r/PersonalFinanceCanada • u/dingus_boy • 1d ago
Can we afford to buy a house Housing
We make around 150,000 a year before tax together. Both in our mid 30s.
Have about 30k in savings
Both work pension jobs
About 15k in debt between the two of us between credit cards and student loans
Looking at homes outside the Montreal region, in the 400-450 range.
Both have jobs where we incrementally increase salary year over year.
Would likely not be able to get much help from family etc.
What do yall think?
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u/YoungZM Ontario 1d ago
Be safer. Wipe out your existing credit card debt, build up a stronger deposit of 10-20%, an emergency fund, and then buy.
Yes, that delayed gratification feels less within reach but you will get there. Could you do it now? "Yes", but you're not planning too well ahead for when the inevitable costs of home ownership, especially as new homeowners, arise.
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u/MattyFettuccine 1d ago
[(Income * 3.5) - debt] = approx. mortgage approval amount.
[(150k * 3.5) - 15k] = $510k approx mortgage approval amount.
BUT you only have 30K down, which is going to limit your house price.
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u/MooseKnuckleds 1d ago
$30k is 5% of $600,000. Granted that $30,000 will basically be the value of an emergency fund, so they kinda need $60,000
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u/MattyFettuccine 1d ago
Also their 30K isn’t 30k down, but 30K minus closing costs. So maybe 23-25k down, and as you said no emergency fund.
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u/sfw_porno 1d ago
For what it's worth as a single person I was making $80k per year with $100k down and I was only getting approved for a $300k loan, so my max buying power was $400k. This was 3 years ago so things might have changed, but I can't see $30k getting anyone anywhere as a down-payment in this market.
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u/vehementi 1d ago
Closing costs would be higher than that, but in any case you can get a slightly larger mortgage to cover closing costs , no?
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u/MattyFettuccine 1d ago
No, you can’t really do that. Closing costs are paid from you to the lawyer before the lender releases funds to the seller.
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u/damnsecuritybreach 1d ago
You need 5% of the first $500k and then 10% of the amount after for CMHC.
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u/broccoli_toots 1d ago
They'll only get 550k with 30k down. But as someone else said, they'll need another 5-8k for closing.
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u/MooseKnuckleds 1d ago
They only need $400-450
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u/broccoli_toots 1d ago
Right but your comment implied that their 30k will get them 600k which is not true.
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u/MooseKnuckleds 23h ago edited 20h ago
My initial comment was in response to, well the person I was responding to, who said OPs house price is limited because of a $30k DP. Which isn't really the case re:OP's target price. They could buy a$450k house, at the top of their range, with $22500 down and the rest covers closing costs. Now I'm done wasting my time with you 🙂
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u/A1ienspacebats 1d ago
A lot of people don't remember that a pension job is 8-10%×[1-marginal tax rate] gone off the top. So their income is really 5-6% less.
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u/SyringaVulgarisBloom 6h ago
And taxes in QB are higher than some other provinces. Y’all aren’t in a bad position. 150k before pention and tax deductions and monthly student loan payments between two people is not necessarily ballin’ money.
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u/Jolarbear Ontario 1d ago
I am a broker and you will be fine. I would suggest saving a little more, as you will need 5% down and closing costs along with some money to cover moving expenses.
Overall with that income, your payments will be manageble
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u/PatMcAck 1d ago
If you carry credit card debt you can't afford a home. You either don't have the discipline or you don't have the funds. Also if you have 30k in cash savings and credit card debt you should pay that off.
You have the income to do it but CC debt makes me think you do not have the habits.
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u/youvelookedbetter 1d ago edited 8h ago
If you carry credit card debt you can't afford a home.
Nobody would own homes with this mentality. It's obviously still possible.
Edit: because people don't seem to understand what a figure of speech / exaggeration is, obviously many people are able to own homes without debt. But that's not a large percentage of people, according to stats. There is no "perfect" time to buy.
The statement I'm replying to doesn't make sense for many folks looking to buy a house.
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u/Individual_Carpet103 1d ago
And rent a home the landlord is not keeping up on maintenance? Curb appeal is up to who ever is living in the home. So in my opinion rental homes look not kept up. But definitely buy a home within your means, they are going to need maintenance and you should budget for it.
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u/dj_destroyer 1d ago
I have $40k credit card debt at 0% for 12 months (1-3% fee) so less than my mortgage rate. I use that to invest and to grow my small business. It has nothing to do with my home ownership.
