HCOLA and keeping housing under 28% of gross

[jimmychippewa]

Has anyone who lives in a HCOLA in the north east been able to keep housing under 28% of gross with a 20% down payment? Or is this not really possible in HCOLAs?

I know Dave Ramsey says to stay under 25% of net on 15 yr note, but that seems near impossible with out saving for many, many years.

We just want to be sure we don't over extend ourselves ...

[MonkeyMama]

I think it is pretty impossible.

I grew up in a HCOLA, and more than 50% income gross to housing (rent or mortgage), is just the standard.

We were able to circumvent the extreme high costs by buying a condo. It was much cheaper than renting, in our case, low maintenance, and the tax breaks also made it much more affordable than renting. Expecting to actually own a HOUSE in a HCOLA, may not make much financial sense. OR, expect to save up a down payment for MANY years. IT's not the kind of thing you can accomplish in just a few years. Good middle ground would be a townhome (though they can be quite pricey too).

You will find if you value financial security, size and sharing walls won't matter so much. Something has to give, generally.

For the record, I don't think this makes Dave's advice wrong. I think more people should think really hard before committing to a large mortgage, or not expect to have the "perfect house" with a few months of planning/saving. If you value financial security, you have to think outside the box a bit in these situations.

[BlackDiamond]

I live in the Boston area and for a house, or even a condo, unless you make 75K+ a year and buy a shack it's just not going to happen.

Honestly, you can't even rent a 1BR in a non-sketchy area for under $750 + utilities.

And if you decide you are willing to live in a sketchy area, just because you're cool with it doesn't mean your auto insurer will be. Expect your rates to triple in certain areas.

[graceful]

Well, in order to keep my PITA to approximately 28% of gross, we had to save and put down around a 46% down payment plus closing costs. Our mortgage amount is around the 2.5 to 3 times annual salary amount.

We had to save up for many years for that large down payment. And we had to add 60 minutes each way to our commute in order to afford even that home.

We could probably have spent less money on the house if it was a major fixer upper. But the amount saved would have cost us in a lot of time and money to make those fixes.

Condos and townhouses would probably be the only thing affordable in our price range if we didn't have the large down payment. In which case, renting might have been a more economical choice since the maintenance fees will go a long way towards rent closer to the city depending on how high the fees are.


Good luck!

[wincrasher]

This is why so many people got sucked into the mortgage mess that has hit this nation.

Prices were rising in these HCOLA faster than you could save a down payment. So eventurally people would "bite the bullet" and take one of these low down/option ARM deals, just to get into a house. For the most part, it was now or never, not greed, that got these people in these bad situations.

The whole thing is sad really and there is a surprising lack of sympathy for the average joe in the public.

Now that the whole thing is collapsed, people are still largely shut out because all the cash buyers/investors are sweeping in a getting all the good bargains.

So it's condo life or renting for the vast majority.