How Much Housing Payment Can a Boglehead Afford?

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BackOfTheNet
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by BackOfTheNet » Wed Nov 23, 2016 10:24 am

edited
Last edited by BackOfTheNet on Tue Sep 25, 2018 10:12 am, edited 1 time in total.

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HomerJ
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by HomerJ » Wed Nov 23, 2016 10:25 am

steadyeddy wrote:We get a lot of questions on this forum that boil down to, "Can I afford this home?" I recently read one such thread where the original poster intended to take out a mortgage of ~2.5x annual income. Many responses advised this was too risky and a smaller mortgage should be pursued. Frankly, I was surprised. And as someone who plans to buy a larger home someday, this is something I've had on my mind, and I would like further discussion.

I've heard many rules of thumb for home affordability. A mortgage of two times income, home price of three times income, payments no more than 36% of gross income, payments no more than 25% of net income, and even home price no more than 1/2 net worth! Obviously there are many different opinions on this issue. And because factors such as cost of living, tax rates, insurance costs, HOA, mortgage insurance, maintenance costs, etc. can all impact affordability, these rules of thumb are often unclear.

I think total monthly payment vs. gross income is the most universal way to frame the issue. Framing it this way also allows renters to have a guide. With that said, what do you propose is the maximum monthly housing payment a Boglehead should consider at any given income level? I imagine the numbers will not be linear since discretionary income increases with gross income, but then things like progressive income tax rates also have to be taken into account. I'll provide an example of what I'm looking for, though I haven't given much thought to these particular numbers:

Code: Select all

Gross Income          Maximum Monthly Housing Payment
$10,000                  $0
$30,000                  $500
$50,000                  $700
$75,000                  $1,100
$100,000                 $1,600
$150,000                 $3,500
$200,000                 $5,500
$300,000                 $8,000
$500,000                 $20,000
Please feel free to specify whatever reasoning you desire for how you arrived at your numbers, but please state numbers in terms of gross income to maximum monthly housing payment if possible. Thanks in advance!
The smartest thing we ever did was STOP increasing our lifestyle past a certain point... When we were making $100,000 together, our mortgage was indeed around $1,600 a month.... When we increased our income to $150,000, we didn't go out and spend ALL THE EXTRA MONEY on more housing.

That's what your chart there says. $1,600 at $100,000 then $3,500 at $150,000? That's crazy. $5,500 at $200,000? Yikes.

Instead we paid off the house faster. For about 7-10 years, we were making $200,000 together, and living a $100,000 lifestyle. That's how you get rich. That's how you save serious bank.

One should not be calculating the "max possible" mortgage. One should be looking for the minimum one can spend to get the house you want.

Get your house and car purchases right (i.e. don't overspend) and the rest is pretty easy.

randomguy
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by randomguy » Wed Nov 23, 2016 10:38 am

grettman wrote:I make a $160K a year. If I had a $3.5K mortgage as your table suggests, I would have to stop funding our IRAs and of course there wouldn't be any taxable investing opportunities. So while technically it is affordable, the cost to my futre self would be too great for me to carry it. It should be noted that I have no car payments and I dine out once a week with the wife at cheapo places so my budget doesn't have a lot of fat.
If you are making 160k/yr, you are talking home somewhere around 120k. Take off 30k for IRA/401(k)/HSA. That is 90k. Take out 45k for the house. That is 45k. That is a lot of money. Obviously that is very high level breakdown.

In the end most of us are money limited. If we spend an extra 1k/month on a house that is 1k that isn't going towards vacations, cars, eating out or retirement. You need to decide what makes you happier.

jerkstore
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by jerkstore » Wed Nov 23, 2016 10:45 am

steadyeddy wrote:It's clear I did a horrible job asking my question, so I'd like to start over. I'm not asking for the answer, but rather your answer.

What percentage of your income would you feel comfortable spending on a home? What is the tipping point where you would begin feeling uncomfortable?

Let's assume there are a wide variety of housing options available at different price points so you get to choose how much of your income to allocate to housing.

I'm so grateful for those of you that have engaged in the discussion despite my poor wording.
PITI north of 20% of gross would make me feel uncomfortable. Currently @ 15% of gross on a 15yr note.

That is My answer regarding My comfort.

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HomerJ
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by HomerJ » Wed Nov 23, 2016 10:57 am

Grt2bOutdoors wrote:
steadyeddy wrote:
Grt2bOutdoors wrote:20 percent of gross income or no more than 28 percent, preferably between 25 and 27 percent of net take home monthly pay. All inclusive costs of principal, interest, hoa, insurance, taxes, utilities including your cable and phone bill and water/heating. This calculation would then permit a healthy level of savings and investment to support you in retirement and in case of job loss.
Thank you. Do you feel those percentages still hold true at higher income levels?
Yes, a higher income level may require even more savings. Assume you are saving for retirement, a lower income worker may find at full retirement age social security replaces 40% of final average pay, whilst the higher income worker finds FRA social security replaces only 18% of final pay. If the higher income worker needs 60% of final pay to retire, the only source to make up for the 42% shortfall in replacement income will come from their own savings. Do not assume a current high income earner will always earn at the same or higher level, the street is littered with plans that went awry - job loss, under employment, disability, early retirement. Use the two levers you have to maximize your options - time and rate of savings. Save, save early and often.
Great post.

