patrick.net

Matt99999 says

I get down in the dirt , work boots, blue jeans and I am swamped with work and I havent made less than 6 figures since 1982

What do you do for a living?

OurBroker says

Mr. and Mrs. Smith make $300,000 a year, $25,000 a month. With a 28 percent front ratio they can spend $7.000 for mortgage interest and principal, property taxes and property insurance -- say $5,500 a month for principal and interest. At 4.25 percent they can borrow $1,085,486.37.

$7K/month is quite hefty -- more than 40% of net, and could easily be 45%+ depending on your payroll deductions. Not sure I'd feel comfortable with that myself, even as a job creator.

However, when I actually did the math on this, I got more like $8K/month (pre-tax) in costs, using submedian's calculator, assuming 40% marginal tax deduction (35% federal AMT + 5% Maryland). That'd be 50% of net income even with very low payroll deductions. The loan amount alone was $1100 more than you estimated at $6620, and your estimate is probably wrong because it's a massive jumbo loan and would have a higher rate.

You can use http://www.paycheckcity.com/calculator/netpay/us/maryland/result.html to figure out what net pay would be, roughly, which of course would need to be adjusted by tax preferences like the mortgage interest deduction ($1M limit of principal + $100K equity loan, right, so if you got a $1.085M first mortgage, not all the interest is deductible).

$25,000 per month x 28% = $7,000.

If you have a household income of $300,000 that's $25,000 per month gross -- before taxes.

My example is designed to provide a general illustration. It's very much in the ballpark.

OurBroker says

$25,000 per month x 28% = $7,000.

Yes, I get that the traditional ratio supports it (and agree with you on that -- I've stated numerous times that traditional ratios are 28/36). What I'm saying is that it might not be a wise financial decision to commit such a high percentage of your net, especially in this economy where you might want to keep a cushion.

That is the maximum point at which a bank gives you a traditional mortgage. Do you really want to be at the maximum and be house-poor with a mortgage that will be quite difficult to pay off, even at such a high income?

I already pointed out that your total monthly calculation was wrong. It's actually more like $8K/month, of which $6600 is mortgage payment, so scale down the mortgage you gave us by 1/6.

If you're ultimate point is that people should not borrow the maximum available to them under lender guidelines then we agree.

My example is to generally illustrate a point. In reality deals differ considerably based on any number of variables. This doesn't make my illustration "wrong."

Q: Why is DC so expensive?

A: Because it's the seat of power, and a good warm seat in the morning is a damned expensive thing!

The Heights of Buildings act of 1910 is what limits the heights of the city's buildings. It's a common misconception that there are laws stating no building can be higher than the Capitol or the Washington Monument, though by the letter of the law, it would automatically be illegal to build a building higher than the Washington Monument. This is because the height of a building is limited to the length of the street it sits on, plus an additional 20 feet. As there are no streets long enough to exceed the height of the monument, it would not be possible to build such a building in the city by default.

I for one like the effect this has had on the cityscape. Housing woes notwithstanding, anyone who's driven East from Arlington down the GW parkway towards Reagan National and beyond can appreciate the effect this has on the landscape. Its kind of nice to be able to see more than 100 feet into the city in any one direction, and that you can be across the river in Arlington and see scenes like this:

Hi --

What a great photo. Were you along the GW parkway somewhere?

Why? Because Jumbo loans helped keep prices high.
But not after October 1

Market Current limit Limit After October 1 Reduction in Limit
San Diego $697,500 $546,250 $151,250
Fairfield, CT $708,750 $575,000 $133,750
Los Angeles $729,750 $625,500 $104,250
Washington, DC (most counties) $729,750 $625,500 $104,250
Orange County, CA $729,750 $625,500 $104,250
Riverside-San Bernadino, CA $500,000 $417,000 $83,000
Baltimore (most counties) $560,000 $494,500 $65,500
Boston (most counties) $523,750 $465,750 $58,000

Can't take credit for that one actually, though from the looks of it it had to be right off the GWP

I'd hate to nitpick this...but..

Has any developer thought of building down instead of up?

I know they have underground centers in Montreal due to the cold. Naturally there would not be a view but if it is cheap enough it might be worth it.

PersainCAT says

Besides the fact that u usually dont build below 2-3 stories underground becasue no one wants to be down there, from my understanding DC has a high water table due to the type of land its built on. So any major underground buildings run the risk of flooding.

Yes, the Potomac being right there makes a difference too. This is why certain Metro configurations that require tunneling (e.g. Metro to Georgetown) are slightly more complicated as well.

Done! says

Why? Because Jumbo loans helped keep prices high.
But not after October 1

I for one am happy to see superconforming loan limits go down. They should go back down to $417K or lower, so this is just a good start.

Jumbo loans lead to jumbo mortgage interest deductions. Working families' subsidy for the rich, it is.