# Questions about home buying



## PrideOfPEI24 (Aug 3, 2011)

Ok, here is the deal. I am 19 years old, from Prince Edward Island. I am entering my second, and final year of Accounting Technology at college and I plan to go straight into the workforce afterwards.

I am not planning on buying a home until I am at least 25, but I have a couple questions.

The main question I want through I am asking, is how much of an annual income would be required (As a whole family), to achieve what I am looking for.

When answering my questions, assumed it based on a family of three (Two parents and a child), as that is ideally the cricumstance I will be looking at when going into buying a home.

Ok first of all, in terms of a home, I'm looking at the 190,000-210,000 price range, with some room to move (for example, getting a 220,000 dollar home for 215,000 if it was morei deal).

So let's assume a 30 year mortage. 

Questions.

A) What do you think would be a good down payment to put towards at home in this range, and mortage term.

B)How much will monthly expenses be ROUGHLY. Here are somethings to consider
Groceries
2 cars on lease
Tv, internet etc...
Heating, lighting water etc...

Basically all the expenses you need to keep yourself living. Now I know that nobody can give exact answers, I'm more or less just looking for rough ball park estimates.

C) How much of an income would it take to comfortable maintain this lifestyle, while also having money to save for stuff like say a yearly trip to Florida, basic family stuff.

If you request any additional information from me, please ask. Again, I know that nobody can give me exact answers, I would just like a curious guess to know where I have to get to to reach my goals.

As I said, I'm only 19 and this is something that still sits at least 6 years away, but I figured it couldn't hurt to start thinking about these things now.

I seriously appreciate any help that anybody can give me! Thanks!


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## crazyjackcsa (Aug 8, 2010)

That's way too many questions, and too little information.

I'll fill in what I can. 

20% bare minimum as a down payment.

Assume a 25 year, not a 30. @3.85% on a 5 year fixed (since 5 year fixed is the criteria you need to meet) You need to show an income as a family of about 50k.

Here's the trouble: Where are mortgage rates in five years? What's your lease costs? How much you spend on Internet, food and "life" is totally dependent on you. You can't even begin to ballpark it.

What are you're property taxes like? You're heating bill? (totally dependent on fuel and insulation in the house) 

Want a holiday in Florida? Do you fly and stay in the Ritz? Or drive and stay in a Motel 6?

Advice? At 19? Forget about what may or may not happen in 6 years, focus on saving enough money that when you walk in to the bank, you can slap down a down payment cheque that sounds like a brick when it hits the table.

With that timeline, save it in something safe, like a GIC, or even a High interest savings account


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## PrideOfPEI24 (Aug 3, 2011)

crazyjackcsa said:


> That's way too many questions, and too little information.
> 
> I'll fill in what I can.
> 
> ...


Ok, so essentially you believe a 50k income is what would be required to deal in that sort of living?

I mean I figured, I'll probabably have 60k+ family income to work with. I guess my concern is am I gonna be the kind of person who mortages and owns a house, or lives in an apartment for the rest of his life. But it looks like I should be able to afford what I'm looking for. I appreciate it and I'm sorry I couldn't give more information.

ATM I do have a tax free savings account that does get annual growth, not by a lot though. That is being setup to pay for school at the moment though so I won't have as much of a burden when I go to pay my student loan.

20% is what I figured, but I hope to go above and beyond that.


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## the-royal-mail (Dec 11, 2009)

rough monthly costs:

groceries $500
pocket change/spending money $400
2 cars $750
heating etc $150
phone, cable etc $100 (doesn't include luxury items like cell phones etc)
mortage cost probably around $1200
taxes, condo fees $400 

That comes up to about $3100 per month x 12 months = $37000/year NET income which means you would need to make about $50K gross.

Those are just operating costs. You also need to save for moving expenses (hundreds or thousands of $) as well as to have an emergency reserve fund.

Although it's commendable that you think about this, I think you should focus primarily on your education right now, get good marks, learn the material and get yourself setup in the workforce. But this is also the time to rack up student loans and have fun. The next 10 years for you will be very volatile. Learn to save money and resist the urge to buy the latest iphone 10 and other such e-waste that is emptying wallets these days.


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## MoneyGal (Apr 24, 2009)

the-royal-mail said:


> rough monthly costs:
> 
> groceries $500
> pocket change/spending money $400
> ...


Wait, what? Those are your estimates for the monthly costs for a family with two adults and two kids? 

2 cars? Walking-around money of $400? Phone and cable of $100?

Uh, no. Try one paid-off, infrequently-used car (total car costs are under $200/month), about $40 for phone and internet. Walking-around money might be $100/month. 

So my estimates for those costs for my family are about 30% of your estimates. Huh.


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## jamesbe (May 8, 2010)

^ All depends I guess. We have 2 cars both paid off, insurance alone cost me $315 per month, add in gas and my vehicle costs are about $600 a month!


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## MoneyGal (Apr 24, 2009)

Still 20% less than TRM's "average" estimate.


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## the-royal-mail (Dec 11, 2009)

Sorry MG, we'll have to disagree here. Your costs are way too low.

$40 for phone and Internet? I don't know anyone who is paying those sorts of unrealistic fees, unless they're on netzero or some such "free" thing that blasts you with advertising.

The OP asked about 2 cars. Insurance alone for a 25 year old male on _one_ car will run you about $130 a month. Unless the OP wants to drive a 1984 Caravan I don't see your costs being consistent with reality. Most people want much newer cars than that and there is no reason to think the OP will be any different.

