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Old 12-26-2013, 11:29 AM
 
Location: roaming about Allegheny City
655 posts, read 789,055 times
Reputation: 646

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Quote:
Originally Posted by pete6032 View Post
I hear this rule of thumb all over. Use 2.5x your HH salary as a rule of thumb. If you are a single person in this economy, making $50,000 per year, then the maximum house you could afford is $125,000. That doesn't buy much. How do couples do it when one parent stays home? I really don't understand how we can have so many houses priced $250,000+ in the US? That would be an income of $100,000. That's doable for a couple in their mid to late 30's, but anything younger than that you're probably not going to break $100,000 take home pay as a couple unless you're either a lawyer, doctor, or engineer.
Simply put, you need to live in inexpensive parts of the country. Avoid the coasts. Avoid places like New York City, almost all of New England (except the interior of ME), California, Washington, Oregon, Florida, Hawaii, and the expensive inland cities like Chicago and Denver. If you use the 2.5x your salary rule, then you need to find a modest older home in a place like Pittsburgh, PA, where I live. Moreover, there are plenty of affordable places to live, places where homes can be purchased fairly cheaply, in both cities and small towns in the Midwest, most of PA, upstate NY, and many parts of the South.
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Old 12-26-2013, 08:34 PM
 
7,249 posts, read 5,565,331 times
Reputation: 7948
Quote:
Originally Posted by Hip Priest View Post
Simply put, you need to live in inexpensive parts of the country. Avoid the coasts. Avoid places like New York City, almost all of New England (except the interior of ME), California, Washington, Oregon, Florida, Hawaii, and the expensive inland cities like Chicago and Denver. If you use the 2.5x your salary rule, then you need to find a modest older home in a place like Pittsburgh, PA, where I live. Moreover, there are plenty of affordable places to live, places where homes can be purchased fairly cheaply, in both cities and small towns in the Midwest, most of PA, upstate NY, and many parts of the South.
Eh, it's totally doable in many places. I'm looking in OR right now and will probably spend about 2x my salary (maybe a little less actually) on a home built in the mid 2000s.

Too often people choose to spend more on a house because they feel like they have to have some 5000 sq ft monstrosity.
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Old 12-26-2013, 09:17 PM
 
25,959 posts, read 28,379,164 times
Reputation: 24623
Quote:
Originally Posted by bad93ex View Post
What if all indicators are pointing towards your income increasing by another 40% within the first five years if owning the home? We have three children so there is a need for at least 3 bedrooms.
Too many things can go wrong in 5 years' time. Wait until you're actually earning that income and have more saved. Don't put the cart before the horse. That is the biggest mistake people make.
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Old 12-27-2013, 09:01 AM
 
106 posts, read 117,451 times
Reputation: 105
Quote:
Originally Posted by mysticaltyger View Post
Too many things can go wrong in 5 years' time. Wait until you're actually earning that income and have more saved. Don't put the cart before the horse. That is the biggest mistake people make.
I was arguing for using the 2.5X HHI rule if we are a younger professional couple who have just entered the professional workplace. I don't think buying a house based upon on our initial salary is a bad move. Buying a house based upon what we think we would make in 5 years would not be wise but that is not what I was advocating.
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Old 01-02-2014, 06:28 PM
 
651 posts, read 731,742 times
Reputation: 310
Quote:
Originally Posted by Hip Priest View Post
Simply put, you need to live in inexpensive parts of the country. Avoid the coasts. Avoid places like New York City, almost all of New England (except the interior of ME), California, Washington, Oregon, Florida, Hawaii, and the expensive inland cities like Chicago and Denver. If you use the 2.5x your salary rule, then you need to find a modest older home in a place like Pittsburgh, PA, where I live. Moreover, there are plenty of affordable places to live, places where homes can be purchased fairly cheaply, in both cities and small towns in the Midwest, most of PA, upstate NY, and many parts of the South.
Denver?

My brother just bought a brand new home for $286K, He mad $130K last year. HH income for him was around $170K probably?
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Old 01-02-2014, 07:57 PM
 
39,162 posts, read 20,270,715 times
Reputation: 12709
Quote:
Originally Posted by michgc View Post
The key is to save and sacrifice for several years before buying so you can save up a good down payment. I didn't buy my first house until I was was 33 years old. I was out of college and working for 11 years at that point. For eight of those years I lived with roommates and finally the last two I rented an apartment by myself. So I was able to stash away a decent amount of money. In that time I saved approximately 6K per year for the down payment on a home (that number includes investment returns). I bought a home for $290K putting down $70K. My husband and my salaries were each in the $50K range at that point (the downpayment was all my money, though). Neither one of us is a doctor, lawyer, accountant or engineer. He is an insurance underwriter and I worked in the educational field.

The bottom line is that I sacrificed in the earlier years in order to get that house. I could have lived in an apartment on my own fresh out of college for $600 per month, but I moved into a 3-bedroom with 2 friends and paid $250 per month. And I gradually increased my standard of living. We then moved into a townhouse in a better neighborhood and I paid about $350 per month for a few years. And then I moved to condo with just one friend and paid her $500 per month (she owned it). Finally I moved on my own for a couple of years and paid $800 per month.

So that's how we did it - bought a $290K house with a combined $100K salary with a $70K downpayment (saved over 11 years when making a salary between $20K and $50K).
Yep, this is how many people do it. Also paying down debt because banks do look at the income to debt ratio. Congrats. Been down in your area last year, loved it! I'd love to move there.
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Old 01-02-2014, 08:00 PM
 
39,162 posts, read 20,270,715 times
Reputation: 12709
Quote:
Originally Posted by mysticaltyger View Post
Too many things can go wrong in 5 years' time. Wait until you're actually earning that income and have more saved. Don't put the cart before the horse. That is the biggest mistake people make.
Yep, too many people make the mistake of buying on "imagined" or "wishful" income. OP don't go there, life is to short to be stressed like that.
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Old 01-03-2014, 10:16 AM
 
Location: Liminal Space
1,018 posts, read 1,229,463 times
Reputation: 1294
Quote:
Originally Posted by pete6032 View Post
I hear this rule of thumb all over. Use 2.5x your HH salary as a rule of thumb. If you are a single person in this economy, making $50,000 per year, then the maximum house you could afford is $125,000. That doesn't buy much. How do couples do it when one parent stays home? I really don't understand how we can have so many houses priced $250,000+ in the US? That would be an income of $100,000. That's doable for a couple in their mid to late 30's, but anything younger than that you're probably not going to break $100,000 take home pay as a couple unless you're either a lawyer, doctor, or engineer.
Is this rule of thumb mortgage vs. income or house price vs. income? Also are we talking about gross or take-home income?
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Old 01-04-2014, 04:04 PM
 
Location: Raleigh, NC
1,464 posts, read 1,214,816 times
Reputation: 1553
I thought the rule was using gross income and that relates to the amount of mortgage you can handle?

A note on the 2 income households -a large percentage of houses in NOVA/DC are bought using 2 incomes because that's the only way to afford those ridiculously priced houses!
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Old 01-06-2014, 02:24 PM
 
Location: San Diego
306 posts, read 547,330 times
Reputation: 261
I went to see a home in a very middle class neighborhood of Orange County recently. The home was priced at $350,000 and needed a little work, it was 1330 sqft, 2 bedrooms and had a 2 car garage. The realtor was mentioning how cheap it was etc. and then mentioned that the home was priced very low so it could only go to low income borrowers per the city mandate.

I laugh when someone tells me a home costing $350,000 is for low income folks. I guess that is the reality that we live in.
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