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warowits
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by warowits » Wed Nov 23, 2016 11:00 am

KlangFool wrote:
warowits wrote:As much as some people on here seem to hate it, housing expense is wrapped up in our concept of class and self worth. There is also the very real fact that when evaluating a housing payment you should also keep in mind the rent you will have to pay if you don't buy. Also looking at it as a multiple of your yearly salary ignores interest rates, which makes no sense unless you are paying cash for the home.
warowits,

<<housing expense is wrapped up in our concept of class and self worth. >>

I spend less on housing in order to avoid living in a neighborhood with people like that. All my peers live in a bigger and more expensive houses.

KlangFool
I would still argue that for 99% of people in ANY neighborhood, housing is wrapped up in their sense of class and self worth. I am not arguing you need a more expensive home Klangfool, I am saying the home you bought says something about who you are and what you want other people to see you as. If you have saved a lot (as I know Klangfool has) that doesn't mean that you have to leave a 'middle class' lifestyle behind. I think it comes up more on the other end of the spectrum. You feel you have modest housing, and could afford more, but I am guessing there are people on your block who can just barely afford to be there, but being there rather than the alternative is very important to them, and worth 35% of their salary.

Rodc
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Rodc » Wed Nov 23, 2016 11:14 am

warowits wrote:As much as some people on here seem to hate it, housing expense is wrapped up in our concept of class and self worth. There is also the very real fact that when evaluating a housing payment you should also keep in mind the rent you will have to pay if you don't buy. Also looking at it as a multiple of your yearly salary ignores interest rates, which makes no sense unless you are paying cash for the home.

To answer your question I am currently at about 20% of gross take home. When I got the house it was close to 35%. I would be very cautious about buying a new home at 35% of my current income, but also would say to a young person starting out 35% is okay. Being house poor sucks, but buying a cheap house you will just want to upgrade 5 years later doesn't make a lot of sense either.
Agree that you have to factor in what your options are. In a very high rent area your answer will likely be different than if in a low rent area. School quality or other factors could come into play.

The second point I also agree with. This is a conundrum young people often face. If you buy a house you will be happy with long term you are often better off long term, vs buying something less and upgrading later, even if squeezed in the beginning. But it has real risks. Any financial difficulties like a lay off or unexpected expenses become very serious very fast. So it becomes a risk/reward trade off that will different people to different decisions.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

lightheir
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by lightheir » Wed Nov 23, 2016 12:00 pm

The advice above is good.

Keep in mind - I've seen quite a few people in highly desirable HCOL areas, spend more and stretch it - to GOOD outcomes.

As long as you don't completely blow yourself up budgetwise, there are lots of good things that come with many HCOL areas, of some of which are rapid home price appreciation and resistance to drops, outstanding lifestyle and schools, and great neighbors.

In my opinion, it would have been a mistake for many of these people who stretched (but are definitely still readily paying all their bills) to opted for the LCOL area if they could make the stretch-budget work.

There's unfortunately no hard-and-fast rule - the guidelines mentioned above are at best guidelines, and in the right situation, you should consider all the factors and be ready to break those so-called guidelines.

letsgobobby
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by letsgobobby » Wed Nov 23, 2016 12:04 pm

It's too hard to generalize. For one thing, two home buyers with the same income may have vastly different bank accounts and vastly different job security.

The house payment I feel comfortable with today is larger than the house payment I felt comfortable with 10 years ago, and though my job and income are about the same. The difference is I have saved 40% of my income for those ten years.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Kow » Wed Nov 23, 2016 12:04 pm

To put a little more structure into everyone's comments, I think you have to go down the list for an individual situation and see how much you have left for housing based on all of the other factors on your priority list. And potentially adjust your priorities if you don't have enough for housing as you would like. It's likely you'll spend less for housing as a % of Gross the more you make.

The way I would look at the math:
Gross Pay = $160,000
Net Annual Pay =$120,000 (estimate)
Net Monthly Pay = $10,000

Monthly Expenses (Groceries, Cable, Car, Parking, insurance,etc....) = $1,250
Monthly Savings (401K max, emergency savings, etc...) = $2,500
Monthly Discretionary Spending (Eating out, vacations, etc...) = $1,500
Total non-housing spend = $5,250

Now you have $4,750 left for Mortgage + PITI. That should be enough in most HCOL areas to afford a house in the $750-1M range assuming 20% down, built up emergency savings, reasonable interest rate, etc... assuming taxes aren't excessive. But if they are, it's important to go back to your list and decide where you're comfortable cutting from. I'd also always build a 10-20% buffer on expenses, so if you think you'll spend $4,000 a month in regular expenses, budget $5,000 and you won't be caught when the unexpected becomes expected.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by steadyeddy » Wed Nov 23, 2016 12:23 pm

Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.

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queso
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by queso » Wed Nov 23, 2016 12:30 pm

jerkstore wrote:
steadyeddy wrote:It's clear I did a horrible job asking my question, so I'd like to start over. I'm not asking for the answer, but rather your answer.

