[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]
520K mortgage at 6.25% (you can get 6.00% without points, but let’s be conservative)
Interest $2708
Principal $493
Insurance $50
Property tax $921 (tax rate 1.7% including Mello Roos)
HOA say $100
—
total housing $4272/month. And only $2800-2900 of that is “effective rent”, the rest is tax deduction and principal payments.

At some point the house will start to appreciate with inflation. Normal monthly appreciation of a 650K house is around $1600/month.

130K income is take-home pay around $9000 after social security, medicare, etc. (married, 2 dependents). You have almost 5 grand per month left on food, utilities, clothing, entertainment. Not too shabby. Besides, incomes tend to rise and housing payments are fixed for 30 years.
[/quote]

$130K is take-home pay under $7.5K/month after taxes and $10K in 401k, assuming generous employee match, married, 2 dependents w/ standard deduction, $0 for wifey’s IRA and employee covered insurance. Your marginal rate is 25%, but since you itemize you forfeit your standard deduction and assuming you cheat by claiming MR your “effective rent” is closer to $3.5K.
Your fixed monthly expenses are:
$3500 “effective rent”
$500 principal
$100 HOA
$300 cable, phone, misc utilities
$600 car payment (entry level sedan and minivan)
$500 food
$300 gas & car maintenance
————————
$5800
You are left with $1700/month to cover medical bills (two kids – what are the chances at least one will need braces?), landscaping, clothing, electronics, furniture for your new house, vacation, preschool/school supplies, birthday parties… you will be able to set asside few hundreds/month, if that, to recover your $130K downpayment.

I am not saying it is impossible, but it sounds very risky and the engineering types with a spouse and two kids, that you count on, are usually risk-aware and rarely accept prayer as a convincing risk mitigation plan.

[BGinRB]

[quote=esmith]
520K mortgage at 6.25% (you can get 6.00% without points, but let’s be conservative)
Interest $2708
Principal $493
Insurance $50
Property tax $921 (tax rate 1.7% including Mello Roos)
HOA say $100
—
total housing $4272/month. And only $2800-2900 of that is “effective rent”, the rest is tax deduction and principal payments.

At some point the house will start to appreciate with inflation. Normal monthly appreciation of a 650K house is around $1600/month.

130K income is take-home pay around $9000 after social security, medicare, etc. (married, 2 dependents). You have almost 5 grand per month left on food, utilities, clothing, entertainment. Not too shabby. Besides, incomes tend to rise and housing payments are fixed for 30 years.
[/quote]

$130K is take-home pay under $7.5K/month after taxes and $10K in 401k, assuming generous employee match, married, 2 dependents w/ standard deduction, $0 for wifey’s IRA and employee covered insurance. Your marginal rate is 25%, but since you itemize you forfeit your standard deduction and assuming you cheat by claiming MR your “effective rent” is closer to $3.5K.
Your fixed monthly expenses are:
$3500 “effective rent”
$500 principal
$100 HOA
$300 cable, phone, misc utilities
$600 car payment (entry level sedan and minivan)
$500 food
$300 gas & car maintenance
————————
$5800
You are left with $1700/month to cover medical bills (two kids – what are the chances at least one will need braces?), landscaping, clothing, electronics, furniture for your new house, vacation, preschool/school supplies, birthday parties… you will be able to set asside few hundreds/month, if that, to recover your $130K downpayment.

I am not saying it is impossible, but it sounds very risky and the engineering types with a spouse and two kids, that you count on, are usually risk-aware and rarely accept prayer as a convincing risk mitigation plan.

[BGinRB]

[quote=esmith]
520K mortgage at 6.25% (you can get 6.00% without points, but let’s be conservative)
Interest $2708
Principal $493
Insurance $50
Property tax $921 (tax rate 1.7% including Mello Roos)
HOA say $100
—
total housing $4272/month. And only $2800-2900 of that is “effective rent”, the rest is tax deduction and principal payments.

