If you are moving from San Francisco to Milwaukee with a 50K income, you should rent for at least 6 months, if not a year, when you get to Milwaukee.

Even if you are from Milwaukee and "moving home". You might not want to live in a different part of the city than you are thinking from SF.

The greater Milwaukee area is a big place -- I'd be looking on Realtor dot com to get a sense of what's out there. Then talk to a bank about how much they'd loan you. My guess is that you'll be fine.

@User what does "you'll be fine " mean as far as the amount i can afford?

i know the neighborhood i want to live in. i am not ready just yet to talk to a bank.... thats why i came here so that i can figure out what to even look for on realtor dot com.

@kempek01 i know the neighborhood i want to live in, i am trying to figure out the amount i can afford.

Limit it to 200-250K if you dont want to be house poor and be unable to afford maintenance and improvements. And keep to a saving program for the house renovations, retirement, future kids, fun stuff, etc. 50K is the new 30K. It doesn’t go as far as it used to, even in WI..

Work backwards. Take several representative homes and try to figure out average property taxes. Insurance is not usually as much. How much of your monthly income do you want to spend on housing? Say, $1000? Minus 1/12 annual taxes and insurance, lets just throw a wild guess of $200. So $800 for principle and interest on a 30 year loan. At a high rate of 3%, that's like 190,000. Your cash down must also cover your closing costs and I can't begin to know what that might be. Your closing costs will include both non-recurring costs and pro-rated interest and taxes, so include a month's payment there, plus a year's insurance.

(And figure out what home ownership also includes, like maintenance. Even if you do your own yard work, do you need to buy tools?)

Assume using maybe 80,000 of your down payment funds for your actual down. That buys you a home for $270K.

Which sounds ridiculous in San Francisco terms (northern Californian here.) But may work in Minnesota.

Note: a condo or home owner's association adds more to your monthly costs.

I used a high interest rate and can't estimate other costs, but that's a rough idea how to work backwards.

@User is that even with a 100k down payment? was hoping that would get me a tiny bit more. my goal is/was 300k

So the standard ratios are front-end: 28% and back-end: 43%.

The back-end ratio is all of your committed debt / gross income. The front-end ratio is just (house payment + interest and taxes) / gross income.

The way to get to the proper payment is to take all your monthly installments other than home (this includes credit cards, car payments, etc., but not utilities, and then subtract that number from 43% of your gross income. You then use the front-end ratio as a cap.

So for example, let's assume that your monthly installments are $800. $800 x 12 = $9,600 per year. You note that your income will be $50,000 per year, so your back-end ratio is $50,000 x 43% = 21,500, and your front-end ratio is $50,000 x 28% = $14,000. So now take your back-end ratio of $21,500 - 9,600 = 11,900. Now use the lower of that number or front-end ratio to get your maximum mortgage payment. So you are looking for a mortgage payment of $992 per month. So using the traditional ratios you are looking at a $250,000 home.

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Now a few thoughts on traditional ratios. It is OK to stretch a bit in early home purchases if your income will increase. I purchased my current home about six years ago and my income has increased over that six years in excess of my total house payment. So if you have reason to believe your income will be increasing steadily, then it is OK to stretch a bit if you can get the right house by doing so.

Also ratios, are designed around people who have typical spending habits. If you don't use credit cards or finance automobiles, etc., then it may be fine to mostly ignore the front-end ratio.

I try not to advise people whether or not to rent temporarily, it is just too hard to make any predictions on the home market. I sold a home in January of 2020 to someone just moving into the area, who I suspect considered renting. The house is now worth 25% more than he paid in 2020. Of course, it could also go the other way, but with all the funds buying houses with low cap rates, one has to suspect that there is a fair amount of money riding on house prices continuing upward trends.

ETA: I should also mention that traditional ratios are not as useful as they were ten years ago. The reality is that those ratios just don't work in many regions and for many starter homes. So we are moving away from them. You should consider rent avoided also. It doesn't make a lot of sense to let the ratios define your maximum mortgage payment at $1,000 and then rent for $1,350 because some ratio tells you that you can't afford a home.

Forget the mumbo jumbo, few do that and it's not necessary.

Look at prices in the area you're considering. Find a mortgage lender with competitive rates and ask for a pre-approval. They'll do the work for you and if you find one that gives good customer service, they'll help you assess a range of what you should afford.

Doing your own calculation is like singing to yourself in the shower and deciding you have a good voice. It's what others think that matters, you're most unlikely to come up with an answer comparable to what a lender thinks so let them provide guidance. Your opinion won't influence their's so expect it to happen the other way around.

