Top things to know before buying a house

CNN Money link

#3 is so depressing!

:( Jake just informed me last night that I wont be getting my own house for 18 months to 2 years!

even if I find a good deal-

I kind of figured that anyway-everything I like is over $900K anyway- and not worth it -

great list....sad..but great

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Posted by dleeny

CNN Money link

#3 is so depressing!

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YES!

So many people buy way beyond their means! Remember the 28% rule. If your total housing payment is more than 28% of your gross income... you are buying out of your league.

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Posted by DjPiLL

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Posted by dleeny

CNN Money link

#3 is so depressing!

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YES!

So many people buy way beyond their means! Remember the 28% rule. If your total housing payment is more than 28% of your gross income... you are buying out of your league.

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I thought it was based on net income.... ?

Great article Dina! Thanks for posting! One to keep on file for the future!

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Posted by dleeny
I thought it was based on net income.... ?

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No its always gross income for the mortgage calculators.

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Posted by DjPiLL

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Posted by dleeny
I thought it was based on net income.... ?

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No its always gross income for the mortgage calculators.

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that's strange... since you don't see a lot of that $$, it should not be factored into what you can afford. JMO

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Posted by DjPiLL

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Posted by dleeny
I thought it was based on net income.... ?

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No its always gross income for the mortgage calculators.

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Yep - gross income.

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Posted by Meaghan729

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Posted by DjPiLL

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Posted by dleeny
I thought it was based on net income.... ?

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No its always gross income for the mortgage calculators.

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Yep - gross income.

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well if that's the case, we can 'afford' way more than we thought. but honestly, I would rather base what I can afford on what we actually take home and can spend.

that's the key-you have to feel comfortable with the finances. Don't let a mortgage calculator talk you into anything. You have to be ok with the money and comfortable spending it!

We based our decisions on our take home pay. We used the calculators as a guide.

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Posted by dleeny

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Posted by DjPiLL

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Posted by dleeny
I thought it was based on net income.... ?

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No its always gross income for the mortgage calculators.

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that's strange... since you don't see a lot of that $$, it should not be factored into what you can afford. JMO

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Its not strange.

You pay mortgage interest and property taxes with GROSS income. Not net.

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Posted by DjPiLL

[Its not strange.

You pay mortgage interest and property taxes with GROSS income. Not net.

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how do you mean?

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Posted by dleeny

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Posted by DjPiLL

[Its not strange.

You pay mortgage interest and property taxes with GROSS income. Not net.

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how do you mean?

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What he probably means is that you are using your mortgage interest and property taxes as a deduction and should see a large part of that back so it's actually net income.

got it, thanks.

which brings me to this question...

what percentage of the interest you pay on your mortgage and property taxes do you actually get back from Uncle Sam?

25%, 50%, all of it?

TIA

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Posted by dleeny

got it, thanks.

which brings me to this question...

what percentage of the interest you pay on your mortgage and property taxes do you actually get back from Uncle Sam?

25%, 50%, all of it?

TIA

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Whatever your tax bracket happens to be. For most people... its around 15-20%.

This is the easy way to look at it. You pay mortgage interest and taxes with gross income.

So lets say your household makes 100k a year gross. You have 8k in property taxes and about 15k of mortgage interest a year. That gets paid with gross income... so after you pay these two... you are actually making about 77k a year and thats what you are taxed on.

So in the end... you are lowering the amount of tax you owe to the government because you are lowering your taxable income.

This is why all the calculators take gross salary.