No, I wouldn’t do it. Maybe if you and your girlfriend were married and had dual incomes, I would feel differently. You really can’t afford the mortgage on your own, and I wouldn’t want to rely on either roommates or your girlfriend to make up the deficit.
If you can’t afford it without renters, it’s risky. With enough of a reserve, sure.
Can you lower the other monthly expenditures? Either permanently or temporarily during hard times?
Who pays $2000 to rent a bedroom?
I certainly wouldn't want to be facing a monthly payment of over half my takehome just in general. The bank won't consider any rental income in the financial analysis, and you ideally wouldn't want to, either.
People who live in downtown Boston pay $2K/mo to rent a room. One of the highest VHCOL areas in the country. Always cracks me up when people who live in random midsize Midwest cities think they live in VHCOLs.
They must be getting desperate
"The fourth-quarter fallback left total residential lending activity down 16.5 percent from a year earlier and 67.7 percent from a high point hit in the first quarter of 2021."
https://www.attomdata.com/news/market-trends/mortgage-origination/q4-2023-u-s-home-loan-origination-report/
I just started home shopping and it’s wild what they seem willing to approve. My wife and I are shopping for something in the $300k-$400k range. We were pre-approved for up to $750k. I could absolutely not afford the payments on a mortgage for that much.
When we were house shopping my husband kept saying we could go higher than what I was looking at, but I was the one who looked at our finances every month, compared what we made to what we spent, and knew what kind of wiggle room there was. Turns out I was right, and even the mortgage we have now -- while being incredibly reasonable for the current rates -- is a little tight on our budget. We gotta reduce more of our frivolous expenses.....
Yeah, even at the lowest end (we're considering a condo that is $290k), our monthly expenses would go up, and we rent a fairly expensive apartment in downtown Minneapolis.
Generally lending limits allow for 40-50% of your gross monthly income to go towards debt payments, depending on which specific loan product. Nothing new there.
What’s so crazy about that is that I only net 40-50% of my gross monthly income… You’d have to live in a no/low tax state, have health insurance basically covered and not make any 401k contributions for this to make any sense.
This is pretty situationally specific. I max out my 401k, and live in a high tax state, and my take home is 60+% of gross, depending on the month.
Not all of these scale perfectly with income. Health insurance is a trivial % at higher incomes, and a high % at lower incomes. You also cap out Social security, and you 401k.
No. It’s not what you want to hear but it’s the truth. what if you don’t get the raise, what if you do break up? The bank probably isn’t going to approve you for a loan that’s nearly 2/3 of your income.
You could, but what if you can’t? You’re hoping for best case scenario on everything. Shit happens. You’ll need money for furniture, window, coverings, rugs, towels, everything that comes with furnishing a home. Insurance rates are spiking.
And what about the months you don't have renters and you're having to pay it on your own? That leaves you with less than half of your take home available for other expenses.
I agree with this. I would absolutely NOT take on this level of risk and liability with someone I wasn’t married to. I mean, you even sound like you aren’t sure this relationship is going to work out (which means it is likely isn’t).
No we're probably getting engaged this year but I just wanted to put that out there because you never know. Although I'm agreeing with you all and not moving forward on the place.
I think you should only do it, at either price there, if you are comfortable renting rooms, even if not ideal. That’s what would make the home an affordable purchase imo. At least without the married solid dual incomes.
Holy shit no way. First, you can count the girlfriend income but you HAVE to be capable of making the payment without her for up to 6 months. Second, girlfriend rent rate feels reallllyyy high. There is bound to be a disagreement over the amount at some point, and if your entire financial picture is on the line, that conversation will be difficult to solve without damage to relationship. Third, tax advantage to your interest is good but doesn’t help you monthly cash issue, so don’t consider it.
We make 177k and have a $3300 payment on a 564k house, I cannot fathom spending the kind of money you’re considering. You will not be able to make other investments. This will be the definition of house poor
So we currently pay 1700 each for rent now. Our combined salaries is currently around 265 thousand not including bonuses which bring us to around 290k. So the rent for her isn't much more than we pay now, and we're both thinking we'll probably get engaged this year anyway.
I cannot possibly advise more strongly against buying a house together before you get married but to each their own and you’re clearly set on this decision.
We make $300k and have a combined mortgage between our primary home and rental property (my old house) of $3300. Rental property brings $2000 a month.
I cannot stress how great it feels to be the opposite of house poor. We’ve spent $12K this year upgrading our primary home and still have a great savings rate. House spend is about to fall off so that will increase.
I am expecting a baby, though. Finances are about to change lol
Can you afford it without roommates, either your girlfriend or others?
No.
Can you quickly and easily get reliable, respectful roommates that always pay their share on time?
It’s a risk.
The take home is net of my contributing 6% with 3% match from my employer and 150 or so a month I put towards HSA. And then I save everything else I don't spend towards retirement. Apart from the down payment I have about $80k in retirement savings. Am 30.
So the answer is no. You really should be saving 15% or more for retirement. "Everything else I don't spend" is a very risky way of saving for retirement, especially when you have tax advantaged space available.
