So 32% of your take home is your comfort level vs a more traditional 28% of your gross (very similar numbers in your case given your take home is 85% of your gross) This doesn’t take into account rear end debt-to-income but I assume anyone carrying significant debt would not be involved in this discussion. I wish that to be true anyway!

I’m starting to fear that even in a more favorable housing market the majority of buyers are willing to take on more risk than I am. That makes for pretty tough competition.

Anyway… adjusting risk/comfort levels to meet “improving” market conditions will be a key focus going forward as this all plays out.

Again, thanks for you input. I have talked with a few people about this and gotten a pretty wide-range of responses.

So anyway, on to the actual numbers. Currently after taxes and a modest 5% 401(k) contribution, my take-home pay is about 85% of my salary. 30% of my gross income figures out to roughly 42% of that 85%. That’s the maximum I would be comfortable spending. So, using my own rule, if I just had to have a house right now, the largest monthly payment I should take would be 75% of that, or about 32% of my post-tax, post 401(k) take-home pay.

With my current pay, that would cover the mortgage on about a $250,000 house (after the 20% down of course). In a different market I would say no problem to spending 100% of what you’re comfortable with, which for us would afford a $325,000 house. But for right now, we’re still happily renting.

Our agent/broker has said “you wouldn’t believe what I could get you!” on more than one occasion.

Do you feel if you could get into a home without exceeding a 38% rear end ratio on a 30-year fixed today that you would be “comfortable”?

The original post was making a case for homeowner friends that had done it right. As potential first home buyers (on the sidelines for now) I was just trying to get a better idea of what is considered comfortable by “rational” people… not irresponsible buyers and lenders.

Working with the posters 3 rules for buying we are working on the 20% and would not consider anything but a fixed rate. We also have only considered homes that we would be willing to be in for 10+ years. We are not interested in living in a "chocolate"hole praying it appreciates… or worrying that it won’t! The “75% of comfortable” is a little harder for me to grasp.

Obviously I have an idea of what comfortable is to my wife and I. I am just trying to get a feel for what others believe. We are dual income renters and enjoy a rear end debt to income ratio of less than 15% and I’m not sure I want to give that up anytime soon!

Today? I assure everyone, that ratios are well exceeding the ’speed limit’(50% rear end ratio) in many cases. A LOT.

Was in a loan center yesterday and overheard a loan officer on the phone talking to a client regarding Stated Income deals. I don’t know if fixed rate is in the vocabulary anymore. I digress.

Obviously “comfortably” can vary quite a bit. I was just curious if people considered a traditional 28/36 “qualifying ratio” to be comfortable? Do the numbers 28% of your gross salary for PITI and 36% of your gross salary for PITI plus all recurring DEBT still make sense?

I’m not sure I’d be “comfortable” with either of those numbers and wondered what %’s people feel make sense.

Well said. The run-up is unprecedented, and the crash will be likewise. And by the time it has run its course, many things will have changed. Those counting on past phenomena to reoccur may be surprised.

When I buy, I plan to live there til the day I die (another 40 years at least).

I don’t ever want to move again. So I’ll just have to be satisfied with living in a stable home , not an “asset”. And I’m fine with that.

But if I had any thought that I may want to move in the next 40 years, I’d wait til this thing hits bottom because I feel it’s got a LONG way to go.

I have a friend in Tokyo whose 1990’s 600K apt. is barely worth 250K now- 15 years later.

That’s what “natural exhuberance” can do!

We’ve pretty much gutted our infrastructure in the US and, unfortunately are so in debt that there may be not much we can do about that for quite some time.

Meanwhile, other parts of the world seem to have economies that are on a solid footing and likely to grow while we decline.

So I’m not looking for a re-coup in these high property prices in the next 10 years.

If anything, I think our wages will come down to meet China and Indias’ growing wages somewhere in the middle so things can even out.

That’s a guess of course! But for sure I don’t see the US as any kind of world economic powerhouse in the future.

That our standard of living falls to meet their rising standard seems like a best-outcome for us.

Another outcome could be that this whole country turns into the rust belt. That would be a shame so I’m not going to entertain the idea for now, at least not until I’ve got some evidence that it’s really happening.

Yes, I was trying to say that today’s transient lifestyle will have to be tempered by an uncooperative housing market.

Thanks for the two blogs.

E

I plan to buy before this thing hits bottom, ie. I can’t wait til the complete bottom.

But I for SURE won’t be buying this spring and summer. That is just throwing money away.

At the end of summer I’ll see what the market’s doing and guage whether fall or winter may be okay to begin thinking about buying.

But I am sure that anyone who buys in the next year is looking for huge depreciation.

It’s just a question of how much depreciation you can handle. I can handle a bit.

Can you tolerate a substantial decrease in the price of the property?