- BYOB
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Re: The salary you must earn to buy a home in 27 metros
Conspiracy Theory wrote:
I have always thought it absurd that it usually takes 30 years to pay off a home, and these "median" prices are absurd as well. I thought that maybe the prices would reset to a lower base price overall, after the recession and the part the housing industry played in it, but it didn't really. I guess it's inevitable that it didn't becuase people payed too much earlier on, and now they can't or don't want to lose money, so everything stays artificially inflated. Deadlocked. Sigh.
I was floored when I started looking in to buying a home.
After paying off a 30 year mortgage, you've bought the house twice.
That's just plain greed.
Yes, you could compare credit cards to mortgages because they're both debts to a bank, and yes, credit cards usually are higher rates, etc., but you could also not compare it to anything and look at it on it's own.
You can not just walk into a bank and tell them how many or few years you feel like paying. There are strict (and since the financial crisis, ever stricter) rules as to what you qualify for. Sure, if you have $50,000 to put down, you could probably get a 15 year loan right off the bat, but the average person, with the average income has very little in the way of choice when first buying a home. You also have little choice in price bracket. Realistically, there aren't many $60,000 houses out there. Most "starter" homes fall into two categories - the $30,000 row house in the city, or $100,000 house. Occasionally, you find a $70,000 house out farther into the country, but be prepared to do a serious overhaul to get it up to a decent state.
I kind of get tired of the mini arguments on this, and would prefer to take a serious look at the overall picture. If there were so many people that "bought houses they couldn't afford" that it helped collapse the entire economy, then one has to at some point ask whether it's not that most people can't afford something, as it is that something has increasingly become unaffordable in it's own right. Look what we do. We work for a relatively small wage, save up a little money as we can to put a down payment on a home to live in, enter into a 30 year agreement with an institution that wants it's money paid back up front, pay increasingly higher local taxes, watch prices on just about everything go up, never down, usually get a few credit cards to make day to day ends meet or to use for unexpected situations (which always come up at some point), maybe have a family, and try to do it all on wages that do not go up in any significant amount.
I feel that this is an unacceptable and unsustainable way for American's to try to live. No, I do not think borrowing money from a bank should be free, as they are a business and therefore need to make money. HOWEVER, the only reason it really takes 30 years to pay off a house is becuase of the interest in the first place.
Last edited by BYOB (3/23/2015 7:39 am)
- tennyson
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Re: The salary you must earn to buy a home in 27 metros
Credit card rates are always much, much more than mortgage rate. As Goose pointed out, current mortgage rates are very reasonable. It is simple math that over 30 years you typically pay back twice the amount. You certainly always have the option to either rent or wait till you can pay it all but till then you still would be shelling out money for rent.
I don't believe that any bank would refuse a 10 or 15 year mortgage. The only reason they would is your ability to pay the amount per month that it would entail. Any lender would do the same thing whether it be a home loan, business loan, etc.
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Re: The salary you must earn to buy a home in 27 metros
BYOB, I do not know that it is true that most people could not get a 15 year loan, or would be forced to pay a huge downpayment in order to qualify for one. I think Tennyson is right on this.
Anybody out there with some expertise in this?
We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists.
- BYOB
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Re: The salary you must earn to buy a home in 27 metros
Credit card rates are always much, much more than mortgage rate. As Goose pointed out, current mortgage rates are very reasonable. It is simple math that over 30 years you typically pay back twice the amount. You certainly always have the option to either rent or wait till you can pay it all but till then you still would be shelling out money for rent.
I don't believe that any bank would refuse a 10 or 15 year mortgage. The only reason they would is your ability to pay the amount per month that it would entail. Any lender would do the same thing whether it be a home loan, business loan, etc.
When was the last time you went to a bank to get a loan?
Step back for a minute and really ask yourself if it's reasonable to pay the same or more in interest as you are paying for the thing itself? I don't care what it is, a house, a TV, whatever. I know low percentage numbers can make just about anything sound reasonable, but percentages are always relative to what specific thing you're talking about.
I also take issue (not with you personally) with the notion that it's acceptable in this supposedly first world country to put people into homeowner/non-homeowner categories. Every single living person needs a home to live in. Maybe some people are better at maintaining and running a home than others, but that's an individual decision. That should have zero to do with home accessibility. Renting has always been a strange proposition to me. While I can understand that some people have to move around for employment reasons, etc., the absolute only reason that someone who pays rent every month to a landlord can not own the home they already pay for is the denial of the initial loan with a bank. Other than that, you're already paying the mortgage anyway, you're paying utilities just as you do when you own a house, you're still juggling the same responsibilities. I feel that we have allowed ourselves to set up this way of doing things, and regardless if it's fair, ethical, or in our individual or nation's best interest, we still go along with it as if there is no other way to do things.