What percentage of your income would you feel comfortable spending on a home? What is the tipping point where you would begin feeling uncomfortable?

Let's assume there are a wide variety of housing options available at different price points so you get to choose how much of your income to allocate to housing.

I'm so grateful for those of you that have engaged in the discussion despite my poor wording.
PITI north of 20% of gross would make me feel uncomfortable. Currently @ 15% of gross on a 15yr note.

That is My answer regarding My comfort.
Same...almost. 16% of gross on 15 year and we cash flow all renovations and repairs. I'd never spend what that table suggests. I'd rather save 1/3 of what I make and still have plenty of extra money for fun stuff than have a bigger/fancier house. My neighbor has 11 bathrooms. Somehow I don't think 11 bathrooms would make me any happier than I am now, but maybe I'm missing out and just don't know it. I do know that the costs of servicing a house that large really add up especially when you outsource cleaning, landscaping, audiovisual repairs for theater, pool cleaning, etc. I can't fathom what the roof will cost someday when it needs to be replaced.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by qwertyjazz » Wed Nov 23, 2016 12:39 pm

steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
I think you missed the point of prudent relationship to money. Money is fungible and you use it for what makes you happy. It does not go in automatic buckets.
Do you want the bigger house enough to give up retiring 5 years earlier or taking trips around the world or paying for a future kid's college?
The problem may be your frame of reference rather than the amount for consumption smoothing. Spending should make you happier than not over your life span. So what do you value and how much do you lust over that bigger house?
G.E. Box "All models are wrong, but some are useful."

lightheir
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by lightheir » Wed Nov 23, 2016 12:41 pm

queso wrote:
jerkstore wrote:
steadyeddy wrote:It's clear I did a horrible job asking my question, so I'd like to start over. I'm not asking for the answer, but rather your answer.

What percentage of your income would you feel comfortable spending on a home? What is the tipping point where you would begin feeling uncomfortable?

Let's assume there are a wide variety of housing options available at different price points so you get to choose how much of your income to allocate to housing.

I'm so grateful for those of you that have engaged in the discussion despite my poor wording.
PITI north of 20% of gross would make me feel uncomfortable. Currently @ 15% of gross on a 15yr note.

That is My answer regarding My comfort.
Same...almost. 16% of gross on 15 year and we cash flow all renovations and repairs. I'd never spend what that table suggests. I'd rather save 1/3 of what I make and still have plenty of extra money for fun stuff than have a bigger/fancier house. My neighbor has 11 bathrooms. Somehow I don't think 11 bathrooms would make me any happier than I am now, but maybe I'm missing out and just don't know it. I do know that the costs of servicing a house that large really add up especially when you outsource cleaning, landscaping, audiovisual repairs for theater, pool cleaning, etc. I can't fathom what the roof will cost someday when it needs to be replaced.
If your neighbor has 11 bathrooms, dare I ask how many bathrooms you have???

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queso
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by queso » Wed Nov 23, 2016 12:42 pm

lightheir wrote:
queso wrote:
jerkstore wrote:
steadyeddy wrote:It's clear I did a horrible job asking my question, so I'd like to start over. I'm not asking for the answer, but rather your answer.

What percentage of your income would you feel comfortable spending on a home? What is the tipping point where you would begin feeling uncomfortable?

Let's assume there are a wide variety of housing options available at different price points so you get to choose how much of your income to allocate to housing.

I'm so grateful for those of you that have engaged in the discussion despite my poor wording.
PITI north of 20% of gross would make me feel uncomfortable. Currently @ 15% of gross on a 15yr note.

That is My answer regarding My comfort.
Same...almost. 16% of gross on 15 year and we cash flow all renovations and repairs. I'd never spend what that table suggests. I'd rather save 1/3 of what I make and still have plenty of extra money for fun stuff than have a bigger/fancier house. My neighbor has 11 bathrooms. Somehow I don't think 11 bathrooms would make me any happier than I am now, but maybe I'm missing out and just don't know it. I do know that the costs of servicing a house that large really add up especially when you outsource cleaning, landscaping, audiovisual repairs for theater, pool cleaning, etc. I can't fathom what the roof will cost someday when it needs to be replaced.
If your neighbor has 11 bathrooms, dare I ask how many bathrooms you have???
The answer is "significantly less than 11". :happy

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by KyleAAA » Wed Nov 23, 2016 12:49 pm

You have to use an income-based rule and it has to take into account other debt since otherwise you ignore the fact that the same size mortgage is much more affordable at 4% with no other debt than 6% with a $500 monthly student loan payment. On that note, I think the FHA debt ratio requirements are a reasonable approximation for a usable rule-of-thumb: 31% front-end ratio/43% back-end ratio.

http://www.fhahandbook.com/debt-ratios.php

For Bogleheads who want to retire wealthy one day and who tend to be more frugal than most, I'd bump those down to 21% front-end and 33% back-end.

randomguy
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by randomguy » Wed Nov 23, 2016 12:57 pm

steadyeddy wrote:It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.

yes spending 15% of your income on housing tends to be very conservative. Most people who are down at that range are the ones that have pretty much paid off their house. But again look at your budget/spending and ask what you think of 1k/month going towards housing versus having it sit in your bank account.

an_asker
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by an_asker » Wed Nov 23, 2016 1:08 pm

steadyeddy wrote:[...]

