Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
One thing I haven’t seen mentioned in this thread is that incomes are not stagnant over the course of a person’s career. A couple that is making $80k in their 20s is very likely going to increase their income as a result of promotions, changes in their jobs, cost of living adjustments, investment income, etc.
So, the mortgage payments and the affordability of a house in general become much more comfortable as time goes on.
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.
The mortgage portion doesn't change, it's the taxes and insurance that changes. But on a fixed rate mortgage, the mortgage portion stays the same.
One thing I haven’t seen mentioned in this thread is that incomes are not stagnant over the course of a person’s career. A couple that is making $80k in their 20s is very likely going to increase their income as a result of promotions, changes in their jobs, cost of living adjustments, investment income, etc.
So, the mortgage payments and the affordability of a house in general become much more comfortable as time goes on.
Wages have not kept up with inflation. So the increase in cost of things such as food and healthcare negate most of any increase in salary and then some. According the to gov't own numbers, healthcare costs for familes have increased 67% over the last 10 years. And health spending by families with large employer health plans has increased 2 times faster than workers’ wages over the last 10 years.
Wages have not kept up with inflation. So the increase in cost of things such as food and healthcare negate most of any increase in salary and then some. According the to gov't own numbers, healthcare costs for familes have increased 67% over the last 10 years. And health spending by families with large employer health plans has increased 2 times faster than workers’ wages over the last 10 years.
You make a great case for locking in housing costs for the long haul, for folks who can afford to do so.
Even if wages stand still, inflation pushes purchase costs higher and higher. A fixed rate mortgage is a decent hedge against inflation for many people.
And, landlords are not immune from inflation, either. Rents increase over time, for sure.
The bank takes all that into consideration when calculating what you qualify for. And I haven’t ever had to call a plumber.
OP, the only thing that the banks take into consideration is how much they can get you on the hook for and how much they are going to make off the deal.
Our banks tell us that we qualify for a home loan of nearly 600K because they are looking at our incomes before the government gets to them, along with our credit score. There is NO WAY IN HE!! we could afford a home that expensive.
You can't just go off of income when trying to figure out what a person can afford when buying a home. Property taxes (ours has gone up 2K in the last 6 years) and insurance costs are going to take your buying power and bring it waaayyyy down.
OP, the only thing that the banks take into consideration is how much they can get you on the hook for and how much they are going to make off the deal.
Our banks tell us that we qualify for a home loan of nearly 600K because they are looking at our incomes before the government gets to them, along with our credit score. There is NO WAY IN HE!! we could afford a home that expensive.
You can't just go off of income when trying to figure out what a person can afford when buying a home. Property taxes (ours has gone up 2K in the last 6 years) and insurance costs are going to take your buying power and bring it waaayyyy down.
Lenders aren't just using income to determine how much they'll let you borrow, it's how much debt you have too. Specifically debt-to-income ratio. A person making $5k/month with a $300 car payment will be able to borrow more than a person making $5k/month who has $2k in credit card, car, student loan payments. Credit score has less to do with amount you can borrow and more to do with the terms and interest rate you can get.
This can be a big shocker for people when they go apply for a mortgage. That couple making $80k should have no problem buying a $200-300k home right? Depends. Maybe if they don't have much/any debt. But start adding in $500/mo car payments, payments for $15k of CC debt, significant student loans and that $200-300k home can be out of reach pretty quickly.
So you were spending 20-30 a day on eating and drinking out?
It was 2-3 decades ago, so the figures were $15-$20 per day, everything was less expensive then, including a Mercedes, but yeah, same effect if you account for inflation. It was ridiculous. That made me take stock of just how many ways I was wasting money on things that were not necessities, and how I could live better and have more of the things I wanted if I paid attention to what I was doing with my money.
I cut cable and sold the televisions. I was renting a huge two-floor apartment, I moved to a much cheaper 3rd-floor attic walk-up. I cut eating out to once a month or less, started taking sandwiches to work and a Thermos of coffee that I made at home. I stopped buying beer and wine and started making my own beer, wine and mead. I started my own business in a closet in that little attic apartment, that I worked during the day while keeping my night job. I used the extra money to start investing in the stock market, and day-trading in between work for clients.
When I bought this house I moved 200 miles with no job, I set my food budget at one dollar a day for as long as I was not employed, which turned out to be a lot longer than I had expected it would be...but I made it work and was never in danger of starving- I actually found that with careful choices it wasn't difficult to eat fairly well on that budget. My wife stayed down south for two years until I had stabilized my employment and began working my way up in a growing company...which was growing, in part, due to my influence, management style and revamping of methods and procedures. At that point we could take the risk of moving her too, despite having to take a significant cut in income.
How you live depends greatly on the choices you make, whether you make a little or a lot. In my last job I heard a lot of my fellow employees whining about how bad they had it because they didn't have enough money at the end of the month...but when I pointed out to them how much they were spending on things they didn't really need, they went deaf. They just weren't willing to do the things they needed to do, they just wanted to whine about how they were treated so 'unfair', that they deserved more but no one would 'give' it to them. But when the min wage was raised by several dollars, did their lives get any better? Nope, not a bit...because they still managed their money poorly, made bad choices and still ended up with more month than money. It doesn't matter how much you 'give' them, because they continue to make bad decisions and waste money instead of doing the things they need to do to change their circumstances.
Last edited by Zymer; 07-14-2021 at 02:27 PM..
Reason: Punctuation
Well, first of all, I think it's a bit optimistic to just assume the demographic you're referring to is earning a combined $80k a year. I remember when I was 20 (mid '00s), I would've been pretty ecstatic to earn ~$29k a year ($40k adjusted for inflation) by myself, and even more so to meet a romantic partner who earned the same. The actual adjusted gross income of the average "millennial complaining about home prices" is probably closer to $25-30k than 40k, and a LOT of them actually live alone and/or with relatives so it's not like they have another 25-30k from the other person to help them out.
But you would certainly be correct in questioning how someone earning a combined $80k wouldn't be able to afford a nice home...
How hard is it to make an $80k household income in areas where a 2,500 square foot single-family home is $300k?
2,500sqft is the standard now? Lol I can't even imagine a house that big unless I had 5 kids, 4 pets, and 3 cars lol I'm plenty happy with half that size.
Houses in my area are around 2K sq ft. They run about 550K new, few upgrades, no fencing and all that.
The larger the house, the more extensive the landscaping.... the more they cost, even for older builds.
Again, we are rural, 30 miles to the first town of 5K, about 50 miles from the main town.
Most of the new buyers are retirees, as there are no jobs out here unless you farm.
We also have areas of modular or mobile homes, and you can get old ones for 200K.
__________________ ____________________________________________
My posts as a Mod will always be in red.
Be sure to review Terms of Service: TOS
And check this out: FAQ
Moderator: Relationships Forum / Hawaii Forum / Dogs / Pets / Current Events
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