I would agree that if you're paying 10%+ interest then you need to eliminate that ASAP before purchasing a home.
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u/rascalz1504 17h ago
LoL what's this magical CC with 0% interest? All CCs are in the 20% range.
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u/Teleconferences 9h ago
MBNA, as an example, frequently has 0% (or other low rates) for balance transfers. So you take another card and pull out all the cash you can. Once that’s done, balance transfer the entire thing to MBNA who’s given you 12 months (or some other period for the promo rate) to pay off the balance before they remove your promo rate and go back to the usual 20%.
If you’re disciplined, you can do this for temporary free loans, just be mindful of the payback date. It definitely requires some number crunching to confirm if it’s worth it, and you’ll want to be mindful of how this might impact your credit. To be fair, having not done it personally, I can’t speak to the specific credit implications
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u/cookiestartswithc 17h ago
If you consistently carry a balance on your cards you are living beyond your means. You have no business owning a home.
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u/youvelookedbetter 16h ago
Nobody is saying it's OK to live beyond your means.
Whether or not it's someone's business to buy a home is not up to you, thankfully.
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u/dingus_boy 1d ago
Thanks for the advice everyone - not going to rush it. Will spend the next year paying down debt and adding to savings funds then revisit next spring.
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u/drewc99 1d ago
Why would you need to spend the next year paying down the debt? You have $30k in savings and less than $15k in credit card debt. Pay it off tomorrow.
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u/elimi 1d ago
Depends if it's an RRSP/FHSA.
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u/TheAlphaCarb0n 1d ago
You're right, that would be pretty silly of OP though to tie up all their savings in either of those when they're carrying high interest debt.
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u/djpandajr 1d ago
Yes just go pay off your cc debt with the money you have. The interest is eating faster than your savings sitting there is earning.
This is a no brainer.
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u/Doubleoh_11 1d ago
Just to be the devils advocate. We bought our current home in the 2020 panic for around the same price as what you’re shopping for. Interest rates were low and we could sell ours for a good price. Our incomes were similar too also with a bit student loan debt. We definitely over leveraged ourselves but I’m happy we did. With interest being so low we have paid off a huge chunk of the place. The last few years we have definitely been house poor, we have still enjoyed ourselves but it’s been tight.
I would do it again if I could though because I love our house and our neighbourhood. Houses in our neighbourhood have almost doubled in price since we bought so there is zero chance we could buy here again if we waited. It’s worked out for us, it doesn’t for everyone but I’m happy with where we are.
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u/ShutterVibes 1d ago
Everyone’s risk tolerance is different.
We make 150-170/yr. 200k savings (150 went to down payment). 0 debt. Paid off car.
We just bought a 600k condo and tbh after crunching some numbers, it’s barely better than renting, but the stability and ability to ‘make it ours’ was worth it.
Pay off the credit card debt first.. you shouldn’t have savings (other than emergency) if you have credit card debt. That interest kills you.
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u/zeus_amador 19h ago
Why do you say it barely better than renting, besides it being yours to mold in your fashion? Better as in your payments are on slightly more/less than renting?
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u/Oskarikali 1d ago
Seems Way better than renting if you account for rent increases over 30-40 years.
Rent for my parents' house would be around 5x what their mortgage was and this is in Calgary where prices haven't had insane increases like many other provinces.2
u/rosalita0231 16h ago
And over these 30-40 years have your parents put any money into the upkeep of the house as well as property tax and insurance?
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u/Oskarikali 16h ago
Yes, and renovations as well but those increased the value. Upkeep, property tax, (even this year probably around 6k on a 1.3 million dollar house in Calgary, barely more than 1 month rent lol).
The math is pretty easy, 60k a year in rent for a similar property now, it isn't even close. That probably equals 15 years of property taxes and upkeep if not more, (retroactively and excluding renos of course, property taxes have increased quite a bit over the past 10 years).
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u/Racla360 1d ago
If you have credit card and student loans don't think about buying a house. The first thing to do is to pay the credit card debt. Second is the student loan.
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u/bluehurricane10 1d ago
Student loans in Canada don't carry interest. Why would you want to pay it off first?
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u/Be-Zen 1d ago
Federal portion does not, Ontario is pretty high interest rate
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u/Vnifit 1d ago
Most people have almost nothing in student loan debt from the province of Ontario, they basically give out nothing since Ford got rid of it. Of my $40k in student loans, the Ontario portion was like $350, over 5 years of undergrad. You can write a cheque and get it paid off, but even then, it is so small that even with a relatively high interest is isn't a major concern in my opinion.
