Announcement

Collapse
No announcement yet.

2x mortgage on single income

Collapse
X
Collapse
First Prev Next Last
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • 2x mortgage on single income

    Does one adjust the affordability of a home if it’s based on a single income? Or does one assume that disability coverage would be able to cover a mortgage within that 2x multiplier should something unfortunate happen.

    Thanks!

  • #2
    The mortgage should be within 2x of your household income.  Disability insurance should be enough that it replaces your income to cover your living expenses (plus enough to save for retirement) if you become disabled.

    Comment


    • #3


      Does one adjust the affordability of a home if it’s based on a single income?
      Click to expand...


      its household income.

      if you have 1, then you have 1.

      Comment


      • #4
        With all rules of thumb there is some reasons to be more or less aggressive.  If there i only a single parent or even only 1 working spouse I would be more conservative with getting too big of a house.  That is just me.

        Comment


        • #5




          With all rules of thumb there is some reasons to be more or less aggressive.  If there i only a single parent or even only 1 working spouse I would be more conservative with getting too big of a house.  That is just me.
          Click to expand...


          But this is what insurance is for...

          Comment


          • #6







            With all rules of thumb there is some reasons to be more or less aggressive.  If there i only a single parent or even only 1 working spouse I would be more conservative with getting too big of a house.  That is just me.
            Click to expand…


            But this is what insurance is for…
            Click to expand...


            I agree you can have an insurance policy that will cover every dollar you would normally have made but I hate to rely on that.  Too many issues with people being denied for bad reasons or delays in payments.

            Also if someone is disabled who knows how it will effect their spending.  Health insurance costs?  Medical equipment costs.  Is their house accessible or do they need lifts, ramps, etc.

            Right now my wife works part time but she could return to full time if she wanted to.  We could live off her salary if she did.  It makes me just that much more comfortable knowing that.  Again this is just my opinion.  I am likely over conservative.

            Comment


            • #7
              I appreciate @peds always brief responses. I figured my thought process was correct. I figure that some may have a skewed perspective if they come from dual physician incomes (or similar fortune of a 6 figure SO), even if one is part time or temporarily not working. I wasn't sure if anyone came from a perspective of making 10x more than their spouse/partner/whatever the correct term is.

              I'm still 18 months from purchasing a home (projected time to pay off loans and save up a down payment to get a conventional mortgage). Luckily, even if I buy 1x my income in a LCOL area, I'd still be buying a big dumb doctor house. I've just been looking online and trying to calibrate what I really need/want and what I'm willing to spend.

               

              Comment


              • #8
                It seems like you should be more conservative if you have two incomes. I know this sounds counterintuitive, but you are twice as likely to suffer a job loss. If you need both incomes, one loss would be just as bad as if a one income family lost a job.

                Comment


                • #9




                  It seems like you should be more conservative if you have two incomes. I know this sounds counterintuitive, but you are twice as likely to suffer a job loss. If you need both incomes, one loss would be just as bad as if a one income family lost a job.
                  Click to expand...


                  I disagree. Often, people can live off of one income (and do! Saving the other income or using for vacations, 529, etc.). You can modify when you have one job loss and have the other still working. If you loose the one job, you are done. It would be unemployment, if you qualify, or disability. Especially for docs, getting privileges takes time (often 90+ days) and there's not always a way to make that income quickly.

                  I agree with @Peds, simple.

                  Comment


                  • #10
                    It may still be the same answer to purchase price, but I may as well ask the question. If it is one income, would you guys then shoot for a more conservative 15 year fixed mortgage vs a 7/1 or 10/1 ARM. It is probably the more conservative approach to try to pay off the mortgage before the rate adjustment, but the 15 or 30 year fixed would be a lower payment, right?

                    Also, on the most recent WCI podcast, it referenced a doc who bought a 3.5x home (2.2M) with a 10/1 ARM. The risk was then that the interest rate could balloon to very high rates. I thought these loans had a cap of how much an interest rate would increase.

