Would this amount of mortgage be a bad idea for someone with my income?
September 15, 2016 1:49 PM   Subscribe

I'm looking into buying a house for the first time, and I need opinions on whether the amount of mortgage I'm looking at is a bad idea.

I will be buying the house on my own. Boyfriend is involved in the decision making and we're going through it together, but for simplicity's sake, it'll only be my name on paper and I'll be paying the down payment on my own. Outside of the relationship, I know I want a house in this city for the future (family nearby, good town to settle in, easy to rent if needed), so this is not something I'm planning to sell in five years.

I have a lot of savings. I'm able to put down 20% and still have a good amount in investment/retirement.

Neither of us are in debt.

My income is 45k and his is a bit higher. We are paying $1400 in rent right now. The houses we're looking at would put us at around $2100-2200/month(taxes and fees included). We would be splitting everything in half.

Is this a reasonable range to be in?
posted by monologish to Work & Money (43 answers total) 5 users marked this as a favorite
Is the bank willing to give you a mortgage when the monthly payment would be more than half your income? It might work differently where you are, but as far as I know your boyfriend's income isn't considered toward your ability to pay the mortgage unless he's on the lease/deed/whatever. I mean, either way, if you're not at the point in life with him where you're comfortable putting him on the documents, then you really need to consider what happens if god forbid the relationship falters and you've got a $2200/mo mortgage on a $45K salary.
posted by griphus at 1:56 PM on September 15, 2016 [18 favorites]

How many bedrooms? Would you consider renting out a room if needed to make ends meet - if boyfriend leaves or if one of you loses your job? if that is a viable back-up plan, I would go for it if the bank will give you the loan.
posted by metahawk at 1:58 PM on September 15, 2016 [1 favorite]

Since it is only your name on the mortgage, and he is only a boyfriend, are you comfortable with your housing costs jumping from $700 ($1400/2) to $2,000 ?

How you view that would be my answer (whether by being ok / dual ownership / marriage).
posted by osi at 1:58 PM on September 15, 2016 [2 favorites]

Your net take home pay is about $3K per month after taxes? That's a pretty high debt load. If you have enough saved to cover any issues, sure, you won't immediately go broke but it does not leave a lot of room. What does your current budget look like?
posted by GuyZero at 1:58 PM on September 15, 2016 [1 favorite]

I have a similar salary (and husband same) and I would not do this. Aim for your current rent or lower. You need money for when the furnace breaks, a pipe in your ceiling bursts, your stove and fridge shit the bed, etc....
posted by soren_lorensen at 2:01 PM on September 15, 2016 [15 favorites]

Definitely would rent out a room if it comes to that. I do already have a pre-approval with a bank and the max amount is in this range.

I don't have any huge monthly spendings right now, but would probably need to budget more after buying a hosue.
posted by monologish at 2:04 PM on September 15, 2016

How Much of Your Income Should You Spend on Housing?

I've always heard that you shouldn't spend more than 30% of your income on housing... that article suggests no more than 43% of your income be spent on a mortgage. Remember, you'll also need to have money available for house emergencies and general upkeep/maintenance costs (which will no longer be covered, as they were by your rent) as well as paying your mortgage.

Understanding the rental market in the area where the house is might help you understand if renting a room would be an option (and how much you could potentially hope to rent for) if the relationship with your boyfriend does end.

What if you lose your job? How long could you carry this high mortgage for on your emergency savings? (Without touching retirement savings?)

Personally, I would say no on this, for me.
posted by warble at 2:06 PM on September 15, 2016 [4 favorites]

I would not do this. I found it a huge adjustment when I bought my house years ago, and my mortgage is less than yours, and I made substantially more.
posted by uberchet at 2:07 PM on September 15, 2016

A third of your take-home pay is a reasonable amount to spend on accommodation. 50% is considered extreme. So on that basis I'd say no. But it depends upon the situation with your boyfriend. Are you definitely getting married? Is this long term? I would check very carefully with a lawyer what ramifications there are of splitting everything, and document with him the precise financial position you expect in an agreement your lawyer is happy with. If you were, for example, to buy the house yourself and then have him as a tenant (properly documented) then the financial side might make more sense.
posted by tillsbury at 2:07 PM on September 15, 2016 [2 favorites]

I wouldn't buy in this range, and my family makes mid 60k. I'm a 1/3 of monthly income or less kind girl which would put me at between 1,600 and 1, 750 as a max.
I dont have children but shit happens and Healthcare is way to expensive for me to do otherwise.

