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There are calculators out there that show in some areas owning is better than renting. Some areas, it's better to rent than to own. If you are in a HCOL area, it may be better to rent and there is nothing wrong with that. Don't get caught up with you HAVE to own a home to have the American dream. You do you.
As far as your question, when I first bought it was a house with my brother. We were both comfortable with the payment, we did not feel stretched. Our incomes increased, but we didn't factor that into the equation because it wasn't a guarantee.
My wife before she was my wife, her first home purchased she did stretch. She was really one bad repair away from being in trouble. She was lucky that her parents would help her out here and there. She deferred a lot of the maintenance and now that we're married I'm having to fix the things she's let go. It did work out though as her home value has increased, and rent in the area has just kept going up and up.
There are calculators out there that show in some areas owning is better than renting. Some areas, it's better to rent than to own. If you are in a HCOL area, it may be better to rent and there is nothing wrong with that. Don't get caught up with you HAVE to own a home to have the American dream. You do you.
As far as your question, when I first bought it was a house with my brother. We were both comfortable with the payment, we did not feel stretched. Our incomes increased, but we didn't factor that into the equation because it wasn't a guarantee.
My wife before she was my wife, her first home purchased she did stretch. She was really one bad repair away from being in trouble. She was lucky that her parents would help her out here and there. She deferred a lot of the maintenance and now that we're married I'm having to fix the things she's let go. It did work out though as her home value has increased, and rent in the area has just kept going up and up.
Renting vs. Owning may be cheaper TODAY, but 20 years from now when your rent is double you will be kicking yourself for not buying. When you rent you are throwing money down the toilet. You will own nothing and have no equity.
Even if you buy high today and prices dip for a few years you will be better off than if you wait 3 years to buy at lower prices. Interest rates will likely rise further and will offset any price discounts. Also, you will throw away 3 more years worth of rent. The person who buys the house today will have equity built up.
I agree with what you said about affordability. Nobody should buy a home that they need to stretch to afford. In that case it would be better to wait until you have enough cash saved up and a more stable situation.
I’m completely playing devil’s advocate here with an amount of money that is far more than these normal calculations consider, but for the sake or argument if you’re making $20K/month with no dependents then who cares if you did spend $12,000 (60%) per month on your mortgage? Like seriously, you couldn’t find a way to live on $8,000 per month to cover your food, insurance, property taxes, etc.? Of course you could. Big difference between 60% of $3,000 going to your house and 60% of $20,000, that’s all I’m saying. The more you make per month the higher percent you could afford for housing and not be strapped with what’s left over. If you struggle to survive well on $8,000/month after housing expenses, you are doing something very, very wrong lol.
A bank won't approve a loan where 60% of your income goes to the payment.
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I’m completely playing devil’s advocate here with an amount of money that is far more than these normal calculations consider, but for the sake or argument if you’re making $20K/month with no dependents then who cares if you did spend $12,000 (60%) per month on your mortgage? Like seriously, you couldn’t find a way to live on $8,000 per month to cover your food, insurance, property taxes, etc.? Of course you could. Big difference between 60% of $3,000 going to your house and 60% of $20,000, that’s all I’m saying. The more you make per month the higher percent you could afford for housing and not be strapped with what’s left over. If you struggle to survive well on $8,000/month after housing expenses, you are doing something very, very wrong lol.
Sounds like a pipe dream. A $12k mortgage would be a multi-million dollar home. Why would someone earning $20k per month need or want a mortgage that high? Unlikely a lender would approve them.
The original poster was interested in a $350k home but would need to spend 60% of their income on the mortgage. It is unlikely they would get approved for a loan and would only have $1200 leftover for everything else. He original poster lives in a high cost area. At best, they would live paycheck to paycheck and always be one emergency away from disaster.
This question is to all of you when you bought your first home.
