proninja Posted August 16, 2007 Share Posted August 16, 2007 I would never dream of trying to cover a 256K mortgage with a 54K salary. Your numbers are way off. $50 for insurance? What insurance? 25% for taxes? What country do you live in? My house was 186 and my monthly is 1300 at 5%. How is a 256K mortgage at 6% only $300 more? That was a dumb loan to make, and a dumb loan to take. You're gonna get yourself in trouble with absolutes like that. I spent $185k on my first house while making $38k with a $1350 payment, supporting two people and didn't have any trouble. I'm really not sure where you're from where you can get a house with a $250k loan, yet the cost of living is so high they can't exist from $1600+ per month. That's a pretty odd combo. I threw those numbers together as an example in about 30 seconds. If I have time later I'll figure out her effective tax rate after she gets to deduct mortgage interest. I'll also explain the difference between marginal and effective tax rates, showing that her net take home is substantially higher than I'd estimated. Go ahead and throw some "stupids" around in the meantime if it makes you feel good though Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 Agree 100% Can you explain why you believe that? Quote Link to comment Share on other sites More sharing options...
darin3 Posted August 16, 2007 Share Posted August 16, 2007 Just found out that me and the wife's credit is im-frickin-peccable so we should be fast-tracked for our loan. :crossingfingers: Looking for homes this weekend. Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 (edited) I live in Washington, we have no state income tax, but we make up for it with higher property taxes, sales taxes, and just about every type of tax you can find. I'm going to run the numberrs without a state income tax, but just realize that everything else costs less because of it. I'm assuming 200/month taxes. Income - $54k Interest + Taxes = $1586/month or $19,032/year In most cases mortgage interest and property taxes are deductible, so we have a new taxable income: $54,000 - $19,032 = $34,968 Right here we have a tax rate chart. Here's where the marginal tax rates are listed. The real tax rate is calculated by total tax paid/total income earned - that's what we're figuring out. Marginal tax rates say what percentage of each dollar you earn go toward the gub'ment. If taxable income is over-- But not over-- The tax is:$0 $7,550 10% of the amount over $0 $7,550 $30,650 $755 plus 15% of the amount over 7,550 $30,650 $74,200 $4,220.00 plus 25% of the amount over 30,650 Ok. $34,968 - 30,650 = $4318 $4318 * .25 = $1079.50 $4220 + $1079.50 = $5299.50 That is our total tax paid, again, only using the deduction we know of - the home. We go back to income at $54,000 per year. We divide our total tax paid by our total income $5299.50 / $54,000 = .09813, or an effective tax rate of 9.813% on the federal level. California has the highest state income tax at 7.25%. Let's just tack that on there ignoring any deductions whatsoever because I'm feeling generous, and we're at an effective tax rate of 17.063%. I'll refer back to your question 25% for taxes? What country do you live in? I live in the USA, and I have a very basic understanding of taxes and how they work. What country do you live in? France? You're spouting your mouth off on the internet like a big smart guy, and you seem to have very little understanding of what you're talking about, speaking in absolutes when absolutes rarely apply, calling people stupid when you're the one who appears to be in a little over his head in this discussion. You can pile on, call her stupid, blame the loan and act all self righteous - I'm going to try to brainstorm a way to help this gal save her dream home. Seems to be the right thing to do. End of lesson. Edited August 16, 2007 by proninja Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 Oh, so let's take this full circle. We'll round her effective tax rate to 17%, assuming she lives in California and has zero deductions, and is paying state taxes on her federal taxes. Let's just say I'm giving this every benefit of the doubt. She makes $4500/month. 83% of that is $3735 per month. We'll hack off another $360/month for medical insurance, and we're right at 25% for income taxes and health insurance. We're right back to where I started. $4500 * 75% = $3375. $3375 - $1638 = $1737. That's $1737 per month for all expenses aside from a mortgage. Can someone please explain to me how it's impossible for a single person to live on that when they've got their roof taken care of? My dad raised a family of 4 on a firefighter's salary, and he's retiring at 57 set for life all on his own. My mom didn't work. You cannot tell me that you can't swing a $256k mortgage on a $54k salary. You're wrong, period. Obviously, the variables we don't know are her other debt service. Personally, I'd look at ways to eliminate that as opposed to eliminate the debt on my home, an appreciating asset over the long term. She can roll over and play victim, another victim of the terrible mortgage crisis, or she can fight, scratch, and claw her way out of whatever hole she's dug herself in that's causing her to not be able to afford a home that she very well should be able to afford, get some help, and try to keep her home. Ramhock, you've got a PM with my email address. The URL has all my contact info, please shoot me an email with some specifics as to why this won't work tomorrow, I'd like to lend a helping hand in any way I can. Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted August 16, 2007 Share Posted August 16, 2007 TLDR Man, that proninja is an effective arguer. Quote Link to comment Share on other sites More sharing options...