At some point the house will start to appreciate with inflation. Normal monthly appreciation of a 650K house is around $1600/month.

130K income is take-home pay around $9000 after social security, medicare, etc. (married, 2 dependents). You have almost 5 grand per month left on food, utilities, clothing, entertainment. Not too shabby. Besides, incomes tend to rise and housing payments are fixed for 30 years.
[/quote]

$130K is take-home pay under $7.5K/month after taxes and $10K in 401k, assuming generous employee match, married, 2 dependents w/ standard deduction, $0 for wifey’s IRA and employee covered insurance. Your marginal rate is 25%, but since you itemize you forfeit your standard deduction and assuming you cheat by claiming MR your “effective rent” is closer to $3.5K.
Your fixed monthly expenses are:
$3500 “effective rent”
$500 principal
$100 HOA
$300 cable, phone, misc utilities
$600 car payment (entry level sedan and minivan)
$500 food
$300 gas & car maintenance
————————
$5800
You are left with $1700/month to cover medical bills (two kids – what are the chances at least one will need braces?), landscaping, clothing, electronics, furniture for your new house, vacation, preschool/school supplies, birthday parties… you will be able to set asside few hundreds/month, if that, to recover your $130K downpayment.

I am not saying it is impossible, but it sounds very risky and the engineering types with a spouse and two kids, that you count on, are usually risk-aware and rarely accept prayer as a convincing risk mitigation plan.

[BGinRB]

[quote=esmith]
520K mortgage at 6.25% (you can get 6.00% without points, but let’s be conservative)
Interest $2708
Principal $493
Insurance $50
Property tax $921 (tax rate 1.7% including Mello Roos)
HOA say $100
—
total housing $4272/month. And only $2800-2900 of that is “effective rent”, the rest is tax deduction and principal payments.

At some point the house will start to appreciate with inflation. Normal monthly appreciation of a 650K house is around $1600/month.

130K income is take-home pay around $9000 after social security, medicare, etc. (married, 2 dependents). You have almost 5 grand per month left on food, utilities, clothing, entertainment. Not too shabby. Besides, incomes tend to rise and housing payments are fixed for 30 years.
[/quote]

$130K is take-home pay under $7.5K/month after taxes and $10K in 401k, assuming generous employee match, married, 2 dependents w/ standard deduction, $0 for wifey’s IRA and employee covered insurance. Your marginal rate is 25%, but since you itemize you forfeit your standard deduction and assuming you cheat by claiming MR your “effective rent” is closer to $3.5K.
Your fixed monthly expenses are:
$3500 “effective rent”
$500 principal
$100 HOA
$300 cable, phone, misc utilities
$600 car payment (entry level sedan and minivan)
$500 food
$300 gas & car maintenance
————————
$5800
You are left with $1700/month to cover medical bills (two kids – what are the chances at least one will need braces?), landscaping, clothing, electronics, furniture for your new house, vacation, preschool/school supplies, birthday parties… you will be able to set asside few hundreds/month, if that, to recover your $130K downpayment.

I am not saying it is impossible, but it sounds very risky and the engineering types with a spouse and two kids, that you count on, are usually risk-aware and rarely accept prayer as a convincing risk mitigation plan.

[BGinRB]

[quote=esmith]
520K mortgage at 6.25% (you can get 6.00% without points, but let’s be conservative)
Interest $2708
Principal $493
Insurance $50
Property tax $921 (tax rate 1.7% including Mello Roos)
HOA say $100
—
total housing $4272/month. And only $2800-2900 of that is “effective rent”, the rest is tax deduction and principal payments.

At some point the house will start to appreciate with inflation. Normal monthly appreciation of a 650K house is around $1600/month.

