First time home buyer. How much can I borrow and comfortably pay?

Asked by John_p, 99203 Thu Feb 5, 2009

We are a family of four (me, wife, two kids in elementary school), and I'm trying to figure out the maximum home price and monthly payment we can afford comfortably & safely. My gross income is $62,000/year and the take home is about $3500/month. The job is stable and gives raise regularly. The only debt we have is a $300/month car payment. But we can only put $15,000 in down payment. My credit history should be excellent (never missed payment in 13 years). The cost of living in my area is slightly under the national average. What do you think? Do I even quality for a loan?

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Waduck, , Spokane County, WA
Thu Jul 9, 2009
I see that nobody gave you very specific answers. I will tell you the rule I go by. This may be hard, but it will also protect you from overcommitting yourself finacially. My mother worked for Consumer Credit Counselors for 17 years, and I base my budget on what she would do for her clients.

In her budget, she allocates 40% of your take home income to housing expenses. This means your mortgage, your utilities, your taxes and anything else home related. Based on your numbers, this leaves you with about $1,400 for housing. Remember, you have to have enough for untilities and home repairs after the mortgage.

So it will depend on the house, an older house will require more work and your heating & cooling may cost more. You can request average utility bills from the seller. A new house is not neccessarily the easy way either, because your landscaping and HOAs may cost more. Make sure you research each home.

I recommend you start allocating that much money every month for housing, even before you buy a house. So if your rent & untilities are only $1,200/Mo now, save the extra $200/Mo for the next 6 months or so and do not touch it until you buy the house. This will make the budgetting second nature.

Good luck and remember, you have time and don't let anyone rush you.
1 vote
BJ Mors, , Tri Cities, WA
Thu Feb 5, 2009
All these answers are good. My recommendation would be to choose a real estate professional who will then be able to direct you to one or two mortage professionals who can give you the best advice on your individual situation. I too have a favorite experienced lender and have taken two intense courses in the last few months on how to get the best out of the lender you use. I generally encourage a buyer to "shop" a lender--so they get the most information to make a good decision. Do not give a deposit up front to get a credit report or anything until you have chosen a home and a lender. Be a good consumer and investigate as many programs as you can. A great majority of the ones who got into trouble 2 or 3 years ago did not do that and let someone else make a decision for them that was not in their best interest and are now in loans that have gone up to 10 and 12% interest that they cannot afford. Buy what you can afford, not what you think you might be able to afford in the future and talk to at least two lenders concerning your situation. If you belong to a credit union that would be a good starting point. Even though we are seeing credit tightening, credit unions and local banks still have what we call "portifolio" money that they want to lend. BJ Mors, CRS (Council of Residential Professionals)
Web Reference:  http://www.Mors4Homes.com
1 vote
j, , Denver County, CO
Thu Feb 5, 2009
Hello John

As mentioned before I too believe a great loan officer is who you shoul be talking to to find out the details of your personal situation, you appear to be in great shape.

A government guaranteed loan, FHA, only requires a 3% downpayment from the buyer and there are programs out there that offer downpayment assistance. I believe there are no funds for these at this time in Spokane but this can change at any time. This is why working with a lender that has access to these First Time Homebuyer funds would be a good idea. Only a few lenders have access to these funds and have had the training. I too have had the training to work with these programs.

If you have had any prior military experience you may also be qualified for a VA loan which does not require any down payment. USDA loans apply to only certain areas and they are mainly for outlying areas rather than in Spokane. If the lender you select is aware and handles these loans as well they will have more options for you to consider so that you can select the one that works best for your circumstances rather than having to talk to several different lenders, a different one for each loan type.

Once you discover what you qualify for then you have to decide how comfortable you are with hte payment amount. I always counsel my clients to make sure they have a life as well as a mortgage payment. As your job has regular raises that may not be a major concern but still worth consideration.

As part of the loan process your credit report will be pulled and occasionally there are mistakes on there particularly if you have a common name, they may relate to another person with the same name and your lender will guide you throught the process of handling that.

