How does everyone afford a house?

[ebaycj]

Originally posted by: radioouman
100% financing. Either PMI, or 80/20 (or 90/10) loans.

Once the house appreciates and you have enough equity in it, sell it for another home and use the equity and the amount from appreciating to put 20% down on the next house.

or just re-fi at that point, with the "appreciated value" instead of what you originally paid.

 

[Toasthead]

Originally posted by: Qacer
A good friend is wanting to buy a house. He makes about 65k/year. I told him that he should use various online calculators such as Fannie Mae's to find out how much he can afford. Out of curiosity, I typed it 65k into this calculator and just assumed certain values (~$900 for car, student loan, etc.) for the other fields. For a conventional loan, it shows that he can get a max loan of $136k and he needs about $30k for down payment & closing costs. This translates to about a $160k house.

I know for a fact that he doesn't have $30k because his broke @ss is still too cheap to buy me lunch even though I paid for his lunches back in school. Plus, he said so himself.

Anyway, I think a $160k house will probably get someone from Tampa an old tent located in the ghetto. Most of the decent houses being listed right now run for about $220k to $260k.

Now, I understand his question about how certain folks can afford a house. Some of the people that we hang out with do not make $65k/yr, but somehow, they were able to buy a decent house in a nice neighborhood.

What's the trick here?

I was going to suggest to him 100% financing with no down-payment thru Wachovia, but I haven't done enough reading to find out the cons.

$900 for a car??? thats the problem

 

[ebaycj]

Originally posted by: Qacer

Originally posted by: pontifex
is he single or what? how can you not afford a house on 65k a year by yourself? furthermore, how do you have no money saved making that much?

Single and fresh out of college by a couple months.

MOST people either rent or live with their parents for a couple years after college.

 

[Gunslinger08]

Originally posted by: Toasthead

Originally posted by: Qacer
A good friend is wanting to buy a house. He makes about 65k/year. I told him that he should use various online calculators such as Fannie Mae's to find out how much he can afford. Out of curiosity, I typed it 65k into this calculator and just assumed certain values (~$900 for car, student loan, etc.) for the other fields. For a conventional loan, it shows that he can get a max loan of $136k and he needs about $30k for down payment & closing costs. This translates to about a $160k house.

I know for a fact that he doesn't have $30k because his broke @ss is still too cheap to buy me lunch even though I paid for his lunches back in school. Plus, he said so himself.

Anyway, I think a $160k house will probably get someone from Tampa an old tent located in the ghetto. Most of the decent houses being listed right now run for about $220k to $260k.

Now, I understand his question about how certain folks can afford a house. Some of the people that we hang out with do not make $65k/yr, but somehow, they were able to buy a decent house in a nice neighborhood.

What's the trick here?

I was going to suggest to him 100% financing with no down-payment thru Wachovia, but I haven't done enough reading to find out the cons.

$900 for a car??? thats the problem

I believe he means $900 for all of his monthly recurring bills.

 

[tfinch2]

$900 a month for a car? ahahahaha

Is he driving a ****** ferrari?

 

[Linflas]

Our first house in 1989 cost $115,000 and our combined income at that time was around $65,000 yet we were able to purchase a house with a mortgage rate of 10.5%. Being a vet I was eligible for a VA loan so there was no down payment required. I do remember when I looked at all the numbers it seemed impossible that we could afford it but in the end our only regret was that we didn't stretch a bit and buy a single family house at the start instead of a townhouse.

 

[RagingBITCH]

I don't make $65K a year and I'm about to buy a house at the end of the year. It's not that hard to afford. Live within your means.

 

[jadinolf]

My first house was 22.5K
My second 69K
My third 55K

If I were to try to buy my house today, I couldn't come close to being able to afford it.

California is wonderful.

 

[nweaver]

Originally posted by: DougK62
I've found that a lot of people that bitch about not being able to afford a house have way-high spoiled-brat expectations. You don't NEED that 4 bed/3 bath house with the 3 car garage. There are lots of nice smaller houses that are just completely off their radar.

Good point...We watched and looked and waited and got a neat 1400 SF house for 87K DURING the boom.

 

[Dulanic]

Originally posted by: radioouman
100% financing. Either PMI, or 80/20 (or 90/10) loans.

Once the house appreciates and you have enough equity in it, sell it for another home and use the equity and the amount from appreciating to put 20% down on the next house.

Since he makes under $80k and is in FL you can use www.acornhousing.org. I just used them for a home in MA and bought a $237k place with no down payment, and they also offered a lower interest rate than anyone else, 5.5% for me. You do need to call and find out what bank they go through in that area. In MA/RI it is Bank of America.