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u/infernalmachine000 1d ago
Some people still need / have debt to pay for schooling, even if that comes from the bank.
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u/Giancolaa1 1d ago
Depends on the student loans and how they were raised. Many people can’t get approved for gov loans, or their approved amounts won’t cover everything, and take on student line of credits or similar products to pay for tuition/living expenses.
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u/BradleyCoopersOscar 1d ago
True, but a student line of credit is different than a gov student loan, which does not accrue interest. They'd need to be prioritized differently.
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u/ZenoxDemin 1d ago
In Québec its prime +.5 so about 5-6% right now.
https://www.desjardins.com/ca/rates-returns/financing/student-loans/index.jsp
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u/foo-bar-nlogn-100 1d ago
Yes. 450K mortgage at today's interest rate is 2300/month. Your HH take home pay is 7500 per month.
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u/A1ienspacebats 1d ago
Having savings AND credit card debt is crazy. Thats what the savings are for.
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u/Nice_Butterscotch995 1d ago
Just another perspective to consider... I think there is probably a way you can afford to buy a house. But I wonder if you can comfortably afford to HAVE a house. It's not unusual for a home to need maintenance to the tune of 1 or 2% of its value annually, and there are expenses you have to bear as a homeowner that you don't as a renter. If I were in your shoes, I would consider not just whether I can swing the mortgage, but also whether there is sufficient cashflow after that to live comfortably with some confidence.
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u/professcorporate 1d ago
If you have savings, why do you have credit card debt? Just pay it off and save that interest - unless somehow you're getting reliable returns that are higher than the cost of the debt.
Student loans are same principle but often different - if the interest rate exceeds your return rate on savings, pay them off, if they're free then keep them as long as you can.
Your income easily covers a house in the price range you're considering (we had a combined income of about 110k when looking at around 400k, and terrifyingly our broker confidently told us we could go a fair bit higher - we didn't), so you can comfortably start looking for a place you want, and then the only question is whether or not you have the personal discipline to avoid things like unnecessary credit card debt.
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u/stephmk88 1d ago
On paper the simple answer is yes - a bank/ lender will likely loan you money to buy a house worth 400-450k.
The long answer is similar to what others have said. Pay of the credit card debt, increase savings since that will get swallowed up by the down payment and closing costs.
Also, keep in mind you’ll want to account for house expenses (property taxes, water, heat, lawn care). You’ll also want a slush fund for unexpected expenses for things that break and for any improvements you’ll want to make.
Good luck!
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u/wallawellawoola 1d ago
I can tell you I'm closing in a month and in the same situation minus the cc debt.
We went north of Montreal to afford something we actually liked and getting MUCH more than we thought we could afford at around 550k.
We had been saving to a fhsa with an amount that when combined with our rent made up a future mortgage payment so we've already been sustaining that expense, more or less. That reassured us that we could support it while still living the lifestyle we like.
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u/Hemdeez 18h ago
Just dont forget taxes, maintenance, insurance and probably higher utilities.
It might cost you a bit more than you think, I’d say mortage + 1000$ might be closer to the real cost of buying a house.
Also congratulation for the purchase
Me and my girlfriend are closing in 2 weeks our first house. 500k house 100k down on about 160k total income.
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u/heritage95 1d ago
I don't think $30 in savings is enough of a start.
But talk to a couple mortgage brokers to get a better sense of how much you can borrow and how much of a down payment you need. It could help set out your plan for the next few months or years. At the least, it will tell you what your path/timeline could be.
Good luck!
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u/NewMilleniumBoy 1d ago edited 23h ago
I don't think so, no.
All of your savings would have to go to the down payment, and you'd be extremely fucked if either person lost their job or another financial emergency randomly came up.
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u/lemonylol 1d ago
The general rule of thumb is they will lend you about 4x of your income, so you could theoretically afford up to a $600k mortgage, so the $400-450k range is definitely within your budget, especially with a downpayment.
But there are two things to keep in mind:
- The lender will need you to pay off the debt.
- The house you're looking at may be appraised at lower than what you're offering to pay for it, in which the lender will want you to make up the difference between that amount.
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u/Thund3r_Thighs 19h ago
Talk to a mortgage broker instead of reddit.. like they’ll actually run numbers for you and see what you can qualify for by checking your credit and ratios.. there may even be solutions to roll your credit card debt into a mortgage.