I currently rent for $750 a month on my income.
posted by AlexiaSky at 2:09 PM on September 15, 2016

If you are the one buying it and assuming all the risk of the loan, you need to be able to pay for all of it on your own. It's your credit rating that would suffer if the boyfriend is no longer in the picture and you can't cover the monthly payments.
posted by cecic at 2:15 PM on September 15, 2016 [9 favorites]

I have a lot of savings. I'm able to put down 20% and still have a good amount in investment/retirement.

It is possible that you have been pre-qualified for a loan in this range because of the assets you have. In other words, the bank thinks that if you have an issue, you can still pay your mortgage by drawing on these other assets. Are you comfortable with that idea? Do you want to spend your savings and retirement fund on your mortgage if you and your boyfriend break up or the house needs unexpected repairs or you lose your job and it takes time to get a new one?

As others are saying, this range is uncomfortably high for your stated income. I am guessing the bank is only approving it because of the other assets you have. The implications here are that you are putting yourself in a position of needing to potentially run through those assets. If that is not okay with you, then you need to look for something smaller (or get married first and base your mortgage on your combined incomes, not just yours -- at the moment, you may need the BFs income to make the mortgage, but he would not legally be on the hook for the mortgage if the house is solely in your name).
posted by Michele in California at 2:16 PM on September 15, 2016 [14 favorites]

That's a lot more than I'd be comfortable with. Remember that there will be a lot more to pay than you think--water bill, gas bill, electric bill, internet, etc. There will probably be more in initial costs for home repairs than you expect, and that can add up like crazy. Even the little stuff--new smoke detectors, paint, tools, all that will add up too.
posted by Slinga at 2:24 PM on September 15, 2016

Hell, no.

When we bought our house, our combined income was about $125k (One FT professional, one feast-or-famine freelancer.) We were approved (this was 2009) for maybe $350k mortgage or something insane. We underbought significantly; our PITI is $1900. When we were both working full time, this was a breeze, but even on one salary, we're fine. I can't say enough for significantly underbuying (vs what the bank will lend, or what your ideal house costs.)

We're white collar in a low COL area, so your numbers will vary but the point stands.
posted by chesty_a_arthur at 2:32 PM on September 15, 2016 [8 favorites]

I make more than you and would absolutely not do this. If your property taxes go up, your mortgage can increase. We are now paying $200 more a month than we did for the past 3 years. That total payment amount is STILL only $800 a month, and I'm not rolling around in extra money. Houses are expensive, don't let your mortgage take all your resources.
posted by masquesoporfavor at 2:33 PM on September 15, 2016 [3 favorites]

I make more than you and I would not be entirely comfortable at your costs. I could do it, but I would feel stressed about it.
posted by Dip Flash at 2:50 PM on September 15, 2016

I would spend every night under that debt ratio in a cold sweat worrying about precarity. What's your salary likely to look like over time? How much would someone on your career path be making in three years, or five? How stable is your industry and employer, and how likely is it that you might find yourself with no income at all? Would it ever get better—MUCH better?

