Question Details

Mr. U, Home Buyer in 79707

I'm 24, buying my FIRST house. I need HELP

Asked by Mr. U, 79707 Mon Mar 31, 2008

I currently make around 85,000. I am in the market for something nice, but obviously in my price range. I am hoping for some advice on what range would be suitable for my income. Any and all advice would be greatly appreciated!

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11
Mr U,
It would be best without know credit info that you just get pre-approval or pre-qualified by a lender. This way you know for sure what you can afford and, when you submit your offer to buy they will want a pre-approval letter anyway. This will be the first big step.

Larry Story
Coldwell Banker Triad
2 votes Thank Flag Link Mon Mar 31, 2008
Mr. U:
Buying a home is both a financial investment and an emotional investment. In order to make a good buy, the property should satisfy both needs. However, if you must err, it is far better to come down on the side of the financial. If this is your first purchase, you should remember that most people buy as if they will spend their lives in a property; but the truth is that you will own it 3 to 5 years if you follow the average. If you look at what is going on in the housing market today--you see the effects of bad decisions made by many. In your search you will of course look for the property that offers you the most for the least amount of money. Keep in mind what you must spend on repairs, upgrades and renovations in addition to the initial price you pay. If you are quoted "comps"; be sure the properties are close to yours in size, age and condition as well as location.
Happy hunting!----Marian
1 vote Thank Flag Link Wed Apr 2, 2008
I stand corrected, please forgive me. I'm afraid I was in a bit of a hurry when calculating sales price before, and took the taxes and insurance portion of the payment out before I worked the 6% interest rate formula backwards to get to loan amount. I will be more careful before I post a comment again.

Yes, based on your income only, you should be able to afford a loan of about $330K, if it is a 30 yr loan at 6% fixed interest (today's rate in our area). That would make your total house payment (PITI) approx. $1984 per month, which is 28% of your before tax income. Add your downpayment amount to this loan amount, and you have the sales price for a house you can afford.
BUT, as I said in my previous response, your OTHER long term monthly payments (anything with more than 10 monthly paments left on it) will come into play as well. If the total of all those other monthly payments is $570 month or less, you are good to go at this loan amount. There can be some flexibilty on both house payment and total monthly payments being somewhat higher, but your long term monthly payments can definitley affect the loan amount you qualify for, and that will affect the price of the home you can afford. I see it happen all the time!
Making $85K/yr., at age 24, I am guessing you have a pretty nice care (I would, if I were you). If you do, there is a good chance you have car payments of close to $500 (or more) per month. If that is the case, that doesn't leave you much wiggle room, with only $70 (or less) per month for all your other longer term monthly payments. If you have credit card debt, student loans, etc. $70 isn't much to cover them, so you really need to talk to a lender, and have your individual circumstances evaluated, to get anywhere close to an accurate idea of a house you can afford. Do it soon, and take advantage of the good prices that are out there now. I hope you find a great home, at a great price, and become a home owner in the very near future - you won't regret it.

To Hi - have you talked to a Realtor lately in your area of Virginia to find out the buying trends in the last 2 months? If you haven't, you should. Real estate is always localized ,and forming opinions on the market from generic information about the real estate market overall, can put you in a position of missing out on the best timing to get the best price. If your market is like ours, Buyer activity is way up!! This is due to really good home prices now, interest rates that continue to stay low, and a combination of other factors. Many houses are being bought NOW! This activity will begin to decrease inventory supply, especially in the most popular price ranges in your area, and since supply effects demand, and demand effects price - that could mean price increases in the near future. You need to talk to someone who is a real estate professional to see what is really going on with prices, and find out if you are as on top of the housing market as you think you are.
1 vote Thank Flag Link Wed Apr 2, 2008
Based on your income, an estimated $400 in monthly obligations, a 6.25% estimated rate and a 15K down payment, your looking at a Conservative Estimate: $334,839.93 or an Aggressive Estimate: $443,804.42. You can also use a calculator that will say "How much home can I afford at a monthly payment of $X?".
1 vote Thank Flag Link Tue Apr 1, 2008
yes, when interest rate go up
that will force prices down further
already happening
thanks for the insight jeffrey
and i also agree with your statement
"Wait until the market changes "

