The good thing about the time is that he does a lot of things better. As you age and get richer, your financial mistakes become a smaller percentage of your total wealth. Of course, the rule of buying a home takes into account overall affordability and all normal expenses. How will this 30/30/3 rule work in today`s Bay Area market? 1. You mentioned mortgage expenses at 30% of income, is it after tax? 2. Prices are already a bit high, so it`s hard to get 3% over 30 years, won`t 10 arms be a good idea? 3. Even if someone can afford it, I don`t realize – if it`s wise to pay nearly 30,000 annual property taxes on a value of 2M+? 4. As a general rule – how much growth in property value should you expect – 4-5% increase in value in 10 years in the San Francisco Bay Area CA for 2M real estate? or much less? Thank you, this site is not for the vast majority of people because the vast majority of people do not have a burning desire to be financially independent. If they did, they would find this post! For the third rule, it makes more sense to limit the debt on your property to 3 times the salary than to limit the value of the property. I could have a $1 million property with $300,000 in debt. When I bought a $1,520,000 home in 2005, my income was about $300,000.
I was sweating bullets three years after buying because of the financial crisis. Fortunately, I was not fired. But I filed everything I had. $320,000 and had no savings for a while. Respect the 30/30/3 rule for the purchase of a house. Here is the rule in detail. I think an important consideration of how much house you can afford, which is not mentioned, is property taxes. For example, I currently live in Illinois, where my home is only worth about $400,000, but my monthly property taxes are higher than my mortgage. My family is considering moving to Colorado and an $800,000 home is almost identical to what we are paying today because of the tax cut. Similarly, HSA or MUD fees can have a significant impact on affordability. I like your «30/30/3» rule, but I prefer to apply it to the entire payment obligation.
I just sat on my hands. First rule: Do no harm (or in finance: don`t lose money). The media loves misery. You only have to trust me when I say that the Moms and Dads Bank I see makes health down payments for over $800,000 in real estate or pays all cash here in SF, Manhattan and other major financial cities around the world. The goal is to follow all three rules. But if not, to follow at least one of the rules. As far as children are concerned. I`m ditto for the «Ellie factor» and I would add that living together closer to anyone who is a beloved part of your village (family, neighbor, friend) will not only have a happier return on investment, but also a higher financial return on investment. Knowing how to connect, give love, receive love, set boundaries, take care of themselves and others will take each child further than any room they live in.
When they meet teens, their village and your ability to understand how to create an environment where a teen feels loved, boosts your self-esteem, follows the inner compass, purpose, kindness, acceptance, self-learning or will break you financially and emotionally. The house you live in won`t even be a factor unless your choices destabilize your children`s support and the real needs are met. I would first consider renting rooms for income as an insurance policy. Do not include income if you use the 30/30/3 rule. Does the 30% of gross income include taxes, insurance, hoa or is it just the mortgage payment itself? Wow, what a beautiful view from your terrace! Absolutely beautiful! I agree 100% with your idea of what should be spent on housing costs. When I talk to people I work with (when I work in the public sector, I know what they`re doing) and see what they pay for the houses, it`s just scary. While we pay about or just under 10% of our income for housing, some of them extend it to amounts that are even more than 1/2! I don`t know who lends to these ratios, but it reminds me a lot of the rise before the last housing bubble. Anyone with good financial sense would keep their housing costs low and use the savings to invest. Please do not jeopardize your financial future and at the same time do not jeopardize the financial future of your neighbor.
Think of others. I don`t think that`s good advice. According to this rule, the average person won`t be able to buy a home until they`re in their mid-thirties after wasting tens of thousands of dollars on rent. Spending money on PMI or an FHA loan is much more beneficial because you expose yourself to leveraged appreciation. They also say that if you have a 3.5% drop and your house falls by 5%, you will be «wiped out». What do you mean by that? You won`t be seized just because you have 1.5% negative equity as long as you pay the mortgage. Savvy readers immediately pointed out that my primary residence guide was not entirely compliant with my 30/30/3 home buying guide. My 30/30/3 home buying guide is a bit more aggressive. They pointed out that most first-time buyers usually don`t have a higher equity in the home they want to buy.
That makes sense. Although I am mentally ready to buy a home, I want to make a financial decision rather than an emotional one. That being said, I wonder if buying after a 15/15/2 rule would put me in a better long-term financial position due to the rapid rise in house prices and low interest rates, rather than waiting maybe 18-24 months and more to reach the 30/30/3 rule. I appreciate your thoughts! 2) You have the ideal net worth and at least the minimum income required. In this situation, you don`t have too many financial worries either. Your net worth is well diversified and generates a reasonable amount of passive income on top of your active income. You can probably earn a more active income if you want to. If you buy your first home responsibly and eventually bring your principal residence to 30% or less of your equity, you will be in great financial harmony. For example, owning a $600,000 home with a $2 million equity or a $3 million home with a $10 million net worth is a good ratio.