How do you afford a $350K plus home? (sale, 2nd mortgage) - Page 7 - City-Data Forum

KantLockeMeIn · 09-30-2007, 07:59 PM

It's all about priorities. You can spend 180k a year quickly if you don't have money management skills. If you want to take control of your money, it's not difficult on paper, it just takes dicipline.

lh_newbie · 09-30-2007, 08:16 PM

Quote:

Originally Posted by maddyzmommy

No kidding! It all depends... We have humongous student loans, three private school tuitions and massive 401k and investment plans. DH makes over 400k and we bought our place a few years ago for 300k. It's all about priorities. We could be in a crazy lovely place but we cannot achieve the future we imagine if we're blow it all on some house and try to fulifll what others expect of us. So there it is. There's this huge stereotype about doctors being rich... Trying paying back med school loans that rival your mortage. Only seven years more!

A

Wow - when the kids get out of college and your school loans are paid off.. you won't know what to do with the remaining $$!

Sounds like you have great financial responsibility going on in your house! Hopefully the kids are paying attention.

Brian

banker · 10-01-2007, 06:05 AM

Quote:

Originally Posted by scyogi

This is all IMO..............When purchasing a home in that price range NORMALLY it is not your first home. Often this is the 2nd or 3rd home for people (even people in there early 30's) so they have the 20% down (or more). Plus people are moving from where home prices are much higher (i.e. Cali and Colorado).

Exactly. I am 33, live in San Antonio, my wife does not work (hasn't since we were married) and I make just under $100K/year. We are looking at purchasing a $300K home. The only way we can afford it is because we didn't go crazy on our first home over six years ago. We bought it with 20% down and then financed it over 15 years. We have about $100K in equity today and are looking to finance just over $200K which is much less than the bank would lend me based on my credit. Also - we have only one car payment (which will be paid off next spring) and no credit card debt.

The trick isn't tons of income or credit card debt...it is called budgeting.

banker · 10-01-2007, 06:12 AM

Quote:

Originally Posted by cdelena

If you make 180K a year and cannot afford a $2800 monthly maybe you need to look hard at your budget.

No kidding. If you need help there are lots of resources on the web for showing you how to structure a budget.

banker · 10-01-2007, 06:15 AM

Quote:

Originally Posted by Lakewooder

It's just not smart to spend too much money on your home. It's really not an asset, it's a huge liability, especially if you live in an area where keeping up with the Joneses is all-consuming (pardon the pun).

Read "The Millionaire Next Door".

Excellent suggestion!! This is one of the greatest finance books out there. Take it from me - I am a credit officer in the banking industry.

fil · 10-01-2007, 10:22 AM

Quote:

Originally Posted by banker

Exactly. I am 33, live in San Antonio, my wife does not work (hasn't since we were married) and I make just under $100K/year. We are looking at purchasing a $300K home. The only way we can afford it is because we didn't go crazy on our first home over six years ago. We bought it with 20% down and then financed it over 15 years. We have about $100K in equity today and are looking to finance just over $200K which is much less than the bank would lend me based on my credit. Also - we have only one car payment (which will be paid off next spring) and no credit card debt.

The trick isn't tons of income or credit card debt...it is called budgeting.

So what happens if you lose your job today?

You just refinanced your home and put your equity into the more expensive home, so where's your cash now that you aren't bringing in a pay check?

How long will you last without a job?

During the dot.Com bust through out 2000-2002, there are many stories where people were living in $600k homes with no income and no saving going bankrupt and having their home foreclosed since they could pay either their taxes or their mortgages.

KantLockeMeIn · 10-01-2007, 10:27 AM

If you have no debt other than your home, and a 3-6 month emergency fund, there's no need to panic. You have to cover basic living expenses, so you can work nights and weekends while you try to find a good job.

tstone · 10-01-2007, 10:51 AM

Quote:

Originally Posted by twojciac

If you have no debt other than your home, and a 3-6 month emergency fund, there's no need to panic. You have to cover basic living expenses, so you can work nights and weekends while you try to find a good job.

Agreed.

Sounds like something Dave Ramsey would say.

banker · 10-01-2007, 11:01 AM

Quote:

Originally Posted by fil

So what happens if you lose your job today?

You just refinanced your home and put your equity into the more expensive home, so where's your cash now that you aren't bringing in a pay check?

How long will you last without a job?

During the dot.Com bust through out 2000-2002, there are many stories where people were living in $600k homes with no income and no saving going bankrupt and having their home foreclosed since they could pay either their taxes or their mortgages.

The same could be said of two income families where it takes both incomes to afford their home. What if one of them looses a job?

The trick is to find a home that you can reasonably afford and have savings. My wife and I have savings, we have nearly $100K in our 401(k) and have no consumer (credit card) debt. A mortgage of $200K with an income of nearly $100K is no real stretch. Forclosure wouldn't happen - even if I lost my job. The problem is that most people don't have any resources to fall back on. No cash savings, no 401(k) and have debt between 3.5X and 4X their annual gross income.

I just won't do that. Right now my total debt is less than one years salary. I ow $65K on my house and $4K on my car - so while I will be taking on more than double the debt - I am still well below "normal" debt levels - with lots of liquidity to fall back on.

banker · 10-01-2007, 11:10 AM

Quote:

Originally Posted by twojciac

If you have no debt other than your home, and a 3-6 month emergency fund, there's no need to panic. You have to cover basic living expenses, so you can work nights and weekends while you try to find a good job.

I am closer to the 3-4 month emergency fund - but we are working to build that up before we move just to be sure. Most people have no savings and have tons of credit card debt...so when something happens they are really in a bind.