I could go on but it's just not realistic for 2 adults to spend $50 each per month in spending money. Eat out as a couple just once and you're at $30 for a very average sit down meal.

He asked for average, rough figures. He did not ask us how to be frugal.


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## MoneyGal (Apr 24, 2009)

My costs are not "way too low." These are my actual monthly costs. 

I don't have cable or a home phone and I don't pay the full cost of my monthly internet (so you DO know someone with monthly costs that low!). 

My car insurance is under $130 a month and we fill up less than 1x per month. 

We really don't eat out. 

So, my costs are "realistic" in that they are my real, actual, no-kidding, I'm sure costs.


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## MoneyGal (Apr 24, 2009)

Derp. I also don't pay my cell phone bills.


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## Addy (Mar 12, 2010)

I agree with the others who suggest saving as much as you can for now and worry about the details later.

We pay $74/month for phone, cable and internet. If we took cable out of the equation I'm sure it would be pretty close to $40 (maybe $45) per month. 

Cell phones I generally pay $100/yr for and that includes a free phone - although my husband does have an unlimited data/talk plan for his iPhone that we pay $75/m for, and as much as I grumble about that it's for his contracting business so at least he writes a chunk of it off.

We have an old van that we pay around $75/m for insurance, and average $50/m for gas. We mostly walk or bike everywhere, and we strategically buy housing close to work, shopping, library and other amenities so this saves us huge amounts of money each year.


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## Charlie (May 20, 2011)

without getting too detailed, probably the old bank guidelines are a good starting point:

No more then 30% of your income for housing costs -- incl mortgage, prop tax, condo fees etc. I recall there was a ceiling of 35% (or so) including all other debt obligations -- that would be your two leased cars. (HINT-Don't spend so much on the cars!). I'd go 25% and play about a bit to see the effect of interest rate changes. 

For a DP -- go with whatever amount exempts you from CMHC insurance. I think it's 20%. And consider a 20 or 15 yr amort if you can swing it.

Track your expenses now -- that will show you whether the 'left over' amount is reasonable for your lifestyle. (It may also help highlight areas your spending exceeds the enjoyment you get from that money).


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## Potato (Apr 3, 2009)

Just keep in mind costs are different on PEI. For instance, heating oil and electricity are generally much more expensive than the estimates someone from Ontario might give you (where natural gas is ubiquitous). Some of those estimates you should be able to get from your parents or friends on the Island.

A lot can happen in 5 years, so I'd agree with crazyjackcsa: just save as much as you can now and sort out the details when you're a little closer to your goals.


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## crazyjackcsa (Aug 8, 2010)

I think the preceding posts (and disagreements) really hammer home what I was trying to get at. There are far too many variables to try and figure out month expenses. Especially 6 years from now.

Save your money.

In 4 years you'll have a better idea about what you want to do in 2 years and what it will cost.


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## marina628 (Dec 14, 2010)

He said lease on two cars even if they were basic ford focus with little money down they will run $320 or so a month.I spent $1000 today on my 2008 car which is paid off ,**** happens so better to OVERESTIMATE expenses to be on the safe side.We spend $400 a week CASH on groceries , gas ,clothing and entertaining for family of 4 with a couple pets.This includes gas for a v8 boat and driving to and from the cottage each week and buying the groceries for two homes .


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## Plugging Along (Jan 3, 2011)

I acutally thought TRM estimates were a little on the low side and the MG  if looking for averages.

I think $50K income sounds about right for the mortgage. However, I think that should be ONE income (perferably the lower earner). Forget about family income, what happens if one gets laid off, is ill/unable to work, or decides to stay home with the one kidlet.

Groceries - $50/week/person is some Canadian average I read somewhere, that also includes toiletries, cleaning supplies, etc
Utilities - $250/month, I think this really depends on the place, and usage, etc. I know my old place was $600/month for a small place, but it was old. My current place is about $300. 
House Insurance, maintainance, taxes - $400/month (againd depending on how old)
2 LEASED Cars - $1000, let's say $300/lease/car, plus insurance, gas, and maintenaince I assume because they are leased they are new
Going out - with 1 kid, who knows, this could be free if you're frugal, but I would say $100/week for the family

One thing that no one here has mentioned is the cost of the one child. You would need child care, unless one person stays home, then you have to factor the reduction of income. We spend on just childcare and tuition over $3k a month. That doesn't include clothing, food, or entertainment. Then there are the activities, that's where it can get expensive.

Also, do you want to have anything in savings, education funds, or retirement? This is a chunk too. 

I think that at your age, work on the school, and the career, save as much as you can for a 20% down payment. The best thing to do is instead of trying to figure out all these variables, is the make as much as you can, save as much as you can, and plan a lifestyle around less than what you make.


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## MoneyGal (Apr 24, 2009)

OK! Good to know that two leased cars are apparently a "reasonable" expense at $750 a month but my iPhone at $65/month is "e-waste." 

I missed the part in the OP where he asked for estimates for the cost of two leased cars. I was reacting to what I thought was a suggestion of the "reasonable" costs for a family with a kid, and I responded with my own costs, which are "reasonable" in my world. 

I did go out and spend $165 on lingerie yesterday, and I am taking my husband out...for Bæjarins Beztu Pylsur. That's, uh, hotdogs steamed in beer. He'll have 'em eina með öllu.


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