patrick.net

My motto was, and I got, I wanted the most house for the least amount of money.

Space, Rooms and Yard. I drive by houses that has nicer curb appeal and nicer lawns throughout, but they look you could open a side window, and your neighbor does the same and they could shake hands, and the back yard ends at the backdoor steps. Those houses aren't for me, at any price.

lol, when graphs/charts/tables/plots are put together by none math/science types, it could not be more transparent, lol ;-)

For the sake of discussion, when I bought in 2007 (30yr fixed at 7%), lenders were willing to lend me as much as would be covered annually by 45% of my gross annual income.

I.e. With a $100,000 salary at 7% interest rate for example, they were willing to lend me enough to translate to ($45,000/12) = $3750/month for 30yrs (principle+interest+HOA+taxes). Back that that would be $580,000...

Today, I don't think they banks are quite as optimistic.

ChrisKolmar says

How Much House Can You Afford

I could afford to pay $50,000 for a beat up old Alpha Romero...
But decided to pay only $680.

Im pretty sure a billionaire could afford to pay $10M for my home ...
But it would be foolish to do so...

What one can afford and price they should pay are too different things,
something of an idea lost during the raging bubble years.

Back in 2005 I was pre approved for 500k. My accountant told me I'd be lucky to afford half that- he told me flat out anything over 200k would be streching.

I still rent.

in year 2001 i got approved up to 400k. bought a home for 300k

in year 2004 i got approved up to 1.5m (my salary was about 5k higher per year!!!!!!!) so I bought one for 825k and flipped it the next year for 1m. zing! (the buyers still live there, i think they got a loan mod/princ reduction... sometimes everybody wins)

I live in WI, property tax hell. I currently pay $6900 all utilities included, rent is high in the city where most of the work is, and a typical property tax bill for southern WI is 3-4 thousand for even a low end 2 or 3 bedroom house. Friends who own homes in the 225k-300k range definitely pay more property taxes than my current rent.

It would not be a good idea for me to buy, I've had the same job for 15 years, and 50 cent pay increase in the last 4 years, I would have to quit my job and move to see any pay rate increases. But, the bank would probably let me buy anything up to 150k, it all depends on your salary and perceived job security.

How much house can I afford? I can afford as much house as the bank is willing to lend. So I guess the question you should ask is.....

How much is the bank willing to lend?

E-man says

How much house can I afford? I can afford as much house as the bank is willing to lend.

The bank doesn't care whether you can afford the house because it lands the mortgage origination fees regardless of whether you can afford it and continue paying the loan buyer (today that usually means the government sponsored enterprises) and will still make loans that you can't afford (while still maintaining your middle class lifestyle, saving for retirement, and covering your health insurance costs).

In non-recourse states where you're willing to walk away and suffer bad credit this translates into being able to afford as much as the bank is willing to lend. Any time your cash flow ceases to support the property you just stop paying, save your extra cash to help when renting your next home, and squat until they seize it.

Elsewhere you can afford less than the bank will lend you because you'll be liable for any net loss when they seize and sell the property and if they give up trying to collect you'll owe 28% (or whatever your federal tax rate is) of whatever debt they forgive.

Drew,

I beg to differ. This is 2012 and not 2004-2007. The banks care now. I am in a process of getting a couple of loans & they make me jump through all kinds of hoops.

E-man says

I am in a process of getting a couple of loans & they make me jump through all kinds of hoops.

Tell me about it, before I was working on closing our loan, I had a few rogue grey hairs, by the day I moved in, the sides of my head and my mutton chops, were completely grey. That was just a 45 day closing process. Every day someone at the bank was putting me to the test.
Always end with, "Well it sounds like we have everything we need, that should be all, good luck see you at the closing."
The next day, someone else would call with a tone, like the deal is being X'd if I don't get my ass down to some office, get a form filled out and faxed back by close of business that day.

This was every single day. I hope there's a bad spot in hell, the worst place imaginable, where the hell sun don't shine, and the hell winds don't blow, for the people who came up with the SOP for getting a loan processed.

Shuddup, if your photo is any indication of how bad you looked at the end of your purchase I may have to put off buying a house.

I haven't taken care of myself all these years only to look like that!

I second the captain. This country has been at the extremes lately. If the federal government butts itself out of the house buying process and stops the bail outs (with our money), everything will become normal and we get to see affordable house prices, normal loan qualification and house buying standards.

"Tell me about it, before I was working on closing our loan, I had a few rogue grey hairs, by the day I moved in, the sides of my head and my mutton chops, were completely grey. That was just a 45 day closing process. Every day someone at the bank was putting me to the test.
Always end with, "Well it sounds like we have everything we need, that should be all, good luck see you at the closing."
The next day, someone else would call with a tone, like the deal is being X'd if I don't get my ass down to some office, get a form filled out and faxed back by close of business that day.

This was every single day. I hope there's a bad spot in hell, the worst place imaginable, where the hell sun don't shine, and the hell winds don't blow, for the people who came up with the SOP for getting a loan processed."

E-man says

How much house can I afford? I can afford as much house as the bank is willing to lend. So I guess the question you should ask is.....

How much is the bank willing to lend?

Not entirely true. The bank will often give loans for more than a person can truly afford. To live comfortably, I should not buy a house for more than 450K, but the bank will give me almost 700K (this was last April), based on my salary and credit score. However, I am not willing at all to pay more than 400K to buy land and build. Not going to settle for a former crack house in the NOBE (North Oakland Berkeley Emeryville).

rufita11 says

E-man says

How much house can I afford? I can afford as much house as the bank is willing to lend. So I guess the question you should ask is.....

How much is the bank willing to lend?

Not entirely true. The bank will often give loans for more than a person can truly afford. To live comfortably, I should not buy a house for more than 450K, but the bank will give me almost 700K (this was last April), based on my salary and credit score. However, I am not willing at all to pay more than 400K to buy land and build. Not going to settle for a former crack house in the NOBE (North Oakland Berkeley Emeryville).

What is not entirely true about my question above?