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Post by Deleted on May 12, 2011 15:29:46 GMT -5
of your net or gross should it be again? I was reading a comment about Firebird and them downgrading because their current rent is above a certain percentage.
So I was currious and calculated ours based on 2 checks a month for my wife and 4 checks for me (she gets paid biweekly and I get paid weekly)
Our current rent is $1,670/month and it represents 41% of our net and 24% of our gross.
We are moving June 1 to an apartment that is $1,275/month and it would represent 31% of our net and 18% of our gross.
What are the guidelines? And should you include utilities?
*I say utilities because current apartment does not cover gas/heat (past winter it cost us about $230/month) while the one we are moving to covers gas/heat.
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Post by illinicheme on May 12, 2011 15:32:03 GMT -5
Our mortgage is roughly 22% of our gross (not counting any bonuses).
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Sum Dum Gai
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Post by Sum Dum Gai on May 12, 2011 15:35:05 GMT -5
To me they're two different questions. For rent; as low as we possibly could and still feel safe letting the kids play outside. For a mortgage, whatever fits comfortably in your budget, but I can see the argument for stretching a little at first too. Over time your wages go up, by and large, so the mortgage gets easier.
We rented a one bedroom apartment when it was us and one kid. Moved to a two bedroom apartment when we had kid number two. House on base for a while. When I got out, we shared a three bedroom townhouse with my SIL. Then we moved into a two bedroom condo that we rented. We never had much space, but it kept our costs down, and also kept us from acquiring too much crap.
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midjd
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Post by midjd on May 12, 2011 15:40:02 GMT -5
I work in foreclosure prevention and our guideline is no more than 28-31% of gross. That is for PITI only - doesn't include utilities. But like Dark says, rent is a bit of a different animal.
ETA - we bought in February and our PITI is about 22% of gross, 38% of net. Prior to that, our rent was about 5% of gross, but this would be difficult to do in a M or HCOLA.
ETA 2 - Cawaiu, for your purposes, since heat was covered at once place and not another, you might want to lump utilities in with both. In that case, you could go as high as 35% of gross in theory (though IIRC you have hefty SL payments, so probably not a great idea).
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dancinmama
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Post by dancinmama on May 12, 2011 15:45:47 GMT -5
I work in foreclosure prevention and our guideline is no more than 28-31% of gross. That is for PITI only - doesn't include utilities. But like Dark says, rent is a bit of a different animal. ETA - we bought in February and our PITI is about 22% of gross, 38% of net. Prior to that, our rent was about 5% of gross, but this would be difficult to do in a M or HCOLA. And does that assume no other debt - no credit card payments and no car loans?
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Post by Deleted on May 12, 2011 15:48:19 GMT -5
Why would rent be different? I understand how you would want to get the cheapest rent you can but there is no guidelines as to what not t exceed? We are planning to stay at the apartment we are moving to for at least 2 years or less if my job is paying for it. One of my cousin is paying $1,500/month in Manhattan and she has 3 roommates. Basically that apt rents for $4,500/month but that is the costs of living in NYC. So HCOL area will definitely eat more of you pay... but what is the absolute max one should go for both rent and mortgage?
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Post by Deleted on May 12, 2011 15:50:16 GMT -5
ETA 2 - Cawaiu, for your purposes, since heat was covered at once place and not another, you might want to lump utilities in with both. In that case, you could go as high as 35% of gross in theory (though IIRC you have hefty SL payments, so probably not a great idea). Heat is not included in the apartment we are at now which is $1,670/month but will be included in the apartment we are moving to in June $1,275/month. And yes we do have a hefty student loans balance that we are repaying.
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brdsl
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Post by brdsl on May 12, 2011 15:50:50 GMT -5
Rule of thumb....one week of your labor for the month to cover the house payment.
25% ??
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Post by Deleted on May 12, 2011 15:51:57 GMT -5
Rule of thumb....one week of your labor for the month to cover the house payment. 25% ?? gross or net?