I'll preface by saying that I'm a very prudent saver and the last few years have been able to save 40-50% of my gross income. I'm at a point where I'm very comfortable with the retirement money I've put away and I wouldn't mind sacrificing aggressive retirement savings to purchase a home. However where I live is so expensive compare to the median income.
Back in 2012 when I had my first stable good paying job in my early 20's, 150-200k seemed like a lot for a house and it wasn't something I was ready for. Those same homes are selling for 300-450k now. And five years later that 150-200k is very affordable for my current income.
Finally to my question. When you bought your first home was the payment affordable at the time, or did you struggle for a few years until you started making more money through career advancement or wage inflation. A lot of my friends seem to fit this criteria. A recent friend bought a house for 400k+ and since we both worked for the govt I knew his salary. He got approved on his own with a 100k downpayment but his payment is roughly 70% of bet by his admission. His GF lives with him so he has some income support. Even without her he said he's comfortable because in a few years he'll go from making 60k to 90k and the payment will be easy for him then.
In my area I couldn't touch a decent home for under $350k. With 3.5% down and a 30 year at 5% would be approx $2200 a month which would be nearly 60% of my net take home. I could rent out a room for $600-$700 a month if I want to. This seems very expensive but in 5 years I'm sure I'll be making a lot more and that $2200 will seem very affordable. If I wait until then, that 350k home may be $500k.
I have a job where I can pretty much transfer to any state in the country and not see a huge drop in income. That may be an option but with aging parents in questionable health it's not something I'm considering now.
I say go for it. I plan to buy at the top of my limit. However, I will not have any other debt. I am also frugal.
I am all for keeping on track with the budget and not overspending. I could move a little further out and spend considerably less but I like living close to work. I save so much on gas. I have not filled my tank in two weeks. In addition, brown bag it. I can not tell you how much I save in preparing my own meals.
It is important to consider appreciation. Not all homes appreciate in value over time. I know someone who went on the cheap but the home never appreciated in value. It sucks because homes require maintenance and that can be costly. I am more conserned about this than the mortgage. Sigh!
Sounds like a pipe dream. A $12k mortgage would be a multi-million dollar home. Why would someone earning $20k per month need or want a mortgage that high? Unlikely a lender would approve them.
The original poster was interested in a $350k home but would need to spend 60% of their income on the mortgage. It is unlikely they would get approved for a loan and would only have $1200 leftover for everything else. He original poster lives in a high cost area. At best, they would live paycheck to paycheck and always be one emergency away from disaster.
Not... really. I mean I grant you that it would be a ludicrous overexpense to pay so much for a mortgage but if you put down $1M against a $4M house so 25% down (they may require 30%...), then each $400K would cost you what about $2,250 let’s just say for sake of argument? So $800K would be $4,500/month. Even $2.4M mortgage would run $13,500/month. All I’m saying is some people buy expensive houses and finance a large portion. I grant it seems unlikely someone would have a house that expensive with $20K/month income but my only point is IF they could get the mortgage for $12K/month they could afford it.
Not everyone plays by the same rules you do, either. I don’t need to show an income statement or W2 to get a mortgage. I go to my private bank and they look at my assets and understand my assets are far in excess of any mortgage they’d give me, so there are no issues. Someone making $20K/month may often be in the same position where their assets are high but income isn’t as high if they are in various circumstances.
We purchased a $400k house but were approved for $600k. We're very comfortable with our payment at about 25% of income but we're also frugal and have very little other expenses. I put 6% of my pay into a 401k with a match, wife has a pension, we try to max out our Roth IRA every year and we're currently buying a rental property. Our goals are much different than others, so a 30% payment for someone else might also be extremely comfortable.
Even still, those first few months were stressful, but before you know it you don't even think about it. You start to see the equity in your house grow. You'll see your principle go down, the value of your home go up, you'll get the tax benefits, and realize that your monthly home expenses are locked in, where if you were renting in 10 years your rent may double.. Every home in this country is owned by someone, and Realestate is the most tried and true way of becoming a millionaire. You're here asking the right questions... You'll clearly be fine.
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