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I pay $1200 (including taxes and insurance) and I think that's a lot (though Im only 4 yrs out of college and starting a family) though well within our means (a little bit worse ratio than the poster above).
But I also am outside of KC so a $160,000 house got me a very nice house.
That's how we started too - our first house was $177,000 in Vermont. Eight years later (and three little boys) our recent house in PA cost around $475k but is much larger.
My 1st house was 40,000. 2nd was 90,000. Bought these with total family income in the 40's. I was not able to buy until I was 32 and married for 6 years. Just saved and did not have expensive toys and no big loans. I think with the prices now on property, it is still possible, but tougher. As property prices (values) went up, it benefits those that can afford it. It is not a game. I agree that the numbers never add up.
Here's a thought... How about NOT owning a House. Ever. Just forget about it and be happy renting.
Renting is NOT a bad idea. Renters are NOT loosers.
Owning a House is a MASSIVE LIABILITY!!
When you own a house you have to pay Mortgage Interest for 30 years, Property Taxes, Insurance, Maintenance, FULL Utility bills that are going to be much higher than if you had a small apartment.
You DONT Need a house to be happy. Just rent a nice Condo on the beach or something. Most retirees find it's far cheaper to simply rent than maintain a house anyway so WHY send your entire life working yourself to death just to own a stupid house anyway??
In addition, Don't any of you have relatives or friends who own houses?? Live with them and pay a portion of their mortgage.
When you own a house you have to pay Mortgage Interest for 30 years, Property Taxes, Insurance, Maintenance, FULL Utility bills that are going to be much higher than if you had a small apartment.
You don't think that you're paying for all of those when you rent? I doubt many landlords are nice enough to come out of pocket each month for your benefit. All of those expenses are reflected in your monthly rent.
Renting is a very viable option, and for many it's the only option. I agree with most other posters on here... Save, save, save until you have 20% down, plus an emergency fund, plus...
If your career can't afford the lifestyle you want in your current location, it's time to change your career, lifestyle or location.
If taking on a second job is an option... it's so much better to do when you're young. I'm in my late 20s and my wife and I both have second jobs (less than 20 hours a week), despite the fact that we're college educated professionals. The second jobs pay for our vacations and luxuries.
Good to see that others who are starting out are thinking this through the right way. Having lived in WNY for many years I can validate most of your numbers. My thoughts are the following regarding how they can be adjusted/changed realistically. How you might want to adjust your thinking.
1) get rid of the car payment and lower your gas expenses... buy a car with cash (used is the way to go). Get something reliable, a few years old, very fuel efficient (compact or sub-compact car), and with low-mileage. Nothing with monthly payments because monthly payments will just decrease your ability to borrow money for a mortgage or anything else for that matter. Cars are just a poor investment in general, so pay for them in cash.
2) Find a job with benefits so as to lower your insurance/healthcare costs. The numbers you gave seem high for someone who is young, healthy, and single (and when working for a corporation). The number is about right if you are insuring a dependent such as a spouse. If you indeed have a spouse then hopefully he/she has some income (this day and age I'd expect that to be the case, if not, then I would hope to hear a good reason because now more than ever before double incomes are needed to live the stereotypical American dream so many seek).
3) Don't look at buying a house right now. Until you find a life-partner, or until you earn more money with one or by yourself, look into buying a condo at the most. Otherwise look into identifying a very good value rent-wise. The expense examples you provided are right on target for homeownership. If you rent you can cut them significantly. So for now rent someplace affordable and try to save as much from your paycheck as possible with the ultimate goal of eventually buying a home a few years down the road. You don't need to buy a home right out of school, and indeed it will do more to potentially cause you harm (financially) than waiting.
If you have a life partner already, just don't rush into homeownership. You've probably heard more about the positives than the negatives. Negatives such as the high cost of maintenance which comes with a home, negatives about significant chunks of paychecks (and the associated employment pressures/stresses) taken out to cover your mortgage payments. Lastly, negatives about how if you have less than 20% in cash down-payment to apply to a mortgage at closing your loan terms will be less favorable and indeed the ones who then get the best deal are the lenders, not the buyers.
