5 ms·

How does one have "low debt" and buy a home?

drchiu 8y ago
Only two ways that I can think of: * Have a lot of capital to begin with (or saved up or inherited) * Move to an area where homes are cheaper
- rubicon33 8y ago
  Having capital saved up is tough. I've tried to save as much as possible but, year after year, it's amazing that I haven't managed to save more. As for moving to a cheaper area... We all know what that means. I'm certainly looking in the "cheaper" neighborhood, but it's not the "cheapest". We all have our limits to what we consider a safe and healthy neighborhood, I suppose.
wutbrodo 8y ago
The obvious (and often unrealistic) answer is to buy a much, much cheaper home and save much more. Other than that, "low debt" isn't well-defined and all debt isn't created equal. If you get a mortgage whose payments give you a lot of wiggle room based on your income and expected future income, most people wouldn't have trouble including that situation among "low debt".
- rubicon33 8y ago
  Gotcha. That's the boat I've been in. I want to avoid debt as much as possible, but unless I'm willing to live in a really rough neighborhood, I will need to buy a home that is roughly 3.5x my gross yearly pay (before taxes). That's a lot of debt. The payments however, are manageable. So I suppose it is helpful to frame "low debt" in that way.
  - wutbrodo 8y ago
    At some level, it's a pretty reasonable definition: having all your liquidity tied up in a single asset doesn't make a lot of sense, so having a house with a mortgage secured on it is just a way of getting somewhere between renting and buying outright without having to swing to the other extreme. The main risk you're faced with is a drastic drop in value right after you buy it, but that shouldn't affect your day-to-day if your payments were affordable in the first place.
    - mark-r 8y ago
      That was the point of the article though, payments that are affordable today may not be tomorrow if your income takes a hit.
      - wutbrodo 8y ago
        Right of course, which is why some estimate of future expected income is important, including a buffer for lowered income in the future.
  - itronitron 8y ago
    3.5x your gross yearly pay sounds fairly typical. You should really only care about your monthly mortgage payments. If you have student loan debt then you should try to roll that into your mortgage if it has a much lower rate.
    - dalyons 8y ago
      Not typical everywhere... The median wage / house price in sydney & melbourne are 13x and 10x respectively. And you pretty much have to live in one of those two cities if you want a decent job in Australia. The country’s in for a lot of pain if there’s a big recession.
    - acjohnson55 8y ago
      Through the new school student loan consolidation firms, you may be able to get better interest rate on your student loan debt than your mortgage. This was the case for me. I used Common Bond.
  - neumann 8y ago
    Come to Australia, where in capital cities, the median house prices are ~8x the median income!
ohiovr 8y ago
Buy the home in cash is how. Might seem ridiculous and impossible where you are at the moment. But if tech crashes, where will you be? In my home town in the land of unimportance you can own a home for just $26K. And it isn't bad. Compared to homelessness and unpredictable future rent costs.
- outworlder 8y ago
  What, where the heck is this? Is it in the US? I don't doubt it, I have seen crazy low home prices in some backwater locations, but never as low as 26k.
  - ohiovr 8y ago
    Marion Ohio, USA. My brother even knew an dying fellow that wanted to sell his house for 10 grand. The house is kind of a relic from the 50s. When soliders came home many of them bought these little 800 sq foot homes. Marion Ohio is more than 45% senior. No tech in the town besides the broadcasters, and ordinary sys admin type stuff. But there is a little bit of tech (tiny) in Delaware Ohio, Lewis Center, and all of Columbus has tech jobs that pay anywhere from $60-100k. If you can put up with a 50 minute commute you could save up a nice pile of cash in no time. Thrift!
  - selimthegrim 8y ago
    There are parts of New Orleans where this is a thing - of course you will need to put some work into the house.
  - deleted 8y ago
    [deleted]

Only two ways that I can think of: * Have a lot of capital to begin with (or saved up or inherited) * Move to an area where homes are cheaper

rubicon33 8y ago
Having capital saved up is tough. I've tried to save as much as possible but, year after year, it's amazing that I haven't managed to save more. As for moving to a cheaper area... We all know what that means. I'm certainly looking in the "cheaper" neighborhood, but it's not the "cheapest". We all have our limits to what we consider a safe and healthy neighborhood, I suppose.

wutbrodo 8y ago

The obvious (and often unrealistic) answer is to buy a much, much cheaper home and save much more. Other than that, "low debt" isn't well-defined and all debt isn't created equal. If you get a mortgage whose payments give you a lot of wiggle room based on your income and expected future income, most people wouldn't have trouble including that situation among "low debt".

rubicon33 8y ago
Gotcha. That's the boat I've been in. I want to avoid debt as much as possible, but unless I'm willing to live in a really rough neighborhood, I will need to buy a home that is roughly 3.5x my gross yearly pay (before taxes). That's a lot of debt. The payments however, are manageable. So I suppose it is helpful to frame "low debt" in that way.
- wutbrodo 8y ago
  At some level, it's a pretty reasonable definition: having all your liquidity tied up in a single asset doesn't make a lot of sense, so having a house with a mortgage secured on it is just a way of getting somewhere between renting and buying outright without having to swing to the other extreme. The main risk you're faced with is a drastic drop in value right after you buy it, but that shouldn't affect your day-to-day if your payments were affordable in the first place.
  - mark-r 8y ago
    That was the point of the article though, payments that are affordable today may not be tomorrow if your income takes a hit.
    - wutbrodo 8y ago
      Right of course, which is why some estimate of future expected income is important, including a buffer for lowered income in the future.
- itronitron 8y ago
  3.5x your gross yearly pay sounds fairly typical. You should really only care about your monthly mortgage payments. If you have student loan debt then you should try to roll that into your mortgage if it has a much lower rate.
  - dalyons 8y ago
    Not typical everywhere... The median wage / house price in sydney & melbourne are 13x and 10x respectively. And you pretty much have to live in one of those two cities if you want a decent job in Australia. The country’s in for a lot of pain if there’s a big recession.
  - acjohnson55 8y ago
    Through the new school student loan consolidation firms, you may be able to get better interest rate on your student loan debt than your mortgage. This was the case for me. I used Common Bond.
- neumann 8y ago
  Come to Australia, where in capital cities, the median house prices are ~8x the median income!

ohiovr 8y ago

Buy the home in cash is how. Might seem ridiculous and impossible where you are at the moment. But if tech crashes, where will you be? In my home town in the land of unimportance you can own a home for just $26K. And it isn't bad. Compared to homelessness and unpredictable future rent costs.

outworlder 8y ago
What, where the heck is this? Is it in the US? I don't doubt it, I have seen crazy low home prices in some backwater locations, but never as low as 26k.
- ohiovr 8y ago
  Marion Ohio, USA. My brother even knew an dying fellow that wanted to sell his house for 10 grand. The house is kind of a relic from the 50s. When soliders came home many of them bought these little 800 sq foot homes. Marion Ohio is more than 45% senior. No tech in the town besides the broadcasters, and ordinary sys admin type stuff. But there is a little bit of tech (tiny) in Delaware Ohio, Lewis Center, and all of Columbus has tech jobs that pay anywhere from $60-100k. If you can put up with a 50 minute commute you could save up a nice pile of cash in no time. Thrift!
- selimthegrim 8y ago
  There are parts of New Orleans where this is a thing - of course you will need to put some work into the house.
- deleted 8y ago
  [deleted]