Thursday, June 4, 2009

Bad advise?

An article on is reporting that the pending home sales were boosted by record low mortgage interest rates.
"Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®."
This is certainly good news just in time for the home buying season. With the amount of incentives out there for first time buyers, this is certainly a good time to buy. The article goes on to say that a median-income family making $60K could afford a home costing $296K, which I found rather disturbing.
"A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest."
While this may be possible if the family has no other debts such as car payments, drives a fully paid clunker and lives a very, very, very frugal life, I would not recommend this advice even to my worst enemy. Some one wanting to buy a $296K home with a $60K income has to be either the biggest gambler or the biggest fool on earth. As is often the case, expenses have a habit of popping out of no where; a car breaks down, a major repair needs to be done on the house, or the HOA asks you to paint your house. In this time of a bad economy, the best advise I can give is to buy a house that you can afford, not as an investment but one to live in, and certainly not to impress others.

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