Housing Calculations

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IronWing

No Lifer
Jul 20, 2001
72,148
32,500
136
Originally posted by: Vic
Originally posted by: Demon-Xanth
Usually they say 65% of gross.
:Q
Originally posted by: ironwing
Put every dime you can into the mortgage. The housing market can't help but go up.
:Q:Q

Given the current market I thought that statement would have been picked up as sarcasm. Oh well, back to the drawing board.
 

BlueD0T

Member
Sep 11, 2004
49
0
0
a) Put upto what you job matches. for me that %4. your way to young for an IRA.
b) someone said %65... thats a good number. also you need %20 down. (%20 down is a must).
c) ask someone that has a house about the same size that you will be buying. for thinks like cable and phone. look it up online.
d) the food and gas only you can say. just sit down and think about it.
e) left to save?? a house is an investment save only what you need for emergency?s (I.E how much will you need to make it for 30 days without any income while you find a new job, you should always have this much cash on hand).
 

chimmytime

Senior member
Jul 26, 2002
702
1
0
You've all been very helpful.

Originally posted by: MadPeriot
In my situation at 27 years old living in So Cal:

mortage: $2200
Utilities (water,trash, gas, elec, cable, internet): $240
401K: 10%
Living expense: $250

0 debt, 0 car payment, and 0 in savings. Just bought a condo with all my savings.

Are you living by yourself, or do you have a roommate helping the mortage?
 

sirspotti

Senior member
Dec 29, 2004
497
0
76
Originally posted by: Demon-Xanth
Usually they say 65% of gross.


That sounds pretty good. You may have to eat a lot more ramen and mac and cheese for a while but that is what college trains you for. Also, think about whether living away from home will make you happier than being with your parents all the time. You cannot put a price tag on that.
 

Miramonti

Lifer
Aug 26, 2000
28,653
100
106
If you have EXCELLENT credit, spend as much on a house as a mortgage broker will loan you.
 

Ferocious

Diamond Member
Feb 16, 2000
4,584
2
71
Originally posted by: NogginBoink

Put as much as possible into 401K and other savings. This is the period of your life where you will have A) the fewest expenses and B) the most time for that saved money to earn you a decent retirement. When kids, wives, bigger houses, and cars come along, A) will no longer be true.


Yeah, nothing like the divorce you will probably have (statistically) to mess up finances.
 

dullard

Elite Member
May 21, 2001
25,815
4,364
126
It that were me, I personally would:

a) Put all that I can in the 401k until you meet the company match. No more and no IRA. Why no more? (1) You don't have the money and (2) you can get the same return with zero risk elsewhere. If you get a house you'll have loans. Loans that if you pay back more principal, then you need you will pay less interest. A mortgage now is about 5%-6% and possibly a down payment loan would be 7%-8%. Putting your money there is a guaranteed zero risk 5%-8% return on investment year after year. But if you put that same money in the stock market which has been flat for 5 years, you have a risky investment which isn't likely to return more than 5%-8% long term (and likely 0% or heaven forbid losses short term). No risk vs risk. Either way, time compounding of money will leave you financially the same long term. But one has no risk at all. There are minor tax differences between the two options, but at your income the tax savings is negligible either way.

b) While you may be able to afford more, in your situation I wouldn't want to spend more than $800 a month on housing. Of course, I don't know if that is possible in your situation. You are still going to have ~$1500 a month in other expenses, then include your 401k and you've nearly already spend your entire $2500. You'll have no money for fun, for emergencies, or anything else. You can try to skimp and save and be miserable to afford more than $800/month. I just refuse to give advice for people to be miserable for years without furniture in a new house eating nothing but ramen noodles and watching TV with a fuzzy antenna reception. Heck, if you could find a nice home for a less than $800/month I would definately consider it. Note: this number includes principal, taxes, interest, and insurance.

c) Varies dramatically by location, house age, house style, etc. On your limited income, I would definately pay close attention to average gas/electricity bills on all houses you look at. A fancy 100 year old house might run $400 a month to heat in the winter while a charming 20 year old house of the same size may require $80 a month in the winter.

d) To afford a decent house on that budget, you will have to keep these living expenses small. Treat yourself a little though. Don't be miserable. However, learn from some on this forum on how to save on everything you buy. For example, a lunch date at a fancy restaurant may run you $15 while the same date at the same restaurant with the same food for dinner may cost $50. Think about that everytime you buy something. There is always a cheaper way to do the same thing.

e) I don't think you have much left to save. Try to accumulate enough that you can survive for as long as it will take to replace your current job if you lose it. Some jobs can be replaced in a few weeks. Other jobs require many months. So no one can answer this question but you.
 

BlueD0T

Member
Sep 11, 2004
49
0
0
Originally posted by: HombrePequeno
Originally posted by: BlueD0T
a) Put upto what you job matches. for me that %4. your way to young for an IRA.

You're never too young to invest money tax free.

In the long run, putting more money into a Home (mortgage) would give him a better return that anything you can make in a IRA. A house is an investment, that will always give a better return than IRA. Some kinds of IRA?s are tax free but a mortgage can be tax deductible.
 
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