Post # 1
My fiance and I would like to buy a house in the next few years. We’d prefer to do it by Christmas because that is when I would be moving home. However, I will not have a full time job until next fall (student teaching in the spring) and therefore we will not have a double income. More like an income and a quarter. Haha.
My question is, is there a way to get a mortgage this year and have lower payments for one year then increase the payments other than by extra payments to the principal? We’d like to increase the actual mortgage payment. Is there a way to do this? We will be visiting our bank this weekend, I was just trying to figure out some things before then. We’re from the Midwest and know exactly where we want to live so once we buy a house, it will be our forever home. Therefore we don’t want to buy a starter house and upgrade later. We actually want to build a factory home, but that’s a whole other story.
Thanks all 🙂
Post # 3
There are adjustable rate mortgages where the payments are lower initially but I wouldn’t reccommend them… You might be surprised what a bank would be willing to give you (I always think they say I can afford too much) so I’d ask for a preapproval sooner rather than later to give you an idea of what you’ll be able to afford. They’ll pull your credit but it won’t hurt you because you’re allowed by their models to shop around… Also, I bought a house on my own 4 months after being hired at my first real job, so you might have enough time on the job to have your income count.
Another thing to consider is a fixer upper or a house you could build on. There are actually factory built second floors that they can just drop on a house so if you expect to be making a lot more later, you can buy what you can afford and upgrade that same house when you can afford it!
Post # 4
- Wedding: August 2013 - Rocky Mountains USA
You could maybe refinance your mortgage into a 15-year one after the first year?
I don’t see why you couldn’t just do extra payments though? If you just pay double the mortgage amount every month (or even a few times a year), you’ll pay down your principal.
However, this is only a good idea if your interest rate is higher on your mortgage than on other investments. If you have a super low interest rate like they are right now (3.5% or whatever) and can make more interest on investments, you’re better off putting that extra money into the investments with a higher return than the interest you’re paying on your mortgage – ya know?
Post # 5
We’re also looking at homes and we are both full time students but have enough savings. It seems like refianacing when possible is the best way to go, although you may have to wait several years.
Post # 6
You could get a mortgage with the option to double up payments. That way you can double the amount you are paying per month and still have the lower amount to fall back on if something happened to make you not a double income family again
Post # 7
I agree with PP’s suggestions to just pay extra principal. My mortgage broker told me when I first bought my house in 2010 that ONE extra payment to principal only over the course of one calendar year would reduce the terms of my mortgage by about 7 years (by reducing the amount of total principal subject to interest). I refinanced earlier this year, still to another 30 year mortgage- my payments went down almost $200 a month, so I will put $100 of that extra savings back toward principal and the other $100 into our savings. Also, when you sell the house later, you’ll end up with more profit since you owe less on the mortgage.
Post # 8
Even if you started a new job TODAY, it’s highly unlikely a loan officer would be able to base what they lend you off of your dual income.
Income AND time at a job play a factor into what a bank will lend to you. Someone who’s been at a job for a year or less would probably be considered a bad risk.
Going with an adjustable rate mortgage is a bad bad idea. Especially since interest rates are so low right now!! You’ll most likely have to just get approved off of what FI’s income is. Your lender will tell you if you can pay more than your mortgage and pay down points without penalty (not all mortgages wll allow you to do that…which I find odd, but whatever.)
Post # 9
@JaneyDcat: Agreed OP. Even if you get pre-approved using both of your current incomes, by the time you buy your house, if you do not have an income, you will not qualify for that mortgage.
Pre-approval is only an “idea” of what you will qualify for based on your current financial position. Once you find a house and have an approved offer, you then apply for a mortgage and it is granted based on your current situation.
So, is you are student teaching for a year, and buy a house at Christmas, you will only qualify with your DH’s income and credit score.
My advice would be to either buy what you can afford on DH’s salary alone, or wait until you have a full-time job and can qualify with both of your incomes.
Post # 10
You could refinance to a shorter term length to increase your required payment.
But I don’t get why you wouldn’t just want to pay extra each month that would go straight to principle.
Plus, I agree with the PP who said that if you have a low interest rate, you are financially better off not paying extra on your mortgage and instead investing that money. That is exactly what my financial advisor has told Darling Husband and I to do.
Post # 11
I know that 15 and 30 year terms are the most popular in the US, but are there no 1 year terms? They are used quite often here.
If so you could go that route and then switch to a 15 or 30 year term when it’s time to renew. From what I’ve been reading, people are expecting rates to stay low for a while.
Post # 12
Quite honestly, it’s always good to purchase a home and knowing you’ll only need one salary to do so.
What if one of you becomes sick or loses their job? You don’t ever want to be in that predicament! Shop around too.
We are now in our forever home, so this is the third house I’ve owned in my adult life. We were SHOCKED that we were approved for so much when we got our last mortgage for this house last year.
My advice to you is to sit down and figure out how much money you can truly AFFORD and want to spend on your monthly mortgage. You also need to figure in what your taxes would run…and utilities, etc. You don’t want to overextend yourself when you go to buy a home.
NEVER rely on what a mortgage broker tells you what you CAN afford. You don’t have to take out that $300k mortgage if you’re only comfortable with a $250K mortgage….
Post # 13
- Wedding: October 2011 - Bed & Breakfast
If I understand your post correctly, OP, you want to buy a house based on what you think you will be able to afford when you are both working full time, but only have to pay a smaller loan payment amount for the first year or two until you actually start working full time. So you want to defer a significant part of your payments until the 3rd and later ytears of your loan when you think you will be able to afford the larger payment. Am I understanding you correctly?
Post # 14
@JaneyDcat: I think the OP is trying to buy a house based on one salary.
I don’t think it’s unreasonable to plan to pay more when both people are working. Maybe that amount would be more than what a couple would want to pay based on just one salary, but it’s still doable if one did lose a job.
Post # 15
@lovekiss: Yea! You got it 🙂 I didn’t word that very well. Like I said, very new to this and wondering of possibilities. We know what we can afford per month and not have to scrap around the make ends meet. But we also know that we want a really great house. So if we have to wait, we will. I also agree that paying on the principal is a great way to knock off some interest and it’s something we would like to do when we are stable enough to do so. The bank we’re going through is my parents bank and they know us both very well. So they’re more willing to approve us for what we know we can afford than what other banks or government loans would want to. Because right now, we don’t look very stable. Fiance makes $1000 a week after taxes and I only make $150 (embarassing, but that’s literally all the time I have to work with 21 credits and planning for lessons.) We both have excellent credit scores and I’m the only one with debt right now – $5000 in student loans. (I was a full ride basketball scholarship up until this year so those have been minimal.) We know how much we can afford on a fix rate interest mortgage, we’ll just have to wait to see what we’re approved of. We won’t spend more than what we know we’re comfortable with paying right now.
Post # 16
- Wedding: October 2011 - Bed & Breakfast
Okay, so what you are asking about is not going to happen. Lenders will only lend you the amount that THEY think you can afford to pay back based on your current income. They do not take future earning potential into account in their calculations. The “good” news is that what lenders think you can afford is generally way more than what you can actually afford. So you could, theoretically, buy a house that maxes you out right now and that would be more comfortable once you are both working full time. But don’t do it. Don’t max yourself out. Buy what you can comfortably afford on one salary right now. You never know when things will go south, you don’t get that full-time job you planned on, and you are stretched too thin to pay your mortgage. You don’t want a foreclosure ruining your credit for the better part of a decade. Play it safe.