Can we qualify to buy a house? how much?
Credit: 710-Mine 750-His NO negatives Income: $51,000 My fiancé works for a delivery company and in May he will have worked there for 1 year. I would say in the next 6-9 months he plans on buying his own delivery truck and becoming part owner on the company. Before he worked for a Sports Retail Store for 3 years. I work for a construction company and in May I also will have been with the same company for 1 year. I am an hourly employee. I finished school for Accounting and my current position is Accounts Receivable Billing. My prior position was an accounting assistant with another construction company where I worked for 1 year. Debt: $259.00 Monthly lease for a car. $100.00 a month that I contribute to a Simple IRA for retirement. My employer also contributes a certain percentage. (not sure if the IRA counts as debt) Total Cash Asset: 15,000.00 Credit History: His: Owns a 2006 Dodge Ram- paid off. Owns a 2006 ATV –paid off Wells Fargo Credit card $2500 limit-zero balance Macy’s Credit Car (not sure what the limit is) –Zero balance Polaris Off-Road company $6000 limit-zero balance Mine: Nissan auto lease-$259.00 Monthly Bank of America Credit card $7000 limit-zero balance Mervyns Credit card $600 limit-zero balance (I don’t if they count since they went out of business) We don’t plan on buying till 8 months from now…some time around September-October. With house prices being low and interest rates being low we would really like to take advantage of it. Instead of moving out and renting why not buy?We are more then willing to buy a condo but would really like a 2 bedroom fixer upper kind of house. 8 Months from now we hope to have an extra $15,000 for down payment which will then make our total cash available for down payment $30,000.00 Area: Los Angeles CA
Public Comments
- I don't know about the other stuff, but the ATV wouldn't count for anything, unless you had a balance owing on it. When banks, and other lenders, look at your "debt servicing," they don't look at your balances - only your limits, and they calculate your approval/amount based on the assumption that your credit cards are maxxed out. That being said, car credit is much harder to get than house credit, because cars depreciate in value so fast. And you already have car credit. I'd close the Mervyn's card and go from there.
- The previous answer was not entirely correct. They look at your monthly debt payment to income ratio. It is actually good to have old credit cards with 0 balances, it increases your credit score and you might find that closing them will lower it. Just don't have tooo many credit cards open (like 4 per person is too much) My wife and I are looking into this too. In June I will get my first post-grad-school job at 75K per year, but my wife does not work. Our problem is that we have a cumulative 90K in student loans, so they subtract the monthly payments from our monthly income, which really hurts since its just me paying both of our loans. I still hold out hope though. We live in the Bay area just north of you, and man, watching these prices plummet is something I have anticipated for a long long time, we love Cali, but housing prices have long become completely disconnected from reality, where even educated professionals could not buy. This "housing crisis" is really just a correction of rediculous-ness, and I for one think it is long overdue. Do a google search for "how much mortgage can I afford?" and you will come up with several online calculators which will show you what banks are likely to approve for you. For us, the results of these however are not very happy, as even if I were making 100K I'd barely qualify for enough for the kind of house we'd like to buy when you add the student loan monthly debt.
- It sounds like you are doing well...congrats. You will have an easier time qualifying if you buy before he becomes part-owner = self-employed. That adds a layer of risk for the lender and the standard requirement is to show two years of tax returns reflecting the self-employment so the lender can get an accurate picture of how much you make...it can be less than that, but your easiest path is to not become an owner until after you have purchased your house. Conventional loans standard qualifications allow your total housing expense to be 28% of your gross income, so $51k/12 = $4,250 per month and 28% of that is $1,190 per month for principal, interest, taxes, insurance, and any homeowner's association dues such as the monthly condo HOA fee. I'm in the Midwest so I'm not sure how much taxes and insurance run out there but I would assume at least a few hundred dollars per month so on a 5% 30-year fixed rate loan you could borrow about $150k plus your $30k down payment would put you at $180k price...but you have to be aware of mortgage insurance, closing costs, etc. Your qualifications sound strong (before the brand new self-employment takes effect) so you could probably stretch the payment percentage up to 40% or so, which would be $1700 and that would add another $100k to what you could borrow since all you owe is the small lease payment. Sit down with your bank or a kind real estate agent and they should go over this with you face to face for no charge in hopes of capturing you as a customer. Good luck.
- Instead of relying on a bank to figure out how much you can afford, you should try to figure out a monthly budget that you are comfortable with. With a 51k income, your monthly gross income is 4250. $4250 - state/fed taxes - car lease - other debts - mortgage payment?? - food/entertainment - savings/emergencies - insurance (home and cars) - utilities/bills (phone, cable, gas/electric, garbage/water, etc.) Plug in those numbers for each month and you will have an idea of what you are comfortable paying each month. Now use a mortgage calculator on the net to figure out a total loan amount that matches your monthly payment target. Don't use all your money on down payment, you need some for moving expenses, furniture and emergency savings. Good luck! And sounds like you guys are on a good start with no debt and some savings.
- If you make $51,000, then I believe the bank will allow up to around 38% of the gross to be applied for mortgage. So you would allowed up to around a mortage payment of around $1,600 per month. A $300,000 loan at a 5.5% mortgage rate for 30 years fixed comes out to around $1,700. At 5.0% mortgage rate, the same loan would run you about $1,600. The question is, based on your current spending habits, can you afford to pay out around $1,700. Remember you have to add other costs like real estate tax, insurance, condo homeowners association fees, internal maintenance, water and refuse service. Probably run you about $2,300 total. You'll get some of it back on taxes refunds, but it's just never as much as you think it would be. :0/ I live in LA, too, and wish you all the luck! FYI, 2010 might be another down year for LA real estate (google "shiller index") so you may want to wait another year.
