Working Moms

Curious about your mortgage

DH and I are starting to talk about buying a new house - we hate living in a condo association and when baby #2 comes along we'd really like to have one more bedroom and our own backyard. I'm curious what percentage of your gross pay your mortgage payment is (including insurance & taxes)? Ours is currently only about 15% with no other debt, and I'm trying to figure out how anyone could pay significantly more than that when you factor childcare expenses, retirement savings, and college savings into the budget. Realistically we will need to take on a slightly larger payment to move, and I'd like to think we can manage it - we live very comfortably otherwise and could definitely cut a few corners for a year until kids are in school and we don't have daycare expenses or a nanny to worry about. Reassure me that it isn't crazy to take out larger mortgage that would require more like 25% of our income?
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Re: Curious about your mortgage

  • With escrow ours was about 25 when we bought which based on the stats I read for our area is actually a lot lower. Now it's more around 18.
    We were approved for much more so I think some make it work.
  • Ours is really low - about 10%.  A lot of people can handle more, but IMO you need to put together a budget that covers all of your fixed expenses, and base your mortgage payment on how much of your NET (not gross) income you can afford after your other known expenses.  I would also factor savings into your budget, so you don't end up taking on such a large mortgage that you don't have any money to put away.

     

  • SoMoNYSoMoNY
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    Of our 4 pay checks each month 1 goes to mortgage, 1.5 pays for day care and bills and other 1.5 goes into savings/emergency fund.

    We were approved for a bigger mortgage but at the time we didn't want to over extend ourselves during fertility treatments and didn't want to make big adjustments to our lifestyle.

    I could see going over 25% if you both plan on continuing to work a while and there is growth ahead as this means what could be 30-33% today will be back down to 25% a few years from now.   

     

    Editing to add the 1 paycheck covers mortgage, insurance and taxes. 

  • SaraTFSaraTF
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    I recommend looking carefully at what your budget can handle. We tried to get a mortgage that we could pay on one income, in case one of us lost our job. With our hoa dues, taxes, mortgage, etc., our housing is a little over 15% of our pre-tax income. However, we live in an area with reasonably priced childcare. We also have no other debt. We're comfortable at this level, even though we could have gotten a much higher mortgage loan.

    Also, be sure to think about all the other expenses that come with owning a larger home. Lawn care, roof maintenance, higher utility bills, hoa fees, etc. We recently moved into a larger house after renting for a year, and I had forgotten how quickly those small fees (e.g., new blinds or replacing the garbage disposal) add up.

  • image SaraTF:

    Also, be sure to think about all the other expenses that come with owning a larger home. Lawn care, roof maintenance, higher utility bills, hoa fees, etc. We recently moved into a larger house after renting for a year, and I had forgotten how quickly those small fees (e.g., new blinds or replacing the garbage disposal) add up.

    This is a good point.

    Also, if ou are planning to have another LO soon and will be adding to your DC bill, take that into account as well in a worse-case-scenario budget. 

     

  • Our mortgage is currently about 8% of our gross pay but 15% of our take home pay.  However, we bought our house 9 years ago and it was a much higher percentage of our income at that time, closer to 30% of our gross pay.  We were very early into our careers and have doubled our income since then and we refinanced and lowered our mortgage payment due to lower interest rates and having paid down principle over the last 9 years. 

    We put 15% to retirement, save for college, have general savings, pay for daycare, travel, etc. and are saving now for the next house, which will double our mortgage payment, but will still be affordable for us.

    I would put together a very detailed budget to see what you can comfortably afford to pay monthly for a house and go by that, not necessarily percentages.  If you make 50K and your mortgage is 25%, that only leaves you $37K to live on which could be hard. Whereas if you make $300K and your mortgage is 25%, you still have $225K to live on which seems totally manageable. :)

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  • Of our take home pay, it's about 24% inclusive of taxes and insurance. This is a bit of a rough number since we don't escrow either taxes or insurance and we don't pay mortgage insurance.

    Of our gross pay it's quite a bit less than that. We have found this to be quite doable.

    Daycare at DS's new center will cost about 12% of our take home pay.

     



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  • Our mortgage is 17% of our gross pay and 25% of our net pay.  