Another part of a buyers costs to close on a home are the closing costs and in the current market many buyers are negotiating for these to be paid by the seller. So the first step is find that experienced lender and a great Realtor and you will discover that many things are possible. I would be happy to pass on the loan officer that my clients are thankful they worked with and he will talk to you anytime. He is also available outside of the 8-5pm time frame as I find many buyers have questions in the evenings and at the weekend.
1 vote
Ben, , New York
Thu Feb 5, 2009
Generally, a safe mortgage is about 3x yearly income.
1 vote
Stacey Lange, Agent, Kirkland, WA
Thu Feb 5, 2009
John, although I specialize here in the Greater Seattle Area - I am an educator for the Washington State Housing Finance Commission that allows First-Time Home Buyers such as yourself to qualify for amazing down payment assistance programs. This program was established over 25 years ago by the State Legislature and there are educators and lenders in the Spokane Area who can assist you. I strongly encourage you to visit the WSHFC website http://(www.wshfc.org) to find someone in your area. You will be required to attend a 5 hour home buyer education class that is FREE an very informative, then you will be certified to qualify for the funds from this non-profit organization -- it is VERY COOL!

I have other links on my website that you might find helpful, http://www.key2yourhome.net/index.cfm/page/51159/parent/4316…

Another cool loan program that is out there that you might want to inquire about that requires often times zero down is a USDA loan program. There are specific location requirements and a knowledgeable lender can help you with that -- I have two lenders that I work with who have extensive knowledge about this program and the location parameters for it, but I would guess there are MANY areas in and around Spokane that would qualify. Here is a link to my lender page: http://www.key2yourhome.net/index.cfm/page/49145/parent/4675… and the 2 specialists I can recommend are Matt Berg and Toby Wonder. Call them with no-obligation to learn more -- and if you do want help they will gladly assist!

You are in a good situation and am confident there are programs out there to assist you. I know I am far away but happy to answer any questions you might have as you move forward with this exciting process!!

Good Luck!
Web Reference:  http://www.key2yourhome.net
1 vote
BethAnn Long, Agent, Spokane, WA
Thu Feb 5, 2009
Greetings John,
It is important as a Realtor that I don't overstep my professional boundaries. This questions needs to be directed to a lender. I work with someone on a regular basis that would be glad to speak with you, no obligations. We both live on the South Hill and if you would like his contact information, feel free to call me at 362-4607.
Best wishes!
BethAnn
Web Reference:  http://www.BethAnnHomes.com
1 vote
Kary Krismer, Agent, Renton, WA
Thu Feb 5, 2009
I'd agree you need to talk to a mortgage broker/loan originator in your area. They can work through your options.

Keep in mind though you do not want to become "house poor." With the tightening of credit, that's much less of a concern than before, because you'll qualify for less loan than before. But still, you need to take your own situation into account and not necessarily get as much loan as you qualify for.

Also, keep an eye on the first time home-buyer tax credit. Consult your tax professional, but I believe it's currently $7,500 for qualifying individuals, but it's a 15 year no interest loan paid back at $500 a year on your following returns. With the economic stimulus plan there's talk of doubling the amount and making it a true credit instead of a loan.
1 vote
Marty S, , Irvine, CA
Thu Feb 5, 2009
You should not have any issue qualifying for a loan. Sit down with a Mortgage Broker and discuss your scenario.

I am a mortgage broker. If I can be of service, please let me know!

Martin Smith

Precision Funding
877-238-6324 Ext 704
513-536-7184
877-238-6324 FAX
MSmith@PrecisionFundingUSA.com
http://www.PrecisionFundingUSA.com
1 vote
BethAnn Long, Agent, Spokane, WA
Wed Jun 3, 2009
Greetings John,
This question should be directed to a lender. While I am able to figure this out for you, I think it best I do not step outside the boundaries of my job. You can e-mail me at bethann@tb.com if you would like me to recommend a good lender. It is certainly worthwhile considering buying with the 8000$ tax credit!
Best wishes
Web Reference:  http://www.BethAnnHomes.com
0 votes
Wenceslao Fe…, , 33130
Wed Jun 3, 2009
Hey, John. Still on the market? Have you found a place? If not, you may still want to consider homeownership and taking advantage of the new $8000 tax credit. All the calculators you need for preliminary research may be found here: http://www.fha.com/calculator_afford.cfm. However, this is no substitute for getting pre-approved by a lender. Hope all is well and all the best.
0 votes
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