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‘Stretched way too thin’: One bad decision doesn't spell it out for the entire real estate market, but guy with less than $150k salary who buys $500,000 home poses a common buyer mistake

It's called financial illiteracy and you don't want to find yourself in that category when house hunting.

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Posted by Elna McHilderson
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  • We don't have to tell you how messed up the real estate market is these days. It's like the early 2000s all over again, but somehow worse. You'd think people would have learned that just because a bank offers you a huge loan, doesn't mean you should take it… Unfortunately, it's becoming clearer and clearer that these huge money-hungry loans are banking on the client being financially illiterate. 

    One man took to Reddit to convince himself that he made the right choice buying a house for $500,000 even though his salary was only $150k, with barely any savings. And then to put the cherry on top of a money-burning pile, he got laid off after closing on the house. And yet he STILL believed he could afford his over $4k monthly mortgage. 

    He got so ripped apart for his financial illiteracy, that he deleted his own post. But Reddit user thesuppplugg couldn't let it slide. He created his own post summarizing what the original post had said and explained why he had to reiterate it. Apparently, this is an all-too-common mistake made by many first-time homebuyers. You want a house so badly, that you try to make it work in any way possible, and then you're spread yourself too thin and find yourself struggling. Thankfully, the post and its comment section go into detail on examples of this happening, how to avoid it, and how to crawl your way out of it. See for yourself below! 

