Home Buying in 07054>Question Details

Generator515, Home Buyer in 07054

How much would you be comfortable buying a house for?

Asked by Generator515, 07054 Fri Sep 9, 2011

My wife and I want to purchase our first home in the Northern NJ area. We reached out to a mortgage broker who said we could afford well into the $500K. Mortgage calculators on the other hand are telling me $350K to $400K.

We only have about $40K-$50K for a downpayment so we'd be well below the 20%.

Combined we make $130K in gross salaries. Neither of us have car loans, student loans or recurring credit card payments (pay in full each month).

Any thoughts would be appreciated.

Help the community by answering this question:


The best and easiest rule of thumb is that you should buy a house for 2 to 2.5 times your gross annual income (up to $325,000 for you), and no more than that.

However, since interest rates are so low right now you may well be able to afford up to the $500,000 but make sure you are comfortable with the full payment including taxes, insurance.

You can also pick up a major bargain in the form of a foreclosure, short sale (pre foreclosure). See http://www.realtytrac.com/gateway_co.asp?accnt=168899&pa… as this is the largest and best database of foreclosure property listings in the USA.

After all, you may be able to get a $500,000 property for $300,000 or so, good luck on your purchase!!
3 votes Thank Flag Link Fri Sep 9, 2011
You can do the math Generator! Here is an easy equation:

Generally speaking, your monthly "PITI" (Principal, Interest, Taxes and Insurance) should be 28% or less of your gross monthly income to qualify. What is 28% of your combined gross monthly income? Compare that to your complete proposed housing payment. If the housing payment is lower than 28% of your gross monthly income, perfect! If higher, then either shop for a lower priced home, or a lower interest rate to lower the payment.......or buy a lower interest rate by paying points.

I also want to add, that your total debt-to-income ratio should be generally under 40% (or 43 to 44% if a government loan.) That would be percentaging your total monthly gross income total of ALL of your monthly credit obligations that show on your credit report, (using the minimum payments due) and your new housing payment combined.

So even if your housing payment is under 28%, but your credit cards, car payments, student loans, etc, minimum payments bring your monthly obligations higher that the 40 to 45% allowed, that could turn down a mortgage application. I used to advice my mortgage clients not to open any new credit or buy any new cars until after the mortgage closes.

2 votes Thank Flag Link Sat Oct 8, 2011
Very helpful input from Jane - once you establish what you can afford, then you decide what you want to take on. You may qualify for more than you want to take on and that, my friend, is ok. If more people bought at or below their true ability to carry, we would not be in the collective pickle we are in.

Good luck to you!
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
Web Reference: http://www.feenick.com
1 vote Thank Flag Link Thu Oct 13, 2011
Jeanne is right on the money here. Just because you can be qualified for a number, doesn't mean you should spend that much. Regarding your situation -- it sounds like you "can" buy more than you seem to want to spend.

Here's the truth -- the specifics of every individual situation make it imperative that a buyer sit with a well-qualified lender who will go through all the pertinent information with you, assess your situation, and advise you on the most appropriate programs, Like "doctor", "attorney", "cpa", the title "licensed mortgage loan originator" now refers to a trained, certified professional who goes through a beast of a screening process in order to be allowed by the feds/state to originate residential mortgages. It's imperative that you sit with some one qualified rather than try to figure it out all yourself.

Because your downpayment is less than 20%, I would nudge you toward a larger mortgage banker instead of a regular bank. As a rule, a banker will have more education in his/her pocket and more in-house programs available to service your "non-generic" situation. A broker will not be able to shift gears seamlessly mid-process if necessary. (Sorry to all you brokers out there, but it's true and you know it. :))

Obviously I work for such a lender. I'm sure most of the nice folks who've answered your question do as well. I'm sure that all of us would be happy to consult with you. Perhaps you should speak to a few people and see how you feel.

If you want to reach out to me, find me here:
If not, I'm not mad at ya!!! I wish you the very best of luck in your search.
0 votes Thank Flag Link Wed Oct 17, 2012
If there is ever a questions that is loaded, that is the one. It really comes down to what you feel comfortable paying. With our rates being so low, and values a near 2001 levels you are getting more home for the buck.

I would be more than happy to spend a few minutes chatting via email or phone to help. Feel free to visit my web reference below to view my testimonials.

Mickey Ballantine
Parsippany, NJ
0 votes Thank Flag Link Wed Jun 13, 2012
The rule of thumb is that your rent or mortgage should be no more than 25% of your take home pay. This has worked good for me. Any time that my mortgage goes above this, I feel the pain. So your rent should not be over $2700.
0 votes Thank Flag Link Wed May 16, 2012
An important consideration: I would suggest not putting all your eggs in one basket related to purchasing your first home. Keep in mind that if you or both you and your significant other loose income, even part of of an income, could you comfortably afford the mortgage payment? I purchased a home years ago while keeping this in mind, and sure enough my significant other lost his job a couple years into home ownership and we were in great shape with just my income. A lot could happen in just a few years so always keep the "unknown" factor in mind. Planning it right will allow you to purchase a great home, have extra money to do things you enjoy, and most importantly have a cushion to weather the storms along the way. Good luck!
0 votes Thank Flag Link Thu Oct 13, 2011
There are two questions - (1) what you can qualify for; and, (2) what you are comfortable with. Prior posters are right, the first tells you the cap of what is possible but only you can decide if you are comfortable pushing yourself to that limit. Being conservative is never a bad thing....

Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Sat Sep 10, 2011
Here are a few ideas I share with first time buyers I work with.

1. Your upper limit is not a requirement, only a cap. Buy where you are comfortable.

2. Due to tax write offs, your mortgage payment will be somewhat subsidized. If you are comfortable now with a rent payment of $X you can afford a higher mortgage payment and be in a similar cash flow position.

3. Due to the tax write off, you may want to adjust your withholdings at your employers to free up some of your cash. Talk to your tax preparer and HR person to decide by how much.

4. Buying & selling costs money, buy a home you can stay in longer and you'll be money ahead in the long run. If two bedroom condo meets your needs now, but you anticipate needing a 3 or 4 bedroom place in 5 years, buy the larger home now and skip the condo.

5. Appreciation is the historic rule of home ownership. We have been in a historically unusual market the past 4-5 years. Once things settle down, I anticipate some normal appreciation. If a $400,000 home goes up 5% that's $20,000. If a $600,000 home goes up 5% that's $30,000 or $10,000 more. These numbers are just examples, but buying higher compounds your upside when/if appreciation does return.

6. What are your plans/expectations for the future? Will you be a 2 income family in a couple years? Will one of you see a dramatic uptick in income due to promotions or will one stay home with kids?

There are arguments to be made in buying both at the upper end and more moderate, but ultimately the decision isn't your lenders or agents, it's one you will have to live with. Consider as many factors as you can and make the best decision for you.
0 votes Thank Flag Link Fri Sep 9, 2011
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