caseyctsv Posted May 14, 2015 Report Share Posted May 14, 2015 Just a note on mortgages - what you can qualify for will be far more than what is reasonable (in my opinion). Generally you can get approved with a debt to income (gross) less than 43%. I was once near that debt ratio and it was not comfortable - definitely meets the "paycheck to paycheck" description. Remember it is on gross not take home and only counts "minimum" payments. At that point in my life I was drowning. This is an interesting thread as I am currently kicking this around too. For the first time in my life my wife and I have gotten down to 2 debts...house and 1 car payment. I want a car terribly but do not want to take on debt. I have the cash but have a wedding for my daughter next year and my youngest is off to college next year. We have been paying cash for all of that. It is hard to argue though with the rates today and if you buy smart. You can always get out of them if you need to. For that reason I am in the market and will have a loan but am waiting on the perfect car. Quote Link to comment Share on other sites More sharing options...
dq driver Posted May 14, 2015 Report Share Posted May 14, 2015 A mortgage payment is supposed to be below 28% of your monthly gross income. Clearly, your down payment will change your monthly liability, but I am also an old school thinker that if you can not put 20% down, then you probably shouldn't be buying that house for a majority of the population. Sure rates are great now, but most people don't have the discipline to save and or invest that money that would be tied up in that down payment and end up accumulating more debt in luxury items like cars, boats, and vacations...the debt cycle Quote Link to comment Share on other sites More sharing options...
zeitgeist57 Posted May 14, 2015 Report Share Posted May 14, 2015 How much $$$ is acceptable for this hobby? As little as possible to keep you happy. Quote Link to comment Share on other sites More sharing options...
caseyctsv Posted May 14, 2015 Report Share Posted May 14, 2015 Ok, here's a question... Based on your income (assuming all other spending/bills aren't out of whack, what multiple of your household income can you spend on a house? I am looking for a house right now. I make "X" and I am looking at houses that are 2.5X.... Is that okay? I'm looking for a "rule of thumb" answer. Not a "everybody is different" answer. Way too many variables to do it this way. How much money do you have to put down? Real estate taxes and HOA dues vary significantly even on houses of the same value. You are better off calculating the payment for which you are comfortable and back into it. I would talk to a mortgage lender to get this info. You will need a preapproval before you start looking anyways as the houses move so fast. Quote Link to comment Share on other sites More sharing options...
caseyctsv Posted May 14, 2015 Report Share Posted May 14, 2015 How much $$$ is acceptable for this hobby? As little as possible to keep you happy. This guy gets it Quote Link to comment Share on other sites More sharing options...
Trouble Maker Posted May 14, 2015 Report Share Posted May 14, 2015 This guy gets it The problem is, for Clay, that's 7 potatoes. Even worse, for me, that's been 0 potatoes while I've been working on other financial goals. :fa: Quote Link to comment Share on other sites More sharing options...
wagner Posted May 14, 2015 Report Share Posted May 14, 2015 I guess being exposed to the racing world in the ways I have makes me numb to the sense of money spent. Spending weekends surrounded by addicts who will spend their mortgage payment to make it to the track warps your sense of right and wrong. Quote Link to comment Share on other sites More sharing options...
TTQ B4U Posted May 14, 2015 Report Share Posted May 14, 2015 How much $$$ is acceptable for this hobby? As little as possible to keep you happy. ^^ exactly what I was thinking. We do quite well but there's no way I could justify spending 30% of my own money on a car. It's a fucking car already....I can have fun with far less and way more fun spending 30% on something else other than a car. same with a house; there's no way I'd want a morgage that's 28% of our monthly gross today. If you're mortgage is that damn big then you're likely pissing away a lot of interest, especially early on. I'd hope if I'm buying a really really nice house, there's money down and a ton of equity down to help lower a monthly payment to the point that it's not 28% of my gross monthly. Sure, we could afford both, but IMO niether would be worth it. We live way, way below our means and have tons of fun. Different strokes though....some like cars more than vacations and other things. Cliffs: For my own money I'd be hard pressed to spend more than $30k on a car. Quote Link to comment Share on other sites More sharing options...
