yogiii
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Post by yogiii on Mar 8, 2011 10:23:16 GMT -5
HCOLA - bought about 2.5x income but put down 20% so about 2x income. We've been paying down aggresively so after 3.5 years we're at about 1.3x income left on the loan. We should be on year 26 but down to 17/30 years left on loan
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wodehouse
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Post by wodehouse on Mar 8, 2011 10:32:46 GMT -5
By the way, I didn't buy based on some multiple of income, etc. Instead, I developed a large, intricately- related set of Excel spreadsheets that consisted of proposed budget while owning the house, income tax (and effect of mortgage interest deduction), etc. Then I ran various scenarios at which I felt comfortable with the monthly and annual cash flow (given sufficient reserves for home repairs, retirement savings, etc). This gave an "affordable mortgage payment amount" which I then back-calculated to get the related mortage principal based on 15-, 20-, 30- year loans at various interest rates. That plus cash available for downpayment gave me my personal "affordable home purchase price" far better than the online calculators. This house was at the higher end of my zone but given the pickings available...
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kdamron
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Post by kdamron on Mar 8, 2011 10:36:29 GMT -5
Right under 1.5X
MCOL
No stretch
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Gardening Grandma
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Post by Gardening Grandma on Mar 8, 2011 10:37:38 GMT -5
Our first home (in 1992) was $149K. That year, our combined earnings was $53500, so the house was nearly 3x our annual pay. We had no other debt, however. The first 3-4 years felt "tight" because there were so many things that seemed necessary right away. By four years later, our income was about $90K so it was much easier.
Our current home was over 3x as much as our annual income, BUT, we used an inheritance to pay cash for the land and used the proceeds from the first house (which we sold for $307K) to pay nearly 1/2 of the cost up front, so our mortgage was about 2X our income. Our current mortgage is a little over 1X our annual income.
Probably MCOL
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Post by ca on Mar 8, 2011 10:40:53 GMT -5
I haven't bought yet, but I'm in a very HCOL. The house I want will be at least $500k. I only make $120k or so alone, but if I get engaged/married that should go to near $200k, which would make it under 3x I hope.
I'm aiming to put 20% down, have about $50k saved for it, but I had $18k a year to that amount and not planning to buy for at least 2 years (hopefully house prices stabilize in my area rather than go up 5-10% a year ugh).
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Urban Chicago
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Post by Urban Chicago on Mar 8, 2011 11:03:51 GMT -5
Our current place was 2.5x income when we bought it. Right now it's around 2X income. We are in MCOL. I actually feel more stretched right now, mostly because we've had 2 kids since we bought the place.
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workpublic
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Post by workpublic on Mar 8, 2011 11:25:54 GMT -5
so 46K salary ain't gittin a house anytime soon.
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parker1b2
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Post by parker1b2 on Mar 8, 2011 11:45:35 GMT -5
Bought in 2007 at 3x our income in a HCOL. Put 20% down. Actually was able to get the house for 50k then the asking price because sellers had to sell.
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Deleted
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Post by Deleted on Mar 8, 2011 11:46:59 GMT -5
When we bought our current house, the purchase price was 5x our income and the mortgage was 4x our income (one income household). We had credit cards, car debt, and child support. I have no idea how we made it through those early years. I know we sold a lot of our toys. This was during the boom and we figured if things got bad, we could sell and still make a good bit. We never took out a HELOC, because we couldn't afford another payment. That turned out to be a good thing, because we are still right side up on our house, income increased, and expenses decreased.
ETA: It's a HCOL area.
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Deleted
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Post by Deleted on Mar 8, 2011 12:01:36 GMT -5
My first house was 2.5X my full-time job, but I was working retail as well. LCOL but my house was really close to the bottom of what you could buy a house in good condition not needing repairs ($115,000 in 2002) I wasn't stretched, but it was three or four years before I was comfortable quitting my second job.
My second house was more like 2X my full-time job (whose salary had risen) after the downpayment. Even lower COL since this was in a different area and an older house ($142,500 in 2006) I was definitely stretched, but didn't know it since I had a live-in bf. That's why I don't depend on my now DH's contribution but rather save them in a house account.
