[quote=SDEngineer][quote=davelj]I’m with Bob on this.
A $350K house is the MOST you should be buying based on the facts provided.
Just my opinion, of course.[/quote]
Why?
Based on their income, and assuming reasonable HOA’s and no Mello-Roos, even with a minimal down payment (3.5-5%) they’ll have a housing component DTI somewhere in the 23-28% range, which is very affordable, and with a minimal down payment, they’ll also have at least 6 months reserves in the bank, which as far as I can see is a bigger hedge against unemployment or other unexpected economic issues than a higher down payment.
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I guess I’ve got a holdover East Coast mentality about money in general. I grew up in a mid-sized east coast city. My brother and his wife make a combined $180K (with no kids) and they were bitching and moaning about ponying up for a $300K house (2200 sq ft) and how it was a stretch. And my brother’s job will never disappear – he’s a career federal prosecutor.
So, even though I’ve been out here in SoCal for almost 9 years, I still think like an East Coaster. Not to the degree that patientrenter does, mind you (not that there’s anything wrong with his approach).
Of course these folks can afford a $450K house using the “common” ratios. But the question is whether buying what you can afford based on recent metrics is the right way to go about things. Maybe it is, maybe it isn’t.
My own opinion – and that’s all it is – is that a home priced well below what you can actually afford might be the better choice.