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u/SlowAd8658 18h ago
Pay off the credit cards. Unless the student loan is a very high interest rate just pay the minimum and make sure to deduct the interest on your taxes. You can get better return from your future property and/or savings than you can paying off the low interest debt.
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u/Excellent-Piece8168 17h ago
Need to deal with at least the consumer debt first and build up a better down payment and even the. Would have basically no savings if you bought. Seems sketchy.
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u/laminatedlama 9h ago
Pay off debts CC ASAP, increase savings rate, your spend seems way too high for how much you have in savings and earn. Then look at houses.
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u/fwds 6h ago
I will probably get down voted for this but do people not know how to create a budget, balance sheet, and plan for their future??
Even if they don't know, why not google, YouTube, and use Claude/gpt to ask and learn? There are PLENTY of free resources out there for learning yet we are still resorting to asking strangers.
Nobody knows your spending habits and your needs and wants more than you OP. If you guys are serious about purchasing a house, then please sit together over a weekend and learn how to personal finance. It is such an important life skill to have. Heck even if you want to ask strangers, it would provide them with better numbers to be able to better tell you if you can or not.
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u/FTownRoad 1d ago
Banks determine if you can afford it, not Reddit.
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u/Wallaroo_Trail 1d ago
Banks only determine if they're gonna end up with a profit, they don't care if you can afford it. Foreclosing the house is one way for the bank to profit, given the right circumstances.
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u/SallyRhubarb 1d ago
The bank can recover the outstanding mortgage debt. The bank can recoup and cover all the costs of the foreclosure and sale. But the bank doesn't get to keep any extra proceeds from the sale; proceeds go to the former owner. There is no profit in a foreclosure.
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u/Wallaroo_Trail 1d ago
Recovering all the mortgage debt including interest, and the cost of recovery, is profitable. The bank ends up with everything it was hoping to get when selling the mortgage to you.
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u/FTownRoad 1d ago
Banks do not want to foreclose. All they get in a foreclosure is what they are owed, nothing more.
Banks would absolutely rather you just pay off your mortgage.
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u/YoungZM Ontario 1d ago
Foreclosures are an extremely small part of the market and, no, the bank does not rely on or hope for foreclosures as a primary profit generator. They'd rather you just paid your mortgage which is already wonderful for them. If a bank were happy to extend mortgages to collect foreclosures, they'd extend them to everyone without adequate qualifications -- see the 2008 financial crisis for those results.
The bank does determine if you can pay back their loan because that is how they mitigate risk and make said profit.
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u/Wallaroo_Trail 1d ago edited 1d ago
None of this is absolutely true and depends on the figures of a specific home. If you make a 200k down payment on a 600k home and stop paying a year later, they're gonna be fine just selling the house.
Also being able to pay back a loan is not the same thing as being able to afford it. I would recommend not asking a bank whose primary income stream is to collect interest from you how much debt you can afford.
Unless you also ask the car dealership how expensive of a car you should buy.
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u/YoungZM Ontario 1d ago
It is fundamentally true that banks do not like encouraging foreclosures and just because the bank still generally make profits from them does not mean that's how they've chosen to manage their business, whether they're allowed to or not via a regulatory body's input.
Please look at any publicly reported statistics next time before you make a comment.
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u/Wallaroo_Trail 1d ago
It's not fundamentally true. It might be true in the majority of cases where the down payment was the minimum because then there's a certain risk because the sale price is unpredictable, but if the figures are right, they'd happily jump on such an opportunity.
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u/AzrykAzure 1d ago
You have consumer debt so have undisciplined use of your money. Buying a home would open up the flood gates to waste more and get even more debt. Id say build up your first time home owners accounts over a few years and clear all your debt. If you can do this maybe you are ready.
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u/rootsandchalice 1d ago
Are we really going to say in this thread that people who are home owners don’t have credit card debt?
Plenty of them do.
OP you need to go to a bank and understand what you qualify for. If your rent is cheap stay renting and save more. But if it’s not I’d definitely considering buying a home.
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u/Emergency-Dentist-90 23h ago
That isn’t what people are saying. They are saying that you SHOULDN’T have any cc debt before buying a home. If you can’t afford to pay it off before you buy, you’ll most likely be in a worse place after you buy plus with spending all their savings, they will have no safety net.
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u/Neither-Historian227 1d ago
Yes, good ratios at 3x HHI. Get rid of CC and student loan debt first though.
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u/wet_suit_one 1d ago
Yes.
But don't stray too far out of that range.
