First time home buyer - how much can I realistically afford?

Asked by A-Day, Austin, TX Sat Apr 4, 2009

I am an Austin-area teacher and my husband is a nursing student who works part time. We net about $40,000 annually.

Currently, we have about $10,000 saved for a down payment and have good credit history. Niether of us has ever owned a home before.

We probably could not afford to pay more that $1,100 per month for our housing (we comfortably pay $1,000 in rent at the moment).

Between closing costs, PMI, home insurance, taxes, etc. what price should we be looking at for homes? I have been looking at homes in the $150,000 range, but worry that I am looking at more than I can afford. I've looked at mortgage calculators, but I want advice from a living being.

Also, is it wise to get pre-approved before you get a real estate agent and start looking?


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Perry Hender…, Agent, Austin, TX
Sat Apr 11, 2009
Yes get pre-qualified but then avoid Foreclosures.... Try going with an agent that knows all of the distressed sellers before they go to foreclosure. The best one I know is Mary Beth Selden
1 vote
George Kiefer, Agent, Austin, TX
Thu Apr 9, 2009
If your on a budget and want the most home for the most money; I would consider looking at the Foreclosure market as well. HUD alone sells about 2,000 government owned Foreclosures a year in our area (these are the ones that had FHA loans on them at one time). And HUD has a plan right now that allows you to buy HUD homes for only $100 down payment (if you plan on owner-occupying the home). The Banks are also liquidating thousands of Foreclosures per year in our area as well. Many of these Bank and HUD Foreclosures can be bought for 50 to 80 cents on the dollar. And many of these homes are under 5 years old. If you would like a free online list of Foreclosures in our area (with color photos); visit my website below.
1 vote
Carol Pease,…, Agent, Austin, TX
Wed Apr 8, 2009
Hi A-Day!

First find someone to talk to that makes you feel comfortable. The right realtor can hook you up with the right lender for a smooth and easy transaction. It is a good idea to get pre-qualified with a lender before you start looking so that you are looking in the price range. Judging by what you have disclosed I would recommend that you stay under $130,000. If you would like to talk one-on-one give me a call 512-721-6320. I'm an Accredited Buyer's Representative and I love helping families find their first home. The $8,000 tax credit is a real incentive to buy right now.

Carol Pease
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1 vote
Betina Forem…, Agent, Austin, TX
Tue Apr 7, 2009
I would suggest that just because you get approved for a specific amount, you do not need to use the whole amount. You may want to spend money on furniture or a vacation. Don't over extend yourself.

Getting pre- approved is a good idea, so you don't waste your time looking at homes that won't work for you. I have several lenders on my website. You will find them under area links/local service providers/mortgages. Please feel free to call any of them to get a more solid idea of what you can qualify for. Bernie Brenfeld even goes to the closing with you to answer any last minute questions. Find someone local instead of a website lender. I feel that someone local is easier to reach and will be more prompt with getting back to you. Please give me a call if I can help you further. Good luck!

1 vote
, ,
Sun Apr 5, 2009
$150K is a bit on the high side of what you need to be looking at with that payment in mind.
You should get pre-approved so you can find out exactly what $1100 will buy.
Knowing the tax rate where you are looking will help the lender greatly in providing an accurate estimate.

$130K might be pretty close to your target of $1100 per month. But, again, this is just a guess on taxes and insurance escrows.

Let me know if you need to run some numbers. Or feel free to follow up with more specific questions
1 vote
Josh Thomas, , Austin, TX
Sat Apr 4, 2009
Hey there,
For what it's worth, I was in your exact same situation about 3 years ago. I was making
about the same, had the same amount in the bank and ended up buying a home in
the $150's. From my personal experience, you are in the right ball park. But you have
an extra bonus that didn't exist when I was buying a home. The government is handing
out $8,000 tax credits for first time homebuyers. You may also qualify for this money
before you file your taxes next year. I'd bet you can use this money to your advantage.

About the credit, it used to be a 15 year tax free loan, but now there are options to
simply make it more of a "grant" that you don't have to pay back. If your credit is
good, the price range you are looking for seems reasonable.

You can and should get pre-APPROVED for a loan before you start looking at homes.
Whether you do this before or after you find a realtor is not as important as doing it
before you actually start looking. A pre-approved buyer is much more attractive to
a seller than one who is not.

