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Mortgage Amount 2-2.5x Annual Income
Posted on 4/9/22 at 6:08 pm
Posted on 4/9/22 at 6:08 pm
Curious as to what people are seeing with the rule of thumb. Over the last year it seems like more people are really stretching this to 3-4x annual income.
Though, given the current housing market I think in a lot of the country people feel like they have to go house broke just to get something decent.
Given everything, is this still a good rule of thumb moving forward or does it no longer really work?
Though, given the current housing market I think in a lot of the country people feel like they have to go house broke just to get something decent.
Given everything, is this still a good rule of thumb moving forward or does it no longer really work?
29
Posted on 4/9/22 at 6:14 pm to OleVaught14
quote:
Given everything, is this still a good rule of thumb moving forward
Yes it is. It always is.
quote:
or does it no longer really work?
That is what the bankers and real estate agents will tell you.
Posted on 4/9/22 at 6:19 pm to OleVaught14
Interest rate plays a part. 2.5x right now would be a good rule to have.
Posted on 4/9/22 at 6:25 pm to OleVaught14
Quick Google search shows median household income in USA is 70 and median home is 370.
Posted on 4/9/22 at 6:37 pm to OleVaught14
Yeah i definitely wouldn't stretch 3-4x otherwise you're just house poor. I'm not even 2x income on my mortgage and don't even like how much I pay towards mortgage/escrow 
Obviously if you live in a HCOL area spending 2.5x or more your annual income is the norm. But just another reason not to live in a HCOL area.
Obviously if you live in a HCOL area spending 2.5x or more your annual income is the norm. But just another reason not to live in a HCOL area.
Posted on 4/9/22 at 6:42 pm to OleVaught14
quote:Depends on the monthly note. As rates rise, those multiples fall.
Curious as to what people are seeing with the rule of thumb. Over the last year it seems like more people are really stretching this to 3-4x annual income.
Posted on 4/9/22 at 6:44 pm to Puffoluffagus
quote:
I'm not even 2x income on my mortgage and don't even like how much I pay towards mortgage/escrow
That's where I'm currently at, but scrolling through Zillow there's nothing even available at the price I bought my house at 2.5 years ago. Even the major reno and flip houses are stupid expensive
Posted on 4/9/22 at 7:47 pm to OleVaught14
I look at a house as a place to live.
Pick a good neighborhood with low crime and decent schools.
Don’t spend all of your money on housing.
I’ve only bought two houses. Still living in the second one. It’s almost paid off.
I guess the “multiple of income” formula should have some cutoffs on the low and high end.
I can see spending 2-3 times your income when you make less, but as you gain income there has to be a point where loading up on a big house is not necessarily the best move.
Pick a good neighborhood with low crime and decent schools.
Don’t spend all of your money on housing.
I’ve only bought two houses. Still living in the second one. It’s almost paid off.
I guess the “multiple of income” formula should have some cutoffs on the low and high end.
I can see spending 2-3 times your income when you make less, but as you gain income there has to be a point where loading up on a big house is not necessarily the best move.
Posted on 4/9/22 at 7:53 pm to makersmark1
But everyone is different. For a family of 4 making 130,000 a year, maybe a 325,000-350,000 house would be the max amount. But I could also see a couple with no kids making 130k with no debt easily affording a 475k-500k house. There are too many variables sometimes.
Posted on 4/9/22 at 8:02 pm to OleVaught14
Are we talking just the mortgage amount (amount borrowed) or the total value of the house?
Posted on 4/9/22 at 9:27 pm to OleVaught14
This just in:
Americans overspend and overextend and try to keep up with the Jones’.
Americans overspend and overextend and try to keep up with the Jones’.
Posted on 4/9/22 at 10:12 pm to OleVaught14
We are a little above 2x. I wasn’t really comfortable when we bought but am I happy that we stretched to get our house.
Posted on 4/9/22 at 10:21 pm to Paul Allen
quote:
But I could also see a couple with no kids making 130k with no debt easily affording a 475k-500k house.
I guess if you hate building wealth this would be acceptable.
Posted on 4/9/22 at 10:35 pm to OleVaught14
We did 2-2.5× back in 1980 and this is our home unless health precludes otherwise. It felt tight back then but we had three children at home back then.
Posted on 4/10/22 at 1:03 am to PhiTiger1764
quote:
guess if you hate building wealth this would be acceptable.
I said 475-500k, not 700k. I don’t think a 2600-2800 mortgage note for a couple making 130k with no kids and zero debt is really going to hurt or impede any wealth building.
Posted on 4/10/22 at 7:07 am to OleVaught14
We were extremely lucky buying in 2018 and refinancing in 2020. We're now at 0.7x and it's wonderful.
Posted on 4/10/22 at 8:54 am to GEAUXT
quote:
We were extremely lucky buying in 2018 and refinancing in 2020. We're now at 0.7x and it's wonderful.
I'm screwed. I sold in 2016 due to personal issues and haven't bought back in yet. At these prices, I may not ever be able to unless it all comes crashing back to Earth. Not sure I want that, but I'd love to own a home again. I just can't spend $350K on a house with my single income.
Posted on 4/10/22 at 9:35 am to Paul Allen
In FL or TX you would have 2% property tax to swallow. Assuming a low down payment the home would be way over 3000/mo. Approaches 40% net.
Posted on 4/10/22 at 9:36 am to OleVaught14
2.5x was the rule of thumb I was told 20+ years ago but I think most people go well beyond that these days.
Posted on 4/10/22 at 9:43 am to fallguy_1978
2.5 when we bought but we knew this would be forever home. Wasn’t super comfortable with it at first but good now. Around 2x this year with good wiggle room. Thankfully at 2.75 with no points bought, too. Caught it just right on refinance.
This post was edited on 4/10/22 at 9:44 am
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