I am looking to buy a 2 bedroom condo for 250k (CA) range with 20k down, so a 230k loan. I will have a friend renting the other room; he’s good for the money; so no responses about relying on others is a bad idea ect; plus I know a lot of people in the area.

My question is, is their an equation to see how much I’d be making if the HOA is $350 a month, property mortgage insurance $150 a month, property taxes (whatever Southern CA is avg), housing expenses (avg, but in a new condo development so not as much as old), ect…………..Assume I am renting the room for $800 a month and assume I am getting a 5% interest rate on 30yr and assume I am for sure going to sell the condo in 5 years. Assume the condo does not appreciate nor depreciate. I am just confused with all these stupid expenses like HOA/PMI/interest rates/taxes if I am even making money or how much equity all have in the house after 5 years. I live in Southern CA OC, so all condo HOAs are high, and if I waited to buy a 3-4 bedroom detached house it would probably be a MINIMUM of 380k which I can not afford. I am single, no kids, ect. I get 400 month for car at my work, gas paid, cell phone paid, toll road paid, expense card for some lunches/breakfast, benefits ect. I do pay $50 month for student loans, and $100 for car insurance.

So can someone do all that math for me for like how much equity all have after 5 years. I assume a 230k loan with all the expenses like hoa,pmi, taxes my monthly payments will be like $1600, give or take 100-200, does that sound right? Do you think all qualify for 230k with only 2 years working income and a credit score of 700 only signing by myself?

It all seemed so logical in 2007.

How much of this $3,100 do you really want going to your house? Then you have to worry about cars, kids, eating is always nice, car insurance, clothing, gas, utilities, repairs on the house.. it’s a long list.

We personally try to stay at 2X income as a rough number, assuming that you put down 20%. I’d recommend building a cash budget and see what you can afford. 30 years is a long time to be house poor. I know that we spent about $200K on our house and the payment after 20% down was about $1,500. Do you really want 50% of your $3,100 going to the house? We took out a 15 year mortgage (when I was 30 & kept it for about 6 years. We later refinanced and now our payment is less than $940 a month (even more manageable now that we have 3 elementary aged children) & we now have about 55% equity. Fortunately, our incomes have kept up so our ratio is now less than 1. We could easily pay the house off today if we really wanted to, but we’ll probably just wait a few years… maybe 5 or so.

The real point is, at no time were we ever house poor. We built out 3K sq ft (1/3 acre lot), 5 bedroom house in 2002 and watched our budget. The banks would of certainly given us more money, but I didn’t like their numbers or the real estate guy’s numbers. . More importantly, I’m the one having to live with & make the payments.

Safety is always a concern (no one cares more than you do). What happens if a spouse is unemployed, becomes ill.. you have to protect yourself & not get in over your head. Worst case, you’ll sleep very well at night knowing that even though you may not live in the fancy $500K homes or drive the really nice cars, etc. You have a little money in the bank and you’re not house poor. And you can still take 2 – 1 week vacations every year. After all.. it’s just a house.

good luck.

now, my wife is staying home with the kids – a conscious choice and one we agreed upon, mind you – so we have been living on my income alone rather than the double income when we got our mortgage. since we are now looking to relocate due to a new job for me, i went and got pre-approved for a mortgage to help us be more serious. the lender found both of us to have “A1 credit” (my scores were almost too good to be true) but we were easily approved for a FHA loan that would be about 2.5 times my current gross salary. the lender said she could probably get us a loan for even more (about 3.25 my current salary) but i said “no way! i know we could never pay that back.” the lender applauded that reaction, actually. besides, the ace up mysleeve is that my salary is going to increase by about 13% with the new job. however, my goal is still to only get a loan for what i can afford now.
i realize that i must use credit to buy my home, but the key is notto overextend. unfrotunately, i just dont have enough cash lying around to buy a house outright. (maybe i can get a 3-4 year advance on my pay, eh?) basically, we live within our means so we can live. if anyone lives beyond their means, they will be homeless one day (and soon).

If you want my advice get a nice home with a reasonable mortgage. Make extra payments towards the principle every month and then get your house paid off in 10-12 years.

