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Deciding What Percentage of Income Our Mortgage Should Be

By on September 22, 2011

Boy, am I happy my husband I have been saving and saving for our future first home and haven’t jumped in before we were ready.  I read an article yesterday that made me a little uneasy about getting ready to sign on for my first mortgage:

“…68% of homeowners say if they lost their jobs, they wouldn’t be able to make mortgage payments for more than nine months, and many would fall by the wayside before that.”

I was actually pretty surprised that two-thirds of home owners could pay their mortgage for that long after losing their job – major props to E-funds!

But it did get me to thinking about our future home.  There’s that whole thing about putting 20% down, but then there’s the issue of what you’re left with in terms of a monthly mortgage payment.  We’ll definitely meet the 20% requirement, but now I’ve started to think about other percentages: how much of our income do we want to devote to our mortgage every month?

Here are some some bits of advice I’ve seen:

  • Limit your monthly payment to 25% or less of your monthly take-home pay [Dave Ramsey]
  • Your mortgage should not be more than 28% of your income. [Investopedia]
  • You can afford to mortgage a property that is 2 to 2.5 times your annual income. [various people and places]

Now, I’m a big Dave Ramsey fan, and so is my husband, so we generally try to follow his advice.  I like his 25% rule and our big goal is to meet these qualifications and we probably will.  But … that’s with two incomes.  What if some day one of us loses our job or one of us decides to stay home when we have kids?  I think things would be tight and would leave very little wiggle room for emergencies.

Surviving on one income is a very real possibility someday, too.  So, we have to consider these things.  If we find a house at the low-end of our price range, it would make things much, much easier.  But, I get a home listings e-mail every day and every single home that we’re interested in is in the mid- to upper-end of our price range.  (Of course.)

Decisions, decisions.  The only thing we can do right now is to continue to save our little tails off.  Which we are.  And we will.

What are your thoughts on how much you should commit to for a mortgage payment?  What do you think of the 25% rule?

Categories: House, Personal Finance16 Comments

I’m Over Groupon’s Daily Deals

By on September 16, 2011

We’re all really familiar with Groupon and Living Social at this point.  These “daily deals” are supposedly really awesome because they allow you to do all sorts of fun stuff (that you would never normally do) at a fraction of the cost.  Your life is forever changed.  Sign up for Groupon, buy the certificates, have fun, live the dream.

But that’s what they want you to believe.  I’m not buying it anymore.

First of all, Groupon offers things that I don’t really need.  Sure, it’d be fun to go horse-back riding along the Missouri River or learn to crochet with crochet experts or whatever else they advertise, but, in general, it’s a waste of money.  It’s more like this:

“Ohhh, today’s Groupon is laser hair removal!  Only $150!  I’ve really been wanting to get laser hair removal, so I should definitely get this.  There is no reason to check prices at any other salons because this is a Groupon so it must be the BEST deal.”

Secondly, Groupon doesn’t want you to shop around.  They want you to believe that their special, exclusive, uber-important daily deal really is the best deal there is … and that you MUST buy this facial right this instant.  Because this is the best deal, you know.  And it’s only a one-day thing.  So, you have to buy it.  Right now.  Do it!

The other issue? Groupons expire. Don’t act like this hasn’t happened to you.  It has happened to me on at least two three occasions.

Another problem? The sheer number of Groupons sold.  You know that massage certificate that you bought yesterday? Well, about 5,648 other people bought it, too.  Good luck getting an appointment.  Unless you want to get a massage at 8:45 on a Tuesday morning.  Because it’s not like you have to work for a living – because you buy GROUPONS.

Oh, and then there’s THE EXTRA DEALS.  Did you know that there is no longer just a daily deal anymore?  I get additional e-mails about special offers and there are about a dozen other “secret” deals listed along the side of the main daily deal…

(…something tells me that if they have SO many deals, you’re probably not getting that good of a deal in the first place.)

Finally, there are the ridiculous, completely non-funny descriptions that they claim they are “famous” for.  But the descriptions seem over-fluffed and just aren’t very funny.  Case in point:

“Sharing a meal with loved ones is a way to connect, create memories, and discover which family member has been a robot all along. Refuel your clan with today’s Groupon to…”

Really not funny…

Are you over the Groupon/Living Social daily deals, too?

Categories: Personal Finance19 Comments