photo #1971273

I saw a news report showing the median price of a house in the US now is sitting at $405,000.00. I wonder how many people KNOW the difference between median and average? They are NOT interchangable terms! My brain has so many comments running simultaneously! How much of this is being fueled by the "instant gratification" that has seemingly overtaken our society? Why does it seem to be necessary to have this year's decorating colors in order to look at a house? Are people searching for a house or do they want a home? Do you remember the traditional 25% rule? It was fairly easy, don't spend over 25% of your AFTER tax income on housing (rent and insurance or mortgage, interest, taxes and property insurance). Example, your take home on $50,000 income is $37,500, annually housing maximum is $9,375 or $781 per month. Today, banks are using the 28% rule. Again fairly easy to understand. Your housing should not exceed 28% of PRE tax income. In the example, your limit would be $14,000 or $1,167 a month. Ok, let's go back to the median home price of $405,000. Let's figure a downpayment of $40,500 (10%), this leaves you roughly $360,000 divided by 30 years equals $12,000 divided by 12 equals $1,000. That number is before interest, taxes and insurance. Question comes back to the drudgery of debt or life. When we were young, we knew we could not afford to live like our parents when we first set up housekeeping. I remember stories my parents told of their first home being in an area know as "Bloody Flats". Doesn't sound desirable but many young couples started life in that area. The questions we should be asking involve YOUR goals! It goes back to expanding your horizons and using your imagination. When we bought our property 11 years ago, our goals had been established as had our price range. We refused to consider anything that would require a mortgage. It really didn't matter what others thought of our decision. I doubt that many of my oldest friends will ever understand our decision but we have never followed the crowd. We need to again learn to respect the individual. We can't allow "them" to force all of us into their version of life! Don't spend so much just to fit in! You may not live in "THE" neighborhood but there are still decent places you can purchase for $50,000. The $50,000 comes back to a principle payment of $125 a month vs $1,000. Which would you rather pay in good times and bad?