    Like other people said, it's all relative to how you live and budget your money.

    Just create a kick-butt budget and review it before you buy. 

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  • image SandAndsSea:

    I would put together a very detailed budget to see what you can comfortably afford to pay monthly for a house and go by that, not necessarily percentages.  If you make 50K and your mortgage is 25%, that only leaves you $37K to live on which could be hard. Whereas if you make $300K and your mortgage is 25%, you still have $225K to live on which seems totally manageable. :)

    I second the above.

    FWIW - our mortgage is currently 27% of our net pay. We live in Canada so our interest is not tax-deductible, so we accelerated our payments such that we'd have the house paid off in 12 years. If we went with the normal 25 year amortization schedule, then our mortgage would be 15% of our net pay. We put another 25% of our net pay towards retirement savings; and DC for DS cost us about 12%. We only have one car, no other debt, and don't spend a lot of money on discretionary items, but we do go out every weekend and live comfortably.

  • skyejoskyejo
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    Our mortgage is 9.5% of our gross pay.  We bought the house five years ago, our income has went up a ton, and we refinanced twice.  A lower mortgage payment is working out great for us right now.  We're able to pocket 20% of our net into savings, fund 529s and retirement, etc--things that would have been greatly reduced if we had a more expensive home.

    12% of our gross goes to daycare--MORE than our mortgage! Once the girls hit schools the bulk of that percentage will be used on a new house.

  • hocushocus
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    I think gross pay will very problematic as a indicator for this post. Gross pay varies a lot from region to region due to taxes and different costs of benefits.We're looking at a mortgage payment that would be 40% of our take home pay which is a lot I know but we're OK with that. It is very common to spend that much of your take home pay on housing in our area.

    Fundamentally only you know can know if it would work. I would take your new housing payment and start banking the gap between the "new" and what you pay now to see how tight it feels. 

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  • We're at 17% in a VHCOL area.  We bought a less expensive house than we were approved for.

    It's easier to put a larger % of your salary towards your mortgage when you make more money.  You have certain fixed expenses that probably don't change much, even if you were to get, say, a $25,000 raise.  For example, we would send DD to the same daycare, drive the same cars, etc. Our grocery spending wouldn't change much, nor would health insurance costs, etc. So we could in theory put the extra money towards mortgage (although in reality we'd put it mostly into savings). 


  • Ours is about 21 percent of our net.

    Sometimes I get upset bc it's higher than it should be, but at the same time, we are also in our forever house. We live in a great area, plenty of room, really nice interior upgrades [ie Amazing kitchen]

    Like PP's have mentioned, you just need to really look at your budget to see what works. While we take vacations and drive newer cars, they aren't lavish vacations and we don't own a BMW or Audi, kwim? Trade off
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  • Working the percentages from a gross standpoint never really meant much to me. I find it makes more sense to me to work from our net.

    In your case. I would create a budget and see where you are. When I started creating my budget, I went back about a year so I could get averages on variable expenses, like utilities and also credit cards. I use Quicken now, so when I decide to update the budget I can run reports on things like that.

    We have two houses. We both came to the marriage with houses and since my DH was, and still is, under water with his, we haven't sold it. We couldn't take the loss on a sale and I'm not willing to take the credit hit of a foreclosure when we can still afford the monthly payments. In any case, the house we live in is ~16% of our net income. We escrow, so that includes all our taxes and homeowner's insurance. His house would be about 8%, also including taxes and insurance. We're not hurting financially (fortunately the cost of DC in our area is low), but I can. not. wait to lose one of the payments.

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  • 9% of our gross, ~25% of our take home. 
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  • JJ_13JJ_13
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    image mexicolombiana:

    Our mortgage is 17% of our gross pay and 25% of our net pay.  

    Like other people said, it's all relative to how you live and budget your money.

    Just create a kick-butt budget and review it before you buy. 

    This is us exactly. I only work part time, however, so I am not maximizing my income potential and am considering looking for either higher-paying jobs or going full time. We can do it, but it's tough with DC, SL payments and other life stuff! We are in a MCOL area.

  • ccamccam
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    Ours is about 25% of our net pay.

    ETA:  The only other debt we have is my car. 

