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Show me, with numbers, why you have to make 100k+ in metro Denver to live comfortably. I've already shown you, with numbers, that this is untrue.
I presented numbers in post #46 in this thread.
My net income each month (2-paycheck month after taxes, 401k, HSA, student loans) is about $3025/month. I don't see $5500 a month, so let's stop looking at my gross income for one second. I have $3025/month to play around with (about $4700/mo during the two 3-paycheck months per year).
At this moment, I have about $15k for a down payment. No equity, as I'm a first time buyer. Even if I wanted to save 20% for a no frills house in Denver metro at around $200k, it will take me years to do so. Who knows what interest rates and housing prices will look like then. I have been advised to strike while interest rates are at record lows. So the way I look at it, I don't really have the luxury to wait around for five+ years to make 20% down happen.
If I could get a place at $1200/mo (the max I'm willing to pay), that's about 40% of my net income, leaving me with about $1800 left each month for whatever. After utilities, home insurance, I figure I'm down to about $1500 month. I still have to have money for food, entertainment, emergencies, travel, clothes, etc. The bottom line is that this is not a lot of money to have left over each month and it's the bare minimum
My conclusion is that you have to make a decent salary ($100k is a rough estimate, +/- $10k) and/or have a decent chunk of equity for a down payment ($40k+) anywhere in the metro region, or else live minimally paycheck to paycheck. A $250k+ home is not a good option for a first time buyer, but that seems to be what is mostly what available throughout Metro Denver.
Mortgage P&I on a 350k house, assuming 20% down, is only 1.3k per month. Insurance and property tax add up to around 200/month. For the first several years, your mortgage payment goes mostly to interest, so you get high tax deduction there, about 200/month. So you only really pay 1.3k a month for the house. Maintenance and utilities cost maybe 100/month. Your monthly net income is around 4.5k. Subtracting the house and student loan expenses, you still have around 2.8k a month. If you save 500 for retirement, you still have 2.3k. Pretty sure you don't have to eat ramen everyday with this budget.
And that's for a 350k house. If you can settle for less than 300k, your budget will be expanded by quite a bit.
Quote:
Originally Posted by Lafleur
I presented numbers in post #46 in this thread.
My net income each month (2-paycheck month after taxes, 401k, HSA, student loans) is about $3025/month. I don't see $5500 a month, so let's stop looking at my gross income for one second. I have $3025/month to play around with (about $4700/mo during the two 3-paycheck months per year).
At this moment, I have about $15k for a down payment. No equity, as I'm a first time buyer. Even if I wanted to save 20% for a no frills house in Denver metro at around $200k, it will take me years to do so. Who knows what interest rates and housing prices will look like then. I have been advised to strike while interest rates are at record lows. So the way I look at it, I don't really have the luxury to wait around for five+ years to make 20% down happen.
If I could get a place at $1200/mo (the max I'm willing to pay), that's about 40% of my net income, leaving me with about $1800 left each month for whatever. After utilities, home insurance, I figure I'm down to about $1500 month. I still have to have money for food, entertainment, emergencies, travel, clothes, etc. The bottom line is that this is not a lot of money to have left over each month and it's the bare minimum
My conclusion is that you have to make a decent salary ($100k is a rough estimate, +/- $10k) and/or have a decent chunk of equity for a down payment ($40k+) anywhere in the metro region, or else live minimally paycheck to paycheck. A $250k+ home is not a good option for a first time buyer, but that seems to be what is mostly what available throughout Metro Denver.
You have to take the average monthly income, not the lowest months, in your calculation.
1.2k/month gives you a 300k+ house. A 250k house costs you 900/month in mortgage alone, but after tax deduction, the cost comes down to 750/month. That gives you another 450/month. Looking much better now, isn't it?
Now show me how you came up with the 100k+ income figure. You work in finance; clearly you can do better than a random guess.
You have to take the average monthly income, not the lowest months, in your calculation.
1.2k/month gives you a 300k+ house. A 250k house costs you 900/month in mortgage alone, but after tax deduction, the cost comes down to 750/month. That gives you another 450/month. Looking better now?
Yes, but is this also assuming 20% down? I don't have that right now and it would take me several years to save that much. And the tax deduction...are you referring to a deduction you get at tax time, similar to student loan interest deductions?
Yes, a $750/mo mortgage would be awesome for me.
Also wanted to mention that my lease is up in August, so I have a few more months to save. I'm hoping to have around $18k-$19k saved up by that time. $17k of that would probably be towards the down payment.
