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Old 05-23-2019, 10:05 AM   #1
Pineywoods
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Default Home Cost vs Income?

The property across the street just went up for sale for $650k. We love that place but it is well beyond our means at this time. This got me to thinking about income versus what is spent on a home. Our home is worth roughly double what my wife and I bring in combined on an annual basis and the mortgage with escrow is extremely easy to cover. I understand that some will overextend themselves and live in a house above their means and others will live well below their means. With that said, what do you think the average person spends on a home versus their income? Double? Triple?
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Old 05-23-2019, 10:10 AM   #2
warrington
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2-3 x yearly salary is a good amount. More than that is extending your self for sure
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Old 05-23-2019, 10:13 AM   #3
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This is our first home, and we bought it and is under our yearly salary combined. Couldn't justify anything else, never wanted to be house poor. Others I know that make less and their homes are twice ours, and dont see how they do it.
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Old 05-23-2019, 10:15 AM   #4
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I have numerous people close to me that are house poor! It seems miserable for them. No deer leases, no anything because they all had to have big houses. It’s all personal preference, but if the monthly mortgage is over 30% of my net pay, I’m not even looking at it! My house is around 2X my income and I wouldn’t ever want to go above that. It is everything we need and more. No, it’s not 4,000 sq/ft with a swimming pool, but it’s a beautiful home and we are thankful for it.
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Old 05-23-2019, 10:25 AM   #5
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I did 1.2x. Hindsight I can never see more then that on a home. With that said wealth accumulation/retirement are more important to me then square footage.

Income producing Land I run a different t formula
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Old 05-23-2019, 10:29 AM   #6
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Depends on what other debt you have and how much you're able to put down on the property. Really comes down to how much you finance.

I'm still in my first home (10 years this summer) and paid $150k for it which was about double my income at the time. Now married with two incomes that have both grown significantly, our combined income is considerably more than what our house is worth. However, my wife had well over 6 figures worth of student loan debt and our goals have kept us in a place where we're not even thinking of upgrading homes. Sure we could get into a $300k house and make it work at this point but the path we're on will have us debt free (including student loans, house, vehicles) in the next 4-5 years and that seems more important to us right now.
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Old 05-23-2019, 10:32 AM   #7
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Too many people buy houses to impress other people (who arent even truly impressed)...
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Old 05-23-2019, 10:37 AM   #8
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We bought our house 10 years ago and it has doubled in value just from the area it is in. My note is about 1/3 of my pay maybe less but my house is valued at 5X my salary. We will most likely sell when it's time to retire and build a smaller house and pocket some of the profits.
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Old 05-23-2019, 10:39 AM   #9
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Obviously you are better off living well below your means, than above.

It seems like most are living above their means. There are so many people drowning in debt. They have house debt, vehicle debt, credit card debt, student loan debt etc. No consumer debt is a good thing.

It's crazy to me to think that most folks dont have a sizable emergency fund that is easily accessible, some savings that are invested making money, then their retirement investments/savings accounts. Having all of this should be accounted for when calculating what your "means" are. The statistics of the average American is shocking.
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Old 05-23-2019, 10:39 AM   #10
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Depends on the rest of your expenses and if you already have kids or are wanting kids in the near future. My daycare bill is 3 times my mortgage so if a family is in your future i would buy below your means and save. Who knows if the housing market stays this strong too, that 650k house could be a 500k house in a few years. It could go the other way but if you save up your pennies you can be ready to buy when the market turns in the buyers favor.
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Old 05-23-2019, 10:41 AM   #11
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We’re in our starter house, but we don’t plan on leaving it til we can pay cash outright for the land, and finance less than $100k for the build. I’m thinking we will be here another 6-7 years. We make pretty decent money, and our current house is worth roughly 90% of our annual income. A house like ours in other markets would be closer to 130-150% of our income though. Lubbock is cheap luckily.
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Old 05-23-2019, 10:43 AM   #12
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I know of several people who ran out and bought as much house as the lender would let them. 2,3 even 4 times their annual income. A lot of them no longer have those houses. I bought mine when I was 22 and unemployed, but had a little money saved. It's a small place but we like it, it's almost paid for now.
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Old 05-23-2019, 10:44 AM   #13
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Ive always told myself I will never be married to a mortgage. Too much life to live to be stuck at home because you can't afford to do anything else.
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Old 05-23-2019, 10:45 AM   #14
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Originally Posted by tmurray View Post
Depends on what other debt you have and how much you're able to put down on the property. Really comes down to how much you finance.

