Author Topic: Absurdity found on TikTok: how much income to afford $350k house?  (Read 4331 times)

fat-johnny

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Answer this question:  In your opinion, what yearly gross salary would you need to have to afford a $350k house?

Now, with your answer in mind, go watch this 30sec TikTok video:  https://vm.tiktok.com/ZTdahdJpv/

I’d love to hear the responses from the Mustachian community.  (and for more comedy gold, watch any/all of this clown's other videos)
FJ

Spoiler: show
He says you can buy a $350k house on a $59k gross household income
« Last Edit: March 29, 2022, 06:08:37 AM by fat-johnny »

DadJokes

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #1 on: March 28, 2022, 06:40:08 AM »
Our house was purchased for $325k with a $90k income back in 2018. That was more than we wanted to spend, but still easily affordable. Income has gone up since then, and we've refinanced to a lower rate (much lower than the 3.99% he's using). He's also citing some 45% of gross income limit on payment, but I prefer to stick with 30% of net. I don't think someone making $60k is losing 15% of their income to taxes, unless they are single, in which case I'd suggest getting a roommate to share some of the costs.

RWD

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #2 on: March 28, 2022, 09:55:13 AM »
Personally I'd probably want to have an income of at least $80-90k. But I don't think there is anything wrong with the TikTok as framed. He's basically stating the bare minimum to get qualified for a loan to buy a $350k house. He didn't conveniently forget about PMI, homeowner's insurance, or taxes. Though 4% interest rate is probably optimistic for an FHA loan, I think closer to 5% is more common right now.

OtherJen

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #3 on: March 28, 2022, 10:11:00 AM »
Answer this question:  In your opinion, what yearly gross salary would you need to have to afford a $350k house?

Now, with your answer in mind, go watch this 30sec TikTok video:  https://vm.tiktok.com/ZTdahdJpv/

I’d love to hear the responses from the Mustachian community.  (and for more comedy gold, watch any/all of this clown's other videos)
FJ

18 years ago, my husband and I were approved for a maximum $100K loan. Our total household income at the time was $50K, we had more than 3% for a down payment, and we had credit scores over 700. I'd laugh at the absurdity of this video, but I know that a lot of people are probably taking this as sound financial advice (which is depressing).

fat-johnny

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #4 on: March 28, 2022, 10:50:44 AM »
I don't think someone making $60k is losing 15% of their income to taxes, unless they are single, in which case I'd suggest getting a roommate to share some of the costs.

Assuming ZERO pretax deductions, the income taxes on a $60k salary are $8,948.50......which is 14.91%

Granted, having ZERO pretax deductions would be very, very rare.
FJ

innkeeper77

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #5 on: March 28, 2022, 11:12:02 AM »
Answer this question:  In your opinion, what yearly gross salary would you need to have to afford a $350k house?

Now, with your answer in mind, go watch this 30sec TikTok video:  https://vm.tiktok.com/ZTdahdJpv/

I’d love to hear the responses from the Mustachian community.  (and for more comedy gold, watch any/all of this clown's other videos)
FJ

18 years ago, my husband and I were approved for a maximum $100K loan. Our total household income at the time was $50K, we had more than 3% for a down payment, and we had credit scores over 700. I'd laugh at the absurdity of this video, but I know that a lot of people are probably taking this as sound financial advice (which is depressing).

It looks like 2004 rates were in the high 5% range then, which would decrease the total loan value people could afford somewhat relative to today's lower rates (And last years significantly lower rates), but additionally general rent is much higher today, meaning it could make sense for more people to buy even if they DO have to stretch a bit.

I also know, and in the past was one of these people, a number of people that ended up qualifying for a mortgage based on ONE income in a two income household, due to paperwork, new jobs, or other reasons- which isn't nearly as big of a deal as stretching the total household budget. (Like Dicey below, I'm in a M-HCOL area which is, at this time, not negotiable)
« Last Edit: March 28, 2022, 12:55:08 PM by innkeeper77 »

Dicey

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #6 on: March 28, 2022, 11:31:43 AM »
The elephant in the room is "other debt". I was always able to live comfortably with mortgage payments that ate up a higher-than-recommended percentage of my income because I had no car payments, SLs, or CC Debt, none of which this dude mentions.

