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From reading these forums people have great real-world practical advice, and a reality check is exactly what I am seeking. I am meeting with a mortgage specialist next week at my preferred bank to hopefully prequalify, but I may be seeing some properties before then so I'd like to get a sense of what I can realistically afford before then.
I am 28 years old, about to graduate with my PhD. I have $35,000 saved and another $10,000 I could take from my IRA without penalty for homebuying purposes (and ~6000 in stocks... probably more like 4000 or less at this point I haven't checked!), and am saving at a rate of ~1000/month. My credit score (FICO not FAKO) is 796. I take home ~3200/month after taxes. On top of this, this year I have earned an additional $12k net for teaching. Reporting a gross income is a bit weird for me since I receive a stipend (2000) and get paid hourly (1200), and my stipend isn't taxed so my actual gross is less than a comparable gross would be for my net income if "regular" taxes were taken out - does that make sense? Does it make a difference?
I already have a job offer in writing for when I graduate in June. In my postdoc I will make $56,000 in the first year and near $60,000 in my second year. This is guaranteed by my future employer (who is also partly my current employer of 4 years so I am not all that worried about something sketch that will fall through) for two years and then in my next job I will likely earn 80-100k. I know that I can't get a loan based on my future income, but since my "employment" will change in 6 months I want to know how banks handle that.
I have no credit card debt and I own my car outright, but I have 92k in student loan debt. Will this horribly impact what I qualify for? I have applied for a grant to pay this off in its entirety (40% accept rate) and I find out if I will get this by September of this year. Would it impact me greatly to wait until I find out if I will have this debt paid off for me? Regardless I won't have to start payment on this for 3+ years.
My other question is, when I apply for a loan do they take location into account? I am buying in the Boston area so the money realistically needed for a home is not like what it is in someplace like Texas where my former roommate just practically got a mansion for under 200k! I would like to put ~25k down and take the PMI but try to pay up to 22% in the first year if I can. This will hopefully give me a buffer rather than trying to pour all my money into a downpayment and being screwed later on.
I AM SO SORRY THIS IS SO LONG! I will boil this down:
1. based on my information, am I candidate for a loan? Ideally I'd find something below 250k with 10% down (~225k total house, 200k mortgage - in this market I am looking for a first home not a dream home). This would put my mortgage payment at ~1200-1400, which is less than what I pay in rent now. This is more than I qualify for using the simple online mortgage calculators, which has been ~180k. Do I have any mitigating circumstances that would give me that extra bump?
2. is my temporary student status a major negative, even when I make good money now and will make good money when I graduate?
3. i am in a long-term relationship (e.g. likely marriage within a year or 2 - and no i don't want to wait until i'm married to buy, much to my mother's dismay!!!) I want to buy this on my own (but would consider having my parents co-sign as a last resort). Likely my boyfriend would move in with me and contribute slightly less than half of the mortgage in rent. Would having him sign a tenant agreement increase the amount of mortgage I would qualify for?
4. BOTTOM LINE:do I HAVE to wait on this? Is this all worked out great in my mind but not realistic?
Thank you everyone in advance! I AM SO LOST WITH THIS! ANY help (even partial answers!!!!) would be greatly appreciated!
When I bought my first house in Indianapolis,IN in 9-2001 I qualified for 200,000.00 but bought at 140,000.00. Income was 50,000.00 as a truck driver and had 5000.00 cash only. Credit score was 660 and had fair amount of debt. Payments were 1094.00/mo including taxes. Interest was 6.25%.
I think you will have no problems if I was able to get my house and your situation is Platinum compared to what mine was. Good Luck!
Location: central, between Pepe's Tacos and Roberto's
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Quote:
Originally Posted by iders
Hi everyone,
From reading these forums people have great real-world practical advice, and a reality check is exactly what I am seeking. I am meeting with a mortgage specialist next week at my preferred bank to hopefully prequalify, but I may be seeing some properties before then so I'd like to get a sense of what I can realistically afford before then.
I am 28 years old, about to graduate with my PhD. I have $35,000 saved and another $10,000 I could take from my IRA without penalty for homebuying purposes (and ~6000 in stocks... probably more like 4000 or less at this point I haven't checked!), and am saving at a rate of ~1000/month. My credit score (FICO not FAKO) is 796. I take home ~3200/month after taxes. On top of this, this year I have earned an additional $12k net for teaching. Reporting a gross income is a bit weird for me since I receive a stipend (2000) and get paid hourly (1200), and my stipend isn't taxed so my actual gross is less than a comparable gross would be for my net income if "regular" taxes were taken out - does that make sense? Does it make a difference?