Yes, but is this also assuming 20% down? I don't have that right now and it would take me several years to save that much. And the tax deduction...are you referring to a deduction you get at tax time, similar to student loan interest deductions?
Yes, a $750/mo mortgage would be awesome for me.
You specifically don't have 20% down, but you cannot extrapolate that for everyone else making what you are making.
Tax deduction can be claimed when you file tax returns at the end of the year. Both mortgage interests and property taxes are income tax deductible.
You specifically don't have 20% down, but you cannot extrapolate that for everyone else making what you are making.
Most first time buyers don't have 20% to put down, because they don't have any equity from a previously owned property. That's why there are special programs in place for first time buyers.
Most first time buyers don't have 20% to put down, because they don't have any equity from a previously owned property. That's why there are special programs in place for first time buyers.
If they don't have existing home equity, they should instead have savings. Otherwise, either rent until you have enough, put down less and pay PMI until your equity reaches 20% which probably takes 5 years, or take a 80/10/10 mortgage. Keep in mind that PMI is also income tax deductible, and is pretty modest if you have an excellent FICO score.
Go over to the mortgage forum if you want to learn more. Looks like my role is done here.
I'm not opposed to living anywhere as long as the neighborhood is relatively safe and within 25 miles of the city (preferably 15 miles). In other words, I don't want to have to move halfway out to Greeley. That's really my only criteria. I live in Denver now, but on the outskirts near Aurora and DTC. It's a terrible place for an unmarried 20-something (most of my community appears to consist of low-income, possibly undocumented, immigrants), but it's doable.
Affordable to me, as a first time buyer with no equity and a smaller down payment, is about $900-$1000/month mortgage payment, or somewhere between a $150k-$225k house.
My point was that there are more blue collar oriented communities in those metro areas that provide more reasonable options for first time buyers. There doesn't seem to be as many of those options in Metro Denver. Even in the 'burbs, it's as if you need to be making $100k+ to live comfortably.
I don't know, but I do have a handful of professional friends/acquaintances that seem to be doing well. My sister and her fiance make less than me combined and they already purchased a house in the suburbs. A lot of people who don't know anything about Metro Detroit look at Detroit proper's job market and see an astounding 10%+ u/e rate. The fact is, most good paying jobs in the area are in the suburbs. That's how Detroit is different from a lot of metro areas. The suburbs are thriving, and the core city is just recently coming around. I know a couple years ago, when I was back living there, I was offered a job at about $54k/yr in the city of Detroit.
Either way, my original point was that there are plenty of suburbs around the city that provide affordable housing options. Denver Metro does not seem to have as many of those options outside of places like Englewood and parts of Aurora. Otherwise, you seem to have to make at least $100k+ to live anywhere in the metro area comfortably.
I've spent the last several years paying down debt on student loans and a used Mazda 3 while trying to build savings. I also moved here in 2008 without a job, and accepted the first job that came my way, which paid about $30k/yr. My income has exponentially increased over the past six years to where it is now. But I only started making around $66k/yr last January. That was a big jump from my previous job, which was about $50k/yr.
My frugalness is the reason why I have any savings at all, a car that's been paid off for a couple years, and a student loan bill that has been cut down significantly. I've lived in no frills apartments for the past six years, for the most part, to make this a possibility.
What makes you think more affordable houses in other high priced cities are going to be in any more desirable areas than Aurora and Englewood, though? Homes that are in or easily accessible to nicer, more interesting, more fun areas of any city will command a premium price. Denver is not even remotely unique in this regard.
The reality is that this does go back to the fact that what you can afford isn't what you want, and you don't want what you can afford. But saying that it takes $100,000 income (for a single person no less, not supporting a family!) to buy a house in the Denver area is false, period.
Lafleur,
I applaud you for keeping your payments down. So many people get talked into going over what they can comfortably afford. May I suggest you look at the city of Thornton and try to pick something up near one of the future rail stops. Your commute for the time being may stink but after the rail opens in 2018 you will be in a better commute position and a good position for appreciation.
Both are nicer than what I bought 20 yrs ago for $153K.
However I would also suggest that you wait and save for your down payment. You are very new at your current salary level. If you jump in too soon at too high of a level and aren't used to living enough below your means than you could end up not having any cushion should you lose your job and not be able to find something at your old salary level.
I am also financially cautions and if I were in your situation I don't think I would buy something at those prices no matter what the real estate agents or bank said to me. When I moved to Denver I went from a $65K salary (which is where I saved my down payment from) to a $75K salary which is the base I bought from. I don't know how old you are but waiting a few years is probably not a mistake. You could decide to relocate to a lower cost of living area in that time.