                    Another tangent, but bear with me. Does one consider how well a home will re-sell when purchasing a "forever" home? $500k around here will get you a 4-5000 sq ft house around here (which would be less than 1x for me come partnership in a couple months). It's great for me when buying, but if I should want to resell, the pool of people who could purchase that amount of house here isn't large. Houses above 700k may sit on the market for months, especially if minimal renovations were done since the initial build.

                    Comment


                    • #11


                      but the 15 or 30 year fixed would be a lower payment, right?
                      Click to expand...


                      It depends what your rates would be on each of those.

                       


                      Also, on the most recent WCI podcast, it referenced a doc who bought a 3.5x home (2.2M) with a 10/1 ARM. The risk was then that the interest rate could balloon to very high rates. I thought these loans had a cap of how much an interest rate would increase.

                      They usually are capped but a change from 4% to 8% interest could be around $6k per month on a $2.2M loan. That could easily be enough to send a physician into financial turmoil. That's why during the housing crisis much lower interest rate changes just completely annihilated people.


                      Another tangent, but bear with me. Does one consider how well a home will re-sell when purchasing a “forever” home?
                      Click to expand...


                      You shouldn't but I bet a lot of people do.

                      Comment


                      • #12


                        Luckily, even if I buy 1x my income in a LCOL area, I’d still be buying a big dumb doctor house. I’ve just been looking online and trying to calibrate what I really need/want and what I’m willing to spend.
                        Click to expand...


                        If you're in a LCOL area and you're income will be north of $500k once partner, this would be such a great opportunity to reach financial independence much earlier than you could ever imagine. I would seriously think 2x (ha!) about spending 2x your income.

                        Comment


                        • #13





                          Luckily, even if I buy 1x my income in a LCOL area, I’d still be buying a big dumb doctor house. I’ve just been looking online and trying to calibrate what I really need/want and what I’m willing to spend. 
                          Click to expand…


                          If you’re in a LCOL area and you’re income will be north of $500k once partner, this would be such a great opportunity to reach financial independence much earlier than you could ever imagine. I would seriously think 2x (ha!) about spending 2x your income.
                          Click to expand...


                          Yea, my high end budget is set at 1x. But I've dabbled with the idea of continuing to do the 3 bed/2 bath apartment until I save up to pay for a .5x income home in cash. If I could get those fixer upper people to do a renovation in the midwest...

                           

                          Comment


                          • #14




                            Another tangent, but bear with me. Does one consider how well a home will re-sell when purchasing a “forever” home? 
                            Click to expand…


                            You shouldn’t but I bet a lot of people do.
                            Click to expand...


                            Would you expand on this thought? I don't do anything in terms of "forever" and am more relaxed with my primary residence but the ability to have a relatively quick and painless resale is always a significant consideration for me.

                            Comment


                            • #15







                              Another tangent, but bear with me. Does one consider how well a home will re-sell when purchasing a “forever” home? 
                              Click to expand…


                              You shouldn’t but I bet a lot of people do.
                              Click to expand…


                              Would you expand on this thought? I don’t do anything in terms of “forever” and am more relaxed with my primary residence but the ability to have a relatively quick and painless resale is always a significant consideration for me.
                              Click to expand...


                              I'll elaborate but first I'll clarify. Your statement "how well a home will re-sell" may mean different things to us. You mentioned having a quick and painless resale. I take your statement as a home appreciating and the homeowner making money on it. I think lots of people buy a primary residence with a goal (either consciously or subconsciously) of making money on it. I'm of the opinion that a primary residence is bought for shelter, not for investment. Would it be nice to make money on a home? Duh. But that shouldn't be the primary or even secondary reason of a home purchase. However, I think many of the reasons people buys homes will typically encourage a profitable resale, i.e. good schools, good community, no major home issues, etc.

                              Comment

                              Working...
                              X