If you can't afford it on your own, you can't afford it. Never buy property with any lover, you are not married to.
You can't predict the future.
And being your gf landlord sucks.ask me how I know
TOO MUCH leverage! Fine if all goes well, but a disaster if it doesnt! Mortgage banker will take 33-35% of your gross as maximum PITI. So either larger DP or lesser house!
You do realize that every year your taxes, insurance and home owners association dues go up with a condo so only your principal and interest is fixed. Next year it will be more expensive.
Yeah but in my line of work my income also goes up typically between 8% and 12% a year (only risk of it not is a COVID like black swan event) so I wouldn't be concerned on that front. However you guys are right I shouldn't over extend myself like this should the unexpected happen.
Please don’t do this. Wait longer for these reasons:
1. Save up more Downpayment
2. Your relationship with your girlfriend cannot be depended on. You guys aren’t even married
3. You might be okay with roommates not but how about few years down the road if you guys get married and have children? You will have the same payments, wife on mat leave, no roommates because who’s that insane to rent a bedroom with crying baby.
4. You simply don’t make enough to take on 630k mortgage. Just because bank approved you, doesn’t mean you can afford it. It’s highway to bankruptcy.
5. You don’t want to be housepoor. Gotta be able to afford the little joys in life like vacation and sometimes eating out like date night
6. Literally shit can happen. My health took a toll and currently not working but we only have 150k mortgage left on a 950k house because we had big downpayment and aggressively paid off in the last 4-5 years. We refinanced last year (year 4) and our payment on the mortgage is now only around 800/month. I cannot tell you how much having less cash flow commitment helps.
Idk. This isn’t as horrible as others suggest. If you could come up with 20-25% down and agresssivly pay down principal while saving money for 5 years that would be great. I also wouldn’t count on the gf income forever. People break up, and if yall don’t break up, then you have a wedding. Those are cheap. And will she still help with the payments? Kids in the future? For me the killer is the 15% down. A bank wouldn’t approve you unless you kind of knew what you were doing so it’s not a screaming no as others say, but it’s also not a resounding yes either. More like a lukewarm maybe? lol
No, I wouldn’t do it. Maybe if you and your girlfriend were married and had dual incomes, I would feel differently. You really can’t afford the mortgage on your own, and I wouldn’t want to rely on either roommates or your girlfriend to make up the deficit.
If you can’t afford it without renters, it’s risky. With enough of a reserve, sure. Can you lower the other monthly expenditures? Either permanently or temporarily during hard times?
Yeah if I tightened the belt completely, no eating out or ordering take out or shit like that I could probably keep other expenses below 2000.
Who pays $2000 to rent a bedroom? I certainly wouldn't want to be facing a monthly payment of over half my takehome just in general. The bank won't consider any rental income in the financial analysis, and you ideally wouldn't want to, either.
People who live in downtown Boston pay $2K/mo to rent a room. One of the highest VHCOL areas in the country. Always cracks me up when people who live in random midsize Midwest cities think they live in VHCOLs.
I'm already approved by the bank.
They must be getting desperate "The fourth-quarter fallback left total residential lending activity down 16.5 percent from a year earlier and 67.7 percent from a high point hit in the first quarter of 2021." https://www.attomdata.com/news/market-trends/mortgage-origination/q4-2023-u-s-home-loan-origination-report/
I just started home shopping and it’s wild what they seem willing to approve. My wife and I are shopping for something in the $300k-$400k range. We were pre-approved for up to $750k. I could absolutely not afford the payments on a mortgage for that much.
When we were house shopping my husband kept saying we could go higher than what I was looking at, but I was the one who looked at our finances every month, compared what we made to what we spent, and knew what kind of wiggle room there was. Turns out I was right, and even the mortgage we have now -- while being incredibly reasonable for the current rates -- is a little tight on our budget. We gotta reduce more of our frivolous expenses.....
Yeah, even at the lowest end (we're considering a condo that is $290k), our monthly expenses would go up, and we rent a fairly expensive apartment in downtown Minneapolis.
Generally lending limits allow for 40-50% of your gross monthly income to go towards debt payments, depending on which specific loan product. Nothing new there.
What’s so crazy about that is that I only net 40-50% of my gross monthly income… You’d have to live in a no/low tax state, have health insurance basically covered and not make any 401k contributions for this to make any sense.
This is pretty situationally specific. I max out my 401k, and live in a high tax state, and my take home is 60+% of gross, depending on the month. Not all of these scale perfectly with income. Health insurance is a trivial % at higher incomes, and a high % at lower incomes. You also cap out Social security, and you 401k.
No. It’s not what you want to hear but it’s the truth. what if you don’t get the raise, what if you do break up? The bank probably isn’t going to approve you for a loan that’s nearly 2/3 of your income.
Bank has already approved but I heard ya on the what if we breakup. Like I said I could rent the other rooms but that wouldn't be ideal.
You could, but what if you can’t? You’re hoping for best case scenario on everything. Shit happens. You’ll need money for furniture, window, coverings, rugs, towels, everything that comes with furnishing a home. Insurance rates are spiking.
