how big of a mortgage will i be able to afford if …….

[pertinazzio]

Hey all,

Some of you may remember that I am planning to move to San Diego in the Spring. At my job I waste a lot of time looking at the listings out there but I remain pretty fuzzy as to how much of a mortgage we will be likely to afford so I am clueless whether I am being realistic as I wistfully check out the listings in such areas as liberty station. Hopefully someone here can give us ball park figures.

Initially I expect us (me and my nice lady) to have an pre-tax income of 85K per year. This income will consist of 45K from a fixed benefit government retirement program and 35K from the crummy jobs that we might be working. Of course we would hope to each get jobs paying more than 17.5K per year but I want to be conservative as I think about how much mortgage we will be able to afford COMFORTABLY. So let’s just leave it at a total income for our marital unit at 85K per annum.

Now assume that prices have moderated quite a bit and that we have located a prospective dream home. We will put down 200K.

Now assume that we will also present to the lenders documentation of other liquid assets (CDs) worth 40K as well as retirement accounts worth 500K (we can take out funds without penalty but we don’t want to touch it).

So that’s our hypothetical financial picture. We want to buy a house. How much will lenders give us? But more importantly how big of a debt could we take on COMFORTABLY. Basically I am asking this because I really don’t know if financially I am Chula Vista or a Liberty Station kinda guy.

[patientlywaiting]

I’d say you can afford a $250k mortgage. Depending on where interest rates go.

Maybe $300k since you’re at a later stage in life where you probably don’t have many expenses other than food and shelter.

You may be able to get a townhouse at Liberty Station at the very trough. You will definitely qualify to live in Carlsbad if you want to be ocean close.

[patientlywaiting]

I’d say you can afford a $250k mortgage. Depending on where interest rates go.

Maybe $300k since you’re at a later stage in life where you probably don’t have many expenses other than food and shelter.

You may be able to get a townhouse at Liberty Station at the very trough. You will definitely qualify to live in Carlsbad if you want to be ocean close.

[Vishon]

With your financial situation, quite a bit of cash but less income, would it make more sense to purchase something around $300k with cash?

This way the monthly expenses is cut drastically, which will put less stress on income.

[Vishon]

With your financial situation, quite a bit of cash but less income, would it make more sense to purchase something around $300k with cash?

This way the monthly expenses is cut drastically, which will put less stress on income.

[(former)FormerSanDiegan]

I’d also guesstimate in the 250-300K range. But you may have issues qualifying for the best rates on income from new jobs. Significant assets (e.g. 500K retirement funds) certainly helps.

Anyway, with 200K down if it were me and I wanted to be close to the best San Diego has to offer, for 450 – 500K by next year you can probably also get into SFRs in Bay Park or Bay HO/ West Clairemont, have Ocean Breezes (no A/C) and be 10 minutes or so from from downtown, Old Town, Mission Beach, Point Loma, La Jolla, Jack Murphy Stadium, Petco Park, etc…

[(former)FormerSanDiegan]

I’d also guesstimate in the 250-300K range. But you may have issues qualifying for the best rates on income from new jobs. Significant assets (e.g. 500K retirement funds) certainly helps.

Anyway, with 200K down if it were me and I wanted to be close to the best San Diego has to offer, for 450 – 500K by next year you can probably also get into SFRs in Bay Park or Bay HO/ West Clairemont, have Ocean Breezes (no A/C) and be 10 minutes or so from from downtown, Old Town, Mission Beach, Point Loma, La Jolla, Jack Murphy Stadium, Petco Park, etc…

[HLS]

Hi PERT,,
I am in the mortgage biz…

First of all, you MAY have a problem using income from brand new jobs. Some lenders don’t give much/any weight to that.

Even with huge assets, lenders like to see INCOME.
Sometimes retired people need to go stated income to get approved, but they still need income sources to verify.

Without about 20 pieces of information, there is no possible way to answer your question correctly.

Your middle credit scores are the first question. The higher they are, the better it is.
Depends how much other monthly debt you have (credit cards, car payments etc)

Assuming a loan amount of $417K or less, at todays BEST rates FULL DOC you are looking at a monthly payment of about $600 per $100K for a fully amortized 30 yr fixed.
OR
$530 per $100K interest only.

Add at least $100 monthly for property taxes per $100K of Purchase price to the payment above.

YOU need to decide what is comfortable debt for you. IF you qualify, lenders will loan you more than should be comfortable, (it’s insane)
They might loan up to 60% of gross income in some cases.
How much of your income are you willing to spend to “buy” is your decision.

I can underwrite FNMA loans, I never know what they will approve or decline, it’s based on overall strength of the borrwers. With your assets, you might be approved for a great rate.

Without a better picture of you & “nice lady” it’s impossible to quote you.

Your situation might look like a no brainer a lender, however, you may not get full doc great pricing.
If you haven’t had a self employed side business for at least 2 years, you cannot go stated.

