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The median household income on city data for Chatham NJ was 137,496 and median home price was $665,216 in 2009 (not sure what it is today- does anyone have updated numbers ?)
So how are these people with median incomes of 137k able to afford a 665k home ? I understand that it can be done monthly payment wise with sensible budgeting, but the question is more about what the bank will approve for a loan ?
I understand that Madison, chatham etc., are rich towns with rich people in there. When we say "rich" are we talking about the ppl making a median family income of 137 k ?
I had not considered that regardless of my attitude towards wealth or lack thereof, the kid would be exposed to these things- and someone here opened my eyes to it . now I am worried.
I really want to live in one of these areas for the good schools and maybe someday buy. But I am very worried about the kid (4 year old) a) feeling deprived on some level, by comparison. One can try to instill a sense of self-worth that comes from within, yet I don't want to have to fight an uphill battle....
so how rich is rich.. in these parts ? would earning a bit below the median make me and my kid "poor" ?
I'm going to have to move soon, starting to pack- yet don't have a location identified. help!
It could be that a lot of people in Chatham bought their homes before they worth that much and thus don't have huge mortgages . . . or maybe they made a lot of money when they sold their last house so they came in with a huge down payment and don't have an outsized mortgage either. A surprising amount of people paying huge money for a house pay cash. People with that kind of money also usually have good accountants and have ways of hiding assets . . . or making it look like their LLC owns their house . . . and just generally making it look like they have a lot less money than they actually do.
Median means half above/half below. So, say Chatham has 1000 houses. Maybe the 500 below the median skew towards $500k houses and the 500 above the median are clustered between $665k and $750k with a few outliers going up to $1million or just above. At the same time the 500 households below the median are clustered very close to $137k while the households above the median skew towards much higher incomes. In other words maybe the households with $137k are living in $480k houses and the people living in the $700k houses are making a lot more money.
Before 2008, if you had the money for the down payment (20% of the total) and your credit was anywhere above totally-shot-to-hell, a bank would approve you for a mortgage. Even now I would expect a family making $137k/year to easily be approved for a $540k mortgage (enough for a $700k home), provided they had good credit. Although the usual guideline is no more than 2-3x your income for a home purchase, this becomes more flexible at higher income levels as a family making $137k/year must devote a much smaller percentage of their income to essentials than a family making $50k/year (about the national average).
With a salary of $137k, the purchase of a $665k home is perfectly affordable. Assuming 20% down payment, that leaves a $532k mortgage. With today's low rates, that's roughly $2500 per month mortgage payment, figure another $800 per month for property taxes, and you're looking at a total monthly payment of $3300. $137k salary equates to $11416 monthly, and spending $3300/$11416 = 29% on your home which is well within almost all affordability guidelines.
Also consider that purchasing power is not determined solely by income...could easily afford a 600k house if you inherit a million dollars or two, even if your annual salary is 60k
With a salary of $137k, the purchase of a $665k home is perfectly affordable. Assuming 20% down payment, that leaves a $532k mortgage. With today's low rates, that's roughly $2500 per month mortgage payment, figure another $800 per month for property taxes, and you're looking at a total monthly payment of $3300. $137k salary equates to $11416 monthly, and spending $3300/$11416 = 29% on your home which is well within almost all affordability guidelines.
Save for a few years? With a $137k income, you should easily be able to save $133k in maybe three to four years. Before you buy a house, at least a quarter of your pre-tax salary should go towards savings.
Housing shouldn't exceed 33% of your net income.(monthly payment)
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