Question: True about things being relative…I think the standard of living is higher now, and people have more, but I remember a subdivision of homes built in Irving, sub of Dallas, frame, 3 bedrooms, hardwood floors…very cute and the average working guy could afford one. My dad was an uneducated union worker and could buy a house. The average blue collar worker today usually lives in an apt. My parents even saved some money…of course as I said, we didn’t have all of the “toys”. kel
Answer: Please also take into consideration things like saving for retirement, building up a nest egg, etc. Treat them as if they were “debt.” (You may not owe it to the credit card co., but you “owe” it to yourself!)
We bought our first house ~4 years ago. We had no other debt, and our jaws dropped to the floor when we were told we qualified for DOUBLE what we felt we could afford. Later we got to thinking that they didn’t take into consideration that fact that my husband puts in $2000/year in an IRA, I put in 12% of my income in a 401(k), 5% of my income in co. stock, we tithe 10% to our church, and invest a couple hundred monthly for short/mid-term goals. When we totalled all this stuff up and treated it as if it were DEBT, it was the difference between what the bank told us we could “afford” and our original figure of what we felt comfortable with.
We went with the lower figure, and even had to argue with the loan officer at the bank who told us we wouldn’t be happy in an “inexpensive” house (average price for our area, the type we had both grown up in) and that we were foolish for doing this, and would change our minds when we went house-hunting.
It’s been 4 years, and I have NEVER felt foolish for getting the cheaper house/loan. It’s one of the wisest decisions we made. Since that time we have had a child, purchased a new car, continue to watch our nest-egg build, and we remain DEBT-FREE.
Moral of the story: You know yourself and your finances better than that yahoo at the bank. Do not take a huge mortgage just because the bank says you can afford it. If that’s your #1 priority, fine, but if you have other priorities, make sure you have enough flexibility in your budget for them, too.
YMMV, of course.
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