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Just curious what folks out there who earn $100k year (and not much more) are able to afford in terms of housing, or have any suggestions. I've run the typical calculators online, but am hoping to get some "real" data for a reality check as I (hopefully) look for a SFH...
A few things about my situation:
- I earn almost exactly $100k/yr and am the sole source of income.
- I support a wife and two pre-school kids.
- I am NOT handy in the slightest bit.
Given the property taxes in NJ, the calculators are putting me between 375k to 450k for the price range (monthly payments ranging from 2300-2750). In Central and Northern NJ, that's not getting you very much house. Throw in thing like retirement savings, kids' college savings, etc., and I'm looking further in the upper 300s. Not thrilled with the options.
Thoughts anyone?
-jersey$P!KE
I'm not familiar with many parts of NJ, but is Monmouth County a possibility? I certainly think you can find something in that range in many towns and the taxes aren't terrible.
But that's not realistic. In the long term, you won't be holding the same loan.
(1) the value of a dollar today isn't the same as the value of a dollar in 5 years, so it's not valid to just add them. You need to apply an appropriate "discount" to future amounts to get the difference in today's dollars.
(2) you need to take into account that you could invest the money that isn't tied up in a down payment (opportunity cost)
I'm not going to spend a lot of time arguing about this, I don't have a substantial dispute with your conclusion, but your math is completely wrong here.
btw, realtors use exactly the same kind of analysis you do above to "prove" that it's much cheaper to buy today than at any other time -- that's the real reason I have a big problem with your analysis (higher rates look much worse if you ignore the fact that (a) you can invest at better rate in a high rate environment, (b) inflation means you need a steeper discounting of future payments, and (c) high rates reduce the chance that the loan is held to maturity)
My quick breakdown of the 2 loans was surely not all encompassing and wasn't meant to be. There are numerous factors that we could sit here and debate to try and determine which case makes more sense dollar wise. The problem is we don't know many factors such as future interest rates, future house values, etc... Sure we can guess and argue them but like you said not worth it.
I do however take offense to you comparing my logic to that of a realtor.
I think you guys can spend all day arguing pay it now or pay it later. I think it's preference. I personally would pay off my mortgage to my primary home as soon as I can. If it's an investment property, that's a different story.
Just curious what folks out there who earn $100k year (and not much more) are able to afford in terms of housing, or have any suggestions. I've run the typical calculators online, but am hoping to get some "real" data for a reality check as I (hopefully) look for a SFH...
A few things about my situation:
- I earn almost exactly $100k/yr and am the sole source of income.
- I support a wife and two pre-school kids.
- I am NOT handy in the slightest bit.
Given the property taxes in NJ, the calculators are putting me between 375k to 450k for the price range (monthly payments ranging from 2300-2750). In Central and Northern NJ, that's not getting you very much house. Throw in thing like retirement savings, kids' college savings, etc., and I'm looking further in the upper 300s. Not thrilled with the options.
Thoughts anyone?
-jersey$P!KE
WOW I did not realize this post got 6 pages long while I was replying?
we put down 20% and no regrets. We have no PMI, and a very clear cut loan at 4.75% - you can still get this with 0 pts for 30 years.
Where in NJ are you looking to buy?
we bought a 400k house, with 20% down, 4.75% 30 year , ~$2250 a month includes insurance + taxes ($6500/yr). a lot of this will also depend on your personal spending habits i think. i know how much i spend, but no idea how much kids cost, etc.
I think you will do fine, just pick a house with a basement that is not on a busy street or a corner lot I can tell you if you are interested, you can find something in your 400-450k price range in Midland Park NJ.
Last edited by joe moving; 02-17-2010 at 12:48 PM..
I am buying a house in Haddonfield, NJ. 8th Ranked best high school in the state. Price right around $300k. 4bd 2+bath.
Not brand new but useable while I slowly upgrade it to my taste.
Is that in NJ? What part of the state is that? County? If its in South Jersey that really does not count. It pretty much understood that south jersey is cheaper but thats because its just not that desirable. Dont get me wrong if I worked in south jersey I might buy a house their but thats not the case for most people. North Jersey is more expensive because its better situated for most jobs. I know this hurt a lot of feelings but the truth is the truth. Where is Haddonfield again? Penn?
