I would say 60,000 would be a good number.
http://www.homebuyingtips.net/home_price_range.htm
http://www.homebuyingtips.net/home_price_range.htm
I was hoping for better input on this !
She is making reasonably close to this. My concern is job security, I think she over-estimates her job security. she's like 25-26.
It would suck to have a $1400 mortgage and your job is outsourced to India, then you have to take $12 an hour, then its another foreclusure.
I advise her to wait, as I think prices will drop more in Hartford,CT area.
Any thoughts on where property in this small city is headed ?
She is making reasonably close to this. My concern is job security, I think she over-estimates her job security. she's like 25-26.
It would suck to have a $1400 mortgage and your job is outsourced to India, then you have to take $12 an hour, then its another foreclusure.
I advise her to wait, as I think prices will drop more in Hartford,CT area.
Any thoughts on where property in this small city is headed ?
How Much Can You Afford?
Start out with a budget so you can determine your price range
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40 Rate & Comment Read 104 comments
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If you're like many first-time homebuyers, chances are you've been spending your weekends driving around visiting open houses and new model homes. This is a great way to get a feel for what you want. The problem is that what you want isn't always what you should get.
Before you start touring homes for sale, it's important to start off with a budget so you know how much you can afford to spend. Knowing what mortgage payment you can handle will also help you narrow the field so you don't waste precious time touring homes that are out of your reach.
Where to begin
The key factor in figuring how much home you can afford is your debt-to-income ratio. This is the figure lenders use to determine how much mortgage debt you can handle, and thus the maximum loan amount you will be offered. The ratio is based on how much personal debt you are carrying in relation to how much you earn, and it's expressed as a percentage.
The ideal ratio
Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.
Doing the math
First, figure out how much total debt you (and your spouse, if applicable) can carry with a 36 percent ratio. To do this, multiply your monthly gross income (your total income before taxes and other expenses such as health care) by .36. For example, if your gross income is $6,500:
$6,500 (Gross monthly income)
x .36 (Debt-to-income ratio)
= $2,340 (Total allowable monthly debt payments)
Next, add up all your family's fixed monthly debt expenses, such as car payments, your minimum credit card payments, student loans and any other regular debt payments. (Include monthly child support, but not bills such as groceries or utilities.)
Minimum monthly credit card payments*: ____________
+ Monthly car loan payments: ____________
+ Other monthly debt payments: ____________
= Total monthly debt payments: ____________
*Your minimum credit card payment is not your total balance every month. It is your required minimum payment -- usually between two and three percent of the outstanding balance.
To continue with the above example, let's assume your total monthly debt payments come to $750. You would then subtract $750 from your total allowable monthly debt payments to calculate your maximum monthly mortgage payment:
$2,340 (Total allowable monthly debt payments)
- $750 (Total monthly debt payments other than mortgage)
= $1,590 (Maximum mortgage payment)
In this example, the most you could afford for a home would be $1,590 per month. And keep in mind that this number includes private mortgage insurance, homeowner's insurance and property taxes. To determine the price of home you can afford based on this amount, use a home affordability calculator.
Exceptions to the 36 percent rule
In regions with higher home prices, it may be hard to stay within the 36 percent guideline. There are lenders that allow a debt-to-income ratio as high as 45 percent. In addition, some mortgage programs, such as Federal Housing Authority mortgages and Veterans Administration mortgages, allow a ratio higher than 36 percent. But keep in mind that a higher ratio may increase your interest rate, so you may be better off in the long run with a less expensive home. It's also important to try to pay down as much debt as possible before you begin looking for a mortgage, as that can help lower your debt-to-income ratio
SO BASICALLY...from this example...she is trying to buy TOO MUCH HOUSE
I would personally recommend 1. Coming up with minimum 10% down (that way if she does have financial difficulty there is 20K in equity to make sure she doesnt forclose and can sell. or
2. look for a house around 160K in total. MAXIMUM
Most people could fit a nice size mortgage payment in there budget, but they are trying to jump the gun alittle.....In other words keep in mind that this 200K home, although very nice, it doesnt have to be the very next house she buys.....U could always buy a 140-160K house and then save 200-300 a month for 5 years and have another 10-20K plus the equity in that house from sale to buy the 200-225K home and have a mortgage of 180-200K to start and get more house for the money.
Most people are trigger happy and buy on impulse...Im sure a nice 140-160K house would do her just right....Personally it sounds like she doesnt have any money saved up, so why would she want to be strapped to a mortgage payment that is overwelming and to the limit when she has no personal savings (besides work 401K etc).
