On 17 Dec 2013
First time house purchase loan questions..,
3X your annual household income is the MAX house you can afford. Do not go beyond that amount.
That's a good rule of thumb, but hardly a certainty.
I agree. But, if a person "earns" their payment through "wages", and has a desire to pay-off the home at some point, then I kinda think it is a rule. If the buyer has a short term selling idea, or has no plan to ever stay put, or does not plan to own, or is willing to gamble, or sees a benefit worth the difference (good area, view, schools, ect), then that 3:1 ratio can move around. But, I submit it should be slid down when the same variables are negatives. In an area like the 209, a middle-class subdivision home is only worth 2X the middle-class HHI, in my opinion. Real numbers in 209 would be something like 45K HHI X 2 for a 90K home. The trouble is, Section 8 hands out $1,000 a month to rent these mid-level houses that can be bought for 1/2 that amount in payments, so most middle-class subdivisions in the 209 are becoming gang slums. This is forcing the regular people that do not want to live in tijuana to sell to the investors and then to pay more-than-value to get into areas that are not infested - yet.
The way is looks to me is, the REMafia has parlayed their position by gathering up lots of SFH's, having taxpayers pay the note through Section8, and then drive the productive middle-class out of the middle-class subdivisions, and into higher-cost areas, by infesting the area with scum. Graffitti, gangs, drugs, violence, loud music at all hours, little dogs running through the streets, cars parked on the front yard ..... all coming to a subdivision near you if Section8 is not removed from the SFH market.
p.s. Section 8 allows people to BUY also.
In the meanwhile, stupid people are rewarded with laon modifications. That is absurd. That is welfare for stupid people. Once again, anyone not stupid enough to go into debt at 10:1 HHI, and then HELOC every penney they can from the asset, and then make zero payments for 5 years, and then get a loan modification -- is the one paying the way for those who were that stupid.
Back on topic: 3:1 is a good rule for anyone coming on Patrick.Net for good advice. If you are wealthy enough to go beyond that ratio, you can just use the tried and true system of telling your REMafia member, "I can afford this much $___ per month", and out of the goodness of their heart they will find a home that takes (just a little bit more than) that amount for you to own.