Who can afford 800K-1M homes? Genuine Curiosity!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
A sub.300k income and 700k mortgage is irresponsible

What an ignorant blanket statement to make. Come on.

What is ignorant is a sub 300k income and a 700k mortgage. However avearge Americans are not exactly known for making sound financial decisions.As illustrated by all of the short sales and foreclosures.

This should be obvious, but since it isn't: For some people, it is irresponsible. For some people, it isn't. It depends entirely on the specific situation. The short sales and foreclosures are much more about people borrowing 100% and taking ARMs for houses that were vastly overvalued; not nearly the issue in DC (especially DC proper) that it is in bubble cities like Las Vegas, Phoenix, etc. And banks aren't doing that anymore--you have to have 20% down, great credit, and evidence of salary to support the mortgage to get a jumbo loan these days.

[Anonymous]

Also think about it this way. Once you reach a certain income spending 40-50% on housing isn't that big of a deal.

If I make 100k a year spending 50% of my housing would leave me only 50k to live off of.

If I have 250k a year spending 50% of my income would leave me 125k a year to live on.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
A sub.300k income and 700k mortgage is irresponsible

What an ignorant blanket statement to make. Come on.

Agree- an assessment about what's financially prudent depends on a careful evaluation of an individual household's finances.

Given the high housing costs in the DC area, a front-end ratio (percentage of gross monthly income to housing costs, standard measure to assess financial eligibility for mortages) of 28-33% is entirely reasonable. Assuming it works with your back end ratio (% to total debt obligations), a sub-300k household can responsibly service a mortage of 700k.

A 30 year fixed jumbo at 3.875 would yield a PITI payment of around $4050 which could potentially be affordable to household incomes well below $300k assuming low levels of other debt.

If you are not comfortable with it then you're lucky no one is going to force you to take out a mortgage of that size. I work alongside plenty of professionals with 200-300k HHIs with $700k range mortgages. Most of them have one or more graduate degrees and are in professions with very low unemployment levels and have long-term income growth potential- they are perfectly responsible in taking on mortgage debt of this size after they have been carefully vetted by a lender.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
A sub.300k income and 700k mortgage is irresponsible

What an ignorant blanket statement to make. Come on.

Agree- an assessment about what's financially prudent depends on a careful evaluation of an individual household's finances.

Given the high housing costs in the DC area, a front-end ratio (percentage of gross monthly income to housing costs, standard measure to assess financial eligibility for mortages) of 28-33% is entirely reasonable. Assuming it works with your back end ratio (% to total debt obligations), a sub-300k household can responsibly service a mortage of 700k.

A 30 year fixed jumbo at 3.875 would yield a PITI payment of around $4050 which could potentially be affordable to household incomes well below $300k assuming low levels of other debt.

If you are not comfortable with it then you're lucky no one is going to force you to take out a mortgage of that size. I work alongside plenty of professionals with 200-300k HHIs with $700k range mortgages. Most of them have one or more graduate degrees and are in professions with very low unemployment levels and have long-term income growth potential- they are perfectly responsible in taking on mortgage debt of this size after they have been carefully vetted by a lender.

this is us to a tee. So we have 8K to live off per month after housing costs. pity us!

[Anonymous]

Anonymous wrote:Also think about it this way. Once you reach a certain income spending 40-50% on housing isn't that big of a deal.

If I make 100k a year spending 50% of my housing would leave me only 50k to live off of.

If I have 250k a year spending 50% of my income would leave me 125k a year to live on.

Well, and also: A salary of under $300K and a mortgage of over $700K doesn't equal paying half of salary to mortgage. Or even 40%.

We have HHI of just under $300K and mortgage of $750K, and our payments are less than 20% of our gross income, less than a third of our take home (after maxing out 401k). 30 years at crazy-low rate!

[Anonymous]

I work in foreclosures I daily see people with 700K mortgages getting thrown out of their homes despite their 250K salaries. Looking at people's financials, most can at MOST sustain their expenses for 3 months after a job loss. Overwhelming all of these people losing their homes have kids. They are digging into their retirements just to stay aflot. I think people severely underestimate what happens when someone gets sick or loses their job, only to have to take one for less money.

People get crushed with taxes, utilities, and a certain lifestyle they are maintaining. They are living a lie, lying to themselves and eveyone else.

Being in banking, truly, the solid people taking out 700K mortgages actually have incomes in the mid 500s, few and far between do we see people riding the edge of their front and back end ratios. You are certainly NOT in the majority if you have a sub 300K income and a 700K mortgage, you are the exception to the norm.

[Anonymous]

Anonymous wrote:I work in foreclosures I daily see people with 700K mortgages getting thrown out of their homes despite their 250K salaries. Looking at people's financials, most can at MOST sustain their expenses for 3 months after a job loss. Overwhelming all of these people losing their homes have kids. They are digging into their retirements just to stay aflot. I think people severely underestimate what happens when someone gets sick or loses their job, only to have to take one for less money.

People get crushed with taxes, utilities, and a certain lifestyle they are maintaining. They are living a lie, lying to themselves and eveyone else.

Being in banking, truly, the solid people taking out 700K mortgages actually have incomes in the mid 500s, few and far between do we see people riding the edge of their front and back end ratios. You are certainly NOT in the majority if you have a sub 300K income and a 700K mortgage, you are the exception to the norm.

you do not work in banking. this post is a lie.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I work in foreclosures I daily see people with 700K mortgages getting thrown out of their homes despite their 250K salaries. Looking at people's financials, most can at MOST sustain their expenses for 3 months after a job loss. Overwhelming all of these people losing their homes have kids. They are digging into their retirements just to stay aflot. I think people severely underestimate what happens when someone gets sick or loses their job, only to have to take one for less money.

