Post # 1
My FH and I would like to own a home, and we would like to have it before the wedding. The thing is, I know what I like, but we don’t want to start loving something out of our price range. So how do we know what we can afford?
Post # 3
Could you speak to a financial adviser?
Post # 4
there are online calculators that will take into account your income, bills and debt and give you a price range. just google.
Post # 5
There are a few calculators online that can help you figure that out. You should try to stay below 35% of your income on housing expenses.
Here is one of the loan calculators. You will need to save 20% to avoid PMI on a traditional mortgage or 3% on a FHA loan.
Post # 6
I would work up a budget, list all your current bills and savings and see what you have left over each month. If you are going the FHA route, you will need 3.5% down, we got a gift from his dad for that part since we had to use our down payment money for our wedding. Also, realize that whatever your principal and interest are, add about $400 to that for insurance, pmi, and taxes – depending on how your state works. Ours was about $350 on top of our principle and interest. Good luck!
Post # 7
Don’t go by what the realtor or what loan amount you get approved for! I think this is the biggest problem for first time home buyers. My first time I got approved for 300,000 when I was only making 40,000 at the time. You have to consider your other bills like car loans, entertainment etc.
What I did was look at har.com (Houston homes) and on it you can look at houses and do the mortage calculator per month. Keep in mind though this is ONLY mortage not taxes and insurance which can add another 500 + to your monthly payments.
Next you need to sit down and list all your expenses; car, vacations, bills, etc. added it up and subtract from your take home pay. Then you’ll see how much you have left to spend. Also, if you are paying rent right now then you have a baseline of how much or how little you can spend. For example, I was in an apartment spending 800/month on rent. So I knew that I could afford at least 800/month on the mortage.
Post # 8
Opps: I meant “How do we know how much we can afford to spend on a mortgage”?
Post # 9
Start by figuring out realistically what you can spend per month towards “home” expenses. Keep in mind that this doesn’t just mean a mortgage, but also taxes, insurance, interest and maintenance (if condo/co-op). Also, you need to determine how much money you have towards a down-payment. Many mortgage lenders are no requiring you to have 20% down in order for them to provide a mortgage. Don’t bank on having the seller pay closing costs, and keep in mind that you will need to pay misc. one-time costs when purchasing (your agents commission, property transfer fees, etc). Also, I wouldn’t spend all of your savings towards your down-payment. What happens if one of you loses your job, or there are unexpected expenses.
Definitely get credit reports for both of you. Banks will use your credit scores to determine whether to give you a loan. They will also look at what outstanding loans you both have (i.e. school, credit card balances, etc).
Once you have all of that, I would see what your 20% down is 20% of (i.e. if you have $20k, that would be 20% of $100k). Use that as a staring point with the online mortgage calculators to see if the monthly breakdown is something you can afford. Also, get some quotes from banks to see how much money they are willing to lend you and at what interest rate. My biggest advice would be to not spend more per month then you really can afford.
Post # 10
@vintage: I always used har.com to look at homes before we were engaged, but once I found out that we have to move I stopped.
That is a good rule, both of us are spending the same amount in rent that we are planning to spend on a mortgage.
Post # 11
Great points, Thanks ladies! I am thinking that we should aim to look at homes that cost less, because I don’t want us to get in over our heads.
Post # 12
You’ve got really good advice here. A few thoughts I would add:
– figure out what your income would be like if either of you lost your job. Take into consideration whether or not you would receive unemployment insurance, and how much. I would then figure out what your essential bills are (loan payments, taxes, electricity, gas, food, transportation, etc., NOT cable) and see what you would have left over if either one of you lost your job. IMO, whatever that amount is should be the most you are willing to pay for your monthly mortgage. Just using play numbers and to keep it simple, lets say your take home pay is $2500 a month, and FI would receive $750 in unemployment. If your monthly bills are $1500, your mortage (with tax, insurance, and PMI) should be NO MORE than $1750. This approach basically means that you are much better set to handle the future, and that you will have flexibility if one of you needs to leave work.
– don’t use the amount that you qualify to borrow as how much you should spend, often it can be crazy. But do get approved first, just to get a sense of what your interest rate would be. You can find a better loan later, but having a rough idea will make a big difference in your ability to plan.
– save like crazy now.
– keep in mind during the process that there is a huge difference between cosmetic and structural improvements. LOOK PAST BAD WALLPAPER, but really think twice about a place that will need a new roof, has shady plumbing, etc. You can usually fix ugly on your own schedule and with elbow grease, but when you need a new heater, you need a new heater.
– keep in mind that you’ll get a very healthy tax deduction from interest paid on the mortgage. Our old rent was for $1400 a month, mortgage is about $2200, but the difference in per month price is actually only about $300 more because of the interest deduction.
Post # 14
Talk to a lending agent. In addition to your mortgage, there are all sorts of monthly fees tacked on, which you’ll find out about in a “Truth In Lending” statement. These include your property taxes and homeowners insurance and a couple of other similar things. When we first started looking I was pretty surprised at how much those monthly extras are. (In our area and price range, they’re around $350.)
Post # 15
Don’t go at the very top of what you’re approved for by your bank! My last bank said I could be approved for a home that would be 80% of my income. Umm how would I pay for ANYTHING?!!
You want your payments to be around 35% of your income. Right now, I’m buying a house & it will be almost 50% of my income. Soon FI will have a job & then it will be right around 35% where it belongs :).
Do you have a specific lender/bank? I’d suggest meeting with someone… however, don’t go from bank to bank to see what you’re qualified for… that will hurt your credit & you have to pay for your credit report at each bank. The best way to find a bank is to find a good realtor, & they’ll give you a list of recommended lenders.
You may want to look into StateFarm Insurance… they provide home loans & insurance so they may give you an extra discount.
Post # 16
Everyone has good tips! I want to buy a house within the next 2-3 years. Sucks because I am not working and it’s up to my fiance on his income. But taxes, other bills, upkeep all come in to play. Also that down payment everyone says should be about 20% (yikes).