iranisculpable t1_jad70nn wrote on February 28, 2023 at 4:22 PM

3800 / 7500 = 51 percent dti. No you cannot afford to buy the home you want.

Including retirement savings how much do you save per month?

gagralbo t1_jadb75i wrote on February 28, 2023 at 4:50 PM

Right now we are both putting 11% of income to retirement and an additional $1700/month into savings

iranisculpable t1_jadfclp wrote on February 28, 2023 at 5:16 PM

175 * 0.11 / 12 = 1600 a month retirement savings.

1600 + 1700 = $3300.

I suggest

lowering retirement contributions to the level needed to maximize employer match,
pay off your debts, and
then save more toward a down payment to reduce this ratio:

(mortgage payment including insurance and peppery taxes) / (Take home pay + retirement) to 25 percent

Unusual_World2421 t1_jadbm0u wrote on February 28, 2023 at 4:52 PM

a 200k mortgage on a town home is nearly 300 dollars cheaper than my 400k house with mortgage of 3.5%.

i m though going to buy the town home to rent out for 2k.

the rates are the highest in my adult life time as i have ever seen. i m 37 years old and have owned various properties since 2009.

whynot19734 t1_jadyitr wrote on February 28, 2023 at 7:16 PM

DTI ratios are generally done using gross income because peoples’ deductions and taxes vary widely depending on their circumstances. Using gross income, his DTI is 26%.

OP, if you have kids requiring expensive childcare, this is not doable. Otherwise, it will be doable but a bit tight. I think the odds are that mortgage rates will come down in the next few years, though, so just be ready to jump on a refinance whenever it makes sense, and that will free up some more room in the budget.

iranisculpable t1_jae0vra wrote on February 28, 2023 at 7:31 PM

What a lender will accept and what is actually doable are two different things.

I once had a 70,000 household income in HCOL. That is $5800 gross per month.

I borrowed $216,000 at 9 percent. That is $1700 per month. Taxes $250 / month. Insurance $100 / month (earth quake insurance required in those days)

2050 / 5800 = 35 percent debt to gross income.

No kids. No other debt.

The banks and realtors convinced me I could afford this.

5 months into ownership I realize I was being lied to. My cash in the bank account was declining each month and I realized I had 4 months left.

I hustled a new job that brought household gross to $7900 / month.

2050 / 7900 = 26 percent.

After that I everything was better.