Hopefully u can expain this to her...I have worked with thousands of clients who have cried tears in this foreclosure world, and u explaining this to ur sister could save her a bundle of stress/heartache/ and money in the long run.
Goodluck
-murph
Start out with a budget so you can determine your price range
Provided by
169
40 Rate & Comment Read 104 comments
ARTICLE TOOLS: Email article Printable view IM article Save to del.icio.us Bookmark
If you're like many first-time homebuyers, chances are you've been spending your weekends driving around visiting open houses and new model homes. This is a great way to get a feel for what you want. The problem is that what you want isn't always what you should get.
Before you start touring homes for sale, it's important to start off with a budget so you know how much you can afford to spend. Knowing what mortgage payment you can handle will also help you narrow the field so you don't waste precious time touring homes that are out of your reach.
Where to begin
The key factor in figuring how much home you can afford is your debt-to-income ratio. This is the figure lenders use to determine how much mortgage debt you can handle, and thus the maximum loan amount you will be offered. The ratio is based on how much personal debt you are carrying in relation to how much you earn, and it's expressed as a percentage.
The ideal ratio
Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.
Doing the math
First, figure out how much total debt you (and your spouse, if applicable) can carry with a 36 percent ratio. To do this, multiply your monthly gross income (your total income before taxes and other expenses such as health care) by .36. For example, if your gross income is $6,500:
$6,500 (Gross monthly income)
x .36 (Debt-to-income ratio)
= $2,340 (Total allowable monthly debt payments)
Next, add up all your family's fixed monthly debt expenses, such as car payments, your minimum credit card payments, student loans and any other regular debt payments. (Include monthly child support, but not bills such as groceries or utilities.)
Minimum monthly credit card payments*: ____________
+ Monthly car loan payments: ____________
+ Other monthly debt payments: ____________
= Total monthly debt payments: ____________
*Your minimum credit card payment is not your total balance every month. It is your required minimum payment -- usually between two and three percent of the outstanding balance.
To continue with the above example, let's assume your total monthly debt payments come to $750. You would then subtract $750 from your total allowable monthly debt payments to calculate your maximum monthly mortgage payment:
$2,340 (Total allowable monthly debt payments)
- $750 (Total monthly debt payments other than mortgage)
= $1,590 (Maximum mortgage payment)
In this example, the most you could afford for a home would be $1,590 per month. And keep in mind that this number includes private mortgage insurance, homeowner's insurance and property taxes. To determine the price of home you can afford based on this amount, use a home affordability calculator.
Exceptions to the 36 percent rule
In regions with higher home prices, it may be hard to stay within the 36 percent guideline. There are lenders that allow a debt-to-income ratio as high as 45 percent. In addition, some mortgage programs, such as Federal Housing Authority mortgages and Veterans Administration mortgages, allow a ratio higher than 36 percent. But keep in mind that a higher ratio may increase your interest rate, so you may be better off in the long run with a less expensive home. It's also important to try to pay down as much debt as possible before you begin looking for a mortgage, as that can help lower your debt-to-income ratio
SO BASICALLY...from this example...she is trying to buy TOO MUCH HOUSE
I would personally recommend 1. Coming up with minimum 10% down (that way if she does have financial difficulty there is 20K in equity to make sure she doesnt forclose and can sell. or
2. look for a house around 160K in total. MAXIMUM
Most people could fit a nice size mortgage payment in there budget, but they are trying to jump the gun alittle.....In other words keep in mind that this 200K home, although very nice, it doesnt have to be the very next house she buys.....U could always buy a 140-160K house and then save 200-300 a month for 5 years and have another 10-20K plus the equity in that house from sale to buy the 200-225K home and have a mortgage of 180-200K to start and get more house for the money.
Most people are trigger happy and buy on impulse...Im sure a nice 140-160K house would do her just right....Personally it sounds like she doesnt have any money saved up, so why would she want to be strapped to a mortgage payment that is overwelming and to the limit when she has no personal savings (besides work 401K etc).
Hopefully u can expain this to her...I have worked with thousands of clients who have cried tears in this foreclosure world, and u explaining this to ur sister could save her a bundle of stress/heartache/ and money in the long run.
Goodluck
-murph
Tell her to take 15 year mortgage.
I am sure many here will disagree, but 30 year mortgages are for suckers! If you can't afford a 15 year term, than you can't afford the house. I am sure she won't remain in the house 30 years, but have you actually seen how much money is lost in intersest for several hundred extra square feet.