I'm still in my first home (10 years this summer) and paid $150k for it which was about double my income at the time. Now married with two incomes that have both grown significantly, our combined income is considerably more than what our house is worth. However, my wife had well over 6 figures worth of student loan debt and our goals have kept us in a place where we're not even thinking of upgrading homes. Sure we could get into a $300k house and make it work at this point but the path we're on will have us debt free (including student loans, house, vehicles) in the next 4-5 years and that seems more important to us right now.
We're in a similar boat. My wife bought the house we live in 11 years ago before we got together...it's small, ~$130k but big enough for the both of us. Dual income, no kids and our combined income far exceeds the house value but we will have it paid off and be completely debt free next year. I'm pouring a lot of our income into retirement savings b/c I want to retire in my early 50s. At some point after next year we'll consider a larger house/retirement land but right now we're focused on being debt free...we don't really feel the need to have a big house.
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Old 05-23-2019, 10:52 AM   #15
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I would venture most spend 2-3 times their household annual income for a house.

Lots of factors come into play when it comes to what you can or can't afford. Down payment, other financial obligations, etc... come into play as well. My wife and I could afford a much larger house than what we are currently living in but we like extra luxurious we can afford by not going larger.
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Old 05-23-2019, 10:56 AM   #16
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We bought our first home 10 years ago for 100K, and it seems like a lot of money then even with us both working. In hindsight it really wasn't much considering we were paying more in daycare monthly than our mortgage at the time. When we sold 3 years ago we upgraded significantly but still not beyond our mean, and we are glad we did. 3 years in the new house and it is worth 50K more than we paid for it, so it was a good decision.

I wonder how people pay for some of these houses too, but to each their own. We have a nice home and are still able to have nice thing and have a life.


House homes value is roughly 2X our yearly income.
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Old 05-23-2019, 10:57 AM   #17
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your monthly mortgage (including tax and insurance) should be no more that 25% of your monthly income, what you bring home, not net.

and to me that is uncomfortable. Mine is closer to the 10-12% range
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Old 05-23-2019, 10:57 AM   #18
BowOnly81
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Our house is 1.5 times our combined salaries.
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Old 05-23-2019, 11:01 AM   #19
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Quote:
Originally Posted by Stins View Post
your monthly mortgage (including tax and insurance) should be no more that 25% of your monthly income, what you bring home, not net.

and to me that is uncomfortable. Mine is closer to the 10-12% range
X2 this is what Iíve always heard recommended
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Old 05-23-2019, 11:07 AM   #20
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X2 this is what I’ve always heard recommended
Mine is about 27% of my take home. However it used to be less then 25% but since property tax is getting carried away in Tarrant county, my monthly has gone up almost $300 these past 3 years. A lot of how much home you can afford depends on your taxes and interest rate also. Just a percent increase in either can make a big difference.
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Old 05-23-2019, 11:10 AM   #21
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I will add also, No more than 25% of your salary towards payment but, base it off of one salary if you are still looking at starting a family.

