Americans Must Earn $114,000 a Year to Afford a Typical Home
Americans Must Earn $114,000 a Year to Afford a Typical Home
There is a discussion on Hacker News, but feel free to comment here as well.
The article is paywalled. Is this $114,000 total family income? That seems a lot more feasible than $114,000 per person. The median income for a 35 year old is $63k so two people working would, on average, be able to afford a home.
Who determines "afford". Avg house is $400k, including rural America. 7% mortgage rates right now is basically 28k per year to interest.
115k means you lose about 35% to taxes. 74k take home means about half your annual just goes to interest. Afford isn't the right word here.
Why would I want to go into debt with a bank for thirty fucking years? Why does a bank get so much free money over that thirty years in the form of interest, for almost nothing? All they do is front the cash, and that's it. Why does that justify so much free profit? Why is this the way it has to work?
Some of it is that it needs to be profitable to be a reality. If they gave you 300k and you paid back the exact percentage of 35years x 12 months each month they'd lose money.
Other parts are that you're competing with their other opportunities.
It's a necessary evil unfortunately.
What you should be asking is why can corporations own land. Residential land is for people only, that would lower costs and give more of a chance to the people.
Corporations owning land is the current way many young / low income people get housing.
Renting is cheaper for people that might move in ~5 years. Moving citys is an important way to gain income.
I think baning cooperate ownership of "residential land" would be another government handout to owners at the expense of renters. Id prefer policies that increase housing supply instead. For example, investment in nonmarket housing, and permitting reform favoring infill development.
Credit union
Because they take on the risk of what happens if you don't pay it or default. They have to pay out a massive amount of money that they could have used for other investments, instead you become the investment and they just hope you'll pay off, literally.
You don't have to have the bank front you a loan though, you could just save up for 30 years and pay it all off with cash, but given the way housing prices are increasing, that seems to be a terrible plan. By the time you've saved up $150k for that $300k home, that home will likely be worth $450k lol. It's better to get in early, lock in a rate (and refinance later), and start to pay off your mortgage now.
Risk. They take a risk when they give people money that they may be unable to recoup. At the same time it is money not liquid to use for other things.
Get a loan when interest rates are low and/or refinance when they go lower. Your alternatives are buying a house with cash or renting. I'm assuming cash is off the table, so let's compare renting with paying off a mortgage, which can often have similar monthly payments. When you rent, you have fewer responsibilities, but you also have less control over your space and lose every penny of your monthly payment. When you own, you have more financial obligations eg repairs or upgrades, but you have more control over your space, and a portion of your monthly payment goes toward your principal, which becomes equity. That equity is yours if/when you decide to sell. If you want to pay off your mortgage more quickly than the amortization schedule and pay less interest, that is also your prerogative.
But paying rent is no different than paying interest on a home loan as far as your pocketbook is concerned, except you get to keep some of your home loan payment every month
The 30 year mortgage revolutionized hime ownership in the US. Before it existed, home ownership was totally out of reach for a much larger percentage of society than it is today
Also consider that most banks have free checking amounts. Those cost money.
I'm so close, only $97,000/year to go.
You make $17,000/year? Do you work full time?
Yes. No. I'm going to college full time and work on campus, they cap my hours at 20/week. It kinda sucks cause I'm really reliant on financial aid and am stuck living with my parents as an adult, but it's also really convenient.