What house can I afford?

Nov 16, 2021 32 Comments

Completely new to this, deriving some numbers below based off my first google search on this topic.
TC: $350,000
NW: $950k
25, single

According to this - https://www.financialsamurai.com/three-home-buying-rules-for-all-to-follow/,
TLDR Below - $1.5m house, $8750 mortgage

1) According to mortgage as 30% of gross income, Can afford a mortgage of 0.3*350,000 = 105000 or $8750 per month.

2) According to rule 2, 30% of house value saved in cash, Can afford house value of 3.1m. Because 0.3*3.1m = $950,000. This seems like an upper bound. I wouldn’t want all my networth to be in house so see point 4.

3) According to rule 3, house value shouldn’t be 3x my income, so not more than $350k*3 or ~$1m

4) Rule 2 and 3 seem to contradict each other.
I think I may be comfortable putting in 30% of my networth in downpayment for house so about $315k, assuming that’s 20% of house value, seems $1.5m house

5) 3 and 4 above seem to align better.

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 TOP 32 Comments
  • eBay
    aks2iwy7

    Go to company page eBay

    aks2iwy7
    Good job with the NW OP. What were your successful investments so far?
    Nov 16, 2021 3
    • Google
      MetaPls

      Go to company page Google

      MetaPls
      Hasn’t FB underperformed broad tech-focused ETFs such as QQQ and VGT the last 5+ years? Why would you hold onto FB instead of diversifying into those ETFs? Asking because I’ve been considering diversifying my GOOG RSUs into QQQ since the returns are almost the same with much less risk (and GOOG has outperformed FB in the time frame you’ve been working).
      Nov 16, 2021
    • OP
      Fb beat VGT in the last yr, but before that you’re correct, VGT beat both g and fb.
      I do choose to diversify most of my rsu now. When I said lucky I meant I still beat s&p 500.
      Also quoting obvious, highly stated, yet important fact - Past performance is not an indicator of future
      Nov 16, 2021
  • Apple
    TrjD37

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    TrjD37
    Seems like a waste of money versus what you could get renting tbh
    Nov 16, 2021 6
    • Amazon
      NewBanana

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      NewBanana
      Then do it… worse case the 5x leverage back fires and you will be stuck in that house for a while but not a decade.
      Nov 16, 2021
    • Amazon
      NewBanana

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      NewBanana
      Also buying a house while single is a better personal finance decision compared with the time that you are married since the house equity will be shared.
      Nov 16, 2021
  • Why do you want to buy a house?
    Nov 16, 2021 5
    • I recommend to buy the property, when you would have a partner. This person may dislike your house
      Nov 16, 2021
    • OP
      Or - Buy house I like, and marry a partner who likes it too. In that case, house can act as added convenience to attract a partner. (Basically if the mortgage split b/w us would be cheaper than what they would rent for a similar space).

      Also quoting someone above - buying a house while single is a better personal finance decision compared with the time that you are married since the house equity will be shared.
      Nov 16, 2021
  • Lyft
    welactualy

    Go to company page Lyft

    welactualy
    To be conservative you can calculate mortgage payment from base salary and not include RSUs. This way the RSU money lets you have fun/save for future
    Nov 16, 2021 0
  • Buy a reasonable house in a safer neighborhood. Don't go by max affordability
    Nov 16, 2021 5