I already have a job offer in writing for when I graduate in June. In my postdoc I will make $56,000 in the first year and near $60,000 in my second year. This is guaranteed by my future employer (who is also partly my current employer of 4 years so I am not all that worried about something sketch that will fall through) for two years and then in my next job I will likely earn 80-100k. I know that I can't get a loan based on my future income, but since my "employment" will change in 6 months I want to know how banks handle that.
I have no credit card debt and I own my car outright, but I have 92k in student loan debt. Will this horribly impact what I qualify for? I have applied for a grant to pay this off in its entirety (40% accept rate) and I find out if I will get this by September of this year. Would it impact me greatly to wait until I find out if I will have this debt paid off for me? Regardless I won't have to start payment on this for 3+ years.
My other question is, when I apply for a loan do they take location into account? I am buying in the Boston area so the money realistically needed for a home is not like what it is in someplace like Texas where my former roommate just practically got a mansion for under 200k! I would like to put ~25k down and take the PMI but try to pay up to 22% in the first year if I can. This will hopefully give me a buffer rather than trying to pour all my money into a downpayment and being screwed later on.
I AM SO SORRY THIS IS SO LONG! I will boil this down:
1. based on my information, am I candidate for a loan? Ideally I'd find something below 250k with 10% down (~225k total house, 200k mortgage - in this market I am looking for a first home not a dream home). This would put my mortgage payment at ~1200-1400, which is less than what I pay in rent now. This is more than I qualify for using the simple online mortgage calculators, which has been ~180k. Do I have any mitigating circumstances that would give me that extra bump?
2. is my temporary student status a major negative, even when I make good money now and will make good money when I graduate?
3. i am in a long-term relationship (e.g. likely marriage within a year or 2 - and no i don't want to wait until i'm married to buy, much to my mother's dismay!!!) I want to buy this on my own (but would consider having my parents co-sign as a last resort). Likely my boyfriend would move in with me and contribute slightly less than half of the mortgage in rent. Would having him sign a tenant agreement increase the amount of mortgage I would qualify for?
4. BOTTOM LINE:do I HAVE to wait on this? Is this all worked out great in my mind but not realistic?
Thank you everyone in advance! I AM SO LOST WITH THIS! ANY help (even partial answers!!!!) would be greatly appreciated!
Based on the $3200 a month you probably couldn't realistically qualify for more than $1000 a month (about $125K-$140K or so depending on rates, your local tax rates, mortgage insurance factor, etc.), and I would not push that. If you decided to buy right now than you could not use anticipated income from the job in June nor the amount that your BF would be paying. The only consideration income wise would be that $3200 that you are presently making.
If you decided to wait until you took the new job (I believe some loan programs will take the offer letter and use that income as long as you start employment within 30 days of closing but I may be wrong), based on your annual salary of $56K you could possibly qualify for more like $1400 or so a month, which should be around $180,000 maybe up to $200,000, again depending on tax rates, interest rates, mortgage insurance, etc. Again, I would not push that too much. That is a solid 31% housing expense ratio and following that guideline will put you in a much better financial position for future plans.
I don't think that your current student status should matter, particularly if you wait until you start the new job and you can provide transcripts to prove that you studied in the same field as you are going to be working in.
I usually say, if you pay $1000 for rent and you want a mortgage that will cost you $2000, save up the difference for 6 months and see how it feels to pay out that extra money (this way you can tell if you can really do it, and if you do you have a nice little bundle of cash in the bank) but you already pay more than what your mortgage would be so that is out the window.
I am not a mortgage expert, but I can share with you what my DH and I dealt with in our first home buying endeavor.
1. based on my information, am I candidate for a loan? Ideally I'd find something below 250k with 10% down (~225k total house, 200k mortgage - in this market I am looking for a first home not a dream home). This would put my mortgage payment at ~1200-1400, which is less than what I pay in rent now. This is more than I qualify for using the simple online mortgage calculators, which has been ~180k. Do I have any mitigating circumstances that would give me that extra bump?
If you can handle your rent, you can handle the mortgage, as long as you expect to pay a certain amount extra in unanticipated costs. The extras are what have cost DH and I quite a bit of money, really. But they will not be the same for everyone, and a lot of them could potentially be non necessary to some (we bought them out of need/desire) For example, need yard tools, there's $150. Need to plant grass? There goes another hundred dollars. How about a lawn mower, snow blower, washing machine, dryer. Need to paint the house? Replace Carpeting, etc. Not all immediately necessary but something to consider.
Are you going to a bank or credit union?
2. is my temporary student status a major negative, even when I make good money now and will make good money when I graduate?
I wouldn't think so, as long as you have a salary.
3. i am in a long-term relationship (e.g. likely marriage within a year or 2 - and no i don't want to wait until i'm married to buy, much to my mother's dismay!!!) I want to buy this on my own (but would consider having my parents co-sign as a last resort). Likely my boyfriend would move in with me and contribute slightly less than half of the mortgage in rent. Would having him sign a tenant agreement increase the amount of mortgage I would qualify for?
