khampster
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| First time home buyer. |
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Greetings! I am new to the board and would like to know more about financing a new home.
So far my wife and I have been looking for a couple months and we have our hearts set on a house that is about $172,355, but we are going to put in an offer here soon next week for $165,000. Which was recommended by our realtor, since in my area housing market has been slow and still is slow. This might give us an opportunity to purchase a home at the price we feel comfortable at.
I talked to my mortgage lender, and he specified that we will need to act quick because FHA is raising their PMI nearly double from what it is today. Speaking of principle and interest, property tax, insurance, and PMI; our total monthly mortgage is approximately $1315 a month. Our annual gross income is about $74,840. Do you think we will be able to live comfortably or live paycheck to paycheck?
Please chime in, any advice would be helpful. 
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Wed Mar 28, 2012 11:11 pm |
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criss7
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I think you can definitely pull that kind of payment on your income, especially since you don't mention kids.
Take things that realtors say with a grain of salt. They always want you to act quickly... so that they can close the sale. I'd probably offer a little less since I'm certain you're expecting a counter offer. Within 10% of asking is more than reasonable in this market. Don't forget to check comps to make sure.
Prime interest rates are going to double soon? I'd check out where these facts are coming from. Hopefully you've shopped for mortgages already and have an idea of what your rate looks like.
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Wed Mar 28, 2012 11:50 pm |
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oldguy
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quote:
Speaking of principle and interest, property tax, insurance, and PMI; our total monthly mortgage is approximately $1315 a month. Our annual gross income is about $74,840.
Your mortgage payment is $836/m if you finance the whole $165k. That means that the property tax, insurance, and PMI is about $5800/yr - is that right? Maybe you are in a high prop tax area?
As for qualifying for $1315/m - yes, easy. The rule of thumb is 28% max, ie 28% of your gross, about $1750/m in your case. As for doubling the PMI cost soon - that doesn't pass the common sense test - those costs are closely watched by regulators, a cost increase has to go thru an approval cycle - a 'double' could never be justified, maybe 5% or 10% tops. Don't allow yourself to be stampeded thru this. I would not offer $165k, I would start at 90%, ie $155k, then settle at about $160k.
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Thu Mar 29, 2012 12:07 am |
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musnelo
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I am buying a new house this year. Is this a good year? I don't want to rush into things.
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Thu Mar 29, 2012 1:12 am |
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khampster
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thanks for responding..yes i do live in one of the high property tax areas. I live in the NW suburbs of Chicago.
My in laws called my wife and I over to their place and had a little "talk" about committing to something priced too high. They were saying to plan with just my salary which is 55k a year. If we figure it out with that amount then I will be over my head with a $1300/month house payment.
Anyone here know of a Piggyback loan? I was thinking about putting down a 5%-10% downpayment and then pull a 2nd mortgage out for the other 10% loan. Then my primary loan will be the 80% of the loan.
Reason why I am thinking of this route is to avoid the PMI as much as possible.
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Thu Mar 29, 2012 3:28 am |
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oldguy
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quote:
Anyone here know of a Piggyback loan? I was thinking about putting down a 5%-10% downpayment and then pull a 2nd mortgage out for the other 10% loan. Then my primary loan will be the 80% of the loan.
Reason why I am thinking of this route is to avoid the PMI as much as possible.
Before the 2006 Bubble, the piggyback loan was very common - usually an 80-10. As you know, lenders made loans to anyone who could fog a mirror, no-documentation laons, liar's loans, etc - very little due-diligence was done to assure that the loans were 'solid'.
As for PMI, buyers single-mindedly try to avoid it. Kinda foolish, often the PMI cost less than the high-interest shortterm piggybacks. Plus, the PMI is usually cleared in a 4 or 6 yrs. So do the math for each deal, I've bought several (rental houses) and the math often makes the PMI s the better deal.
quote:
is 55k a year. If we figure it out with that amount then I will be over my head with a $1300/month house payment
No, $1300/m is right on the safe limit for a $55,000 gross. But tailor it for yourself - if you have two new cars w/ payments, are planning to get pregnant, have $100k in student loans, yada - that cuts into your income stream.
Also look at your current rent - eg, if you currently pay $1000/m rent and the house will be $1300/m, analyze your budget in terms of the difference.
