Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
There's a lot of wisdom here and some terrific advice here too.
I don't know exactly what your situation is Need Affordable Home, but I have a bit of advice based on my guess that you might be a first time home buyer and on my experience. I'm a Realtor who's been at it since 1988. A great deal of my prior experience has been with first time homebuyers, who have referred other people to me and returned. I say this merely for context...
First - I can't say strongly enough how well served you'll be if you use a local lender. Ask around. Find a mortgage professional who comes with rave reviews and who has been in the mortgage business for a while. Preferably a long while. It's fairly easy to get in to the business, and the quality of mortgage folks varies a great deal. You'll also want somebody who has a lot of mortgage PROGRAMS available, and who is very familiar with the special state specific programs offered for first-time homebuyers in your state if there are any. You'll also want somebody who seems happy to work with you and answer questions.
The internet is a great place for satisfying your curiosity and using the available tools to get oriented. But in my opinion, there's just no substitute for sitting down with a professional who can offer a variety of mortgage PROGRAMS, and has a lot of experience. There are just too many variables, and too many questions specific to your own personal situation that simply can't be addressed otherwise. I think it's also an benefit to be able to talk with somebody who has a LOCAL reputation to uphold, and a local office to walk into.
In my state, there are even non profit organizations which offer home buying classes and can help make recomendations based on your situation. They can help you look at your finances and credit report and make recommendations.
Firgive me if my assumptions aren't correct - and best of luck to you.
The old true formula used to be to never have to use more then 25% of your income for housing whether it be rent or house payment/insurance/taxes. They have now raised it to 30% of your income and that'd be as far as I'd stretch it. So if you gross $60,000 per year, you should be able to invest $15,000 in housing per year. That's of course if you have a small family.
Conventional mortgages used to be figured at 28/36.
That's to say, no more than 28% of Gross Monthly Income would be spent on housing cost (PITI: principal, interest, taxes and insurance) and P.I.T.I. plus consumer debt would be no more than 36%. Which is a lot of debt!
That's traditional ratios on a conventional mortgage. Those numbers are a bit out of date since the advent of all the other flavors of mortgage - both the wise and the foolish sorts. But they are a decent (if blunt) rule of thumb.
Last edited by chaz longue; 09-03-2006 at 08:40 PM..
Another way to look at it - what percentage of your income do you want to spend on your house?
I prefer to spend less on a house (smaller, older, fixer-upper, whatever), to be able to afford other things - travel, saving, maintaining my lavish lifestyle.
I own my current house free and clear, which is awfully nice! Mind you, it's a small, old crappy house. But not having a mortgage (and less than $1000 a year on property taxes) is great.
And you have to be prepared for a downturn in salary, health emergencies, all sorts of contingencies. IMHO, too many people are "house poor" and at risk.
A good rule of thumb is 25% of your gross income, but I suppose for very high incomes, you can spend considerabily more as youd still have enough for other expenses. Lets base a $30k annual gross income. $7500 a year obviously wont get me any house in Florida. It could get me a $30,000 condominium in Houston, Texas though. Maybe even a $50,000 house!
Quote:
Originally Posted by holt4fam
I tried several mortgage calculators when we decided to move. They were all over the place as far as how much we could afford. One calculator said we could carry a whopping $50,000 mortgage. When we went to the lender that amount went up to $180,000. Our lender told us never to rely on those calculators. He's gotten phone calls from several people who were all upset because they thought they couldn't afford much when in reality they were in a good position (especially first-time buyers who may not known any better).
Good point. However its always better to err on the conservative side than overshoot your budget and bite more house than you can chew. I have done the math and I am confident I can afford $30,000 of house/condo/mobile on a $15/hour salary. $50,000 of property may be pushing it but doable if you cut out other expenses(dont eat out, dont go to movies, dont buy electronic gadgets, buy just the essentals)
Quote:
Originally Posted by pkoons
Whatever the answer, it should NEVER be "what my lender approves me for." There's a sucker deal out there for every circumstance. In this market, you're a chump if you go with an interest-only or balloon payment mortgage!!!