Code: Select all

Gross Income          Maximum Monthly Housing Payment
[...]
$150,000                 $3,500
[...]
Please feel free to specify whatever reasoning you desire for how you arrived at your numbers, but please state numbers in terms of gross income to maximum monthly housing payment if possible. Thanks in advance!
This is an household income figure I am comfortable with discussing. For a household with two kids. I would want to maximize all retirement savings first.

Subtract $17k for taxes (I am in the ballpark I believe, for just the federal taxes)
Subtract $36k for 401(k)
Subtract $9k for FICA taxes
Subtract $5k for Medicare (don't remember if I am close enough on this one)
Subtract $11k for Roth IRAs
----------------------------------
Subtract $78k for the above
----------------------------------

Now, if you have a 529 or an HSA, consider about $5k to $10k annual. Let's go with the lower figure of $5k.
I don't know what is a ballpark for medical insurance, but I would say about $5k should be a reasonable number.
Property tax about $3k
Homeowners Insurance $1k (could be up to 2k)
Utilities about $3k
Vehicle insurance about $1k
Gas about $3k
-----------------------
These total to $21k
-----------------------

Now, we have $51k left. Of which you want to spend $42k on the mortgage.

Just under $800 per month leftover for: food, clothing, school supplies, vacation, eating out, emergencies, etc. And all this is assuming I have not underestimated any of the above. Seriously??!!

[edited to add]: Property tax is way too low for a house with a $3500 per month mortgage payment for sure!

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steadyeddy
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by steadyeddy » Wed Nov 23, 2016 1:22 pm

an_asker wrote:
steadyeddy wrote:[...]

Code: Select all

Gross Income          Maximum Monthly Housing Payment
[...]
$150,000                 $3,500
[...]
Please feel free to specify whatever reasoning you desire for how you arrived at your numbers, but please state numbers in terms of gross income to maximum monthly housing payment if possible. Thanks in advance!
This is an household income figure I am comfortable with discussing. For a household with two kids. I would want to maximize all retirement savings first.

Subtract $17k for taxes (I am in the ballpark I believe, for just the federal taxes)
Subtract $36k for 401(k)
Subtract $9k for FICA taxes
Subtract $5k for Medicare (don't remember if I am close enough on this one)
Subtract $11k for Roth IRAs
----------------------------------
Subtract $78k for the above
----------------------------------

Now, if you have a 529 or an HSA, consider about $5k to $10k annual. Let's go with the lower figure of $5k.
I don't know what is a ballpark for medical insurance, but I would say about $5k should be a reasonable number.
Property tax about $3k
Homeowners Insurance $1k (could be up to 2k)
Utilities about $3k
Vehicle insurance about $1k
Gas about $3k
-----------------------
These total to $21k
-----------------------

Now, we have $51k left. Of which you want to spend $42k on the mortgage.

Just under $800 per month leftover for: food, clothing, school supplies, vacation, eating out, emergencies, etc. And all this is assuming I have not underestimated any of the above. Seriously??!!

[edited to add]: Property tax is way too low for a house with a $3500 per month mortgage payment for sure!

Thanks for your input. That chart was A) a maximum bound I thought anyone would choose to spend, and B) created carelessly to show formatting. Rather than a mere critique of one number (which I agree personally I would never choose to spend), would you be willing to share what you personally feel someone with that income would be prudent to spend in order to leave room in the budget for the things you've listed above that you value? Would $2,000 be more appropriate? $1,000? Your numbers and your rationale are greatly appreciated!

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by bigred77 » Wed Nov 23, 2016 1:38 pm

steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
If kids are in your future plans (or at least haven't been definitively ruled out), I'd say wait and keep saving like heck. If kids are not in the future and you want to live in a nicer place, well I think you can certainly afford it.

If your going to spend more, I found (counter-intuitively to me at the time) that I got much more bang for my buck by spending more on "location" rather than size/features. I MUCH prefer a mile long commute and a walkable community to a 4k ft house in the suburbs with a pool, even if I have to sacrifice square footage and yard space to get it.

I also see the benefits in consumption smoothing (to a certain extent). Although spending 20% of gross on housing with a 15 year mortgage is different than spending 20% with a 30 year mortgage. I had to use a 30yr to get what I wanted but it sounds like you may be in position get what you want in the future while using a 15yr.

good luck :mrgreen:

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Wellfleet » Wed Nov 23, 2016 1:47 pm

bigred77 wrote:
steadyeddy wrote: If your going to spend more, I found (counter-intuitively to me at the time) that I got much more bang for my buck by spending more on "location" rather than size/features. I MUCH prefer a mile long commute and a walkable community to a 4k ft house in the suburbs with a pool, even if I have to sacrifice square footage and yard space to get it.
good luck :mrgreen:
While I agree with this sentiment and see lots of folks on here practice the walkability, do you rent, or is your job secure enough that a one mile commute is reasonably assured for your career? Jobs in my field are 1/3 in the city center, 1/3 inner ring suburbs, 1/3 exurbs. I am finding that a central location will work best for me.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by steadyeddy » Wed Nov 23, 2016 1:58 pm

qwertyjazz wrote:
steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
I think you missed the point of prudent relationship to money. Money is fungible and you use it for what makes you happy. It does not go in automatic buckets.
Do you want the bigger house enough to give up retiring 5 years earlier or taking trips around the world or paying for a future kid's college?
The problem may be your frame of reference rather than the amount for consumption smoothing. Spending should make you happier than not over your life span. So what do you value and how much do you lust over that bigger house?
If I knew ahead of time exactly how much house would make me happiest without the possibility of overextending myself I wouldn't have bothered to ask. Money may be fungible, but houses are expensive to sell one if you decide you want more or less house after you buy one. In other words, we can't just spend more or less on housing to maximize happiness at any given moment. I've already purchased one too-small house, and now I'd like to get it right with the next one.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by steadyeddy » Wed Nov 23, 2016 2:00 pm

bigred77 wrote:
steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
If kids are in your future plans (or at least haven't been definitively ruled out), I'd say wait and keep saving like heck. If kids are not in the future and you want to live in a nicer place, well I think you can certainly afford it.

If your going to spend more, I found (counter-intuitively to me at the time) that I got much more bang for my buck by spending more on "location" rather than size/features. I MUCH prefer a mile long commute and a walkable community to a 4k ft house in the suburbs with a pool, even if I have to sacrifice square footage and yard space to get it.

I also see the benefits in consumption smoothing (to a certain extent). Although spending 20% of gross on housing with a 15 year mortgage is different than spending 20% with a 30 year mortgage. I had to use a 30yr to get what I wanted but it sounds like you may be in position get what you want in the future while using a 15yr.

good luck :mrgreen:

Very true! No luck on kids yet, but I definitely won't be buying a new house until we either have kids or know for certain we aren't having kids.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by *3!4!/5! » Wed Nov 23, 2016 2:07 pm

Rodc wrote:Every extra dollar spent makes me more less comfortable, even is the difference is super tiny. Where is the absolute threshold? Reminds me of this: how many grains of sand make a pile of sand? One grain is not a pile. Two grains is not a pile. One million grains is I presume a pile. If I add one grain at a time, when exactly did it become a pile? This is similar. This is why hypothetical rules of thumb have so little value.
Straw man. :oops:

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Rodc » Wed Nov 23, 2016 2:10 pm

*3!4!/5! wrote:
Rodc wrote:Every extra dollar spent makes me more less comfortable, even is the difference is super tiny. Where is the absolute threshold? Reminds me of this: how many grains of sand make a pile of sand? One grain is not a pile. Two grains is not a pile. One million grains is I presume a pile. If I add one grain at a time, when exactly did it become a pile? This is similar. This is why hypothetical rules of thumb have so little value.
Straw man. :oops:
Very odd response. :confused
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Rodc » Wed Nov 23, 2016 2:18 pm

lightheir wrote:The advice above is good.

Keep in mind - I've seen quite a few people in highly desirable HCOL areas, spend more and stretch it - to GOOD outcomes.

As long as you don't completely blow yourself up budgetwise, there are lots of good things that come with many HCOL areas, of some of which are rapid home price appreciation and resistance to drops, outstanding lifestyle and schools, and great neighbors.

In my opinion, it would have been a mistake for many of these people who stretched (but are definitely still readily paying all their bills) to opted for the LCOL area if they could make the stretch-budget work.

There's unfortunately no hard-and-fast rule - the guidelines mentioned above are at best guidelines, and in the right situation, you should consider all the factors and be ready to break those so-called guidelines.
Yep.

I split the difference, buying a very modest home in a very desirable town, then adding on a few years later to make what was then a median home. Due to mansionization it is now about a 30th percentile house. It has worked out very well. As it turns out, fortune smiled on us and over the years we have not had any financial hardships and so if we had stretched hard we would have come out even better!

No regrets though. While risk did not show up, it might have. So how hard to stretch when starting out is a hard call.
Last edited by Rodc on Wed Nov 23, 2016 2:18 pm, edited 1 time in total.
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Mudpuppy » Wed Nov 23, 2016 2:18 pm

steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
I think if you had just led with this, you would have gotten useful advice much quicker. A few questions. Are kids on the horizon such that you'd have to plan ahead for raising them (kids are expensive)? How stable is your income? What does your overall financial situation look like (retirement savings rate, cash reserves, etc.)? Why would you like a bigger house instead of staying in your current house? These are the sorts of things to consider when deciding to stay or to move, not just a percentage of gross income.

Personally, my house is fine but the neighbors are becoming more and more questionable as the years pass. In other words, the neighborhood is eroding slightly, but not so badly that I would need to move right now. I've lived in worse neighborhood growing up. So this is my primary motivation to move. However, the down payment and closing costs on the new home would not be offset by selling my current home, so I would have to go into cash reserves to afford a new home. I don't personally think I have enough cash reserves to move to the neighborhood I'm eyeballing, even though the increased monthly payment (including insurance and property taxes) would be only 2% more of my gross income.

