What is the "rule of thumb" for how much house you can afford?

[Tink&SquirtsMom]

Originally posted by robsmom

I think that there is no doubt that there are markets in which the housing market is out of control. I think too, however, that there are job markets in which the average salary is no where near $100,000! It is all relative. The real great markets are the houses are $200,000 and the jobs are $100,000 (do those exist)The worse are the houses are $500,000 and the jobs are less than $50,000 (sounds like Esmerald has one of these areas!!) [/B]

Believe me I know that. Where we live now the average salary is no where near $100,000 but the median home price just hit $375,000. We were lucky enough for dh to keep his current job but work from home so we get the better salary and the better home prices (which also just happen to be in the area where I grew up and all my family is). Was not easy to make that happen though. My sister and her DFi combined income (mid twenties, 2 college degrees between them) is $60,000 and with down payment help from her fiances parents they just bought a $200,000 800 sq ft townhouse in a place where they would never raise any kids.

 

[Crankyshank]

It can be done. DH and I bought a house 2yrs ago. We have significant debt we are working on eliminating and we were coming from an area where starter homes were $300k

What it meant to us was: putting off school, not going out to eat or the movies as much, reading at Borders instead of buying books or borrowing them from family members, not going on vacation, and hoarding our tax returns.

We had to look in RI, which still has slightly lower house prices but higher property taxes, though. But it's not a horrible commute for DH and I to work. We were able to get a house 14mos after we started saving- with 0 down thanks to FHA/VA and a slightly higher interest rate than the going rate (6.4%)

 

[soccerchick]

Esmaralda - save, save, save. it can be done. the more you save the less you are borrowing so you can get a more expensive house and qualify. If you can put down 50% on that 300,000 house first you can qualify. There are two ways to finance a house, the money you have saved and money you borrow. I realize that saving $150,000 seems near impossible to you but just put one foot in front of the other and keep moving towards your goal!

Why would you put that kind of money into a mortgage that's probably 6% ish? All the financial advisers will tell you to put as little as you need to into your house. Build your equity, absolutely, but there are better rates of return to invest that 150K. We will put down 20%, but that's only because we made quite aq bit on our house and putting down more does very little to the monthly payments. That's driven by your rate. Heaven forbid you need that cash for a medical emergency and have to sell your house to get it. Invest it in several different savings tools. There are two great books my DH and I read, one by Ric Edelman and another, and of course I can't remember her name (but it was NOT Suze Orman). I'll see if it's been packed yet and post the titles here. Lots of great financial advice that is echoed by many others.

You can buy a house w/ no down payment. Like I said before, talk to financial advisers, mortgage lenders, etc. If the owning is what's important, start investigating.

 

[Micca]

What a helpful thread this has been. BTW, I did the math on the house DW and I bought almost 20 years ago and our monthly payment comes in around 7% With DDs in college I would hate to think what our financial sitch would be if we were paying 4 times that

Esmeralda come out to the heartland where you can get a very nice place well under $200K...in fact, closer to $100K

 

[Bellamia4]

It's the norm around here for it to take two salaries to buy a house.

 

[SplshMtn99]

Esmeralda,

We bought our first home (a $60,000 condo in 1993) with only $100 down using a VA loan. We currently owe about $25,000. (I know, I could of paid it off faster...but we were taking trips & buying things.)

I buckled down the past 2 yrs...and have really been sending money into the mortgage payment like crazy. We will be selling that condo next year -- hopefully for around $185,000. And buying another condo (to be built next year) for approx $330,000. How? Buy using the $$$$$$$$$$$ we've made in those 11 years on this place. (I know we got lucky buying very low...and selling high....but we'll also be buying high.)

My point, you ask? Buy something -- anything. That payment you make every month will become YOUR equity....and you'll get it all back (assuming market doesn't crash).

Start saving your money....and when prices come down....buy!

 

[ErikdaRed]

There are plenty of markets (NOVA is one of them) where they are creating almost 2x the number of jobs as houses. The boom isn't going to end anytime soon in any of these, and there is no way salaries can keep pace.

 

[chrissyk]

Originally posted by EsmeraldaX
Well, I have been looking for other jobs. No luck. And I don't know ANYONE my age around here who makes over 40K a year, degree or no.

How old are you? I just turned 30, and I made more than that when I was in my early 20's, as did my DH and my sister. I live in Central MA, but I'm originally from your area. It would be tough to buy a house in MA pn an income of under 40K a year. Housing costs are astronomical here!

Are you dead set on staying in MA? DH and I do well and we've owned this house since we were in our early 20's. We did buy before the run-up. Even with the decent profit we're making on this house, we decided that staying in MA was not the right thing for us financially. We wanted to live somewhere where the cost of living is lower and the quality of life is higher. We're moving to FL Young people are moving out of MA in droves according to our several people I've talked to recently. The cost of living here makes it prohibitive to buy a house in ANY town, nevermind a town with good schools

 

[my3kids]

Don't look toward the new $300,000 starter homes for a starter home. Look in older, establish, beautiful tree lined neighborhoods. Look for the worst little house in the best little neighborhood and grab it! As time, money and desire warrants, fix it up. Paint is cheap, floors can be sanded yourself, plantings aren't that expensive when purchased small, and they grow!

