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I live in Indiana where homes are relatively cheap. I've ran the numbers for a couple who makes 100k a year total, which should be easy in Indiana and has $1000 in monthly debt. So maybe 2 car payments and credit cards. Then I put in a 10k downpayment. Well the mortgage came out to 300k, which is a nice home! That would buy a nice home in Indiana! Help me understand what I'm missing.
I'm not sure why you care, but I think your monthly debt is quite low.
The average person in Indiana carries nearly $7K just in credit card debt:
We qualify for a large mortgage. Larger than we would ever consider.
We qualify for a spiffy luxury car or two. We won't be doing that.
We qualify for nicer furniture. With "18 months NO INTEREST." Nope. No, thanks.
We qualify for platinum/titanium/cesium/toxic levels of credit cards. Huh-uh. Have a nice day.
We qualify for.... blah, blah, yadda, yadda....
The reason some people don't worry about their next move is because they don't buy or grab everything in sight that they "qualify for."
I tell those buyers who want to buy on a one income qualification, rather than to max out, "Smart. Your home should be your shelter from the storm, not a burden and a worry every month."
But, I am truly aware of some markets where buyers are under terrible stress to find housing they can afford.
I know everybody uses the combined income to qualify and buy but one thing to consider.
Doing so stretches your ability to pay. One person loses their job (economy crash) and the other will struggle with expenses. Don't ask me how I know.
Seems like it is easy for most household to buy and qualify for a 300k home, so why don’t they?
You're assuming their monthly expenses at only $1000 a month? When we applied for our mortgage, my health insurance alone was $700 a month. So anyway, I said "we" applied, but I had to apply myself because my fiance has poor credit. So that is another reason. I barely got approved for a $100,000 house, with an income of about $88,000, with a credit score of about 780. But I had a good amount of debt, as I was out of work for 10 months before and right after a back surgery. I think you're assuming squeaky clean credit, low debt and low expenses on most people, and I think there are a lot of factors affecting why more people aren't homeowners.
Today, more and more people are also getting their income via contracting jobs with no guaranteed income, which also makes it harder. I held an unconventional job that proved very difficult to verify to their satisfaction. Despite 2 decades of tax returns showing high income, it almost resulted in our being rejected.
You're assuming their monthly expenses at only $1000 a month? When we applied for our mortgage, my health insurance alone was $700 a month. So anyway, I said "we" applied, but I had to apply myself because my fiance has poor credit. So that is another reason. I barely got approved for a $100,000 house, with an income of about $88,000, with a credit score of about 780. But I had a good amount of debt, as I was out of work for 10 months before and right after a back surgery. I think you're assuming squeaky clean credit, low debt and low expenses on most people, and I think there are a lot of factors affecting why more people aren't homeowners.
Today, more and more people are also getting their income via contracting jobs with no guaranteed income, which also makes it harder. I held an unconventional job that proved very difficult to verify to their satisfaction. Despite 2 decades of tax returns showing high income, it almost resulted in our being rejected.
Debt is what is factored into your loan qualification, not monthly expenses from the calculator I used. And you had employer health insurance for $700 a month!?! Sounds abnormal.
Mortgage calculators don’t take into account living expenses outside of debt. Expenses like medical/dental bills, car insurance, day care, cell phone plans, cable/internet bills, and retirement fund contributions - just to name a few.
Most people take these other expenses into account when determining mortgage affordability. Or at least they should.
We qualify for a large mortgage. Larger than we would ever consider.
We qualify for a spiffy luxury car or two. We won't be doing that.
We qualify for nicer furniture. With "18 months NO INTEREST." Nope. No, thanks.
We qualify for platinum/titanium/cesium/toxic levels of credit cards. Huh-uh. Have a nice day.
We qualify for.... blah, blah, yadda, yadda....
The reason some people don't worry about their next move is because they don't buy or grab everything in sight that they "qualify for."
I tell those buyers who want to buy on a one income qualification, rather than to max out, "Smart. Your home should be your shelter from the storm, not a burden and a worry every month."
But, I am truly aware of some markets where buyers are under terrible stress to find housing they can afford.
What you are missing is 100k is a pretty good income in Indiana, you don't have to spend 300k to buy a first house there, and banks will loan you enough money to keep you broke after making the payments.
the median household income in IN is $54K.
As astounded as people may be at the homes of athletes and entertainers, they could actually buy much more expensive homes. But if $10MM gets you everything you want, why spend $40MM?
Debt is what is factored into your loan qualification, not monthly expenses from the calculator I used. And you had employer health insurance for $700 a month!?! Sounds abnormal.
Many people have to pay for their own health insurance.
What you are missing is life.
Some people want to go on vacations rather than be house poor.
Some people went to college and have massive school loans.
Some people have children and pay for daycare.
Some people take care of an aging parent.
Some people had a health issue and are making payments on health care debt.
Some people got divorced and have credit issues as a result of that.
Some people don't plan to stay in Indiana and are actively searching for jobs elsewhere.
On and on...
So the bottom line is that people don't do it because they don't want to or they can't because of life circumstances.
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