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Just watched an episode of House Hunters. The husband is a Major in the Army. No mention of the wife working. They bought a $600k + house in Hawaii. Even at the top of his pay grade he makes $65000 a year. How in the world can they afford let alone qualify? My wife and I are both realtors. Unless they inherited a boat load of money this just doesn't add up.
The thing with the military is that they can have some very generous housing allowances in addition to salary in order to allow their people to have decent housing in expensive areas. One of my cousins was senior enlisted- married with two kids- and his housing allowance was enough for his final posting in Hawaii that they bought a $400-$450K place there. Course when he retired, that allowance went away and they sold the Hawaii house to move to Florida.
Just a general question but I often watch shows like House Hunters, My First Home and Property Virgins and the buyers had budgets of $400k and up.
I always wonder how do people (in general) afford such high price homes and where do they get the down payment money?
Is it equity from a previous home? Savings? Inheritances? Are these people just highly paid? Cashing out 401K?
How do people do it? Can anyone share some experiences?
Well, there are a lot of lucky people in the world whose parents can give them gifts or interest-free loans disguised as gifts. I only got 5K from my dad and I paid most of it back although he insisted I keep it. Heh heh
But there are a lot of people whose parents have awesome pensions and savings and can afford to provide 30K, 50K or more toward a house. As much as it pisses me off and makes me want to barf, it is possible.
Other than that, if both spouses make say 70K (or more as is common in a lot of areas in our federal-contracting-dependent state), that's 140K, and they can spend up to 400K on a house. It may be possible to have the following scenario:
400,000 House Cost
-50,000 Assistance from relatives
-10,0000 Savings
-7,000 Seller Downpayment assistance (a smart buyer always asks for one)
333,000 Financed Amount
That's a little high to me, but a lot of banks etc may consider it affordable...and for all I know, interest rates are even lower today. If the couple gets about 5800 net income each month, they'll have 3500 left for expenses. It is pushing it a little, but affordable.
It is also possible the couple gets LESS assistance from relatives, and saves more, but the combination of reducing the financed amount using ohter sources puts the house in "affordable" range for the "average" (at least in MD...140K is rich in a lot of other areas) couple.
A friend of mine bought a $125,000 house, all cash (which is essentially equivalent to putting down 20% on a $600k house).
How did he save that much? "Easy":
* Shared a small, cramped apartment with a friend.
* Ate out once a week. The rest of the time, he ate rice, frozen chicken, and sometime vegetables. Lots of cereal.
* No pets. No kids. No girlfriend.
* His hobbies are running (cheap) and playing old computer games (also cheap)
* Bought a brand-new compact car (from a graduation gift from his parents) he didn't have to worry about car maintenance.
* All his furniture was left over from his college days (aka he's still sleeping on a twin sized mattress).
He did this for about 5 years.
Why would someone do that? Seems like a terrible life so that you can own a home.
I got a bonus once in 2001. I think it was $1,200.
The last company just gave us all a bottle of wine. Employees were not happy about that one, esp the non-drinkers.
I made more in 2002 than I have ever since!
There are some professions and locations which really make it hard for you to get ahead.
Forget the bonus, we would just like a cost-of-living (or performance based) raise. That hasn't happened in 5 years now as a public school teacher.
Oh well, hindsight is 20/20 in terms of career choices.
Haha, I'm with you! I once got a bottle of wine and another year we got...jars of salsa! I've never gotten a monetary bonus and neither my husband nor myself have gotten a raise since 2007! Thanks economy!
Agree and with interest rates <4%, why pay all cash, even if you have it?
Cos no matter what....you are still financially better off with no mortgage interest. Sure one can try to invest for potentially higher returns but remember that return is not guaranteed but your mortgage interest sure is
Cos no matter what....you are still financially better off with no mortgage interest. Sure one can try to invest for potentially higher returns but remember that return is not guaranteed but your mortgage interest sure is
I don't think you are. With a rate of ~3.5% plus the tax break on the interest, you can certainly earn more than that through high dividend paying stocks or a reasonable diversified portfolio. I understand that the market can crash, but if your time horizon is >5 years investing, with rates as low as they are now is the way to go.
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