"Doing your own calculation is like singing to yourself in the shower and deciding you have a good voice. It's what others think that matters"

Please do not use this advice! I was not advising on what mortgage amount you can get approved for. Nor should anyone with an 825 credit score and a big down payment in Wisconsin ever confuse what financing they can get approved for with how much house they can afford.

I thought that was rather obvious, but maybe I need to spell it out just in case someone else doesn't understand the difference. The 43% ratio is not a maximum for loan approval, that is 57% back-end. The 43% & 28% were developed based on average spending and saving habits. They are a bit dated and should be adjusted but are still an excellent starting point for calculating your housing budget.

People not living in the Wisconsin/Northern Illinois area are likely unaware of the enormous sea change in the housing market there. It’s an area that people are fleeing to from Chicago, and all the Chicagoans moving there have inflated housing prices. Residents of Milwaukee suburbs like Elm Grove and Mequon have median incomes of $200k. And the previously more sleepy exurbs have also changed almost overnight. The biggest problem is the lack of inventory.

The OP omits some crucial info - what kind of housing s/he will be buying - a starter condominium, a condo or a home with a view of Lake Michigan, a 4- bedroom family home, approx what square footage and with a yard, acreage or nothing? I don’t see how we can advise on budget without knowing more.

@M Miller

single family home in the bayview area of milwaukee is what im hoping for. 2 to 3 bed, 2 bath. but how does that matter as far as the amount goes? i can either afford it or i cant. correct me if i am wrong, though.

i dont have kids and i am pretty frugal. 50k is working 3 days/week

@sftomke,

@sushipup2 is on the right track then for you. You do need to work backwards. If that is "doing your own calculations", I guess I will just have to be on the other side of the table than my friend @Elmer J Fudd

You have 50K in annual income, 100K for a down payment, and around $1 million in other funds.

Your first step is to determine how much of the 50K you are willing to put toward all housing costs (mortgage, taxes, insurance, upkeep). If you are planning on a fixer upper, you'll need more for upkeep. If you're buying new construction, maybe you can get by with $0 for upkeep for a while.

Once you know how much you are willing to spend on housing, you can use any of the thousand of mortgage calculators available to determine how much mortgage you can support. Then you can add your $100K down payment to that amount. And then anything above that that you are willing to take from your portfolio.

@kempek01 i was planning on using some of the 100k in my savings for that kind of stuff.

also, all of those calculators end up with you having to enter your phone number so that a lender can call you.

sftomke, maybe it would help to look at this:

see down at the bottom, it shows the asking price ($214,900) and an estimated monthly mortgage cost ($1,230). If you go to realtor dot com and click on a house, you can click on the blue estimate and it'll take you another screen that shows the particulars of down payment, loan period and interest rate, etc. So you can plug in your own figures and see how that changes the monthly payment.

No need to talk to a bank or real estate agent, it'll give you a rough idea of actual monthly cost and an idea of the housing market in your desired area.

Still a good idea to read and heed bry911's posts above; just because the bank would happily lend you a gazillion dollars doesn't mean it's a good idea to go a gazillion dollars into debt. This site was helpful too: motley fool/beginners guide to home loans (does not ask for any contact info)

Good luck, this should be a fun process :-) (both my parents were born are raised in this general area so it holds much sentiment for me)

@sftomke - It is difficult to know how much house you can afford, because it is difficult to understand how you manage your money and what type of lifestyle you have. To some people, a nice house is important enough to sacrifice for, while others may want to spend their money on lifestyle choices other than homes.

I will warn you, that with $100,000 down and an 825 credit score many banks will loan more money than most people would be comfortable paying for a mortgage. You represent almost no risk in default and some bank out there will portfolio you if need be.

$50,000 per year is about $3,150 per month bring home in Milwaukee. If you purchase a $300,000 home using $80,000 for down payment. You would have a payment after taxes of approximately $1,470 (using a 1.6% tax rate). I would guess that you can plan about $375 - $425 per month in utilities and internet (just a guess), so that leaves you $1,250 - $1,300 per month for food, entertainment, phone bill, car payment, credit card payments, savings, etc. If you are comfortable with that, then great.

Personally, I wouldn't be comfortable with that amount for a long period of time, but with a $20,000 emergency fund I would probably be comfortable enough if there is a chance of income increasing.

