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(16,038 posts)
34. I've been in LA, It doesn't cost $500k to live within 30 miles
Mon Feb 9, 2015, 01:37 PM
Feb 2015

Of any major city in the US. This is the actual "privilege" that exists...I know people who will swear they need to buy new cars, a bedroom for each of their sub 5 year old kids, eat out 3 times a week and splurge on Saturday for some place nice, move into a turnkey home, it is lunacy that banking regs used to keep from happening.

I had a real estate license in 1985 and sold homes for several years. To qualify for a first time mortgage one had to have 20% down, the 20% had to be earned income or in your bank account for at least a year. Your total indebtedness couldn't exceed 35% including the mortgage.Minimum 2 years job time. People had to save and pay down their debt. Their debt/income may support a $1000 payment which a allow $100k mortgage, but if they couldn't come up with $20 plus 10k closing costs (which could be borrowed but not through collateralization of the real estate) you would buy a $50k home. ..paint the bedrooms, put on a new faucet and toilet, refinish the kitchen cabinets, tidy up the lawn, plant some trees, clean out the gutters, get the ac charged, paint the trim, recalk the windows, and sell it in 5 years for $85k leaving you with $45k equity to buy the $100k fixer upper (2nd home) for another 5 years and scoop the equity allowing for the dream house. It took work. It is what kept the housing market safe for everyone's investment.

Before the bust we had first timers 2 months out of RN school buying 'the home we've always dreamed of' consuming 50% of their income for the interest only for 5 years, 40 year mortgage putting no money down and financing 120% of the purchase price so they can swing by IKEA and furnish the entire new house. Then they pulled up in their driveway in their 2 year leased BMW. ...oh they were so proud. ...now they are the Cabreas'...

both parties shared this one...the other piece is the repubs reducing bank solvency requirements exacerbating the problem.