To a certain degree, banks in general used to have some levels of integrity. Over time they've consistantly shown again and again that that when left to do what they want, they choose badly. And this is o.k. behavior how? People have been conditioned over time to expect them to do what they have been doing and accept it, they've also been conditioned to expect most of the burden of a loan to fall on the person getting the loan, which is NOT how lawfully it's supposed to work. While the person getting the loan does have a responsibility to pay it back, the burden of a loan actually falls on the institution giving the loan. If a person can't pay back their loan, the bank is supposed to be as equally, if not more, culpable for granting the loan in the first place. But that never happens.
The whole damn thing is stupid and frustrating.
- BYOB
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Re: The salary you must earn to buy a home in 27 metros
BYOB, I do not know that it is true that most people could not get a 15 year loan, or would be forced to pay a huge downpayment in order to qualify for one. I think Tennyson is right on this.
Anybody out there with some expertise in this?
If that were true, why is a 15 year mortgage not the norm? Does most of the population choose to pay for something for 30 years just because they prefer to?
Can someone out there show me a person who walked into a bank with an average salary, $10,000 down to get a $130,000 house, and left with a 15 year mortgage?
Last edited by BYOB (3/23/2015 8:37 am)
- tennyson
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Re: The salary you must earn to buy a home in 27 metros
We have kind of drifted (like that never happens) from the original topic of what it takes in earnings (salary) to buy a home in metro areas to a discussion of mortgage rates and if they are outrageous or not. As far as metro salaries and what it takes there are huge variances depending on the metro area (ie San Francisco vs York for example). What appears to in those cases to be true is that the median salary in the higher priced areas usually corresponds to the higher home prices. Kind of a wash. It is totally noticable when people from those areas migrate to an area like ours and because of their old home sale price they are usually able to "afford" a much, much larger place here. As a matter of fact, taxwise they almost have to to avoid taking a hit on the gain (or at least the tax laws used to work that way).
But let's get back to the mortgage issue which is a good one itself. I tend to agree with BOB that a home that you might want in the suburban area might run at 100K or so vs the lower price in the City. A lot of that has to do with taxes which has been another sore subject.
Zillow is a good online tool to look for homes in an area given parameters you want to feed in including bedrooms, price range, zip code or town, etc.
I did a search on Zillow and saw what looked like an acceptable home in Dover, Pa that is listing at $92,000. When I then ran a mortgage estimator (using 4% rate which might be a median now) the 30 year came in at $439 and the 15 year came in at $680. That is if you can qualify for 0 down. IF you need 20% down (about 19K) then the 30 year is $348 and 15 year is 523 per month. Looking at taxes in Dover township (Rock has a good tool), the total taxes would be 2525 for the year (or about another 210/month). It is important to look at the taxes in the total as districts vary widely.
"Do not confuse motion and progress, A rocking horse keeps moving but does not make any progress"
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Re: The salary you must earn to buy a home in 27 metros
BYOB, I do not know that it is true that most people could not get a 15 year loan, or would be forced to pay a huge downpayment in order to qualify for one. I think Tennyson is right on this.
Anybody out there with some expertise in this?If that were true, why is a 15 year mortgage not the norm? Does most of the population choose to pay for something for 30 years just because they prefer to?
Well, today the website for my local bank is advertising a 15 year mortgage with 5% down.
Yes, people DO choose the 30 year loan because they prefer to.
Because they are focusing on a lower monthly payment rather than the total interest paid over the lifetime of the loan.
It's a question of what you rate as more desirable.
We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists.
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Re: The salary you must earn to buy a home in 27 metros
Credit card rates are always much, much more than mortgage rate. As Goose pointed out, current mortgage rates are very reasonable. It is simple math that over 30 years you typically pay back twice the amount. You certainly always have the option to either rent or wait till you can pay it all but till then you still would be shelling out money for rent.
I don't believe that any bank would refuse a 10 or 15 year mortgage. The only reason they would is your ability to pay the amount per month that it would entail. Any lender would do the same thing whether it be a home loan, business loan, etc.
When was the last time you went to a bank to get a loan?
Step back for a minute and really ask yourself if it's reasonable to pay the same or more in interest as you are paying for the thing itself? I don't care what it is, a house, a TV, whatever. I know low percentage numbers can make just about anything sound reasonable, but percentages are always relative to what specific thing you're talking about.
.
2008 was the last time I went to the bank to get a loan. And. as I recall, multiple mortgage types and lengths were available. I went with a note that was fixed for five years and then became variable. 30, 15, 10 ten year fixed rate notes were also available.
What do you suggest?
If you borrow money over a 30 year period, you are going to pay a lot in interest.
It is what it is. If I was in the business of loaning money, I'd expect to be paid interest on the balance every year until it was paid back.You would as well.
BTW, get a loan with no pre-payment penalty, and you can turn a 30 year note into a five, ten, or fifteen year loan at your discretion. Just pay extra principal each month. The "greedy" bank can't stop you.
I'm not sure what you would suggest that we do.
Prohibit banks from charging interest and they will stop writing mortgages.
That won't help home buyers in the least.
Last edited by Goose (3/23/2015 8:50 am)
We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists.
