Since the teenage daughters were in on the decision, the one in college, at least, should be working all summer to help the family out. But I don't know how much of a dent that would make, if any.
Submitted by temeculaguy on August 21, 2007 - 11:33am.
400k is not affordable with nothing down on 90k gross with four people to feed and put into vehicles. 3x income is a ceiling of loan affordability and that is a stretch for the early years. 270k loan and they should have made it work, they paid twice that and are suprised that it didn't work out. I can't believe they didn't realize the taxes would be raised based on the purchase price. On 90k gross their take home is about 4-5k a month after health insurance, minimal 401k, etc. And their interest only payment for two years would be 3800/mo. before it resets. Even if they didn't have the new tax rate it was 3200, how do you buy a house where you can't afford the temporary teaser rate. When I made 90k gross I bought a house for 200k and money was tight for a few years.
These stories are becoming so common and every person in this situation has friends, relatives and co-workers that know their story, what is that going to to do the buyer psyche even when prices get in line with rent. Joe six pack isn't going to understand the details and why it happened they will just equate R/E with financial ruin.
I don't understand how all these people thought that they could "afford" $500K-plus homes on such low salaries. I was absolutely terrified when I bought a $115K home in 2000 on a $50K annual salary. My payment (including impound) was like $950, a $300 increase over the rent I was paying at the time(in Sacramento things used to be cheap). Even now, with an annual income four times what I was making then, I would not take on that kind of mortgage unless the house was on several acres of land or riverfront.
Allow me to speak from experience. Before departing San Diego, I was making exactly 90k and owned a home with exactly a 400k mortgage. Here's how we lived:
Yearly Costs
-$37,200 - 7yr., IO Loan, Mello Roos, HOA, Taxes, (3,100/Mo)
-$25,000 - 28% deducted for taxes, soc.sec., Medicare etc.
-$9,000 - Groceries/Dining, Family of four
-$4,000 - Gas
-$4,500 - 5% 401k investment
-$500 - Auto repair, oil change etc.
-$2,000 - Home/Auto/Life insurance
-$1,000 - Yearly vacation, travel costs
-$500 - Gifts
-$4,000 - Utilities
-$750 - Clothing
-$1,500 - Household stuff (yard, plants, trash bags etc.)
--------
$89,950
Savings = 25 cents/Month
Note: I had no debt other than the home, no ccard balances, no student loans, no car pmts.
Submitted by waterboy on August 21, 2007 - 12:09pm.
JES
It would have been nice to see realtors/brokers/lenders require their clients to fill a yearly expense sheet before they signed, but I guess it would have turned a client back into a prospect.
Some buyers would have lied anyway, but at least they couldn't claim ignorance as many have
Submitted by kicksavedave on August 21, 2007 - 12:59pm.
I don't know if they are trying to blame everyone else. At least they are getting a second, and maybe third job, and say they want to keep the house. They made their bed, now they are lying in it, good for them.
Running the numbers is always a good idea, and I recommend Quicken's budget feature to give you an idea of what you are budgeting and how your spending compares. I was shocked to see that I am spending $60,000/year in expenses, not including anything that I save like a 401k etc., and I live in Iowa.
Submitted by temeculaguy on August 21, 2007 - 2:29pm.
JES, your budget was pretty tight yet you still managed to hit the average american savings rate. You did have an IO loan so you really couln't afford it even on your spartan budget. The only reason it worked was an appreciating market, now htat is no longer a near term option would anyone take the same risk. What you did was a risk because had you timed it wrong you would have had your loan reset and would have to handle the fully amortized rate, which would have sunk you.
That's a good lesson for disciplined money management, something a lot of people simply don't comprehend, i.e. our sobbing family in question. Also having no ccard debt, and car payments is virtually unheard in our society.
But one question:
What did you do (or would you have done) after 7 years?
This family couldn't hack it in less than that. It's really a roll of the dice on where values will be when buyers realize they couldn't afford their house.
I want to know if they sold a house a couple of years previous, what did they do with that money???
That's point#1
Let me add more:
2. "was tired of renting", WTF is that? Its being broke is better than renting? Is being a renter makes you do work out and push up, wasting your energy thus makes you tired?
