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Ask Dave

Is Our Mortgage Too Expensive?

Katie and her husband are working through Baby Step 2. They've hit a wall, and they're reconsidering the affordability of their home. Dave thinks the real problem is their income.

QUESTION: Katie in Spokane and her husband are in their 30s and working through Baby Step 2. They’ve hit a wall, and they’re reconsidering the affordability of their home. They bring home between $2,100 and $2,700 a month. The mortgage is $930 a month. Dave thinks the real problem is their income.

ANSWER: At $2,700, the house payment is all right. At $2,100, it’s not. Both are tough, but if your income stays at $2,100, you have to sell the house. If you can get it at $2,700 with plans to go higher, you can keep the house. At $2,700, the house payment is at about 34% of your income, but at $2,100 you are at about 45% of your income, which you just cannot do.

But you don’t really have a house payment problem; you have an income problem. You aren’t making a living. There are two sides to this equation, the income and the outgo. Your outgo side is not terrible. You didn’t call me up wasting money and going crazy. You told me you have a $930 house payment, which in the scope of most of America is not a big deal. But you are fighting on the income side with a marriage and two babies, and that’s tough.

Someone needs to be making $3,000 and then the other person needs to make some money. Your household income is well below the national average. With two kids, you are not that far above the poverty line. That’s not to pick on you—that’s to say that we have identified the weak spot to work on, and it’s the income and career side.

What are we going to do with your husband’s hunting and fishing guide small business to grow it, or are we going to put it on the shelf and call it a hobby? I know guys who do that and make $50,000 or $60,000 a year. Maybe his approach to that needs to be a little less hobby and a little more income.

I know some guys that enjoy what they do so much that they forget to charge for it. Tell him to get professional about it and charge for it. He can charge for it because he’s worth it.