Expect a lot of foreclosures in expensive metro areas... I knew one Thai immigrant who was approved for a $375K mortgage with $0 down and about a $45K combined household income (with his girlfriend). I pleaded with him not to spend so much, but a lot of people are buying more than they can afford.
Some new homes being built in my old hometown of Laurel (in the $700K range) are seeing two families move in with lawn furniture as the living room set. No joke. There's an Escalade in the driveway, a huge house, and NOTHING inside.
The banks should learn not to offer unrelistic morgages. Both the customer/person and the bank lose if the deal falls thru. If I were a bank, I wouldnt approve more than about $75k morgage based on their 45k combined income. A smart bank would probably not approve more than a 50k loan for me when I get a $15/hour job. $50k loan wont get me anything(in Florida, that is) so I wouldnt take a loan in the first place and just pay the $8000 outright for a mobile home while saving more money and working my way up on the job.
"Bob and John might both earn $100k a year, but Bob may have no bills other than utilities and car insurance, whereas John might have student loans, car loan, credit card bills."
Exactly! That's what I've tried to say in many posts. I don't have a "lavish" lifestyle... My money goes to bills & food! My "big spending" is buying some books or something on ebay which is usually never more than 20-40$!
Need_Affordable_Home: Where exactly are you? And if you plan on living by yourself it's different. I couldn't afford a house in Miami (in a decent area anyway) by myself. But I sure could in MANY other places!!! You can buy houses in ND, IA, NE etc for 10-30k!!!!!!! They're cute little houses too! Sure you'd have to commute in snow, but most people in the US do!
If you buy with someone, you can afford it! Although the interest rates HAVE gone up considerably!
But check into government loans! They have first time buyers loans etc. There are MANY options! Someone I work with said if you make less than 38k a year you can qualify for 25k! If you can't afford a house, & you don't want to change cities/states, maybe you could buy a condo. (studio or 1 bedroom)
You have options! Keep researching!
Factor in $4000 a year on food, $2000/year for car insurance and gas, $1500/year for electricity and water, $420/year for internet plus other expenses which apply for everyone. We all have expenses. I believe I can afford $50k of house based on my math. Will need to move to Houston for this.
I am in Palm Beach County and plan to live alone. I cant afford any house nor condominium anywhere in south Florida. Will need to move out, considering Houston. So the government will qualify me for a $25k loan? I guess ill need to save $25k down payment, take a $25k loan and buy a $50k house in Houston and pay back the loan in like 3 years to ward off interest expenses. If the loan is interest free to $25k then ill pay it back slowly over like 10 years.
I dont want to stay in south Florida when I can live in Houston at a fraction of the cost! Actually, last month me and my dad checked out a condo conversion and they want $150s for 1/1, $220s for 2/2! That is alot of money! My dad agreed and said its not affordable for most people.
saw your post, and don't know your job situation, etc., - you don't mention if you have a second job on weekends/nights or not. If you are willing to work hard for even two years, you can take all of the 2nd job and apply it towards the down payment. I did this in Sarasota, Florida a few years ago. I worked my reular 40 hour job as a nurse at one hospital, and had a second job-24 hours a week at another hospital. You take the money from the first job and put away whatever percentage you have planned on, and take ALL of the money from the second job and put it towards a down payment. For example, say you earn $15/hr. If you work a weekend, and put in 24 hours, that will be about $1,200.00 a month after taxes, in Florida. In just one year, you will have almost $15,000! Think what you can do in two years! Work all the holidays you can for time and a half. Work 12 hour days.And that is not counting whatever you save from the first job. I know it is not getting any easier to buy a home, but if you really want to, work hard, don't spend on unneeded things, you can do it! I think an awful lot of people complain- it takes sacrifice to get something as important as a house! Look into foreclosures. If you have 20% down, you won't have to have PMI. Buy a smaller home work at fixing it up, then resell- you'll make a profit to put into a bit better house. You can do it if you'll work. Americans in general are greedy, want too much, too big- are not realistic. Hop to it!!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Affordable Housing
how low can you go
