Housing should be no more than 28% of your income.

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SmallCityDave
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Housing should be no more than 28% of your income.

Post by SmallCityDave » Sun Mar 17, 2019 10:59 am

I was listing to a show this morning and he said the CFP board recommends that you spend 28% or less of your gross income on housing.

Housing would be rent or taxes & insurance (if you own your home) or P&I, taxes, insurance (and hoa). Obviously this doesn't include utilities, lawn care, cleaning services etc...

28% seems awfully high, what percentage are you spending?

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RickBoglehead
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Re: Housing should be no more than 28% of your income.

Post by RickBoglehead » Sun Mar 17, 2019 11:04 am

Actually, the rule of thumb if you do some Googling is 30%. We did 45% at one point, knowing income would grow.
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miamivice
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Re: Housing should be no more than 28% of your income.

Post by miamivice » Sun Mar 17, 2019 11:08 am

I have always heard 28% to 35%.

On Bogleheads, folks often recommend no more than 10% or 15%. I think that has a lot to due with a lot of Bogleheads are older and higher income, and people in their 50's with higher than average income would naturally spend a smaller amount on housing.

Most 30-35 year olds will spend a larger percentage of their income on their PITI mortgage payment, because of smaller incomes and larger cost of housing.

miamivice
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Re: Housing should be no more than 28% of your income.

Post by miamivice » Sun Mar 17, 2019 11:09 am

SmallCityDave wrote:
Sun Mar 17, 2019 10:59 am
I was listing to a show this morning and he said the CFP board recommends that you spend 28% or less of your gross income on housing.

Housing would be rent or taxes & insurance (if you own your home) or P&I, taxes, insurance (and hoa). Obviously this doesn't include utilities, lawn care, cleaning services etc...

28% seems awfully high, what percentage are you spending?
Why would you include HOA but exclude electric bill?

I have not heard HOA thrown into the mix, unless the HOA is large (say for a condo). Otherwise it is usually excluded as it is not part of the monthly payment.

rashad3000
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Re: Housing should be no more than 28% of your income.

Post by rashad3000 » Sun Mar 17, 2019 11:20 am

We have 11 years left on a 15 year mortgage that is approximately 14% of our monthly gross income.

usaar33
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Re: Housing should be no more than 28% of your income.

Post by usaar33 » Sun Mar 17, 2019 11:22 am

I don't see how there's any one size fits all percentage here [1]
  • Increasing housing costs can lead to decreasing transit costs (live far away - drive a lot; live in the city center - don't even need a car).
  • In HCOL markets, it's mostly housing that is far more expensive than other goods, so you'd expect a higher percent of income to be allocated to housing.
  • It doesn't make sense for rented housing to only be allocated the same amount as mortgage (P&I). In the former, the rent money is burned; in the latter, the interest is burned, but principal is preserved in home value. Consequently, you can afford much more mortgage than rent.
I know very few people in the Bay Area staying under 28% pre-tax income on owned housing. You would need $220k combined annual income to afford the median priced home (~$1M) under such a rule.

[1] Outside of absolute upper bounds set by marginal tax rates.
Last edited by usaar33 on Sun Mar 17, 2019 11:47 am, edited 3 times in total.

cherijoh
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Re: Housing should be no more than 28% of your income.

Post by cherijoh » Sun Mar 17, 2019 11:24 am

miamivice wrote:
Sun Mar 17, 2019 11:09 am
SmallCityDave wrote:
Sun Mar 17, 2019 10:59 am
I was listing to a show this morning and he said the CFP board recommends that you spend 28% or less of your gross income on housing.

Housing would be rent or taxes & insurance (if you own your home) or P&I, taxes, insurance (and hoa). Obviously this doesn't include utilities, lawn care, cleaning services etc...

28% seems awfully high, what percentage are you spending?
Why would you include HOA but exclude electric bill?

I have not heard HOA thrown into the mix, unless the HOA is large (say for a condo). Otherwise it is usually excluded as it is not part of the monthly payment.
I think mortgage lenders take HOA dues into account when looking at prospective borrowers.

miamivice
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Re: Housing should be no more than 28% of your income.