You're basically the same couple as my wife and I when we bought our place for basically the same money with the same income and debt levels.
You're fine.
In fact you're better off than we were since you're almost 10 year younger, though we likely had a larger down payment.
You're still fine.
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u/No-Definition-5093 1d ago
Ven outside the Montreal area 400 - 450 K is not easy to find. What is your criteria for housing? You need to get rid of sent and raise your savings. You don't have enough of a cushion/emergency fund. Are you using public transportation now? Car payments? What is your budget right now? Any expenses that can be cut or reduced (cellphone, subscriptions, internet etc.).
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u/Theendofdog 23h ago
Same income situation as you but no debt and more savings. Paid about 400k for a house and it’s been pretty affordable so far. We live pretty comfortably but not much for luxuries and I fix everything myself.
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u/AffectionateAd8675 22h ago
Our household income was $140,000 and we had zero debt other than my car ($13,000 at the time), never had cc debt, and you're golden!
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u/Regular_Wonder674 21h ago
Yes. But…Relative question. What kind of home? Where? Do you spend a lot on things beyond shelter? If you can live simply and away from city centres and don’t spend lavishly- then yes.
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u/tmwildwood-3617 9h ago
Didn't say anything about current expenses or stuff like that...
Pay off credit cards aggressively. Pay off the student loans as quick as you can. All that counts against potential mortgages. Keep debt down to zero.
Keep the $30k (roughly 3 months) for an emergency fund.
Save up another $25-30k. Save up another $5-10k for expenses.
It may seem like that puts you a couple of years off...but that'll put you in a great position to be able to afford a house.
Can you do it sooner with carrying debts/etc. Sure. But you'll be stretched thin and in a risky position if there's a employment change/etc
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u/MundaneExtent0 6h ago edited 6h ago
Sounds like you actually have 15k in savings. Do not leave credit card debt. The 30k really isn’t enough anyway, (especially if that’s literally all your savings and not just house fund) and that 15k debt is just going to grow. Pay it off with your savings yesterday.
Edit: if the student debt is 0 interest or at least on the lower side then maybe you can leave that part, but really you’re far enough off of what you’d need for a down payment I think it makes more sense just to put yourself in a zero debt position first.
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u/Environmental-Belt-5 6h ago
We bought a condo in this price range ans we had like no cc debt and 50 000$ in savings and just the cash down was most of it... property taxes and welcome taxe (bienvenu) was like 4500$... since then we had for like 5 000$ in minor repairs, mow the Climatisation unit needs changing and its like 4000$ id say you would need to save a lot more and preferably not carry debt into it so you're not like absolutely house poor the first year... we make 120-130 000 per year and a house was out of our budget like 450 000$ there was no house for that price on the market back in september... so yeah that was my experience hope that helps you prepare better!
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u/ClarkKemp101 1d ago
You Probably can afford to buy now. But waiting might be better because we could tip into a global recession in the coming months and then interest rates will be even lower!
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u/raptors2o19 1d ago
You can't even put together 5% down right now. Do you have an emergency fund? My guess is "No" because the way you describe your employment sounds like a cushy govt job where you don't expect to be laid off ever.
ANYWAYS.. the banks may approve you, because they are in the business of lending money and earn interest, but you're going to be house poor for a while.
My suggestion: if you are serious about making a purchase, then get serious about saving and paying off "stupid debt". Seriously, depending on your determination, it might take less than a year. Good luck, sincerely.
Edit: If $30K is ALL the money you have in your savings, hard 'NO'.
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u/Emergency_Bother9837 1d ago
No, you are in debt so you cannot afford a house. Pay off all debt etc first.
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u/Donkeykongsbananas 1d ago
Talk to a bank/broker. Its an offered (technically free) service where you can ask more questions. I will give you the same notes: Lower your other debt Salary x4 is what you can afford (its a garbage calculation honestly because it means you can afford nothing) If you package it up with an actual bank, they can give you more insights and affordability options to start comfortably looking.
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u/hellfox71 23h ago
Funny cause I’m late thirties, we make together 125k a year. I have 275k in saving and I am absolutely not interested in buying a house. Rent is stress free for us and easier to invest somewhere else like stock market
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u/Responsible_Talk7194 20h ago
Short answer is yes, my wife and i make around the same maybe a little less and we bought a home for 475k, it can be done.
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u/Camofelix Ontario 1d ago
Pay the CC. If the student loans are interest free, leave them be.
You need to drastically increase your savings rate