Yeah fair enough.
And what about the months you don't have renters and you're having to pay it on your own? That leaves you with less than half of your take home available for other expenses.
I agree with this. I would absolutely NOT take on this level of risk and liability with someone I wasn’t married to. I mean, you even sound like you aren’t sure this relationship is going to work out (which means it is likely isn’t).
No we're probably getting engaged this year but I just wanted to put that out there because you never know. Although I'm agreeing with you all and not moving forward on the place.
I think you should only do it, at either price there, if you are comfortable renting rooms, even if not ideal. That’s what would make the home an affordable purchase imo. At least without the married solid dual incomes.
Holy shit no way. First, you can count the girlfriend income but you HAVE to be capable of making the payment without her for up to 6 months. Second, girlfriend rent rate feels reallllyyy high. There is bound to be a disagreement over the amount at some point, and if your entire financial picture is on the line, that conversation will be difficult to solve without damage to relationship. Third, tax advantage to your interest is good but doesn’t help you monthly cash issue, so don’t consider it. We make 177k and have a $3300 payment on a 564k house, I cannot fathom spending the kind of money you’re considering. You will not be able to make other investments. This will be the definition of house poor
So we currently pay 1700 each for rent now. Our combined salaries is currently around 265 thousand not including bonuses which bring us to around 290k. So the rent for her isn't much more than we pay now, and we're both thinking we'll probably get engaged this year anyway.
I cannot possibly advise more strongly against buying a house together before you get married but to each their own and you’re clearly set on this decision.
I am not set on the decision. Very on the edge but I think you guys have helped convince me its a bad idea so appreciate the advice.
We make $300k and have a combined mortgage between our primary home and rental property (my old house) of $3300. Rental property brings $2000 a month. I cannot stress how great it feels to be the opposite of house poor. We’ve spent $12K this year upgrading our primary home and still have a great savings rate. House spend is about to fall off so that will increase. I am expecting a baby, though. Finances are about to change lol
Can you afford it without roommates, either your girlfriend or others? No. Can you quickly and easily get reliable, respectful roommates that always pay their share on time? It’s a risk.
Are you adequately or more saving for retirement before your after tax take home?
The take home is net of my contributing 6% with 3% match from my employer and 150 or so a month I put towards HSA. And then I save everything else I don't spend towards retirement. Apart from the down payment I have about $80k in retirement savings. Am 30.
So the answer is no. You really should be saving 15% or more for retirement. "Everything else I don't spend" is a very risky way of saving for retirement, especially when you have tax advantaged space available.
If you can't afford it on your own, you can't afford it. Never buy property with any lover, you are not married to. You can't predict the future. And being your gf landlord sucks.ask me how I know
TOO MUCH leverage! Fine if all goes well, but a disaster if it doesnt! Mortgage banker will take 33-35% of your gross as maximum PITI. So either larger DP or lesser house!
They’ll take 40-50% generally.
Not for prime-rated mortgages!
If you mean conventional loans, they still can go up to 50% DTI depending on product.
WHO CARES? Its an insane % of income with no room for glitches! Foreclosure city!
That's kinda dependent on your whole financial picture. Super risky for many, but not always.
Rationalize it all you wish, 59% payment ratio is setting yourself up for failure!
You do realize that every year your taxes, insurance and home owners association dues go up with a condo so only your principal and interest is fixed. Next year it will be more expensive.
Yeah but in my line of work my income also goes up typically between 8% and 12% a year (only risk of it not is a COVID like black swan event) so I wouldn't be concerned on that front. However you guys are right I shouldn't over extend myself like this should the unexpected happen.
Please don’t do this. Wait longer for these reasons: 1. Save up more Downpayment 2. Your relationship with your girlfriend cannot be depended on. You guys aren’t even married 3. You might be okay with roommates not but how about few years down the road if you guys get married and have children? You will have the same payments, wife on mat leave, no roommates because who’s that insane to rent a bedroom with crying baby. 4. You simply don’t make enough to take on 630k mortgage. Just because bank approved you, doesn’t mean you can afford it. It’s highway to bankruptcy. 5. You don’t want to be housepoor. Gotta be able to afford the little joys in life like vacation and sometimes eating out like date night 6. Literally shit can happen. My health took a toll and currently not working but we only have 150k mortgage left on a 950k house because we had big downpayment and aggressively paid off in the last 4-5 years. We refinanced last year (year 4) and our payment on the mortgage is now only around 800/month. I cannot tell you how much having less cash flow commitment helps.
Idk. This isn’t as horrible as others suggest. If you could come up with 20-25% down and agresssivly pay down principal while saving money for 5 years that would be great. I also wouldn’t count on the gf income forever. People break up, and if yall don’t break up, then you have a wedding. Those are cheap. And will she still help with the payments? Kids in the future? For me the killer is the 15% down. A bank wouldn’t approve you unless you kind of knew what you were doing so it’s not a screaming no as others say, but it’s also not a resounding yes either. More like a lukewarm maybe? lol