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For the most part, the places in the country with higher priced homes are also the places with higher earning jobs on average. In my area, where the average person with a good job earns $30k or less a year, a couple shouldn't be buying a house with a loan for more than about $200k. So if you want to buy a house that is substantially more than that, you need some significant down from some source, whether savings, or a gift, or whatever. But some places, the average income is much higher.
Yes, I think my area is much like yours. I knew some areas in Cali were much higher but I don't think I realized how many more parts of the county people were bringing in these high earnings.
I know of 2 couples in California with $4,000 mortgages and they aren't sweating to pay it either.
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?
Most do some combination of the above. I doubt many are touching their 401k.
For example, my friends are both PHD's one in medicine so they have combined household income of maybe 250-300k. They lived in a home worth <200k for years paying down student loans and saving some $$$ and have now moved into a house more in the 500-600k range.
In my case, my first house I bought for 155k sold for 200k years later and by having a 15yr mortgage had around 100k in equity. I put 50k down on a 250k home and took another 15 year mortgage. I now own my 300k value home and if I wanted could now roll that into a 600k home where my mortgage payment would be around 1.5k a month on a 30yr fixed at 4.5%.
For the younger couples you see they generally have some sort of nest egg from being from a wealthier family (ie. grandma died and left them 100k) and also have good incomes. Some have their parents die very young and as a result come into LARGE sums of money. For example, my wife died a couple years back and I have 2 kids in middle school. If I die today they get my 401k, close to 1.5mil in life insurance plus cars, house etc. Basically they are both instant millionaires and not old enough to drive.
Yes, I guess people are just in much higher income areas because I just cannot fathom being able to accrus $100k in savings.
I've been saving since I was 15 and have had times when I tried to put away more than I spent and have never been able to hit above $30k in savings (traveling does eat away at it). I've just never known of anyone that was able to put away that much money.
It took my spouse and I about 3 years to save about $100k towards down payment. We are by no means considered rich or well off in the bay area. We make decent enough salaries.
I'm wondering how you can only manage to save about $30k since age 15?
I'm wondering how you can only manage to save about $30k since age 15?
I've never been able to save more than $200- $250 a month comfortably. I've also never earned more than $50k annually and that was short lived. I currently earn under $40k.
And I know I've done very well compared with many of my friends and family.
Believe me I am trying every way I can to cut corners and save more but there's always unexpectant expenses like vet bills, car work or random household things that get in the way.
The key is to have the money directly deposited into you savings account from your employer and consider it a BILL. Never, ever touch it unless it is a life or death situation. Consider the money gone and only available upon what your savings for.
It took my spouse and I about 3 years to save about $100k towards down payment. We are by no means considered rich or well off in the bay area. We make decent enough salaries.
Also, I think you would easily be considered rich or wealthy where I live.
The key is to have the money directly deposited into you savings account from your employer and consider it a BILL. Never, ever touch it unless it is a life or death situation. Consider the money gone and only available upon what your savings for.
Yes, I do automatic deposits into my account. I just don't earn enough to sock away hundreds per month.
Also, I think you would easily be considered rich or wealthy where I live.
Well it wasn't that easy to save up the money. We had to curb our spending considerably. We also didn't run into any unexpected emergencies. I've never been to your hometown but I think I'll keep this nice weather where I live. I'll stay put and not be rich.
Yes, I do automatic deposits into my account. I just don't earn enough to sock away hundreds per month.
I'm hoping to one day.
Well, don't feel bad about it! Both my husband and I each have two younger siblings. The six of us are all in different industries and the reality is that depending on your career, saving hugs sums of money may just not be possible. One of my sisters teaches 7th grade special ed, the other is a social worker. They aren't going to become millionaires in those fields, and that is fine with them. I'm in finance. I make more money, but none of my friends would change jobs with me anyway. My brother in law does lighting and set design for a university. Again, it's not a field he is likely to get rich in, but he wouldn't trade places with my husband for money, ever.
My husband and I don't put away a lot of money each month in savings; however, we both get bonuses each year. It's a lot easier to save when several thousand dollars are suddenly just handed to you. We put that money in the savings account and then forget that it exists... without that, saving would be harder, at least for me.
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?
Depends upon where you live. $400K would not buy you much more than a small house on a small lot in New Jersey, for example.
But I get your point overall. I used to wonder how people got a down payment together. It was not possible for me to live, support my daughter, and save the huge sums of money needed for a down payment, and when I asked other people how they did it, they'd always gotten some kind of windfall--an inheritance from a grandparent, a gift from parents, or a settlement from a lawsuit. In a very few cases there were two working adults and they lived on one salary and saved one salary. My family didn't have any money either inherited or to give away, I had no reason to sue anyone, and my husband decided he didn't like to work and I kicked him to the curb, so I was just SOL. Finally, at age 52, I was able to get a small condo by borrowing a down payment from my retirement and taking advantage of the tax credit in 2010.
Of course, I will never be able to actually pay off the mortgage unless I live to be 82. But it's cheaper than renting was and I can have my pets and paint the walls any color I want, so it's all good!
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