Bear in mind that homeownership comes with ongoing maintenance expenses, too, and not in a way you can plan for ahead of time. Sure, you can put off painting and redo failing caulk yourself, but there are other emergencies that come up you probably can't handle alone. If you're lucky, it's that your thermostat broke, and that's a couple-hundred-dollar fix. Or your lawnmower broke. Or your refrigerator. But every so often it's something much, much more expensive. The washing machine broke, and by the way it flooded out and now you have to replace the floor and several inches of drywall all around your laundry room, for a few thousand dollars. (Ask me how I know.) And every now and again it's... a lot worse. Boom! You need a new roof or sewer line, and that can be $15,000, depending on the specifics of your house.
posted by Andrhia at 2:52 PM on September 15, 2016 [2 favorites]

This is a big no from me. You could make this work if you were more committed relationship-wise (so if your combined income was approaching $100k, for instance), but if you're unwilling to put him on paper, you have to factor in just how long it would take to rent a room if things went poorly, and how many months you could carry the mortgage yourself without him.

You're taking home about $2,800/month in income, right? That leaves you basically NOTHING to live off of ($600, maybe) if he is no longer contributing. While you may have some savings padding, how many months can that carry your current standard of living if it's just you in the house?

Even still, this is a big step up, and a big step toward potentially becoming housepoor.

If you're confident that your market would support a half split for rent ($1,100 for the room, plus utilities... in a market where you're paying $1,400/month for two people) such that you could get someone in there relatively quickly, you'd still want to account for at least 6 months of you covering it all yourself.

And you say the $2,200 is "taxes/fees included"... but... what's that include? Utilities? Aren't they going to be even more expensive than where you live now? Do you have to pay water/sewer/trash? Is there landscaping? I pay $125/month for those for our relatively modest house. What about homeowner's insurance? That might be included in your monthly payment as a requirement from the bank, so you may be including those. What about a home warranty, or in lieu of that, repairs? An AC unit can cost $300 to repair, $1,500 to repair, or $5,000 to replace.

What about your other utilities? Internet is at least another $50, right? What about power? Another $100-$200, depending on your market, weather, etc.

My point here is there are a LOT of costs and you are RIGHT at the cusp of affordability with JUST the mortgage and only IF you have a renter.

This is a bad idea. Please be careful.
posted by disillusioned at 2:53 PM on September 15, 2016 [7 favorites]

I'd say no. When we bought it would be tight even at allegedly 30% of income (NOT take home pay) and then right off of closing we got laid off. Even ten years later, making more it was still kind of not easy to hit every month, with daycare and car payments and such. We just refied to take it down to 25% of take home pay (and paid off the car) and think we can make it.
posted by tilde at 2:57 PM on September 15, 2016

Absolutely not. You HAVE to plan for how you'd be able to keep this payment up on your own if the boyfriend disappears from the picture. Believe me, you don't want to be searching for a roommate just so you don't get foreclosed on while trying to go through a breakup. And really even on your two salaries that is far more than I'd spend.
posted by MsMolly at 2:59 PM on September 15, 2016 [3 favorites]

Agreeing with the nos--we bought a house and while the bank pre-approved us for significantly higher than we ended up borrowing, we chose to borrow only what we were already paying--basically our rent. We do pay ahead whenever possible to pay down the mortgage, and have knocked a couple of years off the payment time that way, but when my husband switched jobs he ended up taking a pay cut, which we wouldn't have been able to swing with borrowing the full amount the bank was willing to give us.

His new job is SO MUCH LESS stressful. Worth it.
posted by telophase at 3:14 PM on September 15, 2016

If you are the one buying it and assuming all the risk of the loan, you need to be able to pay for all of it on your own.
This. As Cecic said, the BF may not be long term, and as you carry the risk and responsibility for the loan you need to be able to repay it yourself.

However if the BF is long term, what is his stake in this arrangement? He is paying half YOUR mortgage, with nothing other than living in the house to show for it, not what I see as an equitable arrangement. If I was in his shoes I would not do this. I would continue to make my existing 'rent' payment, and share the non-house-related expenses (food, utilities etc), and let YOU handle the other half of those expenses PLUS ALL the house/mortgage expenses - it is your house after all.

