Reply to Is 300k the bare minimum income to buy a single family now?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Assuming you can put 20% down on a house, [b]a 420,000 loan at ~5.5% interest over 15 years is $3,400/month just on the principle.[/b] Add in another monthly $150 for insurance and $500 for taxes (which is a very low estimate in any locality that isn’t cheap) that is over 4k/month mortgage.

A family making 100k/year is bringing home maybe 7k/month tops after taxes and health premiums and very modest retirement contribution. 
[/quote]

Let's get the spelling and arithmetic right.

A 20% down payment on a $500,000 house is $100,000, leaving a $400,000 [i]principal[/i] loan balance.

Now 5.5% of $400,000 is $22,000/year or almost $2k/month.  A 15-year amortizing mortgage payment would be $3,268.33/month.

Online paycheck calculators show that a a pre-tax annual salary gives a paycheck of around $6,600/month.

The Bureau of Labor Statistics shows that the average family spends around one-third of budget on housing. One-third of the paycheck would cover interest, but it would take half the paycheck to cover a 15-year payment.  I have not even considered taxes, insurance, and maintenance.

Here is the tricky part.  I figure the long-run real interest rate is around 3%.  With higher interest rates, your house tends to appreciate at the rate of inflation.  But there is also taxes, insurance, and maintenance.  So I think the real cost of home ownership is around 6% per year, or .5% per month.  That is $2,500/month on a $500,000 house, or 38% of of the $6,600 paycheck.  That is getting tight.  D.C. is a high-tax area, both income and property taxes.

Theoretically, this homeowner might afford the house in a low-tax area if the homeowner does a lot of the maintenance and is "house poor".  This will almost certainly require digging into savings to cover insurance and property taxes in addition to the mortgage.  In the long-run, the house appreciation will repay it, but you should plan on living frugally for a decade.[/quote]

I don’t see how the mortgage payment would be so low at 5.5%. We have a 15 year mortgage at 2.375% that we took out in 2021 on around 400k.  Our payments are $3900 a month (including taxes and insurance). [/quote]

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