gooddecisions
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Post by gooddecisions on Feb 27, 2013 9:39:40 GMT -5
Am I crazy for thinking $2000/month doesn't sound so bad for a dream home? My current mortgage is only $690/month, so it's a big change. But, given mortgage rates are so low, nice homes are more affordable than ever. The same 450,000 loan was about $3000/month at 7% and now it's only about $2000/month at 3.5%. My only fear is that when mortgage rates go back up nobody will be able to afford the nice homes in the event we need to sell.
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Rocky Mtn Saver
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Post by Rocky Mtn Saver on Feb 27, 2013 9:42:17 GMT -5
It depends on your income & expenses.
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Deleted
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Post by Deleted on Feb 27, 2013 9:44:16 GMT -5
It depends on your income & expenses. Basically that! Can you afford it? And how long you plan on staying there? And don't worry about future interest rate and affordability, even at 7% people were still buying 500k-1 Million dollars home.
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Deleted
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Post by Deleted on Feb 27, 2013 9:44:48 GMT -5
It depends on your income & expenses.
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Deleted
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Post by Deleted on Feb 27, 2013 9:46:38 GMT -5
Am I crazy for thinking $2000/month doesn't sound so bad for a dream home?
That depends. For me, if it was 2K a month, it would have to stay my dream home.
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 9:47:43 GMT -5
Our income is high and our total expenses have been around $2000 a month for years until daycare was added last year. Now, it's 2800 total, including housing and daycare. We've been living like we are poor for a long time.
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thyme4change
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Post by thyme4change on Feb 27, 2013 9:51:35 GMT -5
I said to someone at work the other day "Our mortgage is so low that I can afford to..." and he said, "Yes, some people have crazy mortgages, like $1500." Ours is around $1500 - oops. So, I guess it is all relative. He has a SAHW and probably makes a little more than I do (now that I'm part time.)
So, $2000 doesn't sound crazy to me, but would surely make some people vomit blood.
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ontrack
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Post by ontrack on Feb 27, 2013 9:53:12 GMT -5
We're looking at about a $2000/month mortgage if we buy a house. And that would just be for a 3/2.5 townhouse with a 1 car garage. But, I live in an insanely HCOLA and we currently pay $1900 to rent a 850 sf apartment. It's all about what you can afford.
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Deleted
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Post by Deleted on Feb 27, 2013 9:54:54 GMT -5
Ours is $1600 with taxes and insurance, but it kills us.
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Kung Fu Panda
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Post by Kung Fu Panda on Feb 27, 2013 10:02:29 GMT -5
I would advise to create a % based allocation breakdown of your income and expenses.
Our Escrow (include M+I+T) is @ 15% of our net after taxes and 401k. Dont forget taxes and insurance on that size of Mortgage..
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 10:03:08 GMT -5
If we can negotiate down to about 450K for the house and put 20% down that brings the mortgage down to $360,000 and if we get the 3.5% rate, that means the mortgage is actually "only" about $1600/month. I am ready to put this offer in and see what happens. We put a pre-approval in on the 15th and I was really hoping to have that letter by now. The good news is the seller dropped the price to $499 yesterday. We were ready to make a 475K offer but were waiting on the pre-approval.
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 10:09:39 GMT -5
It's hard to do a true % since we don't know the final price, but say it's 1600 plus another 500/month for insurance and real estate taxes- puts it at 2100, so total housing to income would be around 11%.
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Deleted
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Post by Deleted on Feb 27, 2013 10:09:54 GMT -5
If we can negotiate down to about 450K for the house and put 20% down that brings the mortgage down to $360,000 and if we get the 3.5% rate, that means the mortgage is actually "only" about $1600/month. I am ready to put this offer in and see what happens. We put a pre-approval in on the 15th and I was really hoping to have that letter by now. The good news is the seller dropped the price to $499 yesterday. We were ready to make a 475K offer but were waiting on the pre-approval. If they just dropped the price, I wouldn't expect them to drop it another $49k for an offer. what does your real estate agent say the market value is? and I would definately not make an office without being pre-approved.