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Sum Dum Gai
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Post by Sum Dum Gai on May 12, 2011 15:55:01 GMT -5
Why would rent be different? Because I'm willing to spend more of my money to pay my own mortgage, but not willing to spend that same amount paying somebody else's mortgage.
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Gardening Grandma
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Post by Gardening Grandma on May 12, 2011 15:57:30 GMT -5
Our mortgage (piti only) is 13% of our gross. 15% of our net. I'd be uncomfortable if it were more than 1/3 of either. I've always tried to keep it to no more than 25% of gross.
"Because I'm willing to spend more of my money to pay my own mortgage, but not willing to spend that same amount paying somebody else's mortgage"
Same here. When we've rented, we've gone to the cheapest we could find that was at least what we needed because we were simply paying for shelter. With a mortgage, we are purchasing a home that we hope will end up being a good investment, and we do get a bit of a tax break, so we are willing to pay more.
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michelyn8
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Post by michelyn8 on May 12, 2011 16:04:17 GMT -5
I work in foreclosure prevention and our guideline is no more than 28-31% of gross.
For me that's over $1000 a month. No way I would be comfortable paying that for rent or PITI - that's nearly 1 paycheck a month.
I figured my top end price for rent is no more than 30% of my net. This way I know I have some wiggle room in my budget for extras and don't feel like I'm overpaying because someone is upside down on their rental investment (as I suspect my current landlord is). For my area, that's reasonable - or used to be. Rentals are scarce right now and I'm finding more and more priced over $900 a month for poorly maintained homes.
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brdsl
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Post by brdsl on May 12, 2011 16:43:33 GMT -5
net
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phil5185
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Post by phil5185 on May 12, 2011 17:21:09 GMT -5
based on 2 checks a month for my wife and 4 checks for me (she gets paid biweekly and I get paid weekly) You are introducing quite a bit of error by using only 48 of your 52 pay checks and only 24 of her 26 checks (about 8%). It doesn't matter if your pay period is monthly, semimonthly, biweekly, weekly, or a fortnight. The guideline is 28% MAX of your annual gross income / 12. (Note the MAX). ![:)](//storage.proboards.com/forum/images/smiley/smiley.png)
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oreo
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Post by oreo on May 12, 2011 17:22:48 GMT -5
I've always been over the 30% or whatever the "max" should be. Right now, I pay extra on the mortgage and am paying 44% of my income (NET, not gross) and I haven't deducted holidays and vacation days for which I don't get paid because they vary year to year so it would actually be a slightly higher percentage. If I just paid the minimum on my house each month, it would be 32%. The only other debt I have is a 0% car loan. I'm in a fairly HCOLA (San Diego).
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dancinmama
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Post by dancinmama on May 12, 2011 17:25:19 GMT -5
based on 2 checks a month for my wife and 4 checks for me (she gets paid biweekly and I get paid weekly) You are introducing quite a bit of error by using only 48 of your 52 pay checks and only 24 of her 26 checks (about 8%). It doesn't matter if your pay period is monthly, semimonthly, biweekly, weekly, or a fortnight. The guideline is 28% MAX of your annual gross income / 12. (Note the MAX). ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) phil: This just gives cawuai a little cushion for when his wife wants to buy $1000 shoes. ;D
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Post by Deleted on May 12, 2011 17:30:55 GMT -5
based on 2 checks a month for my wife and 4 checks for me (she gets paid biweekly and I get paid weekly) You are introducing quite a bit of error by using only 48 of your 52 pay checks and only 24 of her 26 checks (about 8%). It doesn't matter if your pay period is monthly, semimonthly, biweekly, weekly, or a fortnight. The guideline is 28% MAX of your annual gross income / 12. (Note the MAX). ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) Ok, based on annual income : - Current apartment is 38% of net and 22% of gross - Apartment we are moving into in June will be 29% of net and 17% of gross
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Firebird
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Post by Firebird on May 12, 2011 17:31:58 GMT -5
of your net or gross should it be again? I was reading a comment about Firebird and them downgrading because their current rent is above a certain percentage.