I think this might help. When my brother bought his second house, he had to have proof that he'd have the two apartments in the first ones rented before they'd give him the loan for another. So for him, it helped. Don't know about other situations.
4. BOTTOM LINE:do I HAVE to wait on this? Is this all worked out great in my mind but not realistic?
If I were you I'd definitely go for it. Really, rates are low and so are home prices. May they fall farther, I have heard yes, but I wouldn't want to move into an apartment just to buy a house 6 months later.
Regarding the school loan debt, unfortunately they do take it into consideration, at least they did for us. My dh is a physician and has 200 k in school loans. At first we were preapproved for 280K because they were not counting the school loans. Then 6 months later they were not going to give us the loans because they had to count the school loans and the debt to income ratio was too high. Now, this was at a credit union and some other lender might have done it just with a higher rate. But my DH had a fit at the credit union and basically said he didn't understand how a doctor couldn't buy a freaking house, esp. because like you he would be seeing a dramatic increase in income in the next 1.5 years. Well because it was a credit union, the VP got involved, was really nice, worked with us. He divided our loan to an 80/20 loan, so we didn't need to pay the PMI (saving us about 300 a month or something , I don't really remember the figure). The 80 part is a 30yr fixed, and the 20 part (well 18%, because we put 2% down) is a 10yr fixed, at a bit of a higher rate. I am now looking into refinancing the 30 year mortgage into a 15 yr fixed because it is a much better rate, savings on interest, paid off by the time kid 2 goes to college (the 10 year part will be paid off by the time kid 1 goes to college), so it will work out well and save us about 180K in interest (shocking I know).
So anyway, they take the debt into consideration, but if you deal with a credit union (does your university have one?) and they look at individual cases, you will have an easier time. They will be very happy at your savings, we only had 10K in savings and obviously a lot of that was going toward the 2%, closing costs, attorney, etc.....
With your boyfriend contributing, you can really make extra progress on your loan. (We pay a hefty extra amount, and that is why we are considering the re-fi, because the payment is higher, but we've already been paying the higher amount so it won't be any difference for us---i did check the 15 vs 30 yr rates for you and the payment is quite a bit higher, 1580 vs 1135 on a 200K loan) So w/your SO contributing, you can pay extra and then maybe re-fi for a shorter term and lower rate.
Anyway, this is doable, you already pay more for your mortgage, you have steady income, your score is high, you've got money in the bank, you have a lot going for you!!!!
Good luck on your loan/house hunting and let us know how it turns out!
Like I said, I am not an expert so if someone with more knowledge on the subject comes along I defer to them.
Based on the $3200 a month you probably couldn't realistically qualify for more than $1000 a month (about $125K-$140K or so depending on rates, your local tax rates, mortgage insurance factor, etc.), and I would not push that. If you decided to buy right now than you could not use anticipated income from the job in June nor the amount that your BF would be paying. The only consideration income wise would be that $3200 that you are presently making.
If you decided to wait until you took the new job (I believe some loan programs will take the offer letter and use that income as long as you start employment within 30 days of closing but I may be wrong), based on your annual salary of $56K you could possibly qualify for more like $1400 or so a month, which should be around $180,000 maybe up to $200,000, again depending on tax rates, interest rates, mortgage insurance, etc. Again, I would not push that too much. That is a solid 31% housing expense ratio and following that guideline will put you in a much better financial position for future plans.
I don't think that your current student status should matter, particularly if you wait until you start the new job and you can provide transcripts to prove that you studied in the same field as you are going to be working in.
Thanks so much for your information!! From what you are saying the primary influence on my loan qualification is my income and everything else is more secondary. I just did a bit more digging and including the teaching money, according to my employers my total gross income for 2008 was 51,360, which would still put me below where I'd need to be. I might try to wait now and save up more downpayment so that the upfront payment can go towards adding another 25,000 to my future home price. By then I'd also have the new job. I'll still meet with the mortgage specialist to see what adding my parents will do, but most likely I'll just wait and just continue to go to open houses!
I was going to go through my bank where I also do my investing (through a separate division), it's not a small bank but it's not bank of america either. My school does have a credit union, I didn't even think to check that, but that's a great idea I will go there today!
Quote:
Originally Posted by mommytotwo
If I were you I'd definitely go for it. Really, rates are low and so are home prices. May they fall farther, I have heard yes, but I wouldn't want to move into an apartment just to buy a house 6 months later.
