How can people with 35k year jobs buy houses that are 300k?

Question

Let's say the husband and wife both work jobs earning 35k to 40k each. Just how are they buying a house that is 300k and paying for all of lifes other expenses as well like car, food, clothes, insurance etc. How are you doing it. Me and my wife can put the figures together. Are people spending every last dollar they have and using credit cards for everything. Whats the story?

Answer 1

its bad business and the sub prime lending did alot of these folks in.

Figure a 300,000 home loan is about a 3,000/month payment, add taxes and insurance in escrow and PIM insurance and your talking 3,500 a month.

so take your guys salary at 35k and 40k respectively and 75,000/12=6250/month/3,500payment= 56 percent of your monthly income. WAY too much.

thats no food, lights, cable, etc etc...

Answer 2

My husband makes around 35K and we were approved to buy a $250,000 home. We bought a $147,500 home and we had excellent credit, got a good interest rate and have very inexpensive home insurance and we're living paycheck to paycheck paying our mortgage. One car is paid off and we have a low payment on the other one and we live fairly frugally and have no daycare expenses. Your income is double ours, and a 300k house is more than double what ours cost. The house is probably quite a bit larger so more expensive to heat and cool so higher electric bills. If you have two car payments, plus daycare on top of that, along with all your other bills, you're looking at spending yourself into a hole or having some considerable credit card debt.

Answer 3

first get approved for a loan. don't hunt for a Realtor until you are approved because then you can't tell the Realtor what you will qualify for, so what is the point of looking at anything? it is going to be very hard for you even if you have NO long term debt whatsoever. as a general rule, you can borrow 2.5 times your gross annual income for housing as well as debt. so the lower the debt, the more you can borrow for the residence. your downstroke is very strong--it amounts to about 20% of a $175 purchase price. that, in itself, will make your offer look far better to a seller than would one with 5% or nothing down. your principal, (common) insurance, taxes and assessments alone should not amount to higher than 33% of your gross monthly income, but some lenders let you go higher than that these days due to price. if 33% for PITA, then figure about 38% for PITA plus any long term (over 6 months to pay it off) debt. happy, happy house hunting. i think you can do it.

Answer 4

They have either saved a substantial amount of money for a down payment on the home, or they are drowning in debt. $80k in combined income puts a 100% financed 300k mortgage at the maximum threshhold allowed by banks. They use a debt to income ratio that usually allows for no more then 30-33% of your gross income for a mortgage.

If you assume a 100% financing situation, plus car loans, plus other expenses, they are probably leveraged to the max...

Answer 5

People like that are living well beyond their means. They are borrowing and using credit a lot. Many have two mortgages on their homes. What would happen if one or both spouses loses their jobs? Then their world wound be falling apart. This is a good sign of "wanting it a now" regardless if they can properly afford to have it.

Answer 6

Creditors figure your eligibility on a debt-to-earnings ratio. I forget the exact number....maybe 10 percent. If you make 10 percent or more of what the house is worth, they will extend you credit to buy the house. Existing debt is also considered.

Answer 7

The answer is that the sub prime mortgage "melt down" is the result that your math is correct and the people that gave out those loans and those that got those loans wasn't.

Answer 8

There are some mortgage co. out there now that are offering 50 years mortgages.