to build wealth for the lender from the thousands of almost pure interest payments. Sunlei Feb 2015 #1
As to opposed to enriching your landlord? Adrahil Feb 2015 #9
mortgages are front loaded for interest. the majority of the first many years are interest payments. Sunlei Feb 2015 #13
Yes.. I agree. Adrahil Feb 2015 #18
very similar to what I did. pay very heavy towards the equity. Sunlei Feb 2015 #22
Yeah, we did that too, and now own the house outright in retirement. It Nay Feb 2015 #32
Exactly. Adrahil Feb 2015 #85
Renting is not throwing money away tabbycat31 Feb 2015 #63
There is a way to really cut the interest you pay, on a conventional loan. dixiegrrrrl Feb 2015 #41
did that but put no money down at all. Lenders handed out mortgages like candy & I took advantage! Sunlei Feb 2015 #54
Save, put down a big down payment, and pay on the principal every month. MADem Feb 2015 #52
If you get a 30 year mortgage mythology Feb 2015 #58
My adorable mom told me the secret was "Buy low, sell high." merrily Feb 2015 #2
We got very lucky...sort of... Phentex Feb 2015 #20
I'm glad you got a good deal. The neighborhood would have changed either way, so it's good merrily Feb 2015 #23
lol Lurker Deluxe Feb 2015 #3
"Interest only" loans do have a purpose.... Adrahil Feb 2015 #10
It prevented them from pulling any equity out of the house? FBaggins Feb 2015 #4
They would have had no equity with that price drop even if they had put 20% down. Gormy Cuss Feb 2015 #24
Yeah....I don't think 10% is enough down for most people.... pipoman Feb 2015 #5
The actual value of the "start home" is irrerlevant... Adrahil Feb 2015 #11
I've been in LA, It doesn't cost $500k to live within 30 miles pipoman Feb 2015 #34
I don't disagree that some feel that way... Adrahil Feb 2015 #46
I've spent a lot of time in N. San Diego County, my son lived there 5 years pipoman Feb 2015 #48
California is tough. Adrahil Feb 2015 #70
Maybe if you mean "city" as the greater LA area. jeff47 Feb 2015 #82
Perfect call. n/t FSogol Feb 2015 #16
It was a little crude..see 34 above. .nt pipoman Feb 2015 #39
Shelter is another thing that is a basic human right and should not be libtodeath Feb 2015 #6
Maybe yeoman6987 Feb 2015 #8
They fail to mention the money pit that a house is tabbycat31 Feb 2015 #7
Speaking as both a homeowner and a landlord whatthehey Feb 2015 #12
It's peace of mind to me tabbycat31 Feb 2015 #17
Consider a nice travel trailer and 'live' where ever you choose to park. Sunlei Feb 2015 #28
Do you have experience with that? WorseBeforeBetter Feb 2015 #35
I wouldn't sell a home that is paid for. Rent it for retirement or general income. Sunlei Feb 2015 #42
My mothers' next-door-neighbors sold their home... WorseBeforeBetter Feb 2015 #49
The money your parents spend on their home falls into 2 categories pipoman Feb 2015 #44
I agree Johonny Feb 2015 #21
Maybe a condo? pangaia Feb 2015 #57
So far, I've made $20k in the last two years on my house. jeff47 Feb 2015 #88
You could sell that house and make 20K Johonny Feb 2015 #97
Markets don't go up evenly. jeff47 Feb 2015 #98
Yes, I prefer not to have to deal with that stuff. alarimer Feb 2015 #27
Five Figures a YEAR? Adrahil Feb 2015 #47
I don't care that I have nothing to show for rent tabbycat31 Feb 2015 #64
Hey, it's your money... flush it down the crapper if you wanna.... Adrahil Feb 2015 #65
Thanks for proving my example tabbycat31 Feb 2015 #71
Who said you are second class citizens? Adrahil Feb 2015 #72
We'll agree to disagree. tabbycat31 Feb 2015 #75
Cheers! Adrahil Feb 2015 #79
Renting is great PasadenaTrudy Feb 2015 #94
Thank you. "They fail to mention the money pit that a house is" raccoon Feb 2015 #60
It was in the 40s through the 80s treestar Feb 2015 #14
I think it really depends on how you buy the house bhikkhu Feb 2015 #15
Agreed tammywammy Feb 2015 #19
The strategic reason to buy property with interest-only loans is that you don't tie up your cash Gormy Cuss Feb 2015 #26
I suppose if you have cash to invest elsewhere, buying or renting is neutral bhikkhu Feb 2015 #43
That's the approach we took - TBF Feb 2015 #61
That loan product was designed for people with money to invest elsewhere. Gormy Cuss Feb 2015 #83
I believe it is a still a pretty good way rock Feb 2015 #25
I agree! Red State Rebel Feb 2015 #30
no it is not. The best way guillaumeb Feb 2015 #29
It is still the best way, they are not making any more land. Well they are but not on that large of ChosenUnWisely Feb 2015 #31
Little boxes on the hillside, little boxes made of ticky tacky... WorseBeforeBetter Feb 2015 #33
like everything else the housing market's been "financialized": suburbs aren't built for housing for MisterP Feb 2015 #55
The point of a house is shelter; a roof over your head. lumberjack_jeff Feb 2015 #36
Homes are a place to live edhopper Feb 2015 #37
Here's a "starter" type home in my town.... PasadenaTrudy Feb 2015 #38
Holy shit. And I thought Northern Virginia was bad. WorseBeforeBetter Feb 2015 #50
SoCal is prime PasadenaTrudy Feb 2015 #67
LOL Well I moved to Raleigh... WorseBeforeBetter Feb 2015 #73
Wow! PasadenaTrudy Feb 2015 #78
Aaaah, wonderful town. (n/t) WorseBeforeBetter Feb 2015 #86
A "starter" type home for 3 quarters of a million dollars Art_from_Ark Feb 2015 #95
Renting has been great for my brother... PasadenaTrudy Feb 2015 #40
Renting is great in cities with rent control, I guess. MADem Feb 2015 #53
They've been there PasadenaTrudy Feb 2015 #66
If they're at that kind of place in their lives where they can manage to do that without issue, then MADem Feb 2015 #68
We are a Childfree family PasadenaTrudy Feb 2015 #77
Stocks are the best way to build wealth Augustus Feb 2015 #45
It is the only hedge on inflation most people need... pipoman Feb 2015 #59
I agree... a house is not the BEST way to build wealth... Adrahil Feb 2015 #80
Yes and no FBaggins Feb 2015 #99
There really are so many factors that can weigh heavily for, or against, buying a home Lex Feb 2015 #51
This message was self-deleted by its author olddots Feb 2015 #56
It never was the best way to build wealth NT fxstc Feb 2015 #62
starter home = $490K, wow..... steve2470 Feb 2015 #69
It was in Los Angeles - that probably was about as cheap as you'd find Matariki Feb 2015 #93
A home is not an investment, it's a constant cost. dilby Feb 2015 #74
If you're renting, you can;t even break even, of course. Adrahil Feb 2015 #81
That is very true, but you are not responsible for maintenance. dilby Feb 2015 #84
Well, you still PAY for maintenance, make no mistake. Adrahil Feb 2015 #87
I got screwed. It was the worst financial decision I ever made. iscooterliberally Feb 2015 #76
Thank you for sharing your experience. This is a keeper: raccoon Feb 2015 #100
Too many factors and variables madville Feb 2015 #89
Probably is at least an effective defense against poverty in old age...If you can pay it off TheKentuckian Feb 2015 #90
It all depends on the circumstances. We encouraged our daughter and son-in-law to buy pnwmom Feb 2015 #91
How is home owership supposed to make up for "dwindling pensions and stagnant wages" Matariki Feb 2015 #92
I bought a lancer78 Feb 2015 #96
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