With a decent credit score and $200K down, you might also get an OK rate with a no doc or no income loan from a prime lender
OR
a loan from a subprime lender.

This is where they step in, situations that cannot get approved at better rates.

Who knows what rates, programs or guidelines will be next spring.

I always wonder….
What if there were NO lenders and people had to pay cash for houses. I bet that prices would be a whole lot lower….

[HLS]

Hi PERT,,
I am in the mortgage biz…

First of all, you MAY have a problem using income from brand new jobs. Some lenders don’t give much/any weight to that.

Even with huge assets, lenders like to see INCOME.
Sometimes retired people need to go stated income to get approved, but they still need income sources to verify.

Without about 20 pieces of information, there is no possible way to answer your question correctly.

Your middle credit scores are the first question. The higher they are, the better it is.
Depends how much other monthly debt you have (credit cards, car payments etc)

Assuming a loan amount of $417K or less, at todays BEST rates FULL DOC you are looking at a monthly payment of about $600 per $100K for a fully amortized 30 yr fixed.
OR
$530 per $100K interest only.

Add at least $100 monthly for property taxes per $100K of Purchase price to the payment above.

YOU need to decide what is comfortable debt for you. IF you qualify, lenders will loan you more than should be comfortable, (it’s insane)
They might loan up to 60% of gross income in some cases.
How much of your income are you willing to spend to “buy” is your decision.

I can underwrite FNMA loans, I never know what they will approve or decline, it’s based on overall strength of the borrwers. With your assets, you might be approved for a great rate.

Without a better picture of you & “nice lady” it’s impossible to quote you.

Your situation might look like a no brainer a lender, however, you may not get full doc great pricing.
If you haven’t had a self employed side business for at least 2 years, you cannot go stated.

With a decent credit score and $200K down, you might also get an OK rate with a no doc or no income loan from a prime lender
OR
a loan from a subprime lender.

This is where they step in, situations that cannot get approved at better rates.

Who knows what rates, programs or guidelines will be next spring.

I always wonder….
What if there were NO lenders and people had to pay cash for houses. I bet that prices would be a whole lot lower….

[(former)FormerSanDiegan]

As always, good info from HLS.

I always wonder….
What if there were NO lenders and people had to pay cash for houses. I bet that prices would be a whole lot lower….

Good thought experiment …
With no mortgage loans, my guess is that they would all be owned by rich folks, REITS, investment pools, and institutions and that most people would be lifetime renters. The price would be set by the relative return on rent compared to other investments.

[(former)FormerSanDiegan]

As always, good info from HLS.

I always wonder….
What if there were NO lenders and people had to pay cash for houses. I bet that prices would be a whole lot lower….

Good thought experiment …
With no mortgage loans, my guess is that they would all be owned by rich folks, REITS, investment pools, and institutions and that most people would be lifetime renters. The price would be set by the relative return on rent compared to other investments.

[Diego Mamani]

Ciao Pertinazzio,

Financially speaking, it would be best for you to rent in San Diego. I don’t understand the rush to catch a falling knife. It’s way too early IMHO to consider buying… you can easily afford to rent a nice place with your $80-$85K gross income. After 3 or 4 years your 200K will have grown, plus you may have added some savings along the way. More importantly, houses will be a lot cheaper then than now. You’ll also know the area much better than you do know, and you’ll have time to make your credit scores even higher. As an added bonus, you’d spare yourself from the headaches of owning. It’s a no-brainer!

Buona fortuna.

[Diego Mamani]

Ciao Pertinazzio,

Financially speaking, it would be best for you to rent in San Diego. I don’t understand the rush to catch a falling knife. It’s way too early IMHO to consider buying… you can easily afford to rent a nice place with your $80-$85K gross income. After 3 or 4 years your 200K will have grown, plus you may have added some savings along the way. More importantly, houses will be a lot cheaper then than now. You’ll also know the area much better than you do know, and you’ll have time to make your credit scores even higher. As an added bonus, you’d spare yourself from the headaches of owning. It’s a no-brainer!

Buona fortuna.

[HLS]

Former….
On the other extreme,,, think about cheap items that are financed.. People who use credit cards to buy everything, including groceries.

They have no idea what they are actually paying in the long run for anything that they buy.

There should be NO home lenders and NO credit cards. Only buy what you have cash for. Home prices would drop real fast.

Life was simpler when there were no credit cards.
There has always been credit though.

I wonder who Adam and Eve borrowed from…..

[HLS]

Former….
On the other extreme,,, think about cheap items that are financed.. People who use credit cards to buy everything, including groceries.

They have no idea what they are actually paying in the long run for anything that they buy.

There should be NO home lenders and NO credit cards. Only buy what you have cash for. Home prices would drop real fast.

Life was simpler when there were no credit cards.
There has always been credit though.

I wonder who Adam and Eve borrowed from…..

[Author]

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