Post by miamivice » Sun Mar 17, 2019 11:27 am

cherijoh wrote:
Sun Mar 17, 2019 11:24 am
miamivice wrote:
Sun Mar 17, 2019 11:09 am
SmallCityDave wrote:
Sun Mar 17, 2019 10:59 am
I was listing to a show this morning and he said the CFP board recommends that you spend 28% or less of your gross income on housing.

Housing would be rent or taxes & insurance (if you own your home) or P&I, taxes, insurance (and hoa). Obviously this doesn't include utilities, lawn care, cleaning services etc...

28% seems awfully high, what percentage are you spending?
Why would you include HOA but exclude electric bill?

I have not heard HOA thrown into the mix, unless the HOA is large (say for a condo). Otherwise it is usually excluded as it is not part of the monthly payment.
I think mortgage lenders take HOA dues into account when looking at prospective borrowers.
I don't believe they did with mine. I know that I didn't provide the lender with the HOA dues amount when I applied for a mortgage and don't believe they got that from another source. However, our lender did not escrow HOA dues. Maybe if they escrowed HOA dues then they would have been considered.

abner kravitz
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Re: Housing should be no more than 28% of your income.

Post by abner kravitz » Sun Mar 17, 2019 11:33 am

28% (and 36% total debt to income) were long-time Fannie Mae underwriting guidelines. They still may be, but not sure. That is probably where they came up with this number.

Momus
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Re: Housing should be no more than 28% of your income.

Post by Momus » Sun Mar 17, 2019 11:37 am

I'll just let it go past 28% income and rent all the rooms out. I have seen someone go as far as rent all 5 BR and owner lives in the garage >_>;

It seems to be a common occurance in high cola.

cherijoh
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Re: Housing should be no more than 28% of your income.

Post by cherijoh » Sun Mar 17, 2019 11:40 am

SmallCityDave wrote:
Sun Mar 17, 2019 10:59 am
I was listing to a show this morning and he said the CFP board recommends that you spend 28% or less of your gross income on housing.

Housing would be rent or taxes & insurance (if you own your home) or P&I, taxes, insurance (and hoa). Obviously this doesn't include utilities, lawn care, cleaning services etc...

28% seems awfully high, what percentage are you spending?
I think I was probably at 25% when I first started out, but by the time I bought my current house (when I was in my mid-30s) I started at about 15% of gross income and was down well under 10% by the time I paid the mortgage off. It also helped that I was able to cut expenses in both my condo and my house by refinancing the mortgages to lower interest rates. I refinanced two or three times on the condo (initial interest rate was over 14%! :shock: ) and twice on my house (to lower interest rates and shorter terms). Now with a paid off house, my housing expenses (by your definition) are minimal - under $4K for 2018.

MotoTrojan
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Re: Housing should be no more than 28% of your income.

Post by MotoTrojan » Sun Mar 17, 2019 11:40 am

I’m closer to 9% gross and that’s in a HCOL city. Most of my peers are closer to 20-30%, mainly due to location/size preferences increasing rent. Been nice.

staythecourse
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Re: Housing should be no more than 28% of your income.

Post by staythecourse » Sun Mar 17, 2019 11:49 am

There are other aspects to the finances of home buying to keep in mind...

1. Is the 28% COMBINED income. If so, will your significant other be going back to work or full time if you have kids? If not that income number is sure to change.
2. Is the house you are buying in a good public school and/ or have you settled on private? Either situation you have to add in private school costs for each kid onto the bill.
3. Are you both set in your jobs. 2 different reasons, 1. A chance of being fired and that ratio of income to house costs changes if that happens and 2. If you need to relocate for job another headache is trying to sell a house and NOT be underwater. As life happens most times you will be fired the same time everyone else is due to a poor economy which leads to not many folks looking to buy.

Good luck.
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anonenigma
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Re: Housing should be no more than 28% of your income.

Post by anonenigma » Sun Mar 17, 2019 11:58 am

That’s a nice aspiration but rarely achievable in moderate or HCOL areas, where high percentages of residents are “rent burdened” (>30%, including utilities) or “severely rent burdened” (>50%). Rents have risen way faster than pay.

SQRT
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Re: Housing should be no more than 28% of your income.

Post by SQRT » Sun Mar 17, 2019 11:59 am

Obviously it depends on your stage of life and personal circumstances.

I’ll share our story although it’s not really relevant to the OP. Perhaps it will be of interest to others.

