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Thread: Determining how much house you can afford (don't need answer fast)

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    Oliphaunt
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    Wink Determining how much house you can afford (don't need answer fast)

    If you can guesstimate how much your annual mortgage would be, how do you extrapolate how much house that buys?

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    Elen síla lumenn' omentielvo What Exit?'s avatar
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    This one is pretty simple, there are a lot of mortgage calculators on the Internet that are free. Though they tend to be monthly, so remember to divide your annual by 12 first.

    Now, before you determine what you can afford per month, also determine the taxes and utilities the house will require. Figure out how much you can put down and if it is less than 20% you need to figure out PMI*.

    Google itself has a basic mortgage calculator, this one should work pretty well too: https://www.mortgagecalculator.org/


    * Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price – or, in mortgage-speak, the mortgage's loan-to-value (LTV) ratio is in excess of 80% (the higher the LTV ratio, the higher the risk profile of the mortgage).

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    Oliphaunt
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    Thanx WE! I thought it was a fairly straightforward answer. How does not knowing properly taxes effect it?
    Last edited by Erictelevision; 11 Sep 2018 at 09:39 PM.

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    Elen síla lumenn' omentielvo What Exit?'s avatar
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    Quote Originally posted by Erictelevision View post
    Thanx WE! I thought it was a fairly straightforward answer. How does not knowing properly taxes effect it?
    Varies by state, in most North East States and West Coast States property taxes are very high and really need to be roughly calculated. In the Appalachian states it is far less important. But whatever area you looking at, go to Realtor.com and pull up some interesting properties; in the listing will be the most recent tax rates for the houses so you can give yourself an baseline.

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    Oliphaunt
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    Thanks! I have realtor.com accounts I futz with.i will check those.

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    Member Elendil's Heir's avatar
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    There can be big differences in property taxes even within a state. In Ohio, it's done by school district within each county, and they're by no means the same.

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    Elen síla lumenn' omentielvo What Exit?'s avatar
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    It's funny, 25 years ago I wrote a nice little Amort program for 15, 20 & 30 year mortgages ranging from the extremely low 5.5% to 18% I believe. Now 5.5% would seem high to younger people and apparently some people are getting 40 year loans. As this program requires an RPG compiler, I have stopped porting it. It is pretty primitive by today's standards anyway.

    The old rule of thumb for house loans was 3 times your gross salary, in the 2000s leading up to housing bubble burst, banks had started using 5 times gross. Part of what led to so many people not really being able to afford their loans.

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    Oliphaunt
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    Nice! I only needed guesstimates. So. 4X income is a reasonable ballpark figure?

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    Elen síla lumenn' omentielvo What Exit?'s avatar
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    Quote Originally posted by Erictelevision View post
    Nice! I only needed guesstimates. So. 4X income is a reasonable ballpark figure?
    4x gross would be considered reasonable today. But best if you are in a phase of your career where your income is rising faster than inflation.

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