Edit to add:
Quote:
Originally Posted by emm74
What makes you think more affordable houses in other high priced cities are going to be in any more desirable areas than Aurora and Englewood, though? Homes that are in or easily accessible to nicer, more interesting, more fun areas of any city will command a premium price. Denver is not even remotely unique in this regard.
The reality is that this does go back to the fact that what you can afford isn't what you want, and you don't want what you can afford. But saying that it takes $100,000 income (for a single person no less, not supporting a family!) to buy a house in the Denver area is false, period.
Emm makes a really good point. The pricing is all based on the desirability of an area. Part of the reason why were trendy is that we have alot that people with money (educated professionals, well off retirees) want in a place to live. You may or may not value these things more or less than what you desire in a neighborhood or house. Each person's situation is different. My feeling in reading many posts on this forum is that alot of people want instant access to what their parents had in middle age or late in their life. They seem to forget that the house that now sits in a desirable location was at the time out in the middle of an empty field with no trees, no grocery or, in in some cases a little starter home box with a couple of basic appliances, single pane windows, and no insulation.
Lafleur,
I applaud you for keeping your payments down. So many people get talked into going over what they can comfortably afford. May I suggest you look at the city of Thornton and try to pick something up near one of the future rail stops. Your commute for the time being may stink but after the rail opens in 2018 you will be in a better commute position and a good position for appreciation.
Both are nicer than what I bought 20 yrs ago for $153K.
However I would also suggest that you wait and save for your down payment. You are very new at your current salary level. If you jump in too soon at too high of a level and aren't used to living enough below your means than you could end up not having any cushion should you lose your job and not be able to find something at your old salary level.
I am also financially cautions and if I were in your situation I don't think I would buy something at those prices no matter what the real estate agents or bank said to me. When I moved to Denver I went from a $65K salary (which is where I saved my down payment from) to a $75K salary which is the base I bought from. I don't know how old you are but waiting a few years is probably not a mistake. You could decide to relocate to a lower cost of living area in that time.
So I just spoke to a local mortgage broker just a moment ago and this is what he told me based on my criteria. He said that what I'm looking for is doable with some caveats. He said that I should be willing to stretch my monthly payment as much as I'm comfortably doing so, so around $1200/mo. Now, this could have been a sales pitch, but he said this summer will be one of the best opportunities to buy because of the low interest rates and how they are likely to go up this year. I've been told this before, hence the reason why I'm looking to buy now with less than a 20% down payment. Otherwise, it would take me years to reach that level and who knows what interest rates and housing prices will be.
We were talking primarily about condos and townhomes in the $150k-$200k range with $15k down. With everything estimated into the cost (HOA dues, property tax, insurance, PMI), he said I'm looking at between $1100-$1200/month for that.
@Lafleur - I thought this was in reference to Dodgeball. I didn't figure it would be for Guy Lafleur
@MIC111, you do realize these homes are directly downwind of the refinery and dog food plant right? Homes directly downwind of the refinery here in Tulsa are super cheap too but not a great investment for appreciation. Rentals maybe.
@AmFest: Your math is completely wrong on interest and taxes. You only get money equal to your tax rate back, not dollar for dollar. Also, the Gov't holds on to that money for 12 months of the year so you need to back out the interest rate you could have earned on that money IF you had it. Basically, Lafleur only gets $40/ for sending the bank and state $200/mo. Paying $200 to get $40 back sounds stupid to me, unless you are the banker.
I really think the acceptance of 40-50% of take-home income going to housing tells me that Denver is on the Bubble again. The level of "well, you just stink and don't want to buy a home," responses is surprising considering we are 5 years out of the bust. I heard all this garbage before in Denver in 2005-2006 right before the bust. Denver will level off the minute the Fed decides to have real interest rates later this year. I wonder if any bank busts from the oil and gas bust will cause contagion or not.
FWIW, I just turned down an opportunity to interview with a utility in Golden paying about 110k where my friend is the hiring manager. He complained that he's getting a lot of unemployed engineers for E&Ps that made 150-175k last year and are in their late '20s. He knows they aren't going to stay and will jump back to E&P in a few years when oil bounces back. So, they don't get an interview. I am a great fit but our family can't afford the extra 100k in mortgage debt and have my wife stay at home with our infant. If we moved, she'd have to work full time as an RN AND work overtime just to pay the nut on a 350k comparable size house (we need a min 3/3 due to having 2 teens at home). We're lucky because we'd bring 100k in equity to the table to stay out of PMI.
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