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...Is it equity from a previous home? Savings? Inheritances? Are these people just highly paid? Cashing out 401K?
...
Those are all reasonable assumptions, although I would hope cashing out a 401K is a very low method in reality. You could also throw in down payment gifts from family members.
I suspect most are paid well enough to save the down payment and to afford the monthly payments.
The combined salary, savings, and emergency fund with the spouse supports the buying ability. We can't find a decent house in the the bay area for $200k. That's a pipe dream.
Just a general question but I often watch shows... and the buyers had budgets of $400k and up.
Is it equity from a previous home? Often.
Savings? and other investments
Inheritances? and internal family strategic gifting
Are these people just highly paid? Often
Cashing out 401K? that too
How do people do it?
First is to distinguish between the purchase price...
and what (if any) mortgage is being carried.
A good earner getting $150,000 will also often get a nice bonus or could just save up the down and closing
(if they didn't get cash from one of examples as above) and still responsibly carry a $400,000 mortgage.
But when the buyer is your kid's favorite teacher and her spouse the NGO staffer...
then there is probably substantial family money being used to if not pay off the whole purchase
then at least bring the mortgage down to the $100,000 or so they can actually afford.
At least that's how my husband and I did it. I had bought a condo when I was 23 that was kind of a dump. I fixed it up (not to flip, but so I could live somewhere nice), doing the work myself. By the time I met my now husband, it was the nicest condo in the building. When I sold it, I made about $40,000 on the sale.
My husband, on the other hand, rented a place that was cheaper than what he could afford. He had over $100,000 in savings. So, we used the combined $140,000 as our 20% down on a $700,000 house.
We both have good jobs and were well paid at the time, so the house payments weren't a problem. Honestly, we started out with a budget of $400,000 but couldn't find anything we liked at that price point. Over the course of the 6 months we were looking for a place we just kept slowly increasing the budget.
If my husband hadn't been such a saver with his money prior to meeting me, we would not have been able to spend what we did. We would have definitely bought something less expensive. We both know it was pretty ridiculous to spend as much as we did on the first house we bought together (his first purchase at all), but that's just how things worked out. We're still pretty happy with the decision, I just really wish I had some unfinished or garage space to set up a studio.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Where I live there's hardly anything for $400k, most are more than that, but the median family income is over $150,000. I don't fit the demographic but bought years ago when it our house was under $200,000, and at that time had a good down payment from the
equity in our previous home.
Depending on the amount of down payment and interest rate, all it takes to buy a $400,000 house is about $110,000 income to meet the 1/3 or less of income mortgage amount requirement. With husband and wife working that could be $55,000 each, which is about double the U.S. median income but still considered middle class.
Location: Danbury CT covering all of Fairfield County
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The median home price in my market area is over $300,000, and this is a realitivly affordable commuting area from NYC. Wages are pretty high here, compared to most of the country, but housing prices reflect it. Most households are double income and save. Most of my buyers that spend about $300,000 put about $30,000 down. People relocate here from more expensive closer in areas to NYC.
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 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.
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