There is nothing for sale under $200k.

That’s why I have a side business now, to boost my income by $1000 a month. This, along with a decent D/P, is the most important factor in buying RE. Even though I could afford 50%-60% a month on a mortgage, and I would be renting it out 10/12 months a year, and I expect my income to increase every month, I still rather wait until I can ‘officially’ afford the place I want.

My idea for how much we can afford for our next home is to start saving the difference between a projected payment and our current payment. It’s a virtual new mortgage, with the savings being available for DP. If we realize in a few months that we’re stretching, then we’ll know that we’ll want to aim lower.

Lots of homes available here

The large house where I grew up sold last year for double the price our family sold it for 20 years earlier.

But property taxes on that house nearly quadrupled over the same period.

And that’s in a southern state with a relatively low tax burden.

Not a trend that bodes well for future homeowners.

This is an underappreciated reason behind the foreclosure problem, especially, we can guess, the walk aways.

My parents were also of the mindset “buy the biggest house you can afford.” My parents have always, and still are, real estate aficionados–my Mom has jokingly diagnosed herself with “House Lust” after reading the book of the same title.

I disagree with this advice wholeheartedly, but in their defense, times were different in the 70′s and 80′s when they were buying.

Most importantly, the most expensive house one “could afford” was based on far more conservative estimates than we find today, or at least we found a couple years ago. Also, as a career military officer, my Dad enjoyed the benefit of a very generous pension after 20 years of service, so in a sense, his retirement “savings” was already covered. His job was obviously very stable, medical costs were non-existent, we bought used cars and got rid of them when only the junkyard would buy the scrap heaps, we took vacations only to visit family, we went out to eat rarely, and to places like Pizza Hut.

But they loved the various houses, and spent a good deal of time working on them, refinishing used antique furniture, etc.

So, it depends on your priorities and what else you’re willing to sacrifice, your income stability, your other emergency savings, etc., etc.

On the other hand, my wife and I enjoy moderate vacations and eating out at family restaurants fairly regularly, etc. So, for a number of years before children, we had two full time incomes and lived on less than one, saving ALOT for a 60% down payment in order to “buy down” our mortgage payment when we bought a house.

When we bought the house, the principal on the mortgage was less than our gross annual income. And that’s a nice feeling. So is making double payments (30 yr fixed), and I absolutely can’t wait until the mortgage is history.

For the general rules, it’s nice to have a sense of perspective and comparison when considering the monthly budget (the 28/36 rule), but it’s also important, like many of the previous commenters have said, to consider the bigger picture. One third of your monthly income going to a 15 year mortgage is much better than the same 1/3 going to a 30 year. And a 22 year old taking out a 30 year mortgage is in a much different situation than a 50 year old.

And finally my pet peeve: People often brag about refinancing and how much they’re saving each month. Part of the savings, yes, comes from the lower interest rate, but often times a big chunk of the monthly “savings” simply comes from the fact that the loan has yet again been re-amortized for another 30 years. But these folks can only think in terms of monthly cash flows, so they don’t see the huge downside to these savings, that are now freed up for more frivolous spending.

God bless you all!

Property taxes and insurance have been rising annually at close to double digits. If you have an HOA fee, that’s probably gone up too. Even if your mortgage is a fixed rate, your payment is probably a good bit higher than when you bought.

Twenty years ago I heard the term “house poor” in connection with the elderly, the classic situation of a person having a house with trememdous equity, but no income to support it. Now it seems a lot of young people are in the same boat, but not always with nearly the big equity position.

We probably all need to be more conservative in buying a house. But if your house payment is 36% of your take home pay after 401k, you’re not in as bad shape as a lot of people. The last 10 years have seen a lot of people at 36% (or more) of GROSS income. How they’re managing…might be reflected in the foreclosure stats.