the cost of living

[topaz]

As I fill out mortgage applications for moving in to Mosaic Commons I can't help but do the math and see that the cost of our mortgage, condo fees, and property taxes adds up to about 40% of my net take-home pay, without even taking heating costs into account. This seems really high to me but maybe I don't have much to compare it to.

[Poll #1363745]

Comments

[reesei.livejournal.com]

General "rule of thumb" is that your fixed costs shouldn't exceed about 36% of your gross income (pre-tax) - that is housing + property taxes + insurance + transportation. I believe some sources also include student loans.

Old standards for mortgage approvals is that housing + insurance + property taxes had to be under 28% of your gross income.

Those figures don't include utilities, typically.

One of the fairly common views I see around about the housing crisis is that lenders stopped following those rules, or bending their products to make initial payments fall under those rules with the full knowledge that it would explode later.

[harimad.livejournal.com]

What I always heard (including ec classes and business school) was housing costs <= 28%. This means mortgage + RE taxes + house-related insurance. It doesn't include other insurance, utilities, or transportation. Nor did it include the house downpayment, for that matter.

Note this is a post-WW2 standard. Prewar allocations were very different.

[reesei.livejournal.com]

Yes, that's the second of the two designations listed. The lenders also wanted some way to assess that you weren't squeezed by other obligations that would impact the amount you had available for housing, which is where the higher percentage that I listed for all fixed debt came from (factoring in the transportation, student loans, etc).

Downpayment doesn't matter in either of the calculations, because it doesn't factor into the ability to make monthly payments.

I know absolutely nothing about pre-WW2 standards =) All of my research is from pre-house-buying in 2005. I had this vague impression that pre-WW2, you were supposed to buy the house cash-down and this mortgage stuff just wasn't involved.

[catya.livejournal.com]

i want to say that our affordable units are priced based on 33% of income = mortgage + taxes + insurance + condo fees, but i can't find the number now.

[ghislaine.livejournal.com]

Yes, that's correct.

[maebeth.livejournal.com]

Its 30% in the spread sheet you sent me once, used for calculating mortgage payments.

[maebeth.livejournal.com]

I was using 33% for my own calculations, but the affordable units actually use 30%