- BYOB
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Re: The salary you must earn to buy a home in 27 metros
We have kind of drifted (like that never happens) from the original topic of what it takes in earnings (salary) to buy a home in metro areas to a discussion of mortgage rates and if they are outrageous or not. As far as metro salaries and what it takes there are huge variances depending on the metro area (ie San Francisco vs York for example). What appears to in those cases to be true is that the median salary in the higher priced areas usually corresponds to the higher home prices. Kind of a wash. It is totally noticable when people from those areas migrate to an area like ours and because of their old home sale price they are usually able to "afford" a much, much larger place here. As a matter of fact, taxwise they almost have to to avoid taking a hit on the gain (or at least the tax laws used to work that way).
But let's get back to the mortgage issue which is a good one itself. I tend to agree with BOB that a home that you might want in the suburban area might run at 100K or so vs the lower price in the City. A lot of that has to do with taxes which has been another sore subject.
Zillow is a good online tool to look for homes in an area given parameters you want to feed in including bedrooms, price range, zip code or town, etc.
I did a search on Zillow and saw what looked like an acceptable home in Dover, Pa that is listing at $92,000. When I then ran a mortgage estimator (using 4% rate which might be a median now) the 30 year came in at $439 and the 15 year came in at $680. That is if you can qualify for 0 down. IF you need 20% down (about 19K) then the 30 year is $348 and 15 year is 523 per month. Looking at taxes in Dover township (Rock has a good tool), the total taxes would be 2525 for the year (or about another 210/month). It is important to look at the taxes in the total as districts vary widely.
I know from experience that tax calculators never give you the total you will actually pay to your mortgage company each month. There's PMI in there as well (private mortgage insurance) which is a joke, but I won't get into that right now. The banks also use your gross income to figure things up. Another joke, as we all know you can't spend money that you never get in the first place. I would beg people to only use those calculators as a starting point when figuring things out.
I don't think we've drifted very far from the topic, as they are directly related.
Looking at the Zillow example you've provided, we are so far up to $649 a month to start, little to no money down, for 30 years, roughly half of your life on Earth. I believe we are also assuming that there is nothing that needs to be done to that house, which in reality is rarely the case if the home has any age to it. Plus we need to add PMI, hope the taxes never go up (yeah right), etc. While that may seem acceptable if that's all you ever have to pay for, it isn't. You must also try to pay for all the other necessities of life simultaneously.
Now, all this might be trivial to people who make more than the average income, but 'average' means what most people make. I don't think the way we do things now is helpful AT ALL to the average American, in fact it's detrimental.
Last edited by BYOB (3/23/2015 9:19 am)
- BYOB
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Re: The salary you must earn to buy a home in 27 metros
Credit card rates are always much, much more than mortgage rate. As Goose pointed out, current mortgage rates are very reasonable. It is simple math that over 30 years you typically pay back twice the amount. You certainly always have the option to either rent or wait till you can pay it all but till then you still would be shelling out money for rent.
I don't believe that any bank would refuse a 10 or 15 year mortgage. The only reason they would is your ability to pay the amount per month that it would entail. Any lender would do the same thing whether it be a home loan, business loan, etc.
When was the last time you went to a bank to get a loan?
Step back for a minute and really ask yourself if it's reasonable to pay the same or more in interest as you are paying for the thing itself? I don't care what it is, a house, a TV, whatever. I know low percentage numbers can make just about anything sound reasonable, but percentages are always relative to what specific thing you're talking about.
.
2008 was the last time I went to the bank to get a loan. And. as I recall, multiple mortgage types and lengths were available. I went with a note that was fixed for five years and then became variable. 30, 15, 10 ten year fixed rate notes were also available.
What do you suggest?
If you borrow money over a 30 year period, you are going to pay a lot in interest.
It is what it is. If I was in the business of loaning money, I'd expect to be paid interest on the balance every year until it was paid back.You would as well.
BTW, get a loan with no pre-payment penalty, and you can turn a 30 year note into a five, ten, or fifteen year loan at your discretion. Just pay extra principal each month. The "greedy" bank can't stop you.
I'm not sure what you would suggest that we do.
Prohibit banks from charging interest and they will stop writing mortgages.
That won't help home buyers in the least.
All of that is all good if you "just" have enough money to have options. I can not accept that most people have so much money that they choose to pay extra when they don't have to. I'm sure there are exceptions to the rule, as there always are.
There is a difference between making a fair amount of money and an obscene amount of money at the expense of people's livlihoods. Of course I would expect to make money on a loan I gave to someone, I've said that already. I just would never expect to get the same or more in profit as the cost of the item the loan is for. I would never tell someone that I will loan them $150,000, and tell them they had to pay me back the $150,000 plus at least another $150,000 on top of that or more. If I did, I would tell myself to go to hell. I will never expect an intangible to meet or exceed the cost of a tangible when it comes to the loan business. They have every right to make money, but the question is how much? Or is there no limit? In the future, will we be paying a bank $300,000 to buy a $35,000 house? I sure hope not, but that's where we're headed if we keep doing things the same way.