Foreclosed house question

[Sabda]

When we were looking to buy our first home, my wife and I figured what the monthly mortgage payment would be on each home we looked at. We thought, OK, how does that compare with what we are now paying for rent? Can we comfortably afford that payment?

I thought everyone did that. Much later, I was having a discussion with a mortgage broker, and I said to him, “when people come to see you, don’t they really already know how much of a monthly payment they can afford?” “Jim,” he replied, “people think that they can afford whatever I tell them they can afford!”

A lot of them don’t factor in the insurance, taxes that go with the mortgage payment either. That is very important because the taxes and insurance can pretty much double you payment.

The rule of thumb we always goes by is if the house is $100,000, than the total mortgage payment will be in the neighborhood of $1000 a month.

 

[JimG]

The mortgage payment calculator at bankrate.com can be used to calculate the monthly payment for principal & interest. You will have to add to that amount 1/12th of the annual real estate taxes, homeowners insurance, and any PMI or FHA insurance required.

(It’s also interesting to take the mortgage payment for P&I times the total term to see how much total dollars you will be paying out. For example, the P&I payment for $100,000 at 5% on a 30 year term is $537. $537 x 360 payments is $193,320, the total of payments over the loan term.)

 

[dontknow]

“people think that they can afford whatever I tell them they can afford!”

We recently sold and bought a new home last year.

Our goal was to keep our payment the same. The amount they were going to lend us was literally 6 times the amount we wanted to borrow.

This is where personal responsibility needs to kick in.

Again, running an honest and complete assessment of what “Life after the Closing” will look like is critical. Without it - it’s merely a guess.