Also, you don't have to do "consumption smoothing" by purchasing things. You could also find charities that you support and give to them. Along with saving for a down payment, my current fiscal plan is to increase my charitable giving. Now that my base income allows me to max out my 457b and IRA, and almost max out my 401k, I've been redirecting bonuses more towards charitable giving and building up my cash reserves.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Rodc » Wed Nov 23, 2016 2:22 pm

steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
Unless you really want and would enjoy a different house another approach is to give more to charity or simply retire earlier.

I would not advise buying a lot more house than you need just because you have the money.

I don't understand why you want a rule of thumb. Why not make a budget of things you need and somethings you want and see what is left over? Would that not be easy and give you a better answer?
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by bigred77 » Wed Nov 23, 2016 2:41 pm

Wellfleet wrote:
bigred77 wrote: If your going to spend more, I found (counter-intuitively to me at the time) that I got much more bang for my buck by spending more on "location" rather than size/features. I MUCH prefer a mile long commute and a walkable community to a 4k ft house in the suburbs with a pool, even if I have to sacrifice square footage and yard space to get it.
good luck :mrgreen:
While I agree with this sentiment and see lots of folks on here practice the walkability, do you rent, or is your job secure enough that a one mile commute is reasonably assured for your career? Jobs in my field are 1/3 in the city center, 1/3 inner ring suburbs, 1/3 exurbs. I am finding that a central location will work best for me.
I own, job is fairly secure, and I'm centrally located in one of the 3 major employment clusters in my city (at least for my line of work). The other 2 are about 7 miles away from me in opposite directions. Commute times would be about 15 - 30 min depending on specifics if I had to make a change.

I live in a city known for horrible traffic and 1+ hour commutes are common because of the drastic price changes between the city core and the suburbs. I did the large commute when I first started working and I will do everything in my power to not have to do it again :mrgreen:

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Rodc » Wed Nov 23, 2016 2:55 pm

bigred77 wrote:
Wellfleet wrote:
bigred77 wrote: If your going to spend more, I found (counter-intuitively to me at the time) that I got much more bang for my buck by spending more on "location" rather than size/features. I MUCH prefer a mile long commute and a walkable community to a 4k ft house in the suburbs with a pool, even if I have to sacrifice square footage and yard space to get it.
good luck :mrgreen:
While I agree with this sentiment and see lots of folks on here practice the walkability, do you rent, or is your job secure enough that a one mile commute is reasonably assured for your career? Jobs in my field are 1/3 in the city center, 1/3 inner ring suburbs, 1/3 exurbs. I am finding that a central location will work best for me.
I own, job is fairly secure, and I'm centrally located in one of the 3 major employment clusters in my city (at least for my line of work). The other 2 are about 7 miles away from me in opposite directions. Commute times would be about 15 - 30 min depending on specifics if I had to make a change.

I live in a city known for horrible traffic and 1+ hour commutes are common because of the drastic price changes between the city core and the suburbs. I did the large commute when I first started working and I will do everything in my power to not have to do it again :mrgreen:
Me too. There was always some risk of a job change, but then again while I might not have found a job I wanted within the same 1.5 miles of work, good chance it would have been within some reasonable distance. And push come to shove I could have moved. And the town near work had fabulous schools, nice restaurants, pool, library, etc so even if I did end up with a commute I would still have liked the town. Been here 23 years and will retire in this house, so it all turned out for the best.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by arsenalfan » Wed Nov 23, 2016 3:04 pm

16% was the most monthly PITI/gross I ever did - rented before that point.
First home was married, 80k combined HHI.
Have never been stressed about housing costs, and met savings goals. It has been smooth sailing on that front (knock wood).

Consumption Smoothing always reminded me of the joke: How do you make God laugh? Make a plan.
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by steadyeddy » Wed Nov 23, 2016 3:13 pm

Mudpuppy wrote:
steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
I think if you had just led with this, you would have gotten useful advice much quicker. A few questions. Are kids on the horizon such that you'd have to plan ahead for raising them (kids are expensive)? How stable is your income? What does your overall financial situation look like (retirement savings rate, cash reserves, etc.)? Why would you like a bigger house instead of staying in your current house? These are the sorts of things to consider when deciding to stay or to move, not just a percentage of gross income.

Personally, my house is fine but the neighbors are becoming more and more questionable as the years pass. In other words, the neighborhood is eroding slightly, but not so badly that I would need to move right now. I've lived in worse neighborhood growing up. So this is my primary motivation to move. However, the down payment and closing costs on the new home would not be offset by selling my current home, so I would have to go into cash reserves to afford a new home. I don't personally think I have enough cash reserves to move to the neighborhood I'm eyeballing, even though the increased monthly payment (including insurance and property taxes) would be only 2% more of my gross income.