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Tiny
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Post by Tiny on Mar 8, 2011 12:05:50 GMT -5
1. I paid 1.7 x my gross at the time for my house. The mortgage amount was 1.3 x my gross at the time. I put down a bit more than 20% though. 2. MCOL 3. I "streched" by taking a 15 year mortgage - I felt like I had a pretty big mortgage payment. It never felt like my income caught up with mortgage - because I eventually had a HELOC payment (for fix ups) and my property taxes seemed to go up a couple hundred every year Back then I wasn't very financially savvy - if I could go back in time I'd tell myself to put down less and take the 30 year mortgage. It all worked out ok though because I didn't pay much interest for the HELOC (since I kept transfering to 0% no fee CCs!). I also used some of an inheritance in the DP - which kept me from frittering it away. I also managed to keep myself from frittering away alot of 'disposable' income by tying up so much in the house and by taking the 15 year loan. A key point is that I purchased well BEFORE the big run up in real estate prices. I currently have a paid for house that is worth more than I paid for it (including the loan interest and fix up expenses). Well, in theory, it's worth more My first foray into owning rental property - the Condo's sale price was about 1/2 my Gross. I have to keep myself from thinking of it as a 30 year long Car Loan.
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wewillsee
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Post by wewillsee on Mar 8, 2011 14:27:15 GMT -5
1. How many times was the purchase price of your current home vs your gross household income at the time of purchase? 2. HCOL or LCOL? 3. For those who stretched, how many years until your income caught up and things stopped feeling tight? 1. Bought fixer upper for $450,000 in early 2007, salary was $165,000. Did 100% financing. First mortage, 75% LTV, 6.25% fixed for 30 years, $2084/month. Second mortage, 25% LTV, 8.22% fixed for 30 years, $843, month. Taxes in 2007 were under $6,000, this year they will be over $8,000 annually. 2. HCOL. The schools are very good and the infrastructure related to public transportation highways makes this area attractive. However, I still commute nearly 3 hours per day to downtown. 3. Still stretched. The house was a fixer upper and we are only half way done. Still needs another $30,000 or so in work. When we were looking in 2007 I wanted to buy a fully updated house, not a fixer upper. However, even if we spent $100,000 more the homes still needed a fair amount of work. Last fall I refi'd the first into a 20 year mortgage at 4.75%. First mortgage pmt went up $17 a month. This was done under Obama's plan so no closing costs. Still can't refi the second because it is underwater and will be for a long time. I have stuck about $45,000 or so into fixing it up so far. Current market value is in the $370,000 to $390,000 range. In my opinion, the housing market is still inflated in most areas of the country. The old 3 times salary is usless when we are all paying so much more of our income towards state and local taxes, education/student loans, retirement, and energy.
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Post by kadee on Mar 8, 2011 14:49:15 GMT -5
Back in ancient times, 1970's, when I sold real estate...the way to figure what you could afford was no more than 25% of your take home pay for a house payment! Course, most of the houses were selling in the $10,000, $20,000 & $30,000 range back then! Sold a 2 story, 4 br, 2 bath, 2 car garage & about 1 acre lot for $32,500! It had a large kitchen (eat in or not) dr, lr, parlor and several fireplaces too! Oh, and a porch that went fully around 2 sides & lots of established landscaping.
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telephus44
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Post by telephus44 on Mar 8, 2011 15:26:51 GMT -5
We bought in 2008. Purchase price was 2x gross annual income, mortage was 1.8X income. We put down 10%.
We live in a MHCOLA (medium high).
We now make a little more money than 3 years ago, but not enough to feel like the mortgage payment has gotten cheaper.
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Post by rumples on Mar 8, 2011 19:21:42 GMT -5
4X base gross HCOLA Put enough down that it's never been a stretch.
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formerexpat
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Post by formerexpat on Mar 8, 2011 21:39:44 GMT -5
28% and 36% are much more important than a multiple of income. You may not want to take a 3x loan when rates are >7% but when they are <5%, a 3x loan isn't nearly as bad.
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Waffle
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Post by Waffle on Mar 8, 2011 21:53:03 GMT -5
1st house was a little less than 1.5X salary. Last house was about 2.6X. I don't remember the two in between.
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dcmetrocrab
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Post by dcmetrocrab on Mar 9, 2011 0:10:29 GMT -5
Thanks for the responses! The thread wasn't meant to debate how outdated the rule of thumb was nor to support it, but to see what the collective YM populace ended up with knowing what we all know. So after that's all said and done, looks like people who aim for a comfortable balance end up landing around 1.5 to 2x for the mortgage/PITI as I was thinking I'd see.
