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Old 08-01-2007, 07:32 PM
 
5 posts, read 17,059 times
Reputation: 12
Default Can I afford a home?

I am torn between renting or possibly owning some sort of condo or townhouse. I currently make 43k a year, and around March next year I will be receiving a promotion which will increase my salary to around 50-52k. I was initially looking to rent some place around the Ft Meade area close to my job, and expecting to pay around $1,100 a month. I believe I calculated correctly that I could afford around that rent each month + other living expenses, I have no debt.

Could I not find a mortgage for around that and be better off owning a place? Ignore the downpayment and closing costs, I would have those covered. I am just wondering how much I could afford, some calculators show a 200-225k condo at around the same $1,100 I would be paying to rent. I am still trying to figure this out so I have not attempted to find a realtor. Any input would be appreciated.

On a side note I would be perfectly fine with commuting up to 45 minutes, so it does not have to be that close to the Ft Meade area. And I do expect to have my gf moving in with me later this year and chipping in, but I do not want that factored into the calculations. Thanks.
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Old 08-01-2007, 07:54 PM
 
31 posts, read 85,484 times
Reputation: 25
There are lots of financing options out there, but I think you'd have to be crazy to get an interest-only loan in this market. If you get a 30 year fixed interest rate, you can probably afford the morgatge at around $1100, but remember that compared to renting, you will be on the hook for all the utilities, as well at homeownsers insurance and property tax. Taxes can be pretty high in some parts of MD. You might end up with a total cost of homeownership of approximately $300 to $600+ greater than the morgatge payments alone. Your best bet is to talk to a GOOD local realtor and explain how much you can pay per month TOTAL.

Be careful though, because lots of realtors will try to convince you to spend more than is practical. You should have a firm cost in mind, above which you will not purchase a home and resist any realtor who tries to drive that number up. If you are comfortable either way, you will be less suceptible to pressure.
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Old 08-01-2007, 08:17 PM
 
Location: California
510 posts, read 2,205,693 times
Reputation: 361
The best thing you can do is call a local mortgage brokerage, and also a local bank. Do your best to pay attention to how they treat you, and what kind of questions they ask. There's amazing loan officers who know their stuff, and then there are some who know so little they shouldn't still be in the business.

By working initially with two people, they should both offer you similar advice, but likely touch on different points. They will both be able to give you an idea of what you qualify for, and what the payments would be. They should also know what the local property tax rates are, so they can factor that into your payments.

One thing to consider... even if your payment is 2-300 more than you pay in rent, you will recoup some of that on your income taxes, as you can write off the interest you pay on the loan.
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Old 08-02-2007, 06:09 AM
 
222 posts, read 713,230 times
Reputation: 81
Calculators don't account for everything. I am thinking my mortgage is for $175k? (can't remember right now) and payments are $1200 + $200 HOA. This is with excellent credit.

HTH!
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Old 08-02-2007, 07:10 AM
 
Location: Stuck on the East Coast, hoping to head West
1,874 posts, read 3,997,413 times
Reputation: 2325
When we bought our first house (15 years ago) we went through some of the HUD counseling courses to qualify for special loan programs through the different banks--in our case, bank of america.

We went through Acorn Housing (acornhousing.com). Its a nonprofit, primarily for low-middle income first-time homebuyers. You meet with counselors who explain everything about owning a house, help you calculate how much you can afford, if you'll need PMI, which loan programs are best for you, etc.

Once you go through all of that, they give you a certificate which can qualify you for special loans. For example, back then it was a lot harder to qualify for loans. We had excellent credit, $0 debt (no car loans, no student loans, no credit card loans), but we were very young and newly married and our bank suggested that we complete the program for better interest rates. We did and it worked. We ended up going through bank of america and got a whole percentage point lower than what we we'd originally been quoted. Anyway, yeah, some of the counseling was elementary, but we did learn a lot and we did get the lower interest-rate loan. Can't guarantee that's how it works to day, but we had a great experience.

The other point I'd make is that when owning a house is more than just a monthly payment. Utilities are higher. Property taxes go up. HOA fees go up. And maintenance is a huge expense. Even the most well-maintained home will have something that needs to replaced in any given year. Hope this doesn't discourage you. I love owning. Just wish I'd known a little more about all these other expenses. Good luck to you.
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Old 08-02-2007, 07:55 AM
 
274 posts, read 809,082 times
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my mortgage is $187k, $1280/month with taxes, insurance included. HOA IS $350/year
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Old 08-02-2007, 09:29 AM
 
Location: California
510 posts, read 2,205,693 times
Reputation: 361
Rates fluctuate daily, and on top of that there has been a steady increase in interest rates for the last few months (on top of the rates just generally going up). In addition to the increase in rates, peoples credit scores, equity, and reserves have a major impact on the rate they get, which of course has an effect on payment.

