whatever

My husband and I are trying to work out what $$$ we can afford to spend on a home in the US.

Can anyone tell us what (as a general rule of thumb) US Mortgage companies lend?
i.e. In the UK you can borrow between 3, 3and a half and 4 times your annual income. (We are with the AbbeyNational and they gave us 4 x's).

Thanks everyone

Pulaski

They don't work it like that here in the US, it is worked on a percentage of your monthly income v the monthly payment.

I think that the basic "allowance" is 28% of your monthly gross income, though Ithink that it can go as high as 36%.

Really it depends on where you will be living as in New York, much of New England, and in California you'll wish that you had a much larger budget, and in most of the rest of the country you'll really only need to borrow a much lesser amount, unless you want to buy a palace!

Be careful though - there are other complicatiing factors. Notably that taxes on housing can be frightening high. A modest house near NYC, say in Westchester county, can have annual taxes of $6-$8,000, or more!!! I think that it is similar in other urban areas - in Charlotte NC for example you can buy a really nice detached house for $300-$350K, but you'll then pay $3,500+ a year in property taxes.

Remember that mortgages here are usually fixed for the term of the mortgage, with 15 and 30 years being the most common, though 20 years are also available.

Also have a look at realtor.com as they have a mortgage calculator that'll help you.

Englishmum

$6,000 to $8,000 in housing taxes? I wish! It's much higher than the UK.

We live 18 miles west of Manhatten in the New Jersey suburbs. We have a very modest 3 bedroom house and the taxes are $10,200 per year. Plus $215 extra to use the town open-air pool during the Summer (it's only open weekdays when the school hols begin too). Grrr. Visitors who wish to use the pool have to get a $10 daily pass from the town hall and have to be accompanied by a member - local residents only. You can't use pools in neighbouring towns and this insularity drives me nuts!

However, we do live in a nationally top-rated school district; this is the over-riding factor in virtually all local housing taxes and property values. If you live in a poorly-performing school district it's more difficult for your property to hold or rise in value and again more difficult to eventually sell.

Before buying (even if you don't have children), ask the realtors about the local school system and which local towns in the areas you're looking which are the 'best'. You can ask for 'school report cards' but I have to admit they seemed meaningless to me, (get the realtor to explain them); they list things like how much is paid in admin costs, teachers' salaries etc.

You can pay your housing taxes along with your monthly mortgage payments (although some people pay their mortgage bi-weekly).

whatever

We have been looking at houses in MA (a realistic hours drive from Boston) via Centuary 21 website and so far the most expensive tax we've come across is $3,500 pa. Over $10,000 dollars in taxes seems very high - you must be living in a better neighbourhood than perhaps you realise.

Our council tax where we live now (Hertfordshire) is around £1,200 p/a which is about $1,800 and you are right - so yes you are right, it does appear much more expensive. HOWEVER the properties we are looking at in MA are 3 times the size in sq ft than we currently own and on a lot, measuring anything from a third of an acre to 2+ acres! If we were to purchase a property of these proportions in the UK (which we could never afford), we would pay a far higher council tax exceeding the taxes payable in the US plus 3% stamp duty.
For us, one of the bonus's of moving to the US is to be able to afford a good environment and quality of life without half killing ourselves getting it.
I appreciate your comments about the schools - thanks for the report tip. We do have a child so will be taking great care selecting the best we can.

frrussre

As a rule of thumb:

You can't spend more then 28% of annual gross income on Mortgage + CC + Rtx
or
Mortgage + Mt
or
Mortgage + Rtx

You can't spend more then 36% of annual gross income on:

The above choices + all other debt's. I.e. Loans, credit cards, etc.
Would not usually include , monies you spend but don't have to (Life Insurance, school fees).

If your debt load is low then they usually will allow the 28% to become 31/32/33%.

CC = Common Charges (Condo etc)

Mt = Maintainence ( Co-op)

Rtx = Real Estate Taxes



Deposit or down payment usually needs to be in your possession/account for 90 days. Or they will want to know where you got it from.

Gifts of deposit or "Gift Letters", from close family are usually good for 5% matched by 5% from yourself or 10% matched by 10% from yourself.
No Income Verification, usually requires, 25 or 30% down.

Frank R.

Bi Weekly mortgages are the best if you can get one. 15 years & Bi weekly.

Vicky88

I've also been looking at mortgages here in the UK and something I ran across the other day mentioned not being able to borrow roughly 2 and half times income.

Also re the property taxes, situation here in San Diego is similar to Englishmum's experience. If we were to buy a 3 bedroom 1300 ft condo we would be paying in excess of $5,000 per year for property taxes. Add in another couple of hundred a month for home owner's association and the total soon adds up.

I saw a financial show the other day and they say when figuring your repayments allow $800 for each $100,000 borrowed to calculate your monthly payments as that should allow for all expenses. Of course this is based on the current very low interest rates.

Englishmum, made an excellent point about school districts. They are fanatical about it here in San Diego, is often the first line advertising a house, so make sure you do not buy in one of the lesser successful school districts or you will never be able to sell.

frrussre

Location, location.

School District, school district.

The Real Estate taxes are high, because they include the running of the schools. Hence the better the school district the more costly to run them. 18/20 children per teacher in the good districts. 37 - 40 per teacher in poorer areas.

Reg. Frank R.

The 2x for singles & 3 times for couples is a British Bank deal. In USA it's usually, the 28% & 36%.

whatever

Some excellent thoughts and valuable info - Had no idea about most of it!! Thanks so much, englishmum, vicky88 and Frank R - I owe you one.