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« Seven Landscaping Ideas That Can Add Value to Your Home | Main | Is It Better to Rent and Invest Rather than Buy a House? »

July 03, 2007


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Did they say how much monthly rent should be for those who can't get a mortgage? (I don'tg think anything exists for 28% of my gross income; even if it did, I have no hope of getting a mortgage.)

In my neck of the woods, an estimated one in five renters pays at least half their income on rent (not including utilities). Wouldn't those people be "financially unstable"?

Rents around here are projected to go up 8.5 percent this year and another 6 percent next year. Is this a great country or what?

how are you at 0%? are taxes and insurance free in your state? (smile)

You wrote: "We're currently at 0%, though that could change if we buy a new home." Does this mean you don't pay any real property taxes and you don't insure your residence?

JP and David --

You two are right -- I'm at 0% as far as a mortgage but I do (of course) have expenses for taxes, maintenance, insurance, etc. My bad.

I am right around 28%-29% of my salaried income; maybe 26%-27% of total gross income. That includes the mortgages, taxes, and insurance. Our other debt payments only amount to maybe 3% of our monthly income. Before we got married, our mortgage debt was about 18% of our gross income. Once my wife is out of law school, we'll probably be back to around 18% or less of our total income, but we'll have a much higher debt ratio when we start paying off her student loans. It should still be within the tolerable level, though.

I remember in high school finances I was told that housing should never be more than 20% of your monthly income. Unfortunately, I don't think that is a reality for most Americans, especially in the inflated markets.

I think your advice is spot on, though, about buying a house you can afford. Just because you could live in a nice house that sucks down 40% or more of your income doesn't mean you have to!

minimum wage: Yes if you are paying half your income on rent then you are financially unstable. Even if its unavoidable, its still a precarious position to be in. I probably shouldn't comment on whether you live in a great country or not - especially as we have a million more households than homes.

I've just calculated (slow brain) that I'm under 28% of gross for my mortgage, insurance and council tax. My only other debt is my student loan, adding that in takes me to about 30%. I'm doing better than I thought.

We live in an extremely high COLA and live within the 28% limit. So either we make a huge income (no) or we had a big DP (yes), and we bought less house than we could (yes).

So it's possible no matter where you live, but how many people would sacrifice and live in a 1 bd 500 sq foot condo because that's all they could afford as a young couple? That's what we did, in San Diego. So easily one of the highest cities in the US to live.

First I definitely agree with one of your main points - you should only buy as much house as you can afford. That said, I would venture that for most young people, myself included, this will almost never apply when purchasing your first home.

Without mentioning numbers, I consider myself extremely fortunate to be making as much as I do at 21. But even after adjusting for the fact that I live in Western Connecticut just outside New York City, a person can't really expect to buy a house or condo around here at 28% of their salary until they are in their early-to-mid 30s. I know the area has an inflated real estate market, but even so the situation is the same in most of Connecticut and New York, where salaries are much lower.

Surely all debt should be on home equity for cost and tax reasons, so 36% is a reasonable limit for those with no other debt. It was what I paid when I first bought. I was surprised at how affordable it was, because it was no more than I was already paying in rent, taking taxes into account. It took 25% down to even get it that affordable. In a few years, income rose and rates fell.

Many people do pay 50% out in rent. They would be well off if they could only pay 40%. The options are to lower their expenses, which is very difficult if there is nothing cheaper to rent, increase their income, through a better job, second job, or second earner, or move to an area in line with their income, also difficult since incomes also drop but not quite as much as property. I suggest marrying well ;-).

Oh Lord, you have posed a profound conundrum!

You suggest marrying well, but men who earn minimum wage are considered unmarriageable in our society.

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