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My friend bought a nice 4 bedroom home for 197K and taxes 6500 a year. Built in late 90's early
2000's in a decent neighborhood and their income is 40K and have 3 kids. It's an ok income for 1 person in a small condo but an entire family on 40K a year? How did they get the loan? I know they didn't have savings and could only afford to go out once a month before they bought a house. I don't want to ask them how they can afford it....just curious since we make over 100K together, no kids and struggled to find a 2 bedroom home we could afford and also have a bit of extra money on the side. Also they only lived their 6 months and are already trying to rent or sell it since they don't like the neighborhood (too snobby is kind of what they said).
How can you buy a nice 4 bedroom home on 1 salary?
Have an adequate salary.
It's often argued that if you CAN'T buy what you might prefer on one salary...
you should probably reconsider buying at all. Especially since that one salary is also needed
to cover MOST of every other common expense the family will have.
iow... the second income should (ta dah) be secondary.
Quote:
My friend bought a nice 4 bedroom home for 197,000K and taxes 6500 a year.
That's a common enough price point in many areas...
but it's also a rather high property tax rate (3.3%)
Quote:
their income is 40K and have 3 kids.
How did they get the loan?
How much was the down payment? iow what's the actual mortgage they're paying?
As to affordability...
The PITI (and utilities etc) number needs to be a LOT lower than the levels that most brokers will lend at.
Sounds like they want to sell and move because they are in over their heads because too snobby an area is a lame excuse.
To answer the question you asked in the thread title, move to an area where homes are cheap or get a better paying job, or cut out all unnecessary expenses.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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With 10% down and good credit, that is a mortgage payment of less than $900. That's a couple of hundred below the 1/3 of income rule of thumb for home loans, so the only question is where they got the down payment, which is really no one else's business. Your area has really high property taxes, ours is about the same $6,500 and our house is valued at close to $700k, and we have no state income tax. If their tax is that much, it is definitely Seems tight on that income.
Unless they've been discussing their savings accounts with you, how would you know they don't have any? Granted, we have a few friends we talk about stuff like that with, but otherwise it sounds like you're basing that conclusion on them not going out to eat very often.
Let me tell you, going out to eat with kids is HARD. It's stressful to get them to behave in a manner that won't bother other customers, even if they behave at home. Usually they're so excited about a restaurant that they bounce off the walls or crane their head around to look at everything and everyone or talk too loudly--it is a pain. There are plenty of parents who don't eat out as much as a DINK couple could expect to.
Not eating out helps you save money, too, and that might have been a concsious decision on their part. A meal for two people at a nice chain restaurant might be $62, IF they both get dessert and one of them gets a beer or two or a glass of wine. (Basing this on our latest date night.) A dinner out with kids? We pay close to $75-$100 depending on the restaurant. And THEN add in the tip of anywhere from $7 (crappy service at lowest cost) to $20 or more (extremely exceptional service). You can save hundreds every month by just. Not. Doing. It.
I know this from experience. We're lucky enough to have made some good career choices in life and make even higher than your DINK income. Our housing is almost $200K more than theirs, with much less than that in gross income, and yet we were still eating out several times a week with kids and putting $1000 in savings every month because we were smart with our money. When we realized we were about to move, we cut the eating out to once a month and have saved an extra $1000 a month with JUST that change, for five months. If they've been doing that all along, for years, that's thousands of dollars saved towards a down payment that you might not know about.
Unless they've been discussing their savings accounts with you, how would you know they don't have any? Granted, we have a few friends we talk about stuff like that with, but otherwise it sounds like you're basing that conclusion on them not going out to eat very often.
Let me tell you, going out to eat with kids is HARD. It's stressful to get them to behave in a manner that won't bother other customers, even if they behave at home. Usually they're so excited about a restaurant that they bounce off the walls or crane their head around to look at everything and everyone or talk too loudly--it is a pain. There are plenty of parents who don't eat out as much as a DINK couple could expect to.
Not eating out helps you save money, too, and that might have been a concsious decision on their part. A meal for two people at a nice chain restaurant might be $62, IF they both get dessert and one of them gets a beer or two or a glass of wine. (Basing this on our latest date night.) A dinner out with kids? We pay close to $75-$100 depending on the restaurant. And THEN add in the tip of anywhere from $7 (crappy service at lowest cost) to $20 or more (extremely exceptional service). You can save hundreds every month by just. Not. Doing. It.
I know this from experience. We're lucky enough to have made some good career choices in life and make even higher than your DINK income. Our housing is almost $200K more than theirs, with much less than that in gross income, and yet we were still eating out several times a week with kids and putting $1000 in savings every month because we were smart with our money. When we realized we were about to move, we cut the eating out to once a month and have saved an extra $1000 a month with JUST that change, for five months. If they've been doing that all along, for years, that's thousands of dollars saved towards a down payment that you might not know about.
Eeee-Yup.
Some people handle money better than others.
And many people are smart not to discuss their financial picture with friends. Let them wonder....
Like I told my nephew when he went into the service, "You will be among a bunch of guys all making the same money. When someone says, 'Let's go in on pizza,' on a Saturday night, some guys will always have money in their pocket to chip in. Some always will not, because they are always broke 24 hours after payday.
Will you be one of the guys who always have a 5 or a 10 to throw in, or will you be one of the guys who looks away and hopes the guys with money will share?"
It is amazing how much money people can amass with discipline, or can fritter away and wonder what happened.
Also, where the heck are you living that you can't afford a 2 bed/1 or 2 bath place for what is probably less than $197k if that's a typical 4-bed price for your area? How are 2 beds more expensive than 4-beds?! We'll be taking a pay cut going to our next area by about $27K a year (non-taxable), and even on that pay would be less than the DTI we have here--in fact, getting a new place for around $225K-$250K without selling AND without renting what we already have a mortgage on would still only have us at 39% DTI. Maybe your friends are like us and just better than you are at living within their means so that they (and the bank) weren't so worried about their DTI when they bought. Because that's the only reason I can think of why $100K a year wouldn't let you buy in an area where 4-bed houses in decent (I'm assuming) school districts are only $197K.
If the neighbor is a veteran, he can get a mortgage with zero down. In the case op mentioned, the house cost seems doable, but not the property taxes.
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