Well, just for clarity we're mostly moving because we need the extra $300 per month for the wedding. Were it not for that, we could easily continue affording our rent.
I was pointing out that it was pretty sporty of me to assume a rent that was initially 41% of my take-home since DF hadn't yet moved in and gotten a job.
Here's how the numbers broke down (this is all net):
Current Apartment (at the time of the lease): $1,360 / $3,300 = 41% Current Apartment (for most of last year): $1,360 / $6,000 = 23% Current Apartment (after the rent went up): $1,500 / $6,000 = 25%
New Apartment (which replaces the third number above): $1,200 / $6,000 = 20%
Our gross is $110,000 by the way. So yeah, we could've afforded to stay but it's better to have the extra cash for the wedding of our dreams.
As a general rule, I like to keep committed expenses under half of take-home. So housing can be whatever portion of that I want. When I was in NYC, it was around 42% - but I literally had no other committed expenses except a piddling electric bill and a subway pass, so it was still okay.
As for utilities, they'll go down in the new place too. Right now we pay about $150 per month, but gas is included in rent for the new place so we'll start paying around $80.
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Post by Deleted on May 12, 2011 17:32:09 GMT -5
based on 2 checks a month for my wife and 4 checks for me (she gets paid biweekly and I get paid weekly) You are introducing quite a bit of error by using only 48 of your 52 pay checks and only 24 of her 26 checks (about 8%). It doesn't matter if your pay period is monthly, semimonthly, biweekly, weekly, or a fortnight. The guideline is 28% MAX of your annual gross income / 12. (Note the MAX). ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) phil: This just gives cawuai a little cushion for when his wife wants to buy $1000 shoes. ;D lol, true indeed ![:P](//storage.proboards.com/forum/images/smiley/tongue.png)
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Firebird
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Post by Firebird on May 12, 2011 17:36:18 GMT -5
So HCOL area will definitely eat more of you pay... but what is the absolute max one should go for both rent and mortgage?
As I said, 50% net income going to committed expenses is as high as I ever hope to go, so I would think that I'd never want my housing to be more than 30% (now that we have other committed expenses to contend with, like cars, that I didn't have in NYC).
But, to each his own. I'm awfully conservative with my cashflow.
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Firebird
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Post by Firebird on May 12, 2011 17:37:58 GMT -5
For me that's over $1000 a month. No way I would be comfortable paying that for rent or PITI - that's nearly 1 paycheck a month.
Around here, unless you want roommates or to live in some old lady's spare room, you don't have much choice. The cheapest apartment I've seen around here is around $975, and it was a rattrap.
There are things I'm willing to pay for, and a decent place to live is certainly one of them.
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Firebird
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Post by Firebird on May 12, 2011 17:40:22 GMT -5
It doesn't matter if your pay period is monthly, semimonthly, biweekly, weekly, or a fortnight. The guideline is 28% MAX of your annual gross income / 12. (Note the MAX). Wow, we could technically afford $2,500 then. I could never spend that much on an apartment and still sleep at night (although it would be a palace around here, and a really decent place in downtown SF if we went that route). sfbay.craigslist.org/sfc/apa/2377676119.html
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midjd
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Post by midjd on May 12, 2011 18:08:58 GMT -5
I work in foreclosure prevention and our guideline is no more than 28-31% of gross. For me that's over $1000 a month. No way I would be comfortable paying that for rent or PITI - that's nearly 1 paycheck a month. I figured my top end price for rent is no more than 30% of my net. This way I know I have some wiggle room in my budget for extras and don't feel like I'm overpaying because someone is upside down on their rental investment (as I suspect my current landlord is). For my area, that's reasonable - or used to be. Rentals are scarce right now and I'm finding more and more priced over $900 a month for poorly maintained homes. Yeah, I think net is a better calculation of how much you can really afford... unfortunately the federal government disagrees You also have to take outside debt into account - it's best if your total debt repayment doesn't exceed 40% per month (again gross). I believe the "total debt repayment" includes SLs, credit cards, and car loans, but not utilities, cell phone, internet, etc.