twiley Posted August 16, 2007 Share Posted August 16, 2007 (edited) Can you explain why you believe that? You've provided enough info to make me believe that it is possible but your calculations are still way too conservative. $200 a month on food? uh no. $200 on fun? You find me 5 single people that make 54K that are only spending 200 a month on fun. Edit: Most of the people I know that make that amount are only getting a home about 2.5 - 3 times their salary. I wasn't aware that the norm is apparently 5 times what you make? IMO, still doesn't sound like a great idea. I'd be living in a million plus home then. Edited August 16, 2007 by twiley Quote Link to comment Share on other sites More sharing options...
KevinL Posted August 16, 2007 Share Posted August 16, 2007 Speaking of grade 2 math, I'm still having trouble seeing how a single person can't afford a $1700 mortgage with a $4500 income. Take out 25% for taxes and insurance, and she's left with $3375. She's got $1675 left. Food - $200 Fun - $200 Insurance - $50 Gas - $100 Clothes - $100 Cell - $50 Internet - $50 Cable TV - $50 Investment - $500 Other stuff - $300 More other stuff - $75 Total - $1675 I'm sure I missed a few things, but I've got $375 to cover 'em. Also, there's some fluff in there. I'm totally shuke at how this is an "end of the world" type situation. Wow, you sure have missed some things from my budget. The first 3 here are absolute necessities. I think these numbers are on the low side.: Utilities (Electric, Gas, & Water) $325 Car Insurance $25 Car (Payment / Lease / Maintenance / Fund) $300 These more than cover your "other stuff" and knock the investment amount down to $200. If she has that much home, I'm guessing she has kids. This may be a bad assumption? But if it's true, then $200 for food and $100 for clothes is a ridiculously low number. She may or may not go to church and tithe, but that would be another $450 / month. Finally, we don't know whether or not she has any other debt. If she bought this much house on so little income, I'm guessing she's towards the "instant gratification" end of the scale and has some credit card balances she's making payments on. Quote Link to comment Share on other sites More sharing options...
Ramhock Posted August 16, 2007 Author Share Posted August 16, 2007 She was single, with a 580 FICO & 15K in CC debt. A shame is what it is. Those that say shame on her, I disagree. Everyone can't be a expert on all things and when you have a job as important as this, people are speaking with you and wrongly assuming that they are in fact speaking with an expert in said field. Adults need to act responsibly on their jobs and advise people to the best of their abilities, not grabbing fees at any cost. I blame management in these shops for these unscrupulous tactics. Quote Link to comment Share on other sites More sharing options...
Bill Swerski Posted August 16, 2007 Share Posted August 16, 2007 I live in the USA, and I have a very basic understanding of taxes and how they work. What country do you live in? France? You're spouting your mouth off on the internet like a big smart guy, and you seem to have very little understanding of what you're talking about, speaking in absolutes when absolutes rarely apply, calling people stupid when you're the one who appears to be in a little over his head in this discussion. Quote Link to comment Share on other sites More sharing options...
twiley Posted August 16, 2007 Share Posted August 16, 2007 She was single, with a 580 FICO & 15K in CC debt. A shame is what it is. Those that say shame on her, I disagree. Everyone can't be a expert on all things and when you have a job as important as this, people are speaking with you and wrongly assuming that they are in fact speaking with an expert in said field. Adults need to act responsibly on their jobs and advise people to the best of their abilities, not grabbing fees at any cost. I blame management in these shops for these unscrupulous tactics. Isn't 580 pretty bad? That's just bad practice on the loan officer for allowing that one to go through. Quote Link to comment Share on other sites More sharing options...
hoopsnakes Posted August 16, 2007 Share Posted August 16, 2007 Ok..another question. I've got a lot of equity in my house and would like to borrow some to cover a few major expenses. My current fixed rate is much lower then the current rates. Is it possible to take out some equity without having to refinance to the higher rate? Quote Link to comment Share on other sites More sharing options...
