Honest Opinion Required!

[Ms Pington]

We are a young couple under 30, our gross salary is currently about 125K per year.We are thinking of buying a place now, given the low interest rates.We currently don’t have any debts except for a car loan with another 1.5yrs of payment(380/month). We have about 17K for a down payment. Our only option right now is the FHA which has the 3.5% DP. What are the pros and cons of buying now as opposed to waiting until we save the 20% DP? What amount should we target if we decide to buy now?

[danielwis]

Several year reader. First time poster. Love this site and all the knowledgeable comments.

The 3 times income is a pretty standard formula used to calculate maximum mortgage. Personally, I have never owned a home that was more than 2.5 times max yearly income. Currently I am in a home that is 2 times my max yearly income. Its about your comfort level and your perceived job security for both of you.

Ideally, it would be nice to have a mortgage and monthly bills that could be covered on one income, should one of you lose your job, develop health problems, or chose to stay home with kids. Economic stress on a daily basis makes life very difficult, as most of us can attest to at one point or another in our lives, so make sure you make wise choices and live within your means. Remember that you can always move up if your economic situation improves in the future.

[danielwis]

Several year reader. First time poster. Love this site and all the knowledgeable comments.

The 3 times income is a pretty standard formula used to calculate maximum mortgage. Personally, I have never owned a home that was more than 2.5 times max yearly income. Currently I am in a home that is 2 times my max yearly income. Its about your comfort level and your perceived job security for both of you.

Ideally, it would be nice to have a mortgage and monthly bills that could be covered on one income, should one of you lose your job, develop health problems, or chose to stay home with kids. Economic stress on a daily basis makes life very difficult, as most of us can attest to at one point or another in our lives, so make sure you make wise choices and live within your means. Remember that you can always move up if your economic situation improves in the future.

[danielwis]

Several year reader. First time poster. Love this site and all the knowledgeable comments.

The 3 times income is a pretty standard formula used to calculate maximum mortgage. Personally, I have never owned a home that was more than 2.5 times max yearly income. Currently I am in a home that is 2 times my max yearly income. Its about your comfort level and your perceived job security for both of you.

Ideally, it would be nice to have a mortgage and monthly bills that could be covered on one income, should one of you lose your job, develop health problems, or chose to stay home with kids. Economic stress on a daily basis makes life very difficult, as most of us can attest to at one point or another in our lives, so make sure you make wise choices and live within your means. Remember that you can always move up if your economic situation improves in the future.

[danielwis]

Several year reader. First time poster. Love this site and all the knowledgeable comments.

The 3 times income is a pretty standard formula used to calculate maximum mortgage. Personally, I have never owned a home that was more than 2.5 times max yearly income. Currently I am in a home that is 2 times my max yearly income. Its about your comfort level and your perceived job security for both of you.

Ideally, it would be nice to have a mortgage and monthly bills that could be covered on one income, should one of you lose your job, develop health problems, or chose to stay home with kids. Economic stress on a daily basis makes life very difficult, as most of us can attest to at one point or another in our lives, so make sure you make wise choices and live within your means. Remember that you can always move up if your economic situation improves in the future.

[danielwis]

Several year reader. First time poster. Love this site and all the knowledgeable comments.

The 3 times income is a pretty standard formula used to calculate maximum mortgage. Personally, I have never owned a home that was more than 2.5 times max yearly income. Currently I am in a home that is 2 times my max yearly income. Its about your comfort level and your perceived job security for both of you.

Ideally, it would be nice to have a mortgage and monthly bills that could be covered on one income, should one of you lose your job, develop health problems, or chose to stay home with kids. Economic stress on a daily basis makes life very difficult, as most of us can attest to at one point or another in our lives, so make sure you make wise choices and live within your means. Remember that you can always move up if your economic situation improves in the future.

[evolusd]

A general rule of thumb I’ve heard is your mortgage should not exceed 3x your gross annual salary. So based on your above situation, a proposed mortgage of $375k + your $17k for DP equals a purchase price of $392k (less closing costs you’d have to pay). Hopefully you have at least another $10-15k in savings that you’re not allocating as your DP. You’ll also be limited by the FHA front and back-end debt-to-income ratios, which will take into consideration your auto loan.

In addition to job stability, a HUGE factor that people in our age group don’t consider is having children and the impact on your income/expenses. If you’re not planning on having kids ever, then the above math might make sense (assuming you feel we’re at the bottom of the housing market, which I don’t). If you are planning on having kids, you must consider one income going away or a significant monthly expense for full-time daycare. This will change the math dramatically.

[evolusd]

A general rule of thumb I’ve heard is your mortgage should not exceed 3x your gross annual salary. So based on your above situation, a proposed mortgage of $375k + your $17k for DP equals a purchase price of $392k (less closing costs you’d have to pay). Hopefully you have at least another $10-15k in savings that you’re not allocating as your DP. You’ll also be limited by the FHA front and back-end debt-to-income ratios, which will take into consideration your auto loan.