3."say their mortgage broker assured them they would be able to refinance in a couple of years to keep their payments affordable." Let me try to understand this logic, you barely could afford the payment now, after a couple of years you refinance again, then you refinance again, then again (even if interest rates stay level).... when will you payoff your loan?
4. $700.00/ month on car payment! sell one car and take the bus, moron!
5. No more piano lesson? Good for you, who cares about classical music snob, as long as moved to the better area and not being a renter. Being a renter is tiring remember!?
6."The couple now eat out once or twice a month, instead of once or twice a week before they bought the house. They have yet to visit a nearby jazz club they had hoped to frequent. The trips they used to take to Lake Tahoe now are out of the question." They should be doing this before they bought the house, and save the money for down payment last time so they will be in better shape financially.
Submitted by MisterMark123 on August 21, 2007 - 11:37pm.
Yeah, snail, you sound mad - and bitter.
People do get tired of renting. Most Americans want to own a home.
Taking the bus is often not a feasible option.
Don't call people "moron" when they're acknowledging their mistakes. I'm sure you've made a few mistakes in your life, right?
People who appreciate classical music are "snobs"? I guess it would be equally as rational to say that you're a hick if you don't like classical music.
Submitted by temeculaguy on August 21, 2007 - 11:58pm.
At this point there's no reason to get mad, be thankful they paved the way for you. If all the 2/28 and toxic 0 down borrowers hadn't caused the run up, the builders wouldn't have added so much inventory that will soon be vacant. Like a hermit crab, look at all the pretty shells you will have to choose from. Had things leveled off in 2003 they would be taking off again now and there would be less inventory to choose from. You had all those years to prepare and save. I haven't had to bust out any Lao Tzu for weeks but you forced me, "There is beauty in life's disorder." Some guy just ordered a bunch of Pizzas and couldn't pay for them, rather be angry about how his large order delayed yours, offer the pizza guy half the price to take it off his hands.
Good point temecula guy. But I have to admit that these type of sob stories make me mad as well. Who the hell thinks that they deserve to live in a 567k home on 90k a year with "so-so" credit and two car loans!!!???
My husband and I make a decent amount more than that, no debt except $250/ month student loan payment, good credit, and would not think of getting a loan more than 400k.
I just get sick and tired of hearing these stories that seem to implicate that we should feel bad for these people and someone should bail them out, ugh!
Anyways, sorry for the rant. I am an infrequent poster, consistent lurker.
Yes, I am bitter. These are cry babies, getting media attention.
“Most Americans want to own a home.” Are you a spoke person for NAR? My point is if you couldn’t afford it don’t buy it. Save your money first then get it afterward. You are confusing want versus need, for instance I want a FERRARI but in reality I just need a reliable car to go to work.
“Taking the bus is often not a feasible option.” Good point there. Then consider other options. Sell the cars and buy older cars. Check the Craigslist. An older car have cheaper insurance and registration, the maintenance cost is not more as long as you don’t buy a problematic car (such as Ford Pinto) of course driving an older car sucks. Are they thinking about this? Of course not (I don’t see it discuss at all), so they want the cake and………
“they're acknowledging their mistakes” Let me ask you this, how many times they mentioned the Mortgage Broker? They’re acknowledging there was a mistake, but it sure was mostly everybody else. And please stop crying to the media, in my dictionary this is called Moron.
You could call me Snobbish Hick :). It was sarcasm statement about the music lesson. Their priority messed up. My children education (including piano lessons when they get older) is the most important priority. I rather drive a beat up car than have to pull my kid out from something she loves. They still eat out once per month? Why don’t use that money for her instead?
I am self-righteous, because I don’t have sympathy for this BS? So be it…..Now you on the other hand, make no judgment about other people but place me in self-righteous spot. What do you call that?
We all should be ok to own or not to own our homes. I am not against homeowner here. However I don’t want to hear you complaining to the media if you take a suicide pill.
Submitted by threadkiller on June 23, 2008 - 8:23pm.
"snail" you sound like someone I know. Are you going to be angry when people cannot afford their rent either. Then get ready to be really angry in the next 10 years,because that's what is coming when the layoffs start. Very few people are immmune from a depression. Usually only the really rich/really smart make money in a depression. Are you in either of these groups?