Under your proposed arrangement I would also start to harbour some resentment at you, for buying a house with MY money ... unless there is more to this arrangement than you have told us.
posted by GeeEmm at 3:25 PM on September 15, 2016 [5 favorites]

Hard pass. Consider the upsides of not having every last bit of financial flexibility tied up in this house. They look like early retirement, not having to worry about whether you can pay bills, vacations, etc. etc. My income is twice yours, household income over that, and our mortgage is equal to your current rent, and I am very happy it's at that level and not gobbling up our financial flexibility.
posted by craven_morhead at 3:51 PM on September 15, 2016 [1 favorite]

I don't think this is reasonable. I was very recently in the same situation. I make $45,000 and have good credit, my (then) boyfriend makes $60,000 and has terrible credit. We had $40,000 in savings. For Reasons I bought a house totally in my name, without the bank factoring in his income or debt. We wound up with a $840 monthly payment with everything (taxes, HIC, etc) included. To be honest $840 would be pushing my comfort level on my own income, but with his help it's doable. We live in an area where the average house is in the $250,000-275,000 and we were lucky in finding a foreclosure with instant equity.

I cannot imagine taking on a $2000 mortgage. Different strokes for different folks, but since you asked I am voting no.
posted by pintapicasso at 4:01 PM on September 15, 2016

Eh, I'm not as negative as everyone else here. Presumably, if you pre-qualified for this mortgage, you have quite a lot of assets (because your income is nowhere near enough to pay for it). If you're fairly confident you'll make a lot more, or marry the boyfriend (or someone else who makes a good income) in the next couple years, it might not be a bad way to leverage your assets and get a place to live, without taking too high a risk. It may make more sense than investing the same money in the stock market, or spending it on vacations or something.
posted by miyabo at 4:02 PM on September 15, 2016

Anecdote: A year ago, we (2 income marrieds) went from 23% on (rent+electric+gas)/net pay to 28% on (mortgage+electric+gas+water)/net pay. Combined with all the up-front costs (a much smaller down payment than 20%), we still really felt the impact on our budgeting (partially because I'm very meticulous).

We were pre-approved for probably 70-80% more house than we ended up buying. That's what banks want, not what normal humans should want. Also, preapproval isn't approval.

If you do this, you should enter into an explicit written lease with your boyfriend. He should be your tenant. His rent should reflect the tradeoff of equity you're gaining and the risk you're taking on. It's not romantic, but if things turn sour, you'll be damn glad it's there.
posted by supercres at 4:04 PM on September 15, 2016

You have a pre-approval, or a pre-qualification?
posted by hwyengr at 4:05 PM on September 15, 2016

Pre-approval is not the same as the amount they'll let you borrow. I was pre-approved for a very large sum, but the amount they were actually up for lending me was far, far, lower than that. Pre-approval is based on your credit. The actual mortgage amount they will give you is based on income and debt load.

Even if you have actually been approved for such a large loan, I would really not recommend it. Houses are a lot more expensive than renting, in so many ways. Using up that much of your net on just the mortgage payments is going to leave you with very little wiggle room if something breaks (water heater) or needs replacing (like the roof. . .ugh).

I disagree with GeeEmm. Unless he wants to buy his own house, he would be paying rent to *someone* so it might as well be you. I don't see how that's unfair. I do think you should be the one to pay for repairs, etc, just like a regular landlord would.
posted by ananci at 4:07 PM on September 15, 2016 [3 favorites]

The top comment on this related Reddit question echoes my thoughts, just better laid-out. Unsurprising from someone actually working (self-stated) in RE law.
posted by supercres at 4:12 PM on September 15, 2016 [2 favorites]

Just as another data point, many years ago, the payment (PITI) on our first house was just about $2k, and we were making a little over $100k at the time. So it sounds like we'd be in about the same situation as you, if you factor in your boyfriend's income. It wasn't super tight, but we also weren't flush with cash, especially after all the other little expenses of home ownership were factored in. I wouldn't have wanted to go any higher on the mortgage or lower on the income. So if I were in your shoes, I'd do it if and only if I could completely rely on both incomes.
posted by primethyme at 4:44 PM on September 15, 2016

No. My husband and I were making over 100k together and our mortgage was $2k (that was bc we financed 100% and had no down payment). We qualified for much higher than that but you never want to borrow the max the bank will let you as that's overly risky. Anyway 2k was barely comfy for us. I cannot imagine taking that on at 45k. And this is a very bad deal for your bf to put $$$ into a property but get no equity from it. That's trouble for your relationship. Do not do this. Do not borrow more than you can afford . Aim for 30% or lower of you monthly income as a mortgage payment (and don't cheat with a low upfront but balloon or interest only loan).
posted by TestamentToGrace at 5:27 PM on September 15, 2016 [1 favorite]

No f-ing way.

