On Sat, 20 Jun 2015 23:47:35 +0000 (UTC), Larry Blanchard
wrote:

On Sat, 20 Jun 2015 17:26:14 +0000, John McCoy wrote:

My Dad used to say the house you could afford was 4x your salary. Of
course, he was saying that in the days of 8%
or 10% mortages, but still, I doubt folks in that area have anything
close to $150k annual incomes. They must be hurting to have to pay that
much for a house.

It's not the house price, it's the size of the mortgage. And your father
was liberal. I always heard that a mortgage should not exceed 3 times
your annual income. But with 20% down, the bank approved 4x for us.

3x looks like a pretty good number, assuming 4% interest rates and a
tax millage rate of 2% (a little more complicated that that, since the
millage is based on value, not mortgage). With the above numbers, you
wouldn't be too much over 25% mortage+tax+insurance/income. Of
course, every dime you don't have to pay in real estate tax is a dime
that can be spent on the mortgage (note that 2% millage represents
~1/3 of the mortgage payment). IMO 4x is do-able but starts out in a
pretty deep hole. Of course, all of this is based on 4% interest. At
8%, everything drops roughly in half (and the housing market crashes
and burns).