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Old 09-11-2016, 10:41 AM
 
14 posts, read 24,871 times
Reputation: 18

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Hi there,

Looking to move in Laureate Park(Orlando FL area), we are at the end stages of possibly purchasing - last thing left is for me to pull the trigger and do it. Here is our financial situation:

110K per year combined
Car payment of 350 per month
0 other debt

Estimated mortgage payment with 5 percent down payment is 2,200 per month (includes taxes, pmi, insurance etc.) lender locked interest rate at 3.5 percent

Our net income per month is 7,200 (gross is 9,000)

On paper, I think this would be safe? After all home/living expenses, we would have an additional 1.5-2k per month for savings etc.

With that said, I am starting to get cold feet based on quite a few things I am reading online - for example, that someone making combined income of 100-120K cannot afford a 350K home based on xyz calculations.

I am OK with backing out of this deal - however, I just feel like there is something I am missing as articles I read online lead me to believe we should be making 150K+ a year and have a larger down payment.

Any advice is appreciated -

We have about 4 months of savings/rainy day.
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Old 09-11-2016, 01:47 PM
 
Location: South Carolina
383 posts, read 386,110 times
Reputation: 876
That's a great interest rate. But only you can decide what you can comfortably "afford." You may qualify for the mortgage but if the payments are higher than your comfort level, then look to buy something less expensive.

Your PMI will eventually go away. Rates will not stay this low forever. You can continue to pay someone's else mortgage by renting or you can start building equity in your own home investment. And don't forget that your interest is a tax write off, which also should be considered when looking at the big picture.

Cold feet is normal. Home buying is a very emotional experience. Is there anyone IRL you can talk to about this? A friend who is a first-time home buyer who's already gone through what you are going through now?
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Old 09-11-2016, 02:15 PM
 
12,016 posts, read 12,790,789 times
Reputation: 13420
$110K salary is fine for a $350K home, It's a little over 3X. What natters is your debt to income ratio and it sounds like you are under 30% of your income for mortgage. That must be quite a home for Orlando, I always thought housing was cheaper there. Good luck.
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Old 09-11-2016, 11:43 PM
 
947 posts, read 924,004 times
Reputation: 1850
Is that a 30 year loan? That $350,000 house would actually cost you over $570,000 , because you'll be paying about $175,000 in interest.

Check out Mortgage Calculator


Plus it is not certain that house prices will stay high. Some people are predicting another crash. With that possibility looming, it might not be a good idea to buy a house in a price range that makes you nervous.
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Old 09-12-2016, 06:32 AM
 
12,016 posts, read 12,790,789 times
Reputation: 13420
Quote:
Originally Posted by tlarnla View Post
Is that a 30 year loan? That $350,000 house would actually cost you over $570,000 , because you'll be paying about $175,000 in interest.

Check out Mortgage Calculator


Plus it is not certain that house prices will stay high. Some people are predicting another crash. With that possibility looming, it might not be a good idea to buy a house in a price range that makes you nervous.
Paying interest is expected on a mortgage, they can also make a few more payments a year to pay less interest and shave a year or more off the mortgage. Plus rates are near or at an all time low. There will not be a similar crash to last time, that was a unique situation with wall street and bankers messing everything up by giving unqualified sellers loans as well as inflating home prices artificially.
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Old 09-12-2016, 07:00 AM
 
947 posts, read 924,004 times
Reputation: 1850
The home prices were artificially inflated by flippers and other investors. That is happening again. And one of the markets that is being heavily inflated by flippers is Florida, where the OP wants to buy a house.

As far as interest is concerned, $175k on a $350k house seems pretty steep, doesn't it? That comes out to 50%. Many people don't realize just how expensive those 30 year loans are.
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Old 09-12-2016, 07:33 AM
 
Location: Raleigh, NC
19,449 posts, read 27,893,581 times
Reputation: 36146
Quote:
Originally Posted by tlarnla View Post

As far as interest is concerned, $175k on a $350k house seems pretty steep, doesn't it? That comes out to 50%. Many people don't realize just how expensive those 30 year loans are.
Very few people ever stay in a house long enough to pay off a 30 year mortgage, so your point is moot.

Regardless, no. I don't consider $175k on a $350k loan pretty steep. I used somebody else's money for 30 years at 3.5% while leaving my money invested in a tax sheltered IRA earning 5-8% on mutual funds (sometimes more). That interest deduction allows me to itemize and pay less in taxes fir at least the first ten years of that mortgage, maybe longer.

The PMI that the OP is gonna pay because they are only putting 5% down? THAT'S expensive. My advice to OP would be to not buy until you can at least put 10% down, then look at 80/10/10 mortgages. Better yet, get 20% doen.
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Old 09-12-2016, 07:40 AM
 
Location: Finally the house is done and we are in Port St. Lucie!
3,487 posts, read 3,348,309 times
Reputation: 9914
30 year loans have been around forever. Hell, I remember when interest rates on those mortgage loans were above 10%.

Banks make money, we get a house.

Whether we rent or buy, we will pretty much always have a monthly bill for something we need to live in.

In our case, this is our last home. We've rented all this time until we found the area we want to stay in for the rest of our time on this earth.

We aren't looking at a house as something to get rid of down the road and make money on. This will be our home. Not just a commodity or an investment.
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Old 09-12-2016, 10:19 AM
 
4,399 posts, read 10,681,839 times
Reputation: 2383
Quote:
Originally Posted by strickforce View Post
Hi there,

Looking to move in Laureate Park(Orlando FL area), we are at the end stages of possibly purchasing - last thing left is for me to pull the trigger and do it. Here is our financial situation:

110K per year combined
Car payment of 350 per month
0 other debt

Estimated mortgage payment with 5 percent down payment is 2,200 per month (includes taxes, pmi, insurance etc.) lender locked interest rate at 3.5 percent

Our net income per month is 7,200 (gross is 9,000)

On paper, I think this would be safe? After all home/living expenses, we would have an additional 1.5-2k per month for savings etc.

With that said, I am starting to get cold feet based on quite a few things I am reading online - for example, that someone making combined income of 100-120K cannot afford a 350K home based on xyz calculations.

I am OK with backing out of this deal - however, I just feel like there is something I am missing as articles I read online lead me to believe we should be making 150K+ a year and have a larger down payment.

Any advice is appreciated -

We have about 4 months of savings/rainy day.
Rate this post positively
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Without knowing all the details I think your fine with what you posted. Make you are plan to be there long enough and that your job is stable.
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Old 09-12-2016, 12:48 PM
 
14 posts, read 24,871 times
Reputation: 18
Thanks for the advice everyone -

I know that we will not be in this home for 30 years. This will technically be our second home purchased.

First home was purchased in 2009 at the bottom of the market for 120K (home was originally sold in 2006 brand new for 330K) - we lived it in until 2014 and sold. We have been renting the last 1 1/2 years deciding where we ultimately want to be. Our income while living in the 120K home combined was probably around 90K - over the last 5 years we have brought it up to about 113K.

The mortgage on a 120K home was about 800 a month - so going from that to 2,200 is sticker shock, although technically by my math, seems ok on paper and by most calculations I have researched. The rent on the home we are in now, for example, is 2,100 a month - and while we have enjoyed renting for this short time - I would rather be building equity in a home. We also have 3 kids - which is why we wanted to be in an area with good schools and a little bit larger home.
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