Making 200k and can't afford a home? (sale, foreclosure)

[LagunaLady27]

I think jambo101 is hitting the nail on the head. I rent in the OC and my COL is a fraction of yours. My rent is under $2000 for 1600 square feet. I pay $100 for phones, Internet and TV. Fun is about $100 per month. You have no business buying a house with all that student loan debt. Learn the difference between a want and a need, reality and fantasy. Once you have your spending and debt under control, revisit the home buying question. At that time, perhaps you will be able to afford the OC.

[redrocket2]

Unfortunately you cannot buy a home counting all of the $9k take home income. What if one of you loses their job? You have to give a substantial buffer especially in this volatile economy. The days of stable long term employment are history, these days layoffs are dime a dozen.

Also take into account having a family...that is a shockingly expensive affair. Just child care will take a huge bite out of your take home. Add to it children's activities and expenditures and you will be squarely in the poor house buying just a $450-500k home on a $200k income. I also do not see any budgeting for maintenance...that can be quite a bit.

Many people buy it on a lot less than that...but they also head towards foreclosure.

An additional point - do you really want to spend 30 years of your life paying off your mortgage? How old are you? Strive to buy something that you can pay off way sooner not to have mortgage payments into your retirement years.

[redrocket2]

Originally Posted by Joe Van Fossen

the size of your family, but $1000 a month on groceries, eating out and other entertainment doesn't really sound all that frugal..

$1000/month on eating out + groceries + entertainment for 2 people making $200,000/yr combine does not seem over the top to me at all. It certainly isn't frugal in that sense, but it's reasonable for that income level.

The truth is that due to inflation all those things have become very expensive especially in Southern California. Have you been to a basic sit down restaurant lately? An appetizer, Couple of entrees, desert and a few drinks and you're already close to a $100 bill!!!

[Joe Van Fossen]

Originally Posted by redrocket2

Have you been to a basic sit down restaurant lately? An appetizer, Couple of entrees, desert and a few drinks and you're already close to a $100 bill!!!

I have and totally agree, but I don't do it very often. I'm actually pretty frugal.

[Electrician4you]

IMO
Start paying off your DEBT pay it off and then buy a house.
Stop the entertainment and eating out. I would pound the hell out of those student loans and kill off all your debt. With 9k a month become you should be don with it in no time. You may have a few lean years. Trust me living debt free for over 15-16 years has been the best decision my wife and I made. And we are not financially strapped at all. If anything its made it easier for me to buy what I want on my terms

[Galaxie Girl]

Hi all, just found this website in researching where to move.

Regarding the OP's question, I think you should talk to a mortgage broker to see what you would qualify for for a mortgage, based on current income, debt, credit score, etc. You obviously do not need to buy a $700,000 house just because you qualify for it. There are still good neighborhoods with homes around $450k-550k. With income of $200k, you can easily qualify for a house even with your student debt.

Now, some are saying to wait until you pay off your student loans, but I disagree. We are just coming out of the bottom of the market, and as much as I hate CA and want out, I am not going to deny that demand to live here will continue to cause real estate prices to rise. Buying will lock in your housing costs for the future, with low interest rates. You are better off buying sooner, rather than renting the whole time you are paying off your student debt.

If you decide to buy, I have a great mortgage broker in OC who I have used, message me for his info if you want.

[kwong7]

Originally Posted by shishkabab

Here's the scoop... We make 200k combined a year, and after running all the numbers, I don't see how we could afford anything more than a 450k mortgage, which I'm sure you all know doesn't buy much in OC

Some details:
Combined take home per month is roughly 9k
Subtract 1700 for student loan payments
300 car payment
500 gas
325 phones/cable/Internet
500 food
500 misc for drinks/movies/eating out etc


That leave us with about 5100 for a mortgage. Lets say we pay around 3k a month on a 450k mortgage, that's leaves us with 2100 a month for savings and other misc expenses. To me this seems low. Am I being overly frugal? Would you spend more on a home and feel comfortable?

You seem to have a high income but home buying is a big financial commitment. I would suggest you buy as much house as you could need, but not anything larger. You should try to be more flexible with your budget and determine what is most important. I'm very surprised with your gas bill as ours is only $100 a month, between the two of us we put on about 1K miles (we have an old VW Golf TDI and a Lexus Rx400h). Also, hopefully your student and car loan payments will not be forever. Once you've eliminated or diminished those obligations, you might feel at much greater liberty to buy a home. My wife and I are in our early 30s and just bought our first house last year. We got a steal on a short sale in Newport Beach and were able to put 25% down to get a 3.75% interest rate.

Our income was a little less than yours, we had zero car payments but $2,200 monthly student loan payments at a weighted average interest of 6.78%. I decided to tackle the student loans since she owed $220K. Because there were no prepayment penalties, I got creative and decided to reduce the monthly payment obligation by restructuring my wife's loans from a 10 year repayment plan to a 25 year plan. We took advantage of a .25% interest rate reduction by signing up for an electronic auto-debit payment schedule, and received another .25% interest rate reduction after making 12 on-time payments. Finally, I consolidated all the low interest fixed-rate loans with Sallie Mae/DoE and got an additional .25% interest rate; all the while we were sending extra payments to pay down the principal of the highest interest rate loans. After 5 years, we only owe $40K at 3.00% with a monthly payment of $178...much less than the $2200 we paid each month in 2008.

I wish you the best of luck and I'm confident you can achieve your goal.

[NeuroSigh]

Originally Posted by nyc2020

Where's the other 50%?

Excellent question. Perhaps it went toward a train from Bakersfield to Firebaugh.

[CA4Now]

Originally Posted by Galaxie Girl

With income of $200k, you can easily qualify for a house even with your student debt. Buying will lock in your housing costs for the future, with low interest rates.

Lock in your housing costs for the future? And when the market cycles back down, they'll definitely be "locked in."

[Outdoorfanatic1]

WOW 1700 in student loan payments? No wonder people can't afford to attend college. Something is VERY wrong with our current education system for student loans on a 22 year repayment plan to be that high