Ramhock Posted August 16, 2007 Author Share Posted August 16, 2007 Ok..another question. I've got a lot of equity in my house and would like to borrow some to cover a few major expenses. My current fixed rate is much lower then the current rates. Is it possible to take out some equity without having to refinance to the higher rate? Yes, a 2nd or HELOC. Quote Link to comment Share on other sites More sharing options...
alexgaddis Posted August 16, 2007 Share Posted August 16, 2007 you want someone to blame, blame Ameriquest...they were the leader in screwing people over big time to make a buck...they got is a lot of trouble... Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 You've provided enough info to make me believe that it is possible but your calculations are still way too conservative. $200 a month on food? uh no. $200 on fun? You find me 5 single people that make 54K that are only spending 200 a month on fun. Edit: Most of the people I know that make that amount are only getting a home about 2.5 - 3 times their salary. I wasn't aware that the norm is apparently 5 times what you make? IMO, still doesn't sound like a great idea. I'd be living in a million plus home then. I can find you a married couple that spends less. But that's not the point. The point is that it's quite affordable to live on that kind of scratch. If you don't think it's possible to do that, you should probably pick up a personal finance book or two. Fact is, some people prefer to spend their money on living in a nice home. Others prefer to spend it on a nice car, and others prefer to go out to nice restaurants and go out to eat a lot. Simply because you've made one choice and live in a cheap house doesn't mean others are wrong for the choices they've made. I drive an old Toyota, don't take many vacations, and don't spend a lot on random crap. I use the money to invest in real estate instead. So, I've got a few houses that are worth many times my annual income, getting ready to sell one and pocket enough to buy the cheap house you're so proud of. I've stretched to make it happen. Is that wrong? No. Is that right? Nope. It simply is, and it's a choice I've made. I wouldn't bring it up, yet you are so, so proud and so, so condescending of others that, in my opinion, you need to be taken down a notch. I'd suggest getting a ladder down from that high horse of yours, and realizing that criticizing people because they don't do what you do is petty, childish, and in this case foolish, because you don't have the first clue of what you speak. Hopefully, instead of being angry at me you've learned something from this. Next time, instead of saying "HAHA, STUPID" take a step back and put yourself in someone else's shoes. Just my two cents. Quote Link to comment Share on other sites More sharing options...
Bill Swerski Posted August 16, 2007 Share Posted August 16, 2007 Isn't 580 pretty bad? That's just bad practice on the loan officer for allowing that one to go through. I don't know about bad, but it's probably below average. And, if I'm reading the first post correctly, it's incredibly irresponsible to give somebody with that score and a mid-50's income AND a mortgage a 2 year, $28k loan. Quote Link to comment Share on other sites More sharing options...
alexgaddis Posted August 16, 2007 Share Posted August 16, 2007 Fact is, some people prefer to spend their money on living in a nice home (white people). Others prefer to spend it on a nice car (black people) Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 Wow, you sure have missed some things from my budget. The first 3 here are absolute necessities. I think these numbers are on the low side.: Utilities (Electric, Gas, & Water) $325 Car Insurance $25 Car (Payment / Lease / Maintenance / Fund) $300 These more than cover your "other stuff" and knock the investment amount down to $200. If she has that much home, I'm guessing she has kids. This may be a bad assumption? But if it's true, then $200 for food and $100 for clothes is a ridiculously low number. She may or may not go to church and tithe, but that would be another $450 / month. Finally, we don't know whether or not she has any other debt. If she bought this much house on so little income, I'm guessing she's towards the "instant gratification" end of the scale and has some credit card balances she's making payments on. Ok - how many people live in your home and use electric, gas, and water? I've got two in my house that's probably a little bigger than this lady's, and spend less than $250 in the winter for those three. It's like $120 now. What do you think the $50 for "insurance" was that was right next to "gas?" Insurance for her boob job? Who needs a car payment? If I were her, I'd sell the car before I sold the house. Appreciating assets>depreciating assets. In my opinion, car loans are the single biggest mistake people make financially, going into debt for a depreciating asset they can't afford using debt not as a tool to lever themselves for financial gain, but to dig themselves a big, deep financial hole to crawl into and then blame the mortgage when she can't afford her house. $200 a month for food is low? My wife and I have lived on half that, and there's two of us. We ate quite healthy too, lots of fresh vegetables, beans were a staple. The only poor people that aren't able to eat healthy are the people who aren't educated in the subject matter. She's got a car loan, credit card debt, and a 580 FICO. The fact that she can't afford her house is not because the mortgage is $250k, it's becase she's made poor decisions that have cost her money that she could be using to keep her house - instead she drives a car that is functionally identicaly to what she could get for a grand. I've got a microsoft buddy who buys $1000 cars. He drives them until they die, gives them away, and buys the next one for under a grand. These things last 3-4 years usually, and he goes and gets a new one. Insurance costs are way low, and he spends very, very little on cars, and for the most part only has problems every 3-4 years, and he just chucks them and starts over. You don't need a fancy car. You can't afford a fancy car if you can't afford to pay cash for it. Stretch for a home - it's an appreciating asset that will help your bottom line over the long term, and as your income rises it will become more and more affordable. Don't go into debt for depreciating assets. Cars, credit cards, etc. Quote Link to comment Share on other sites More sharing options...
