Financial Question

[starkitten]

I just found an acreage that I really really want - however my payments would go up quite a bit. I have heard there is a percentage guide to your income vs your house payments but can't remember what it is (20%, 30%, etc...). Does anyone know what that is? I certainly don't want to get into financial trouble on this. I will certainly comb through my budget and all that too...

[WashingtonBay]

I think in general, housing is ideally no more than 30% of your income. But obviously, the bigger the income, and the lower your other commitments, such as car payments or credit card debt, the more wiggle room you have in that. :)

[starkitten]

Nope no car payments or credit cards here (learned all that the hard way when I was younger ;) ) I guess it kinda freaks me out because what I pay now is very low (way below average) and I have kinda grown accustomed to be being able to buy what I want (trust me I'm not rich or anything like that - I wish). The payment would be going up 1275 a month, but I could keep my pony at home so it would be nice. The other nice thing is that this would be paid off in 10 years and then no more mortgage payment (it is a direct buy from the seller kind of deal).

Now when you say 30% of your income are we talking take home pay here vs what my salary is?

[WashingtonBay]

Take home pay. Your gross salary might be a nice number to have on the wall, but if it's not yours to spend then I wouldn't count it.

Good luck on it, I hope it works out for ya :)

[Miracle Whip]

One other thing, your down payment should factor into this. I paid $10% down, which was $10,300 on a house in town 8 years ago. They did NOT verify my income. I was able to purchase a decent 3 bedroom ranch on the fast and dirty program instead of a peice of crap $60,000 home which is what the rules said I could buy as a single person.

So save your money. The more you have for a down payment the more you can buy. I was not married yet and my husband had a crummy credit rating. We bought the house in my name only and he helped me with the payments.

That 33% rule isn't set in stone. There ARE ways around it. We never had kids and I never had any problems making the $850 payment. BUT, I would not want to have a $1275 mortgage payment. Egad. If the gas prices went back up I'd be dead in the water.

At times my mortgage payment has been nearly 1/2 or 60% of my take home pay. 30% would be a piece of cake.

[starkitten]

MW - This one is a contract sale - my actual payment would be 1575 per month for 10 years then it would be mine free and clear. I put in the payment to a ratio calculator which I found online that says it would be 29% of my income. My only fear is becoming house poor - I've been really spoiled by my current rent which is 300 per month. The place I live in now is a dump but it is cheap that's for sure :) I just worry about the economy right now - even though I have been at my job for 11 + years you never know...

[westmanfarrier]

Make sure you have a rock solid contract, probably worth the $100 bucks or so to consult with a lawyer. Is the seller charging you interest? If so, it is deductible on your taxes if you itemize, so that would give you a little bit of wiggle room. I am a believer in owning property, you always have something tangible that you can sell later and should appreciate over time.

[starkitten]

Good thoughts Westman - I will definitely have a lawyer look at the contract if we decide we are going to do it. The seller is charging interest, I'm not sure how that would work on taxes - I'll have to check on that for sure. I have had a regular mortgage before, but not sure exactly how the whole contract deal works - will definitely have to do more research.

[starkitten]

Well I'm going to look at it this Sunday - maybe I'll take some pics (although it will be covered in snow ;) ) I have dug like crazy through the budget to see where I could make any cuts and I think I can do it. My SO has been out of work for a few years since his last injury, but we are thinking he could take a part time job out there for some little extra spending cash although making sure it is not income we ever rely on.

[westmanfarrier]

Good luck!

[Cat]

Also - don't forget to factor what you will save in board. While you will still have to pay for hay and feed - board typically is higher than what the cost of feed at home is.

[Miracle Whip]

Sounds like maybe you could board another horse on this property also, if it is 8 acres? $1575 seems like a LOT for one person to carry. Honest. Jumping from $300 to $1500 or so it a HHUGE jump. Do you currently have a budget and do you follow it? That is my suggestion. Start itemizing your expenses so you know what you CAN afford in the future, its the only way to go. Just saying its 30% isn't going to cut it if you haven't been tracking your expenses and know what you have to have and what you can do without.

I mean, if I was only spending $300 on rent - how many horses do you board? With one horse, $700 + utilities, I'd still be saving a good $200 a month if not more.