What Price Home Does An Annual Salary Of $250,000 Buy?
I’m just saying here — looking ahead to how much house someone who earns $250,000 a year will be able to buy as we re-distribute the wealth. Not saying it shouldn’t be re-distributed, not saying it should. (Thain’s should.) OK, $250,000 in the 28% income tax bracket. That leaves $180,000. Or a monthly income of $15,000. Lots of money. We had a car lease of $1,000 on that Beamer, and maybe a little college loan out there. We are down to $13,000. We charge about $4500 a month — we pay that off. We donate and/or fritter another $1000. Did I forget anything? That leaves us $7500 for PITI — house payment, taxes and insurance.
I ask you: what price range home can you afford with $7500 a month?�
11 Comments to “What Price Home Does An Annual Salary Of $250,000 Buy?”
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Candy, It’s a good thing to speculate on what someone can afford, particularly as the new tax structure is debated. I’m glad you though about charity donations, but I think you left off a few expenses: 401(K) or other retirement plan contributions, additional savings and investments (just ’cause you have it doesn’t mean you spend it!), exorbitant restaurant meals, upgrading wardrobe and the like. Figure $4000/month tops is still available for the home (including maintenance and utilities). That sounds like a nice Oaklawn townhouse to me.
you don’t want to save/ invest any money?
EP….I believe the “exorbitant restaurant meals, upgrading wardrobe and the like” are covered in the $4,500 in charges that are paid off each month.
All things being equal and I have $7,500/month for PITI, I would be in the $850k – $1.2mil range.
Well,
The easy answer is this: income * 3 or income * 4 (works for every income level, and is what a reasonable bank is typically willing to lend assuming fair credit and a decent down-payment). So, right away you get to $750k to $1MM.
These ratios became accepted in the 80’s and 90’s — the ratio used to be a much more conservative income * 2 to income * 3 (meaning, the same person may really only be spending within their means at a “mere” $500k to $750k).
I ran some different ratios, but came up with a similar amount available for housing at about $7k/mo (though, I didn’t factor in any children or expenses that they might add) — I based mine on a single person.
Plus, I believe that the $250k income now places couples into the 33% tax bracket.
Anyway — the $7k/mo does need to split into several categories, including: TX property taxes (which are *HUGE* — may taxes in Boston were only $2,500 / yer and here they are $10,000 / year — and my property in Boston was 50% more expensive); HOA dues (which, can be quite expensive); and various maintenance/etc (including Gas, Electric, Lawn, etc).
Lets say that utilities cost roughly $1k / mo, and taxes which we round up to 3% of the purchase price (so, $750k gives us about $1,875 TX taxes / mo). Then, lets assume an HOA of $500 / mo, plus additional maintenance of $250 / mo == we end up with $3,625 in “housing payments” that don’t go to paying the mortgage.
Which means, you really only have about $3,375 / mo (ok, “only” — its still a lot of money).
And guess what == Buy a home for $750k, put down 20%, get a 30 yr loan @ 6% — and your mortgage payment is $3,597.
So — just take the easy route, and multiply income by 3 and that’s what you can afford (but, now you know why that’s all you can afford).
I live a fairly frugal lifestyle so I don’t have many expenses. Restaurants have little appeal for me after getting deathly sick after a meal at a restaurant. Expensive cars have no appeal.
I think there’s a lot of variables: single, married, number of children, etc.
From a mathematical standpoint, considering your FICO score, I suppose an income of $250,000 would compute to a house valued at X dollars.
I would be hesitant to buy a $500,000 house, because I really don’t know how saleable the house would be in the future. You’ve got to think about reseale value. Yeah, a person may plan on staying put for decades, but lives can drastically change very fast.
That’s a good income, so you should be sending your kids to private schools. Annual tuition for a really top-notch private school is in the $10,000 to $15,000 range. Two kids could cost you around $30,000.
I am wondering/thinking that John must not have any children in private school — I’m SURE 15,000 wont even get you in half-day kindergarten at a top-notch school and then it only goes up from there!
Seriously? Oh no! Only $7500 left over for my mortgage payment! Darn those under $250k/year peasants. Why must they take so much and leave us with so little. They are out of bread? Let them eat cake!
You could do it the old fashioned way – save up the cash.
rmom, I don’t have children.
I checked the Internet just a bit and as of 2006 the average tuition cost at private schools was $6600. It does vary according to secular and relgious schools. For the most part, tuition costs at private religious schools are less than at private secular schools.
Granted, this data from the Department of Education is a little over two years old, but I think my assessment tuition costs are in the ballpark.
Top-notch private schools are indeed expensive especially in big cities. The above tution costs are just for “average” private schools.
About $20,000 per year for the upper grades at St. Marks.
Sounds good, Candy. In big cities, the tuition costs are more.
Let’s make $10,000 to $15,000 the tuition cost at top-notch dog obedience schools.