Also, you don't have to do "consumption smoothing" by purchasing things. You could also find charities that you support and give to them. Along with saving for a down payment, my current fiscal plan is to increase my charitable giving. Now that my base income allows me to max out my 457b and IRA, and almost max out my 401k, I've been redirecting bonuses more towards charitable giving and building up my cash reserves.
Believe me, I already regret posting anything at all. The gamesmanship on this forum is unreal sometimes.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Atilla » Wed Nov 23, 2016 3:21 pm

steadyeddy wrote:

Code: Select all

Gross Income          Maximum Monthly Housing Payment
$10,000                  $0
$30,000                  $500
$50,000                  $700
$75,000                  $1,100
$100,000                 $1,600
$150,000                 $3,500
$200,000                 $5,500
$300,000                 $8,000
$500,000                 $20,000
Please feel free to specify whatever reasoning you desire for how you arrived at your numbers, but please state numbers in terms of gross income to maximum monthly housing payment if possible. Thanks in advance!
Those numbers are a joke to me. It would have us paying upwards of $6K a month just for housing. Preposterous! As it is we pay $400/month in property taxes and another $200 for utilities and water for a nice little place in the hood assessed at $200K. Maintenance/repairs are not included in our monthly figures - but still. Sheesh!
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Re: How Much Housing Payment Can a Boglehead Afford?

Post by 2Birds1Stone » Wed Nov 23, 2016 3:24 pm

Crazy inflated numbers in the chart.

This doesn't even take into account maintenance on such an expensive home, or utilities.

This is a great way to inflate your lifestyle and prevent true wealth building. :confused

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by 2Birds1Stone » Wed Nov 23, 2016 3:25 pm

We rent in a HCOL area and spend 6% of gross income on our "housing payment" which includes maintenance and utilities.

I laugh my way to the bank... :sharebeer

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by KlangFool » Wed Nov 23, 2016 3:26 pm

warowits wrote:
KlangFool wrote:
warowits wrote:As much as some people on here seem to hate it, housing expense is wrapped up in our concept of class and self worth. There is also the very real fact that when evaluating a housing payment you should also keep in mind the rent you will have to pay if you don't buy. Also looking at it as a multiple of your yearly salary ignores interest rates, which makes no sense unless you are paying cash for the home.
warowits,

<<housing expense is wrapped up in our concept of class and self worth. >>

I spend less on housing in order to avoid living in a neighborhood with people like that. All my peers live in a bigger and more expensive houses.

KlangFool
I would still argue that for 99% of people in ANY neighborhood, housing is wrapped up in their sense of class and self worth. I am not arguing you need a more expensive home Klangfool, I am saying the home you bought says something about who you are and what you want other people to see you as.
warowits,

In my particular area, the median annual household income is 150K. The only question left is whether you live in a lower cost section with the house price around 350K to 450K or in a median cost section from 500K to 700K. So, I have no idea what do you mean in my context? Or, it does not apply in my area since everyone makes about the same amount of money. It is just a question of how much that they are willing to spend on housing.

KlangFool

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by an_asker » Wed Nov 23, 2016 3:29 pm

steadyeddy wrote:[...]Thanks for your input. That chart was A) a maximum bound I thought anyone would choose to spend, and B) created carelessly to show formatting. Rather than a mere critique of one number (which I agree personally I would never choose to spend), would you be willing to share what you personally feel someone with that income would be prudent to spend in order to leave room in the budget for the things you've listed above that you value? Would $2,000 be more appropriate? $1,000? Your numbers and your rationale are greatly appreciated!
Sure, I can give you our numbers (obviously, that is not the top of what we could've paid). We are paying about $1100 per month into our mortgage (thanks to me following DW's suggestion in purchasing a house near the bottom of the real estate market). But I am very conservative/frugal/putyourlabel :-)

On the flip side, we blew our travel budget out of the water this year. Just on travel tickets alone, we have spent about $15k. And that does not include lodging, food, travel at the destination spots, etc.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by KlangFool » Wed Nov 23, 2016 3:39 pm

steadyeddy wrote:
Believe me, I already regret posting anything at all. The gamesmanship on this forum is unreal sometimes.
steadyeddy,

Is it possible your thought process is not the same as many of us?

1) We have a financial goal.

2) Then, we decide a gross saving rate to achieve our goal.

3) We implement "Pay Yourself First" saving method to save that amount of money every month.

4) We spend the rest of money.

In our system, there is no possibility of reckless spending. And, there is no question of whether we should or could spend more on housing. We could do it because we "Pay Ourselves First".

Please note that in our system, we have a specific number and we save a certain percentage in order to achieve our goal. So, there is no doubt of whether we save too much or too little as per our plan. If we do not spend all the money in step (4), we know that we spend too little.

So, in my opinion, you have all these questions is because you never think and implement step (1) and (2). Why and how much you should save? What are your financial goals in concrete numbers?

There is no game here.

KlangFool

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by Rodc » Wed Nov 23, 2016 4:06 pm

KlangFool wrote:
steadyeddy wrote:
Believe me, I already regret posting anything at all. The gamesmanship on this forum is unreal sometimes.
steadyeddy,

Is it possible your thought process is not the same as many of us?

1) We have a financial goal.

2) Then, we decide a gross saving rate to achieve our goal.

3) We implement "Pay Yourself First" saving method to save that amount of money every month.

4) We spend the rest of money.

In our system, there is no possibility of reckless spending. And, there is no question of whether we should or could spend more on housing. We could do it because we "Pay Ourselves First".