People get crushed with taxes, utilities, and a certain lifestyle they are maintaining. They are living a lie, lying to themselves and eveyone else.

Being in banking, truly, the solid people taking out 700K mortgages actually have incomes in the mid 500s, few and far between do we see people riding the edge of their front and back end ratios. You are certainly NOT in the majority if you have a sub 300K income and a 700K mortgage, you are the exception to the norm.

you do not work in banking. this post is a lie.

Agreed. i don't believe that for a second. Plus, he/she can't spell "afloat"

[Anonymous]

Anonymous wrote:Also think about it this way. Once you reach a certain income spending 40-50% on housing isn't that big of a deal.

If I make 100k a year spending 50% of my housing would leave me only 50k to live off of.

If I have 250k a year spending 50% of my income would leave me 125k a year to live on.

+1, after a certain income what more do you need? You could go crazy and upgrade the japense luxaries to german and start eating exclusively at whole foods. We chose not to.

[Anonymous]

and it depends on your job field, if you are in a high demand industry such as IT software or medical sales which average about 120-150k for non managerial jobs you are in good shape if you lose your job. Personally I have never had to wait longer than 1-2 weeks for a job. Some people who are in foo foo jobs that are not in demand have to wait months to find one in that pay range 120-150k.

[Anonymous]

the key thing, to me, is not so much the income to debt ratio. lenders are pretty conservative now, and they are still approving loans for those ratios. those ratios are very doable. You have plenty of money to live off after housing costs. The worry is if you lose your job, but that is a worry for most no matter the income or house cost.

The key things are (i) putting enough money down, (ii) getting super low interest rates, (iii) having a stable job and (iv) having cash savings for 6 months plus. If you do those things, then you are fine.

[Anonymous]

Anonymous wrote:the key thing, to me, is not so much the income to debt ratio. lenders are pretty conservative now, and they are still approving loans for those ratios. those ratios are very doable. You have plenty of money to live off after housing costs. The worry is if you lose your job, but that is a worry for most no matter the income or house cost.

The key things are (i) putting enough money down, (ii) getting super low interest rates, (iii) having a stable job and (iv) having cash savings for 6 months plus. If you do those things, then you are fine.

Exactly, 100% right.

[Anonymous]

Anonymous wrote:

Anonymous wrote:the key thing, to me, is not so much the income to debt ratio. lenders are pretty conservative now, and they are still approving loans for those ratios. those ratios are very doable. You have plenty of money to live off after housing costs. The worry is if you lose your job, but that is a worry for most no matter the income or house cost.

The key things are (i) putting enough money down, (ii) getting super low interest rates, (iii) having a stable job and (iv) having cash savings for 6 months plus. If you do those things, then you are fine.

Exactly, 100% right.

I would add buying a house at those price-points putting a premium on location matters if you ever need to sell your home quickly due to job loss or change in circumstances, i.e. the 2500 square-footer for 900k in N Arlington will probably turn over faster than the 10,000 sq foot mansion in Chantilly for the same price.

We've had a few friends in close-in desirable areas who needed to relocate quickly and were able to sell their homes in these price ranges very quickly over the last couple years-- and yes they were all sub-300 folks.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:the key thing, to me, is not so much the income to debt ratio. lenders are pretty conservative now, and they are still approving loans for those ratios. those ratios are very doable. You have plenty of money to live off after housing costs. The worry is if you lose your job, but that is a worry for most no matter the income or house cost.

The key things are (i) putting enough money down, (ii) getting super low interest rates, (iii) having a stable job and (iv) having cash savings for 6 months plus. If you do those things, then you are fine.

Exactly, 100% right.

I would add buying a house at those price-points putting a premium on location matters if you ever need to sell your home quickly due to job loss or change in circumstances, i.e. the 2500 square-footer for 900k in N Arlington will probably turn over faster than the 10,000 sq foot mansion in Chantilly for the same price.

We've had a few friends in close-in desirable areas who needed to relocate quickly and were able to sell their homes in these price ranges very quickly over the last couple years-- and yes they were all sub-300 folks.

agreed with the sentiments, but not aware of the proverbial 10,000 sf mansion in chantilly. maybe leesburg? but, I hear you ... my $950K house in Vienna, bought in 2006 unfortunately, has held fairly steady, but with the rates going so much lower the house has actually gotten much more affordable even though our incomes have been painfully flat over that period. so much so, that I went to a 15 year mtg.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I work in foreclosures I daily see people with 700K mortgages getting thrown out of their homes despite their 250K salaries. Looking at people's financials, most can at MOST sustain their expenses for 3 months after a job loss. Overwhelming all of these people losing their homes have kids. They are digging into their retirements just to stay aflot. I think people severely underestimate what happens when someone gets sick or loses their job, only to have to take one for less money.

People get crushed with taxes, utilities, and a certain lifestyle they are maintaining. They are living a lie, lying to themselves and eveyone else.

Being in banking, truly, the solid people taking out 700K mortgages actually have incomes in the mid 500s, few and far between do we see people riding the edge of their front and back end ratios. You are certainly NOT in the majority if you have a sub 300K income and a 700K mortgage, you are the exception to the norm.

you do not work in banking. this post is a lie.

Agreed. i don't believe that for a second. Plus, he/she can't spell "afloat"

And why exactly does that make a difference? Spelling doesn't have anything to do with math.