Is $300,000 too expensive for someone with a salary of $50,000? (Denver: how much, house)

[Katarina Witt]

Originally Posted by Bob from down south

Don't forget to include in your planning the very real likelihood that taxes of all kinds and at all levels will be going up--perhaps dramatically--to pay for our government's irresponsible borrowing binge. Do a budget, and if there isn't enough money to cover a doubling of all the taxes you pay, you could well find yourself not just house-poor, but among the foreclosed and forelorn.

Also, as far too many have discovered, you need a cash emergency fund of at least six months expenses--INCLUDING six months of house payments (the full meal deal--PITI+HOA). Owning a home isnt such a great deal when you get pink-slipped and don't even have enough cash on hand to pay the mortgage for 90 days while looking for a new job. A Notice Of Default isn't the kind of document you want framed in the front hall along with junior's soccer team photos...

Debt is Dangerous

Property taxes for schools are limited by the School Finance Act. I think this first paragraph is fear-mongering.

I do think $300K is a big stretch on a $50K salary.

[MantaRay]

One thing that should be noted about choosing to rent until you can afford the home you want is to try to get a handle on the mortgage payment you want to pay, view the rent as interest on a mortgage (money thrown away to the landlord instead of to the bank), subtract it from the amount you would like to pay in mortgage, and take the difference and set it aside as "equity" meaning you don't spend it, you save it to increase the eventual down payment you will make when you are fully ready to purchase. This forces you to try living on the mortgage budget you have set for yourself (and shows whether you will or won't have trouble doing it).

Normally people will consider renting as giving money away to a landlord and contrast that to home ownership which you build equity in, but in truth you still give money away with home ownership- money to the bank in interest. So as long as you save diligently to your "down payment stash," you are still effectively gaining equity even while you're renting. I think the OP should either rent and build that equity/stash until they CAN afford the home they really want OR they should buy a much cheaper home and build equity in it until they can afford the home they really want. It's not that tough to run a financial analysis and find out which gives them the greater chance to build equity more quickly, which one puts them into the home they really want more quickly. Don't forget to factor in the mortgage interest tax deduction.

[giz2000]

Fantastic advice ^^^

[CosmicWizard]

For your own well being, take everything the real estate agents and bankers tell you with regard to affordability with a grain of salt. Remember, the more you spend the more thay make, so naturally they will steer you toward the upper end of what THEY term as affordabe. Like another poster suggested, add up your monthly expenses in addition to your mortgage, then give yourself a BIG cushion with your mortgage payment. Stay waaaaaaaaaaay below what the bankers and real estate people tell you you can afford. Remenber, sh*t happens down the road, that you cannot forsee at this time. Give yourself plenty of breathing room.

[Katarina Witt]

Originally Posted by CosmicWizard

For your own well being, take everything the real estate agents and bankers tell you with regard to affordability with a grain of salt. Remember, the more you spend the more thay make, so naturally they will steer you toward the upper end of what THEY term as affordabe. Like another poster suggested, add up your monthly expenses in addition to your mortgage, then give yourself a BIG cushion with your mortgage payment. Stay waaaaaaaaaaay below what the bankers and real estate people tell you you can afford. Remenber, sh*t happens down the road, that you cannot forsee at this time. Give yourself plenty of breathing room.

This is true. When we bought our first house, we thought we were going to become adoptive parents, which takes a long time. Little did we know that 1 1/2 years later we would have a baby, which made my keeping my job impractical. Then we had another baby, then DH got laid off. All in about 5 1/2 yrs. Fortunately, we were living within our means.

I would add, do not think of renting as "throwing money down the drain". You are getting a place to live. You are relieved of a lot of the expenses of home ownership, and if a rental gets too expensive, you can usually get out and find a cheaper place fairly easily.

[crazyme4878]

Originally Posted by MantaRay

One thing that should be noted about choosing to rent until you can afford the home you want is to try to get a handle on the mortgage payment you want to pay, view the rent as interest on a mortgage (money thrown away to the landlord instead of to the bank), subtract it from the amount you would like to pay in mortgage, and take the difference and set it aside as "equity" meaning you don't spend it, you save it to increase the eventual down payment you will make when you are fully ready to purchase. This forces you to try living on the mortgage budget you have set for yourself (and shows whether you will or won't have trouble doing it).

What absolutely fabulous advice! Wish I read this post about a year or two ago!

Re: the heating bill and the previous post about it being blown out of proportion-- in a newer, well built home with a newer heating system, you are right, winter heating bills are not as major of a deal. However, if they buy an older house (you know, 'with charm' ), it could become a big deal. I have dealt with both situations and it is not fun to see that $300+ electric bill! (that was in northern Wisconsin, though...)

[lovesMountains]

Originally Posted by CuriousLindsey

My husband and I are thinking of relocating to Denver and I've been looking on Realtor.com to see what's available. Based on their mortgage calculator (using the average settings) it seems reasonable to look at houses up to about $300,000. Their calculator estimates the monthly payments to be about $1500 a month for this price.

We will be making about $50,000 a year (just over $4000 a month) plus about $20,000ish for a down payment. I was just wondering if $300,000 was reasonable like the website says. If anyone makes around that much and knows whats do-able on that salary or if any real estate agents could help me out on this one, I would appreciate it. I just want to make sure I'm looking in the right price range. Thanks.

Not at all "reasonable". You are more in the $200,000 and under range, (way under to be on the safe side) with that salary level.

[Kibbiekat]

Originally Posted by crazyme4878

What absolutely fabulous advice! Wish I read this post about a year or two ago!

Re: the heating bill and the previous post about it being blown out of proportion-- in a newer, well built home with a newer heating system, you are right, winter heating bills are not as major of a deal. However, if they buy an older house (you know, 'with charm' ), it could become a big deal. I have dealt with both situations and it is not fun to see that $300+ electric bill! (that was in northern Wisconsin, though...)

I had a late 1970's home in central California and had $600 utility bills in the summer. The AC ran 24/7 sometimes. HOT!

[LisaCACO]

one nice thing about buying a home that costs less is that you can do things like upgrade the heating and cooling to more efficient appliances. amazing what that can do. we did that when we lived in CA and it was fantastic. could run the air conditioning and it was negligible financially. loved it. paid for itself in just a few years . with tax credits and things nowadays, you can do well doing that. of course, if you're maxed out financially, you can't upgrade things like you might want.

[EscapeCalifornia]

Originally Posted by rkb0305

I had a late 1970's home in central California and had $600 utility bills in the summer. The AC ran 24/7 sometimes. HOT!

We also have some of the highest electric rates in the country though. My electric bill in a 2 bedroom apartment is almost $100/mo with no AC usage. It doesn't take much to get into the $0.30/KwH range.