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By conventional standards a couple making 300k should have a loan of about 3x that income. So 900k. Perhaps that is the case coming in with an existing property

by runamok 10y ago

By conventional standards a couple making 300k should have a loan of about 3x that income. So 900k. Perhaps that is the case coming in with an existing property but do they really think they will have 30 years of prosperity and one parent won't take some time off to raise their kids? I can't help but assume many people are going to lose their everything come the next recession...

usaar333 10y ago
Prior property isn't needed and I'm not sure where the 3x rule comes from. Non-housing costs need not scale linearly with income. $300,000 a year is $190,000 post-tax. Assuming 20% down, a $1.7M home would cost somewhere in the range of $8,000 a month after factoring in the mortgage income tax deduction. That leaves $94,000 a year disposable, which is a lot anywhere. This family can readily get a full-time nanny for the early children years, ensuring no parent needs to take time off.
- runamok 10y ago
  Right. Until one person gets laid off, has a car accident, wants a divorce, etc. 8000 in 12 months is 96000 so now one salary goes only to the mortgage... Now make those salaries for the next 30 years. Your point is valid in that as you make more money more of it can go to housing because a smaller portion is required for things like food, clothing, gas, transportation, etc. 3x gross income was the conventional rule of thumb but truthfully that was back when interest rates were 7% or so. However, just because you can afford something doesn't mean you should.
dcosson 10y ago
That rule of thumb was probably intended for more "middle class" wages though, no? Above a certain level your other basic costs like food, clothing, travel (especially if you're having kids and can't do much traveling or fine dining) don't have to increase with your income so you can afford to spend a higher percentage of your pay on housing if you want/need to.

by runamok 10y ago

usaar333 10y ago

Prior property isn't needed and I'm not sure where the 3x rule comes from. Non-housing costs need not scale linearly with income. $300,000 a year is $190,000 post-tax. Assuming 20% down, a $1.7M home would cost somewhere in the range of $8,000 a month after factoring in the mortgage income tax deduction. That leaves $94,000 a year disposable, which is a lot anywhere. This family can readily get a full-time nanny for the early children years, ensuring no parent needs to take time off.

runamok 10y ago
Right. Until one person gets laid off, has a car accident, wants a divorce, etc. 8000 in 12 months is 96000 so now one salary goes only to the mortgage... Now make those salaries for the next 30 years. Your point is valid in that as you make more money more of it can go to housing because a smaller portion is required for things like food, clothing, gas, transportation, etc. 3x gross income was the conventional rule of thumb but truthfully that was back when interest rates were 7% or so. However, just because you can afford something doesn't mean you should.

dcosson 10y ago

That rule of thumb was probably intended for more "middle class" wages though, no? Above a certain level your other basic costs like food, clothing, travel (especially if you're having kids and can't do much traveling or fine dining) don't have to increase with your income so you can afford to spend a higher percentage of your pay on housing if you want/need to.