I’m 68 years old and have been retired for about 12 years. Our total real estate expense is about 20% of our pre tax cash flow. But we are certainly not typical. 4 personal use homes, no debt. I’ve included everything ie travel costs to get to them, landscaping, all maintenance, utilities, taxes, even furniture/art purchases and auto costs for the autos in use there. Works for us but if we were just using one place the ratio of expense to income would be around 3-5% (depending on which place).
Last edited by SQRT on Mon Mar 18, 2019 3:31 am, edited 1 time in total.

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arcticpineapplecorp.
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Re: Housing should be no more than 28% of your income.

Post by arcticpineapplecorp. » Sun Mar 17, 2019 12:09 pm

30% or less is the typical definition of "affordable housing" as defined by HUD (housing and urban development):

https://www.google.com/search?client=fi ... sing+30%25

Some lower earning folks might spend 50% of their income on housing which obviously doesn't leave much room for investing/saving.

If you think 28% seems "awfully high" (your words) then consider yourself lucky or in a good position (this means you're either in a LCOL or you have higher income relative to the average housing costs in your area). In either event, you have more discretionary income for spending or investing. Not everyone is in your financial boat:
Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more than 50 percent of their annual incomes for housing. A family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States.

source: https://www.hud.gov/program_offices/com ... lehousing/
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MikeDun
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Re: Housing should be no more than 28% of your income.

Post by MikeDun » Sun Mar 17, 2019 12:22 pm

miamivice wrote:
Sun Mar 17, 2019 11:27 am
cherijoh wrote:
Sun Mar 17, 2019 11:24 am
miamivice wrote:
Sun Mar 17, 2019 11:09 am
SmallCityDave wrote:
Sun Mar 17, 2019 10:59 am
I was listing to a show this morning and he said the CFP board recommends that you spend 28% or less of your gross income on housing.

Housing would be rent or taxes & insurance (if you own your home) or P&I, taxes, insurance (and hoa). Obviously this doesn't include utilities, lawn care, cleaning services etc...

28% seems awfully high, what percentage are you spending?
Why would you include HOA but exclude electric bill?

I have not heard HOA thrown into the mix, unless the HOA is large (say for a condo). Otherwise it is usually excluded as it is not part of the monthly payment.
I think mortgage lenders take HOA dues into account when looking at prospective borrowers.
I don't believe they did with mine. I know that I didn't provide the lender with the HOA dues amount when I applied for a mortgage and don't believe they got that from another source. However, our lender did not escrow HOA dues. Maybe if they escrowed HOA dues then they would have been considered.
Lenders dont escrow HOA dues only taxes/insurance but they do count it as part of PITIA (this is actually new acronym they use insted of just PITI)

warner25
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Re: Housing should be no more than 28% of your income.

Post by warner25 » Sun Mar 17, 2019 12:24 pm

usaar33 wrote:
Sun Mar 17, 2019 11:22 am
I don't see how there's any one size fits all percentage here... In HCOL markets, it's mostly housing that is far more expensive than other goods, so you'd expect a higher percent of income to be allocated to housing.
I was thinking the same thing. What matters is how many dollars are still available after paying for housing. Early in my career I rented a 1BR apartment in a LCOL area that was about 13% of my income ($8k of a $60k income). More recently I rented a 4BR house in a HCOL area that was about 33% of my income ($35k of a $105k income), but in real dollar terms I was able to save a lot more money because there was no significant change in my non-housing expenses between the two places. So you don't need to earn 2x more to thrive in a place where housing is 2x more expensive.

rgs92
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Re: Housing should be no more than 28% of your income.

Post by rgs92 » Sun Mar 17, 2019 12:46 pm

There are no rules (or one size fits all as mentioned above).

Housing is a consumable item and how much you spend on it as part of your spending budget it up to you. Maybe you want to spend more on housing than say vacations (zero?), fancier cars, entertainment, gifts, high-cost education, or anything discretionary.

As long as you have a decent retirement-savings plan so you can foresee a Firecalc-approved SWR from your nest egg for needed expenses, then you are OK.

(And if you don't forecast enough for retirement, then even 28% is too high.)

Pie charts don't lie.
Last edited by rgs92 on Sun Mar 17, 2019 12:52 pm, edited 4 times in total.