Please note that in our system, we have a specific number and we save a certain percentage in order to achieve our goal. So, there is no doubt of whether we save too much or too little as per our plan. If we do not spend all the money in step (4), we know that we spend too little.

So, in my opinion, you have all these questions is because you never think and implement step (1) and (2). Why and how much you should save? What are your financial goals in concrete numbers?

There is no game here.

KlangFool
Or we just save some more! :)

But yes. And on the flip side, if you do this and find you simply can't afford a house you can at least consider changing the goals. For me this is where comfort comes in. If you do this and can't make it work you have to consider how far off your other goals you are willing to slide to fit in the house. And it might not be a house, or a bigger house, but some other desire.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by HornedToad » Wed Nov 23, 2016 5:48 pm

steadyeddy wrote:
Mudpuppy wrote:
steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
I think if you had just led with this, you would have gotten useful advice much quicker. A few questions. Are kids on the horizon such that you'd have to plan ahead for raising them (kids are expensive)? How stable is your income? What does your overall financial situation look like (retirement savings rate, cash reserves, etc.)? Why would you like a bigger house instead of staying in your current house? These are the sorts of things to consider when deciding to stay or to move, not just a percentage of gross income.

Personally, my house is fine but the neighbors are becoming more and more questionable as the years pass. In other words, the neighborhood is eroding slightly, but not so badly that I would need to move right now. I've lived in worse neighborhood growing up. So this is my primary motivation to move. However, the down payment and closing costs on the new home would not be offset by selling my current home, so I would have to go into cash reserves to afford a new home. I don't personally think I have enough cash reserves to move to the neighborhood I'm eyeballing, even though the increased monthly payment (including insurance and property taxes) would be only 2% more of my gross income.

Also, you don't have to do "consumption smoothing" by purchasing things. You could also find charities that you support and give to them. Along with saving for a down payment, my current fiscal plan is to increase my charitable giving. Now that my base income allows me to max out my 457b and IRA, and almost max out my 401k, I've been redirecting bonuses more towards charitable giving and building up my cash reserves.
Believe me, I already regret posting anything at all. The gamesmanship on this forum is unreal sometimes.
Don't let the negative feedback get you down. Some people have the opinion that if you have more than 4 walls and a roof on your house then you are splurging and taking a risk of catastrophic proportions. Not everyone starts with deciding whether they want to retire in 27 years or 30 years and sets saving goals to meet hypothetical returns decades in the future and corresponding housing tradeoffs.

I max out both 401ks, save decent for taxable savings, choose a reasonably comfortable house to live in, take reasonable vacations and assume everything is going to be fine and don't stress about a decision 20-30 years in the future.

Right now if you like what you do and don't have an urgent need for financial independence or retirement, then keep housing costs at 15-20% of gross and you'll most likely be fine, beyond that depends on various tradeoffs you want to make or if you have a ton of kids.

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Re: How Much Housing Payment Can a Boglehead Afford?

Post by qwertyjazz » Wed Nov 23, 2016 8:24 pm

steadyeddy wrote:
qwertyjazz wrote:
steadyeddy wrote:Thanks again everyone! This has been very helpful to me as I think about where to allocate funds. I currently live in a very modest house and have no kids, so the vast majority of our income is just piling up in savings. I'd like a bigger house someday and definitely ought to spend more on something in the interest of consumption smoothing. I have the theoretical ability spend an ungodly amount of money on housing compared to my current budget, but I don't have a good concept of what is prudent.

I'm hearing some some consensus around 20% of gross as the upper bound of a comfortable house payment, with a lot of cautionary advice not to overextend. Obviously I won't spend more just for the sake of hitting an arbitrary number, and really my problem is just the opposite. I would have to triple my current housing payment to hit 20% and my income is likely to increase quite a bit in the next few years. Basically I wanted to know if doubling or tripling my house payment is reckless, or simply a function of buying such a cheap house to begin with. It sounds like doubling a house payment to 10-15% of income would still be considered a relatively normal outlay for people with a healthier relationship with money than I've cultivated.
I think you missed the point of prudent relationship to money. Money is fungible and you use it for what makes you happy. It does not go in automatic buckets.
Do you want the bigger house enough to give up retiring 5 years earlier or taking trips around the world or paying for a future kid's college?
The problem may be your frame of reference rather than the amount for consumption smoothing. Spending should make you happier than not over your life span. So what do you value and how much do you lust over that bigger house?
If I knew ahead of time exactly how much house would make me happiest without the possibility of overextending myself I wouldn't have bothered to ask. Money may be fungible, but houses are expensive to sell one if you decide you want more or less house after you buy one. In other words, we can't just spend more or less on housing to maximize happiness at any given moment. I've already purchased one too-small house, and now I'd like to get it right with the next one.
Then it really is not just about your current income but rather expected future income and your sense of risk/gambling (not in a bad way just how you view life). Transaction costs in housing are high so you want a house you can stay in for decades or rent if possible in your area
My SO is glad we bought - I often wished I kept on renting
I wish I had a percentage as reasonable in mind - I just find it so variable with all other considerations playing a role
Good luck on whatever you decide
G.E. Box "All models are wrong, but some are useful."

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