I saw this post over on the FatWallet forums:
I recently read a thread about a person wanting to purchase a home. Almost all of the posters told the OP he was not financially ready. This made me wonder what everyone thinks of my situation, as I am under contract to purchase my first home.
27 yrs old
Credit score of 780
employed as an engineer
$53,000 annual salary
Take home pay is about $1200 every two weeks, contributing 15% to 401k
approximately $50,000 cash
$0 credit card debt
only debt is $24,000 on truck with payment of $453. Trucks value is about $30k
Currently living rent free with parents ( this needs to change )
Purchase price of home: $130K
20% down so loan amount is $104k
Mortgage payment will be about $580
Taxes are $1700/ yr
I also have several thousand dollars in other easy to sell items such as silver, guns, and ammo.
Here’s a link to the thread.
Wouldn’t it be nice if everyone was this prepared when they bought a house?
According to my math, his house payment plus taxes equal about 30% of his take home pay. This is reasonable and should become a smaller percentage of his net pay due to future raises. Not a bad starting point.
The only thing that sticks out to me is the that the mortgage payment and the truck note will take up 43% of his take home pay, which seems like a lot. He’s fortunate that he will have a nice cash cushion of $24,000 when he moves into his house ($50,000 – $26,000 downpayment). Let’s hope he doesn’t have to eat through it as he adjusts to homeownership. Trust me, there will be lots of unexpected expenses popping up.
I wish him well.