how much house should I be looking for????

[stillbr]

Hope this is the right place to post this.

I am 23, recently married, no kids, graduated from college 1 year ago. Income of 43k/year. I have a good secure job, and can expect 5% raises and 3% bonus every year. I also expect a promotion probably 1-2 years out and will get a 10-15% raise at that time. However, obviously nothing is ever 100% certain.

My wife is 23 and makes a steady 30k/year and expects no raises.

We have 0 debt of any kind.

We plan on my wife being a homemaker when we decide to have kids. This will probably be a good 4 years or so from now.

We live in Huntsville, AL where the real estate market is pretty reasonable.

After paying off debt we have been able to build our bank accounts up from basicly $0 to about 18k in the past 8 months or so.

Question---
What should our price range be for our first house?
-I dont think we should count what we are both making together since she'll stop working in 4 years.
-I dont think we should just count just my salary now considering I can expect various raises before she quits work.

Given this is a frugral place , What seems reasonable when we start looking for a house in a few months?

[Darlene]

We bought with only one salary in mind. "They" said we could afford a house that was more costly but we knew that prices rise, taxes go up, homes need maintenance & we didn't want to be a slave to a tight mortgage so we bought much lower. Others can give you the numbers, I just wanted you to know what worked for us. I've been a sahm and we raised our children here. We are mortgage free and live in a nice home on almost 5 acres. It's not a McMansion but a normal house, lol. Don't be house poor and a slave to a huge house and all that comes with it.
Good luck!

[bumplett]

I agree D ~

I'd say only purchase what you need -

good luck!!

[bridge]

Remember, the bigger the house the bigger the energy bills will be.

[momtoadiva]

Buy whats best for your money and with that in mind there are utlities to think about keeping it warm in winter, cool in summer. Other wise you could always sell before moving on to the next stage in life. For us buying a home is an investment, so we buy low and work on it for the equity.

[sdrjeolsen]

Officially, the bank will lend 36% minus monthly debts or 28%, whichever is lower. I know they used to fudge the rules all the time, but with the meltdown, I hear they are a lot more strict.

Going by the banks rules and considering you have no debt, with both your incomes73,000 x 28%/12mo, you could carry a debt load (Principle, interest, taxes & homeowners ins) of 1703/mo. figuring about 1300 of that as actual mortgage -30 yr fixed @ 5.25% interest, you are looking at about 235K loan

We always bought well under what we could afford (till this current house) and then made extra payments so that we could be debt free sooner and have more options availble to us. Good luck.

[frugalmel]

Hi. I don't post here often, but since I am living in the area you are asking about, I thought I would give you my .02 cents.

Huntsville can be expensive, at least in my opinion. I wouldn't count on the raises or promotions you are supposed to get. If she is going to quit work, don't count her salary in for house payments, etc. I would begin to live off of one income now, and save/pay off bills with the other. Work out your budget with your bills and etc and see what kind of house payment you can really afford. Do you like to eat out occasionally? Take trips, etc. The reason I say that is what the bank says you can afford and what you can afford and live comfortably may be two different numbers.

Also factor in travel time and traffic. Where do you work? How long of a commute is reasonable to you? My husband works on the Arsenal and we live in Harvest. If we had to do it again, we would have moved to a different area. Not because we don't like our house or our area, but because of the commute.

There are varying housing costs within very close proximity to one another. We live in a neighborhood that houses range from 115 - 140K. Down the road a mile there are 200-300K houses. Inside Madison city its the same way. I don't know much about the housing in Huntsville city limits.

Do you have children or plan on having them while in the area? If so, besides figuring in childcare costs, you might want to think about schools.

I hope I have been some help to you. If you have any questions, feel free to ask away. I am not here often, but Missy can get a hold of me.

Good luck on your house hunt.

[auntie2many]

I have heard a few financial experts say to expect to not exceed 33% of your income on a house payment. That includes property taxes, homeowner's insurance and if I remember correctly utilities as well. This particular expert also said to only count one family members income because as soon as children come, one of the parents usually wants to be at home with them.

Have a solid budget in hand and consider also if you will need new vehicles once your family expands to have children.

It sounds as if you and your wife are heading the right direction. Good luck!

[sweetlittle]

Great for you for asking. Just that means that you are heading in the right direction (to me). I agreee with all the posts. I would add that if you have any trade skills that would help upgrade or maintain your home then purchase a fixer-upper matched to your current skills. You could save alot of money over time Even an interest in these skills can go a long way as a hobby work and by adding value to your home. You can pace yourself at upgrading your home instead of buying something more expense right from the get go. Best of luck.