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steph08
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Post by steph08 on Feb 27, 2013 10:12:23 GMT -5
To me, a $2k mortgage is crazy. But then, we do not have high incomes, live in a LCOLA, and my PITI is $450. My max would be about $1200 PITI unless our incomes jumped substantially.
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giramomma
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Post by giramomma on Feb 27, 2013 10:12:47 GMT -5
Do you have property taxes? How much would those be? In my neck of the woods, you'd be looking at an additional 1K/month in property taxes. I personally do think that 2K is high for a mortgage alone. But we're poor folk. We also have different spending priorities. If we were high income, we'd probably plan on taking our kids out of the country more than twice in their lifetimes. (Hopefully Canada next year, and in 4 years, a month bumming around Europe.) I'm guessing by your daycare that you aren't in a higher COLA area. (Our daycare would be 1500 for an infant.)
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 10:13:25 GMT -5
It's a short sale, so it's up to the bank not the seller. The seller will not be expected to pay the difference in what they owe, so I can't imagine them caring. The seller's agent agreed that 10% less than the sales price is a reasonable offer that the bank should consider, but we'll see. There hasn't been any other interest in the past two weeks. I don't want to get my hopes up, but I may have...
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 10:15:15 GMT -5
She's toddler now, so daycare is now $800/month and property taxes are 5000/year on that house. My area is MCOL- definitely not high.
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bean29
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Post by bean29 on Feb 27, 2013 10:21:23 GMT -5
Personally I would be terrified of a $450,000 mortgage. It sounds like you are not considering taxes and insurance. Taxes on a $450,000 house have to be pretty steep. My house is assessed at $284,400 and my taxes are $6,417. My Mortgage is $210,000 (15 year) $1,431 so for my Principal, Interest and Taxes I am at nearly $2,000/month. My assessment is a little higher that my appraised value. We just refi'd in November. City wants to walk through again though because we are nearly done with the basement remodel. It appears the appraiser added nothing to the value for the basement b/c we did not need it to refi and meet the ratios the bank wanted and he did not have to worry about how much of it was complete/try to place a value on it in an incomplete stage. Assessor is chompling at the bit to bring in more tax $$ so they want to see it themselves and determine their own value.
We are very close to being done...we need to set toilet/sink in bathroom and install shower door and hang doors. We need to hang doors on cabinets, install dishwasher, countertops and sink in kitchen. Add counter top and wet bar in bar area and lay about 1/2 the tile floor in great room area and we need to lay carpet in guest bedroom. There is a "Office" that is complete. Office and bedroom are "legal" bedrooms as there is a partial exposure with windows and we also have a walk out basement. There is a total of 8 doors to be hung down there. It will probably take DH about 2 more months as he only has 1/2 day on Sat and Full day on Sundays to work on it. I don't know how much city will hit me for but it will be at least $40,000 added to my assessment.
New construction homes often have taxes listed for just the land...make sure you know how much the tax bill will be when the city assesses the land + the improvements.
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skubikky
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Post by skubikky on Feb 27, 2013 10:26:31 GMT -5
With a $230k/yr income, $2k/month at 11 percent of income is fine. As you said, one of the risks is your ability to sell this place if you need to. How well are other homes like this selling right now?
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Kung Fu Panda
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Post by Kung Fu Panda on Feb 27, 2013 10:31:04 GMT -5
$500 month for Insur and Taxes seems very low. Thats lower than what I have for 240k. I would assume your Taxes and Insur should be closer to 14k / year. or about 1200/month.
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tootsieroll
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Post by tootsieroll on Feb 27, 2013 10:37:16 GMT -5
I also wonder about the property taxes - what appraisal amount is the $5000/yr based on?
