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When can you "afford" a house?

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For us it was when we could afford to put 20% down and the payments were less than 50% of our take home pay. Looking back we could have afforded more but since it was our first house we didn't have the experience to know.
 
ghost recon88 said:
Idk, we have some nicer houses here http://www.zillow.com/homedetails/960-Vista-Dr-Bay-Harbor-MI-49770/2112244012_zpid/

Detroit is not the standard or example for the whole state. By the way if you want a walk through of that house, I can have my agent schedule one.
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So taking a look around that area - I see ~80 properties on the market asking over $300K, (That seems to be the upper end of the market there) and 6 sales of homes over $300K in the past year. I see about 30 places in that price bracket that have been on the market more than a year, and a few at more than 2 years.

That doesn't look like a healthy market.

~edit~ Even at the low end that area looks ugly. 57 properties available for under $200K, and only 16 sold in the past 12 months.
 
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MustISO said:
For us it was when we could afford to put 20% down and the payments were less than 50% of our take home pay. Looking back we could have afforded more but since it was our first house we didn't have the experience to know.
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50% of your net?

Most banks will not lend with 20% or not at over 36% gross including all credit.

A normal ratio is about 28% gross for a mortgage payment.
 
Belegost said:
So taking a look around that area - I see ~80 properties on the market asking over $300K, (That seems to be the upper end of the market there) and 6 sales of homes over $300K in the past year. I see about 30 places in that price bracket that have been on the market more than a year, and a few at more than 2 years.

That doesn't look like a healthy market.
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It's been for sale for over a year, and had at least 3 price drops. :hmm:
 
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Well if you don't buy a house because you think a loan is bad, you end up paying for an apartment. Why are you paying for that apartment each month? Right, because you couldn't afford to buy it. So you're still essentially still paying for something you don't own anyway.
 
I'm of strong belief that one should not use credit for stuff unless it's an emergency or something you NEED. You need a place to live and the average person is never going to have 200k just lying around to buy it cash.

When I bought my house my determining factor was the mortgage preapproval. I would make sure that whatever the bank says I can afford, that I go lower than that. They said 200k, so I aimed for 150k range. Ended up buying my house for 165k. Go with minimum payments, 25 or even 30 year mortgage, and once you have a better feel for what the finances are like then you start making bigger payments. My base payment is 400 biweekly but I actually pay 600. It's crazy how much of that money goes straight to interest too. More than half. When you make extra payments it goes straight on the principal.

Before I bought I also sat down with my parents to get an idea of all the other expenses I can expect like hydro, gas, insurance etc... so I can factor all that in when deciding on what I can afford.
 
alkemyst said:
Much like Wisconsin, unless you are on the bay or close to it; you ain't really living.

This is what you need:

http://www.floridamoves.com/propert...-Hillsboro-Mile-Hillsboro-Beach-FL-33062.aspx
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On second thought... you should genuinely being giving advice. The general rule on this forum would be to do the exact opposite. We can take a survey 5 to 10 years later to see how much people have prospered. It wouldn't be a question of if they have prospered. We would just need to find out how much they have prospered.
 
Tweak155 said:
I honestly don't think I know what you're getting at here. I made the comparison, someone pointed out why the comparison was flawed, and I agreed with them. Thus I agreed my comparison was flawed, but then you interjected additional reasoning behind it. I just added to your reply.

What's with the caps man?
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Maybe he flawed in reading and comprehension and will admit the flaw in a future post.
 
I think rentals are pretty attractive in the Bay Area, due to crazy purchase prices, and slightly less crazy rental prices for similar properties. If you count how much equity you are building, it's not much compared to renting and investing the down-payment.
 
Red Squirrel said:
I'm of strong belief that one should not use credit for stuff unless it's an emergency or something you NEED. You need a place to live and the average person is never going to have 200k just lying around to buy it cash.

When I bought my house my determining factor was the mortgage preapproval. I would make sure that whatever the bank says I can afford, that I go lower than that. They said 200k, so I aimed for 150k range. Ended up buying my house for 165k. Go with minimum payments, 25 or even 30 year mortgage, and once you have a better feel for what the finances are like then you start making bigger payments. My base payment is 400 biweekly but I actually pay 600. It's crazy how much of that money goes straight to interest too. More than half. When you make extra payments it goes straight on the principal.