There's honestly no realistic way to compare what you might have, with what others have now.

In this post (chicago suburbs forum): first time home buyer. please give me some tips I talked about some first time home buyer stuff to be aware of.

The most important piece of information in there has to do with first time home buyer assistance programs. These programs will almost always give you a loan where you don't have to make any payments on it. This loan is essentially a 2nd mortgage, so in essence it's a downpayment. This will allow you to get a lower rate on your first, and in addition the lower loan amount and rate translates into a MUCH lower payment. (One thing to mention, "first time home buyer" doesn't mean your first home in the eyes of most cities...it just means it's been a set amount of years since you've owned one.) Not everyone will qualify, but it's generally income dependant, done in a spread. The less you make, the more you can get.

Regarding calculators and national averages for rates... the calculators do calculate true payments, but the information you used is based on too much assumption. It won't cost you a penny to call a local mortgage brokerage or a bank, and they will be able to offer you the information you need so you can make a good decision on what is best for you. (well if you have a pay per minute cell phone it might cost you a little bit )

One thing I wanted to add, was if you decide to buy a condo/townhouse there are things you need to be aware of before you do. There was an article by Bob Bruss about this, but I can't seem to find it now. Here's a good one by some real estate agent in CT I found... Six Things to Know About a Condo Complex Before You Buy Real Real Estate in Connecticut - A CT Realtor Blog for Buyers, Sellers and Home Owners Definitely important to know what to look for when you do buy a condo. There are things that can have an effect on lenders even giving you a loan there, regardless of immaculate credit.

Last edited by UseJeff; 08-02-2007 at 09:36 AM.. Reason: Condo info
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Old 08-02-2007, 04:38 PM
 
Location: Prison!
913 posts, read 1,993,085 times
Reputation: 240
Quote:
Originally Posted by Trinston View Post
I am torn between renting or possibly owning some sort of condo or townhouse. I currently make 43k a year, and around March next year I will be receiving a promotion which will increase my salary to around 50-52k. I was initially looking to rent some place around the Ft Meade area close to my job, and expecting to pay around $1,100 a month. I believe I calculated correctly that I could afford around that rent each month + other living expenses, I have no debt.

Could I not find a mortgage for around that and be better off owning a place? Ignore the downpayment and closing costs, I would have those covered. I am just wondering how much I could afford, some calculators show a 200-225k condo at around the same $1,100 I would be paying to rent. I am still trying to figure this out so I have not attempted to find a realtor. Any input would be appreciated.

On a side note I would be perfectly fine with commuting up to 45 minutes, so it does not have to be that close to the Ft Meade area. And I do expect to have my gf moving in with me later this year and chipping in, but I do not want that factored into the calculations. Thanks.
Look into CDA , FHA or SELP program to help you with closing costs and fixed interest rates.
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Old 08-02-2007, 05:03 PM
 
5 posts, read 17,059 times
Reputation: 12
Thanks for all the great advice. It will be really helpful. I am 21 and recently graduated, so this process is new to me. I never gave thought to owning a home until about a month ago, when everyone kept mentioning it was better to own than rent. I have had so many people attempt to scare me away from renting because "renting puts you in a hole that is hard to dig out of" or "you are not building equity". Am I wrong in thinking that most people start out renting and can still save up for a home? It just seems like I wouldn't be able to get a quality place I enjoy living in for under 200k, except for some condos which I am very hesitant on and I have read they do not really build equity.
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Old 08-02-2007, 05:20 PM
 
Location: Prison!
913 posts, read 1,993,085 times
Reputation: 240
Quote:
Originally Posted by Trinston View Post
Thanks for all the great advice. It will be really helpful. I am 21 and recently graduated, so this process is new to me. I never gave thought to owning a home until about a month ago, when everyone kept mentioning it was better to own than rent. I have had so many people attempt to scare me away from renting because "renting puts you in a hole that is hard to dig out of" or "you are not building equity". Am I wrong in thinking that most people start out renting and can still save up for a home? It just seems like I wouldn't be able to get a quality place I enjoy living in for under 200k, except for some condos which I am very hesitant on and I have read they do not really build equity.
by all means...renting aint that bad..Dont over extend yourself. There is more than just mortgage. You have PMI insurance unless you dropped 20% downpayment, then you have taxes , insurance and maybe HOA. You are still young...
Have ever rented a place or you been staying in dorm or parents home the whole you are in college?
I am too looking for a home but i am slightly older hah...but do whatever you feel comfortable. factor in all the cost up there
Do you plan stay in that place more than 5 years too?
PM me if you more questions
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