Pre-approved Mortgage advice

[RamblingMad]

Just curious. Why? My daughter just bought half a duplex. She bought, because it is cheaper than renting. Her payment with taxes and insurance is $500 a month less than what those units rent for. The rental market here is nuts.

The rule of thumb is that you buy at 10x rent and sell at 20x. My previous home I bought at 15x. My current home I bought at 18x. We're nearing the top of the real estate market. Markets like SF are outliers, where homes sell for more than 50x rent.

My calculation is simply: (home price)/(monthly rent x 12). Monthly rent is what you could expect to receive in rent if you put the home up for rent.

If you google price to rent ratio, you can read up on this calc.

 

[MillauFr]

Buy half the bank’s number. You’ll have more flexibility in the future.

When I moved, I had to get approved to carry my existing home and my new home even though I only carried both for a little over a month.

Buy as much as you feel you can afford. Ignore the bank number unless it is under your number.

 

[tvguy]

The rule of thumb is that you buy at 10x rent and sell at 20x. My previous home I bought at 15x. My current home I bought at 18x. We're nearing the top of the real estate market. Markets like SF are outliers, where homes sell for more than 50x rent.

My calculation is simply: (home price)/(monthly rent x 12). Monthly rent is what you could expect to receive in rent if you put the home up for rent.

If you google price to rent ratio, you can read up on this calc.

Okay, only bought one house, been in it almost 37 years, so I have never thought about resale just needed a place to live that I could afford. It's been paid off for 20 years.
DW and I come by it naturally. My mom lived in her house 53 years. My FIL live in his house 40.

 

[RamblingMad]

Okay, only bought one house, been in it almost 37 years, so I have never thought about resale just needed a place to live that I could afford. It's been paid off for 20 years.
DW and I come by it naturally. My mom lived in her house 53 years. My FIL live in his house 40.

The real estate market is pretty crazy these days. I don’t want to buy at the top again. I did that in 2005. Big mistake even though I could easily afford it. I’m not doing that again.

 

[tvguy]

The real estate market is pretty crazy these days. I don’t want to buy at the top again. I did that in 2005. Big mistake even though I could easily afford it. I’m not doing that again.

One former neighbor bought at the top of the housing boom and was complaining that he sold for $152,000 less than he paid. But he had the house 8 years and did NOT spend $192,000 in rent for that time ($2,000 a month rent for 8 years) so he actually was actually $40,000 ahead of the game in my book.

 

[SirDuff]

One former neighbor bought at the top of the housing boom and was complaining that he sold for $152,000 less than he paid. But he had the house 8 years and did NOT spend $192,000 in rent for that time ($2,000 a month rent for 8 years) so he actually was actually $40,000 ahead of the game in my book.

He didn't have a mortgage? He didn't spend anything on home improvement (and other things that are covered by your landlord/building management if you rent)?

 

[RamblingMad]

One former neighbor bought at the top of the housing boom and was complaining that he sold for $152,000 less than he paid. But he had the house 8 years and did NOT spend $192,000 in rent for that time ($2,000 a month rent for 8 years) so he actually was actually $40,000 ahead of the game in my book.

My apartment got turned into a condo during the boom, so I bought a house. That was probably my worse financial decision ever. Now, I know better, but it still sucks.

 

[tvguy]

He didn't have a mortgage? He didn't spend anything on home improvement (and other things that are covered by your landlord/building management if you rent)?

He did have a mortgage but that is counted against the purchase price. He wasn't big on home improvements and repairs. Not sure what he spent in 8 years, but I doubt it was $40,000 so still money ahead

 

[mdurette]

Hello - Mortgage officer here. here is my advice. As a First Time Homebuyer there are many specialized programs that are available and in some areas there are even grants to assist with homebuying. I always tell buyers to call a few local banks and find out their array of programs. Find a loan officer you are comfortable with that offers alot of the programs. You should be looking for programs like Home Ready, Home Possible, FHA, VA, USDA, state sponsored programs. Start off you preapproval with a lender that offers them all so they can review one help you pick out which program is best for YOU. Because mortgages are not one size fits all and contrary to what you may think....lowest rate is not always the best program with the lowest payment.

 

[MrsPete]

Get pre-approved...but then also understand what you really can and want to pay.

For example, a bank may pre-approve you for $500K, but you can't imagine buying a house for more than $400K. Stick to what you think.

However, conversely, you may think you can afford $500K, but the bank approves you for $400K. In this case, stick to looking for houses at the bank's number.

Good advice!

- Yes to determining what you yourself believe you can afford -- and afford comfortably. Consider whether you'll be able to pay this mortgage if you add a child (or another child) to the family or if your spouse is laid off for a while. Don't push yourself to your financial limits.

- My daughter and her husband bought a house a couple years ago in a similar market: Small starter houses are in demand in our area, and they put in offers on at least four ... only to find that someone else had bought literally hours ahead of them. They also scheduled several appointments with their buyer's agent, only to hear, "No point in going -- it's gone." In such a market, yes, you should get yourself pre-approved.

- You're fortunate that this is your first house. You're not going to write a contract that says, "Contingent upon sale of our current house." Anything that makes you a "quick and easy sale" is good.

 

[Jimsig]

During our process our mortgage broker even had us signing paperwork that we fully understand that buying big purchases, even furniture, is highly unadvisable and may affect your mortgage rate.

For us our credit was pulled at pre-approval and then again just prior to closing. For us that amounted to something like 8 or 9 months of being under strict orders to not purchase anything large (that included meeting with builders, committing to a builder and the time spent building our home). It's not just things where you'd need credit it's putting things on your credit card that goes to your credit as that could impact your debt/income ratio.

A good mortgage broker should always warn their clients about it. Especially if they are getting a commission.

 

[Hey Blinkin]

Remember....banks, realtors and mortgage brokers are not your friend. They are selling a product called debt and dont care if you can make the payments. Don’t get lured into what THEY say you can afford. Good rule of thumb is 25% of you monthly take home pay and no more than a 15 yr mortgage.