4) Look into buying a home (or even renting) in a more affordable state or area. The reality is that NY has a high cost of living... but not everywhere does. If you're open to moving like I was, you can find places which actually have more to offer but cost less. I live in Fort Wayne Indiana. Our homes and land cost much less to purchase. The property taxes are about 60% less than Rochester, and the cost of home owners insurance is likewise a lot less. Our automobile insurance is also about 50% less and the sales tax on all things purchased is over 2% less as well. Our state income tax is likewise less than NY's. When you add all that savings up, my wife and I have incomes which stretch much further than all of our friends living in both downstate and upstate NY. Our incomes because we have good educations may be less than some of our counterparts in expensive or larger cities, but not much less. We live better lives out here with our family when all is said and done. We have all the stores/businesses and career opportunities out here that we had in NY (yes hard to believe if you're NY-centric and haven't traveled much outside the NE US) - in fact when you travel the country these days you'd be hard-pressed to find any mid-sized cities which are completely unique in what they have to offer. Most everything you see in Rochester you can find somewhere else more affordable (except Wegmans )
Good luck with whatever you do. I actually am friends with people who with combined incomes of less than 40k or single incomes of just over 20k actually do have mortgages. It can be done, but you need to set expectations accordingly. Their houses are not 2k square feet nor are they in the best school districts.
I back this 100%. Sound advice especially comment #4. The high property taxes are an expense you don't have to suffer with in other markets/states. I'm 34 and my wife is 36. We've both been renters our entire life. Two years ago we got married and saved. We make well above the median income of the area $61K. Still at a combined gross income of $10K monthly, we're having a hard time finding a house we can afford when you factor in property taxes. A median priced home is $320K and average taxes $8K.
The thought of "cutting back" sounds cute and americanesque, but it's a joke. The most you're going to cut is several hundred bucks a month at the most, that's 4-5K a year. But when the median house price is above 200K it will take you 5 years of uninterrupted savings just to tap into 20% down, and a whole decade to come up with emergency fund on top of that (assuming 8K/yr savings and a single median income of 43K gross). Good luck not having medical emergencies, car trouble, doing any traveling etc. Fact is, you need a six figure income job (or combined income) to be able to afford a median home period. As a single individual 100K is only 5% of the population in the US, so good luck with that.
I agree with the posters above, renting is bliss. The country has turned medieval on us. The only way to afford a house today without being de facto house poor is to inherit one, or join 5% of the population and earn 100K+. (for the "change careers if your current one doesn't make it happen for you" crowd)=> I'll go to my employer and get right on that, maybe they can make it a Xmas present lol.
I love the fact my rent makes housing a non-issue (700/mo split two ways is waaayyy better than a mortgage, no matter how big the house is). We live tight but we don't worry about coming up with a mortgage payment, the peace of mind almost makes me forget we live in a shoe box lol. That and all the talk about foregoing equity...well it's 2008, WHAT EQUITY?!?! All joking aside, risk-averse as I may be, I wouldn't recommend thinking on owning a median home in this country unless your household income is six figures;so go ahead and have that extra popcorn at the movies, that savings gap won't amount to much to solve the situation... I don't go to the movies as often as I should anyways so I've earned the right to make that observation lol. Peace.
We didn't have a lot of money when we bought our first house 3 years ago. We didn't have a down payment either. We took an 80/20 loan which we didn't have to pay PMI. We had 7 years to pay off the one loan. Our rate was 5.85. Our payment is lower then what we were paying for rent in our apartment. Though we did relocate and are living in a cheaper cost of living area. We didn't cut back on much because we didn't have much to cut back with. We just watched what we spent.
Quote:
Here's a thought... How about NOT owning a House. Ever. Just forget about it and be happy renting.
