My husband and I live in the Tampa area, which is considered to be one of the least expensive major U.S. cities to buy a home. We bring in enough household income to "afford" a home in the most expensive San Francisco area, according to a mortgage comparison site HSH.com. Although our household income is more than four times the amount needed to afford a home in Tampa, we wouldn't feel comfortable with a mortgage higher than the one we have at $900 a month. A recent Yahoo Finance article looked at where people can and can't buy homes on their salaries. When we went home shopping during the "original" housing bubble, my husband and I didn't let how much money we made at the time tell us what home we could afford. We assumed our household income and financial responsibilities would change throughout the years. We were correct.
Paying no more than rent
We didn't want to pay significantly more on a mortgage compared to what we would have paid for rent. As a single person, I paid about $800 a month to rent a 2-bedroom apartment. When we got married, we didn't even consider renting an apartment because we could buy a home with mortgage payments of about $1,100 a month. Our mortgage payment went down to $900 last year when we refinanced to a lower interest rate of 2.75 percent on a 15-year fixed.
Affording less home as we age
We were smart to under-estimate what we could afford in a home because we had smaller bills in our 30s. When we hit our 40s, our bills grew as our children grew and went to college. Also, we wanted to be able to financially assist our elderly parents at times. I can't imagine what kind of lifestyle we would have if we had stretched ourselves. According to the HSH.com study, a household income of $125,000 is what would be needed to buy a $705,000 home in San Francisco. I can't fathom spending $2,918.34 a month on a mortgage even though some, very lucky years, we surpass the 6-figure household income mark.
Dealing with stagnant wages
Some people purchase a home assuming they will earn more money as time goes on so their mortgage payments will become more affordable. Our income did increase for the first few years, but then hit a plateau. Since I work in the marketing and media field, I know I could easily lose my full-time job. We can afford our home on one income, which makes it easier to sleep at night.
In our 30s, we could easily afford a mortgage on a loan of about $150,000. It's a different story in our 40s because we are edging closer to retirement. We wouldn't take on a loan for more than $100,000 because we want to be free of mortgage debt by age 55. For us, what we can afford in terms of a home purchase has very little to do with our income and more to do with our individual financial goals. We want more money to spend on entertainment, food, clothing and other people. A lot of factors have to go into the home affordability calculations.
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