I don't know where you are located but a lot of homeowners insurance policies are being rewritten and increased in light of the crazy weather events lately. Do you have an estimate of the policy costs?
Personally, we pay about $1500 a month for our mortgage, but are in a middle - high COL area. We make do on dh's income as I stay home with our kids and are helped by very low transportation costs.
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 10:38:28 GMT -5
The rates I quoted were accurate. I have a killer deal on homeowners insurance and real estate taxes are low where I live- comparatively speaking. This is not a new home, so there is a historical list of real estate taxes for the property.
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 10:40:07 GMT -5
The inventory is pretty low on homes in this range, so they are selling fast- probably because the rates are so low. We saw some beautiful homes for 750K, but we're not willing to go that high.
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Kung Fu Panda
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Post by Kung Fu Panda on Feb 27, 2013 10:43:29 GMT -5
Ok, last question Why the bank short sale? Did the surrounding market valuation lower, or was the previous home owner in over their head with a $500k note?
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Deleted
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Post by Deleted on Feb 27, 2013 10:47:09 GMT -5
I don't know? It makes me a little nauseous, but my sister just bought a400k fixer upper... Different markets .... If you can do it and want to do it, do it... You don't sound like the impulsive buying type. I'm sure you've worked out extra expenses like furnishings, utilities, etc...
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gooddecisions
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Post by gooddecisions on Feb 27, 2013 10:48:18 GMT -5
The previous homeowner was in over their head. My guess is they took out a new mortgage when values went up and are SOL now that the values are down. Now one is unemployed, they need to move and don't have the difference.
We looked at some other homes in the same neighborhood. Since the sale hasn't gone through, there hasn't been an impact on the nearby houses, yet. The houses were all individually designed and built, so no two houses are alike making comps a little different than neighborhoods with identical houses.
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Kung Fu Panda
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Post by Kung Fu Panda on Feb 27, 2013 10:51:08 GMT -5
well, sounds like a sweet deal. Seems to be a marginal ratio of your income (banks dont like more than 26%) and you're way lower than that. Your sweet deal on insurance and low tax rate are a bonus.
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Deleted
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Post by Deleted on Feb 27, 2013 11:00:38 GMT -5
we are also in a hcol area
orig mortgage amount was 3300 month @ 5.75 when we bought
we refinanced at 4.25 and cut it to 2650 about 14 months ago (va loan so rates are a little higher)
we have always paid 3500 a month....and continue to do so...which will pay down the loan in a lot less than 30 years....but we also like the lower payment option if we ever need to use it (as they say, shit happens)
dont forget home maintenence, and projects you will want to do around the house
btw...my ins and taxes are right at 9600 year on mine
2k is not that much in hcol areas.....where salaries also average higher
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Deleted
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Post by Deleted on Feb 27, 2013 11:36:47 GMT -5
Hubby and I make about the same before bonuses and I don't think I'd be comfortable with that high of a mortgage. That being said, it can be done. I supported a total payment of $2,400/mo on a salary of about $125k while still maxing out retirement and having to pay for parking at about $300/month. It was just me, though, and I don't have any other real debt other than a small student loan. There were times when it was tighter than i would have liked it to be, but I made it work. That $2,400 included HOA, the loan and taxes, but not insurance. That was separate and was running about $600/year if I remember correctly. I have told hubby that, when we start looking for a new house, the most mortgage I would be willing to take on is 325k. Anything else has to be in the downpayment. . Keep in mind, though, that we still have that other property, so it freaks me out more than a little to have over $600k in mortgages that I am responsible for....granted that property is rented (doesn't cover the mortgage though), but still....
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Deleted
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Post by Deleted on Feb 27, 2013 11:52:08 GMT -5
$500 month for Insur and Taxes seems very low. Thats lower than what I have for 240k. I would assume your Taxes and Insur should be closer to 14k / year. or about 1200/month. my pproperty taxes are less than $4K a year on a $440K house. homeowners insurance is less than $800 a year.
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