Old_Dollar
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Re: Housing should be no more than 28% of your income.

Post by Old_Dollar » Sun Mar 17, 2019 12:49 pm

Rising housing prices and rents coupled with stagnant wages have made 28% the low end among most of my coworkers age 26 to 35. It is a chore just to find an apartment with a rent that is 30% of my income.
I am here solely to learn about investing.

pdavi21
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Re: Housing should be no more than 28% of your income.

Post by pdavi21 » Sun Mar 17, 2019 12:53 pm

2-3%. I spent almost 200% buying the house though.

EDIT: 11-12% would be my equivalent rate for putting 20% down and getting a 30 year mortgage and homeowner's insurance.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

MoonOrb
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Re: Housing should be no more than 28% of your income.

Post by MoonOrb » Sun Mar 17, 2019 12:59 pm

Rules of thumb are just a starting point and helpful for people who need some frame of reference to begin thinking about this question.

Mortgage + taxes + insurance= 13.5% in my particular situation, but it was much higher when we bought the house, probably closer to twice that (or, right around 28%, come to think of it).

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SevenBridgesRoad
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Re: Housing should be no more than 28% of your income.

Post by SevenBridgesRoad » Sun Mar 17, 2019 1:04 pm

Hey, you tried.

It is interesting how many times the same topics get rehashed. Even when directed to previous threads, the conversation will continue in the newest thread. And that's probably why: conversation. Many folks are here for participating or at least following a conversation, not just reading about a particular topic. People can quietly read about any topic by Googling the entire internet in seconds. I think many come here for the noisy and entertaining conversation. Dinner table verses the library.
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runner540
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Re: Housing should be no more than 28% of your income.

Post by runner540 » Sun Mar 17, 2019 1:20 pm

abner kravitz wrote:
Sun Mar 17, 2019 11:33 am
28% (and 36% total debt to income) were long-time Fannie Mae underwriting guidelines. They still may be, but not sure. That is probably where they came up with this number.
These are long gone. 50% DTI now allowed...and people still say mortgages are hard to get

Additional leverage on the same amount of income is how housing prices have risen faster than incomes.
Last edited by runner540 on Sun Mar 17, 2019 1:22 pm, edited 1 time in total.

Ron Ronnerson
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Re: Housing should be no more than 28% of your income.

Post by Ron Ronnerson » Sun Mar 17, 2019 1:20 pm

rgs92 wrote:
Sun Mar 17, 2019 12:46 pm
There are no rules (or one size fits all as mentioned above).

Housing is a consumable item and how much you spend on it as part of your spending budget it up to you. Maybe you want to spend more on housing than say vacations (zero?), fancier cars, entertainment, gifts, high-cost education, or anything discretionary.

As long as you have a decent retirement-savings plan so you can foresee a Firecalc-approved SWR from your nest egg for needed expenses, then you are OK.

(And if you don't forecast enough for retirement, then even 28% is too high.)

Pie charts don't lie.
I totally agree. Rules-of-thumb are fine as a starting point but they do tend to ignore individual circumstances. Our housing expense as you define it (PITI, insurance, HOA) are around 31% of gross income. However, for some more context, I’ll provide the percentage of gross income that we spend on some other categories that many people spend quite a bit more on than us:

Childcare (we have a four-year-old): 0%
Health insurance: 2.2%
Vacations: 1.2%
Federal income tax: 1.6%
California state income tax: 0.04%

Our 31%-of-gross-income housing expenses are not really a problem since the total we spend on childcare, health insurance, vacations, and income taxes add up to only 5%. Our savings rate is close to half of gross income.

It’s a choice what you spend money on and housing is just one of many categories. Look at the big picture (meaning all categories) to figure out a budget that is tailored to your specifics.

jharkin
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Re: Housing should be no more than 28% of your income.

Post by jharkin » Sun Mar 17, 2019 1:47 pm

28% comes from the old 28/36 DTI rules for conforming mortgage approval. However as mentioned above they go a lot higher now:

https://www.fanniemae.com/content/eligi ... matrix.pdf


Right now we are at around 10% on housing, but we are hoping to move up to a larger house this year which will reset us probably to 18-20%. We might float at 30%+ for a couple months in between closings if we have to carry both temporarily but I would not be comfortable carrying that long term...

