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Author: aja91 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 883929  
Subject: Re: How big a house can I afford Date: 5/20/2001 10:05 AM
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Can anyone provide some help? How big a house can I afford?

The mortgage company will tell you that you can afford a house where the mortgage you carry is equal to about 28% of your gross monthly take home pay. If you make $60,000/year, 28% of your gross monthly take-home pay is $1400/month. At today's rates for 30-year mortgage (7%), that would equate to a $210,000 mortgage. If your income doubled to $120,000, you could cover a $400,000 mortgage using banking rules and a 7% mortgage. (I'm assuming you have the necessary down payment and closing costs throughout this). If this is your case, your wife is correct in that you can "afford" the new house.

You need to realize, however, that your housing expense will likely increase more than the speculated $1200/month increase in mortgage payment. How much will your property taxes increase? Maintenance costs for things lawn care, general repairs to your home, cleaning supplies. With more space and rooms, there is more furniture to buy and eventually repair and replace. Will the neighborhood "norms" make you feel obliged to buy expensive furniture and cars to "fit in"? These are questions that you and your wife need to answer yourselves, after doing the basic "can we afford the higher mortgage payment" analysis.

If you stay in the current house, could you address the "separate rooms for the kids" problem? Could you split their existing room? add a new bedroom in a basement? add on to the house? This might be cheaper than taking on a new mortgage.
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