Semi-related question: do lenders look at how much you're loading into your retirement accounts? I wonder if rolling back your contributions to merely match level just ahead of the buying process would allow you to qualify for more?

If you live in a HCOLA, especially if you're not a high wage earner, you often don't have the luxury of "buying something cheaper", because it just doesn't exist and rents are crazy, too. On one hand it sucks sucked, on the other, property appreciation has definitely made it worth the sacrifice over the last thirty years, even through the Great Recession, provided you managed to ride it out. You could, because as a badass mustachian, you still managed to save, despite the high mortgage payment.

moof

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #7 on: March 29, 2022, 12:13:32 AM »
I personally believe in 3x your salary max for a a mortgage.  We were barely over that for our house 15 years ago, and despite no debt it felt really tight for a few years till I got a few raises.  I think I was at about 90k for a 290k loan.  Interest rates were a little higher back then, but not that much more.

Spending 45% of your gross income leaves very little to live on after taxes take another quarter to a third.

caleb

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #8 on: March 29, 2022, 08:11:04 AM »
If you live in a HCOLA, especially if you're not a high wage earner, you often don't have the luxury of "buying something cheaper", because it just doesn't exist and rents are crazy, too.

I have to imagine that rising interest rates are going to make more areas feel HCOL.

As borrowing costs rise, house prices may be sticky and not fall proportionately.  If so, the supply and demand curves diverge and sales don't happen.  Or, as the WSJ wrote yesterday, individual homeowner demand may just end up being replaced with investment money that's looking for a vehicle that can track inflation with rising rents.  Either way, it seems like a recipe for lots of social frustration.



remizidae

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #9 on: March 29, 2022, 09:04:16 AM »
Semi-related question: do lenders look at how much you're loading into your retirement accounts? I wonder if rolling back your contributions to merely match level just ahead of the buying process would allow you to qualify for more?

Mortgage lenders look at the ratio of debt to gross income, so contributing to a retirement account wouldn't hurt you.

CTEC_Stache

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #10 on: April 05, 2022, 07:59:11 AM »
Answer this question:  In your opinion, what yearly gross salary would you need to have to afford a $350k house?

Now, with your answer in mind, go watch this 30sec TikTok video:  https://vm.tiktok.com/ZTdahdJpv/

I’d love to hear the responses from the Mustachian community.  (and for more comedy gold, watch any/all of this clown's other videos)
FJ

Spoiler: show
He says you can buy a $350k house on a $59k gross household income


That is absurd!

My wife and I are currently searching for a home. Our local market's average 3/2 home (which we are looking for) is right around $350k so I have some direct insight here. Our current household income is $67k and we will have roughly $100k - $130k for a down payment depending on what we can sell our current home for. That being said our mortgage loaned amount would be $220k - $250k and I'm not even comfortable with that! In the fall our household income will increase to about $80k. At that point I feel comfortable spending up to $350k for the total purchase.

JAYSLOL

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #11 on: April 06, 2022, 01:09:06 PM »
$80k if i had prospects of yearly increase in income to at least keep up with inflation.  $100k if it was a fixed income with no prospect of the income keeping up with inflation

Chris22

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #12 on: April 06, 2022, 02:26:04 PM »
Our first house was similar, we paid $275k IIRC, but the payment was similar because we had higher property taxes and a higher interest rate (2007, think we were 4.75%?). We made around $120k combined at the time, but did have other debt (car payment).  It felt about right, monetarily, right up until we we had a kid and suddenly paid $1500/mo in childcare. Then it felt tight. Fortunately our wages increased over time as well.

