Cash flow criterion works, Patientrenter!
[quote=patientrenter]
Scarlett, I am sure that you are a wonderful person, but if it would take you “years and years” to save 10% of the price of the home you want to buy, then you cannot afford it. The only way you can “afford” it is if its price only goes up, not down. That is never guaranteed. It is widespread denial of the simple ‘cash flow’ criterion for affordability that got the entire economy into its current fix.[/quote]
We have $170K income and excellend FICO scores. If we can’t afford a decent 4 br house that now goes for 550-600K, how many can then? By “years and years” I meant more like 5 years in the current conditions, playing it safe by first putting away money for college and retirement, before saving for down payment.
I am paying rent of $2700 and save ~$1000 per month, after retirement, college fund savings. I think in terms of cash flow, assuming steady income, it works just fine. With $3600 total PITI and 10% down, I could buy something quite decent right now, instead of waiting those 5 years. I don’t care much if the prices don’t go up, though it would be nice.
What if in 5 yrs the rates are over 10-15% and the prices haven’t dropped dramatically (though they probably would, with those rates)? I may not be able to afford the monthly payment then, even if I have 20% down. Why wait (except for prices to decline further)? Why should I turn off all the other savings and live in a crappy place in order to save that those money in couple years instead? What’s wrong in this case to buy now with only 10% down?
I can tell you what’s wrong. You are right, it shouldn’t take us years to come up with an extra 10%, when you have 170K yearly income, even with that high of a rent. The house market is still so much out of whack. The prices should be HALF of what they are now!!! Ok, maybe not quite half, but at most 66%. Then yes, I’d have 20% down right now. Well, I am waiting, maybe they will go down that much in a couple years. I think they will.
