[college_boy]

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Using 33% as your living expenses on 25k.. that gives you the following:

Assuming a net income of $25,000 a year
Montly income = $2083.30
33% of Monthly income = $687.50

By maintaining that ratio, you should be spending $687.50 of your income monthly on living expenses. Without getting too detailed, lets just assume that half of your expenses is your mortgage+insurance

Mortgage Payment = $343.75

Now.. with this payment, at a 5% APR, you could afford a house costing - $64034.

That's a generous rate, especially since the buyer is most likely young. Additionally that house price is WAY to low to be something worth buying, unless you are looking into investment opportunities, or other ventures, not a great scenario here to buy at this point.


Although the savings look nice, and the 10% down (which wasn't added into the calculations) I would agree with everyone else in saying that perhaps the potential buyer should improve thier situation financially, by either getting a signifigant down payment, or improve the income/education etc..

Hope this helps, and please anyone feel free to dispute/correct my math, its very late, and errors are possible, but the general idea is there.

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I liked your post but 25K was the absolute minimum income i was suggesting. I am going to be a teacher and i think the starting salary in my area is 33k or so with a mandatory 1000 dollar raise every year, so that's not too far off of that 25k I guess. I was really just asking for a theory for everyone to go by as to when they should buy a house. I enjoyed your posts though.

How would a downpayment of 20% or 0 down change the strategy of someone buying a house. Assume 35k or so for their salary and a 200,000$ house. I'm leaving poker out of this because it's hard to say where the games will be in 3 years, but it may be a factor nonetheless.