Question for homeowners or those house hunting

So I know me and DH have some saving to do, but I want to start saving the right way to get to our goal of a down payment for a house.

I have NO clue where to even start this process of figuring out how much ultimately we would be able to afford monthly for a mortgage payment.

So how did you start this process and figure everything out? Did you go to one of those free workshops...or talk to a financial adviser...or go right to a bank?

I want to know how much we need to manage monthly to survive in a house...and how much we need to work towards for a down payment.

So any insight on this whole thing would be great ladies!

Re: Question for homeowners or those house hunting

We did a few things:

- Took our income AFTER taxes, and decided on the monthly payment number that would make us both feel comfortable so that we can have money for additional expenses (for homes, have to include taxes, if you're putting under 20% down, you will have to pay PMI, utilities, food, clothes, etc.) We also took into consideration if one of us lost our jobs, could the other one afford it for a few months on their own. This was the biggest factor.

- Then, I used something like this tool which lets you see how much a mortgage would be based on the amount you'd take a mortgage on and interest rate. It's important to know your credit scores - we both have Identity Guard which constantly monitors our scores so we're always aware. If you have a high score, your interest rate will be lower which helps with payments:

http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

- Then, the best way to check, is to go to a bank and get a range. You can give them how much you make gross income, your credit scores, etc., and they can give you a range on the spot for the most part.

In terms of a down payment, the best thing would be to have 20% down, to avoid PMI costs. If you're buying a co-op, you will need 20% down, in some co-ops higher than that. For homes, you can put down less, but be prepared to pay that PMI cost, which can be low to a few hundred a month. There's a calculation for this also.

Let me know if you have any questions at all. When we first bought our coop and now looking for a home, we've done everything on our own, so I've done tons of research and can help ya' out if you need to.

The best thing we did is about a year or so before we started looking, we put a strict amount of how mcuh we need to save a month to get a down payment. This is crucial. There's also closing costs that you'll have to pay, which can add up to a few thousand bucks.

Re: Question for homeowners or those house hunting

Ok 1. What are PMI costs?

2. So if you go to a bank with that info, then they can give you an estimated guess of what you could afford a month, and how much house you can afford?

My friends are currently purchasing a co-op...but I feel like I don't want to bother becauese it won't be enough space, to have to then just sell it shortly to move into somewhere bigger. So I'd like to skip the middle step.

I know there are a lot of first time buyer programs and incentives and stuff but I have no clue how to go about finding them. I guess google is a good place to start. We do not have a ton of debt...but I have a TON of student loans and we have a car payment for the next 50 million years...or 5 1/2. lol. I know what we currently spend now with our apartment, but I am not sure how to really figure out how much we can max a month and survive. I kind of want to talk to a financial adviser, but not even sure how there fees work or if there is a specific type of adviser we would need to speak to. I need to figure out the best way to save...and fast. lol I see some prices on houses and I am like how the heck do people my age do it...or feel like OMG we are never going to be able to afford a house!!

Re: Question for homeowners or those house hunting

Adelina's advice is great, Dh and I did basically everything she said.

Definitely first look at your joint bills, debts, and monthly expenses and leave wiggle room for the emergencies that are bound to pop up.

What I would like to add though to Adelina's advice is I would strongly recommend NOT going to the high range of waht the banks or the lenders SAY you can afford.

You can go to a bank and they will sit with you and give you a range. For example, they will say you would be okay getting a house that is up to 450,000. However, from our experience, they really try to extend you to the absolute thinnest you could go. DH and I knew what we'd like to spend on a mortgage every month and had a figure we were comfortable with. However, the lenders were kind of trying to sway us from going even up to 80,000 more! I'm glad we didn't listen to them and didn't torture ourselves with looking at houses out of our range. I have no idea how we would afford any more than we already pay without drastically cutting out basically everything like vacations, eating out, etc. things we enjoy!

The plus side to home ownership is you do get quite a bit of money back during tax season that is a huge help with the unexpected costs that always pops up.

as far as PMI goes:

What Is PMI?

PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.

Benefits of PMI

PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.


The downside of it is of course you are adding yet ANOTHER bill every month in addition to your mortgage. I forget how much it would've been for DH and I but I think it was around 300? If you can, I would really try to put %20 down. Not only to avoid PMI but it also gives you leverage with the sellers to talk them down in price since you come off as a more serious and responsible buyer who will basically cause less issues with the lenders/banks who might reject a couple who is not as financially stable.


Ahhh, there is so much info, like adelina said, first step is taking a long hard look at your bills, debts, income etc and give yourself ROOOM for emergencies and life situations.

Then I would go into a bank one saturday with DH and just sit with a lender and see how much they think you could undertake.

Then look at houses online and in areas you'd like in those price ranges. See what you like but be practical. Then you'll have an idea how much you'd have to save to get %20.

After that, save, save, save. It really helped making a goal. Good luck!

Re: Question for homeowners or those house hunting

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Posted by mybabylovesmoi

After that, save, save, save. It really helped making a goal. Good luck!

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Everyone has given really great advice - it should definitely help you in getting started on the right foot and figuring out how much you can afford and what price range you're looking in.

Specifically in reference to the 'goal number' for your down payment, I had a friend who literally created one of those thermometers and made the top $$ amount her down payment goal - and she colored it in as her and her DH achieved each mini-milestone in between. It was great to see the savings add up visually!!

Re: Question for homeowners or those house hunting

DH and I are starting this! Ugh it totally stinks bc we are still in my parents basement apt and are itching to get out! We don't want to waste rent when we can prob buy in about a year.

Re: Question for homeowners or those house hunting

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Posted by Linzee636

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Posted by mybabylovesmoi

After that, save, save, save. It really helped making a goal. Good luck!

---

Everyone has given really great advice - it should definitely help you in getting started on the right foot and figuring out how much you can afford and what price range you're looking in.

Specifically in reference to the 'goal number' for your down payment, I had a friend who literally created one of those thermometers and made the top $$ amount her down payment goal - and she colored it in as her and her DH achieved each mini-milestone in between. It was great to see the savings add up visually!!

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That thermometer idea is so cute! I am a visual person like that myself.

Yea I need a goal to save towards...so it is helpful to have a starting place so I know how much realistically we would need as down payment instead of guestimating what the number may look like.

All this advice is so wonderful!! And I figured the bank wants to try to oversell more house than you could handle which I know more or less what would push us WAY over the top. Payment is one thing...but I guess I even get lost in the monthly cost it takes to upkeep the house. I know pricing for my apt...but utilities in an apt is much different than a house. So how do you factor that into the mix?

Can the bank check your credit score info? Or does it make sense with your own reports printed out with credit rating yourself?

Re: Question for homeowners or those house hunting

DH has champagne taste on a beer budget for sure when it comes to houses...and I am the practical thinker all the way. All the houses he points out are way too expensive and I'm like you want a house like that you need to move to the boonies to afford it. If we want to stay in queens, or li, or westchester that type of house is not happening. I think going to a bank and actually laying it out on the table would help him have a more realistic view.

Is there any specific paper work that needs to be brought with you to the bank?

Re: Question for homeowners or those house hunting

You can go to the bank and get 'pre-qualified' - even though it might be a little pre-mature for you to do this right now, its a pretty painless process and will answer some questions for you now. You give them your info (they might want some records such as tax returns and paystubs), and they run a credit report and based on the info you give them and the credit report, they tell you how much of a mortgage you will qualify for (taking into consideration your outstanding debt, income, etc.)