An Open Letter to my Two Mortgage Companies

Re:An Open Letter to my Two Mortgage Companies by zain on Saturday February 07, 2009 @04:31AM (#470993)

I'm not sure where you're getting your 3x income numbers from, but they're simply ludicrous. With a mortgage of 3x your income, your mortgage will be less than 20% of your salary. For example, with an $85000/yr income, you earn about $5300 post-tax per month, and your mortgage payment is only $1350. If you consider home owning to be important to you, surely you can afford paying more than that for your mortgage.

Furthermore, it is impossible to find a home in the bay area for under $600,000. I'm certain that those starter homes are not being occupied by high net-worth individuals with $200,000/yr salaries.

I have been told that your monthly payments should not be more than 45% of your monthly household post-tax income. That comes out to a mortgage that can be about 5x your income. With those numbers, the lady in the article should've had a household (her + her husband) income of about $150,000/yr.

I'm a recent buyer of a $625,000 home with a $85,000/yr salary and I have no problems keeping up with my payments and establishing an emergency fund.

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Re:An Open Letter to my Two Mortgage Companies by timr on Saturday February 07, 2009 @04:59AM (#471007)

He's right. The traditional guideline is that you should pay about 30% of your net income on housing. You're right that the bay area is "different", but that doesn't mean it's different in a reasonable way. Most people really can't afford to own property here, by traditional standards.

Also, I'd like to point out that this woman took out an interest-only loan for the bulk of her debt, skimped on the deposit, and secured with another loan. Even if we use your standard (45% of net income), there's no way that she could afford the property.

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