Before you know it, the worst little house has become the cutest little house. We bought our first right after we were married and my DH made next to nothing. We fixed it up, sold it a few years later for nearly double. The house that sat on the market forever when we bought it transformed like those bizarre Swans on the beauty pagent show! When it was time to sell it, people expected it to be on the market a while again. They were the ones who hadn't seen the fairly inexpenive transformations. It sold almost immediately.

Don't look to what someone else tells you is a starter home. Start your own search.

 

[lulubelle]

EsmeradlaX,
Please do not think your income will not significantly increase with time. I remember thinking while in my 20's that I would never make over $35K, than thinking in my 30's if I could only reach $50K, boy would I have it made and now in my 40's realize that I can (and have) made even more. With hard work, loyalty, dedication and a GREAT attitude, you can advance and succeed very far in life/business.

I work in Personnel/Payroll for a manufacturing firm. (No rocket scientry, here)

Chin up, girl! You will be able to buy a place, just save a down and look around in the less desirable areas, hey, it's a start. And with that very first payment, it is an investment and equity begins to build

Good luck to you (and Monty)

 

[chrissyk]

Originally posted by my3kids
Don't look toward the new $300,000 starter homes for a starter home. Look in older, establish, beautiful tree lined neighborhoods. Look for the worst little house in the best little neighborhood and grab it! As time, money and desire warrants, fix it up. Paint is cheap, floors can be sanded yourself, plantings aren't that expensive when purchased small, and they grow!

I'm going to assume that you're not from MA, LOL! When EsmeraldaX is talking about a $300K "starter home," she isn't talking about a new house in a nice town. She's talking about a run-down fixer-upper in an average town. That would cost $300K here if you could find a real deal. I have friends who are looking in some of the grossest, most run-down towns in MA. They can't even find a fixer-upper in need of major structural repair for $300K in one of those towns! These are towns where you none of us would have considered living when we were growing up. Things have changed THAT much here in terms of the cost of housing

The established houses in beautiful, tree-lined neighborhoods are truly out-of-reach for most of the people my age here in MA It seems to me that either you inherit one of these houses from family or you hit the lotto and buy one. Otherwise, you're stuck buying a tiny subdivision house in a town with bad schools for 500K, LOL!

 

[my3kids]

Originally posted by chrissyk
Otherwise, you're stuck buying a tiny subdivision house in a town with bad schools for 500K, LOL!

Oh My! Unless one is tied to the area with a real career,maybe it is best to move and find the home and life you want!

 

[jel0511]

Originally posted by my3kids
Oh My! Unless one is tied to the area with a real career,maybe it is best to move and find the home and life you want!

That seems to be the problem. I grew up in NJ and have lived here all my life. My parents bought their first home here back in 1973 and it cost $54k. That same house now probably would be upwards of $500k, and it's not even that big!!! Here in NJ, and I'm sure it's the same pretty up and down the Northeast, if you live within commutable distance of the city, housing prices are astronomical!!! We built out house 5 years ago, and it's worth double what we paid for it, that's how NUTS it is!!! We looked at a house in one of the best neighborhoods around here, it cost over $1Million, and needed at least $300k worth of work to fix it up!! Now, that's a fixer upper if I ever saw one!! The other house in the neighborhood, that don't need as much work are upwards of $2million, and they're not mansions by any sense. They're regular 4 bedroom colonials, probably around 3,000 sq ft on 1/2 an acre. I'd consider leaving the Northeast to get better housing prices and a better standard of living, but when you work in the Financial Industry (like DH does) you can't because this is where the jobs are. We live about a 1 hour commute from NYC, and that's pretty average, but our area is definately not as expensive as Northern NJ, Westchester or Southern Connecticut, those places are NUTS!!! I don't think a shack in any of those areas goes for under $500k, and I'm serious there. It's all realtive to what you're used to and where you have to live. Some people have jobs that easily translate to other areas and others don't.

 

[chrissyk]

Originally posted by my3kids
Oh My! Unless one is tied to the area with a real career,maybe it is best to move and find the home and life you want!

That's what we're doing Apparently, a lot of young people are leaving MA for the same reason. Now, if only I could convince my sis of this before she spends another 10 years trying to get on her feet here She is so smart and well-educated, but there just aren't any good jobs in her field here! She is stuck working a temp. job while living with our parents. I don't know how she'll ever buy a home here. Home prices rise faster than you can save money

If DH and I had waited to buy a house as long as we'd originally planned, we'd never have been able to buy one. We started looking on a lark, and we bought even though the 3% down took every last dime that we had. 2 months later, the run-up started, and everyone I know was priced out That was 7 years ago this coming December.

