• “How Much Home Can You Afford?” Calculators Scare the Bejeezus Outta Me

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    Between friends and coworkers, I’d say that 80% of the people I know are now homeowners, with many of them buying their first home in the last year or so. Admittedly, I’ve felt out of the loop.

    In the past, we’ve wondered if it were feasible to put down 20% on a home. The more I look at our future, it looks like that could be possible. As we’ve just paid off all of our revolving credit card debt, I’ve wondered (just for fun) how it would affect how much home we’d be able to afford. So in order to get a better idea of a number, I decided to run the numbers using four different online calculators, and maybe even see if I could get some of the best home loan rates.

    Before I get into the details of each calculator, there were some ground rules in the numbers to make everything even. I assumed:

    - $50,000 for a down payment, the approximate amount I’d like to save up before buying a home

    - Fixed 30-year mortgage at 6.25%, a reasonable guesstimate of what our interest rate would be considering our FICO scores

    - Annual property taxes of $2,300, an eyeballed average of property tax listings of condos in my part of town

    - Annual homeowner’s insurance of $659, the 2004 Illinois state average.

    - Monthly debt of $1,000, the minimum payment for the student loans

    The first calculator is the one (warning, this calculator is a java applet that will slow down your computer for a few seconds) from dinkytown.com. I’m pretty sure that it is the same calculator found on (also java) interest.com (disclosure: they may have ads on this site, on every page, or something). I like their calculator because it shows how much mortgage you can afford over a range of interest rates. But since we’re only looking at interest rates at 6.25%, I’ve gratuitously outlined the value in the chart: $318,883. Add to that a $50,000 down payment, and we have a value of $368,883. Not bad.

    The second calculator was the venerable bankrate.com‘s housing affordability calculator, which said we could afford a $368,902.36 home:

    bankratehomeafford.gif

    I next went to smartmoney.com to use their calculator. The mortgage amount was pretty much the same as was dinkytown.com stated, $318,835, making the final value $368,835.

    smartmoneyhomeafford.gif

    The last calculator I tried was CNN Money’s offering. This calculator gave me a range from $368,882.87-$397,846.38.

    cnnmoneyhomeafford.gif

    This was a fun exercise considering that a year and a half ago a calculator (erroneously) told us that we could only afford a $10,000 home!

    Why do these calculators scare the bejeezus out of me? Because I know for a fact that I’m not in the state of mind for home ownership. I’m still in young and carefree mode, and with a house comes a lot of responsibility that I don’t think I’m ready for. I think Mapgirl would agree with me on this one.

    The real scare is knowing how much more debt would be added to our tally. That is only slightly tempered by the fact that we’d have to be paying for housing whether we’re renting or buying…so why not build equity? I also have to keep in mind that these numbers represent the MAXIMUM amount of mortgage that we’d be able to handle. Her and I have had some pillowtalk discussions about how stretched thin we’d be if we bought the maximum amount of house we could “afford,” and how we’d rather not have to stress about the money.

    In the end, I know that none of this is serious. We’re not looking to buy until at least a few more years, both for maturity and saving’s sake. It does feel good though, to know that we’re making some financial progress.

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