Hope this helps. Let me know if you'd like to hear how my stuff turned out, since it
is so similar.

Good luck.
1 vote
Jeff Kessler, Agent, Austin, TX
Sat Apr 4, 2009
Hi A-Day,
If you are looking for a great lender then check out Ashleigh Fletcher.
She does an awesome job.
Here is a link to her info.
Web Reference:
1 vote
Tim Moncrief, , Austin, TX
Sat Apr 4, 2009
As noted, your first step is a lender. If you do not know someone you KNOW or a referral from someone you know, you may contact my lender, Gerald McChesney, who is not only a lender but a counselor as well. He can be reached at or (512) 343-4593. I would stay away from the old theory of buy as much house as you that is what help fuse the downfall of the market. i.e. Be prepared for worse case scenarios. But you really need to do something this year to take advantage of the tax credits....which means reducing your taxes by $8k (unless your taxes are less than that, then Gerald will tell you what tax credit to expect).

I know it is scary. But start off here first and then you can have a gameplan of what price range you SHOULD be in........

Best of luck!!!!!!!!!
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1 vote
Tammy Fariss,…, , Austin, TX
Sat Apr 4, 2009
You have some very good answers already, but I would like to say that it is a good idea to look at lenders locally (in the Austin, TX area) and also ask them if they have special programs for teachers. Bank of America used to have some programs designed for teachers and your credit union may also. Selecting a Realtor first will give you access to beneficial information about selecting a lender and some questions to ask the lender. Credit scores determine the interest rate you are eligible for, so only a lender after doing a credit report will be able to tell you what your payments are based on the interest rate they can give to you. YES...being preapproved is like competing with a cash buyer when you are looking for a home. You have a distinct edge over those buyers who do not want to commit to getting preapproved until they find a house they love. Some of them loose that house because they do not have a loan application and approval in place. In the price range you are looking, there is much competition for the really good homes, so being ahead of the game by being pre-approved is a must. Lenders are better equipped to tell you about all the different programs that would fit your needs best. And as first time homebuyers, you are fortunate to be able to take advantage of the $8,000 tax credit. Let us know if you need additional information. We would be glad to tell you how to compare lenders and Good Faith Estimates. Good luck and let us know if we can help.
1 vote
Anita Dallas, Agent, Austin, TX
Sat Apr 4, 2009
You and your husband are wise to investigate your options before jumping in. This is a good time for qualified buyer to be in the market for a home.

I suggest you contact at least 2 lenders. If you are a member of a credit union, you might start there. There are many lenders who can give you good information about loan programs available to you. I would be glad to send you my "short list" of lenders who have successfully helped past clients get mortgage loans that met their needs.

You can make an informal inquiry about what loan programs they have, but you will only get rather broad information until the loan officer can pull your credit report and "plug in" your assets and liabilities. You can ask for a copy of your credit report/score and allow other lenders you meet with to use it to give you more accurate information about your qualification to get a mortgage loan.

FHA financing only requires 3.5% buyer participation (most going to down payment). You may be interested in purchasing a home in an area that is eligible for USDA 100% financing. As a teacher there may be other programs available to you to help with lowering your costs. And don't forget the $8,000 Tax Credit for 1st time homebuyers! Lots of options for you.

If your credit history and debt to income ration are good, you can probably purchase a home with a sales price of around $130,000. - $135,000 and keep your monthly payment where you are comfortable. I'm figuring a property tax rate of $1.1531/$100 valuation, which may be a little low depending on where you will be buying a home.

When you are ready to speak with real estate professionals, I hope you will give me the opportunity to meet with you.

Good luck
1 vote
Cathy Elmore, Agent, Spokane, WA
Sat Apr 4, 2009
Run, do not walk to a lender, preferably more than one. Find out what you CAN afford comfortably.
THEN interview and choose a buyers agent and then begin your search for your home.
Good Luck! It is a great time to buy and there are some great programs out there....including the first time buyers credit!
Cathy Elmore
John L Scott Real Estate Ocean Shores
1 vote
Peter Simons…, , Cedar Park, TX
Sat Apr 4, 2009
Hi A-Day,