Before I bought I also sat down with my parents to get an idea of all the other expenses I can expect like hydro, gas, insurance etc... so I can factor all that in when deciding on what I can afford.
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I had thought the housing/lending market was toughened up a bit..then I went to get my mortgage and was told if I asked for it, I could probably have got over $300k. 😱

I think I was making ~$40k at the time...there's no way in hell I could've pulled that off. I bought my house for $140k.
 
jlee said:
I had thought the housing/lending market was toughened up a bit..then I went to get my mortgage and was told if I asked for it, I could probably have got over $300k. 😱

I think I was making ~$40k at the time...there's no way in hell I could've pulled that off. I bought my house for $140k.
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They called these liar's loans (on the flip side these same people are now playing liar to get out of the loan).

What was happening is they were pushing SISA loans (Stated Income/Stated Asset) to the average joe who shouldn't need to 'state' anything since they are usually getting W2,1099 or another kind of trackable income, plus most had just a checking and savings account + maybe a retirement account.

I was working for the mortgage industry during this time (in IT after 1999 and prior on the contract management/loan sale side back into the 80's), we had a waiter at a Chili's come through stating an income of $120k a year and assets in the $250-300k range, he was 22? We passed on that loan much to the sales manager's anger. The kid got someone to write the loan and got a reverse interest only loan.

He was hoping to strike it rich by flipping the property prior to the full payment being due...it didn't work out and the property was not only vacated, but they literally had an auction there and even sold the copper piping/fixtures.

We were a home-builder owned mortgage company. A top 5 national homebuilder. There were ton's of these stories.

SISA loans are for million/billionaires or those close to it with income and assets all over the place. You can do an easy verification on them (sometimes as easy as 'Celebrity Net Worth' I shit you not) and know they are good for it with a quick credit check to verify they are not taking out loans everywhere at once.

A lot of that contributed to the boom and bust and why there are beautiful homes and condos just rotting away. In S. Florida if the A/C is not being ran, the humidity destroys a dwelling very quickly and these homes were not sitting on very valuable pieces of property (zero lot lines)...the construction value is pretty much the entire value of the home.

Places like Palm Beach, Ocean Ridge, Manalapan, just a simple 1/4 acre lot can be a million dollars or more...in those places the land value drives the total value, some buy and knock down perfectly good mansions to just replace them.
 
jlee said:
I had thought the housing/lending market was toughened up a bit..then I went to get my mortgage and was told if I asked for it, I could probably have got over $300k. 😱

I think I was making ~$40k at the time...there's no way in hell I could've pulled that off. I bought my house for $140k.
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Yeah some banks are a bit too generous. Definitely can't go 100% by that and kind of have to look at the big picture such as what all the other expenses will be.

Whats crazy though is all the newer houses are going for 200k+ now. There seems to be nothing in the 100k market anymore. I'm glad I bought when I did. Even my house is worth well over 200k now not counting the work I did on it.
 
I'm closing on a house this weekend and the mortgage payment for the next 5 years (of 25 years mortgage) will be 18.25% of my gross income. Like the OP I think that the house is too expensive and perhaps I can't afford it, because I have to drain my trading account to buy the house and for renovation.

[add]
The bank was quite insane because they was willing to give me a mortgage up to 32% of my income.
 
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Red Squirrel said:
Yeah some banks are a bit too generous. Definitely can't go 100% by that and kind of have to look at the big picture such as what all the other expenses will be.

Whats crazy though is all the newer houses are going for 200k+ now. There seems to be nothing in the 100k market anymore. I'm glad I bought when I did. Even my house is worth well over 200k now not counting the work I did on it.
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A lot of people with houses in the $100-200k range can't afford to sell yet.
 
iGas said:
I'm closing on a house this weekend and the mortgage payment for the next 5 years (of 25 years mortgage) will be 18.25% of my gross income. Like the OP I think that the house is too expensive and perhaps I can't afford it, because I have to drain my trading account to buy the house and for renovation.

[add]
The bank was quite insane because they was willing to give me a mortgage up to 32% of my income.
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Mine is 16.6% of my pre-roommate-income gross (including taxes, insurance, and PMI) and it's certainly doable, but I also have no car payments, no debt to speak of, and a 2 mile commute. Everyone's situation will be different. I think it was almost 24% of gross when I bought my house, and that was tight but doable. I like living with other people (generally, anyway) so for ~50% of the time I've been renting room(s) out.
 
iGas said:
I'm closing on a house this weekend and the mortgage payment for the next 5 years (of 25 years mortgage) will be 18.25% of my gross income. Like the OP I think that the house is too expensive and perhaps I can't afford it, because I have to drain my trading account to buy the house and for renovation.

[add]
The bank was quite insane because they was willing to give me a mortgage up to 32% of my income.
Click to expand...

28% is a typical/historic loan amount (of Gross income), 36% sometimes pushing a little higher is fine if that is the only planned debt one will have.

These ratios have worked for a long time to keep homeowners out of the red.
 
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