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Perhaps if you used the 33% of net (&including all those other bills) instead as the standard of affordability...
the rest of your life might be more comfortable now?
You wouldn't be in a $400,000 home but you sh/would be able to afford the other things you mentioned.
Just because a lender will sign you up for an $X mortgage... doesn't mean it's a good idea.
I wasn't making this personal, you apparently have no problem with that.
I was merely stating that all the calculators and guides base it off of gross income
using your numbers as an example, in my area someone making 100K a year would be living in a medium sized 1br apartment in the suburbs.
I was merely stating that all the calculators and guides base it off of gross income
And I was offering an alternate, lets say more rational approach, to calculating affordability.
I'll stick with mine tyvm... and seriously recommend that you do as well.
(If those examples weren't your own then I misread the pronouns)
Quote:
...using your numbers as an example,
in my area someone making 100K a year would be living in a medium sized 1br apartment in the suburbs.
And your point?
It seems to be about ignoring the other aspects of life that a given income is supposed to provide for.
You're on Long Island. I used to live in Orange County CA (30 years ago) and my daughter now lives in Santa Monica...well, if you want to call it living. These places and the the things people will do to be there are not NORM's.
btw.. They (daughter and SIL) prefer to avoid the high RE cost reality as well.
They say they're hoping that future income increases will eventually get them over the hump...
they don't mention possible inheritances.
Last edited by MrRational; 07-17-2012 at 01:50 PM..
Im 40. Broke and make a decent wage. In debt up to eyeballs (student loans for a worthless degree 100K+ of them). Probably will never have good enough credit to own a home but I do have a pension thank God or I would forget retirement. Save money, yeah right. its more like what doesnt get paid this month. and buzz off with the iphone lifestyle crap. its pure basics and an apartment fit for a college student.
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.
Ahh, the good old days of military life...I was a LT in the Navy and my wife worked. In the old days, we bought a house for $160k. This was before the bubble. I still had a car loan, and a medical school loan. With bonuses, I paid off the car loan and student loans in 3 years after finishing medical school. When I moved to DC, I used the money from doing a FSBO to buy a house there. With a 7 year ARM, I was able to buy a house over a half a million. Remember, I had two incomes and this was with dependents. So that is how I did it. Got rid of debt, and used proceeds to put it into the market. Still sold that place for a profit in DC just before the bubble burst. Put it into another house. Again, no debt outside of a mortgage. In the meantime, I still put my kid into a private school, saved money, and did not use credit cards. We still went out to eat, watch movies, and travel. Never financed anything but a home. Never bought on credit. I don't get things to impress others. Don't care. Don't wear fancy brand name things. Shopped at discount stores, thrift stores, bought things used, and never paid retail for anything. Don't buy fancy watches or other status symbols. Don't need that kind of stuff. To this day, I still get things used/preowned. I still go to thrift stores. I pretty much live the same way I have since I was a lowly intern.
We just always lived within our means. Always have and always will....
How to do it in Hawaii on an O-4 salary? Military get a housing allowance that is above the base pay. It is tax free. There is a cost of living allowance for places like Hawaii, Boston, DC, etc. That is a hefty sum of money to afford quite a bit. if he did a signing bonus, then he got a lump sum to use for a down payment. If he sold his last property for a profit, he could have easily used the proceeds towards the down payment, too. If he was special forces, there is hazardous duty pay. When he was deployed his salary was not taxed when he was in combat. There is also a monthly food allowance. If he was a physician or pilot, there is professional pay. Well, you get the picture. The bonuses add up to $30-$50k or more, on top of the base pay.
Last edited by titaniummd; 02-06-2013 at 08:55 PM..
Some people take a chance, have some luck mixed with determination/hard work, and hit things at the right time. I was very likely the 3rd full time software developer in that same company (coincidence to run into this post), but coming along 2 years after him so no stake in the company. After 6 years I'm still 50k in debt from school living in an apt. Such is life I guess.
Quote:
Originally Posted by Jamesnana
My son-in-law was employee #1 at a software development company. He worked for a very good salary plus a 5% stake in the company. All the papers say his job is the best job in the country. He worked his brains out, and eventually became an executive. Last year(after 7 years) his company was bought out by a giant privately owned company, and he cashed out very nicely, thank you.
They were able to pay off their underwater condo and put 25% down on a $600+k house. The American dream lives. Anybody with math skills who needs a job should look into software engineering. Companies from all over the country are begging for them.
One answer----Jumbo loans. Many people with little money saved for a down payment are financing about 97% of their 700 house. We have professional incomes but refuse to jump on that bandwagon, so we are buying below our means, and basing the purchase off of one income. You never know when one of you will lose their job. Happens all the time.
Also, some people have no student loans because their parents were able to pay for all of their education. My husband and I had to pay our own way, so we both have student loan debt from undergrad and professional school.
I haven't looked at every post on here, but I would say timing is very important in working your way up to an expensive home. We sold our first home for four times what we paid and the third for double what we paid. The one in between was basically a wash because the market had sort of plateaued at the time.
The other trick is to not overspend or be impulsive. We watch the home shows and every young couple today seems to need granite countertops and marble baths right from the start. We joke that if most of them saw our first home, they would dismiss it as a slum. The key is to upgrade gradually and watch your pennies.
Re being impulsive, it's important not to jump at the first house you like, but to look around a little. Think about your future needs so that you buy a home that will last you a while and achieve some appreciation over fluctuating real estate markets. I know one couple who has jumped from home to home because they're always dissatisfied with what they've bought. Their behavior has cost them some real money. I know another who took some time and bought a home that -- with upgrades -- they could occupy for the rest of their lives if they chose to do so. Both couples spent about the same on their present homes, but one pair got much more in terms of future value.
Most 'first-time home buyers' outside of the 'big city' probably don't start-off with a $400K home (unless they come into a significant 'windfall'). Also, $400K homes, (like $100K homes) aren't what they used to be! [Reflecting back on what we paid for relatively modest homes over the years: $16K/'68, $35K/'73, $58K/'80, $75K/'83, $295K/'00, $500K/'04*, $370K/'11 (*2nd).]
One answer----Jumbo loans. Many people with little money saved for a down payment are financing about 97% of their 700 house.
With the standard 20% down you can go up to about $520K without using a jumbo loan. Aside from the most expensive metro areas, $700K with 3% down is extremely rare if it happens at all. I don't see much evidence that lenders are offering low-down jumbos in great numbers lately. That was popular a few years ago, but it seems things have moved back to where most homes above the conforming limit are being bought with relatively high down payments.
With the standard 20% down you can go up to about $520K without using a jumbo loan. Aside from the most expensive metro areas, $700K with 3% down is extremely rare if it happens at all. I don't see much evidence that lenders are offering low-down jumbos in great numbers lately. That was popular a few years ago, but it seems things have moved back to where most homes above the conforming limit are being bought with relatively high down payments.
My lender was trying to get me to do a jumbo and I am in a moderatly high cost of living area, but not NYC or CA. He said you can do one for only 10% down, and also said they are doing a ton of them lately. In high COL areas you can do FHA jumbos.
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