You are thinking the right way have you have the right approach. Here is what i would recommend:
1. Find a REALTOR that you are comfortable with. You can ask friends and family or you can search the web. It is important that you find a buyers REALTOR who can serve your specific needs.
2. Sign a buyers representation agreement with your preferred REALTOR. This will give you the very best service and fiduciary responsibility (he/she will always have your best interest in mind) from your REALTOR.
3. Have your REALTOR recommend a couple of lenders he/she has worked with in the past.
4. Get pre-approved (not just pre-qualified) by the lender you feel most comfortable with.
5. Set up an automated email search to your email in box with your criteria so that you can start to see what is available.
6. Once you have finalized your criteria like price, neighborhood etc. then it is time to have your REALTOR take you out and show you some homes.
Good Luck
Peter Simonsen
Keller Williams Realty
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1 vote
Paul B. Perez, , Austin, TX
Sat Apr 4, 2009
Austin-Area Teachers get some great deals! There are a few different programs that you can take advantage of that not everyone is privy to. You are deffinately looking in the right price range, so keep it up. As for your pre-qualification letter, yes, it is best to talk to a lender first! Actually, talk to a couple! There are different banks out there with different fees. Go to a credit union first, get the G.F.E. (Good Faith Estimate) and then shop it around. This will help you further define what you can afford and what you should be looking at. If the lender says you are pre-qualified for 150k, then it's my advice to look for something at about 130k, because you never know! Also, you may still be able to find a 80/10 loan, this will help you save money in PMI, which is only needed when your Loan-to-Value is above 80%.

Also keep in mind that your closing costs will be about 3% so your 10k is going to be more like 7k at the end of the day, and thats being generous. If you find an owner financing deal, which there are several, then you will usually be able to afford more house than would usually be afforded to you.

Check out my blog for first time homebuyers, it is chaulk full of helpful hints and guidlines in your first time home buying adventure! Oh yes, you will also get a nice 4k check from uncle sam next year if you buy before December 1, 2009.
1 vote
Derek Wagner, Agent, Colorado Springs, CO
Sat Apr 4, 2009
Olga - That is an EXCELLENT question.

First, you definitely need to talk with a couple living, breathing and LOCAL lenders and see exactly what you and your husband can afford. However, only let ONE lender actually pull your credit. (Then share your score with the other lenders).

Once you know exactly what you qualify for, make sure you are ALSO comfortable with the total monthly PAYMENT. Sometimes what you "qualify for" and what you are comfortable paying are 2 different things.

Finally, interview a few different Real Estate Agents. Ask friends/co-workers who have recently purchased a home if they recommend their agent, or "Google" the different areas that you are interested living in and see if there are agents who specialize in those areas. It is a good idea to get an agent who represents YOU - and not the home seller.

You are SO LUCKY to be buying a home right now - there are AWESOME and super AFFORDABLE homes out there right now. Good Luck and Have Fun!!

- Mariana Wagner
1 vote
Angela Sarge…, Agent, Austin, TX
Wed Apr 8, 2009
Hello A-Day! It is definitely a GREAT time to buy a home in the Austin Area! You have made a great decision to buy rather than rent and to investigate what avenues you should take to reach your goal of owning a home! Pre-qualification is a definite must. It cuts the worry and concern out of home searching and sets your Realtor up to do a fantastic job for you! If you choose the right Realtor, they will help you locate a trustworthy lender who will work to best advise you in your home purchase. Home buying can be very stressful. But the right Realtor coupled with the right lender can make it much more relaxed and even pleasurable! Happy Home Ownership!
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0 votes
Clint West, , Austin, TX
Mon Apr 6, 2009
The quick answer is to stay below $135,000. You payment is based on Principle Interest Taxes and Insurance(PITI). You can put $5,000 down and use the other $5,000 for closing costs. I'm estimating your property taxes at $3400 per year and fire insurance at $540/yr. Your monthly payment would be about $1026 at 5% fixed interest rate. Most first time buyers in Austin use FHA loans which also have Mortgage Insurance (MI) added to your payment. For a $130,000 loan, MI is about $60 per month which brings it to $1086. If you plan on buying outside of Austin, USDA loans are better since they don't have MI, so your payments would only be around $1026. With either, you would qualify for MCC(Mortgage Credit Certificate) which gives you a tax rebate of $2,000 per year. I don't know which area(s) you are looking in, but for your price range, I would strongly recommend a newer foreclosed home in good condition.
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