Renting is NOT a bad idea. Renters are NOT loosers.
This is where we are stuck. We have our house up for sale. We are moving back to Wisconsin where we lived our whole lives till 4 years ago when we moved to Iowa.
Our house did go up in value, but by the time we pay the realor, loan, and taxes we'll probably have about $1000 left. Unless you live in your house long enough to either pay it off or make a ton of money on it, it's not much different then renting. The only difference is you are by yourself. That's the only plus for us. Our tax return is not much different from when we rented.
We are weighing our options of buying a house or renting a new townhome. Rent is very reasonable in the city we are moving too. We don't think we will get a home in the area we want, but we can rent a townhome in the area we want. It's a tough choice. Plus, yardwork is a pain in the butt. I'm so tired of shovelling snow and raking leaves(cutting grass). Not to mention the $3,000 for the new central air we put in and another 3 grand for new windows. We spent $1500 on dead tree removal and another 500 dollars on new sod in the front yard(got a deal because they forgot to come when they said). So all in all, look at your options before making any harsh decisions.
The thought of "cutting back" sounds cute and americanesque, but it's a joke. The most you're going to cut is several hundred bucks a month at the most, that's 4-5K a year. But when the median house price is above 200K it will take you 5 years of uninterrupted savings just to tap into 20% down, and a whole decade to come up with emergency fund on top of that (assuming 8K/yr savings and a single median income of 43K gross). Good luck not having medical emergencies, car trouble, doing any traveling etc. Fact is, you need a six figure income job (or combined income) to be able to afford a median home period. As a single individual 100K is only 5% of the population in the US, so good luck with that.
I agree with the posters above, renting is bliss. The country has turned medieval on us. The only way to afford a house today without being de facto house poor is to inherit one, or join 5% of the population and earn 100K+. (for the "change careers if your current one doesn't make it happen for you" crowd)=> I'll go to my employer and get right on that, maybe they can make it a Xmas present lol.
I love the fact my rent makes housing a non-issue (700/mo split two ways is waaayyy better than a mortgage, no matter how big the house is). We live tight but we don't worry about coming up with a mortgage payment, the peace of mind almost makes me forget we live in a shoe box lol. That and all the talk about foregoing equity...well it's 2008, WHAT EQUITY?!?! All joking aside, risk-averse as I may be, I wouldn't recommend thinking on owning a median home in this country unless your household income is six figures;so go ahead and have that extra popcorn at the movies, that savings gap won't amount to much to solve the situation... I don't go to the movies as often as I should anyways so I've earned the right to make that observation lol. Peace.
We've been looking at homes and we're giving serious consideration to just renting. Home ownership is insanely expensive and unless you have an affirmitive need to own a home (cost/benefit works) there's no reason to real neccesity or encouragement to buy with the prices the way they are. My rent is currently $1350 for a great two bedroom apartment, in a clean building and includes storage and a garage. An average home PITI monthly is $3000. I could invest the $1500 per month, pay taxes on the returns and still have a better investment. The rent increases at 5% per year. We've seen property taxes alone increase locally at 14-17% every year. Yikes!
We've been looking at homes and we're giving serious consideration to just renting. Home ownership is insanely expensive and unless you have an affirmitive need to own a home (cost/benefit works) there's no reason to real neccesity or encouragement to buy with the prices the way they are. My rent is currently $1350 for a great two bedroom apartment, in a clean building and includes storage and a garage. An average home PITI monthly is $3000. I could invest the $1500 per month, pay taxes on the returns and still have a better investment. The rent increases at 5% per year. We've seen property taxes alone increase locally at 14-17% every year. Yikes!
Tell me what the safer plan of action is?
You pay rent for $1350 two bedromm apt.... I pay $1000 (including taxes and insurance) for 2,000 sq ft 3bed, 2 1/2 bath home, I'm building equity, and my property taxes have been stable for 5 years. I couldn't afford to rent.
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The Alternative Way to Happiness
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