Is that in NJ? What part of the state is that? County? If its in South Jersey that really does not count. It pretty much understood that south jersey is cheaper but thats because its just not that desirable. Dont get me wrong if I worked in south jersey I might buy a house their but thats not the case for most people. North Jersey is more expensive because its better situated for most jobs. I know this hurt a lot of feelings but the truth is the truth. Where is Haddonfield again? Penn?
Camden County.
Yes North Jersey has more businesses hence more jobs. More desirable is subjective but whatever...
A quick google search would have figured this out.
you will be fine with 350K - 400K, don't listen to all these others here. 100K is a good income. most people i know bought in the 325-375 range, and make 80 - 90k.
you will be fine with 350K - 400K, don't listen to all these others here. 100K is a good income. most people i know bought in the 325-375 range, and make 80 - 90k.
I don't think ANYONE is suggesting 100k is a bad income by any means.
I think most people here are suggesting to not buy in over your head and to live within ones means.
And if someone making $80k bought a $375k house in NJ, they are house poor now matter how you spin it. They must save NOTHING and be amassing debt or borrowing money from an outside source cause that will not float a $375k mortgage and all that entails...
What's the return on the 16.5% he didn't put as a downpayment and instead invested?
Invest $49,500 for 30 years in the stock market... we'll be a bit conservative and assume an 8% annual return... His money would be worth $498,101... compared to the $120k extra he paid in your calculations, he's looking pretty good.
Trust me, I have the degrees and logical skills to back this up... big downpayments are a bad idea.
There are definitely costs of a shortsale or foreclosure sure... but those costs are there regardless of if you make a large downpayment or not... in the end, your credit is still hosed... your credit report doesn't care if you were short $20k or $300k... the account will be marked "settled for less than amount owed" or similar language. I can only imagine if I'd purchased my home 2 years ago... I could've put 40% down and I'd still be in a short sale position right now. It makes no sense to accept the risk... to tie up your funds... to lower probably the best debt you can possible have with a mortgage. It is super low, tax deductible, fixed rate interest! Get as much of it as you can afford!
I second this logic - even if it wasn't for a house, If someone was willing to loan me 500k to invest at 5% a year for 30 years, I would take it in a heartbeat. You are doing a similar thing by enjoying the fact that you are allowed to borrow and benefit from the money loaned to you, at such a low interest rate. Paying it off early just negates that fact, PLUS you lose the tax write-off of interest payments.
OP, don't listen to those who recommended you to get a below average house in a below average neighborhood and go to below average school. For Christ sake, they are your children, and your job is to provide the best of everything for them. If you put yourself in below average category, your children will be below average too. Their friends will be below average. If you follow their advice, I would advice you just dig a hole or find a cave for your family to settle.
You have to aim high to give yourself the motivation to do better.
All being said, I am by no mean to tell you to go to the max out your limit. Go out to see enough houses you will have an idea on which home styles you and your family like. Then just search these styles until you find one that is good and fit your budget.
When you find something you like, go home and bring out the calculator and see if the math work out. If not, move to another property. If it is, then go make an offer.
* Another thing you need to consider is that hyper inflation that could be hit us any day now. Your 100k savings in the bank will buy you less and less. With interest rate at all the time, it is the best time to buy while your money is still good. Housing is one thing that keep up with inflation.
Really? You must be a real estate agent. Next, you'll be telling us they're not making anymore land. So by your own words then, we are living in a "deflationary" enviornment. Since housing keeps up with inflation and housing prices have declined across the board, what we have here is a deflationary enviornment. To the OP, your $100k in savings affords you the ability to shop selectively, if you don't like what you see, DON'T BUY IT!
Housing expense, is so much more than just the mortgage payment. One must also consider that each year your real estate taxes will increase by a minimum of 4%, your PSE&G bill will increase by at least 3%, if you have cable - expect a 5% increase, your heating bill will be at least $2,000, if you need to replace a roof - count on $4-5,000. When I bought my house, two weeks after moving in, my main sewer pipe broke and set me back $2K. Having a $140k sounds like a lot, and it is, but putting a $100K down will leave you with almost nothing after closing costs, painting, window treatments and any new plumbing fixtures (even Home Depot stuff is expensive). Save for a few more years - it will be worth it, housing prices are not going anywhere, at best they will stay flat.
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I can tell you if you are interested, you can find something in your 400-450k price range in Midland Park NJ.