Since the teenage daughters were in on the decision, the one in college, at least, should be working all summer to help the family out. But I don't know how much of a dent that would make, if any.
400k is not affordable with nothing down on 90k gross with four people to feed and put into vehicles. 3x income is a ceiling of loan affordability and that is a stretch for the early years. 270k loan and they should have made it work, they paid twice that and are suprised that it didn't work out. I can't believe they didn't realize the taxes would be raised based on the purchase price. On 90k gross their take home is about 4-5k a month after health insurance, minimal 401k, etc. And their interest only payment for two years would be 3800/mo. before it resets. Even if they didn't have the new tax rate it was 3200, how do you buy a house where you can't afford the temporary teaser rate. When I made 90k gross I bought a house for 200k and money was tight for a few years.
These stories are becoming so common and every person in this situation has friends, relatives and co-workers that know their story, what is that going to to do the buyer psyche even when prices get in line with rent. Joe six pack isn't going to understand the details and why it happened they will just equate R/E with financial ruin.
I don't understand how all these people thought that they could "afford" $500K-plus homes on such low salaries. I was absolutely terrified when I bought a $115K home in 2000 on a $50K annual salary. My payment (including impound) was like $950, a $300 increase over the rent I was paying at the time(in Sacramento things used to be cheap). Even now, with an annual income four times what I was making then, I would not take on that kind of mortgage unless the house was on several acres of land or riverfront.
These stories are getting old....fast
Allow me to speak from experience. Before departing San Diego, I was making exactly 90k and owned a home with exactly a 400k mortgage. Here's how we lived:
Yearly Costs
-$37,200 - 7yr., IO Loan, Mello Roos, HOA, Taxes, (3,100/Mo)
-$25,000 - 28% deducted for taxes, soc.sec., Medicare etc.
-$9,000 - Groceries/Dining, Family of four
-$4,000 - Gas
-$4,500 - 5% 401k investment
-$500 - Auto repair, oil change etc.
-$2,000 - Home/Auto/Life insurance
-$1,000 - Yearly vacation, travel costs
-$500 - Gifts
-$4,000 - Utilities
-$750 - Clothing
-$1,500 - Household stuff (yard, plants, trash bags etc.)
--------
$89,950
Savings = 25 cents/Month
Note: I had no debt other than the home, no ccard balances, no student loans, no car pmts.
JES
It would have been nice to see realtors/brokers/lenders require their clients to fill a yearly expense sheet before they signed, but I guess it would have turned a client back into a prospect.
Some buyers would have lied anyway, but at least they couldn't claim ignorance as many have
I don't know if they are trying to blame everyone else. At least they are getting a second, and maybe third job, and say they want to keep the house. They made their bed, now they are lying in it, good for them.
Running the numbers is always a good idea, and I recommend Quicken's budget feature to give you an idea of what you are budgeting and how your spending compares. I was shocked to see that I am spending $60,000/year in expenses, not including anything that I save like a 401k etc., and I live in Iowa.
JES, your budget was pretty tight yet you still managed to hit the average american savings rate. You did have an IO loan so you really couln't afford it even on your spartan budget. The only reason it worked was an appreciating market, now htat is no longer a near term option would anyone take the same risk. What you did was a risk because had you timed it wrong you would have had your loan reset and would have to handle the fully amortized rate, which would have sunk you.
JES,
That's a good lesson for disciplined money management, something a lot of people simply don't comprehend, i.e. our sobbing family in question. Also having no ccard debt, and car payments is virtually unheard in our society.
But one question:
What did you do (or would you have done) after 7 years?
This family couldn't hack it in less than that. It's really a roll of the dice on where values will be when buyers realize they couldn't afford their house.
I want to know if they sold a house a couple of years previous, what did they do with that money???
I want to know if they sold a house a couple of years previous, what did they do with that money???
That's point#1
Let me add more:
2. "was tired of renting", WTF is that? Its being broke is better than renting? Is being a renter makes you do work out and push up, wasting your energy thus makes you tired?