JackoC
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Re: Housing should be no more than 28% of your income.

Post by JackoC » Sun Mar 17, 2019 2:03 pm

usaar33 wrote:
Sun Mar 17, 2019 11:22 am
I don't see how there's any one size fits all percentage here [1]
  • Increasing housing costs can lead to decreasing transit costs (live far away - drive a lot; live in the city center - don't even need a car).
  • In HCOL markets, it's mostly housing that is far more expensive than other goods, so you'd expect a higher percent of income to be allocated to housing.
  • It doesn't make sense for rented housing to only be allocated the same amount as mortgage (P&I). In the former, the rent money is burned; in the latter, the interest is burned, but principal is preserved in home value. Consequently, you can afford much more mortgage than rent.
I know very few people in the Bay Area staying under 28% pre-tax income on owned housing. You would need $220k combined annual income to afford the median priced home (~$1M) under such a rule.

[1] Outside of absolute upper bounds set by marginal tax rates.
I agree and would add to the first one that living closer to a good job in a high cost area can also boost your career, because you can spend more time in the office within a given total % of your time spent away from home and family. Doing paperwork on public transport might offset some of that, but it's not the same. And increasing income in a high paying job can mean a lot more absolute retirement saving dollars. But I doubt anyone with high career potential in a V/HCOL area pays much attention to these general housing cost rules of thumb anyway.

On the last point I also agree but as others have mentioned at least some of the commonly quoted %'s derive in part from what mortgage lenders want to see including principal payments, so those might be viewed as applying to an owner and the % should be somewhat lower for a renter. Again, not that that's necessarily realistic in say SF or NY areas.

sawhorse
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Re: Housing should be no more than 28% of your income.

Post by sawhorse » Sun Mar 17, 2019 2:10 pm

usaar33 wrote:
Sun Mar 17, 2019 11:22 am
In HCOL markets, it's mostly housing that is far more expensive than other goods, so you'd expect a higher percent of income to be allocated to housing.

It doesn't make sense for rented housing to only be allocated the same amount as mortgage (P&I). In the former, the rent money is burned; in the latter, the interest is burned, but principal is preserved in home value. Consequently, you can afford much more mortgage than rent.
This. In New York City on average 2/3 of income is spent on rent. It's practically impossible on an average salary to stay within the recommended 28% unless you want to live in a very dangerous neighborhood, and even then you'd be pushing that percentage.

Like many people in high cost areas, I hate burning the money on rent every month, but you're kind of stuck in a bind. A not so big condo 1 bedroom condo in a not so convenient location is at least $750k. A 20% down payment would be $150k. It's very hard to save money for a down payment when you spend so much on rent, so you're stuck renting.

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SmallCityDave
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Re: Housing should be no more than 28% of your income.

Post by SmallCityDave » Sun Mar 17, 2019 2:18 pm

pdavi21 wrote:
Sun Mar 17, 2019 12:53 pm
2-3%. I spent almost 200% buying the house though.

I like those numbers, we are at 1% and spent 50% of gross on the purchase.

harvestbook
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Re: Housing should be no more than 28% of your income.

Post by harvestbook » Sun Mar 17, 2019 2:23 pm

Mortgage was over 60 percent of take-home pay when I started. This was back in 2004 when the banks were insane and everything was fake. They even tried to force an additional $50k home-equity loan on top of that when I obviously had not much equity...I should have known something was fishy somewhere.

I paid off that house in seven years. Still live here.
I'm not smart enough to know, and I can't afford to guess.

KlangFool
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Re: Housing should be no more than 28% of your income.

Post by KlangFool » Sun Mar 17, 2019 2:23 pm

OP,

When you asked the wrong question, you will never get the right answer!

The correct question is how much do you save. It has nothing to do with how much you earn or spend. Or your spending on your housing.

For example, if you save 30+% of your gross income, why does it matters how much you earn or spend? You are doing well financially.

KlangFool

Slacker
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Re: Housing should be no more than 28% of your income.

Post by Slacker » Sun Mar 17, 2019 2:26 pm

15 year mortgage, 20% down

Monthly PITI is just under 11% of monthly Gross Household Income. Total financed mortgage = 1 year gross salary.
MCOL city/MSA. 1900sq ft 3bed/2.5ba/2 car garage.

