@jbh wrote:
Ok, so $100k combined income for something like a $275k mortgage. Interesting. If our scores are in the 700's and it's near 80k (We project more, but I want to play it safe) what would our options be?
More long the lines of $200k? What about FHA? Would that also require 20%? I assumed it would require less.
Thanks
I'll let the mortgage experts respond to your questions about underwriting/approvals, but in the meantime there is something you can do right now that could be very helpful. Make a realistic estimate of how your total monthly housing cost would increase when you are living in the house you expect to purchase, then open a new savings account and every month deposit 110% of that estimate into the account. If you can make these deposits without fail each and every month for a year or so, then you gain several major benefits. First, you have a much better idea what the costs in other parts of your budget were to make those deposits. Second, the money in that account will be available for reserves, downpayment, furnishing your new home, etc. Third, underwriters like to see evidence of an ability to save. If you find yourself unable to make those monthly deposits, or if you only manage to do it by running up your credit card balances, then you have learned something very important: that you cannot afford the home you envision unless something changes in your basic financial situation.
I say 110% above because one thing I have learned from six years of ownership is that surprises will happen, you cannot predict when an appliance will die or a major repair will be needed, but you can be sure some will happen, which means in MOST months you should be SAVING towards the months in which surprises happen. I don't agree with everything Dave Ramsey says, but I like his remark that "having no emergency fund invites Murphy [as in Murphy's Law] to pay you a visit."
For a realistic estimate of what home ownership will cost, talk to friends and relatives who own homes similar to what you anticipate buying; among the items to include in your calculation are:
- Mortgage Principal (I always thought interest-only and negative-amortization loans were crazy, and now they are nearly impossible to get)
- Mortgage Interest
These are the simplest numbers to obtain, because you can simply plug the purchase price, term, and interest rate into a zillion mortgage calculators on the web from sites like www.bankrate.com
- Insurance
- Taxes (and maybe Homeowners Association fees)
These are also pretty easy to obtain, the agent who has your car and/or renter's policies should have a very good idea what homeowner's insurance will run, and most real estate sites include tax data.
- Utilities (a house will almost certainly entail bigger utilities than a rented apartment)
- Maintenance (this of course will depend on age and condition of the place, but for a fairly new structure in decent shape 5 to 10 percent of the purchase price per year might be a fairly good guesstimate. Maybe less for a condo because most of the exterior work will be covered by the HOA fees, BUT about every other year the condos where I live have a special assessment for some major repair, most recently for repainting and before that for roofing work.) Remember maintenance and repairs will be less predictable than utilities and taxes, so estimate how much will be needed over five years and divide by 60 to get a monthly number.
- Furnishing your new home (my wife and I were surprised how much we spent on this during our first year of ownership)
These numbers are the least predictable. Of course if need be you can save on furniture by making do with stuff you find at thrift shops and garage sales for a while. One way to save on furniture for your new house is to rent a storage unit now, so whenever you happen to see a real find at a garage sale or whatever you have a place to keep it.
This is not an exhaustive list, but I think you get the idea.
Message Edited by MattH on 12-05-2008 04:21 PM
TU 791 02/11/2013, EQ 800 1/29/2011 , EX Plus FAKO 812, EX Vantage Score 955 3/19/2010 wife's EQ 9/23/2009 803
EX always was my highest when we could pull all three
Always remember: big print giveth, small print taketh away
If you dunno what tanstaafl means you must Google it
