Looking to purchase home

[hautemama]

Hi all. I have a few questions.  First of all, I've been looking to purchase a home (in the near future, just waiting for a great deal).

I stumbled upon a brand new community which is offering "affordable housing".  They explained to me that the mortgage would roughly be 1600, and with taxes, hoa and everything else, monthly payments would be approx 2100.  For a family of two (such as mine) my income would need to be under 75K (which I qualify).  They also explained that the city holds the 2nd loan, and have requirements of who I can sell the home to and since its "affordable housing" I wouldn't be able to gain equity from purchasing the home.  The benefit I would receive would be getting the tax break fm owning.  Can i have your ideas on this matter?  To me, it seems $2100 doesn't really seem very "affordable" and not being able to gain equity is also a bad thing.  Would the tax break be significant? and beneficial for me to go ahead and purchase or would it not really make that much of a difference?

Sorry for being so long.

Another scenario.  I recently got prequalified (for a condo) approx 370K, but with my 5% down payment they estimated my mortgage to be approx 3K/month. (FHA loan, 30 yr fixed, interest rate of 5.5%)  This community has HOA and mello roos.  This seems excessive, because they qualified me for everything, but I barely even make 3K/month!!

Any input would be GREATLY appreciated.  What should I do?

[ShanetheMortgageMan]

The affordable housing programs in my area have the same limitations... they are under market value for the types of homes (tend to be townhomes or condos), you can either take the city held 2nd mortgage (which usually doesn't have payments) or just qualify for the full financing on your own.  Either way though, they have restrictions on how much you can sell the home for, and if you take the city held 2nd mortgage, it will get to "share" in any equity the property has gained.  If you are unable to afford anything else, and you really want to own a home, it is a good opportunity.

To determine if the tax break would be significant, you would have to be able to write off more than what you are currently taking for your standard deduction (which should be $10k).  My guess is that the interest & property taxes you'd pay each year would be more than $10k, so it would be beneficial for you that way.. however I am not a tax adviser and I don't play one on TV, so I would recommend you speak to your own tax professional regarding how interest & property tax deductions would benefit your exact situation.

If you make ~$3k/mo I don't see how you would get pre-qualified for a condo of approximately $370k.  Something sounds very fishy there.  However being prequalified doesn't amount to a hill of beans, you really want to get pre-approved.  We pre-approve by taking a full loan application over the phone, sending you out the loan application & disclosures, providing you a document checklist for the items that would be needed for an underwriter to review, ask you to sign/date the loan application & disclosures, and send those back with all of the items on the document checklist.  Then we submit the loan through automated underwriting for an immediate response, and if needed, we send the loan into the underwriter for a full review.  Once the underwriter gets back to us with an official pre-approval, that means you've been officially pre-approved.

Doesn't really sound like you've been talking to the right people... this is evidenced by you having so many questions after talking to them.  Don't get me wrong, asking questions here is perfectly fine (actually I get concerned when clients don't ask questions, makes me feel they aren't getting the "big picture"), but it sounds like you've been talking more to salesmen & saleswoman than to mortgage professionals, as if you discuss your situation with the right person, you should leave the conversation having all of your questions answered, and then some.

[hautemama]

Thank you Shane!

Your input is helpful.  Sorry, I wasn't being very clear.  I make approx 7,000 per month, but take home is around 3-4K. 

The moderate income scenario is looking better now, with your information.  Maybe the saleswoman didnt know what she was talking about when she said I wouldn't be getting ANY equity.  That's what turned me off about that situation.  So, personally, you think purchasing with the moderate income with taking the city's 2nd loan a good idea?

[ShanetheMortgageMan]

I responded to your PM.

[Anonymous]

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hautemama wrote:

...This community has HOA and mello roos... 

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What is mello roos?

Anyone remember "Melrose Place"?

[ShanetheMortgageMan]

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masdeocho wrote:

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hautemama wrote:

...This community has HOA and mello roos... 

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What is mello roos?

Anyone remember "Melrose Place"?

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Mello-roos is a special tax that enables communities/cities to fund public utilites/services throughout a community, city, or development.  To my knowledge it's only a California thing, and it went into effect when I was just a tot in 1982.  The reason that it surfaced is in 1978 California enacted Prop 13, which limited the ability of local governments to use property taxes to build public services & utilities.  Government needed to find a new way to raise funds for the services & utilities, so a Senator and an assemblyman formed an act that eventually passed, called the Community Facilities District Act.  The last names of those two peple were Mello & Roos.  The money is raised by the sale of bonds, which the residents of the community, city or development pay back over time.  This is usually in newly developed areas, as the bonds usually have a 20-40 year term.

You can get the rest of the story at http://en.wikipedia.org/wiki/Mello-Roos

I loved watching Melrose Place, my wife (girlfriend at the time) and I watched every new episode from 1999 on... and caught up on the old ones on E! TV.  I'm not sure if you are a big Seinfeld fan too, but the Seinfeld episode where Jerry was dating a cop and had to undergo the lie detector test, and was questioned about if he did or didn't watch Melrose Place was one of the best episodes in my opinion... "Michael... he's so smug!"

[Anonymous]

If you make under 75k can you really afford $2000 a month?

My wife and I make a lot more than that and $2000 a month would be a real stretch for us.

You said your take home is a bit over three grand...so do the math yourself, if you think you can cover ALL these on a grand, go for it:

-gasoline

-phone

-utilities

-cable

-food

-retirement/savings

-entertainment

To me, I couldn't do it.  My utilities and gasoline alone are $600.