In addition to job stability, a HUGE factor that people in our age group don’t consider is having children and the impact on your income/expenses. If you’re not planning on having kids ever, then the above math might make sense (assuming you feel we’re at the bottom of the housing market, which I don’t). If you are planning on having kids, you must consider one income going away or a significant monthly expense for full-time daycare. This will change the math dramatically.

[evolusd]

A general rule of thumb I’ve heard is your mortgage should not exceed 3x your gross annual salary. So based on your above situation, a proposed mortgage of $375k + your $17k for DP equals a purchase price of $392k (less closing costs you’d have to pay). Hopefully you have at least another $10-15k in savings that you’re not allocating as your DP. You’ll also be limited by the FHA front and back-end debt-to-income ratios, which will take into consideration your auto loan.

In addition to job stability, a HUGE factor that people in our age group don’t consider is having children and the impact on your income/expenses. If you’re not planning on having kids ever, then the above math might make sense (assuming you feel we’re at the bottom of the housing market, which I don’t). If you are planning on having kids, you must consider one income going away or a significant monthly expense for full-time daycare. This will change the math dramatically.

[evolusd]

A general rule of thumb I’ve heard is your mortgage should not exceed 3x your gross annual salary. So based on your above situation, a proposed mortgage of $375k + your $17k for DP equals a purchase price of $392k (less closing costs you’d have to pay). Hopefully you have at least another $10-15k in savings that you’re not allocating as your DP. You’ll also be limited by the FHA front and back-end debt-to-income ratios, which will take into consideration your auto loan.

In addition to job stability, a HUGE factor that people in our age group don’t consider is having children and the impact on your income/expenses. If you’re not planning on having kids ever, then the above math might make sense (assuming you feel we’re at the bottom of the housing market, which I don’t). If you are planning on having kids, you must consider one income going away or a significant monthly expense for full-time daycare. This will change the math dramatically.

[evolusd]

A general rule of thumb I’ve heard is your mortgage should not exceed 3x your gross annual salary. So based on your above situation, a proposed mortgage of $375k + your $17k for DP equals a purchase price of $392k (less closing costs you’d have to pay). Hopefully you have at least another $10-15k in savings that you’re not allocating as your DP. You’ll also be limited by the FHA front and back-end debt-to-income ratios, which will take into consideration your auto loan.

In addition to job stability, a HUGE factor that people in our age group don’t consider is having children and the impact on your income/expenses. If you’re not planning on having kids ever, then the above math might make sense (assuming you feel we’re at the bottom of the housing market, which I don’t). If you are planning on having kids, you must consider one income going away or a significant monthly expense for full-time daycare. This will change the math dramatically.

[Ms Pington]

Thanks for the replies evolusd and danielwis. The idea of economic stress is what is making us rethink this. We don’t want to buy solely for the tax credit if it doesn’t make sense for us right now. And the upfront costs associated with an FHA loan (which is the only one we can get right now) are a put-off too. We have been working with an agent and her idea is that it is good to buy now because of the low interest rates and “relatively” low house prices. Should we hold off on buying until we can go for a conventional loan and avoid PMI? Do we risk higher interest rates and not so good prices later? Again give it to us straight, we can take it!

[Ms Pington]

Thanks for the replies evolusd and danielwis. The idea of economic stress is what is making us rethink this. We don’t want to buy solely for the tax credit if it doesn’t make sense for us right now. And the upfront costs associated with an FHA loan (which is the only one we can get right now) are a put-off too. We have been working with an agent and her idea is that it is good to buy now because of the low interest rates and “relatively” low house prices. Should we hold off on buying until we can go for a conventional loan and avoid PMI? Do we risk higher interest rates and not so good prices later? Again give it to us straight, we can take it!

[Ms Pington]

Thanks for the replies evolusd and danielwis. The idea of economic stress is what is making us rethink this. We don’t want to buy solely for the tax credit if it doesn’t make sense for us right now. And the upfront costs associated with an FHA loan (which is the only one we can get right now) are a put-off too. We have been working with an agent and her idea is that it is good to buy now because of the low interest rates and “relatively” low house prices. Should we hold off on buying until we can go for a conventional loan and avoid PMI? Do we risk higher interest rates and not so good prices later? Again give it to us straight, we can take it!

[Ms Pington]

Thanks for the replies evolusd and danielwis. The idea of economic stress is what is making us rethink this. We don’t want to buy solely for the tax credit if it doesn’t make sense for us right now. And the upfront costs associated with an FHA loan (which is the only one we can get right now) are a put-off too. We have been working with an agent and her idea is that it is good to buy now because of the low interest rates and “relatively” low house prices. Should we hold off on buying until we can go for a conventional loan and avoid PMI? Do we risk higher interest rates and not so good prices later? Again give it to us straight, we can take it!

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