Cordell Posted May 14, 2015 Report Share Posted May 14, 2015 I don't like to pay for something every month that isn't fun, that being said I only have a small loan on my Corvette. I like having a cheap paid for beater that can get a little beat up without me loosing my mind over it. I think in the future leasing a car for a couple years so I can have something nice is worth it, and here's why. Cars that get driven every day in Ohio go downhill too fast for me because by the time they are paid for they are starting to rust, and with otherwise higher mileage aren't worth sinking money into them to keep the drivetrain fresh and just leads them straight to the junkyard. Unfortunatly that's just what the auto manufacturers and government want, but what are you to do. Okay I'm done with my ramble of incoherent nonsense. Quote Link to comment Share on other sites More sharing options...
Tshensley Posted May 14, 2015 Report Share Posted May 14, 2015 Ok, here's a question... Based on your income (assuming all other spending/bills aren't out of whack, what multiple of your household income can you spend on a house? I am looking for a house right now. I make "X" and I am looking at houses that are 2.5X.... Is that okay? I'm looking for a "rule of thumb" answer. Not a "everybody is different" answer. The rule of thumb I was taught about what mortgage to afford is being able to afford the monthly payment with only 2 weeks pay Quote Link to comment Share on other sites More sharing options...
STEVE-O Posted May 14, 2015 Report Share Posted May 14, 2015 There is no rule, to many factors in everyday life such as car payment, bills, phone, insurance, food, kids, etc so to say rule is X% or 2 weeks pay or whatever doesn't always work. It's very simple and I can not begin to understand how the average adult can't not determine how much money they bring home vs the Bills they have going out. Maybe I am to nieve because I have always been perfectly able to budget my money since the day I began to work at 14. Love it when I see people talk about being broke but have a project car or the newest cell phone etc but can't go out and enjoy one basic $20-30 night with friends because it's tiesday and they don't get laid until Friday. JP- better question for you sir (because I am not married) how does your wife feel about the situation and how big of a factor is that for you? Does she say you work your ass off and go for it or is she reluctant not knowing for sure the future? I think this plays a huge roll on the conscious of ones decision Quote Link to comment Share on other sites More sharing options...
zeitgeist57 Posted May 14, 2015 Report Share Posted May 14, 2015 how does your wife feel about the situation and how big of a factor is that for you? Does she say you work your ass off and go for it or is she reluctant not knowing for sure the future? I think this plays a huge roll on the conscious of ones decision Props to Steve for this one. I always roll my eyes when guys talk bravado about it's their money and they can do what they want with it and the wife can go f**k off....those are the guys that end up getting blindsided when the wife bonks their best friend and makes them pay alimony for the next 10+ years after a divorce. Idiots. I'm happily married and want to stay that way. If that means a bag of Idaho Russetts for my car fleet in both Ohio and FL, I'm grinning all the way to the bank (literally) as well as the beach. I didn't want to buy a boat just yet in FL, but wifey pushed it. Now, I'm glad we did...she's a smart woman and knows what I like. I bleed for my love/passion of cars, but as others have mentioned, I want/need dry powder for other things that are more important. 1 Quote Link to comment Share on other sites More sharing options...
Jewtoys Posted May 14, 2015 Report Share Posted May 14, 2015 The rule of thumb I was taught about what mortgage to afford is being able to afford the monthly payment with only 2 weeks pay Two weeks of pay straight to a mortgage sounds insane............ Quote Link to comment Share on other sites More sharing options...
Forrest Gump 9 Posted May 14, 2015 Report Share Posted May 14, 2015 Two weeks of pay straight to a mortgage sounds insane............ I was gonna say the same. I'm not very good with money, but my rule is pay with cash and do what make you happy. Also another big rule of mine is do not buy your dream car/house, because if you do that you won't have anything to look toward to. Quote Link to comment Share on other sites More sharing options...
verse Posted May 14, 2015 Report Share Posted May 14, 2015 There aren't any new cars that interest me. I'm happy to drive my ~30+ year old Toyota's, they make me happy and require little money. I typically spend <5% of my gross income on car parts/maintenance. Quote Link to comment Share on other sites More sharing options...