I think 2.5-3x gross is a good rule of thumb. We’re currently right around 2x gross on our house (15 years later, different house) and it’s comfortable and allows us to splurge in other places.

nessness

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #13 on: April 06, 2022, 03:38:20 PM »
Personally I'd probably want to have an income of at least $80-90k. But I don't think there is anything wrong with the TikTok as framed. He's basically stating the bare minimum to get qualified for a loan to buy a $350k house. He didn't conveniently forget about PMI, homeowner's insurance, or taxes. Though 4% interest rate is probably optimistic for an FHA loan, I think closer to 5% is more common right now.
His math seems basically sound, but I wish he'd framed it as "how much income you need to qualify for a mortgage on a $350k house " instead of "how much income you need to afford a $350k house" because those are NOT necessarily the same.

partgypsy

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #14 on: April 07, 2022, 10:40:35 AM »
Personally I'd probably want to have an income of at least $80-90k. But I don't think there is anything wrong with the TikTok as framed. He's basically stating the bare minimum to get qualified for a loan to buy a $350k house. He didn't conveniently forget about PMI, homeowner's insurance, or taxes. Though 4% interest rate is probably optimistic for an FHA loan, I think closer to 5% is more common right now.

yes, and as someone else mentioned, being able to qualify for that loan of a 350K home does not = being able to afford said 350K home. 

PoutineLover

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #15 on: April 07, 2022, 12:13:51 PM »
I think house prices are so out of whack with incomes that it becomes really hard to know what is truly "affordable". My spouse and I make a decent income, and 3x our income wouldn't even be enough to buy a two bedroom condo in our city, let alone a whole house. Our online pre-approvals say that we could get a home at 5x our income, which sounds insane, but that's basically what it would take to get a 3 bedroom home that isn't a long commute away.

So we have the choice of renting (which is what we're doing now) or extending ourselves more than we are comfortable just to buy something now, in the expectation that the market will continue to rise and we may be priced out forever. I wouldn't fault someone who bought a little more than they could comfortably afford just because that's all that was available.


shureShote

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #16 on: April 13, 2022, 05:59:35 AM »
I did some memory straining to run down the six houses I have had over the years. In terms of purchase price versus gross salary for household they were

2x
1.9x
2.4x
2.3x
2.3x
2.1x

I would feel a lot of stress if we approached 3x. We are fortunate to have decently high incomes, but no way I’d be comfortable with some higher numbers. Especially since you normally are not buying quality homes any longer. Dumping a large payment into the shitbox houses that have been built over the last too many decades hurts me.

charis

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #17 on: April 13, 2022, 08:38:58 AM »
I think house prices are so out of whack with incomes that it becomes really hard to know what is truly "affordable". My spouse and I make a decent income, and 3x our income wouldn't even be enough to buy a two bedroom condo in our city, let alone a whole house. Our online pre-approvals say that we could get a home at 5x our income, which sounds insane, but that's basically what it would take to get a 3 bedroom home that isn't a long commute away.

So we have the choice of renting (which is what we're doing now) or extending ourselves more than we are comfortable just to buy something now, in the expectation that the market will continue to rise and we may be priced out forever. I wouldn't fault someone who bought a little more than they could comfortably afford just because that's all that was available.

Truly, in my city, we could find a decent house for less than our combined gross annual income, which is just under $200k.

PoutineLover

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #18 on: April 13, 2022, 09:37:59 AM »
I think house prices are so out of whack with incomes that it becomes really hard to know what is truly "affordable". My spouse and I make a decent income, and 3x our income wouldn't even be enough to buy a two bedroom condo in our city, let alone a whole house. Our online pre-approvals say that we could get a home at 5x our income, which sounds insane, but that's basically what it would take to get a 3 bedroom home that isn't a long commute away.

So we have the choice of renting (which is what we're doing now) or extending ourselves more than we are comfortable just to buy something now, in the expectation that the market will continue to rise and we may be priced out forever. I wouldn't fault someone who bought a little more than they could comfortably afford just because that's all that was available.

Truly, in my city, we could find a decent house for less than our combined gross annual income, which is just under $200k.
That's really lucky. I did a search for my city at that price and the only options available are studio condos, trailers, and parking spots.
At double our annual income you start to see two bedroom condos and small houses (in a flood zone though) or gems like this:

charis

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #19 on: April 13, 2022, 11:12:50 AM »
Luck has some to do with obviously. But I made a conscious decision to move back and settle down there because it was affordable, yet trending up not down.

PoutineLover

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #20 on: April 14, 2022, 08:04:54 AM »
My city was fairly affordable until covid hit, and since then it seems like no regions are safe from extreme price increases. I don't think anyone could have planned for this. Median home price in my city went from 402k in March 2020 to 587k in March 2022.