twiley Posted August 16, 2007 Share Posted August 16, 2007 I can find you a married couple that spends less. But that's not the point. The point is that it's quite affordable to live on that kind of scratch. If you don't think it's possible to do that, you should probably pick up a personal finance book or two. Fact is, some people prefer to spend their money on living in a nice home. Others prefer to spend it on a nice car, and others prefer to go out to nice restaurants and go out to eat a lot. Simply because you've made one choice and live in a cheap house doesn't mean others are wrong for the choices they've made. I drive an old Toyota, don't take many vacations, and don't spend a lot on random crap. I use the money to invest in real estate instead. So, I've got a few houses that are worth many times my annual income, getting ready to sell one and pocket enough to buy the cheap house you're so proud of. I've stretched to make it happen. Is that wrong? No. Is that right? Nope. It simply is, and it's a choice I've made. I wouldn't bring it up, yet you are so, so proud and so, so condescending of others that, in my opinion, you need to be taken down a notch. I'd suggest getting a ladder down from that high horse of yours, and realizing that criticizing people because they don't do what you do is petty, childish, and in this case foolish, because you don't have the first clue of what you speak. Hopefully, instead of being angry at me you've learned something from this. Next time, instead of saying "HAHA, STUPID" take a step back and put yourself in someone else's shoes. Just my two cents. Angry? Far from it and I'd like to see where I was on a high horse. I was just stating that it doesn't sound like a very good idea. I think you need to actually take a step off of your high horse. Lighten up holmes and take that stick out of your ass. Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 She was single, with a 580 FICO & 15K in CC debt. A shame is what it is. Those that say shame on her, I disagree. Everyone can't be a expert on all things and when you have a job as important as this, people are speaking with you and wrongly assuming that they are in fact speaking with an expert in said field. Adults need to act responsibly on their jobs and advise people to the best of their abilities, not grabbing fees at any cost. I blame management in these shops for these unscrupulous tactics. Can she afford to make her payments for the next 3-4 months? Does she have any cash reserves? 1. Get her into credit repair ASAP. If you need someone to contact, let me know. If you forward me a copy of the credit report, I'll fire it on to my guy. 2. If you can get her over 620, you've got a world more options 3. Talk to her about selling her car and buying something less expensive. House > Car 4. Have her write out a budget - a thorough one, not the slap-happy things we throw together while arguing on the internet. See if she really can afford the place. 5. Give her a small notebook she can fit in her purse. Tell her that, whenever she spends money, to write it down in the booklet. At the end of the day, put it in excel in budget categories. You can't budget if you don't know where your money is going, and most don't. If you have her figure out where her money goes while helping her fix her credit over 60-90 days, when you get the new report back and she knows for a fact that she can afford the home at the options you can give her, then you can help her. Your job is not a one time hit for some people. Your intellectual capital can mean the difference between her selling her dream home and turning into a long time renter, and her being able to keep her home forever. That's good value. That's a loan guy earning every penny of his commission. That's a loan guy who's going to stick around through the next six months and be there in time for the refi boom next year. Good luck. Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 Angry? Far from it and I'd like to see where I was on a high horse. I was just stating that it doesn't sound like a very good idea. I think you need to actually take a step off of your high horse. Lighten up holmes and take that stick out of your ass. What if I like it there? I know. You were just piling on without thinking. It's ok, happens all the time on the internet. I'm trying to help and actually be useful instead of being one of the lemmings. That bothers you, and that's understandable. No hard feelings. Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 I don't know about bad, but it's probably below average. And, if I'm reading the first post correctly, it's incredibly irresponsible to give somebody with that score and a mid-50's income AND a mortgage a 2 year, $28k loan. It's even more irresponsible to get the 580 score and take the cash out. Sorry. Quote Link to comment Share on other sites More sharing options...
proninja Posted August 16, 2007 Share Posted August 16, 2007 TLDR Man, that proninja is an effective arguer. :hifive: Quote Link to comment Share on other sites More sharing options...
TimC Posted August 16, 2007 Share Posted August 16, 2007 Most importantly, is she hawt? Quote Link to comment Share on other sites More sharing options...
twiley Posted August 16, 2007 Share Posted August 16, 2007 What if I like it there? I know. You were just piling on without thinking. It's ok, happens all the time on the internet. I'm trying to help and actually be useful instead of being one of the lemmings. That bothers you, and that's understandable. No hard feelings. I wasn't piling on. My original post was in reference to her not being able to afford that much house. You corrected that...I even acknowledge it but I still thought your numbers were a little conservative. Doesn't bother me one bit and as far as being a lemming, you don't know me very well. :hifive: TLDR stands for "too long, didn't read". Quote Link to comment Share on other sites More sharing options...
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