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Answers (9)
Best Answer
- Dan, "the_country_hick"
- Contributions:4693
I ask this not to pick on you.
Are you sure, I mean 100% positive that your job will not go away? So many other jobs have just gone away. People did well, had a great reputation and the boss liked them. Then the job, sometimes the whole business just went away.
This is just to point out things like last hired first fired. That happened to a friend of mine. I can think of nothing worse than buying a house and then seeing it go away with your job.
Assuming you are safe in your job I expect talking to almost any lender would give you a yes. Before buying look at a few things. How many months of inventory are in your area, How many NOD's are there? What percentage of sales are foreclosures and a few more. Look to find out the real foreclosure activity and coming foreclosures in your area. You may find much lower prices are coming. Also, consider interest rates.
Did you know that...
A $100,000 mortgage at 4.25% costs $491.94 a month.
A $100,000 mortgage at 5.25% costs $552.20 a month.
A $100,000 mortgage at 6.25% costs $615.72 a month.
A $100,000 mortgage at 7.25% costs $682.18 a month.
A $100,000 mortgage at 8.25% costs $751.27 a month.
You can easily see how a 1% change in interest rates brings up the mortgage payment each month.
Now lets look at it in reverse. Purchase price with a close to identical cost per month.
A $100,000 mortgage at 4.25% costs $491.94 a month.
A $_89,000 mortgage at 5.25% costs $491.46 a month.
A $_80,000 mortgage at 6.25% costs $492.57 a month.
A $_72,000 mortgage at 7.25% costs $491.17 a month.
Having cash in your pocket could mean waiting makes sense.
Are you sure, I mean 100% positive that your job will not go away? So many other jobs have just gone away. People did well, had a great reputation and the boss liked them. Then the job, sometimes the whole business just went away.
This is just to point out things like last hired first fired. That happened to a friend of mine. I can think of nothing worse than buying a house and then seeing it go away with your job.
Assuming you are safe in your job I expect talking to almost any lender would give you a yes. Before buying look at a few things. How many months of inventory are in your area, How many NOD's are there? What percentage of sales are foreclosures and a few more. Look to find out the real foreclosure activity and coming foreclosures in your area. You may find much lower prices are coming. Also, consider interest rates.
Did you know that...
A $100,000 mortgage at 4.25% costs $491.94 a month.
A $100,000 mortgage at 5.25% costs $552.20 a month.
A $100,000 mortgage at 6.25% costs $615.72 a month.
A $100,000 mortgage at 7.25% costs $682.18 a month.
A $100,000 mortgage at 8.25% costs $751.27 a month.
You can easily see how a 1% change in interest rates brings up the mortgage payment each month.
Now lets look at it in reverse. Purchase price with a close to identical cost per month.
A $100,000 mortgage at 4.25% costs $491.94 a month.
A $_89,000 mortgage at 5.25% costs $491.46 a month.
A $_80,000 mortgage at 6.25% costs $492.57 a month.
A $_72,000 mortgage at 7.25% costs $491.17 a month.
Having cash in your pocket could mean waiting makes sense.
- Greg Cowart, "Roseville Loan Guy"
- Contributions:448
Dan,
Now you're saying what I am saying, that rates are going to go up and even if prices come down mortgage payments will be higher. I didn't say anything about qualifying because it's obvious a higher payment is harder to qualify.
We were just talking about the cost vs benefit of waiting. Your example shows the payment being the same if prices drop about 30% and rates increase to the low 7's and while that's possible, it's not very likely. One of those things is likely, but the other is not. The odds that home prices will drop another 30% in most any market in America is highly unlikely. The odds that mortgage rates climb to 7% in the next few years is entirely likely.
There is a definite bias towards a cost of waiting, rather than safety in waiting.
Greg
- Dan, "the_country_hick"
- Contributions:4693
Greg, "Sure rates may go back up to around 7% in the next few years but do you think that home prices will fall an additional 30% in that same time frame? After the bubble already burst and home values have already taken the big hit?"
Actually, in many parts of the country house prices are still high compared to historic norms inflation adjusted. When you look at 1997 prices and add around 30% for inflation do the prices look about the same? If not there is a long way for them to drop still.
Also, you seem not to understand bubble dynamics. When a bubble pops it usually ends up with prices LOWER than at the beginning of the bubble. That means if a reasonable price based on historic norms would be $150k the price could "over-correct" to $120k or less. As prices went way to high at the top so often do they go to low at the end.