Those are our numbers. We just purchased within the last 12 months and are pretty happy to be able to hit those numbers.

Traveler
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Re: Housing should be no more than 28% of your income.

Post by Traveler » Sun Mar 17, 2019 2:36 pm

About 3.7% but I don't have a mortgage so this only includes HOA, taxes and insurance which are all pretty nominal. And this is only on base salary, not base plus bonus.

TheEternalVortex
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Re: Housing should be no more than 28% of your income.

Post by TheEternalVortex » Sun Mar 17, 2019 3:25 pm

If you own a house you should really count the imputed rent else it’s not exactly a fair comparison.

LawEgr1
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Re: Housing should be no more than 28% of your income.

Post by LawEgr1 » Sun Mar 17, 2019 3:26 pm

I'll play. It's a moving target so I don't think it's super helpful.

3 years ago - 10%
Now - 8.5%

In between taxes went up, PMI disappeared, income increased, etc., but that's what it is now.

ohai
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Re: Housing should be no more than 28% of your income.

Post by ohai » Sun Mar 17, 2019 3:35 pm

Obviously, a lower percentage would be better, but you can change that number to whatever you want if you know how to manage your money and have some rational basis for your decision.

Keep in mind that rules of thumb like this are designed for people who have zero knowledge of finance and little sense when it comes to money. There's no "one size fits all" answer for things like this, but for 90% of Americans, it's better to just specify some kind of target. Otherwise, they will just spend themselves into oblivion.

Sam1
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Re: Housing should be no more than 28% of your income.

Post by Sam1 » Sun Mar 17, 2019 4:14 pm

sawhorse wrote:
Sun Mar 17, 2019 2:10 pm
usaar33 wrote:
Sun Mar 17, 2019 11:22 am
In HCOL markets, it's mostly housing that is far more expensive than other goods, so you'd expect a higher percent of income to be allocated to housing.

It doesn't make sense for rented housing to only be allocated the same amount as mortgage (P&I). In the former, the rent money is burned; in the latter, the interest is burned, but principal is preserved in home value. Consequently, you can afford much more mortgage than rent.
This. In New York City on average 2/3 of income is spent on rent. It's practically impossible on an average salary to stay within the recommended 28% unless you want to live in a very dangerous neighborhood, and even then you'd be pushing that percentage.

Like many people in high cost areas, I hate burning the money on rent every month, but you're kind of stuck in a bind. A not so big condo 1 bedroom condo in a not so convenient location is at least $750k. A 20% down payment would be $150k. It's very hard to save money for a down payment when you spend so much on rent, so you're stuck renting.
If you can’t save to buy a place you have one of two problems:

1. You can’t really afford to live in NY
2. You’re renting too nice (relatively speaking) of a place

Signing up to be a renter for life in NY is rough. Rent goes up every year and usually by a lot. Buying allows one to lock in their housing costs. It’s really hard to get ahead by renting unless you have a rent controlled apartment. You need to either move in with roommates, move somewhere reasonable like Queens , or relocate to another city where you can save AND rent at the same time.

Trust me I was once in your shoes.

Getting on the property ladder in a HCOL city is crucial. It allows you to lock in your housing expense while continuing to earn the HCOL salary that hopefully will continue to increase significantly. Eventually you should have enough equity (by paying it down, not relying on appreciation) to then by another place and again, lock in your housing cost for the next 10-15+ years. It’s a giant racket, but you have to play or you lose.

Sam1
Posts: 353
Joined: Mon Apr 09, 2018 7:24 am

Re: Housing should be no more than 28% of your income.

Post by Sam1 » Sun Mar 17, 2019 4:17 pm

sawhorse wrote:
Sun Mar 17, 2019 2:10 pm
usaar33 wrote:
Sun Mar 17, 2019 11:22 am
In HCOL markets, it's mostly housing that is far more expensive than other goods, so you'd expect a higher percent of income to be allocated to housing.

It doesn't make sense for rented housing to only be allocated the same amount as mortgage (P&I). In the former, the rent money is burned; in the latter, the interest is burned, but principal is preserved in home value. Consequently, you can afford much more mortgage than rent.
This. In New York City on average 2/3 of income is spent on rent. It's practically impossible on an average salary to stay within the recommended 28% unless you want to live in a very dangerous neighborhood, and even then you'd be pushing that percentage.