Then if you really want to keep up with the Jones you can sell your house and have a massive down payment on the house of your dreams.

That’s what I’m doing and my 1st home will be paid in full by the time I am 34 years old. In a few years I’m going to get a house on the water = but nothing too flashy because even with a big down payment I don’t want to be house poor.

The government encourages people to become homeowners by giving you SERIOUS TAX BREAKS on your income taxes. That should also be taken into account.

But, yes, when it comes to the housing market in So. Cal. (I live out here too), REALITY and AFFORDABILITY are two diametrically opposed things! It’s truly insane. I’m not surprised at the housing bubble bursting now. It’s not so much due to the sub-prime mortgages, I think, but to the fact that the whole thing was basically a PYRAMID SCHEME: As long as people kept coming in at the bottom (or rather, buying at the “top” of the market, in this case), everyone kept making money. However, once people “came to their senses,” the bubble burst.

Two years ago I, for one, looked at moving and simply BALKED. I would NOT pay $650,000 (PLUS taxes, plus HOA, etc. etc. etc.) for a 2 bedroom condo! That was when I knew the bottom was going to drop out of the housing market. People were going to wake up and realize the Emperor has no clothes. And, so, here we are now.

Nevertheless, over the LONG TERM, buying a house can still be a great investment (if you can find an affordable one to start off in), not only because of the tax breaks I mentioned above, but also because you ARE at least building equity – rather than throwing away the money for rent each month. Not to mention the fact that as long as California continues to experience population growth (both internally and thru immigration), the housing market will continue to grow steadilly (over the long run, that is).

Some things to consider. And, btw, congrats on your upcoming nuptials!

I’m 26, I’m getting married in March. My fiance and I live in California. We both moved back in with our parents so that we could save money for the wedding and a down payment on a house. We make a combined salary of $105,000.00. With this 1.5-4% logic, we could barely find a house that is liveable after then insane 1.9% tax rates. Factor in the fact that there is absolutely NO guarantee that the housing market is an investment and I think we are better off renting, then taking the money that we are saving (say approx $1500 difference between mortgage and rent) and invest it in something a little more stable (5% cd/mm account) and I think we make it out a little better.

We own a very modest house now, but I’d like to buy in a better neighborhood in the next few years. Our current house is worth somewhere between 120K and 150K, I’m not really sure and don’t like to overestimate. I owe a little under 50K on it. I’d like to upgrade to a house worth 300K-400K. But I can’t afford to borrow hundreds of thousands of dollars. So my plan is to save like crazy until I have enough to make a 50% downpayment on a nicer house. That way, I’ll still be borrowing only, say, 1.5 times my gross income.

The other idea, if I can swing it, is to keep my current house when I upgrade, but I don’t think I can save enough money to upgrade without using the equity in my current house, so that’s more of a wistful idea than an actual plan.

I leveraged out when I bought my place with 40-45% debt/monthly income….. I had to dip into my cash every now and then for the first year and the safety cash is definately something I am going to analyze prior to any future purchases.

In regards to this post: True, banks may allow you 3-5x’s your gross income for loan. However, you, and ONLY YOU, have to figure out if this is realistic or if the bank is taking you over-the-limit. Would you feel comfortable paying 33%, 40%, 50%, or even 65% of your gross income on housing expenses???? (plus, if you do work, an estimated 7.5% goes to fica,medicare; 20% federal; 5% state; and then health, dental insurance; and how about some 401k to possibly get company matching?) Only YOU have to answer this question, and whether you feel comfortable with that in a new home.

Did I read somewhere what the NJ motto is? “If you can dream it, we can tax it.”

That is, if you plan to live in a house for awhile (say 10 years or more), and you don’t want to move, then owning gives you the security of staying put as long as you’d like. With a rental, the landlord could decide to sell the place, have their kids move it, kick you out for any number of reasons.

Furthermore, if the part of the idea of a home is enjoying where you live, then there’s far more incentive to fix up your own place than a rental.

Sure, money counts…but so does life. And a home is much more a life-factor for many people than solely a money-factor.