My wife and I are exploring our options for buying our first home and need a realistic range of what we can afford. We’re both in our early 30s, no kids yet but planning for one soon. Our combined household income is $234k, or $280k with bonuses. We have $115k for a down payment and no debt. We’re conservative spenders and have a healthy investment portfolio. We’re looking to buy in the DC metro area. We’d appreciate any guidance on how much house we should realistically consider.
DC’s market can be tough. We were earning $206k and found it challenging, so we moved to Richmond for more affordability. We just contracted a $425k house with more space and a bigger yard.
Lenders could potentially approve you for up to $1.15 million based on your income, considering a max DTI of 49.99%. However, the amount you should spend is up to what you’re comfortable with financially.
@Finch
Thanks for the insight!
A conservative estimate without bonuses puts your affordable house price around $550k, or $700k including bonuses, based on typical lending guidelines and your down payment.
Zhen said:
A conservative estimate without bonuses puts your affordable house price around $550k, or $700k including bonuses, based on typical lending guidelines and your down payment.
Thank you!
You should decide on a comfortable monthly payment for your mortgage and other home-related expenses, then use a mortgage calculator to reverse-engineer the price of the house you can afford.
Based on your income, lenders would typically allow up to 45% of your gross income for all debt services, including your mortgage. You can afford a substantial mortgage, but it’s wise to stay conservative at a third of your income.
Which areas in the DC metro are you considering? That will significantly impact how much house you can afford.
Consider how much you’re comfortable spending on your mortgage and factor in future expenses like childcare, which can be substantial. Plan your budget with a focus on long-term affordability and lifestyle.
It’s crucial to calculate your disposable income after all current expenses and potential future costs like childcare. Base your decision on what percentage of your take-home pay you want to allocate towards housing.
@Valor
Don’t forget to include the costs associated with labor and delivery, and ongoing medical expenses for the child, which can also impact your budget.
Lay out your full financial picture, including savings goals and expected increases in living expenses. This will help you determine a comfortable monthly mortgage payment, which will guide how much house you can afford.
Congratulations on starting this journey! With your income and savings, you’re well-positioned. The key is to determine how much you’re comfortable spending each month while maintaining your lifestyle and financial goals.
The best approach is to use a conservative estimate of what you’re comfortable spending monthly on housing, then work backwards to find the maximum house price. Use rules like the 28/36 rule as guidelines.
Use the conservative range of 41-49% of your gross income to determine the maximum mortgage payment you can afford, but always factor in other financial goals and commitments.