anyways

good luck
1 vote Thank Flag Link Mon Mar 31, 2008
I would not listen to intently to Hi. They are the type that will wait forever for something that may never come to fruition. If you are ready, the time is right. Prices are great and interest rates are at all time lows.
Sure prices may or may not come down however, I cannot believe interest rates will and in the long term it is the interest on your mortgage that will sap you monthly costs and not the price of the home.
Listen to the already answered (except say bye to Hi) and find what you can afford.
If you are worried about depreciation in the short term, then do not sell in the short term.
Wait until the market changes (and it will, because it always does) and then sell.
1 vote Thank Flag Link Mon Mar 31, 2008
I agree, your 1st step should be contacting a mortgage lender, because there is more to qualifying to buy a home than just your income. A lender will run your credit report - your credit score and the long term indebtedness (monthly payments such as car pymts., etc.) that shows up will determine the LOAN AMOUNT for which you are qualified. The SALES PRICE of the specific home, LESS DOWN PAYMENT MONEY YOU HAVE to invest in the home, is the amount of loan you will need to buy that home. A very basic rule of thumb for a conventional loan is this - your total monthly new house payment (principal, interest, taxes & insur. - known as PITI) should be around 28% of your monthly gross income (before taxes). Your new monthly house payment PLUS any existing long-term monthly payments should be around 36% of your gross monthly income. You really need a lender to give you accurate info, as there are a ton of variables,. But, if in theory you have good credit and are not up to your eyeballs in monthly debt, based on your income, you would qualfiy for a conventional 30 yr. loan, at a 6% fixed interest rate, in the amount of approx. $265,000. This amount would apply ONLY IF you are in an area where your taxes and insurance portion of your total montly mortage payment won't exceed approx. $400 or so a month. If they are higher, you will qualify for a lower loan amount, if they are lower you will qualify for a higher loan amont. Add the money you have for a downpayment to the $265K, and you have a general idea of the price range of houses you should be considering. Having said all this - these numbers could be way off due to so many factors, but I hope it gives you a ballpark answer to your question. Please call a lender ASAP to find out if these figures will apply to your situation.
1 vote Thank Flag Link Mon Mar 31, 2008
Mr. U, I also agree with Larry. It is in your best interest to get in contact with a local mortgage professional to get at minimum pre-qualified. You don't want to be looking outside of your price range and fall in love with something that you can't afford. Also keep this in mind... what are you comfortable paying a month? A lender could tell you can afford a $500,000 house, but if you are not comfortable with the payment that number really does not matter.

As agents that also helps us because agents don't want to push you into something more than you can't afford either. Or at least I would not do that to you. I want you to be happy with your selection and feel comfortable with your house payment:) It also helps us to know what to look for in houses as well. For example if you are getting an FHA loan, then we don't want to get your hopes up in a house that will not meet the guidelines of the loan. So this is really why you should talk to some mortgage professionals first.

I also think it is in your best interest to find a yourself a buyers agent. Someone who will be thinking of your best interest in the transaction. They will guide you along the way. Their commission will be paid through the seller as it is part of the listing contract for a seller when they list the property.

It is not a bad idea to read over an "Agency Disclosure". This will descibe all of the ways an agent can work for you and you can decide what is best for you. If you need a copy of this please feel free to go through my website at http://www.GoMelinda.com and request a copy of it.

I hope this information helps! Best Wishes! Buying a home is such an exciting time!!!!
Web Reference: http://www.gomelinda.com/
1 vote Thank Flag Link Mon Mar 31, 2008
if you do this right
you won't need to qualify for a loan
wait to buy
save your money
pay cash
live debt free
its the way to be
its up to you
wonder why the realtors keep saying its a great time to buy

anyways


good luck
0 votes Thank Flag Link Wed Apr 2, 2008
U
if you're smart enough to make 85K per years
you're smart enough to know that it is not the right time to buy
wait for 2001 prices, then maybe safe to buy
even then you may have paid a little too much

anyways

good luck
0 votes Thank Flag Link Mon Mar 31, 2008
wait til you're married


anyways

good luck
0 votes Thank Flag Link Mon Mar 31, 2008
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