Tuesday, May 30, 2006
My Home: The Budget Is Set
Taking a deeper look into my future home purchase, I realized I need to think about specifics...the financial specifics. I wrote about my realistic dream home earlier, but with my current income and savings, what can I really afford to purchase without affecting my standard of living, my emergency fund, and being able to fund home improvements and other fees associated with home ownership?
Considering my current liquid assets of about $100,000, I'll make an assumption that I can save about $30-50k more in a years time--when I plan to purchase. This is less than my current year-end goal of $100k, but I'm going to assume I don't make my goal to be conservative. This means I should be able to comfortably afford a downpayment within the range of $110-130k. This would leave me $20k of cash on hand. One of my requirements is a 20% down payment, so the homes I can purchase would be $550-650k. In Honolulu, HI, that doesn't leave me much to choose from.
During my prequalification, I was given the okay to purchase a home up to $700k with a $70k deposit assuming I use a 80/10/10 loan.
1st Mortgage: $560,000 (30yr fixed)
2nd Mortgage: $70,000 (15yr fixed)
Deposit: $70,000
There's no way I'm going to do that. In some ways, I wish I didn't see this loan because it makes the "bad decision" even more possible.
So the bottom line is I know the price range of homes I can afford, which is $550-650k. I'm going to stick to this range. Unless some ridiculous mansion is available for 800k...then maybe I'll stretch.
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5 comments:
Wow, that 80/10/10 would be a SERIOUS mortgage payment! Depending on the rates, a little over $4k for just the PI part of PITI. I don't think you have posted your income, but you would have to make quite a few bones for that to make sense.
I think sticking to the 550-650k range is much smarter. In fact, the lower end of the range.
One trick - don't look at ANYTHING outside your range. Don't be tempted by "some ridiculous mansion", because most likely, it will be better than a house in your range. It's too easy to say "well, I'll just make an offer in my range" or "I think we can negotiate it into my range". Stay away from the dark side and don't look at anything higher than your uppermost limit.
Lisa, Thanks...I'll need to make sure I carry a little card with your comment printed on it. :)
LA, I would like to find something in the lower range, but I don't think it's going to be easy...I gotta work on what I want in the house...there are some conditions I have...so with the combo of the budget and the details...it'll be interesting to see if I can find anything.
Depending on where you live, you may not have a choice, but my first thought when I read this post is...Dang, that's a lot of money to spend on your first house!!
SingleMa, I've thought about that...I could move somewhere else, like another state, and afford a much bigger house, but my family and friends are here. I could live in some areas of the island where the housing costs are slightly lower, but for the amount I'd save, I'd probably spend in commute time and gas.
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