Posted on 04/01/2023 6:55:10 PM PDT by RomanSoldier19
Buying a home is a huge financial undertaking. And it's important to err on the side of being conservative when taking on a mortgage loan.
In fact, a good rule of thumb is to make sure your total predictable monthly housing costs don't exceed 30% of your take-home pay. But recent data from Today's Homeowner reveals that many homeowners aren't sticking to that guidance at all.
Some homeowners are in over their heads On a national level, U.S. homeowners spend an average of 28.4% of their pre-tax income on mortgage payments. And homeowners in 21 states and Washington, D.C. spend more than 30% of their median household income on mortgage payments.
(Excerpt) Read more at fool.com ...
And those loans were from a period of time when rates were quite low. I suspect most of those paying such a high percentage of their income bought too high - following the example of those fancy celebrities they worship. They want to eat caviar instead of Vienna sausage, high price scotch instead of rot-gut whiskey.
While I’m sure that everyone would love to spend no more than 30% of their income on their mortgage, I think that is pretty outdated advice. I’m in MA — you’d have a tough time finding any home for less than $500,000. Real estate has increased in costs, salaries have not kept pace, that 30% guideline is a bit of fantasy.
Seems a bit like advice to shop around for gasoline. No one should ever spend more than $5 to fill up their gas tank. Fine advice from the days when gas was 40 cents a gallon.
Depends on Inflation and one’s prospects for stable employment with raises for increased experience, responsibility and productivity.
Recently some homeless people were found to be living in a small cave near a road heading north out of San Fransisco. The cave without improvements was subsequently listed for $1.2 million.
Less than $3 for a VW bug in Calif. in the early 70’s.
The Feds continue to rip me off...
I wonder what the numbers would look like with the property tax rates added in.
My mom was a realtor (d. 1998) - she said they weren’t supposed to sell to anyone if the mortgage was more than 28% of their earnings.
Bullshit.
+1
Luckily I just paid mine off, and at a time to lock it in at a reasonable rate.
If memory serves, 30% is well within the FHA guideline.
At one time, again we are talking a 25 year old memory I am pretty sure the limit was 41%.
Your mom may have been right. I think it was 28% net and 41% gross income.
“salaries have not kept pace”
That’s the root cause of so many of our problems as a society.
Young people can’t afford to have families. If they do then usually both parents have to work and both are stressed out and tired.
Inflation is just going to make the problem much worse.
What worked for me was to ignore that advice when starting out and spend more on a house that will be good for an entire career.
Every time you get enough raises accumulated and move up to a better house, you give 5% or 6% to the real estate industry. They get rich and you get poor. The fewer home sales in a lifetime, the better.
That’s nothing. 65% of my income went to mortgage payments after the property taxes were hiked up.
I covered that cost for years, and I was able to make ends meet for a family of 4 with no debt.
Taxes and insurance added in, my mortgage is about 20% of income
And that’s even now with SS disability
We did that for many years in CA. Payments choked us off. Got to the point where I cursed the house, a house I actually liked at one point. But bailing out of CA put all that behind!☺
And when the home is paid off...put the monthly mortgage payment into paying down your vehicle and any other consumer debt.
Now that’s funny!
Sad, but funny.
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