130K income is take-home pay around $9000 after social security, medicare, etc. (married, 2 dependents). You have almost 5 grand per month left on food, utilities, clothing, entertainment. Not too shabby. Besides, incomes tend to rise and housing payments are fixed for 30 years.
[/quote]

$130K is take-home pay under $7.5K/month after taxes and $10K in 401k, assuming generous employee match, married, 2 dependents w/ standard deduction, $0 for wifey’s IRA and employee covered insurance. Your marginal rate is 25%, but since you itemize you forfeit your standard deduction and assuming you cheat by claiming MR your “effective rent” is closer to $3.5K.
Your fixed monthly expenses are:
$3500 “effective rent”
$500 principal
$100 HOA
$300 cable, phone, misc utilities
$600 car payment (entry level sedan and minivan)
$500 food
$300 gas & car maintenance
————————
$5800
You are left with $1700/month to cover medical bills (two kids – what are the chances at least one will need braces?), landscaping, clothing, electronics, furniture for your new house, vacation, preschool/school supplies, birthday parties… you will be able to set asside few hundreds/month, if that, to recover your $130K downpayment.

I am not saying it is impossible, but it sounds very risky and the engineering types with a spouse and two kids, that you count on, are usually risk-aware and rarely accept prayer as a convincing risk mitigation plan.

[BGinRB]

[quote=urbanrealtor][quote=BGinRB]Ah, urbanrealtor’s eloquent straw men and ad hominems. My favorite. [/quote]
What of what I said was either a straw man or an ad hominem?
I think my remarks have been pretty much confined to the topic. I don’t think I have attacked anyone personally. I don’t think I have presented anyone’s view as a straw man.

[/quote]
shallow, sarcastic, cynical… were all unnecessary adjectives. They apply to persons, not arguments. You are most definitely a very talented and wordy person and it is unfortunate that your debating style and delivery is so uncompromising and lawyerly.

[BGinRB]

[quote=urbanrealtor][quote=BGinRB]Ah, urbanrealtor’s eloquent straw men and ad hominems. My favorite. [/quote]
What of what I said was either a straw man or an ad hominem?
I think my remarks have been pretty much confined to the topic. I don’t think I have attacked anyone personally. I don’t think I have presented anyone’s view as a straw man.

[/quote]
shallow, sarcastic, cynical… were all unnecessary adjectives. They apply to persons, not arguments. You are most definitely a very talented and wordy person and it is unfortunate that your debating style and delivery is so uncompromising and lawyerly.

[BGinRB]

[quote=urbanrealtor][quote=BGinRB]Ah, urbanrealtor’s eloquent straw men and ad hominems. My favorite. [/quote]
What of what I said was either a straw man or an ad hominem?
I think my remarks have been pretty much confined to the topic. I don’t think I have attacked anyone personally. I don’t think I have presented anyone’s view as a straw man.

[/quote]
shallow, sarcastic, cynical… were all unnecessary adjectives. They apply to persons, not arguments. You are most definitely a very talented and wordy person and it is unfortunate that your debating style and delivery is so uncompromising and lawyerly.

[BGinRB]

[quote=urbanrealtor][quote=BGinRB]Ah, urbanrealtor’s eloquent straw men and ad hominems. My favorite. [/quote]
What of what I said was either a straw man or an ad hominem?
I think my remarks have been pretty much confined to the topic. I don’t think I have attacked anyone personally. I don’t think I have presented anyone’s view as a straw man.

[/quote]
shallow, sarcastic, cynical… were all unnecessary adjectives. They apply to persons, not arguments. You are most definitely a very talented and wordy person and it is unfortunate that your debating style and delivery is so uncompromising and lawyerly.

[BGinRB]

[quote=urbanrealtor][quote=BGinRB]Ah, urbanrealtor’s eloquent straw men and ad hominems. My favorite. [/quote]
What of what I said was either a straw man or an ad hominem?
I think my remarks have been pretty much confined to the topic. I don’t think I have attacked anyone personally. I don’t think I have presented anyone’s view as a straw man.

[/quote]
shallow, sarcastic, cynical… were all unnecessary adjectives. They apply to persons, not arguments. You are most definitely a very talented and wordy person and it is unfortunate that your debating style and delivery is so uncompromising and lawyerly.

[Author]

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