Being a one income family has its challenges, but it is doable if you don't always try to keep up with what everyone else has. We raised 7 kids on a modest income.
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Old 05-23-2019, 11:21 AM   #22
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I am on my 3rd home. I do agree to keep your note less than 1/3 of your income but always have a 15 year note. To me that is just as important as the amount of the mortgage. I would buy all you can on a 15 year mortgage and 1/3 or less of your income. Run a simple amortization and look at the interest difference between a 15 and 30 year mortgage
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Old 05-23-2019, 11:24 AM   #23
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Our mortgage is 20% after tax income not included bonuses.
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Old 05-23-2019, 11:28 AM   #24
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25% or less of only your salary is the best guideline. Things can happen that you never expect. The easiest way to get over extended is to base a mortgage off two incomes and loose one salary through death, layoff, or divorce...
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Old 05-23-2019, 11:29 AM   #25
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Just ran the numbers and my monthly house note (with taxes / insurance) is 16% of my bring home.

Original purchase price is 1.4x my annual salary.

Last edited by EastTexasMan; 05-23-2019 at 11:31 AM.
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Old 05-23-2019, 11:30 AM   #26
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Lot's of good advice on here. Personally, my house is worth 3.5 times what my salary is but the value of the home has gone up significantly (thank you tax man) in the last 12 years due to where we live. I would live in a outhouse to keep from my mortgage being more than a quarter of my "net" income.
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Old 05-23-2019, 11:30 AM   #27
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Quote:
Originally Posted by Stins View Post
your monthly mortgage (including tax and insurance) should be no more that 25% of your monthly income, what you bring home, not net.

and to me that is uncomfortable. Mine is closer to the 10-12% range
Still other factors to consider. Are you talking a 30 year note or 15?

I'd rather have a higher note for a shorter amount of time and get it paid off than meet any 25% standard.

Im in the 10% also, but I put down 50% down payment. I also do not have a escrow account. I let my money earn for me not the bank.
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Old 05-23-2019, 11:36 AM   #28
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When we bought our house five years ago it was about 25% more than our yearly income. Now we make the purchase price amount but it has went up in value some.

I will say we were approved for double the amount we spent on the house. I told my wife no way in hell am I spending that on a house.
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Old 05-23-2019, 11:42 AM   #29
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just a suggestion - many folks push for home buyers to get a 15 year mortgage rather than a 30 year.

I have always suggested always taking a 30 year mortgage and then over pay towards you principal each month an amount that will pay it off in 15 years. That way you have some flexibility if the unexpected happens - lose your job, etc.
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Old 05-23-2019, 11:43 AM   #30
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Quote:
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25% or less of only your salary is the best guideline. Things can happen that you never expect. The easiest way to get over extended is to base a mortgage off two incomes and loose one salary through death, layoff, or divorce...
We’re at roughly 26% of my take home salary. We could make it off mine alone, but not hers alone. That doesn’t include any bonuses.
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Old 05-23-2019, 11:43 AM   #31
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House notes suck.. the first few months you are proud to pay it because you have a nice new to you house.. after that it becomes a pla s to sleep and work on. I'd much rather live in a paid for house where I could still go do things.. we have guys at work needing 4 or 5 days a month of ot just to keep up with the Jones'..
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Old 05-23-2019, 11:47 AM   #32
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We just put in an offer on a home at 25% of our income. We are expecting my wife's income to go up in the next couple of months. We are also almost debt free so we are feeling pretty good about it.
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Old 05-23-2019, 11:52 AM   #33
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What is the point in a big, expensive home if you are never home to enjoy it because you are constantly working to pay the bill?
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Old 05-23-2019, 11:52 AM   #34
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Quote:
Originally Posted by rugger View Post
Depends on the rest of your expenses and if you already have kids or are wanting kids in the near future. My daycare bill is 3 times my mortgage so if a family is in your future i would buy below your means and save. Who knows if the housing market stays this strong too, that 650k house could be a 500k house in a few years. It could go the other way but if you save up your pennies you can be ready to buy when the market turns in the buyers favor.
Same here my daycare is double my mortgage. Im drowning in daycare bills

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Old 05-23-2019, 11:53 AM   #35
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Mine when I bought it was about double my yearly income. Roughly 25% of my monthly nut.
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Old 05-23-2019, 11:54 AM   #36
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Same here my daycare is double my mortgage. Im drowning in daycare bills

