How does everyone afford a house?

[kalrith]

Originally posted by: 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.

This definitely depends on the cost of living in your area. I was able to purchase a house before even graduating from college, but it's because housing is dirt cheap in my town. My house payment is $20 less than my apartment payment was. I did have to do the 100% financing thing, but I thought it was a better option than staying in the apartment.

 

[dullard]

Originally posted by: Aharami
$900 car payment wtf?

Why can't people use common sense?

"$900 for: car, student loan, etc."

That isn't $900 EACH for everything you buy. It isn't $900/month for car, $900/month for student loans, $900/month for utilites, etc. Instead, it is $900 total for all of those combined. True, it wasn't written in the best possible way. But anyone with any common sense can tell that it was total for all other expenses. Plus, it was explained in the thread if you read it.

Sorry to pick on your, Aharami, I could have quoted a half dozen other people as well.

 

[zephyrprime]

Well, one obvious way is to get married. Then you have more combine income.

 

[markgm]

Save money, plan on roommates, have friends that will lend you the money, have family that will lend or give you the money, have a windfall of unexpected cash from an accident, lawsuit, death in the family, get a promotion, move to a cheaper area... There are a lot of ways people can afford a house!

 

[PrinceofWands]

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.

I'd say a lot of it is lifestyle and locale.

Up until two years ago you could get awesome houses around here for 120k. A few years before that 100k was a huge brand new home in the best new developments. Just means that people who live in certain areas find it very easy to buy a home, while in other areas it's nearly impossible.

Let's say that a 100k home is 800 a month (roughly). Some people may have other bills that make that hard to afford. Other people making the same amount per year may not have those bills and so can afford it easily. Making only 20k a year I could afford housing that many of my friends that made 50k a year couldn't, just because of my lifestyle choices.

Of course, the easiest way to get your house is to just inherit it like I did. There is absolutely nothing like owning a home free and clear. So much security and stability there.

 

[fisheerman]

i don't care what anybody says if I was just getting out of college I would buy the biggest house in the best location that the bank would give me money on.

it will be the best investment you make in your life plus the huge tax advantages of owning a home. at your age i wouldn't worry about all the "market is falling" bs.

you aren't trying to time the perfect bottom of the housing crash and you have time on your hands as well. Your salary will "likely" increase because of you entry level in the market.

beg borrow and steal to get into the housing market asap when you are young

-fish

 

[dullard]

Originally posted by: fisheerman
i don't care what anybody says if I was just getting out of college I would buy the biggest house in the best location that the bank would give me money on.

it will be the best investment you make in your life plus the huge tax advantages of owning a home. at your age i wouldn't worry about all the "market is falling" bs.

you aren't trying to time the perfect bottom of the housing crash and you have time on your hands as well. Your salary will "likely" increase because of you entry level in the market.

beg borrow and steal to get into the housing market asap when you are young

-fish

:thumbsdown:

Housing historically returns 2% to 3%. That is less than inflation (historically in the low 3% range). That means, including inflation, your house value DROPS as you age in many cases. At best, you'll match inflation and your investment just is neutral. Housing historically has been a HORRIBLE investment. Compare that to stocks which historically have returned 10%-12%.

Plus, the tax savings is greatly exaggerated. Unless you are buying an expensive house or have a high interest rate, you really don't get that much tax savings. Add on thousands per year of real estate taxes, and the tax savings nearly vanish for many home buyers in all but the most expensive areas of the country.

A house isn't an investment, a house is your home. An investment is something you sell when it hits a high and buy back when it goes down. You don't do that with a house.

The biggest advantage of a house as an investment is leverage. Buying stocks on margin and you can maybe double what you can buy with your cash in hand. Buy a house on margin and you can easilly get 10x more house than what you have in cash on hand. But, why do you want a huge leverage on an investment that historically at best stays constant in value?

 

[otispunkmeyer]

my 2 mates just bought a dump in loughborough..ones still a student, the other is a student but is the manager of one of the local pools, but its really not that well paid or glamarous lol essentially theyre both broke, but they bought a house......took out a colossal mortgage and some financing from parents.

so yeah theyre in the dog house money wise, but it should pay off, house prices are rising, homes for sale in loughborough are like gold dust at the moment (if its not owned by the council or lived in by a native.....a lanlord owns it and students live in it) and when they are done... they will have zero problems getting tennants.