I am sure many here will disagree, but 30 year mortgages are for suckers! If you can't afford a 15 year term, than you can't afford the house. I am sure she won't remain in the house 30 years, but have you actually seen how much money is lost in intersest for several hundred extra square feet.
I disagree... a good loan allows you to pay down at will, send in $100 more if you can, she would be good with that, very responsible person. More flexibility with the longer term for a responsible borrower.... you could send in $500 more if you want.
At low interest and 70's type inflation, you don't even want to pay it off !
I wouldn't tell her to go 15 years over 30 years, when you can do that yourself.
I know there is a huge amount paid in interest.
What I'm saying is you could get a 30 year loan, and try to increase payments on your own. Lets say if you pay $300 a month more you do it in 15 years.... you can try do that, and if something comes up you can go back to paying the minimum amount for awhile. That way you're not locked into the higher amount.
I don't think she is right for a 15 year mortgage at this time. It reduces the house you can afford, and she is barely into the range of a house in the area she needs to live
My thought is that this Hartford area has rather high housing prices. I see much more potential for it to fall than rise in the short term.
People move out of CT in greater numbers than those moving in. CT is a good place.... to be from.
New construction is non existant, the population just stays steady. I'd move out of state if I were her, but she can't do that.
People move out of CT in greater numbers than those moving in. CT is a good place.... to be from.
New construction is non existant, the population just stays steady. I'd move out of state if I were her, but she can't do that.
Totally agree
Especially if there's a chance in the next few years that the household income will increase. Lock in the 15 year with these rates. If income goes up, the current payment on the 30 year will look too small in the next few years. If they want to go ahead for a 15 year then, they may not find the rates then and there's also the additional refi costs. If a catastrophi-type situation hits, she can refi for the smaller 30 year down the road and it'll be easier to pay the refi costs etc. Most younger peoples income will increase as they get older and more mature.
Its a house the step-daughter is considering. They want something like 225k for it. I think it is near foreclosure, might get it for 180k or something like that.
Its mainly an example of what you get in Hartford for that kind of $$$.
Nothing fancy,not very large, kind of old ( 1956) only 1 bathroom. I suspect it is due for a roof ?
that's what you get in Hartford suburbs for about 200k. Inner city Hartford ghetto is cheap, but not an option.
Plenty of condos for 140-150k, but the condo fee kind of makes a payment similar to a starter house, but you often get neat stuff like a clubhouse with racquetball,tennis,pool,hot tub,billiards,etc. Plus no lawn to mow, snow to shovel, leaves to rake,etc. Plusses and minuses to both styles.
I'd actually prefer a more modern condo with the clubhouse and least 1.5 baths. I'm not a fan of too many bedrooms and not enough baths, don't really like typical old fashioned floorplans from the 70's and earlier, this one is 1956.
I haven't seen this house, but the siding looks funky in the photos. good size lot with near .5 acres... if you like mowing lawns !
That 180-200k would sure buy a lot more house elsewhere, like NC,SC,Fla,Tex,Co,Az,NM,Ark,etc.
Its mainly an example of what you get in Hartford for that kind of $$$.
Nothing fancy,not very large, kind of old ( 1956) only 1 bathroom. I suspect it is due for a roof ?
that's what you get in Hartford suburbs for about 200k. Inner city Hartford ghetto is cheap, but not an option.
Plenty of condos for 140-150k, but the condo fee kind of makes a payment similar to a starter house, but you often get neat stuff like a clubhouse with racquetball,tennis,pool,hot tub,billiards,etc. Plus no lawn to mow, snow to shovel, leaves to rake,etc. Plusses and minuses to both styles.
I'd actually prefer a more modern condo with the clubhouse and least 1.5 baths. I'm not a fan of too many bedrooms and not enough baths, don't really like typical old fashioned floorplans from the 70's and earlier, this one is 1956.
I haven't seen this house, but the siding looks funky in the photos. good size lot with near .5 acres... if you like mowing lawns !
That 180-200k would sure buy a lot more house elsewhere, like NC,SC,Fla,Tex,Co,Az,NM,Ark,etc.
I say Hartford just to place it geographically, Hartford area. She works in Hartford and that is likely not going to change, so within 20-25 miles of Hartford is the desired area, Rocky Hill ( or close to it) is the desired town, lots of ties to people there. The city itself is not desired, just near enough to it. Hartford is kind of a Shithole.
