I need someone with nothing to gain to tell me what a realistic budget for my first home is. The details are as follows: Household income is around $175,000 gross a year. We have no debt. My credit score is 780 according to Transunion via my banking app (I know those aren’t always accurate.) We have $50k we could put toward closing, down payment, immediate repairs etc. I come from an underprivileged household and have no context for how to navigate this. Buying a house has always been a dream and I want to love it but I also don’t want to set myself up for hardship chasing feelings. So don’t spare my feelings!
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I think it’s best to calculate it yourself.
Bring out an excel spreadsheet. Calculate the following: (your monthly take-home - all expenses including estimated utility bills, HOA and insurance at the new place), (your monthly gross * 0.36 - monthly debt payments), (your monthly gross * 0.28)
Of those three, choose the smallest.
Then, find the maximum your mortgage can be from that number. I might be wrong, I think the command is (=PV((max monthly payment * 12), (APR), 30)
That should give you the maximum you can lend.
I think the common answer you may get is we need more information because we do not know what your spending is like outside of debt, how much you are currently saving or want to save post-house, etc. I am not actually a homeowner (yet) so take everything I say with a grain of salt but considering my situation is very very similar to yours I will try my best to give you my thought process (Anyone please feel free to critique or agree as needed):
My situation for context: 170k gross, ~80k down payment, similar credit score, similar debt (I have a small amount from car loan), also did not know anything before looking for houses myself.
These are the general steps I followed when mapping out what I could afford:
1. Understand your current spending and make a "future state" budget of what you are comfortable/think is reasonable based on your current lifestyle (EX: If you and your family like to eat out a certain amount, determine if that is something you are willing to cut back or if you want to maintain that after you have a house) - I have an excel template I use to track everything each month so if you want to see it to get an idea you are more than welcome to IM for it. There are infinite variations online as well.
3a. Look at your current market to see what is around you and compare it with your own expectations and what you want in your future home.
3b. I reached out to lenders near me to get an idea of what they would quote me given my financials and see how my desired monthly payments line up with their quotes. This also allowed me to set realistic expectations on what houses in the market I could/wanted to afford. 2 important notes on this: 1. Unless you are looking to buy a house within the next 90 days ensure you specifically request them to do it with a soft credit pull instead of a hard credit pull (you do not want a pre-approval) 2. They may say you can go up to X number before hitting your max DTI ration that they will accept... this could be a good or bad thing depending on your monthly number but remember to stick to whatever loan amount sticks within the budget you outlined in step 1!
I know this was a lot of rambling and was mostly just my thought process to get to where I am today but happy to answer any questions or provide more details if necessary. Good luck!
3 times your net pay so about $400K
Similar information as you. I did all the calculations and decided $400k is the top purchase price I am willing to go, is what I want to go with because I want my monthly cost under $3k before utilities. I also only want to put $25-30k between down payment and closing cost and keep the rest of the cash for whatever will break. Here is the breakdown cost sheet I got for my pre approval to give you some idea on closing cost, cash we got to bring and monthly payments estimate
https://preview.redd.it/6englu3u2t9g1.jpeg?width=1206&format=pjpg&auto=webp&s=bbdfa03a3fe992ebd7ae4ce85c667a23a0abb1f0
payments.
We're also similar financial situation and income as OP. However we are fortunate enough to be able to use a VA loan and not pay PMI and we will be exempt from property taxes too. So our max purchase price will be $450k and goal to get a payment between $2k-$2.5k/month. Also there's no homes for sale less than $400k around and that's with us already planning to purchase way far outside of town, so we had to be willing to look wide and also have a bit of an increase in what we're willing to pay
OP can use the NACA Purchase Program to get no down payment and no PMI.
You are the only one who can make a budget. You know what your costs are.
Another “this isn’t possible to answer” response.
You and your partner need to decide what you can afford based on your income, expenses, and lifestyle. No debt is good, but it’s only part of the story.
Then, you have to figure out how to back into a house price based on your area’s property taxes and insurance norms.
Next, you have to figure out if what you believe your needs and wants in a home and what you can afford are aligned with your area norms.
How do you decide how to afford other things that you plan to spend money on?
Online calculators and out-of-date 'rules of thumb' generally are not specific enough.
Meet with a local lender to find out how much you can spend based on your income and debts. The amount they may lend is your budget. Also, ask about estimated closing fees so you have an idea of those costs.
If you hire a buyer's agent, they can describe the costs to complete a real estate transaction. This may include items such as agent compensation, inspection costs, lender costs, legal Fees (attorney, title search, title insurance), earnest money deposits, homeowners' Insurance, flood Insurance, appraisal, utilities, HOA Fees, assessments, property taxes, etc. All of these need to be included in your budget.
Thinking is not knowing.
My a device to you is the same advice I give to my clients.
Apply for a loan with a local lender and let them tell you the max you are eligible for.
From there determine the max you are comfortable spending.
Compare the amount to what's available on the market to determine if it is enough or too much for what you are looking for.
The lender gets paid when you get your key, so reach out now and ask questions until you get your keys. To many buyers wait until the last minute to bring in the lender and they they feel rushed
Bro, don’t make it hard… by the cheapest house in the safest neighborhood that doesn’t need any repairs. That you can get a 15 year loan on and then pay it off and seven and have no mortgage…. Like a $200,000 house.
Live in that house while you save up for another down payment … this time buy a house you love. And rent out the other house. Never sell it.
Because now you’ll have an extra income for the rest of your life… and you can use that payment to pay off the new house loan