Diamonds Posted May 14, 2015 Report Share Posted May 14, 2015 Two weeks of pay straight to a mortgage sounds insane............ yeah, that seems high even at "take home pay" for two weeks. Quote Link to comment Share on other sites More sharing options...
caseyctsv Posted May 14, 2015 Report Share Posted May 14, 2015 yeah, that seems high even at "take home pay" for two weeks. Agreed...that is essentially putting 50% of your pay into your housing. It does depend on the income bracket I suppose but I would be terrified at 50%. I learned my lesson about 7 years ago and unexpectedly lost my job. Finding a new job to make what I needed to to cover my bills was terrifying. I got lucky. I don't ever want to be in that position again. While I don't want to lose my job, obviously, I want to be nimble enough that if it happens I have a lot of options. Quote Link to comment Share on other sites More sharing options...
2highpsi Posted May 14, 2015 Report Share Posted May 14, 2015 There seriously is no "one size fits all" answer when it comes to money management. The percentages really are (and should be) different depending on your income level. All that aside, one thing I PERSONALLY look at it, is "What will owning X REALLY cost me". Now when I say that, I don't mean how much is the purchase price, I mean how much is the purchase price in relation to what I could liquidate it for. The GT-R is a good example. I have caught flack from people for being "wasteful with money" by purchasing that car. One of them in particular looks at thing polar opposite as I do. He purchases EVERYTHING with cash, and tends to buy brand new vehicles with his supplier discount. The vehicle he bought a couple years ago purchase price (after discounts) was about half of what I paid for my high mileage GT-R around the same time. However, here we are two years later, and his car is worth about 12k less than he paid for it, and mine is still worth more than I paid for it. He has also been without all of his cash, and while I am paying ~2% interest on my car loan, my investments have been earning much more than that. To me, my purchase was the more prudent one... YMMV Quote Link to comment Share on other sites More sharing options...
Littleguy Posted May 14, 2015 Report Share Posted May 14, 2015 That seems backwards to me, but you pose a fair argument. Hahaha, the RX-7 has been a lesson on how not to do things, lol. Quote Link to comment Share on other sites More sharing options...
AngryBMW Posted May 14, 2015 Report Share Posted May 14, 2015 Ok, here's a question... Based on your income (assuming all other spending/bills aren't out of whack, what multiple of your household income can you spend on a house? I am looking for a house right now. I make "X" and I am looking at houses that are 2.5X.... Is that okay? I'm looking for a "rule of thumb" answer. Not a "everybody is different" answer. Call me...614-327-8085. I'll happily go over mortgage income qualifications with you and get you prequalified in your comfort level. The general rule is no more than 3 times your monthly gross but I like to keep people below that. I owe you for helping my GF with her nursing resume a few years back anyways. -Marc Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted May 14, 2015 Report Share Posted May 14, 2015 If you ask me...."all the money" If you ask my wife...."none of the money" here is a different approach that I take: a long time ago when I was a single guy I managed to put together a pretty healthy collection of parts and cars and bikes. This was funded by about 50% of my net income. However, being no longer single, not a parent, or somewhat irresponsible this collection had to become largely "self sustaining". Because the wife and I have financial goals, dreams, new business ventures, and a college education to pay for 0% of income derived from working goes into the "toy" fund (maintenance and registration/insurance for DD vehicles is still covered out of net income). Basically if I want to have something I have to sell something. Sometimes I pick up things to flip, and honestly the hunt is often more fun than the car or bike or part it leads to. I am largely an "old" car/bike/junk person so I don't have aspirations about selling it all and buying a gallardo, or new M series cars - most of the stuff that I dig can be had for $20K or less. the ROI on old stuff is way better than anything new where depreciation basically lights your money on fire. I could buy a 1965 malibu for $10K right now, drive it for a year paying gas and classic insurance, and sell it for the same $10K (or slightly more) a year later. you don't have to Plus I like to use the stuff I have: If I could find a way to safely mount a baby seat to one of my bikes without being arrested I would (and yes I have looked into a side car, kid has to be over 11 to ride in one). I don't mind driving old cars in the summer with no A/C so my standards are low, and i don't mind that it offsets the depreciation on the other vehicular assets I own (like an audi that has lost nearly $5K worth of value in the span of 4 years) I guess the take away is - it is all about managing your goals and your participation in the "hobby". If you don't want new junk you can actually have a great time with a lesser budget and manage your participation as if it were a for profit venture. If you want new stuff you have to manage the depreciation and the bleed out from income. Figure out what you want to do and set an appropriate plan. Quote Link to comment Share on other sites More sharing options...