 

[Gunslinger08]

Originally posted by: 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?

Some people like to actually save money for the future. You end up with car payments, car insurance, utilities, property taxes, homeowner's association fees, food, clothing, entertainment, etc. which add up pretty quickly. After that you're looking at not a lot of money left over to save. I don't personally enjoy being house poor and living paycheck to paycheck.

 

[PingSpike]

We're looking to buy in hopefully a year to year and a half. We both got new jobs within the last year and managed to get 20K saved during our poorer years. Only debt is an auto loan for a the elantra we bought last year, which I suppose we could pay off if we really wanted too. I am hoping with a little help from my parents we'll be able to put together about 60K to afford the 20% down plus closing costs on a 250K home. 250K should be able to get us what we want...a house we can stay in and raise a family in.

I hate moving. I don't want to live in a condo because they suck. Home owners associations I will never want to be a part of. I just want our own space.

I've started researching some and looking...honestly the whole process scares me. I haven't figured out what the property taxes are going to do versus and tax deductions you get from the mortgage. I'm scared about the septic tank exploding in the first year when we'll likely be broke. And my wife would like to stay home for a few years after we have children we could change the equation later. I guess I shouldn't be so worried...others seem to manage to keep their head above water with worse circumstances then us. Its just a big step.

 

[BurnItDwn]

Originally posted by: 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 ?

I have just 3 reasons.
1. Fees and closing costs are not free.
2. I plan on selling within the next 2 or 3 years to buy something with a basement, and hopefully closer to work.
3. Procrastination

 

[BarneyFife]

Originally posted by: zephyrprime
Well, one obvious way is to get married. Then you have more combine income.

Yeah and then they get divorced in a few years and its a financial disaster.

 

[MercenaryForHire]

Originally posted by: dullard

Originally posted by: fisheerman
i don't care what anybody says if I was just getting out of college I would buy the biggest house in the best location that the bank would give me money on.

it will be the best investment you make in your life plus the huge tax advantages of owning a home. at your age i wouldn't worry about all the "market is falling" bs.

you aren't trying to time the perfect bottom of the housing crash and you have time on your hands as well. Your salary will "likely" increase because of you entry level in the market.

beg borrow and steal to get into the housing market asap when you are young

-fish

:thumbsdown:

Housing historically returns 2% to 3%. That is less than inflation (historically in the low 3% range). That means, including inflation, your house value DROPS as you age in many cases. At best, you'll match inflation and your investment just is neutral. Housing historically has been a HORRIBLE investment. Compare that to stocks which historically have returned 10%-12%.

Plus, the tax savings is greatly exaggerated. Unless you are buying an expensive house or have a high interest rate, you really don't get that much tax savings. Add on thousands per year of real estate taxes, and the tax savings nearly vanish for many home buyers in all but the most expensive areas of the country.

A house isn't an investment, a house is your home. An investment is something you sell when it hits a high and buy back when it goes down. You don't do that with a house.

The biggest advantage of a house as an investment is leverage. Buying stocks on margin and you can maybe double what you can buy with your cash in hand. Buy a house on margin and you can easilly get 10x more house than what you have in cash on hand. But, why do you want a huge leverage on an investment that historically at best stays constant in value?

Shut up, man, I want to buy his house at 50% when the bank forecloses on his stupid ass! :laugh:

- M4H

 

[V00DOO]

My cousin who works a teacher that makes $65K per year and single just purchased a $580K home in the greater Los Angeles area. He only has a 5% down and needed to get a second loan. The property tax is around $6K a year. I don't know how he's planning to pay any of this. I said he is freaking out of his mind but of course he refused to listen.

 

[KK]

Originally posted by: V00DOO
My cousin who works a teacher that makes $65K per year and single just purchased a $580K home in the greater Los Angeles area. He only has a 5% down and needed to get a second loan. The property tax is around $6K a year. I don't know how he's planning to pay any of this. I said he is freaking out of his mind but of course he refused to listen.

