On the “Your Money” message boards over on MSN Money, there has been a “Please Explain how Folks Afford these Homes” discussion going on for the past few days.I, myself, often wonder that exact same thing. You know, seeing people, even a few years younger than me and my wife moving into the new developments full of McMansions with 3-car garages, finished basements, and 30 foot ceilings in the entryway. Where did I go wrong? Did I make a wrong turn somewhere?
Once you make your way through the typical “Get a better job” or “Move somewhere cheaper” comments that some of the knuckle-draggers over there post in every single thread, there are some pretty decent real world examples among the responses.
One of the eye openers for me was that a number of people whole-heartedly agreed that, for instance, “a $267k home on a $100k income is quite affordable”.
Um… it is?
My first response to that, and a few other posters mentioned it as well, is that after taxes, a $100k income is really only around $60k. On top of that, where I live, insurance and property taxes add an additional $500-700 to the mortgage payment every month. For the fictitious $267k home, that just doubled the mortgage payment.
Among the reponses:
The payment for a 200k loan @ 6.5% is $1264/mo. You can’t afford that at 100k/yr? What else is going on?
I agree, with an income of $100k, you should be able to “afford” a $300k purchase, with about $250k mortgage (about 2.5 x your salary)
Am I crazy? Or are these folks crazy? Are the 20-somethings moving into these beautiful houses the crazy ones? I’m really confused.
On thing I will say is that, even with a combined income over $100k, my wife and I never even would have considered looking at homes in that range. No way. Not a chance. Why?
We can’t afford it.
I see that, “2 and a half times your salary” line thrown about from time to time when it comes to shopping for a home. I’m glad I didn’t take that seriously when I bought the house we live in.
I’m also glad that I had an honest mortgage agent that informed me that just because the good faith estimate says it’s only $816/month, when you get the first bill in the mail, expect it to be double that… cause it was.
On the other hand, the discussion on the message board got me questioning my own expenses…
I mean, your mortgage is supposed to be your biggest monthly bill by far, right? Ours, well, it isn’t.
Don’t get me wrong, it accounts for a large percentage of our monthly income, but could we afford a mortgage that was, oh, say twice as high?
I suppose we *could* do it, but why on earth would we?
I’ve come to the conclusion that I’m not crazy.
And I made one of the wisest decisions in my life inadvertently. Hooray for me!