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OP theres a difference between qualifying for a loan, and being comfortable with the payments. A bank will qualify you up to an amount that sounds good in theory, but leaves you with little cash flow for repairs and other expenses. That's what got people in trouble in the first place.
So, let's just say I qualify for a loan of $146k,
but I "buy" a place for like $120k..
My payments should be like $475 -$500 a month no?
I pay double that in rent now, so won't it technically "save" me money if I just buy a home?
Look for a good mortgage calculator and that will give you an estimate. You forget that in addition to the mortgage you will have to pay property taxes and have homeowners insurance. That can add a good chunk to the mortgage. Plus with a small down payment you will have to factor in PMI. If you're buying a condo, you'll probably have associated fee's there, like an HOA, for lawn care, maintenance, etc.
Not to mention, I would also not buy a place without a decent chunk of savings for emergencies (around 5k minimum probably in your case)
So, let's just say I qualify for a loan of $146k,
but I "buy" a place for like $120k..
My payments should be like $475 -$500 a month no?
I pay double that in rent now, so won't it technically "save" me money if I just buy a home?
That's just principal and interest. Don't forget about costs such as private mortgage insurance, homeowner's insurance, and property taxes. You can expect your monthly payment to include all of these things.
So, let's just say I qualify for a loan of $146k,
but I "buy" a place for like $120k..
My payments should be like $475 -$500 a month no?
I pay double that in rent now, so won't it technically "save" me money if I just buy a home?
You have to include property taxes, insurance, HOA/condo fees, maintenance, the value of your own time (if you work on it yourself), and the lost investment opportunity of your down payment funds and closing cost.
If that is still less than (or very similar to) rent for the same place and you plan on staying there for a while (5+ years) it can make sense to buy it. Strictly speaking you should subtract equity growth from the cost, but the latter depends on unknown future prices.
To be quite honest, I almost feel as if I'll never be able to buy a home. I dont even know why. It seems so daunting and yet I want to purchase so much more than renting. I'm beginning to see how much of my income I waste by renting. $1100/month to be exact.
Do u recommend I use my $6k in savings and pay off my $1k in credit card debt and perhaps put like $3k down on a loan?
While it's true that the money there is going out the window, don't forget that as soon as you take on a mortgage, you'll be paying interest, taxes, and making repairs that will also be money "wasted."
Not to mention as others have pointed out, the down payment you're going to make(let's assume you do 10% and put down 12k) could be realistically earning at least 5% (about $40/month after taxes on average).
When you compare renting vs buying, you need to compare renting to Interest + Taxes + (Your standard deduction - the Interest/Tax deductions) + Maintenance/HOA/TrashFees
All those things are new expenses that you'll pick up entirely because you're renting, and they'll continue to go out the window every month.
I'm not saying buying isn't a good move, just pointing out that it's not as simple as Mortgage vs Rent. Typically if mortgage and rent are the same with a low down payment, you'll usually come out ahead because the principal payment is money you pay to yourself(no change in net worth).
Based on your numbers, you'll probably be better off buying, just don't forget the "hidden" costs.
Most towns I have lived in have had an adult learning class on home buying which might be good for you to take. If they have a home maintenance class I would sign up for that too. I would also start picking up the real estate advertising books that usually come out monthly and just start looking and seeing what is available in your price range. It wouldn't hurt to go to some open houses.
There is a lot more to home ownership than buying.
Why do you even have a $1K in credit card debt. The interest rate is at least 9%. You have the savings. Pay it off! Duhh!!!
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