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garion2003
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Post by garion2003 on May 12, 2011 18:14:09 GMT -5
I'm in a fairly LCOL area, and a have a small 2 BR apartment (I'm single, no roommates).
Rent is 20% of net, 13% of gross.
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Firebird
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Post by Firebird on May 12, 2011 18:21:06 GMT -5
I'm in a fairly LCOL area, and a have a small 2 BR apartment (I'm single, no roommates).
Why two bedrooms, just out of curiosity? You can obviously afford it, but why do you need so much space? Do you entertain out of town guests a lot?
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Sum Dum Gai
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Post by Sum Dum Gai on May 12, 2011 18:22:12 GMT -5
Yeah, I think net is a better calculation of how much you can really afford... unfortunately the federal government disagrees ![;)](//storage.proboards.com/forum/images/smiley/wink.png) That's another one that to me at least differs based on whether you're talking rent or own. Uncle Sam likes homeowners and he's willing to subsidize some of your mortgage, so using gross makes more sense. He doesn't however like renters, you're on your own paying the whole amount and don't get a tax break, so using net only makes more sense. When we bought our house my net income went up due to tax savings. It should be even higher but the wife doesn't want me changing my withholdings. In her defense I'm not very good at it, the two years before we bought we owed right around $2k each April. This year we got a refund. She really prefers the refund.
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Post by Deleted on May 12, 2011 18:23:06 GMT -5
I'm in a fairly LCOL area, and a have a small 2 BR apartment (I'm single, no roommates). Rent is 20% of net, 13% of gross. I am envious
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garion2003
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Post by garion2003 on May 12, 2011 22:17:27 GMT -5
Firebird, good question. Basically it was the nicest apt I saw out of the ones I looked at it. I moved to a small community so there's not a lot of options. The other 2 places I looked at were dumps (and about the same price!)
It's not a large place, other than the 2BR and a bathroom, there's one large living area with a kitchen off to one side. It's kind of like a big studio with 2 small rooms off it. I don't have many guests but the second bedroom comes in handy when I do, and in the meantime it's great for storage.
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Post by Deleted on May 12, 2011 22:28:33 GMT -5
Firebird, good question. Basically it was the nicest apt I saw out of the ones I looked at it. I moved to a small community so there's not a lot of options. The other 2 places I looked at were dumps (and about the same price!) It's not a large place, other than the 2BR and a bathroom, there's one large living area with a kitchen off to one side. It's kind of like a big studio with 2 small rooms off it. I don't have many guests but the second bedroom comes in handy when I do, and in the meantime it's great for storage. we have a 2 bedroom now and we are going to downsize to a 1 bedroom. I think I am going to miss the second bedroom more than my wife will; I use it as my personal space/office unless we have guest(s) geeh, I am really going to miss that room, I take naps/sleep there... it was my man cave somewhat. My wife said this is going to be a new experience for both of us because since we have been living together for the past 4 years it's the first time we are going to live in a 1 bedroom apartment. We might end up killing each other ![:P](//storage.proboards.com/forum/images/smiley/tongue.png)
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❤ mollymouser ❤
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Post by ❤ mollymouser ❤ on May 12, 2011 23:10:43 GMT -5
When looking at housing costs as a percentage of income, are people including things like property taxes, homeowner's insurance, flood insurance, earthquake insurance and water/sewer/trash (and possibly electricity/gas?) ~ or are people just comparing mortgage payments or actual rent payments?
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