Regarding the school loan debt, unfortunately they do take it into consideration, at least they did for us. My dh is a physician and has 200 k in school loans. At first we were preapproved for 280K because they were not counting the school loans. Then 6 months later they were not going to give us the loans because they had to count the school loans and the debt to income ratio was too high. Now, this was at a credit union and some other lender might have done it just with a higher rate. But my DH had a fit at the credit union and basically said he didn't understand how a doctor couldn't buy a freaking house, esp. because like you he would be seeing a dramatic increase in income in the next 1.5 years. Well because it was a credit union, the VP got involved, was really nice, worked with us. He divided our loan to an 80/20 loan, so we didn't need to pay the PMI (saving us about 300 a month or something , I don't really remember the figure). The 80 part is a 30yr fixed, and the 20 part (well 18%, because we put 2% down) is a 10yr fixed, at a bit of a higher rate. I am now looking into refinancing the 30 year mortgage into a 15 yr fixed because it is a much better rate, savings on interest, paid off by the time kid 2 goes to college (the 10 year part will be paid off by the time kid 1 goes to college), so it will work out well and save us about 180K in interest (shocking I know).
So anyway, they take the debt into consideration, but if you deal with a credit union (does your university have one?) and they look at individual cases, you will have an easier time. They will be very happy at your savings, we only had 10K in savings and obviously a lot of that was going toward the 2%, closing costs, attorney, etc.....
With your boyfriend contributing, you can really make extra progress on your loan. (We pay a hefty extra amount, and that is why we are considering the re-fi, because the payment is higher, but we've already been paying the higher amount so it won't be any difference for us---i did check the 15 vs 30 yr rates for you and the payment is quite a bit higher, 1580 vs 1135 on a 200K loan) So w/your SO contributing, you can pay extra and then maybe re-fi for a shorter term and lower rate.
Anyway, this is doable, you already pay more for your mortgage, you have steady income, your score is high, you've got money in the bank, you have a lot going for you!!!!
Good luck on your loan/house hunting and let us know how it turns out!
Like I said, I am not an expert so if someone with more knowledge on the subject comes along I defer to them.
Thanks for your advice and encouragement! The numbers are a bit sobering and it seems from another post that I probably don't even qualify for the amount I'm looking for (but I'm soooo close). Probably the best course of action would be to keep saving and looking and if the dream situation came along (not likely in Boston for under 300k and certainly not for my price range!) then try to get my parents to co-sign.
I like how you are paying extra on your mortgage. My idea was to do something similar and try to get the mortgage as low as possible and just pay extra on it, but it seems like "as low as possible" will still be just beyond my reach at this point. Congrats on your home purchase and thanks for sharing your experience. Good luck with your re-fi it seems like it definitely seems like the right thing to do!!!
P.S. this rent vs. mortgage thing is what's killing me. in this town the rent is so high that if you can afford the up-front costs and then just pay the mortgage/taxes it usually ends up breaking even or being less to own. They say Boston is so inflated and is still overpriced based on the rent vs. own calculators, I don't see it!
The banks are going to count the student debt against you. $92,000 is quite a bit of debt. I would wait to see how much of the debt will be forgiven before you proceed. I would try to limit my monthly housing payment to no more than $1500(all bills related to the house). Do not count on the income from your partner. If you are going to do it alone, then you need to make sure that you can afford to pay the bills on your own.
I do not want to discourage you but you have a lot going on. If you plan to get married in two years, why are buying a house on your own? What are you going to do with the house when you get married? How long do you plan to stay in the home? It is not beneficial if you do not stay in the home for at least 7 to 10 years. It is not cheap to sell. You are only guaranteed income for two years. What happens after that?
If I were in your situation, I would continue to rent during the next two years and save more money. I would look for a permanent job that yields $80,000. Get married if this person is the right person for you and settle down. If you do not get married, you will be in a better position to buy a nice property that you can stay in for awhile. This market is different. You will lose a lot of money if you buy and sell in two years. Good luck!
You will lose a lot of money if you buy and sell in two years.
That's exactly what I was thinking...
You can't count on people being able to afford to buy your house in the near future, and you can't count on the property holding its value. If you were buying with cash to save on rent the numbers would work, but if you're paying interest, it will cost you quite a bit more than rent if you don't stay there at least five years. Another consideration is that if you decide to move, it may take you a lot of time to sell this place.
In this economy, and especially for a first house, the best thing you can do is to find the cheapest thing that you can stand to live in for five years or so. Cheap houses are easier to resell, and you get more bang for your buck when you fix them up a little. If you keep the cost down to twice your income, you can pay it off in those five years, and then sell it and buy something twice as expensive as the first one. When you get done, you get a 4X income house instead of the traditional 3X income, and you can pay it off in 10 years instead of 30.
The general rule of thumb is you can afford a payment that is 1/4 or your net weekly income times 4.33 divided by 4 not including taxes, closing costs or down payment. If you pay less than 20% down, the real esate taxes + principle + interst + house insurance = total payment until the 20% is reached. After that the house insurance and taxes will not be included unless you want to continue.
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