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Old 05-02-2015, 10:33 AM
 
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Hi,

I wanted to make sure that I have my bases covered before purchasing a home. I was considering buying a 8 yr old 420K home in Cary with 8k/month gross salary. My thp is 4500/month. I have enough money to make 20% down payment and enough savings after downpayment to cover for 2 years of mortgage. My monthly debt is a car loan of 500$. My question is will I be able to afford this home with just my income, assuming we have my wife's savings/monthly earnings to fall back on?

I am planning to take a 7/1 ARM or a 5/5 ARM to lower my monthly mortgage payments considering I do not wish to stay in this house for more than 10 years.

Any recommendations on mortgage lenders ?

Thanks
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Old 05-02-2015, 10:50 AM
 
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probably, but it would be a stretch.

what about your wife's income? if it were to disappear, it would be a stretch. if she brings home $2000 a month, boom, there's your mortgage.
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Old 05-02-2015, 10:55 AM
 
Location: Raleigh NC
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Only you and your wife know your expenses. Only you and your wife can decide if you choose to be house poor.

Our opinions will vary greatly and won't help much. Personally, I wouldn't want to live house poor. But I also put 28% of my pay into savings and investment. I also don't have any bills other than the mortgage. So I think your idea is a bad one. Others will disagree. And there are even more who don't mind every dime going to a bill and none into savings.

Just my opinion, but I think you have already made your decision to buy it and are pretty sure it's not a good idea but need reassurance. Again, just my opinion.
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Old 05-02-2015, 11:06 AM
 
Location: Phoenix, AZ > Raleigh, NC
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I agree with Under PSI. That said, don't do the ARM. Rates are at nearly historic lows on a fixed 30 year mortgage. Taking a risk to save so little is simply not worth it. One never knows what the future will bring. (PS When interest rates were higher, I had ARM's, so it's not like I hate them on principle.)
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Old 05-02-2015, 11:13 AM
 
Location: under the beautiful Carolina blue
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Quote:
Originally Posted by Jkgourmet View Post
(PS When interest rates were higher, I had ARM's, so it's not like I hate them on principle.)
I agree on this - we had an ARM on our last house and it worked out fantastic for us - it was like getting a free re-fi every year as rates dropped and dropped. But right now, not a good idea, by the time you realize rates are going up and get your act together to get in line for a conventional loan, you could end up with a pretty high rate. Like JK said, you never know what the future holds.

As far as your other question, like PSI said, only you can say whether this is a good move for you or not. Once you own a house though, you are taking on a debt whether you own it outright or not - houses just have a way of sucking up money.
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Old 05-02-2015, 11:34 AM
 
Location: Raleigh, NC
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Quote:
Originally Posted by Jkgourmet View Post
I agree with Under PSI. That said, don't do the ARM. Rates are at nearly historic lows on a fixed 30 year mortgage.
Like most things financial, "it depends" - how long do you plan on staying in the house? If you plan to move in less than 5 years, a 5/1 ARM can be a good deal. Also, don't make the mistake of looking at a house as an investment - it is a place to live.
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Old 05-02-2015, 11:38 AM
 
Location: Raleigh NC
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Originally Posted by twingles View Post
IOnce you own a house though, you are taking on a debt whether you own it outright or not - houses just have a way of sucking up money.
Yup, like maintenance. House is 8 years old. Another 2 it will most likely need to be painted. Based on the price I would imagine the house is ~3500 sq.ft. A house that size figure around $6-8K for rotted trim repair, prep, and full paint. You can't just look at monthly mortgage payments. You will be responsible for maintaining the thing.

But, then again, some people don't even do that as they don't mind moving every 5-10 years. Buy a house, live in it for a few years, then move without maintaining it so it becomes the next owners responsibility. Hopefully the current owner maintained it so you won't be bombarded with repairs. And hopefully the inspector will catch half of them.
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Old 05-02-2015, 11:42 AM
 
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Nope, you need to be looking at about $250,000 for a house.
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Old 05-02-2015, 12:13 PM
 
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Quote:
Originally Posted by underPSI View Post
But, then again, some people don't even do that as they don't mind moving every 5-10 years. Buy a house, live in it for a few years, then move without maintaining it so it becomes the next owners responsibility. Hopefully the current owner maintained it so you won't be bombarded with repairs. And hopefully the inspector will catch half of them.
Buying a house with intention of staying only 5 years is a bad plan all the way around. No doubt it has worked out well for some, when the market is such that significant equity is gained, but overall odds are in favor of renting being a better deal for short-term stays.

If the goal is to stay 10 years or less, then making major improvements is definitely something to avoid, unless the reason for the improvement is to address some serious flaw that would affect the ability to sell it.

Staying in a home for any period of time and not maintaining it is a pretty stupid move all the way around, and should be something like a last resort for the unemployed and downtrodden who have no other choice. Allowing a home to fall into disrepair is only going to result in some inspector catching all the flaws when it comes time to sell, ultimately affecting the sales price and time on market (which of course go hand-in-hand).

This can be a serious problem for folks who have said "we're going to sell in 10 years", but find that their timing coincides with some unfortunate market condition like a strong buyers market. They are then stuck with a poorly maintained home they can't sell and escalating costs due to neglect.

It's a particularly risky strategy once you get too far above the average home price (which I think in the triangle is probably somewhere around $275k or so right now), because homes above average selling price are much harder to sell in a bad economy, and of course cost a lot more to own.

Last edited by pdocstr; 05-02-2015 at 12:59 PM..
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Old 05-02-2015, 12:19 PM
 
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If you have 2 years worth of savings to coverage the mortgage and can do 20% down, I'd say you could swing it and are being pretty responsible. Being that you have the income of your wife as well to fall back on.

I make a similar amount of money as you do w/ no spouse to help out, and my total mortgage payment with everything is just under 1600/mo. I financed 230k at 3.75 for 30 years locked in.

If I was closer to 2k in a mortgage payment, it would stress me out more. Could I do it?.....yes.

But at that level, it's very hard to save any money for a rainy day as they say.
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