Etherscreen
New Member
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Joined: 20 Feb 2006
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| Need some advice |
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I am a long time lurker and find so much good information here. I finally have a problem of my own. I am starting a new job with a fairly significant increase in income (250k first year, 300K 2nd). I have never owned a home and I trying to decide what I can afford. I have used all of the calculators out there but you seem to get a differnent answer with each of them. I will not be able to put any money down so I will go with a 80%/20% loan. Our fixed monthly expenses are: $1250 car (one will be paid off in a year), $1200 college loans, $500 personal loan (paid off in a year). Would PITI of $5200 be reasonable (520K 80%/ 130K 20%). If so would you recommend paying off the 20% fairly quick since it will be a HELOC?
Thanks,
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Mon Feb 20, 2006 1:35 am |
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Jaszbo
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Joined: 03 Jan 2006
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My advice would be to pay off as much debt as you can. Did you say you are going to be making 200k to 300k per year, but you can't afford a downpayment? Is the average or even larger than average size house not enough?
If you have zero debt, I would recommend not borrowing more than 3 times your salary. After your college loan is paid off, you should try to get out of all debt and never be in debt again except for real estate. The rule of thumb that I like is take your salary and subtract it by 10%. If you are making 100k, that means 90 and then multiple it by 3, so the most you should "borrow" is 270k.
The thing is that there is no rules, because other things have to be taken into consideration, like taxes and insurance just to name a few.
The only way I could help somebody calculate it very accurately is knowing a lot more information, for starters you can go and find out the public records for taxes. You can go online or make some phone calls and find out how much insurance will be, then add the two up and divide by 12 and that will tell you your monthly cost for escrow. Most lenders require an escrow account if under 20% down.
I personally would recommend you paying off all your debt first, so you have more security. If you haven't been listening to Greenspan's warnings, what about Bernanke warnings?
Where do you live? Could you afford for the house to go down 10% and loose your job at the sametime or would you be better off buying the house in a year?
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Mon Feb 20, 2006 4:56 am |
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Etherscreen
New Member
Cash: $ 0.65
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Joined: 20 Feb 2006
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Thanks for your advice. I am still on the fence. With regards to not having a down payment; I will have a significant increase in salary (5X what I make now) and have not been able to save for a down payment. I am a little worried about being cash poor and having this big of a mortgage but by all of my calculations things will work out. I will have a signing bonus which will help with not being so cash poor. I am trying to decide whether to pay down debt with the bonus or keep it as cash. Or maybe do a little of both. I have no high (>10%) debts but I would like to pay off one car and a few smaller school loans in the 7-8% range. One more question... is it a good idea to pay off a $4000 loan at 7% vs. putting $4000 towards a larger loan at 8%?
Thanks again.
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Mon Feb 20, 2006 11:36 pm |
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financialpeace
Contributing Member
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Why not try taking a deep breath, wait and see how the new job works out for awhile? Why the rush? You will need time to adjust to and gain the character needed to handle this kind of income. If you run out and act as though you've hit the lotto, this will be a curse rather than a blessing.
I ditto the advice for you to be debt free and having a down payment before going into home ownership.
I hope the best for you, and I hope you'll cool off the "burning" desire to buy a house for at least 6months, maybe a year, clean up some debts, then position yourself for home ownership with a nice sizeable down payment and only finance on a 15yr or less note.
Just my $.02, but then again on the positive side, its worth exactly what it cost.
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Tue Feb 21, 2006 1:18 am |
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Etherscreen
New Member
Cash: $ 0.65
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Joined: 20 Feb 2006
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Like I said I am on the fence about buying right now. I have waited a long time and will probably be able to pay off the house in less than 15 years. I am just concerned about how far the money will go the first year. You have me wrong. I don't "fell like I have won the lottery". I have put myself in a good position and I am ready to own a home. It might be best to take your advice and wait a few months but I really dont think it will make a huge difference besides giving me a piece of mind that it will all work out.
Becoming "debt free" will not come in a few months for me as I have a small mortgage in student loans.
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Tue Feb 21, 2006 1:19 am |
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financialpeace
Contributing Member
Cash: $ 6.20
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Joined: 21 Feb 2006
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Sorry, my ethics don't permit me to be an enabler. Glad I could help, good luck with that...
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Tue Feb 21, 2006 8:51 pm |
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