I'm in a HCOL area, so I'm hoping more of those guys chime in. I'm fully expecting the multipliers to be higher (with consequently higher downpayments and/or beans and rice lifestyle for the first several years).
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Sum Dum Gai
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Post by Sum Dum Gai on Mar 9, 2011 0:44:13 GMT -5
I don't know how you'd describe our cost of living, but we bought a house for $280k and we make $100k. I guess we live a somewhat beans and rice lifestyle. I mean, I don't think we scrimp and save really, but when I put up the thread asking what people's budget would look like with my salary there was a lot of things on there like making double mortgage payments, doing blow off of hookers, lots of international travel, etc. that we definitely don't do. Well, except that second one, but only on special occasions in Vegas.
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achelois
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Post by achelois on Mar 9, 2011 8:55:18 GMT -5
I bought a house that was 72% of one year's income and put 20% down. It is a 3 BR, 2.5 bath with bonus room and 2 car garage. I am a single person.
I live a bit east of the triangle in NC. I guess it would be considered a MCOL.
I don't have to scrimp. I hate scrimping; had to do it most of my life.
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spartan7886
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Post by spartan7886 on Mar 9, 2011 9:40:55 GMT -5
Our house was about 1.3x.
We live in a fairly LCOLA.
Our payments are actually less than they were in the apartment, although once you add in the additional insurance, yard work, etc, it is probably about the same.
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jkapp
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Post by jkapp on Mar 9, 2011 10:51:22 GMT -5
Purchase price: about 3.47x my income
Mortgage: about 2.77x my income (the mortgage ended up being about the same as my rent at the time)
Medium COL area - high property taxes and fairly high state income and sales taxes but lower costs on many other categories.
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hoops902
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Post by hoops902 on Mar 9, 2011 12:25:32 GMT -5
1. 2x my individual gross income (single when I bought it) 2. LCOL area 3. Didn't stretch, paid cash.
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ihearyou2
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Post by ihearyou2 on Mar 9, 2011 12:40:44 GMT -5
Purchase price was 3.5X gross income, after 20% down it was less then 3X. HCOLA most homes sell for 650K and up even today. With low interest rates it feels like a bargain, we know people that pay rent more then us for smaller properties with property tax and insurance included.
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kgb18
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Post by kgb18 on Mar 9, 2011 13:24:35 GMT -5
I guess we're lucky that we live in a pretty LCOL area. For a house that was roughly equal to our income we got a recently remodeled house with three bedrooms, two full baths and a fenced in backyard. The rooms aren't large and we don't have a garage, but the price was right, especially for a starter home.
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Deleted
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Post by Deleted on Mar 9, 2011 16:11:43 GMT -5
Purchase was 2.8x annual income. We put 3.5% down, interest rate of 5.5% in 2009. Me and my Husband had always thought we wouldn't be able to afford a home until we were much older because at the height of the market the tiny 800 sq ft 2bd, 1bath 1948 build homes in our city were running close to 500k. In 2009 we had grown tired of apartment living and decided to look into renting a house, still being under the impression that we could not afford to purchase. What we discovered is that the cost to rent one of these tiny old houses was equal to the rents being charged. So we hired a Realtor and purchased a home for $280k put 3.5% down with an FHA loan. The total PITI is $2020. The payment is isn't really a stretch. It seems like most people we know pay closer to 50% of their take home on housing, and even more live in multi-family or multi-generation in these tiny homes to make it affordable. Me and my husband are an anomaly. 29 years old, 2 years into a 30 year mortgage, no kids and 100k in income. Looking at the gross vs. net is important. Gross our PITI payment is only a little under 25%, but we are heavily taxed DINKS so it is a little under 35% of our take home pay.
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973beachbum
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Post by 973beachbum on Mar 9, 2011 16:44:09 GMT -5
I live in what I think of as a HCOL area, maybe not NYC but not that far away.
The price of a small house here starts at $250K. And that is probably no more than a 3/1 that needs some work. (read a lot! ) The average incomes are around $58K a household. So even if someone makes $100K a year, which some do but not the majority, the minimum would be 2.5 X yearly salary. Five times is actually pretty common.
Our first house was 3 times and this one is 4.5. We are just used to housing sucking up a greater portion of our income than maybe other areas of the country. We also probably have a more rice and beans lifestyle. Al hough obviously it does feel less tight than a couple of years ago.
If there are any NYC people here isn't it common there for people to spend up to 50% of their income each month on housing?
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