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The bank takes all that into consideration when calculating what you qualify for. And I haven’t ever had to call a plumber.
No, the bank does not take all that the poster mentioned into consideration.
I also never had to call a plumber. I have had to call only two professionals ever for my home, one to install new windows, one for the HVAC system, that is all. For my condo I owned, never in over ten years did I need to call someone.
Yes, you do cover those costs if you a renting. Mortgage, insurance, taxes, and repairs are all baked into the rent.
This is a major misconception. The landlord can charge what the market will bear -- and no more. That is strictly a supply and demand equation, independent of the landlord's costs. Some properties can generate cash flow and some cannot.
Let's say you're a landlord and you find that your insurance and repair costs are going up. At the same time, a lot of people have begun leaving your area and renters are hard to find. Guess which direction rents will go?
Quote:
Originally Posted by oregonwoodsmoke
No one is buying houses intending to rent them out for less than it costs to maintain them. Rent is going to cover all of those expenses.
This is also a misconception. Some landlords are all about cash flow. Others may intentionally rent their property at a loss while waiting for it to appreciate, especially in a place like the Bay Area. Still others may rent it out on a break-even basis or at a small loss because they want to hold onto the property while they relocate temporarily, travel, try to avoid getting foreclosed on, etc.
Not counting coastal cities and high cost of living cities, how do most people not afford homes? I used a mortgage calculator, and if a couple has a income of 80k (40k a person), 600 in monthly debt, and a down payment if 10k, they could afford a home of 300k! Even 200k will get you something decent. That’s a pretty nice home in most of America, and making 40k a year isn’t hard. What am I missing?
I think your guess of $600 per month in debt is low. People don't think twice about having $500/mo car payments PLUS credit card balances. I think the minimum average monthly debt payment for CCs and cars are closer to $800-900 on the low side if they share one car.
$300K in my SC suburb of Charlotte, NC will get you a no-garage townhouse with an expensive monthly HOA fee. $200K will get you a 60-year old 2 bedroom 1 bath house that hasn't been updated since the 1970s and is sold "as is" as a handyman special.
Plus, homeownership is expensive - maintenance, repairs, lawn care, increased utilities, property taxes, hoa fees - it all adds up and should be included when figure out how much the mortgage should be.
Now add groceries for a family of four, child care if the kids are young, commuting costs, two car payments plus insurance, and all the other things people spend money on (cell phones, cable tv, gas for cars, medical bills, etc.) and suddenly $80K doesn't go that far.
When I bought my first house, the lender required multiple months of my paystubs, and then on top of that needed a letter from my employer basically saying, "Yes, this person has a real job with a real salary and is not a temp." They were very concerned I might be temp or pt or that the job might go away.
So I bet they would be reluctant to lend to 2 people making $15 an hour at an ephemeral job like a reataurant, knowing that those people could get laid off or quit at any moment.
Yes, you do cover those costs if you a renting. Mortgage, insurance, taxes, and repairs are all baked into the rent.
With very few exceptions (the New York City, San Francisco sort of places where there is nothing to buy that is the equivalent of an apartment and there is rent control), rent costs the same or more than purchasing a similar dwelling. Landlords don't buy houses for half of what you would pay for one. They don't get any discount on expenses. Owning rentals is a business. No one is buying houses intending to rent them out for less than it costs to maintain them. Rent is going to cover all of those expenses.
Coming back to add, in my area and many other areas, the landlord is paying more for property taxes than the owner occupied house pays. Here, there is $100,000 deducted from the appraisal for owner occupied and rentals pay the full freight. So tenants are paying more for property taxes than the guy who owns his own house.
A study just came out that in my city, renting is cheaper than owning.
Expenses are sometimes, somewhat, built into rent. But if a landlord knows that they will need to replace the roof to the tune of $10K, they're not going to charge $800 more a month to cover that. That cost will be spread out over many, many years across many tenants. It's not one renter responsible for it.
Owning a home is expensive. I just dropped $800 to cut back trees that were dead or dying. I didn't have a choice. And because of how tall the trees were, I couldn't do it myself. $800 is a lot of money for a lot of people.
My mom is retired. She bought a brand new condo (townhouse) about 15 years ago. It's paid off, so no mortgage. She likes it, but she doesn't think she'll live there forever. She is and solidly middle class and in very good health and active. But she has already said she will never own a house again. She's tired of having to fix and replace things. And this is a fairly new condo. But she has had to replace appliances, deal with water leaks, etc.
Again, it's not that simple. Yes, rent and mortgage, insurance, and taxes may be about the same monthly. But what happens when the roof needs to be replaced? What about the hot water heater? Heating/cooling system? Anyone who owns a home can tell you things break. And a lot of those things are expensive. If I'm renting, those are costs I don't have to cover.
The main reason for owning a home rather than renting an apartment is that you build equity over time through paying down your mortgage and home value appreciation.
Most people don’t have the discipline to save up money on their own. They find all kinds of excuses to spend it. At least, owning a home “forces” people to increase their equity since they are likely to stay in their homes for years or decades. The same principle applies with 401(k) plans. You can’t touch it, so it keeps growing over time.
While this is true, the main difference between renting and buying is that your costs are spread out evenly with rent. .........
When you buy a house, those costs are also spread evenly. Unless a person is a real nincompoop with a brain smaller than a chicken's, they realize those things have a useful life and will need to be replaced eventually. So a small amount is placed every month into an emergency fund so that there will be money available to replace the roof, replace the furnace, replace the stove when those things eventually wear out.
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Quote:
Originally Posted by oregonwoodsmoke
When you buy a house, those costs are also spread evenly. Unless a person is a real nincompoop with a brain smaller than a chicken's, they realize those things have a useful life and will need to be replaced eventually. So a small amount is placed every month into an emergency fund so that there will be money available to replace the roof, replace the furnace, replace the stove when those things eventually wear out.
Sadly, while that would be the logical way of thinking, many folks are living paycheck to paycheck and aren't adequately saving for a "rainy day". Easy to say you should do so but much harder for many people to accomplish. Too many folks merely put some expenses on a credit card, instead, making things far worse in the long run.
My taxes are an extra $900/month. Not to mention homeowner insurance($2000/yr)
I pay over $1700/month,with a 15 year conventional mortgage at 2.5%.
I am with you. I pay over $1600 a month on a home we paid $102,000 for. And that's with an 800-some credit score. And we could afford that because my honey and his friends were able to do the approximately $25,000 in repairs needed (it was a foreclosure). And then we had to cough up $24,000 for a new septic system. Last year another $11,000 for a new roof. A $300,000 house would have a mortgage much higher and no way we could afford it, and between us we make well over $100,000 a year. I still have an iPhone 6S and my fiancé has an 8. I drive a 2009 Hyundai and he has a work van from 2008 and a Tahoe from 2006. So not living extravagantly. But if we hadn't been able to buy a cheap home and fix it, we'd still be renting.
It costs significantly more to own a home, too. It's not just mortgage, it's repairs and replacements, etc.
Sadly, while that would be the logical way of thinking, many folks are living paycheck to paycheck and aren't adequately saving for a "rainy day". Easy to say you should do so but much harder for many people to accomplish. Too many folks merely put some expenses on a credit card, instead, making things far worse in the long run.
People can save, but have those savings wiped out by medical bills and other expenses. I paid $14,000 out of pocket for my back issues leading to surgery, and was out of work for 10 months. I ended using all my emergency savings, my Roth, and taking on credit card debt. So then I got to start all over at age 55. Everyone assumes people are spending on nonsense but life in 2021 America is very expensive.
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