it, but I know myself too well and if I don't draw a line in the sand I'll end up paying more than asking... seeing as I have moved the budget up I am just curious as to what percentage of your income you are putting towards your PITI???

The frontrunner and my top-dollar price with 12% down (what I would have based off of the top dollar price) would give me a PITI of $850/mo.

That $850/mo. is 30% of my monthly income (after taxes and 401k reduction).
*19% of income before taxes - not sure which number to use*
Does that seem resonable? My only other debt is 14k in student loans (~$250/mo.)

Total monthly debt (PITI and School Loans) = 40% of income (after 401k and taxes) seems pretty high.... Just curious what normal is?


*Also this isn't including my fiance's income - I would her salary to be "icing on the cake" cake money to go towards savings/fun/etc etc*


Thanks

psudy 10-18-2011 7:29 AM

Its based off of gross although I never understood why. 40% is getting high, but manageable.

sidekicknicholas 10-18-2011 8:31 AM

Total debt (PITI and School Loans) of my GROSS income would be about 27% .... but I agree gross seems like a stupid number to use and probably why the housing market is the way it is now.

In my brain in makes far more sense to use the actual amount me check is... unless my property tax could be used as a write-off.... which I'm not banking on.

...also my $250 towards school loans is almost 3x what my minimum payment is so that number could be reduced if need, but I figured if I could swing it, I might as well chip away at it.


Paul, if you lived closer I would buy you a beer, you're quite helpful,
Thanks!

psudy 10-18-2011 8:34 AM

Glad to help.

phatboypimp 10-18-2011 9:41 AM

These are general lending guidelines: To each is own....but 40% is high in my personal opinion but it is all about protection. If you can have a minimum of 6 months of payments saved away I think it is worth the risk.

Your monthly mortgage payment -- including principal, interest, real estate taxes and homeowners insurance -- should not be more than 28 percent of your gross monthly income (before taxes). This is your housing expense ratio.

Your total monthly debt obligation should not be more than 36 percent of your gross income. Total debt includes the mortgage payment plus other obligations such as car loans, child support and alimony, credit card bills, student loans, condominium association fees. (Note: Government and certain other lenders may be more lenient.) This is your debt-to-income ratio.

sidekicknicholas 10-18-2011 10:01 AM

Quote:

Your total monthly debt obligation should not be more than 36 percent of your gross income
Now I would be sitting at 27% total debt / Gross income... which by rule is just fine.... but is that rule part of the reason there are foreclosures everywhere? and/or the norm? Just curious what actual people use/are doing.

denverd1 10-18-2011 11:49 AM

Foreclosures are going nuts because people leveraged themselves to the hilt to be able the afford the INTEREST on their 500K home, not to mention ever repaying the principal. I think you're fine. Especially considering the fiance's income is not figured there. You're doing several things that help out as well: over/pre-paying your school loan is an example. Sounds like you have a handle on it.


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