Like many people in high cost areas, I hate burning the money on rent every month, but you're kind of stuck in a bind. A not so big condo 1 bedroom condo in a not so convenient location is at least $750k. A 20% down payment would be $150k. It's very hard to save money for a down payment when you spend so much on rent, so you're stuck renting.
To be fair, if you’re making an average salary and living in NY, you’ve made the decision to never accumulate wealth. You’re giving that up in order to live in NY. Some people choose this. But i can’t imagine many on this forum would do so. NY, especially manhattan, is not a city for an average worker bee to live and actually save. It just isn’t possible.

Jags4186
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Joined: Wed Jun 18, 2014 7:12 pm

Re: Housing should be no more than 28% of your income.

Post by Jags4186 » Sun Mar 17, 2019 4:32 pm

SevenBridgesRoad wrote:
Sun Mar 17, 2019 1:04 pm
Hey, you tried.

It is interesting how many times the same topics get rehashed. Even when directed to previous threads, the conversation will continue in the newest thread. And that's probably why: conversation. Many folks are here for participating or at least following a conversation, not just reading about a particular topic. People can quietly read about any topic by Googling the entire internet in seconds. I think many come here for the noisy and entertaining conversation. Dinner table verses the library.
I know and I’m certainly here for the conversation. But certain topics, especially this one, go round and round and round with the same posters chiming in and it gets super annoying. :sharebeer Of course I can simply choose to ignore, but it’s too tempting!!

Independent George
Posts: 447
Joined: Wed Feb 17, 2016 12:13 pm

Re: Housing should be no more than 28% of your income.

Post by Independent George » Sun Mar 17, 2019 4:34 pm

Sam1 wrote:
Sun Mar 17, 2019 4:17 pm
To be fair, if you’re making an average salary and living in NY, you’ve made the decision to never accumulate wealth. You’re giving that up in order to live in NY. Some people choose this. But i can’t imagine many on this forum would do so. NY, especially manhattan, is not a city for an average worker bee to live and actually save. It just isn’t possible.
Not entirely true. Roommates can cut your housing costs dramatically, as can moving to Queens or the less sexy neighborhoods of Manhattan. It's not easy, and you're likely to live in a smaller space than you are probably comfortable with, but as a blanket statement NYC and savings are not mutually exclusive for modest (22% bracket) earners. Not needing to finance or maintain a car is itself a substantial source of savings.

For someone in the 12% or lower bracket... yeah, I agree.

Glockenspiel
Posts: 856
Joined: Thu Feb 08, 2018 1:20 pm

Re: Housing should be no more than 28% of your income.

Post by Glockenspiel » Sun Mar 17, 2019 4:41 pm

We’re at 14% right now. But we’re thinking of moving next year and our budget will put us somewhere around 20% in our next house. We’re still saving about $50k/yr for retirement.

Sam1
Posts: 353
Joined: Mon Apr 09, 2018 7:24 am

Re: Housing should be no more than 28% of your income.

Post by Sam1 » Sun Mar 17, 2019 6:30 pm

Independent George wrote:
Sun Mar 17, 2019 4:34 pm
Sam1 wrote:
Sun Mar 17, 2019 4:17 pm
To be fair, if you’re making an average salary and living in NY, you’ve made the decision to never accumulate wealth. You’re giving that up in order to live in NY. Some people choose this. But i can’t imagine many on this forum would do so. NY, especially manhattan, is not a city for an average worker bee to live and actually save. It just isn’t possible.
Not entirely true. Roommates can cut your housing costs dramatically, as can moving to Queens or the less sexy neighborhoods of Manhattan. It's not easy, and you're likely to live in a smaller space than you are probably comfortable with, but as a blanket statement NYC and savings are not mutually exclusive for modest (22% bracket) earners. Not needing to finance or maintain a car is itself a substantial source of savings.

For someone in the 12% or lower bracket... yeah, I agree.
Understood. But also depends on your standard of living. Who wants to have roommates and live in queens in order to save on 100k a year? It’s true that if you aren’t wealthy you’ll need to make significant sacrifices (space, commute, etc) to stay in NY and still save.

cashisking500
Posts: 57
Joined: Fri Dec 02, 2016 1:08 pm

Re: Housing should be no more than 28% of your income.