3."say their mortgage broker assured them they would be able to refinance in a couple of years to keep their payments affordable." Let me try to understand this logic, you barely could afford the payment now, after a couple of years you refinance again, then you refinance again, then again (even if interest rates stay level).... when will you payoff your loan?
4. $700.00/ month on car payment! sell one car and take the bus, moron!
5. No more piano lesson? Good for you, who cares about classical music snob, as long as moved to the better area and not being a renter. Being a renter is tiring remember!?
6."The couple now eat out once or twice a month, instead of once or twice a week before they bought the house. They have yet to visit a nearby jazz club they had hoped to frequent. The trips they used to take to Lake Tahoe now are out of the question." They should be doing this before they bought the house, and save the money for down payment last time so they will be in better shape financially.
I am mad and not going to take it anymore,
Yeah, snail, you sound mad - and bitter.
People do get tired of renting. Most Americans want to own a home.
Taking the bus is often not a feasible option.
Don't call people "moron" when they're acknowledging their mistakes. I'm sure you've made a few mistakes in your life, right?
People who appreciate classical music are "snobs"? I guess it would be equally as rational to say that you're a hick if you don't like classical music.
Your self-righteous indignation is putrid.
Just for the record, I don't own a home.
At this point there's no reason to get mad, be thankful they paved the way for you. If all the 2/28 and toxic 0 down borrowers hadn't caused the run up, the builders wouldn't have added so much inventory that will soon be vacant. Like a hermit crab, look at all the pretty shells you will have to choose from. Had things leveled off in 2003 they would be taking off again now and there would be less inventory to choose from. You had all those years to prepare and save. I haven't had to bust out any Lao Tzu for weeks but you forced me, "There is beauty in life's disorder." Some guy just ordered a bunch of Pizzas and couldn't pay for them, rather be angry about how his large order delayed yours, offer the pizza guy half the price to take it off his hands.
Good point temecula guy. But I have to admit that these type of sob stories make me mad as well. Who the hell thinks that they deserve to live in a 567k home on 90k a year with "so-so" credit and two car loans!!!???
My husband and I make a decent amount more than that, no debt except $250/ month student loan payment, good credit, and would not think of getting a loan more than 400k.
I just get sick and tired of hearing these stories that seem to implicate that we should feel bad for these people and someone should bail them out, ugh!
Anyways, sorry for the rant. I am an infrequent poster, consistent lurker.
MrMark123
Yes, I am bitter. These are cry babies, getting media attention.
“Most Americans want to own a home.” Are you a spoke person for NAR? My point is if you couldn’t afford it don’t buy it. Save your money first then get it afterward. You are confusing want versus need, for instance I want a FERRARI but in reality I just need a reliable car to go to work.
“Taking the bus is often not a feasible option.” Good point there. Then consider other options. Sell the cars and buy older cars. Check the Craigslist. An older car have cheaper insurance and registration, the maintenance cost is not more as long as you don’t buy a problematic car (such as Ford Pinto) of course driving an older car sucks. Are they thinking about this? Of course not (I don’t see it discuss at all), so they want the cake and………
“they're acknowledging their mistakes” Let me ask you this, how many times they mentioned the Mortgage Broker? They’re acknowledging there was a mistake, but it sure was mostly everybody else. And please stop crying to the media, in my dictionary this is called Moron.
You could call me Snobbish Hick :). It was sarcasm statement about the music lesson. Their priority messed up. My children education (including piano lessons when they get older) is the most important priority. I rather drive a beat up car than have to pull my kid out from something she loves. They still eat out once per month? Why don’t use that money for her instead?
I am self-righteous, because I don’t have sympathy for this BS? So be it…..Now you on the other hand, make no judgment about other people but place me in self-righteous spot. What do you call that?
We all should be ok to own or not to own our homes. I am not against homeowner here. However I don’t want to hear you complaining to the media if you take a suicide pill.
TG
great quote of the Lao Tzu. just make sure you don't outbid me on those pizza
"snail" you sound like someone I know. Are you going to be angry when people cannot afford their rent either. Then get ready to be really angry in the next 10 years,because that's what is coming when the layoffs start. Very few people are immmune from a depression. Usually only the really rich/really smart make money in a depression. Are you in either of these groups?