[FrugalMomof3]

I think it's great you want to purchase a home, it's a big step.... my suggestion to you is dont even count your wife's income from the start or you will be approved for a high mortgage which means high mortgage payment and a bigger home with higher energy costs.

I would recommend maybe for now a 2-3 bedroom home but it really depends on what you prefer, 1 or 2 bathrooms, family room, large kitchen, dining room, living room (how big), etc..

I would start out small with minimal size rooms but with 2-3 bedrooms and possibly 1-2 bathrooms, since you plan on having kids in the future my question would be do you plan to move when the children come along?

Either way I bid you good luck in your house venture and one more thing, dont choose the first house you see.

[Iwant2BDebtfree]

This is so difficult because we are going through the same thing. We are weighing our list or wants VS. needs. We need at least 3 bedrooms and though 2 baths would be great that is much harder to come by here...We NEED an in law due to TC's mother coming to live with us--so we could use her bath
We NEED a decent sized fenced in yard because we have 2 kids and 2 dogs. We WANT something that the work has been done but only NEED somewhere livable that we can make our own.
Price ranges here for what we need are $275,000-$310,000 and what we WANT are closer to $325,000-$350,000.

We have been putting away almost $600 a week to see how doable and uncomfortable that is for us since we are looking at $2400 with principle, interest, taxes insurance and we have to pay PMI if we don't have 20% to put down.
We will also have $500 per month from TC's mom towards bills/expenses.

It's tough but you really need to sit down and weigh the wants/vs needs...if you have been socking away cash for the last 8 months comfortably, then you need to see where your comfort level ends. Try not to overextend yourself...but in my theory--I'm not buying just for the sake of buying..I am going to get want I need and some of what I want.

[fuzzybunny]

I agree with what everyone has said so far.

You should also consider what your plans are for the house. Are you going to just be getting a starter with plans to sell later and trade up or do you plan to stay put for a while?

If you are planning to stay put for a while you may want to consider finding the cheapest apartment you guys can stand and living there until you deciede to have kids. Use the four years of double income and cheap housing to sock away every penny you can. You will be able to get "more" house with a bigger down payment and still have a manageable payment. Or reversly you can still get a smaller house but have a much smaller payment. Then you can make larger payments but if bad times hit (and they do) you will be able to redirect that money else were and have a house payment that is manageable through hard times.

If you are planning to try and do the equity trade up thing then you might want to see about getting into a small cheap house now and plan to do your trade up when the 2nd kid comes or there abouts.

Finally, keep in mind that what many Americans consider an "average" house really isn't for the rest of the world and wasn't for Americans either up until recently. Stainless steel, granite counters and 5,000 sq feet is nice, but if the payment will kill you when hard times hit its not worth it. Avoid getting sucked in to to much house. The bigger the house not only means a bigger payment but also higher taxes, utilities and repair/remodel costs.

Write down what you absolutely need, honestly need and not what Better Homes and Gardens tells us we need, then write down your budget and then stick to it! Take that little piece of paper with you whenever you look at houses and no matter how much you like the house or how much the brokers tell you they can "get you in" don't deviate. A house is nice but when you consider most marriages break up over finances you don't want your dream home to eventally lead you to bankrupcy or divorce court.

[rachelMcK]

What I would do is figure out what you can afford on just your income right now. Don't include the bonuses or raises, that way, when you do find a house, and you do get those raises, you can apply the raises as extra money towards the mortgage. Thats what I would do anyway.

[Christa]

Remember that you don't have to settle now on the house you will live in forever--a little starter house can be a great way to build equity, and if you get in the habit of saving most or all of what your wife makes you will be in amazingly great shape in a couple of years when you are ready to have kids. I only wish we had had the foresight to do that!

[cottageliving]

I don't know the housing costs in the market you're in, but I've been in mortgage lending for over 20 years.

You want your total housing payment (PITI: Principal & Interest, Taxes, and Insurance) to be around 28% of your Gross monthly income.

$43,000/12 = $3583 per month x 28% = $1003 per month.

Can you get a starter home for around that monthly payment? Not sure what the taxes or insurance costs are in that area of the country.

you could most likely go a little higher since you are debt free, but do not stretch. You will want to have extra cash flow for savings and the small and large emergencies that I promise will come up.

The nice things about if you stretch a little now, your spouse is working and you can use her income toward paying down the mortgage until she stays home, or you can set aside her income for use in four years when your plans will be for her to stay home.

Happy house hunting!!