Trouble Maker Posted May 14, 2015 Report Share Posted May 14, 2015 yeah, that seems high even at "take home pay" for two weeks. Well, with some very quick crude calculations (simply based on my overall payment to initial loan ratio), you'll be at about 70% of that with a 2.5xgross yearly salary loan. You would also be at 32% of net take home per month. Now, if you get a 2.5x house, but put 20% down, you're 'only' at 26%. But assuming $100k/year salary that's a $250k house with $50k down. It seems to me not many people have the discipline to do that. We are at about half of that % and I can't imagine doubling our house payment and feeling comfortable. To be fair we bought an old house and are putting away money to do renos, fix things that break. I guess that's kind of part of our house payment, but I also didn't include anything like that in any of the above numbers. Let's use the same $100k salary and go buy a $30k new car with 0 down and a 5 year loan. Payments would be $540/month and house payments with my very crude estimate above would be $1875 (assuming no money down $250k loan). 100k / 12months x 70% (crude estimate of take home after all taxes) is $5833. Now you're at about 40% of your take home going straight to house loan and car payments. Or really 45% of every 4 weeks pay, which is what most people are taking home most 'months' at most jobs getting paid every 2 weeks or even every week. And that's crazy. Quote Link to comment Share on other sites More sharing options...
Got-Boost? Posted May 14, 2015 Report Share Posted May 14, 2015 Ok, here's a question... Based on your income (assuming all other spending/bills aren't out of whack, what multiple of your household income can you spend on a house? I am looking for a house right now. I make "X" and I am looking at houses that are 2.5X.... Is that okay? I'm looking for a "rule of thumb" answer. Not a "everybody is different" answer. To many variables....can't really say 2-4x, etc.. If you make $50k that's $150-200k house which might be tight finanically for a family. But if you are a DINC making $200k, that's a $400-600k+ house (which may or may not be overkill for your area). I'd look more at the 20% down, 15-year mortgage and see if you are below the 20-30% monthly payment gap that some financial companies look at. Two weeks of pay straight to a mortgage sounds insane............ Agree...crazy! Quote Link to comment Share on other sites More sharing options...
AngryBMW Posted May 14, 2015 Report Share Posted May 14, 2015 To many variables....can't really say 2-4x, etc.. If you make $50k that's $150-200k house which might be tight finanically for a family. But if you are a DINC making $200k, that's a $400-600k+ house (which may or may not be overkill for your area). I'd look more at the 20% down, 15-year mortgage and see if you are below the 20-30% monthly payment gap that some financial companies look at. Agree...crazy! I see no real reason to go with a 15yr fixed with today's interest rates. There isn't THAT much of a difference and we have no pre-pay or early term penalties. I sell the 30 so you have a cheap payment, give the 15yr am schedule so you can pay it off quickly if you want, but have the low payment cushion if something serious comes up unexpectedly. And you have a better write-off at the end of the year. If your money isn't earning you 6+% today, you need a new financial advisor. But, I also would suggest an ARM for the super low rates. With the caps in place, you are well protected. I am personally on a 1yr ARM that is adjusting DOWN this year. Over the past 22 years, our ARMs have outperformed the 30yr fixed every single year. Lots of options, just depends on you risk tolerance and how you are managing your money. -Marc Quote Link to comment Share on other sites More sharing options...
coltboostin Posted May 14, 2015 Author Report Share Posted May 14, 2015 Wait, so if you make 100k you are saying that you are only going to drive a 30k car? That's like 650/month... Do you have a bad gambling/gun/women problem that doesn't allow for more cash each month to pay a car note? Now that I think about it.. I need a better car No monthly payments-I like to buy cash. Its just old habit from growing up broke. If I have a car note, its because the Credit Union would beg for it, and give me a ridiculous rate. (My CU is at 1.9% now, get a call every week about it LOL) Most "advisers" would recommend not spending anymore than 20% of your gross yearly income on a vehicle, and would prefer it if was more like 10%. You're a car guy, you tend to do your research and get good deals, and can maintain them. This is a positive and a negative, because you desire more and are most likely going to go as much as 40-50% because it doubles as enjoyment/hobby in addition to the typical commuting. That makes a TON of sense Mikey. 10-20% is what I think is about right too. This is a great "rule of thumb". How much $$$ is acceptable for this hobby? As little as possible to keep you happy. Looking at my builds, you know I'm bout' dat life Quote Link to comment Share on other sites More sharing options...
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