NYT: Life on $7.25 an Hour

[sweetapogee]

41. The NYT article linked at the OP

states that Mr. Shoy made $22.00 when he bought his $500K home, his wife worked as a server. At $22.00/hr., his base pay was around $45K/year when he purchased the home in 2003.

Being math challanged as I am, could someone please explain to me how the Shoy's were approved for a mortgage of that size and how the Shoy's determined that they could afford such a domicile?

My partner and I have a combined income of considerably more than what theirs was in good times. At around the same time frame (2004) we sold our home in NJ (that we had for 19 years) and purchased a new place in PA. Because of the sale of our NJ house we were able to put a big downpayment towards our place which cost $140K. Our income stream has since been uninterupted and our income is higher now but even with a mortgage of around $90K it is at times tight at the end of the month. There has never been 1 minute in the last 10 years when I thought that we messed up by not buying a more expensive house, I'm actually glad we had the disclipline to hold it to $140K.

If someone makes six figures and puts 20% down on a $500K home, the principal payment on the note will be around $1800.00/month for 30 years 3.5% and not including taxes, insurance and escrow. Then there are utilities, food, transportation, clothing, cable tv, entertainment. I think such a borrower would be hard pressed to make it if their salary was $100K. Before taxes, Mr. Shoy made much less, about $3500./month, out of that $1800.00 went to principal/interest on his bank note.

I'm not trying to run salt into someone's bad luck, just trying to understanding the economics. My partner and I, using the Shoy model, should be able to purchase another home in the $140K range as a investment so I look forward to finding out how it's done. BTW, 140K will buy a lot of house here in PA and with 2 houses worth a total $280K we will be at half the Shoy purchase price so this should be possible. All I need is help understanding how it is done.