Home loan question ...
#193698 - 07/09/05 06:08 PM
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SLiCKsGiRL
Reged: 06/20/04
Posts: 428
Loc: Western Washington
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Hey all~ I'm thinking of looking for a home in the next couple of months, and I'm doing my research ...
I'm worried about being able to qualify for a high enough loan, because from what I've read, lenders will only let you spend about 28% of your monthly income on a mortgage. So I'll only qualify for like 30K for a home, and that isn't enough around here ... is there any way around this? Has anyone else ever come across this situation? I'm good at saving my money and could make a house payment easily, but I'm afraid no one will lend money to me ...
Any suggestions? Thanks everyone for taking the time to read this!
Love!
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~*Amber*~
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We bought a house 3 1/2 years ago. We found out that kinda the rule of thumb was that we could get a loan for 2.5-3x gross income, but could only truly afford a loan for 2x gross income.
I hope you don't take this the wrong way, but are you sure you are doing the math right? The 28% is of your gross income, not net. Keep in mind that you have to pay taxes and insurance and other fees on top of that, so what seems like a reasonable house payment can balloon quickly. Our actual house payment is around $450, but the payment we dole out to the bank each month is over $700.
There's a good reason why banks have these kinds of limits, though, so if you truly can't qualify for the price of a house, I'd say keep saving your money for a down payment. I know it's hard to wait when the interest rates are so low, though.  Good luck!
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jen
"It's one of the most serious things that can possibly happen to one in a battle -- to get one's head cut off." -- LC
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Without your monthly income I'm not sure. I do know that around 25% of your income is the recommended amount for home stuff. You can always talk to a mortgage person and get prequalified- this way you'll know ahead of time what you can and can't buy. Your income would have to be really low to only qualify for $30 for a 30 year mortgage though. How much of a down payment do you have?
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Yeah, we qualified for a lot more than we could actually pay for. Not to mention that our taxes have gone up several times (and thus our mortgage payment). Not to mention that if you don't have a sufficient down payment you have to pay private mortgage insurance, which is an extra 100 bucks a month or something stupid. Until you've got 20% equity. Then there's all the crazy house things that pop up... we had to replace our garage doors pretty soon after we bought our house, and we just had a disaster with the air conditioner that cost us a fortune. Houses are so expensive! They eat money!! 
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We're still paying evil PMI!  For us it's $60/mo. We're stuck with it for at least another year or so.
Our house is a fixer-upper. It is horrible to live in right now because everything's ugly and torn apart. We have spent so much money on this house and you can't even tell yet. We don't have to worry about expensive repairs to our garage or air conditioner because we don't have any. 
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jen
"It's one of the most serious things that can possibly happen to one in a battle -- to get one's head cut off." -- LC
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Heh, yeah, we'll be paying PMI for quite a while yet- when we bought we did a grant program for the downpayment, we didn't have it. So it would take us QUITE some time to get to 20% equity. Even though we're doing an equity enhancement program where we pay a little more than half twice a month. They say it will reduce our interest by $35,000.
And, the sad thing is our house is NOT a fixer upper and there's about a billion things we need to fix right now. Air conditioner ruined the new floor in the bedroom, some of the exterior trim is rotting, landscaping needs to be finished in the backyard... it's never done! Ah well. At least we're never bored. Or have too much money. 
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We're going to go to some home-buying seminars and such, and talk to a broker who's a friend of the family. The $30k doesn't really make sense to me ... that means they're giving me a house payment that's a quarter of what I would pay for a decent apartment. I'm using this calculator
I hope that there's something I'm missing!
I'm going to try to put down $8000, more if I can. I'm still trying to figure out all the numbers - this is so confusing! 
Thank you for your help!
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~*Amber*~
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Don't worry, no offence taken - I thought the math looked funny too. I was using a fannie mae calculator. I guess I don't get why a lender is determining what I can afford for me?? I mean, I'm not looking to spend very much, and probably even with taxes and such, the monthly payments would be less than paying for an apartment here. That's why I want to buy.
I'm going to start talking to some people and get some help determining what my options are. Thanks for your response!
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~*Amber*~
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This site: has a couple of calculators on it, one calculates what the monthly payment is likely to be, and one calculates how much purchasing power you have. Do they come up with the same numbers?
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They'll run you through a series of questions and eventually tell you how much you qualify for. This usually includes a credit check, so depending on your credit you may not qualify for the theoretical maximum. They can do this over the phone and it doesn't take long, maybe 10-15 minutes.
The lender sets the amount because banks don't like repossessions. It's not really what YOU can afford, it's what they've found the general populace can afford. And I do have to say their numbers are pretty much right on. Living in a house is a lot more expensive than apartment living. In my area, it is NOT cheaper to buy than to rent unless you're buying a house in Ye Olde Crack Projects, and cost of living is pretty low here, so you might need to do some more investigating on what your true payments would end up to be.
Good luck!! I'll keep my fingers crossed for you. It is so wonderful having a place of your own.
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jen
"It's one of the most serious things that can possibly happen to one in a battle -- to get one's head cut off." -- LC
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