First-time homebuyer seeks the truth-how much house can I realistically afford?

Question

I am 32 and make $64K annually. I have no debt whatsoever, not even a car payment (though I likely will at some point in the future once the one I own now clunks out). I have about $6K saved up (continually increases) and my 3 credit score average is 789.

Not making a big down payment bothers me-I don't want to pay PMI, but I've heard about these 80/20 loans. Those in the know, what price range do you think I can comfortably, realistically afford? And what if I wanted to 'push it' a little and buy something a bit more expensive (though not risky)?

Thanks!

Answer 1

Looks like your mortgage (with taxes, insurance, etc.) probably shouldn't be over $2,000/month, and you actually might want to consider a single loan w/ PMI. After your loan to value becomes 80% (through paying mortgage off or price appreciation), you can cancel that PMI policy without the expense of refinancing (as you'd have to do with an 80/20 loan).

I've heard of some big banks that will do 100% financing even....without PMI on credit scores over 700 (at least in the Southern Nevada area). You just need seller contribution of say 3% to "buy down" your interest rate. Explore all options because it looks like you'd make an easy mortgage client for banks to compete over.

Answer 2

You have to know what you are qualified to purchase even if you have bad credit.

speculation is just that speculation.

So the first thing you should do is contact a mortgage broker so you can complete a loan application, after which he will run your credit report.

This credit report will give him your credit score. Get a cup of coffee or your favorite beverage when filling out the loan application this is not a 15 minute chore.

Your credit score will tell him what loan programs you are qualified for as well as the interest rate you can expect. This credit score will tell if you are able to get a 100% loan and if not how much cash you have to bring to the table as your down payment.

There are lots of documents and information the mortgage broker will need. I will give you a few to get you started.

#1 Six months of all bank statements you use currently, as well as any statements from your 401k at your place of employment

#2 One months of pay stubs from all that are going on the mortgage.

#3 Two years of federal income taxes and W-2s

After discussing the best loan program for you and agreeing on the program you want, the mortgage broker will issue you a pre-approval letter. Don't forget your good faith estimate (GFE). This will give you an idea of the cost of your loan. That
is in addition to any down payment how much additional cash you must bring to the closing table.

In order to preclude PMI when a lender will finance 100% of the house you are buying the mortgage industry have solved that problem by offering a 80/20 loan. Don't be afraid of them.

You have to understand that the increase in payment if the loans are adjustable.

Your first mortgage (80%) might be a fixed product, while your second (20%) could be an adjustable product. If you don't understand the product ask your mortgage broker and don't leave until he/she has explained it to your satisfaction.
Now once this has been established you should connect up with a real estate agent to find you a home. Upon finding a home you like the real estate agent will then prepare a sales contract for you and the seller to sign.

The mortgage broker will order an appraisal of the house to prove the value.

Once all the documents necessary has been collected the mortgage broker will order loan docs for the program that you agreed to earlier. Again don't plan on spending a lunch hour there to sign loan docs this is a process so be prepared to be there for awhile.

Don't sign the loan docs if anything has change from what the mortgage broker explained to you. Call and get an explanation.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

You have to work out your budget. You don't want to end up 'house poor' - paying so much for the house, you can't go to the movies.

Sit down and work out a realistic budget for food, clothes, utilities, travel, entertainment - everything, including things like savings. Also include an amount for property taxes (which you will be paying) and allow a few thousand a year for repairs and unexpected household expenses. Do NOT include you current rent in this calculation.

OK - so what are you left with? That's the amount you are really will to spend on a mortgage. Find out how much mortgage you can get for that amount of money.

You are right on PMI - don't go that route. Even if you have to start out in a property that is smaller - maybe a condo or town home instead of a house - you're better off not paying PMI.

Look for a home in good condition - have your own home inspection done, regardless of what the owner has available - and check out the school district. It's easier to sell a property in the future if it has good schools, even if you don't have kids! Also check with the police on the crime rate and patterns for that neighborhood.

If you do all your homework, you can buy something you really can afford, and in an area that will appreciate.

Answer 4

I think you should be ok around 300,000 or a little more depending on taxes. I live in Florida so taxes are high here so if anything I over estimated. That will leave you room for a car and you can still save $$$ every month for other investments. PMI is a tax write off since they passed the new law in 2007, but if all possible With that credit score you qualify for 100% no PMI anyway talk to your mortgage broker about that...All the best

Answer 5

The amount you can afforddepends on how much the house costs that you want. PMI is not such a bad thing. You no longer pay when 20% of the loan is paid off.

Answer 6

cooper,
somethings said allways depend on your viewpoints.
allways get a fixed rate loan. never get a 80/20% loan - the 20% in Variable as in up rate with defaults in it. never get a p&i payment bigger than ONE week's take home pay. the other week goes for taxes , insurance, up keep, empty house syndrom,
equipment needed for the house. the 3rd week goes for transportation cost increases, food , clothes, entertainment.
4th week goes for rainy day funds , layoff/downsizing funds, boken leg funds, oh retirement funds.
with a 64k$ income the banks would love to write a loan for 250,000 house and u would become a slave to that house. suggest nothing larger than 175k unless u want to stay home alone all the time. ur single that is one empty house unless u fill it with depreciating on easy payment toys. buy cash only, don't impress the Jones.
as for 'tax write off' of interest payments. IRS states 80% or more of home owners do not quailfy to use that because their standard is bigger than the house.
let's look at the (il)logic of this myth - u pay the bank 10k$ yr interest to save from paying IRS 2500$? why not keep the money and pay IRS 2500$ (u got 7500$ leftin ur pockets).
As for PMI u only have to pay it untill u have a loan of 79% of apprased value on the house.
u buy at 100k , 5k down. u owe 95K. PMI covers the 16K so pay down fast extra money on principle while house appreciates. with focus you can get to 79% with in 5 yrs and PMI drops off.
visit daveramsey.com to learn what banker/mortage comp. pray you never ever learn or worse apply in your life - how to own your money not be owned buy it.
get copies of 'house buying for dummies' read digest. visit Gov.site on house buying.

Answer 7

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