Is $2,800 a Smart Mortgage Payment When I Take Home $5,200 Monthly?

If you are considering buying a home, the first and most important thing you must do is figure out what you can afford on your current salary. Most importantly, you must make this decision without being able to determine whether your income will ever increase, which means you must know you can afford the house today. 

One Redditor is going through this process right now and is trying to determine whether a home and mortgage are too expensive based on their current income. Posting in r/personalfinance, this Redditor is trying to decide if their anxiety over cost is warranted between the mortgage and all their bills. 

There is no question that making sure you are comfortable financially when buying a home, which is likely to be your biggest purchase ever, is something that has to be factored in. Otherwise, you might need to walk away. 

The Situation 

According to the Redditor’s post, they are looking at spending as much as $2,800 on a home, all while still facing other debt like a car payment, phone, college debt, and other fixed monthly bills. Considering they make around $5,200 per month, a $2,800 mortgage payment jumps out as very high, which is why this individual, who is buying this home solo, is having some sleepless nights trying to decide what to do. 

What You Should Spend

While different banks and financial experts will view this differently, you shouldn’t spend more than 25% of your net income on housing costs. This includes the mortgage, homeowners’ insurance, property taxes, etc. 

Utility bills are another story, but pushing yourself to pay anything beyond this 25% might get you up as high as 28% if you want to stretch things a little. Any higher than this, you will likely feel underwater very early into home ownership. 

In other words, if this Redditor wants to be financially savvy, they shouldn’t spend more than $1,300 on a home based on the 25% rule of thumb. At best, 28% would get them just over $1,400, but anything above that, and there is a good chance the original poster will end up in a bad spot financially. This might mean not being able to save, or worse, not being able to afford home repair costs if a roof leaks or they need a new air conditioner. 

The challenge is that their proposed payment of $2,800 is almost 53% of their total take-home pay, more than double the recommendation that even the most flexible financial planner would advise you on. 

What Does Reddit Say?

Unsurprisingly, the comment section on this post echoes most of what I indicated above: This individual shouldn’t get anywhere near this payment level. We don’t know how much is left on the car and student loan, so there might be some additional flexibility there as far as money goes, but it won’t be enough to make this a good deal for them. 

At $2,800, one Redditor believes that based on average costs around the country, including taxes and insurance, they are looking at anywhere between $3,500 and $3,800 per month just for the home all in. This would leave the original poster with just $1,400 to $1,700 for all other expenses, again, cutting it far too close and leaving zero room for an emergency fund. 

Even for some Redditors who get a little more liberal on what you can spend on a home, say 30% of your net take-home income, it still doesn’t change the result. The good news is that the Redditor does say they will be making $6,000 with a raise at work in the next six months. The challenge is that this is still 46% of their take-home income with a $2,800 mortgage, a still too high amount of money, so this is a non-starter as far as I and almost all of the comments on this thread are concerned. 

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