Don't Let Your Champagne Taste Ruin Your Beer Budget

Ok—has anyone else seen the story about the bus driver who is on the verge of losing the $800,000 house she and her husband bought? Now, look, some of the foreclosures happening in America today are unfair. The lending industry did take advantage of a lot of people with their crooked mortgages and lending practices. HOWEVER, this is not really one of those cases. (Well, it is a little bit) Yes, the lender here is at partial fault because really? What lender would look at these people and think “Yes, these people will probably be able to pay off this house. This probably won’t end in foreclosure.” (I am assuming, of course, that banks prefer that people pay their mortgages rather than foreclosing on them, but I don’t really know that) And the fact that they allowed these MORONS to believe that they could afford an $800 K house is both ridiculous and wrong. HOWEVER (again), the bus driver and her husband are equally at fault because how ducking stupid do you have to be to think you can afford that house???

According to this salary wizard that I found online, the median salary for a bus driver in the US is $18,446. Now, I haven’t been able to figure out what her husband does for a living, but let’s just suppose he makes $30,000 (I’m willing to bet, however, he doesn’t make that much). That would give them a little over $48,000/year. According to this simple loan calculator that I found via Google, a 30-year loan for an $800,000 house at a low interest rate of 5.75% would end up costing these people $4668.58 per month. So…some more basic math: $48,000/12 = 4000. Now, that’s how much a month these people would have without giving up any of it to taxes or anything. And that? Isn’t even enough to cover the mortgage payment, much less electricity, gas, telephone, groceries. Now, your mortgage payment is not supposed to be more than 20% of your monthly income. I am really bad at math, but here’s what I figured: 20% of 23,342 is 4,668.40, so they would need a monthly income of over $23,000. Thus, they would need (not accounting for taxes again…) a yearly salary of $280,104. Pretty sure that has a snowball’s chance in Hell of happening. So I ask you: What lender would approve such a mortgage? And what idiot potential homebuyer wouldn’t look at that mortgage payment, and think, “How will I pay this?”

Note: I did not take into account any down payment because I figure any down payment they could have made: 10%, 20% wouldn't have made much of a difference in this case...but because several people on my other blog are optimists and suggested that maybe they put down a hefty down payment or "came into some money," I did a few more calculations. Not accounting for what comes out for taxes, IF they make a combined income of $48,000, they'd be bringing in $4000 each month. 20% of that is $800. Even if they came into some money from somewhere...to get the payment down to something they could afford ($800), they'd have had to put down $650,000 (and the payment would be around $875). Now, what are the odds these people inherited $650,000 from someone to put down on this $800 K house? My guess is the odds aren't too good. Simply put, the lenders in this case allowed these people to believe they could afford a house way outside their means, and the homeowners themselves were stupid...yeah, just stupid.

This example is also a sad commentary on our current American society. We are a nation of people seeking instant gratification and a nation of people who feel entitled. We are greedy. We have to start learning to live smaller, to live with less. We need to learn that we are not entitled to the best of the best. Are we all entitled to the American Dream? Sure. But we need to redefine the American Dream of the new millennium. In the 50s it was a lot simpler. I know because I am living in someone’s 1950s-era American Dream House. And it cost less than $100,000. And I can afford it because I make more than $18,446. Would I not love to also live in the lap of luxury with an $800,000 house, and a couple new sports cars, and ducking cabana boy by my custom pool? Sure. But I’m not willing to let any taste for champagne spoil my beer budget. And that’s what we need to come back to in this country. Unfortunately, it’s probably going to be a hard and long lesson for us to learn because we’ve been spoiled too much too long.