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I was just pre-approved for mortgage in the 225,000+ range. Now that I came home and set up a budget I don't have a clue how that's even close to be possible.
Total income is $70k, My co-signer has $0 debt, I have $21,000 car loan at 0% and $9,000 credit cards at 0% for a year. We are budgeting now for a new car because her car is on its last leg, so that's "future car". Grocery budget is based on standard for 4 person family.
Cable -$150.00
Car -$375.00
Car insurance -$250.00
Cell Phone -$170.00
Credit Card -$75.00
Daycare -$300.00
Electric -$250.00
Future Car -$200.00
Gas -$451.84
Groceries -$520.00
Mortgage -$1,300.00
-$3,841.84 total bills
$3,200 Monthly income
To me this doesn't seem doable at all, why on earth would I be approved for anywhere near that much? Realstically what could be afforded?
Many people are approved for more mortgage than they can comfortably afford. Financially responsible people look for houses in the range that is affordable for their lifestyle.
I was approved to over $500k. The house I chose cost less than half that, and the payments are a level I consider appropriate for my family's budget.
Also, as you look to see how much you are willing to pay each month, make sure you are looking at future costs and not current costs. Gas may be higher or lower each month depending on whether the commute changes. Utility bills may change (my water went up and electricity went down at my new house).
Last edited by Aggiebuttercup; 09-06-2013 at 08:29 PM..
Reason: add caution about future budget
Pay off your car and CC before thinking about buying a house. Enter a house purchase with no debt. Why s your n durance cable and cell so high. Can you live with out those things for a while or maybe go to a lower plan and apply the money to paying off CC and car?
Nurse the old car along or save and buy a newer used car CASH. Pay off the debt then buy a house. As far as I'm concerned your expenses are way too high. Your $75 bucks for CC payment s that the minimum payment you are paying? If you are only making the minimum payment on a 9,000 balance you'll be Methuselah old before you pay it off. Pay that down. A least make double preferably triple the minimum payment. Then stop using CC. Only use CC if you can afford to pay it off at the end if the month.
Right now you need to scale back your spending. A LOT of scale back before you go buy a house. There us a lot more to house payment tan the house payment.
Ummm, just because you are approved for a certain amount doesn't mean you should spend that amount. You are correct in thinking you should not get a mortgage for $225,000.
Right now a $1300 mortgage is way out of line. Most guidelines indicate your total debt should be about 1/3 your income. That is all debt. Right now your current debt is about 15% of your income.
Good for you for looking at your budget. Even with that though, I think the budget is unrealistic. The food budget seems too low. The average US family of four spends about $770/month on food. Your kids might be young now, but they will grow and eat more. I know cell phones can be a necessary expense. Are you on a family plan? Look at your bill. Can you cut anything out of it? We cut our cell phone bill by about $70 month by eliminating a few unnecessary things like unlimited texting and the number of minutes we had available to us. Same with the cable bill. I realize that cable often includes internet, but do you have extra channels you don't watch? Cut them off. Use one of the cheap or free online video streaming services. Shop around for car insurance.
You're also missing a few things in the budget like a water/sewer bill that will be a monthly house expense. Is the lender including taxes and homeowners insurance in that $1300? I see you're saving for a car, but what about an emergency fund or saving for the kids' college?
You're right to question the amount. If you really want to move to a house, figure out a payment you can make with ease and go from there.
I agree with other posters here and also would like to add some lenders are giving the amount on higher end assuming worse mortgage conditions (like interest only mortgage). If you find the house for $225K and decided to go with it, the lender might suprise you by their terms, so watch out. They don't like to talk about it in details before you find your dream home
Assuming that means someone who is signing the mortgage with you but will not be residing in the home, don't do it. Having family or friends try to help you by co-signing a note that you cannot afford on your own is never a good plan. Either financially (for them or you) or personally (the relationships are all too often irrevocably damaged beyond repair).
Pay off the credit card. Set up an emergency fund. Try to pay off one for the cars. Then revisit buying a house.
BIG PROPS to you for even looking at these numbers and doing a budget. I wish more people had your common sense!
To me this doesn't seem doable at all, why on earth would I be approved for anywhere near that much? Realstically what could be afforded?
Because banks don't care! You need to start out with what you can afford as a monthly mortgage, then see what that will buy you based on today's rates.
Cable -$150 (cut it back to basic cable, my cable bill is $8 month (comcast) and I have a roku with netflix $8 month)
Car insurance -$250 (my car insurance is $600 year for 2 cars, liability and collision with progressive)
Cell Phone -$170 (cut back to prepaid with tmobile, minutes are good for a year, if your kids use up their minutes they can work or do chores for more, you cant go over, when the minutes are used up, phone stops working, simple as that)
Credit Card -$75 (how do you plan on paying this off? $75 month ain't going to cut it.)
Electric -$250 (time to start switching to cfl or led bulbs and turning things off regularly, something or someone in your house is wasting electricity. if you got your electric bill to $100 month, you would save $1800 year)
Electric bill. You need to move that thermostat a little more. Turn off lights, tv, radio, when not in use. When you do buy that house....be sure to put a ceiling fan in every room....best investment I ever made.
Price shop your cellphone options as well. Do you really need all those options that you are currently paying for?
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