Is $50k your gross or net salary? Does it include an IRA or 401k contribution? Health insurance and/or out-of-pocket health care costs? As others have mentioned, how much of your savings are your comfortable going toward a remodel where these days costs are higher than you might anticipate, even in Milwaukee? And will you have enough left over for unforeseen expenses related to the home in the future like a new furnace or water heater? Will you have money left over to furnish the home? A new lawn mower or the ability to pay someone for lawn maintenance? Milwaukee isn't know for their stellar public transit. Will you have enough left over for car insurance and maintenance?

Also consider the real estate market is still pretty hot right now. Are you prepared to take on a long-term commitment with a home that could potentially decrease in value should the market cool off? Moving from SF to Milwaukee is a big change. Maybe rent a little while to really know what you want, where you want to be and what you want to spend. Milwaukee has a lot of great neighborhoods and there may be one better suited to you and your lifestyle. Take a year to get to know the city and find a place where you can be really confident in your investment.

A lender will not approve a loan amount, the monthly payments for which plus taxes, insurance, projected utilities, and what not plus the borrower's other monthly expenses (which will be requested and verified) exceed established guidelines they have to follow, based on the borrower's income and liquid assets. The guidelines also have a factor of wiggle room to cushion for unexpected and non-recurring expenditures that everyone has.

This is based on my experiences having applied for two loans in the last three years.

@bry911 thanks for the warning about being lent more than i can actually afford. i do NOT want to end up house poor.

car is paid off, no credit card debt.

@Kristin Petro Interiors, Inc. 50K is gross.. working 3 days/week. the 100k in my savings is to go towards the stuff you mentioned like lawn mower, etc.

i grew up in milwaukee and visit multiple times a year so i know the area i want to live in.

@User thanks, i am trying to figure out if i can afford the mortgage, not what the mortgage will be. i will look at that link you posted.

best of luck :-)

I don't think anyone can tell you this without knowing the house you want to buy and want you want to invest in improvements. Your salary on its own, IMO, is too low for a $200k mortgage. But if you retain a significant portion of your $100k savings to draw from then you might be okay.

@Kristin Petro Interiors, Inc. thanks.... not what i want to hear... but rather hear that than finding it out for myself later.

300k would be for something where almost no improvements need to be made

A lot of homes hit the market after the Super Bowl. Maybe you'll get lucky and find one that is nicely updated. It only takes one!

@Kristin Petro Interiors, Inc. interesting.

SFtoMKE - We used to live in Milwaukee and I know that specific neighborhood well. My thoughts: 1. Would you consider working 5 days a week or changing jobs to earn more money in order to afford a house? 2.Do not forget to include property taxes of easily ~$500+ per month- in addition to mortgage when you work the numbers. 3. Do more research and don’t rush things. Good luck with the move and enjoy Milwaukee.

@aelem i will be 49 soon and am a dental hygienist. its really hard on my body. its good money but it kills my back. 3 days is really all i am up for. :-/

You dont need to be ready to actually fill out th application in order to talk to a mortgage lender. Besides they generally have calculators on their websites you can use to get ball park idea, you dont hav to actually talk to anyone. That will give y ou actual info you can use - at best we readers can only guess.

Welcome to Wisconsin! Hope you find a home you love.

I lived in 53207 for around 12 years, now live about 3 miles south of there.

If you find a home on line you would like to pursue, you can go to the Milwaukee assessor's

website and do a search. You can verify square footage, look up permits to see when HVAC was replaced, etc. It is : http://assessments.milwaukee.gov/default.asp

Have fun house hunting!

If you want to be conservative and not get in over your head you can use the Dave Ramsey approach. No more that 25% of your monthly take home pay (after tax) on a 15 year mortgage. That 25% limit includes principal, interest, property taxes, home insurance, private mortgage insurance (if required). Of course how much you put down will affect what you can afford using this method.

https://www.ramseysolutions.com/real-estate/mortgage-calculator

@honibaker thanks! i grew up in 53221.... havent lived there in 30 years though!

@curlyq75 thanks!

Does the 33% rule still hold true (no more than 33% of your income for housing)?

@mtvhike thats kinda what i am tying to figure out. the range seems to vary.

so i found this and plugged in some numbers...... 3.25% interest at 30 years. no debt. 50k income. 100k down payment. it says i can afford a $425k house!!! what?? https://www.guildmortgage.com/get-started/home-loan-guide/income-calculator/

Start backwards. How much of a monthly payment do you want?

SFOtoMKE - It appears as if you do not want to over-extend yourself and I think that is very wise.. So let’s try approaching by figuring out 1. Net take-home income after federal taxes, state taxes, social security taxes, Medicare taxes, health insurance, retirement contribution, etc - in other words what exactly does the $50k gross translate to in net cash deposited on a monthly basis. One of my pet peeves is basing housing costs on gross, rather than net.