We never thought that we'd leave MA, but we couldn't stay here even if we wanted to now. Our town doesn't have very good schools, and we can't afford a house in a town that does Some of my friends scrape up the money for private school, but it's so hard when you're also scraping up the money to pay for an overpriced house to boot. My mother keeps saying that something is going to give and housing prices here will fall, but I disagree. There are more people than there are houses. UGH, I'm depressing myself. On the bright side, we're thrilled to be moving to FL

 

[aprincessmom]

It seems to me that either you inherit one of these houses from family or you hit the lotto and buy one. Otherwise, you're stuck buying a tiny subdivision house in a town with bad schools for 500K, LOL!

Or you do what a lot of people in MA do...buy small at first and move up. Most people in my neighborhood owned condos or very small homes in other areas of MA and then moved when their children came to get the better schools. Their original purchases had appreciated in value enough to fund the nice house on the tree lined streets. Me, I waited until I was almost 38 to own my first home. I finally had enough money saved to afford 30% down...I made too much for first time home buy programs at that point so I was on my own.

You can do it if you work at it.

 

[Lisa F]

Lori, you got that right about NYC. We just went through this ourselves. My inlaws, who bought their house in Rockland county for $135k 20 years or so ago (it was their second "upgrade" house) could sell it for about $750k now and they just know they could NEVER afford that house in today's market. There's just no way.

My parents were on the "lucky" side of things... they sold their house in Brooklyn which they upgraded the systems in over the years but still needed a ton of cosmetic work for $100k more than what they paid for a much larger house on a huge piece of property (for us city folk) in Putnam county (the westchester county line is 2 min from their house, though, so JUST into Putnam... my mom works in westchester). They paid $50k for their original house 25 years ago and sold it for $575k last september (which, although a long time, is still MUCH better than average appreciation over a very long period of time).

For people just trying to break into the market, it's tough. We started looking in westchester and ended up buying in southern dutchess. The new express train at 72 minutes to the city helps as does the fact that we are 5 min from the train station (in westchester we were looking at 55 min to the city but 20-25 min to the train station in the towns we could afford) but still. Ouch. Our whole family is here and this is where we want to be but my husband works at home and telecommutes so there is NO reason for us to live in a particular place besides family.... but we have worked our butts off to be able to live back here again and i am glad it is finally paying off, we are loving it. It's still really really tough.

 

[my3kids]

No wonder people move to my community from the north east and build or buy huge estate type homes in the country. They must have sold a tiny starter home the NY suburbs and have all that money to turn over into a new home!!

And I thought things were nuts here! I will complain no more! Oh, and our taxes on the house which would probably sell for around $400,000.......about $1100 a year!

 

[my3kids]

Oh, for the OP, no more than 25% of your take home pay for mortgage is my husband's policy on mortgage. I think that's what he said.

 

[jel0511]

Oh, and our taxes on the house which would probably sell for around $400,000.......about $1100 a year!

Here in NJ, you'd need to add another zero to those tax numbers!!!!

 

[chrissyk]

Originally posted by aprincessmom
Or you do what a lot of people in MA do...buy small at first and move up. Most people in my neighborhood owned condos or very small homes in other areas of MA and then moved when their children came to get the better schools. Their original purchases had appreciated in value enough to fund the nice house on the tree lined streets. Me, I waited until I was almost 38 to own my first home. I finally had enough money saved to afford 30% down...I made too much for first time home buy programs at that point so I was on my own.

You can do it if you work at it.

This is true, but only if you bought in before the boom. I see so many of my friend struggling to buy that first house now, and they won't likely ever "move up". If you pay 500K for the starter house, you'd have to see the kind of appreciation we've seen over the past decade to move up. It's a catch-22

The thing that REALLY got me was that the towns that were hideously undesirable when I was growing up are now unaffordable. My sister was talking about buying a house in a not-so-nice town recently. I asked her if she would have imagined as a child ending up in that town as an adult, and she gave me a very sad "no"

Someone told me that we are truly the first generation of MA homeowners to do less well than our parents. It's SO true I always thought that my sister and I would own side-by-side houses in Andover when we were adults. Instead, we scraped it together to buy in Central MA, and she lives with my parents still A town with reliably good schools is just completely out-of-reach for most people I know. Many of the "good" MA school systems aren't so good anymore...they're riding on their reputations, unfortunately. The towns with the great MCAS and SAT scores were totally unaffordable for us.

We could have stayed in our starter home here and homeschooled, but we really didn't want that for our kids. We could have moved up, but only to a marginally better town. Our kids would still have had to go to private school or be homeschooled. I'm very disenchanted with what happened to my home state housing-wise Also, I'm the last member of my family-of-origin left here. I stayed as long as I could, but I finally gave up on MA too.