Alright, due to a divorce im going to have to sell my humble aboad here shortly and I'm trying to figure out what I can buy next. If anyone out there can give me a ballpark with the following figures I'd much appreciate it.

Salary = 55,000 or so this year
Debt ( After sale of house ) = 18,000 on truck. Monthly note = 350.00
Down Payment 20,000 ( After sale of house )

What can I get ?

Thanks

 

A lot depends on your credit. If you have good credit; I'd say roughly 200K

 

I am a licenced loan officer.

with great credit and a home under 200k you can expect about 1% and less including tax and insurance depending. It is called piti (principle, interest, tax and insurance...) I can't give you a close quote without an idea of your credit score. You can go to a variety of mortgage websites and you will find a mortgage calculator. Take into consideration every single debt on your credit. I.E credit cards, truck notes etc...nothing like auto insurance or cell phone. Just stuff that will show on your report. That plus your piti cannot exceed 45% of your gross (before taxes) monthly income. Rates have gone up since 2002 so expect 6.5-7.25% estimated with a normal mortgage ARM also known as an adjustable rate mortgage, as having the note not fixed for 30 years will offer a lesser rate... mind you this scenario is with great credit (680-700 fico score and up) I hope this helps.

 

Bankrate's calculator is a good place to start. Looks like about $200k is about right.

 

That link is to troyer performance.

 

Maybe he meant this
http://www.bankrate.com/brm/calc/new...Ea=0&Ed=0&Eo=0

 

I've been shopping for a loan locally, and haven't even considered ARM. What advantages could there be? In my mind its quite the gamble...

 

It is a gamble for those that intend on staying in the home for longer than 2,3,5, 7 or 10 years. Studies have shown (I don't know who's studies, I have only heard from industry veterans) that the average homebuyer stays in a home between 3 and 5 years. So for someone that doesn't plan on staying put, go ARM. If you never want to move again; go fixed 30 years. The key is just being realistic with yourself. I would never recommend one of my clients to stay in an ARM longer that the non-adjustable period. That is how the bank gets their hooks in ya'. Watch out for pre-payment penalties too. If you have questions feel free to ask away. Oh yeah, an ARM tends to have a lower rate because it is less risk to the investor (bank) than insuring a rate for the next 30 years when no one really knows what interest rates are gonna do. It also serves a good "band-aid" loan for homebuyers with less than perfect credit so they can build their credit for a few years and refinance to a better rate if it is available.

 

Thanks, UC. That's the link I menat to use.

ARMs have lower interest rates in general than 30yr fixed and with a 30 yr amortization, will have a lower payment than 30yr fixed during the initial lock period. ARMs are locked for some initial period then adjusts periodically (up or down) after that initial period. For example, a 5/1 ARM means the rate advertised is locked for the first 5 years, then adjusts every 1 year. I don't know that ARMs are the best way to go for most people as intereste rates are likely to go up over the next several years. No one knows what the future will hold, but I only recommend an ARM right now if you plan to sell the house before the lock expires.

 

Adjustable rate mortgage (ARM): These were brought on as a result of high interest rates in the early 1980s. Banks wanted to transfer the risk of higher interest rates to the consumer, so with these loans, you start out with a lower rate and it increases over time. You do not want to get an ARM.

Basically people had locked in rates in the early 70's or earlier at pretty normal rates 4,5,6,7%. Then during the Carter administration inflation skyrocketed and so did interest rates. Banks were paying 12% on savings accounts and CDs, but still had these old mortgages locked in at significantly lower rates (granted the new mortgages had higher interest rates). Definitely not good if you are a banker to be paying people 12 cents on the dollar for savings while only getting 6 or 7 cents on the dollar for your older loans. It's hard to make money.

So they came up with adjustable rate mortgages. They entice you by offering a lower rate. However you have all the risk. If rates go up your mortgage adjusts, hence the name, adjustable rate mortgage. Great for the bank, bad for you.

Get a fixed 30yr or 20 yr (better) or 15 yr (best) mortgage. You can always refinance if rates lower.

I know, I know you'll sell the house before the introductory period is over. Sure about that? How do you know your house will sell? Think you'll just refinance to a convential mortage before the end of the introductory period? How do you know the rates will be lower then than they are now? Seems like a lot of risk to take to me. Personal finances aren't supposed to be extreme sports.

Also a rule of thumb is for your housepayment not to exceed much more than 25% of your take home pay. That way you can still eat and turn the lights on and you're not house poor.

Start here: http://www.daveramsey.com

 

get a fixed rate.

$200k house on $55k a year sold like a very tight budget. my rule of thumb is no more that 3 times your salary, i would spend no more than $165k on House.

also remember that from state to state, insurance , property tax, home owners dues, and mud district will be different.

having a nice house is great, having too big of a payment is miserable.

 

If you plan on staying in th house for a long period or if you don't know, get fixed. The rate will be lower on an ARM and like I said previously, it is not wise to let the loan adjust at all. If you do not make a financial manuever within the lock period, chances are the adjustment to your rate will not be favorable. If you were about to adjust going into december 2002 (30 year fixed was going at 4.25%, a 40 year low), well that's a different story. If anyone knew what the rates were going to do, they'd be rich.

Focker out

 

Your first statement was correct. The fact is nobody can predict the future. Therefore get a fixed rate and you know exactly what to budget for and you don't have to worry.

ARM's were created for banks to screw over their customers. The bank would say they transfer the risk to you. However you say it it's not good.

 

Excellent thread. Looks like we have some in-the-know folks here

Im preparing to purchase my second property. My wife and I managed to take some advantage of the California realestate boom. We only got in two years ago, and the market has REALLY slowed (in our area at least), but it still proved to be a wise investment. We just relocated out of state. Escrow closes on the house Im selling this thursday, and we will be looking for another investment inthe town we moved to. Right now Im looking at investment properties. Meaning a multiple residence home, or duplex.

My advice to the original poster of this thread:

Dont feel pressured into needing huge sum of money for a down payment. The rewards for putting a good chunk down just are not there.

 

There are certain circumstances when an ARM makes sense based on market timing and more importantly how long one plans to live in a house. I enjoyed a 3.5% APR for 2 years (3/1 ARM) before I sold my last house. I was planning to move within the 3yr lock and did. Improved my cash flow for those two years vs. 30yr fixed rate I had before @ 7.5%, or even 5.5% I could have refinanced to. My current house i plan to stay for 20+ years so I have a conventional fixed rate fo the life of the loan.