Post by cashisking500 » Sun Mar 17, 2019 6:55 pm

Just purchased a new home. It will be 17% of gross monthly income and 25% of net monthly income. That’s the max I’m comfortable with.

Candor
Posts: 185
Joined: Sat May 28, 2011 4:25 pm

Re: Housing should be no more than 28% of your income.

Post by Candor » Sun Mar 17, 2019 7:07 pm

Jags4186 wrote:
Sun Mar 17, 2019 4:32 pm
SevenBridgesRoad wrote:
Sun Mar 17, 2019 1:04 pm
Hey, you tried.

It is interesting how many times the same topics get rehashed. Even when directed to previous threads, the conversation will continue in the newest thread. And that's probably why: conversation. Many folks are here for participating or at least following a conversation, not just reading about a particular topic. People can quietly read about any topic by Googling the entire internet in seconds. I think many come here for the noisy and entertaining conversation. Dinner table verses the library.
I know and I’m certainly here for the conversation. But certain topics, especially this one, go round and round and round with the same posters chiming in and it gets super annoying. :sharebeer Of course I can simply choose to ignore, but it’s too tempting!!
I guess your post assumes there is nothing left to learn from this subject. There are no new members who might add a novel idea to this particular discussion and might not run across the prior threads and if they did may not bump them.

I'm sure if you put your mind to it you could do this on 50% of the subjects brought up here or maybe more. I find responses like yours rude and annoying.

MarkBarb
Posts: 221
Joined: Mon Aug 03, 2009 11:59 am

Re: Housing should be no more than 28% of your income.

Post by MarkBarb » Sun Mar 17, 2019 7:47 pm

We're around 5%. Paid off house. Peak earning years. Medium to low COL area. It was much higher when we bought our first house and were early in our career progression.

I don't favor a rule. I think it's OK to be on the higher side when you are younger, but you should be slow to move as the affordability improves. Moves, at least for homeowners, are very expensive. All of our moves have been company transfers or new jobs that covered relo costs.

ddurrett896
Posts: 1040
Joined: Wed Nov 05, 2014 3:23 pm

Re: Housing should be no more than 28% of your income.

Post by ddurrett896 » Sun Mar 17, 2019 8:17 pm

30 year - 12.5% of net

LiterallyIronic
Posts: 1230
Joined: Sat Dec 05, 2015 10:36 am

Re: Housing should be no more than 28% of your income.

Post by LiterallyIronic » Sun Mar 17, 2019 8:31 pm

SmallCityDave wrote:
Sun Mar 17, 2019 10:59 am
28% seems awfully high, what percentage are you spending?
I might get eyerolls, but we're at 13% of gross and it's way too high. I want to recast it to get it to 10%.

retire2022
Posts: 808
Joined: Tue Oct 02, 2018 6:10 pm
Location: NYC

Re: Housing should be no more than 28% of your income.

Post by retire2022 » Sun Mar 17, 2019 8:44 pm

Sam1 wrote:
Sun Mar 17, 2019 4:17 pm

To be fair, if you’re making an average salary and living in NY, you’ve made the decision to never accumulate wealth. You’re giving that up in order to live in NY. Some people choose this. But i can’t imagine many on this forum would do so. NY, especially manhattan, is not a city for an average worker bee to live and actually save. It just isn’t possible.
I did my income was 18K-95K 1986-2019 and my net worth 2.4 million, portfolio is 1.5 million and two time homeowner my coop apartment and 89 acres vacation home. My coop mortgage was 15 year, I paid it off in ten, 25% or quarter of your income at 50K it cost me $225K in 2002, with money I made during the internet boom 10K in 1997 turned to 70K.

My vacation home was cash raised from cash value of whole life, 29K turned to 102 over 34 years 1980-2014 and some cash savings.

Btw my FICO score currently is 820.

montanagirl
Posts: 1156
Joined: Thu Nov 19, 2009 4:55 pm
Location: Montana

Re: Housing should be no more than 28% of your income.

Post by montanagirl » Sun Mar 17, 2019 8:54 pm

Taxes and insurance are about 10% our household income.

No deferred maintenance really but could use a kitchen remodel. :moneybag

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