How in the world do people afford mortgage payments on home purchases of 400K+??

Question

How in the world do people afford mortgage payments on home purchases of 400K+??

Answer 1

That's impossible! The economy is in such bad shape, and most people barely make enough income to survive. For example, nobody could afford to pay over $3,300 a month in most cases, because the average income is not even a fraction of this rediculously high mortgage. The average salary does not match the cost of living anymore. Because of the expensive cost of mortgages and homes, no one is buying and most cannot even obtain the financing for such an expensive home. Unless one is a multi, multi zillionaire, I would not bother with such an expensive proposition.

Answer 2

For a long time the banks were loaning money on those homes and not asking the buyers a lot of questions.  If the buyers had some money or had good credit, the bank would loan the money.  That has not been a good strategy in 2008. I also am wondering what will happen since a buyer should make $100,000 income per year to afford a $400,000 house.  Most people i know do not make $100,000.

Answer 3

People should by what they can afford to buy (NOT what the bank says they can afford to buy, since you can see what kind of problems THAT started).  Housing costs should be approximately 30% of one's income.

Buying a home fr $400k does not mean you have mortgaged the entire amount. If this is their first home, I would hope that they had a downpayment of at least 5%, so only $380k would be mortgaged.

If this is a 2nd home, I would hope that they had made money off the sale of their last home and might have a big chunk to put on their new home.  Of course, that's becoming less likely in today's market -- but if they had lost money on their last house, I doubt anyone would be buying a $400k house unless they had a very high income.

I could buy a $400k house tomorrow, and I hardly make any money now (I only work part of the year).  Of course, that would mean I have to sell my current house.  At the peak of my career, I only made $40k/year.  I could have made more, but I chose to enjoy life rather than work until I was 65.  With the exception of some contract work that I do for 3-4 months each year, I'm basically retired.  I've never inherited any money, my parents have never given me any money.  Some people ask us why we don't drive a new car if we have so much money -- the answer is a new car is a fairly bad investment.  I'd rather retire early than drive a flashy new car.  That's my decision -- someone else might prefer the new car.

It can be done ... you have to be good with money. You have to make good choices that are suitable for your specific situation.

Answer 4

They make a big batch of money.

$400K @ 7%, 30yr-fixed ==> $2664 principal & interest, throw in taxes and insurance and you're looking at about $3300/mo mortgage.

If the mortgage payment is 30% of their income, that means they make $11K per month or $132K per year.

"Rich" according to Democrats, "lower middle class" according to Republicans

Answer 5

There are many foreclosures out there that prove some people can't afford their home mortgages. Just because a bank says you can afford something doesn't mean you can. What happens when unemployment or disability strikes??? A $400,000 home should be no problem to someone with a $200,000 joint income but not to the average $60,000 median income family. People have to assess their lives as to what is most important... the size/image of a home or neighborhood or the security of living within a budget. Would you rather have a $60,000 Lexus or a $15,000 Hyundai??? We all have choices to make and some make wise ones while others, unfortunately, don't.