If you live in a $350K-$450K Home:

[monkeybug]

Thanks for doing the math. Now I know my SIL is getting some kind of financial help. She and her hubby bought a $420K house on $85K, have a payment of $1800 (P&I) a month and have done many large expensive home improvement projects. She always says her husband is just good with money. But after social security, payroll taxes, housing costs similar to yours and three kids, they'd have about $25000 left for food, entertainment, gas, cars, vacations, other monthly bills, savings AND their big projects!

Are you saying they pay $1,800 a month total? Before we moved to where we currently live we paid $1,750 a month (on about $85,000) and we were still putting money into savings! We buy nice things, go on nice vacations, and have three kids. Some people are good at making money stretch!

 

[Mrs. Ciz]

Just principal and interest, no taxes or insurance included. You are very right, some people are very good at stretching money. I just know we make alot more than they do, live frugally, drive older cars and cannot do the huge home improvement projects and buy all the new stuff they do. Granted, we have chosen to put what amounts to a mortgage payment away each month for college savings so our spending priorities are different from hers. And, I am a big enough person to admit that maybe I get a little jealous of the new expensive stuff they always have.

 

[hambirg]

I guess I'm old school. I think PMI plus taxes should be 30% of your take home pay MAX! I personally would feel much more comfortable with 25% or less. I know that just may not be possible in today's economy. . .but that's my story and I'm sticking to it.

When we bought our house over 15 years ago it was $75,000 our PMI with taxes was roughly $700. We were making roughly $4000 take home. Do the math. . .it was still rough. Never mind when we separated and I could barely afford to stay in our house. . .but I sure as heck couldn't afford to rent anything else. Basically I couldn't afford to lose my house. About six years before that, we had wanted to move to a nicer neighborhood closer to my Mom. . .$380,000 house. .. and the broker kept saying. . .sure you can afford it. I'm so soooooo thankful that we both recognized that we couldn't comfortably make that kind of mortgage payment. . .I would have been soooo screwed when we separated if we had bought that house.

Moral of the story .. .don't look at the houses and try to see if you can afford the one you like. You will always want the next one up. Decide right up front what kind of monthly mortgage payment you are comfortable with. . .taxes and insurance included. . . .your debt and your spending habits taken into account. . .what if one of you loses their job, don't forget electric, gas ,water, garbage, sewer and whatever else your city decides to nail you with. . I pay $38 every other month for storm drain. . .whatever the heck that is . . .my Mom pays $58 every other month for street lights. . .really?!!!! etc. . .and then decide what you can afford given your circumstances. It may not be your dream home. . .but I still think buying a house was the best thing we ever did. . .however, it can be a huge burden as well. My house is not my dream home. . .but I know a lot of people that are still renting. .. so I don't feel ashamed by my modest house at all. It actually makes me feel pretty smart.

 

[hambirg]

Are you saying they pay $1,800 a month total? Before we moved to where we currently live we paid $1,750 a month (on about $85,000) and we were still putting money into savings! We buy nice things, go on nice vacations, and have three kids. Some people are good at making money stretch!

But sometimes it really depends on the municipality or the county. You really have to take into account ALL the expenses. Where we live our utilities and excise taxes are almost as much as our mortgage. You really need to know exactly what your "true" outlay is going to be each month.

 

[CaliforniaDreamin]

All I'm gonna say is, I am very happy to live in rural NC.

When we bought our house 15 years ago this month, I was a stay at home mom. So all we had to go on was DH's salary. I eventually went back to college and got a good job. We had planned on moving, but we are really happy with out house and we live on a dead end street and it's very peaceful. Plus we got about 2 acres of land.
I got sick last year and haven't worked since. I have had to do some creative budgeting. But here we are, once again on one income and doing just fine.

 

[The Pink Cupcake]

Why is this any of your business?

Because they asked my opinion

I also think it is everyone's business when our country allows this to happen. We will all suffer if this nonsense of giving out $300K+ mortgages to everyone and their brother continues

My cousin's situation is a disaster waiting to happen. If he goes through with it, I will feel so sorry for his neighbors that will be dealing with a foreclosure in their neighborhood very shortly.

 

[bellarella]

I would say someone should make $250,000-300,000 a year to afford a $350,000-450,000 house, and still be able to meet all of your other goals.

Seriously? You think someone should have to take home over $15,000 per month in order to be able afford a $2500-ish a month house payment? By those numbers just about every person in america should be living in a cardboard box. People don't *need* $12,500 in post tax, post house payment income a month to live responsibly.

