It was in the spring of 1977. Earl Hughes had just become manager of the Great Scott Supermarket in Hillsboro. In those days almost every supermarket had bag boys. It was the custom of the times for a high school kid to bag your groceries and wheel them out to your car. It was a service that was appreciated by most patrons.
I was the first employee Earl hired in his long career of being store manager. Starting pay was a whopping $2.35 per hour. Being in the 11th grade at the time, I was overjoyed with my good fortune to have this job.
Today, the minimum wage has risen to $8.55 for hourly employees. Most minimum wage jobs will not be full-time, but let’s assume this one is. Rounding up to $9 per hour and a 40-hour work week, this person will gross $360 per week and $1,440 per month. After taxes are taken out the net should be somewhere around $300 per week and $1,200 per month. Is that enough to make a home purchase?
Here are some more numbers to ponder. The average home price in Highland County is around $90,000. Current mortgage rates today are hovering just at or below 5 percent. Based on the above numbers, the payment for a home purchased at $90,000 with a 30-year mortgage will be right at $600 per month, including taxes and insurance.
How much is enough? What will most lenders require for an income to make a $600 payment? In order to qualify for a home loan, lenders will use what is called a debt to income ratio. If you tally up all your monthly payments, including your new house payment, the total can’t be more than 43 percent of your income. Also, your house payment alone cannot be more than 30 percent of your income. Crunching numbers can bore us to tears at times, but it’s something anyone wanting to own a home will have to consider.
So, how much income is enough to purchase your imaginary house? If all else is aligned (and the all else is a lot!), you will need a gross income of around $2,000 per month. You will also need to be able to prove you have enough for all the other household expenses. And we all know that list is endless. Example: The compressor for my heat pump stopped working just last weekend. To quote Murphy’s law: “Anything that can go wrong, will go wrong.”
Back in my days of being a professional grocery bagger, I never once gave a thought to owning a home. I did, however, have enough to pay for my 1973 Nova. We all remember and have fond memories of our first car. Let me take that to a whole new level. My payments were $61.03 per month and my insurance was $224.60 for six months of coverage. The cost for that would have been three times as much if my agent had a clue how I drove. I have always been the guy who forgets the name of someone I met yesterday, but also remembers this kind of stuff some 40 years later.
Looking back, what was wrong with my parents for even allowing that car to be owned by me? If they only knew…
Randy Butler is a lifelong resident of Highland County and a licensed real estate agent for Classic Real Estate in Hillsboro.