I made $53K when I bought my house, and my mortgage and HOA was about $1100/mo, which was about as high as I dared to go on housing costs. It was considerably less than I qualified for, but it was at the upper limit of what I could afford. This was also in 2009, after watching a few friends and acquaintances lose their homes due to making just such a mistake as you're thinking of making--buying a house that they couldn't afford without someone else chipping in.

You make less money and want to spend twice as much. Super terrible idea. Your boyfriend might have "input", but it's not his credit at risk here, it's yours. Don't be foolish. If you cannot afford the house without a roommate (including a live-in SO), you can't afford the house. And frankly, I would be amazed if anyone would approve a mortgage for that amount at your income level.

Mortgage rates are low right now, so look for a less expensive home, or wait until you have enough money to bring your mortgage payment down to about $1000/mo. Yep, that means you might not be able to buy in your market. Beats foreclosing and ruining your credit for the next 7 years.
posted by Autumnheart at 5:40 PM on September 15, 2016 [3 favorites]

Nope. I make twice what you do and my mortgage is more like $1750 per month. Homes always need something spent on them.
posted by kitten magic at 5:52 PM on September 15, 2016

Nope. I make a good chunk more than you do and my mortgage plus student loans equals about 2k in output a month. It's manageable but not a lot of fun.

I've also been at your income and felt absolutely massively crunched paying $1100 a month in rent and student loans, and I didn't have to worry about a water heater breaking or dishwasher flooding or a sewer line backing up...

Now, I'm not the most frugal person. I like vacations and glasses of wine at bars and ski lift tickets and a latte now and then. YMMV if you are a frugal saver who goes home and clips coupons and makes casseroles in bulk.
posted by slateyness at 7:55 PM on September 15, 2016

56% DTI (and that's assuming you have no other debt at all) is 2006-level foolhardiness. I'm astonished you got someone to approve that. Don't do it. Sorry.
posted by praemunire at 8:12 PM on September 15, 2016

What everyone else said, plus; Many first time home buyers are so excited about getting a great house, and mostly fixated on how to make that work. We watch those home buying shows and cringe all the time. I always want to see the follow up a few years later to see how those people who "stretched" for the "must haves" feel now.

After a few years you may find yourself resenting that great house. Plus the fact that it's not so great if you lose it. I love where I live but am tired of paying for it. I would rather work less. I'd recommend the cheapest house you can live with, not the most you can afford.
posted by bongo_x at 9:27 PM on September 15, 2016 [1 favorite]

The thing my husband and I learned about houses is that unless you're on a really solid upwards-promotional career path, house-related costs (utilities, taxes, price of drywall, fridges, heating units) have been outpacing cost of living increases in salaries, which means less disposable income every year. With such a high mortgage + utilities + 1-3% of the value of your home in maintenance costs every test, it's going to mean giving up vacations, plane tickets to weddings, car costs, pet costs...and for years and years. And those are happy things; there's also breaking a leg or getting laid off.

Because if your costs are that high - you're talking about $1k+ each a month /before/ any additional expense - how will you save up for things?

If you are thinking of having kids, that's where a high mortgage payment absolutely screws you because you have to keep working, but then you have daycare costs.