 

[kalrith]

I have a friend who makes around $65k/year. He recently bought a $260k house. He put $50k down and financed the rest. He paid off his car prior to purchasing the house. He's still able to save a ton of money each month even with the $1300/month house payment.

 

[kranky]

I see there have been a lot of specific suggestions on what he could do, but it all comes down to choices. He's earning enough income. If he wants a house bad enough, he'll save up a nice down payment and in a couple years or less, he will be able to buy a house.

 

[lupi]

Join the military and get 100% financing with no mortgage insurance required

 

[akubi]

excuse me for being obvious, but you need to earn more, save for a couple of years, or have rich parents.

 

[Suspicious-Teach8788]

Stop complaining. Those 900k 2BR condos in my neighborhood are worth complaininga bout, but your 160k house will get you a cardboard box on the street here.

 

[BurnItDwn]

Originally posted by: DLeRium
Stop complaining. Those 900k 2BR condos in my neighborhood are worth complaininga bout, but your 160k house will get you a cardboard box on the street here.

What are the association dues like for the cardboard box?

 

[Qacer]

Originally posted by: spidey07
Out of curiosity what car does he drive?

Did he run out and blow all his money on a car payment? I'm guessing he's just blowing his money needlessly. If a house is a goal then he should start looking to save 1-2K per month for that goal.

He doesn't drive that fancy of a car. He's got a 2007 Corolla.

 

[brandonbull]

Originally posted by: DLeRium
Stop complaining. Those 900k 2BR condos in my neighborhood are worth complaininga bout, but your 160k house will get you a cardboard box on the street here.

and you have to make $200k-$300k to get one of those $900k condos.

$65k right out of college in FL is pretty damn good.

 

[Vic]

Originally posted by: joshsquall

Originally posted by: Vic
$900 car and student loan payments? How about paying off your debt first? Then you buy the house. Plus, you pretty much never have to put money down to purchase a primary residence conventional mortgage unless you have damaged credit/unverifiable income/lots of debt/etc.
BTW, Ginnie Mae appears to be cutting off the ratios pretty short there as well, at like 37% for the governments and 43% for the conventional (actual allowable ratios are 43% and 50% respectively), and they seem to be overestimating the "other monthly housing costs" section but I suppose that varies by area.
At $65k/yr. with little or no debt and excellent credit, you should be able to EASILY walk into a $250k home with little or nothing down and an affordable fully amortized fixed rate PITI payment of about $1900/mo conventional (which makes for a 35% DTI). Hell, you could do $300k for $2300/mo. (for a 42% debt ratio). That's all day everyday.

You're using gross income. With net, $1900/mo is right around 50% of your monthly income. $2300 is closer to 60-61%. That's way too much money to be spending on just your house payment when you take home $3800 a month (assuming you don't contribute to 401k).

Shocking! I'm using gross income because lenders use gross income. For conventional lenders to use net income would be a violation of several different government regs. Are they supposed to penalize a borrower because he contributes to his 401k? Or has high health insurance costs? Or because he chooses to have high withholdings/doesn't have any dependents?

<- mortgage banker

edit: and do you really need $1900 residual income each month to get by?

 

[Vic]

Originally posted by: lupi
Join the military and get 100% financing with no mortgage insurance required

Except the upfront 2% VA funding fee.

But yeah, the funding fee is financed in, and VA is the best 1st-time homebuyer program there is for the most part.

 

[spidey07]

Originally posted by: Qacer

Originally posted by: spidey07
Out of curiosity what car does he drive?

Did he run out and blow all his money on a car payment? I'm guessing he's just blowing his money needlessly. If a house is a goal then he should start looking to save 1-2K per month for that goal.

He doesn't drive that fancy of a car. He's got a 2007 Corolla.

There's his problem.

Bingo. Happens all the time. They run out and buy a new car when they can't afford it.

It's already been posted that there is no reason why he shouldn't be putting away 1.5K or higher every month to achieve his goal. If he wants to continue his spending habits, he has no right to complain.

 

[ebaycj]

Originally posted by: BurnItDwn

Originally posted by: Vic
Never ever ever use the 3x income method. It doesn't take into account fluctuating interest rates.

Crap!
That's the method I used back when I bought my townhome ...
Of course now I make more money then back then, so I'm ready for the interest rate to go up, and go up it will (in October) ....

Uhh, why not re-finance before then to a 30 yr. fixed mortgage ?

 

[oddyager]

I'm reading people and their prices of $200-250K for a house and I'm just flat out envious.

*shakes fist at exorbitant house prices in NYC*

 

[Aharami]

$900 car payment wtf?

 

[geecee]

I don't think one can reasonably expect to make a purchase like a house right out of college. It generally takes at least a few years of saving and learning financial responsibility before it happens.