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  • We pay about 18.5% of gross income and about 26% of net income. We have one lowish car payment, not much CC debt and my student loans which are also pretty low. We both contribute to retirement, but we don't have enough of an emergency fund.
  • 14% when we both were working full time
    18% with me working part time (current sittuation)
    26% what it would be with just DH working.

    Personally, I wouldn't be comfortable with it higher than 30%.

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  • We pay about 17% of our gross, or 30% of our net pay, including escrow for taxes and insurance. We also pay about $300 extra a month, but on a non-committed basis.


    Prior to deciding to buy, we did a few months of a trial run - pretending that our rent payment was what we'd be paying for the house, and trying to see if we could comfortably make it work without dipping into savings... I wouldn't make any changes without doing the same now.

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  • Thanks ladies! The trail run is a great idea. We have a very detailed budget, but a lot of it is fluff (e.g. eating out, travel, etc) that we could probably cut way back on - I just wanted to check myself on whether anyone actually is comfortable budgeting more than we currently do for housing. Sounds like not really, ha!
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  • Ours is around 20% of our average net in a HCOL area. But my income varies because I'm self employed. We're not comfortable going any higher because of my income fluctuations and the fact that we have significant student loan payments each month as well.
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  • of our gross salary our mortgage is about 17%...but I never base anything off our gross salary. All budgeting happens off our NET income after 401K, HSA, Taxes are taken out of our pay. Of our net pay our mortgage is about 24%.

    And as pp mentioned you will almost always be approved for more than you should really spend. The best way to figure out what you are comfortable with is to really do a detailed budget to see what you will be comfortable spending.

  • Ours is probably close to 33 percent when property taxes and insurance are factored in. We live in a VHCOL and its fairly standard around here. Either you bought your house all cash or it eats up a third of take home.
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  • I just refinanced so I will give both number.  Before refi it was about 25% of net income after refi is about 20%.  I purchased my house way before getting married and can afford it and the expenses for house and living expenses for 2 people on my salary alone but it is very tight.  DH's salary goes to DC, his camper payment (which we are making double payments) and the extras.  Just make a budget that works for you and your family.
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  • Ours is about 25% and things are pretty tight for us right now bc we have 2 student loan payments and 2 car payments as well. No fun.

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  • We bought in DH's name (my credit isn't fabulous as I took all the debt in my first marriage).  So this was a great food for thought question....Ours is 9% of our gross.

     

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  • shannmshannm
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    Originally, it was about 16. Now with increased income and a refi, it is around 13. Could go back to around 17 if DH stops moonlighting or it could be as low as 9 percent if I could land a different position. With daycare and tuition costs over 30k/year, I wouldn't want to handle any more.

  • When we approved for a mortgage we could have gone up to 30% of gross. Instead we went with about 20% net, thinking we were being really conservative. We should have been a *lot* more conservative. In addition to our home losing a lot of value, my husband lost his job about a year after we purchased. We hung on for a year until he finally found a job- making about a half what he used to. I always thought we'd be buying this house as a starter home, and would get something bigger and better down the line. Now I daydream about downsizing and getting something cheaper so we can reduce our payment. My opinion on what I need in a home has changed radically since we purchased 7 years ago.
  • We don't escrow, but when I do the math to include taxes/insurance, it comes out to about 11% of our gross salary.  It's about 20% of net.

    When we bought our house, it was about 17% of our gross.

    FWIW, we live in a LCOL/MCOL area. We fully fund our 401K's and partially contribute to individual Roths. Also have a college fund for DS. Cars are paid off as well.  Once DC2 arrives, we'll have ~$2K per month in DC costs.

    Frankly, I enjoy having a mortgage that's well within our means. We don't have to really budget, have plenty of liquid cash, and can afford nice vacations. We also pay a significant amount more than we need to toward our mortgage in the hopes we can have it paid off by the time DS starts college (the numbers above are based on what we're obligated to pay each month, not what we actually pay, which is closer to 28% of net).

    I'd much rather have that security than a larger house or a house in a more prestigious neighborhood. Plus, we could live on one salary if needed.

    Ethan Michael - 12/21/09
    Norah Jewel - 2/26/14

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