Because they asked my opinion

I also think it is everyone's business when our country allows this to happen. We will all suffer if this nonsense of giving out $300K+ mortgages to everyone and their brother continues

My cousin's situation is a disaster waiting to happen. If he goes through with it, I will feel so sorry for his neighbors that will be dealing with a foreclosure in their neighborhood very shortly.

Then say your piece and be done with it. People have different tolerances for risk. His might be too high, yours might be too low. Going off of his income is a terrible way of trying to make your point though, and might be why you aren't getting through to him.

 

[eliza61]

Because they asked my opinion

I also think it is everyone's business when our country allows this to happen. We will all suffer if this nonsense of giving out $300K+ mortgages to everyone and their brother continues

My cousin's situation is a disaster waiting to happen. If he goes through with it, I will feel so sorry for his neighbors that will be dealing with a foreclosure in their neighborhood very shortly.

We allow it to happen because you can't govern common sense and you can't impose on free market. Every one complains that the government is too involved with their daily lives as it is. You can't have it both ways.

Banks give money out for one reason and one reason only, it makes them a profit. Until the day that stops being the case, banks will continue thinking up creative vehicles for people.

the problem is not the banks and it's not the governments job to regulate financial sense. Your cousin is not doing any thing illegal, he is taking advantage of the choices legally offered to him. It's not the banks job to control his common sense. If your cousin meets the banks criteria then imo, the bank has met it's obligation.

For the last 30 years the mantra in this country was "buy now-pay later (maybe)" and "bigger is better". Well now all of a sudden you expect that to change?

time to look at the man in the mirror.

 

[monkeybug]

Because they asked my opinion

I also think it is everyone's business when our country allows this to happen. We will all suffer if this nonsense of giving out $300K+ mortgages to everyone and their brother continues

My cousin's situation is a disaster waiting to happen. If he goes through with it, I will feel so sorry for his neighbors that will be dealing with a foreclosure in their neighborhood very shortly.

I just hope your basing it on more than income alone. My husband makes around $85,000 a year and we pay $1,500 in rent. We put over $1,000 a month into savings.
If my house payment was 2,000 (and people are saying your cousins would be less than that right?) I could afford it and still live well with in my means.

 

[GrnMtnMan]

Bold is way off. So you don't count the monthly condo fee? It could be just a $100 or so per month or could be $500 per month. If the homeowner puts that money away for home repairs..

There's a big difference between a homeowner VOLUNTARILY putting money away for a repairs, and a condo owner paying MANDATORY condo association dues that to do that for him: the condo fee is factored in to the underwriting of a mortgage and the total monthly housing payment, whereas a detached, fee-simple, homeowner has no such amount included in his underwriting qualifications.

So the broader point still stands:

A raw home price is not that useful in doing this analysis. Both the size of the mortgage and the actual construction value of the home are far more important.
...
So in DC, income doesn't have to be as high to 'afford' the same house, because the actual value of the house is pretty low....the land that [house] sits upon is far more valuable than the housing unit. But if you go out to where land is cheap, you'd better be able to pay for the repairs that that home might have....those bills, for the same total value home, will be much larger.

Do you disagree with the broader point? Or were you just nit-picking the quick example I provided....

If your condo needs a new roof if the condo does not have the money in the bank they will assess the condo owners for the repairs.

Anyway, part of the condo purchase process (in every state the I know of) is the right for the prospective buyer to review the records of the condo association. In the process of that review, you'd be able to determine the size of the reserves that the Condo has for repairs. The condo should also have a capital reserve study, which has the age of many of the common elements of the property, the expected remaining life, and the expected replacement cost. A condo that does not have this is probably not one you should be buying into...or you should at least be prepared for assessments.

And after receiving these documents you can walk away from the deal without explanation or penalty.

 

[DisneyFanUntilDeath]

As I am independently wealthy my salary is $0. However I just purchased my 7th home for just shy of $2M in cash. Salary is just one factor in affordability.

 

[joviroxx]

time to look at the man in the mirror.

Its not up to the bank to tell you what you can afford. The bank is telling you what THEY are WILLING to loan you. It is YOUR decision to figure out what you can afford. Its just like any other goods or service.

You know your expenses, you know what you want to save, only you can decide what you can afford. Formulas are wonderful, but they don't take into consideration your spending habits. No need to blame anyone else for your decisions.