I want to move out

**gamecock43** · 01-05-2009, 05:32 PM

Do you have a down payment? How is your credit score? Do you have credit card debt? Are you paying rent now? Where are you looking to move- what city?

**BigVic** · 01-05-2009, 05:37 PM

I don't have a down payment, so how much should i save?

Not sure about the credit score but I am guessing high 600's. I had a 650 2 years ago and have been very good in paying my bills on time.

I payed the last of my CC debt this week! (The cards themselves are long gone.)

I am currently living with my parents rent free.

I live in Louisville, Ky

**gamecock43** · 01-05-2009, 05:45 PM

I just went through the first time home buying process. You can:
*go to a bank for a preapproval to see what amount you will qualify for. (you need to bring your recent paystub, last years taxes, and know $$ you have in your bank accounts)
*use the general rule to assume you will be approved for 3x your annual income...so you might get a loan for 90k.
*You do need a downpayment. Anywhere from 5-20% is acceptable. There are pros and cons for small down payment and heavy downpayments.
Lucky for you, your FICO score is probably good with no CC debt, but you need to check your credit report (free at freeannualcreditreport.com) for any mistakes that could prevent you from being able to purchase. (for example I found out my husbands parents took out student loans in his name for hius college tuition but had been paying it steady and never mentioned it to us. It was quite a surprise to see he had a 10k loan out in his name!)
And do you have student loan debt? Banks dont want to see a high debt to income ratio.

**BigVic** · 01-05-2009, 05:56 PM

All debt is gone my friend. (Besides my car which is around $7,000) I am really glad that I got into debt trouble while I was young, educated myself, and payed it all off. I don't want to live in a bad situation for the rest of my life, that is the main reason why I asked how much I could afford. Mainly I want to know how much I can safely afford to pay monthly on a mortgage, so that I can have extra money to save.

**maat55** · 01-05-2009, 06:18 PM

Generally, you want 10 to 20% down and a payment that is no mare than 25 to 30% of your take home pay. In addition, you should have a 3 month emergency fund in place first.

3 months expenses
10 to 20% down
closing costs
450.00 or less payment including ins. and taxes

My guess is that you need to save for a while. Buying before you are ready is a bad plan.

**gamecock43** · 01-05-2009, 06:23 PM

This is a mortgage calculator that will tell you your monthly payment based on your loan amount: Mortgage Rates Calculator Home Equity Loan Rate Refinance Loans Current Adjustable Rate Calculators . Then also add taxes and insurance onto that amount. I don't know what you insurance would be or taxes...you would need to do some homework.
Rule of thumb is: mortgage payment should be 30% of your take home pay. But that is crap to me because you don't have kids, debt or student loans so you can afford more than that.

**disneysteve** · 01-05-2009, 06:27 PM

Originally posted by BigVic View Post

Hey all, I am 23 and I am thinking about buying a condo. I just want to know what I can afford. Any help would be greatly appreciated.

Last Year's Annual Income - Roughly $30,000

Monthly Income - Roughly $1500

Also I do put 5% of each paycheck into a 401K with a 50% match so I am saving, eventhough I know I should be saving more.

I don't understand the income figures. $1,500/month is only $18,000/year, not $30,000. Is one gross and one net, though that wouldn't be right either. That would mean you are paying 40% in taxes.

How much are you saving in addition to the 5% to the 401k? What existing savings do you have?

Without knowing those answers, my gut impression here is that you can't afford to buy a home. If the 5% is all you are saving, that isn't nearly enough. If you don't have a 20% down payment, you aren't ready. Don't forget that there is a lot more to ownership than the mortgage payment. There is also taxes, insurance, utilities, furnishing, maintenance and repairs. Those things can add another 30-40% to your monthly expenses.

**red92s** · 01-05-2009, 07:02 PM

Quick scan: you are not ready.

Without knowing where you live, with no downpayment I don't see how you'd find something for an amount you'd be approved at.

Why the firm opposition to renting? For many people, it is a better financial decision than buying.

**gamecock43** · 01-05-2009, 07:04 PM

I would assume Vic knows they are not ready to buy right now- but think they want to know how to prepare. So far they are on a good track with no debt/no large financial commitments.

**jIM_Ohio** · 01-05-2009, 07:22 PM

Set aside 20 percent of each paycheck (6k per year, 500/mo). Put 3000 into a Roth each year in addition to the 401k you are doing now ($1500 per year).

And set aside $125/mo for savings ($1500 per year).

$1000/mo extra would be
$670/mo mortgage payment ($100k financed at 6 percent for 30 years I think)
$200/mo property taxes ($1200/yr)
$130 for electric, sewer, condo fee, phone, cable etc...

Pay off the car (gets you $218 more than you have now) and lower the insurance bill. $1400/year is expensive for car insurance- I think.

**BigVic** · 01-05-2009, 08:39 PM

I am only interested in knowing how to prepare so that I don't make a bad decision. The $30,000 was last year's gross and $1,500 is avg. net monthly without overtime. So I actually make $27,393.6 give or take. Sorry if I wasn't clear before.

**gamecock43** · 01-05-2009, 10:24 PM

To prepare:
*check your credit report and score to get an idea of where you are at/correct any mistakes on there. Don't open up any new credit and stay away from loans and CC.
*Save for a down payment. You need 5-20% to put down (depending on what the bank wants, and what price you purchase the house). Jim gave a good structure of where your money would go after the purchase, and until you purchase, create a plan to save a specific amount every paycheck till you hit a desired goal (10k is a good STARTing place for a house down payment).

(a nice idea is to calculate the monthly mortgage payment you think you will be able to pay, and save that amount of money every month for a year to ensure that you really will be able to make the payments. After a year you have a nice little down payment).

*keep reading this board. It's hard to stay motivated to save such a lot of money, and there are a lot of tips that come up here regarding, money markets, saving money, investments, and stuff that will help you maximize every dollar you save, and spend smartly.
*Don't get impatient. I know the news is acting like this real estate market is the second coming of opportunities- but I bet (though I'm not an expert here!) prices and interest rates will still be a bargain in 2 years.

If you do some internet research there are numerous blogs and forums that weigh the pros/cons of home ownership/real estate prices/and what is needed to prepare.

**disneysteve** · 01-06-2009, 05:46 AM

Originally posted by BigVic View Post

All debt is gone my friend. (Besides my car which is around $7,000)

Originally posted by gamecock43 View Post

they are on a good track with no debt

Just wanted to point out that there is debt - that $7,000 car loan.

**disneysteve** · 01-06-2009, 05:52 AM

Originally posted by jIM_Ohio View Post

$1400/year is expensive for car insurance- I think.

Comments like this get made here frequently. I don't think some people realize how dramatically car insurance rates vary in different parts of the country, even within a small region. I grew up in Philadelphia which has among the highest rates in the US. When we moved to NJ, about 10 miles away, our auto insurance rate dropped 50%. And NJ is reknowned for having the highest rates in the nation when you look at the state average.

Also keep in mind that FICO score is used by many insurers to determine rates. OP mentioned that his score isn't so good (high 600s) so that might be a factor here, as well.

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