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Old 01-10-2010, 09:24 PM
 
Location: GA
34 posts, read 165,068 times
Reputation: 27

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Hey all,

I know the amount we get approved for is NOT the amount of the house we should neccesarily buy. But it turns out we can get approved for a $425K house. Our lender, USAA (who is extremely conservative with all their pre-approval numbers) confirmed it. I found several other online calculators, and all came up with a bit higher number.

USAA is a very trustworthy company (again, conservative). I asked them point blank: "OK - you're lending me about $340K to buy a $425K house. You're conservative. Thus, you feel this is low risk to you. You're happy to do it, and you believe it's right for me. This is based on all your research, underwriting, national averages, etc. You look at the total picture - and this is the type of money you lend (and the price of house you lend on) everyday to people like me with similar financial situations?"

They basically said "yep - and techincally you can be approved for more".

Here's the problem. I feel like that house payment is way outside our comfort zone. We live a modest lifestyle. We are debt free and make good money. Running the numbers however - I do feel like it would be really tight, if not borderline put us in the red.

But most importantly - this makes me feel like I SHOULD be getting a $425K house. If I CAN'T afford it - I'm living outside my means elsewhere. I'm doing something wrong. I've got a leak. But I can't envision where it would be because we live a modest life.

USAA and the calculators - they account for the fact that you're an average American with expenses unrelated to the house (I don't recall the ratio). They factor that in. Groceries, gas, savings, retirement, childcare, car insurance, etc. etc.

So if our current lifestyle couldn't actually support the $425K house we're approved for, are we big overspenders elsewhere?

Or are we fine - and both USAA and the calculators are heavily inflating the amount of home we should actually be buying?

Thanks!
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Old 01-10-2010, 09:51 PM
 
672 posts, read 1,691,986 times
Reputation: 585
I think it would help if you actually told us your income How stable are your jobs?

It sounds like you don't feel comfortable with this amount and that you are "borderline" in the red.....so don't do it. To heck with what some lender is telling you... the more they loan, the more money they make.

A calculator doesn't spell things out in black and white... they are purely guides.... They don't spell out the emotional side of things or work for EVERY single scenario out there.

Part of the reason why the lender may feel comfortable is the fact that you are putting down $85K ($425k-$340k). If they foreclosed on you tomorrow, they'd probably get their money back and then some.... also they believe that since you put down $85K, you're going to do everything you can to not lose your own money.
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Old 01-10-2010, 10:31 PM
 
Location: GA
34 posts, read 165,068 times
Reputation: 27
Our combined household gross salary is about $105K and jobs are very stable. We're 36 with two young kids. 100% debt free with the single exception of one $400/month car payment. We don't have a mortgage right now because we just sold our house and we're renting. So the rent doesn't factor into the equation because it would disappear.

As for lifestyle, we have childcare that costs about $1800 a month. We have average car/life insurance, and are steadily saving for retirement and college. So that's all average I believe. Beyond that, I'd say we have what average folks have - cell phone bills, cable bills, etc.
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Old 01-10-2010, 10:33 PM
 
5,961 posts, read 8,666,376 times
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Quote:
Originally Posted by denemante View Post
Our combined household gross salary is about $105K and jobs are very stable. We're 36 with two young kids. 100% debt free with the single exception of one $400/month car payment. We don't have a mortgage right now because we just sold our house and we're renting. So the rent doesn't factor into the equation because it would disappear.

As for lifestyle, we have childcare that costs about $1800 a month. We have average car/life insurance, and are steadily saving for retirement and college. So that's all average I believe. Beyond that, I'd say we have what average folks have - cell phone bills, cable bills, etc.

Ah, $1800 in childcare.

That's not average.

There's your problem.

Or, more aptly named, your personal money pit, your leak: your kids.
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Old 01-10-2010, 11:14 PM
 
672 posts, read 1,691,986 times
Reputation: 585
Wow... that $1800 in childcare costs is pretty huge... Did you let your lender know about that or plug that into your calculator? My guess is that your Lender has no clue about this obligation. And I don't think any calculators that I have seen take "childcare" into account.

As Chuckity mentioned.... $1800 in childcare is not an average expense. While that may be the going rate for your area... A married couple with a single earner making $105k and a stay-at-home spouse taking care of the kids does not have $1800 in childcare expenses.

Plug your income and obligations (car payment and childcare) into a calculator and that will give you a more comfortable figure.

Good luck!
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Old 01-11-2010, 07:36 AM
 
2,384 posts, read 4,590,111 times
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A $425k house is over FOUR times your gross earnings.

To me, that's insane.
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Old 01-11-2010, 08:41 AM
 
5,961 posts, read 8,666,376 times
Reputation: 4025
Quote:
Originally Posted by cleasach View Post
A $425k house is over FOUR times your gross earnings.

To me, that's insane.
Actually, it looks like the OP would be putting down 20%, which would mean a mortgage of $340K.
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Old 01-11-2010, 08:51 AM
 
Location: Barrington
49,219 posts, read 35,579,132 times
Reputation: 16156
Default No Answers/More Qustions

I am thinking that your credit scores, lack of significant reportable debt and your ability to put 20% down combine to make you a good credit risk.

Your future savings and/or retirement planning are discretionary events. I am not sure how a lender views child care costs, given it's not an obligation that going to reflect on your credit report.

Lots of parents have significant private school costs that also falls underneath the radar.

If you were to put 20% down, do you have other funds available in the event one of you becomes unemployed? What mortgage payment could you reasonably afford if one of you became unemployed, recognizing that the child care expense would likely reduce during that time period?

How long before your children will be in school and your child care costs potentially reduce? Are or do you plan to put aside anything for their college education?

Pay attention to property taxes and utility costs associated with a larger home. My own property taxes more than doubled in 7 years.

How long do you plan on staying in your next home?
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Old 01-11-2010, 09:26 AM
 
Location: NorthTexas
634 posts, read 1,401,644 times
Reputation: 327
The general rule of thumb is that your house payment (including taxes, principal,interest HOA) should not exceed 29% of your take home (net) pay. That is what most financial planners say today.
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Old 01-11-2010, 10:48 AM
 
3,191 posts, read 8,364,455 times
Reputation: 2180
IMHO, it is better to qualify on one person's income. In the event one or the other losses a job, then your debt burden won't be as bad. Basically...live below your means. Safe not sorry, so to speak Could you do that?

And NO you do not have to buy as much house as THEY say you can afford!! Heck, the more you spend the more they make I have always thought it insane for folks to go out looking at houses priced at and over what they qualify for. Sheesh! Work your way UP instead...find the best house to meet your needs, in the best neighborhood/location possible, at the most reasonable price possible. That make sense?? We wound up buying at almost 50% of what we qualified for, same kind of house as in the snazzier neighborhoods, just not the so-called impressive, ha, address.

I do have to ask OP, $1800 a MONTH in childcare>>> was that number taken in consideration by the lender??? That is about $600 more than our house payment!

And dare I ask if it would ultimately be more economical for one parent to be a stay at home one???

Either way good luck to you

also, based on your other posts, are you still in Ga, or WV now?? Or are you wanting to move there, or NC or FLa or any of the other places you have mentioned.....I am confused now that I went back to read them. woudl you still have that $1800 child care?

Last edited by crazyma; 01-11-2010 at 10:56 AM..
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