Then 2. Analyze all of your 2021 expenses and estimate what they will be in the future. Don’t forget those expenses that do not occur every month. And make sure to include what always comes up - those unexpected “surprises”. While I understand you will be moving - utilities, food and other expense may not be hugely different; housing of course is the big difference.

Once you run your numbers on #1 and #2 - then decide how much monthly you want to put towards housing {don’t forget property tax!}. I think your next step is to analyze your inflows and outflows, rather than playing with on-line calculators. All the hard effort now, will pay off later when you have a clear perspective what you want to spend. Best wishes.

I noticed that you used a 30-year mortgage in the calculator....would you consider getting a 20-year instead? It's really nice not to have a mortgage in retirement! (and....frees up a lot of income)

You can choose the mortgage period you want.

There is no real benefit to choosing a 20 year mortgage over a 30 year mortgage when rates are this low.

If you are worried about payments in retirement, put the difference in an IRA. You will be much better off in 20 years.

@honibaker i would like to.... yes.

@sftomke - I recommend that you talk to a real financial professional rather than trying to get this type of stuff from the internet. The time for repayment on a mortgage loan doesn't matter and it never has. It is a trap that people fall into because they don't understand how interest really works.

All that matters is a payment that you can afford and the lowest interest rate you can find. You can repay any mortgage loan off early, you can pay a thirty year loan off in ten years if you want and if your interest rate is better then you will pay it off in less time. The interest rate difference between a 30 year FHA mortgage and a 20 year mortgage is immaterial. You are committing more of your income to a payment for not that much benefit. The actual total savings over 20 years on a $250,000 loan is about $6,000. While committing to an extra $315 per payment in order to save $25 per month, it represents another 10% of your income.

You would be much better off just saving that $315 per month in a mutual fund rather than making a larger payment. Let's just see how much better off...

Suppose two people were faced with this decision on a $250,000 loan, 20 years ago in December of 2001. Person A opted to pay off their home in 20 years, and Person B opted to save the extra $315.00 per month in a retirement account or mutual fund. This month, December of 2021, Person A would make their final house payment and have a paid off home. Also this month, Person B would have made their 240th house payment and still owe $109,155 on their home. They would also make their 240th contribution into their retirement or mutual fund account which would have a current balance of $254,275. Person B could then decide to pay off their home and will still have more than $100,000 remaining.

Good financial decisions take an open mind and investigation.

@bry911 thank you SO MUCH for doing that math. ive been meaning to but havent yet.

I'm a former dental hygienist (100 years ago) and I understand not wanting to do that five days a week. I morphed into a different career that started by working with dental practice management systems and ended as an executive with a medical software company. I did have a four year degree but that might be less critical in this time of employee shortages. Don't rule out other possibilities that could be more lucrative. You might try something completely different a couple days a week that would generate a little extra income and maybe lead to a new career.

I will also say that we NEVER got a mortgage anywhere close to what we qualified for. We had closely followed a budget from the time we got married in college and by the time we could afford to buy a house we knew exactly how much we were willing to pay each month on PITI. Any major improvements were always a challenge and one of the few times we used a credit card.

Best of luck to you!

@3katz4me thank you! i actually took a class at trhe community college here in san francisco (its free!) and decided going back to school was not for me. for now im just gonna try to stick with hygiene.... but you never know. :-)

One caution: I'd look for homes that are outside the area of combined sewers and locations that are affected by these awful sewers. Milwaukee has 27 square miles of combined sewers. These are from the original build out of the town. In the early history of Milwaukee, it was cost reduction to combine the sanitation and street sewers. The thought was that rain water could be used to flush the sewers. It was not anticipated of how much grief this would cause in the future as the town grew and sewerage treatment progressed. These combined sewers tend to flood during a heavy rainfall. By flooding, the sewerage backs up into basements sometimes as much as 4 ft deep. You can live in that area for a couple of years and not be affected until the time comes when and outsized rain falls and your basement floods. You should avoid those areas. Its better to have a longer commute than to deal with that problem and once it happens, the value of your property declines.

The City has been tussling with that problem for years, with only small gains. It yet exists. They refuse to take the bull by its horns and rebuild the entire affected area with a 2 sewer system. Its too expensive and disruptive now.

Apparently, this does not happen to every location within that area. Sewer flooding is determined by the loading of the line serving the property and overall hydrology of the system. The problem worsened as the sewerage district added clients north of the city.