Salary vs House Cost

[Anonymous]

Anonymous wrote:lol, with interest rates at 3.5%, there is no reason to think 3X is a good rule. these are historically low interest rates. some here are extremely conservative financially.

but just remember that Maryland has very high closing costs (Virginia pretty high too compared to the national average), so it is very costly to change houses. So you are not buying the house you will need/want for the next 3-5 years, you are buying the house you will need/want for the next 15-20 years. Your income will not be fixed over that period. Depending on your career and future inflation, it could/should go up considerably.

How much are closing costs in Maryland as a percentage of the home's sale price? Are buyers expected to pay for all of the closing costs? Thanks!

[Anonymous]

HHI of 200k, house 500k, put 20% down, no debt other than 2k a month for daycare, 60k in savings, maxing out 401ks, not saving for college until daycare payments are gone. Mortgage and PMI $2400. We could pay the mortgage on one salary if we had to. We feel comfortable with the payment, more would have given us worry.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We just bought with a mortgage three times the higher of our two incomes.

Wow, if we did that, we'd be limited to a mortgage of about $500k.

And?

I think some of us are laughing at the "limited" comment.

Why? If we included both incomes, we'd be able to afford a mortgage of nearly twice that according to the 3x rule. It seems mad to exclude an entire income.

and your stunning lack of connection to any reality other than your own continues...

You do realize that there are people in this area who can't even afford a mortgage of $500K, right? And we actually buy houses, too! Just generally not in close in ritzy neighborhoods populated by the $300K and over crowd. Doesn't mean that we also don't enjoy good schools and nice neighborhoods, though.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We just bought with a mortgage three times the higher of our two incomes.

Wow, if we did that, we'd be limited to a mortgage of about $500k.

And?

I think some of us are laughing at the "limited" comment.

Why? If we included both incomes, we'd be able to afford a mortgage of nearly twice that according to the 3x rule. It seems mad to exclude an entire income.

and your stunning lack of connection to any reality other than your own continues...

You do realize that there are people in this area who can't even afford a mortgage of $500K, right? And we actually buy houses, too! Just generally not in close in ritzy neighborhoods populated by the $300K and over crowd. Doesn't mean that we also don't enjoy good schools and nice neighborhoods, though.

well, according to this thread, people with HHI of $300K+ are living in small dumpy houses OR they bought before 2003.

[Anonymous]

Anonymous wrote:

well, according to this thread, people with HHI of $300K+ are living in small dumpy houses OR they bought before 2003.

or possibly they value things other than having a million dollar home with the mortgage to match?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We make around 260k. Mortgage is around 360k. 15 year loan. Kids in aftercare/public school. I don't understand how people afford more. I still feel like we are not saving enough for college.

lol. where do you spend your money? certainly not on housing, though you are choosing much higher payments b/c of a 15 year loan. what kind of cars do you drive? where do you vacation? and how much are you saving for college? too much?

Yes the 15 year explains some of it. Save 1000/month for college (two kids). Paid off cars. Cheap vacations.

so lets guess your mtg payment is $3K/month. you are saving way too much for college, but that is another $1K/month. no car payment. Your take home pay, after health insurance, etc., is probably around $14K/month. So even if you both max out 401Ks, you have PLENTY of money. what are you possibly talking about?

Take home after 401K maxand health care is 13,000. Yeah, I am not sure where it all goes. But we have no extravagent expenditures. And we do save, but not more than 2k a month...So maybe I should track all of our expenses for a month. I'm just not sure what we need to/could cut back on. There are no obvious large expenses.

Also, all of the college calculators say that we should be saving significantly more than we are currently saving.

[Anonymous]

$135K HHI

$400K mortgage

[Anonymous]

Anonymous wrote:OP, do a mortgage calculator. they will tell you can afford a house of about $1.4MM

OP here. Holy crap that is a lot of money. That cannot be right!!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, do a mortgage calculator. they will tell you can afford a house of about $1.4MM

OP here. Holy crap that is a lot of money. That cannot be right!!!

Once you make $300K plus or so, its not like all of your expenses go up by the same percentages. utility costs are generally the same as the $100K HHI. college savings are generally the same. car payments the same, vacation costs close to the same. you can put a lot more of our money to housing and never miss it. that is what I find so puzzling.

i.e., if you make $30K/month but have a mtg payment of $7K/month, you still have a shitload of money left over to live off of. The worry is always what happens if you lose your job.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, do a mortgage calculator. they will tell you can afford a house of about $1.4MM

OP here. Holy crap that is a lot of money. That cannot be right!!!

you have to pay to play

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, do a mortgage calculator. they will tell you can afford a house of about $1.4MM

OP here. Holy crap that is a lot of money. That cannot be right!!!

We make over $300K and while we *technically* could afford a $1.4M house, we'd be really crunched. Instead, we put 20% down on an $850K house (well after 2003- and it's not large but certainly not a dump). We have some wiggle room with our expenses each month, but not a ton. If we were to increase our mortgage to near $1M, it would be really tight. I would never encourage someone with our income to buy that much house.

[Anonymous]

If the home cost should be no more than 3x the salary, then, doesn't the home prices seem out of whack with the current salaries?

Let me put that another way. Historically, a normal RE market reflects this ratio. Sometimes, it is well below that (depressed) and sometimes well above that (overheated). RE markets tend to find equilibrium at about the 3x income ratio. Remember, interest rates are being held down, deliberately, by a central bank (the Fed) that is buying massive amounts of bonds (most of them likely never to be repayed) with taxpayer (our) money. It is not sustainable and will not be sustained. Interest rates will rise, perhaps drastically, and we'll get back to 3x earnings eventually, probably below that, before the cycle starts again.

If you borrow five times income at 3.5% to for your house, the buyer who comes after you, with your income level, can only borrow half of what you did should rates go to 7% and still "afford" the payments. And 7% is still below the historical rate for 30 year fixed paper. So think about who you will eventually sell to before jumping in.

[Anonymous]

Anonymous wrote:$135K HHI

$400K mortgage

We're similar. 136 k HHI. 410k mortgage.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, do a mortgage calculator. they will tell you can afford a house of about $1.4MM

OP here. Holy crap that is a lot of money. That cannot be right!!!

We make over $300K and while we *technically* could afford a $1.4M house, we'd be really crunched. Instead, we put 20% down on an $850K house (well after 2003- and it's not large but certainly not a dump). We have some wiggle room with our expenses each month, but not a ton. If we were to increase our mortgage to near $1M, it would be really tight. I would never encourage someone with our income to buy that much house.

where does all of your money go?

[Anonymous]

Anonymous wrote:

If the home cost should be no more than 3x the salary, then, doesn't the home prices seem out of whack with the current salaries?

Let me put that another way. Historically, a normal RE market reflects this ratio. Sometimes, it is well below that (depressed) and sometimes well above that (overheated). RE markets tend to find equilibrium at about the 3x income ratio. Remember, interest rates are being held down, deliberately, by a central bank (the Fed) that is buying massive amounts of bonds (most of them likely never to be repayed) with taxpayer (our) money. It is not sustainable and will not be sustained. Interest rates will rise, perhaps drastically, and we'll get back to 3x earnings eventually, probably below that, before the cycle starts again.

If you borrow five times income at 3.5% to for your house, the buyer who comes after you, with your income level, can only borrow half of what you did should rates go to 7% and still "afford" the payments. And 7% is still below the historical rate for 30 year fixed paper. So think about who you will eventually sell to before jumping in.

more accurate ratio is compared to rents. prices are very low now by any historical measure.