JAYSLOL

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #21 on: April 14, 2022, 05:49:19 PM »
Yeah it’s 400-500k just for a small lot in my area, and construction costs are absurd.  Absolute minimum for a rundown house is about 600k, average is more like 750-800, and a nicer new house is 900-1.2.  It’s insane.  Could have bought a nice house for 550k two years ago, now it’s 900+, definitely regret not stretching the budget and buying two years ago. 

NorthernIkigai

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #22 on: April 18, 2022, 01:59:47 AM »
These things always confuse me: It is as if the only way to buy a home is to have a down payment of exactly 20% and no other assets.

As soon as you have other assets/savings/a current partly paid off home, the number won’t be the same anymore. The same goes for if you are a large single income family where the income comes from basket weaving on TikTok versus if you have two solid careers and no dependents.

I mean, we don’t believe the “you need X% of your current income in retirement” crap either, do we?

poetdereves

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #23 on: June 09, 2022, 08:54:00 AM »
That number really surprised me because my wife and I just got an offer accepted on a $370k house, we make ~$200k gross, and I still felt like it was too much of a percentage of our income. It's probably more the fact that I never lived in a home over $100k growing up, so the mindset of being able to afford a nicer home is still something hard to comprehend for me. Our total PITI will only be about 14% of our total income, which is well within a reasonable range even by mustachian standards.

Kierun

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #24 on: June 09, 2022, 04:38:49 PM »
Must be nice, SFH median price hit $1.15M a few months back. I consider myself lucky with a recent refinance more than 5.5x our gross and still over 350k in equity. FMV of the house is probably around 8x our gross.

clarkfan1979

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #25 on: June 16, 2022, 01:26:22 PM »
Must be nice, SFH median price hit $1.15M a few months back. I consider myself lucky with a recent refinance more than 5.5x our gross and still over 350k in equity. FMV of the house is probably around 8x our gross.

What island? I bought a house on Kauai for 603K in 2018 when my W-2 income was 63K and our rental income was around 10K/year. My wife made 10K, but it didn't count for qualifying for the mortgage because it was part-time work and she hadn't been doing it for more than two years. Total PITI was $2650. The primary home had an ohana suite in the basement. We rented it for $1600/month, so that is how it was affordable.

We bought a house for 280K in 2019 in Colorado. My base salary was 52,208/year at the time. I was asked by family if I needed my rental income to qualify for the loan. I replied and said, "no" and people didn't believe me. I think maybe because my only debt was $150/month for student loans. We also had enough money to put 20% down to avoid PMI.

At $52,208, that's 4350/month. At a debt to income of 45%, I can qualify for $1957/month of debt. Deduct $150/month for student loans and I can qualify for a PITI payment of $1807. That would actually get me a house around 400K. Rates were around 4% at the time, so a 320K mortgage at 4% is $1528. Property taxes would be $179/month and insurance would be $96/month. I actually have exact numbers for taxes and insurance because the house is now worth 400K. 

At $52,208/year, I could qualify for a 400K house. If I didn't have any student loans, I could push it to 430K.

His video is accurate. No problems here. 
« Last Edit: June 16, 2022, 01:29:53 PM by clarkfan1979 »

Kierun

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #26 on: June 16, 2022, 03:10:38 PM »
Oahu, Honolulu.

Fomerly known as something

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Re: Absurdity found on TikTok: how much income to afford $350k house?
« Reply #27 on: June 23, 2022, 04:24:09 AM »
These things always confuse me: It is as if the only way to buy a home is to have a down payment of exactly 20% and no other assets.

As soon as you have other assets/savings/a current partly paid off home, the number won’t be the same anymore. The same goes for if you are a large single income family where the income comes from basket weaving on TikTok versus if you have two solid careers and no dependents.

I mean, we don’t believe the “you need X% of your current income in retirement” crap either, do we?

Yup my current home’s purchase price was 3.8x salary and will be 7.8 times my pension income in 2025.  But at the same time I put more than 20% down and I are coasting toward the end of my income earning years.  Also the mortgage is at 2.5 times current income and there is a “reasonable” amount left over without tapping assets with the pension.  It is actually a reasonable expense based on my overall assets.