What a dumb ass. will he even be able to make a payment? what would the payment be on 580k minus the 5%, about 3.5-4K for just the P&I? and he be bringing home maybe 4.8K after taxes.

 

[slsmnaz]

Originally posted by: KK

Originally posted by: V00DOO
My cousin who works a teacher that makes $65K per year and single just purchased a $580K home in the greater Los Angeles area. He only has a 5% down and needed to get a second loan. The property tax is around $6K a year. I don't know how he's planning to pay any of this. I said he is freaking out of his mind but of course he refused to listen.

What a dumb ass. will he even be able to make a payment? what would the payment be on 580k minus the 5%, about 3.5-4K for just the P&I? and he be bringing home maybe 4.8K after taxes.

Better question is who loaned him the money? I make a bit more than that and couldn't ever afford those payments.

 

[hanoverphist]

Originally posted by: Demon-Xanth
Step #1:
Don't get a car that requires a $900/mo payment.

Step #2: pay off the loans

I make MUCH less and can get a considerably higher mortgage comfortably. I'm watching the housing market fall and waiting.

w3rd on that. i have a 230 payment on my truck, 300 student loan and virtually no credit card bills. even with the expense of 3 kids month to month i can afford to buy a house, all the utilities and still take them out for fun stuffz every weekend. its all about management, and 900 for a car is extreme.

 

[flunky nassau]

Wow I'm so jealous.

If I could find a 3 bedroom for 250K, I'd buy it RIGHT NOW.

I live in the Bay Area, so I'm not going to be able to find anything for less than 600K.

 

[Garet Jax]

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.

There are lots of ways to get into that house. The easiest is to rent our a room or two to supplement mortgage.

 

[everman]

Originally posted by: fisheerman
i don't care what anybody says if I was just getting out of college I would buy the biggest house in the best location that the bank would give me money on.

it will be the best investment you make in your life...

-fish

Look up historical statistics about the housing market, what goes up can also go down.

 

[SampSon]

Hey this thread is back.

People DECIDE what they want to afford.

 

[thegimp03]

Originally posted by: ColdFusion718

Originally posted by: maddogchen
HA! try affording a house in California on 65k a year.

Yeah..

Bay area home prices are just ridiculous. I have no clue as to how anybody can afford a house around here unless they're making $300K a year. Anything in a decent area that's not a shack will run you $500K-$1M.

 

[JEDI]

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.

rough rule of thumb if assuming no debts:
max 30yr fixed loan= 3x gross pay

so 65k = $195k

$30k downpayment means u can afford a $225k house.

As for how i can do it? I bought my $500k house 10yrs ago when it was worth $125k

Winter is the worst time to sell, thus a great time to buy. and buy this year since i expect housing to pick up next year. and the reason i expect housing to pick up is it's election year next year. Repubs want to win. Bush is going to stimulate the economy by increasing his deficit spending so people are flush with cash and happy. Happy people vote for whoever side is currently in power.

Basically Bush is going to sacrifice the future for short term gain and try to buy the Prez for the next repub.

 

[DVK916]

Originally posted by: funboy42
I have said it before and will say it again, need to move down here by me. Jobs, low taxes, and cheap homes.

Just look at what $24.9K will buy you, and no thats not a down payment, its full price.

I would rather live in Uganda that step 1 foot in that ****** hole town.

 

[Zap]

Summary:

Originally posted by: FoBoT
people want more than they can afford

Originally posted by: Joemonkey
Move where housing costs are cheaper?

Originally posted by: spidey07
The trick is to live below your salary and save like a freaking pack rat for 2-3 years. Then have 50K or so for a down payment.

Originally posted by: rdubbz420
buy condo...wait...sell. buy townhouse.....wait.....sell. buy house.........profit.

Originally posted by: Vic
$900 car and student loan payments? How about paying off your debt first?

Here's what worked for me:

1) Good credit.
2) Few loans (credit cards paid off monthly, $400/mo student loan, no car loans).
3) Moved from CA to WI (housing cheaper, cost of living cheaper).
4) Save enough for a down payment (we did 40%!!!)
5) Buy modestly (condo).
6) Live within means.