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Thu Mar 29, 2012 1:28 pm |
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oldguy
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Cash: $ 751.85
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quote:
Anyone here know of a Piggyback loan? I was thinking about putting down a 5%-10% downpayment and then pull a 2nd mortgage out for the other 10% loan. Then my primary loan will be the 80% of the loan.
Reason why I am thinking of this route is to avoid the PMI as much as possible.
Before the 2006 Bubble, the piggyback loan was very common - usually an 80-10. As you know, lenders made loans to anyone who could fog a mirror, no-documentation laons, liar's loans, etc - very little due-diligence was done to assure that the loans were 'solid'.
As for PMI, buyers single-mindedly try to avoid it. Kinda foolish, often the PMI cost less than the high-interest shortterm piggybacks. Plus, the PMI is usually cleared in a 4 or 6 yrs. So do the math for each deal, I've bought several (rental houses) and the math often makes the PMI s the better deal.
quote:
is 55k a year. If we figure it out with that amount then I will be over my head with a $1300/month house payment
No, $1300/m is right on the safe limit for a $55,000 gross. But tailor it for yourself - if you have two new cars w/ payments, are planning to get pregnant, have $100k in student loans, yada - that cuts into your income stream.
Also look at your current rent - eg, if you currently pay $1000/m rent and the house will be $1300/m, analyze your budget in terms of the difference.
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Thu Mar 29, 2012 1:30 pm |
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littleroc02us
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The mortgage would be 28% of your net income so that is totally affordable. The real question is how much other debt do you have?
Risk comes from not knowing what you're doing. (Warren Buffet)
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Thu Mar 29, 2012 3:15 pm |
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khampster
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quote:
Originally posted by littleroc02us
The mortgage would be 28% of your net income so that is totally affordable. The real question is how much other debt do you have?
My other debts that we have are:
Car payment - $365.00 ($9700 left on loan)
Credit card payments - $270 per month (4 credit card minimum payments)
We are going back and forth with the offer.. looks like our price has gone up to $170k with all the options we wanted. FYI this is for a new construction home.
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Wed Apr 04, 2012 2:25 pm |
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littleroc02us
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So with my math you make about $4666 a month net income, your mortgage payment you stated with everything involved would be $1315, your car payment and cc add up to $635 and of course you have necessary bills. So that leaves $2715, so make out a budget with your remaining expenses and you should be able to answer your own question. My only concern is that $635 for revolving debt and a car loan is a lot, so unless you have minimal living expenses you should be able to afford it. As with any home there are a lot of hidden costs, so I hope you have allotted for that?
Risk comes from not knowing what you're doing. (Warren Buffet)
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Wed Apr 04, 2012 2:48 pm |
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khampster
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quote:
Originally posted by littleroc02us
So with my math you make about $4666 a month net income, your mortgage payment you stated with everything involved would be $1315, your car payment and cc add up to $635 and of course you have necessary bills. So that leaves $2715, so make out a budget with your remaining expenses and you should be able to answer your own question. My only concern is that $635 for revolving debt and a car loan is a lot, so unless you have minimal living expenses you should be able to afford it. As with any home there are a lot of hidden costs, so I hope you have allotted for that?
Yes, with everything that we considered we should be able to save up $400 per month into our savings. We were going to payoff some of our credit cards off, but our mortgage guy told us that we need to stay liquid-able as possible in getting a home loan... Cash is King at this moment, so we resorted in paying minimum payments on the plastic and save up as much cash we can get until the closing date. (which is 4-5 months once contract is agreed.)
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Wed Apr 04, 2012 5:23 pm |
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carollbill
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Location: 8830 N Camino De La Tierra, Tucson, AZ 85742
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I have decided to buy a house , but I don't know actually what is basic formalities one need to buy a house. So I just want to know what was the first thing one need to keep in mind before buying a house?
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Wed Jun 20, 2012 7:32 am |
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ericammcoy
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The monthly payment would be just fine since your annual salary is quite high, this would be be a very good deal.
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Sat Aug 11, 2012 6:17 am |
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bobsmith12
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You are absolutely right, buying house not only gives you stability in life but also it is a very good investment. I think even if someone doesn’t have money then also they should invest in property by taking loan from banks.
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Thu Aug 16, 2012 10:53 am |
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