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  • 1
    11 "I feel bad for the guy but it's also frustrating all the dumb decisions he made and how he still won't acknowledge this house is unaffordable.”
    Via MART PRODUCTION via Pexels
  • 2
    When Stretching Too Far to Own a Home Goes Bad Okay so I'm going to summarize this post as I think the OP may be in the process of deleting it. If its still up you can find it here. I see a lot of people posting things like this to either dunk on someone for being stupid or people think one person making a bad decision spells something for the entire real estate market, I don't think it does, that said I imagine many people are doing similar things and for every person who stretches and it works
    Via thesuppplugg
  • 3
    To summarize and some of this doesn't make a whole lot of sense, but 50 year old guy buys a house 500k and some change, $4700 payment. Isn't a tech worker but works in tech ie marketing, on a 150k a year contract. Buys house, gets laid off, not eligible for unemployment as he's a contract worker, tech jobs are hard to come by and many of these overinflated salaries are a thing of the past. Apparently rents are low compared to home prices so renting out the home won't come close to covering the m
    Via thesuppplugg
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  • 4
    So let's look at the situation, stretches way too far to own this house but says its because he's in a HCOL area. Has only like a 2 month emergency fund, no 401k and a small IRA. Initially said selling would walk away with 15k, then break even, then acknowledged would probably have to pay money to walk away. When people tell him he can't afford the house find a way to get out of it he keeps talking about how he can afford it later this year when rates come down, sounds like even if everything we
    Via thesuppplugg
  • 5
    stuck on the idea everyone is wrong he can afford the house, once rates come down, sounds like a realtor got that into his head. I feel bad for the guy but its also frustrating all the dumb decisions he made and how he still won't acknowledge this house is unaffordable.
    Via thesuppplugg
  • 6
    All that said we see plenty of stories of other people who stretched over the past couple years and they got the home, home is now worth 200k more than they bought it for or they got a promotion and its not as tough. A lot of people are stretching and with food costs, insurance costs, etc all going up things are only going to get tougher for people. Just thought it was an interesting post to read. How widespread is this type of thing you can decide for yourself. I think one thing that's interest
    Via thesuppplugg
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  • 7
    feliscatus_lover. 2 hr. ago OP simply bought a house that he could not afford. Even if he didn't lose his job, $4700/month on a 150k annual salary is too much. Compounded by the lack of job security, lack of savings and retirement, OP clearly bit off more than he could chew. He is going to end up in foreclosure and pennyless if he doesn't find a job that can afford that mortgage payment.
    Via feliscatus_lover
  • 8
    thesuppplugg OP. 2 hr. ago The one thing that was mind blowing to me was he continued to argue with everyone in the comments that he "could afford the house later this year", when asked what was going to happen he said when rates come down. The reality is he's likely not going to find a 150k marketing job in tech anytime soon.
    Via thesuppplugg
  • 9
    USDAChoiceBuckSteak 2 hr. ago And even if rates do come down a point and a half or so, the material difference in monthly payment wouldn't be large enough to make these payments considerably more manageable.
    Via USDAChoiceBuckSteak
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  • 10
    RedGecko18 29 min. ago Coupled with the fact that his taxes aren't going to go down, if anything they'll go up year over year, so his payments into escrow will get higher and higher every year as his home's value goes up.
    Via RedGecko18
  • 11
    Green-Confection 9031 1 hr. ago Agree. I don't think anyone should count on lower rates, pay raises or promotions when factoring affordability of a house. The sub 5% rates were the lowest in the past 50 years and average seems to be about where rates are now.
    Via Green-Confection9031
  • 12
    Nutmegdog1959 - 22 min. ago Rates are at 20 year highs. I was in the business when rates were in the teens. Sub 7's are the new norms and you will likely see 5's and 6's in the next 12-24 months. Furthermore, when rates go down, prices go UP! If this guy can hold on (if he is for real which I doubt) he can dump that place in the fall.
    Via Nutmegdog1959
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  • 13
    post-delete-repeat · 7 min. ago That assumes rates will get cut at all this year. Powell and the fed have not really committed to that. If anything the fed seems to be taking a wait and see approach. Tbh even if the payment was 1000$ a month without any income its not affordable
    Via post-delete-repeat
  • 14
    BabyYoda Legend - 2 hr. ago Some people are really just financially illiterate and refuse to fix it. 22 Reply Share Zoolanderek 1 hr. ago . ●●● Tbh an incredibly large amount of this sub I would consider financially illiterate based off all the posts of income vs. mortgage payment. Makes me wary of taking any advice here, so many people are just insanely house poor and completely neglecting retirement and fun just to have a house they can't afford. One minor emergency would put these guys in a h
    Via Zoolanderek
  • 15
    thesuppplugg OP · 2 hr. ago Yeah financial illiteracy along with fomo and desperation to be a homeowner. At the same time with this guy it goes deeper, 50 with little to no retirement savings. Completely disconnected with reality in terms of their earning power, thinking they can predict interst rate movements. I'd even argue that unless OP was content renting they'd be better off moving to Chicago, salary probably wouldn't drop that much but housing cost would probably be halved. OP isn't a tec
    Via thesuppplugg
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  • 16
    Flat-Marsupial-7885 2 hr. ago Yikes! I see getting into a bad financial situation is sort of like the 7 stages of grief. Sounds like OP is bordering the denial and bargaining stages. A long way to go before the acceptance stage.
    Via Flat-Marsupial-7885
  • 17
    Europasplanet · 2 hr. ago I was let go three weeks after closing on my home on 2020. Thank God severance and unemployment back then was enough to carry me till I got back on my feet, but I truly understand the pressure this guy is going through. He likely was qualified based on his salary, which is never really guaranteed. Thankfully I got a low rate and market rents are pretty much even with my mortgage so I was able to rent it out for a time to float myself and now I'm back in it, almost done
    Via Europasplanet
  • 18
    Snacer1 1 hr. ago His salary is alarming because making $150k on contract he has almost no retirement, only 3 months emergency fund, no liquid assets and whatever savings he had were gone with down payment. I may be wrong but it seems like this $150k job was something pretty recent (post Covid) he lucked out with like many tech employees and expected it to be a lifetime Klondike until he got laid off. If it'd be his normal income he'd have a lot more assets or savings. Chances to win that lotter
    Via Snacer1
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  • 19
    thesuppplugg OP. 2 hr. ago Yeah I'm probably too conservative but when I bought my most recent house I particularly liked the idea my mortgage was low enough that if push came to shove I could do gig jobs on craigslist helping people move and clean out garages or could get a retail or food service job and at least make my nut. I was probably too conservative I was pulling in multiple six figures and bought a 200k house but I liked that security, I should add it was kind of a fluke good time for
    Via thesuppplugg
  • 20
    butchertown 2 hr. ago Good read and hits a lot of key dynamics. There are just so many bad decisions being made out there because of emotion and not having any financial literacy. People complaining they didn't know about rising insurance or property taxes when assessments go up. I have a new house oh wait I can't afford a new roof. FOMO is real and people get caught up in it. Then the whole culture of homes as investment vehicles add a whole other layer.
    Via butchertown
  • 21
    mukduk1994. 41 min. ago Hey I agree that it was a bad call. And I'm not gonna pretend to understand the economics of contract work or what his longterm plans were (was he gonna work until he died? Was he trying to flip it in 5 years?). He clearly thought he was in a much more secure situation than he actually was. Bad decision that he should've never gotten himself into that I also completely empathize with given where he is in life.
    Via mukduk1994
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  • 22
    Meditating4Bliss - 2 hr. ago I think it's happening more and more. For the last 4 years I've heard realtors keep saying housing prices can't possibly go down because they aren't approving people for "bad loans". However, I recently discovered people are getting approved for mortgages that are 50% of their gross income. I unfortunately learned this because one of my friends bought a house that there is no possible way they can afford. These aren't high income earners just regular people that are
    Via Meditating4Bliss
  • 23
    While they aren't getting a balloon loan or interest only or something, they are clearly getting a loan that they shouldn't be. If rentals only approve you if you make 3 times the rent, then why can you get a mortgage with much less income when there is much more responsibility associated with it? It made me start thinking there has to be others out there getting approved for the same thing.
    Via Meditating4Bliss

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homeowner costs real estate agent buying land new homebuyer new homeowner homeowner homeownership house hunting helpful new homeowners owning a home buying a house homebuyer advice real estate How To new homebuyers Reddit owning a house new home financial illiteracy housing market buying a new home

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