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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?
You have a lot of if's there. $80K before or after taxes? Where? $80K in Des Moines, Iowa is almost worthless in San Francisco or Manhattan. Few people have a monthly debt of $600....car payments...insurance....credit cards....student loans....the list goes on and on. Monthly bills...utilities.....electric....gas.....oil....w ater.....sewer.....cable.....internet.....phone service......food.....insurance co-payments.....list goes on and on.....
Let's not forget the various property taxes either. Which vary drastically from state to state and county to county and town to town.
Where are they getting the $10K downpayment from? $200K homes don't exist in many areas of the country. Neither do $300K houses.
You couldn't afford to live on 40K a year where I live. You'd be in a tiny ghetto apartment in a crappy neighborhood. I don't live in Manhattan either. I live in a small town in Western NY. That $40K a year won't go far....you won't get a house in my town. Your property taxes will be a minimum of $8K a year. That's 1/5 of that salary.
Keep in mind that the PMI pays for the home insurance so the homeowner won't have to pay separately.
PMI does NOT pay for the homeowner's insurance. PMI is an insurance policy the buyer pays to the bank who then buys an insurance policy in case the buyer defaults on the loan. It does NOT cover your house if there's a fire, wind damage, snow damage, personal injury, etc. Those are all on your homeowner's insurance policy.
Unnecessary expenses - hmmm. You mean like a working vehicle since there is absolutely no public transportation? Without a car, people can't get to work; there aren't a whole lot of jobs in the country that aren't in the towns. Cheap/low cost housing is found outside the cities. Sacrifice to you means not eating out but around here that means walking 10+ miles to a job because there's no other way - no vehicle, no bus, no sidewalks. It isn't an unwilliness to sacrifice; it is not about saving what money is not left over to save.
The constant repairs needed on these old houses. Low cost housing isn't typically well maintained in many areas nationwide. Furnace repairs aren't cheap. Roof leak? New hot water heater? Last time I had one done it was over $700 for the tank and installation. Stove stops working? Do you buy new or repair? Well how much are repairs? How old is the stove? How long will it take to get the parts? 6 months?! What do I do about cooking now? How long for a new stove to be delivered? 4 months? Again what do I do about cooking? This just goes on and on and on.
On zillow, there are small houses or condos for sale in metro areas like Cleveland, Columbus or Indianapolis that go for less than $100k. If a person is patient enough, they can even find a house for under $30k that needs a bit of a makeover.
Personally though, I wouldn't buy those houses because it appears they are unlikely to appreciate much in price. But you never know, it's possible to get lucky with such properties.
How would a person/family from another state make that happen? Most people earning $40K or less can't take their job with them. Moving from state to state is ridiculously expensive. I know as I've done it twice for a job.
But as an investment, though it builds wealth, it's secondary to having a place to live. When you rent you can expect to pay more every year or two. With a fixed rate mortgage it stays the same for 30 years. Of course, with $100k homes comes a lot of crime and poverty that you have to live with, and for a $30k fixer you still need money to do the fixinng.
To afford a $100k house with a down payment of $20,000, you'd only need to earn $14,921/year before taxes to get the loan. That's basically $7.80/hour full-time. The problem may be coming up with the $20,000 down payment. If managing a loan with nothing down one would have to make $19,000, that's still only $9.89/hour.
My mortgage payment is adjusted every single year because of the escrow. Every mortgage I've ever had - there's been 3 - has increased every single year because the property taxes increase every single year as does the homeowner's insurance.
My husband doesn't have any degree. He's only in his early 30s and already a supervisor in his department. He got the job he has making a little over 60k because of determination, job experience- every job he had he rose to supervisor.
Women should not put themselves in a situation where they end up single mothers.
What happens when their partner dies? No one plans on a 30 year old parent of 3 dying in a car accident on their way home from work.
You can definitely reduce many of those costs. Child care at $1400? Food at $900? Heat, auto insurance, auto payment and health care at those price points?
You've got to do more shopping around than that. Have to use coupons, look into getting solar, put a bigger down payment on your car, etc. Have to learn to save more money.
Where I live your electric and heat will cost you much more. Child care will be more than double. Get solar? That costs money!
40k a year is like $20/hour. Minimum wage in many parts is $15 an hour. How can someone who’s halfway motivated not reach that income by their late 20s?
The majority of those "$15/hr jobs" don't give you 40 hrs. Most work between 15-30 hrs a week. YOu have to dig a little deeper to get the truth.
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Quote:
Originally Posted by ss20ts
PMI does NOT pay for the homeowner's insurance. PMI is an insurance policy the buyer pays to the bank who then buys an insurance policy in case the buyer defaults on the loan. It does NOT cover your house if there's a fire, wind damage, snow damage, personal injury, etc. Those are all on your homeowner's insurance policy.
I retracted my original comment, which you obviously didn't read. I did so after someone else corrected me in an earlier post. I even posted an article which explained in detail what PMI did cover. Thanks for your comment.
The scenario put forth was a couple each making $40,000.
That's why I think it's not a practical example for the majority of people.
60/20 would be more common.
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