Sent from my SAMSUNG-SM-G930A using Tapatalk
My son starts kindergarten in August. I'm about to get a $12k a year raise.
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Old 05-23-2019, 12:05 PM   #37
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Same here my daycare is double my mortgage. Im drowning in daycare bills

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Same here. We are at about 1.5x our salary on our home value and itís a stretch some days, but with daycare and credit cards/young and dumb loans wiped out in a couple years I bet we could push that number to 5x and still be fat and happy
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Old 05-23-2019, 12:15 PM   #38
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Just to clarify... Normally mortgage payment should be 25% or less of your monthly take home income.

House value to income doesn't really mean very much. A home is an investment, and one of the few some people have. Buying, selling, and flipping can be a good idea since profits from your homestead isn't taxable in most cases. SO people might have a house or property worth many times their annual salary, but still have a mortgage that is within or below guidelines.
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Old 05-23-2019, 12:30 PM   #39
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Lots of good comments... Most of y'all are right in line with what I thought the average mindset was.
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Old 05-23-2019, 12:54 PM   #40
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When we got pre approved they told us we could look in the 600k range. I told my wife they are out of their minds and set a budget for us of 300k. Last thing you want is to be house poor.
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Old 05-23-2019, 01:05 PM   #41
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Mines paid for. I'm happy!
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Old 05-23-2019, 01:14 PM   #42
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Quote:
Originally Posted by BrandonA View Post
Ive always told myself I will never be married to a mortgage. Too much life to live to be stuck at home because you can't afford to do anything else.

I feel the same way. I want to be able to enjoy life.
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Old 05-23-2019, 01:30 PM   #43
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I believe the rule of thumb was 2 to 2.5x income. I could never see myself going that high. Our comfort level never exceeded 1.25x.

And as others pointed out, home value has nothing to do with it. Unless you are going to sell it, a higher home value only means higher cost of ownership (taxes).
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Old 05-23-2019, 01:35 PM   #44
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Mines paid for. I'm happy!
Yes sir! I guess I have the poor folks mentality, I just cant enslave myself to the debt the typical house requires these days.
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Old 05-23-2019, 01:49 PM   #45
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I would rather have less house on 100 acres than a more house on 0.100 acres.... Value might be the same, but my taxes are WAY less .....
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Old 05-23-2019, 01:56 PM   #46
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Much easier to save up money and do other things if you don't have a house payment, so in my opinion paying it off should be a high priority.
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Old 05-23-2019, 01:57 PM   #47
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Quote:
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I would rather have less house on 100 acres than a more house on 0.100 acres.... Value might be the same, but my taxes are WAY less .....
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Old 05-23-2019, 01:58 PM   #48
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So for people saying 25% of your income, the average household income is Texas is right around $60,000. Are you saying you should buy a $15,000 home? That obviously doesn't exist. The average home cost in Texas is over $175,000. That would take a $700,000 household income. So what am I missing here?

Or are we talking about Mortgage payment vs Monthly income?

Last edited by 44mAG; 05-23-2019 at 02:00 PM.
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Old 05-23-2019, 02:01 PM   #49
Pineywoods
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So for people saying 25% of your income, the average household income is Texas is right around $60,000. Are you saying you should buy a $15,000 home? That obviously doesn't exist. The average home cost in Texas is over $175,000. That would take a $700,000 household income. So what am I missing here?
If I understand correctly, this is what they mean... if the average person made $60k per year, that would equate to $5000 per month. They are saying your house payment shouldn't be more that $1250 per month using that rule if that was the only income.
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Old 05-23-2019, 03:03 PM   #50
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I like rule of thumb that your mortgage should be less than 25% of your after tax income on a 15 year note, but I'm admittedly not all that 'normal' when it comes to following the rules.

I put way more value on the land around the house, and am willing to extend a bit more than that to get a bigger chunk of land, but no way am I grabbing a house that's 2-3x my income AND being stuck in a neighborhood.
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