Lifecycle of a Bubble
Actually, in many parts of the country house prices are still high compared to historic norms inflation adjusted. When you look at 1997 prices and add around 30% for inflation do the prices look about the same? If not there is a long way for them to drop still.
Also, you seem not to understand bubble dynamics. When a bubble pops it usually ends up with prices LOWER than at the beginning of the bubble. That means if a reasonable price based on historic norms would be $150k the price could "over-correct" to $120k or less. As prices went way to high at the top so often do they go to low at the end.
Lifecycle of a Bubble
- Dan, "the_country_hick"
- Contributions:4693
Greg, For easy figuring lets say I have $1,000 a month income. The bank will allow me to pay them $350 a month for a mortgage. How can you explain that the bank will allow me to borrow more money at a bigger payment each month when I am already at the top of the DTI limit?
I say it will NOT happen. I will be given a smaller loan as interest rates increase. I will not be allowed to pay more than is safe with the lending guidelines in place.
Even if I got a 5% pay raise. that would be a whopping $50 a month more. I might be able to pay an extra $7 a month.
"Dan's example shows a reduction in sales price of about 10% per every 1% in rate. But that is just a made up number."
Not quite right. I showed nothing less or more than what a given payment could buy at a given interest rate. Unless wages increase by about 10% every time the interest rate goes up 1% what people can AFFORD TO PAY for a house will drop. I see no way in this economy with around 17% true unemployment adding in international competition how wages can increase by much. Thus house prices must drop to meet buying power.
You must have missed the part where Behaven has cash available.
I say it will NOT happen. I will be given a smaller loan as interest rates increase. I will not be allowed to pay more than is safe with the lending guidelines in place.
Even if I got a 5% pay raise. that would be a whopping $50 a month more. I might be able to pay an extra $7 a month.
"Dan's example shows a reduction in sales price of about 10% per every 1% in rate. But that is just a made up number."
Not quite right. I showed nothing less or more than what a given payment could buy at a given interest rate. Unless wages increase by about 10% every time the interest rate goes up 1% what people can AFFORD TO PAY for a house will drop. I see no way in this economy with around 17% true unemployment adding in international competition how wages can increase by much. Thus house prices must drop to meet buying power.
You must have missed the part where Behaven has cash available.
- Greg Cowart, "Roseville Loan Guy"
- Contributions:448
Behavan,
I hope you see Dan's example as a cost of waiting, rather than a benefit of waiting. You can see that changes in sales price, be they up or down, don't have a huge effect on the monthly payment, right? You can also see that interest rate fluctuation , be they up or down, will have a HUGE effect on monthly the monthly payment.
Dan's example shows a reduction in sales price of about 10% per every 1% in rate. But that is just a made up number. Sure rates may go back up to around 7% in the next few years but do you think that home prices will fall an additional 30% in that same time frame? After the bubble already burst and home values have already taken the big hit?
Dan's example shows us that there is a huge risk to waiting, and not nearly as much risk not waiting. I don't think either is going to happen in the next couple years (a 30% drop in home prices or +7% rates) but one of those two things is MUCH more likely than the other. Yep, rates will go up and it will cost more to buy a house in a year or two than it will now. Even if home prices drop 10% from where they are today it's HIGHLY likely that rates will be higher and your monthly payment on that 10% less expensive house will actually cost you more.
Greg
- Behavan
- Contributions:4
Thanks everyone. You have all made me think this through more.
- Cory La Scala, "San Diego CA Realtor"
- Contributions:419
Hi there, with a score of 808, you are behavan! A HomePath loan only requires 5% down, and with your FICO score and current income, you could be fine. FHA also has a renovation loan that may work for you. I work with two lenders that do both types of renovation loans; I'd be happy to send you their contact info, just let me know!
- Dean Bright, "Dean Bright"
- Contributions:123
Great question. Try the Homepath option first, but also I would speak with a local bank as well. Have had better success with local Banks being willing to loan for investment property. When a property is not your primary residence which this one is not, the Lender's critique a Buyer's financial stability in a much more intense manner. If you get denied, keep your head up and come up with a plan to save money over time to be able to proceed soon with your dream/goal. Best Regards!
- Greg Cowart, "Roseville Loan Guy"
- Contributions:448
Behaven,
So long as your are full time/salaried at your current job there should be no problem using your income for a Homepath loan. Is your income sufficient for the loan? I really can't say without seeing your application but $46,000 a year is more than enough to qualify for the mortgage payment on a $65,000 loan, depending on all your other expenses of course...
Sincerely,
Greg
Can I get a good mortgage?
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