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Can we afford a $159,900 House?

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    Can we afford a $159,900 House?

    Plan and simple can we afford a $159,900 house? We make $50,000 a year combined. Taxes and insurances would be about $225 a month. No debt what so ever. So what do you guys think? Oh and we would be getting a FHA loan so financing the full amount.
    Last edited by skives; 10-15-2014, 04:43 PM.

    #2
    If you're thinking about doing 100% financing, that tells me you probably can't afford the house. Unless house prices go up in that area (no guarantee), you're going to be underwater on that loan for a good while. What happens if you have to sell before that happens? Too much of a risk for me.

    Just curious, but how much cash do you have in the bank?
    Last edited by Mojave; 10-15-2014, 05:11 PM.

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      #3
      Originally posted by skives View Post
      Plan and simple can we afford a $159,900 house? We make $50,000 a year combined. Taxes and insurances would be about $225 a month. No debt what so ever. So what do you guys think? Oh and we would be getting a FHA loan so financing the full amount.
      Is "we" you and your spouse? How does the income break out between you?

      If you are both working full time making 25k each, that could be a problem. There is no room for either one of you to lose your job, stay home with a child, lose income due to a health problem, etc.

      If one person is making 45k and the other is making 5k, that is actually less worrisome. In a pinch, the person making 5k could look for full-time work.

      How does the rest of your budget look? Are you carrying consumer debt? Are you saving for retirement? Do you have any cash available for an emergency fund?

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        #4
        Do you understand that without a 20% downpayment you will be forced to carry expensive mortgage insurance on top of regular fire & break-in insurance, plus interest, mortgage principal and property tax. The process of buying a house has a long list of 'closing' costs like home inspection, land and building appraisal, land transfer tax, registration with land titles office and lawyer costs and disbursements.

        On top of that you'll be paying all the utilities like electric, heat, light, water, sewerage, trash removal, phone, and likely internet and cable monthly. Some utility providers demand a deposit and you haven't moved in yet! Don't skip qualified home inspection because you need to know in advance what problems are waiting for you, even in new construction.

        The rule of thumb is no more than 2.5 times annual income. Monthly housing costs all in shouldn't be more than 28% of your take home pay. Added to all that you need to know that you will stay in the house a minimum of 5 years.

        Let us know what you decide.

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          #5
          Originally posted by skives View Post
          Plan and simple can we afford a $159,900 house? We make $50,000 a year combined. Taxes and insurances would be about $225 a month. No debt what so ever. So what do you guys think? Oh and we would be getting a FHA loan so financing the full amount.
          You'd be spending more than 3 times annual income.
          You would not be putting down a 20% down payment.

          I vote NO. You can't afford the house given those two facts.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

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            #6
            If you aren't sure if you can afford the monthly payment, pretend like you have a mortgage, but send the payment into your savings account for a few months. Before you know it, you'll have a down payment saved up and that will save you a ton of money on mortgage insurance. If you went with a 15 year fixed, 3.5% APR, Principal & Interest would cost $ 1150.00, add in the home insurance and property tax and you are at $ 1,375.00

            If you 'need' to go with a 30 year mortgage to afford this house, then it would be even more beneficial to save up a down payment to avoid mortgage insurance, because the mortgage insurance would hang around for a much longer time. If you aren't familiar with mortgage insurance, it is there to protect the bank from you defaulting. It doesn't do anything for you.

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              #7
              Good to hear you don't have any debt. But before getting too excited, are you set up to stay that way? For example, if your car suddenly died or needed to be replaced, would you be able to resolve that and still avoid debt? The last thing you need is to be in a situation where you commit to a 30 year mortgage and then "life happens" and you get into debt to the point where you're just making minimum payments.

              So for your house idea, I'd want to have 20% down on a 15 year fixed rate mortgage. Then your budget should include fortifying an emergency fund for when that roof needs repair or your furnace or water heater break, as well as carry you through a potential job loss.

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                #8
                If you do not have any money to put down im guessing you do not have an emergency fund?

                Like others said...that house is too expensive on your $50k/year.

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                  #9
                  How does the total monthly payment compare to what you are currently spending for housing?

                  The guidelines are nice but if everybody followed them nobody would take the plunge to purchase their first home, and not everyone expenses fit into the rules listed above.
                  Gunga galunga...gunga -- gunga galunga.

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                    #10
                    Originally posted by greenskeeper View Post
                    The guidelines are nice but if everybody followed them nobody would take the plunge to purchase their first home
                    If everybody followed the guidelines, we wouldn't have had the whole housing market meltdown in 2008. Banks were giving people loans to buy homes for 5 and 6 times their income. Prices were skyrocketing because of insanely easy credit where anybody with a pulse could borrow 6-figure amounts regardless of their financials. There was an explosion of no-down-payment purchases, interest-only loans, and ARMs, all huge red flags that people were buying homes they couldn't actually afford. Do we really need to go down that road again?

                    So I disagree that following the guidelines would keep people from buying. What it would do is keep people from buying something they can't really afford.
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

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                      #11
                      Plain and simple: NO!

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                        #12
                        Originally posted by disneysteve View Post
                        So I disagree that following the guidelines would keep people from buying. What it would do is keep people from buying something they can't really afford.
                        If the OP has no other debts he can afford to put more of his money towards the house. To get into my first house that was at the bottom of the scale I had to put close to 50% of my monthly income towards the house. Guess what? I survived because I didn't piss my money away on stupid worthless junk.

                        I have never had a car payment.....ever. So that right there would be about $300/car/month that can be allocated somewhere else (hint - extra principal payments to pay the 30/yr note in 8yrs)

                        So "one size fits all" guidelines are bunk.
                        Gunga galunga...gunga -- gunga galunga.

                        Comment


                          #13
                          Originally posted by greenskeeper View Post
                          If the OP has no other debts he can afford to put more of his money towards the house. To get into my first house that was at the bottom of the scale I had to put close to 50% of my monthly income towards the house. Guess what? I survived because I didn't piss my money away on stupid worthless junk.
                          And what would have happened if you lost your job? What would have happened if you were seriously injured? If you had to put 50% of your income towards your house...my guess is you didnt have much of an emergency fund. This is a recipe for disaster and you're the master chef. Consider yourself lucky son.

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                            #14
                            Originally posted by skives View Post
                            Plan and simple can we afford a $159,900 house? We make $50,000 a year combined. Taxes and insurances would be about $225 a month. No debt what so ever. So what do you guys think? Oh and we would be getting a FHA loan so financing the full amount.
                            No.

                            If you were putting 20% down and were only financing $127K with a traditional 30 yr loan, then you could probably swing it.
                            Brian

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                              #15
                              I think it's important to look at all things to be considered. Simply having no debt isn't a blank check to take on debt, though.

                              It would be one thing if you had substantial cash savings, a traditional 20% downpayment, if your household income was $50k but one person could work and was choosing not to, etc.

                              In absence of any of those circumstances which would round out a better financial picture, I wouldn't be comfortable affording that. The hidden costs of home ownership can be formidable; and saying "you can't afford it" isn't a moral judgement or anything else. It's those of us who have been in similar shoes, buying our first house, urging you not to put yourself in what can easily become a miserable situation overnight when money becomes unexpectedly thin. Your relationship, health, happiness could all stand to benefit by waiting until conditions improve, or saving more.

                              Also, I believe there is still some downpayment requirement even with FHA, and there is definitely a mortgage insurance premium you have to pay UP FRONT, on top of your monthly PMI on top of your regular payment. The transaction cost may be more than you'd expect--definitely research those in advance of anything you buy.

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