Basically I think this would be a mistake that would leave you, even with your boyfriend's salary, very house poor.
posted by warriorqueen at 6:09 AM on September 16, 2016

Nope. I make twice what you do and my mortgage is around $1400 and I wouldn't want to go higher than that. We have had a ~$6000 expense related to the house pretty much every year that we've owned it (furnace, flooding, water heater + radon abatement + washer breaking...can't even imagine what it'll be next) plus we have to save for known big expenses like a new driveway and stuff. There is SO MUCH risk in owning a house that you can't even imagine as a renter. Aim towards the very low end of what your bank approves you for, not the high end. (See also: recent mortgage crisis.)
posted by peanut_mcgillicuty at 6:27 AM on September 16, 2016 [1 favorite]

"I do already have a pre-approval with a bank and the max amount is in this range."

That means the bank believes that on average people in your situation will pay back enough of their loans to generate some return on their investment.

It's not really their concern if that leaves you without money for your hobbies or vacations, or without a comfortable retirement, or without the freedom to take a pay cut or a few month's unemployment to get out of a job gone bad. The bank doesn't know your spending priorities. Figuring out all of that is your responsibility.

They're not telling you how much would be reasonable to spend, they're telling you the most you're technically capable of coughing up to avoid going bankrupt and getting kicked out of your home. That's a number I'd stay way the hell away from.
posted by floppyroofing at 6:58 AM on September 16, 2016 [2 favorites]

From where I am sitting that amount is WAY outside what you can afford. It would leave you with nothing for emergencies, descretionary spending, vacations, let alone savings/retirement. And if you and your boyfriend break up you would be SO SCREWED.

Questions to ask yourself:
Are you living comfortably now with your current rent amounts?
Hows your budget? Ever over budget?
Do you ever have to scramble at the end of the month to pay bills or get groceries?
How are your debt loads? Are they going down, staying the same, or increasing?
Would you be able to afford an extra 5k a year for various repairs/fixes?
Whats your retirement plan? How much are you putting away for retirement NOW? How much would you be able to put away for retirement at the prices you're considering?

Basically, if you can comfortably afford what you're currently paying for rent then THAT should be your aim for mortgage payments or LESS.

You should do up a detailed budget of what your life would look like with a mortgage for that amount. Be sure to include:
- property taxes
- heating/electric (which will likely be a LOT more than you are paying now)
- moving costs
- buffer amount for inevitable repairs/fixes/household needs (do you need a lawnmower, for example?)
- all your normal bills including groceries, cable, internet, cell phones, etc.
- transportation costs (will that be changing if you move? Will your commute be longer?)
- savings

You should also do up the same budget but base it off of just one salary.

FWIW - Just because the bank approved you for that amount doesn't mean you can afford it and it DEFINITELY doesn't mean you SHOULD afford it. They "approved" me and my husband for ~800k and on no planet could we actually afford that.
posted by PuppetMcSockerson at 7:30 AM on September 16, 2016

I think I got pre-approved for the amount because I have another 1500/month of income that's been consistent, which I've been putting aside, which I completely forgot to mention here. Regardless, this is the exact kind of reality check I needed. We definitely got carried away looking at the nicer houses. Will aim a lot lower. Thank you.
posted by monologish at 7:51 AM on September 16, 2016 [2 favorites]

If you want my advice, set a hard cap on what you're willing/able to afford (ie. houses for 260k or less) and then ONLY look at houses that fall under that cap. Don't tease yourself by looking at houses you can't afford because, as you've just experienced, it can be really easy to talk yourself into something fabulous that stretches you way beyond where you should go. My husband and I recently were house shopping and he kept looking at super fabulous expensive listings that we could "afford" but frankly couldn't afford and it just sucked. I kept comparing the houses we could afford against the super fabulous too expensive ones, and suddenly all our options look like crappy shacks. I finally had to tell him to not forward me any listing unless it was well within our budget.

And maybe think hard on whether you want to buy at all. Houses aren't the investment that they use to be. At all.
posted by PuppetMcSockerson at 9:34 AM on September 16, 2016

Well $1500 a month of extra income is a pretty big difference and if it is reliable indefinitely into the future this may not be so bad. But that's a lot of if's.
posted by GuyZero at 10:02 AM on September 16, 2016 [1 favorite]

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