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So Kris and I want to buy a house. We have the credit scores and income to ensure that qualifying for a home loan is not a problem. So yesterday afternoon we took a drive. I had done a search of properties in the $150-200k range and found a handful to drive by. The area was much closer to Kris' work, and still reasonably close to my anchor points, so on paper it was a solid place to look. Over the course of an hour I discovered just what $200k can buy you around here (crappy houses in skanky neighborhoods), and we began discussing the need to raise our price target if at all possible.
On the way back through Winter Garden I spotted an open house sign, and I figured we may as well take a look. The neighborhood was perfect. The construction was about three years old, and all of the plots were built out so there was no more ongoing construction. The street was a closed loop for local traffic only, and very family friendly. The house was across the street from a playground. The backyard of the house was completely fenced in, with a smooth surfaced fencing material that would be impossible for Ben to climb. Four bedrooms, two full baths, one half bath, two car garage, office downstairs, great separation of space. In a word, perfect. The asking price? $300k
I have no doubt we can qualify for that mortgage. I am a little nervous about being able to *afford* that mortgage. If we do something like a 3/1 Interest Only ARM we can make that nut, but that obviously carries some risks. In a town (Winter Garden) that is expected to double in population in the next five years, there is very little risk that the house will lose any value. But that's always a possibility. Also, interest rates could skyrocket in the next three years, making refinancing a problem. But on the whole, I think we can make the numbers work and keep the risk at an acceptable level.
The problem is that we have not even begun the process of prequalifying for a loan yet. I spoke to the realtor a little while ago, and she seems to think we can make it happen before someone else comes along and makes an offer.
This is bad. This is very bad. We found the perfect house, and at this stage of the game it is more likely than not that we will wind up watching someone else buy it. I am supposed to be a cold, analytical and unemotional guy. It shouldn't be any problem for me to take my shot, and then move along to the next house if this one doesn't work out. So why is my stomach in knots?
Argh!
On the way back through Winter Garden I spotted an open house sign, and I figured we may as well take a look. The neighborhood was perfect. The construction was about three years old, and all of the plots were built out so there was no more ongoing construction. The street was a closed loop for local traffic only, and very family friendly. The house was across the street from a playground. The backyard of the house was completely fenced in, with a smooth surfaced fencing material that would be impossible for Ben to climb. Four bedrooms, two full baths, one half bath, two car garage, office downstairs, great separation of space. In a word, perfect. The asking price? $300k
I have no doubt we can qualify for that mortgage. I am a little nervous about being able to *afford* that mortgage. If we do something like a 3/1 Interest Only ARM we can make that nut, but that obviously carries some risks. In a town (Winter Garden) that is expected to double in population in the next five years, there is very little risk that the house will lose any value. But that's always a possibility. Also, interest rates could skyrocket in the next three years, making refinancing a problem. But on the whole, I think we can make the numbers work and keep the risk at an acceptable level.
The problem is that we have not even begun the process of prequalifying for a loan yet. I spoke to the realtor a little while ago, and she seems to think we can make it happen before someone else comes along and makes an offer.
This is bad. This is very bad. We found the perfect house, and at this stage of the game it is more likely than not that we will wind up watching someone else buy it. I am supposed to be a cold, analytical and unemotional guy. It shouldn't be any problem for me to take my shot, and then move along to the next house if this one doesn't work out. So why is my stomach in knots?
Argh!
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Blew my mind what a quarter of a million would buy - and that was five years ago.
If at all possible, do not get the interest only loan - the forecast is that with the new FED chairman in place and the economy looking up, interest rates will skyrocket after the first of the year...
If you don't have the capital for a down payment, look into the possibilities of an 80/20 - the 80 being fixed, the 20 being variable. You would be paying PMI, but it is worth it to get your foot in the door.
Work the amortization schedule and whoola, soon you own the whole dern thing.
We were able to re-fi after a couple of years to a 15 year fixed, we worked the schedule, and were able to eliminate 7 years of interest.
Good luck.