How much house can I afford is a question many new home buyers ask. Buying a house can be fun. buying a home can also be fun. After this video you will know how much house can I afford. You will also know buying a house tips.
Good advice, shame so many people can’t pay 1/3 or less of their income on repayments, mostly because prices are massively overblown.
IM ON THE VERGE OF SAVING FIRST, IF ANYONE CAN HELP GLADLY ACCEPTING CONTRIBUTIONS AND WILL MAKE MY FAMILY GRATEFUL.
So If I put $30,000 down on a house that cost $120,000 that would be stupid right ?
I still don't get it. If you bought a house for 300k and it crashes to be worth 150k, you still owe the bank a total of 300k whether you put a large down payment in or not. He said the extra money was "wasted" but he doesn't answer the obvious counter point of paying down the mortgage.
Hey when you said 25% of your income to go to a mortgage payment, was that before or after taxes? Thanks
Please do not listen to the second piece of advice. The down payment one makes on a mortgage has absolutely NO bearing on downside housing pricing risk.
Assume you intend on purchasing a home for $300,000, which unfortunately decreases in value to $250,000 during first year of ownership. Let's assume you contribute $10,000 towards principle during this term (disregarding the fact that a higher down payment results in a lower interest burden, so more of your monthly payments will go towards paying down the principle portion of your loan).
5% down payment = $15,000. Equity in home after one year = $15,000 down + $10,000 principle payments = $25,000Remaining mortgage balance after one year = $300,000 house price – $25,000 equity = $275,000Value of home = $250,000Extra cash on hand (money saved due to lower down payment) = $45,000Net value = what you own – what you owe = $250,000 + $45,000 – $275,000 = $20,000
20% down payment = $60,000. Equity in home after one year = $60,000 down + $10,000 principle payments = $70,000Remaining mortgage balance after one year = $300,000 house price – $70,000 equity = $230,000Value of home = $250,000Extra cash on hand = $0Net value = what you own – what you owe = $250,000 – $230,000 = $20,000
Notice that your net value is $20,000 regardless of your down payment election. This represents a $40,000 loss, considering that in either scenario we've assumed you originally had $60,000 to make either the 5% or 20% down payment.
Put it this way: if you contribute a lower down payment, your'll owe more money to the bank. If the value of your home decreases, you'll still owe that money, so you'll still take the loss.
Contributing a smaller down payment does not insulate a home buyer from market risk.
Real advise: assuming you're currently paying rent, calculate the aggregate cost of paying rent while saving up for a down payment. The more savings you can accumulate for a down payment, the lower your lifetime interest charges will be, but you will pay more in rent during that time. Conversely, you can lower your rent burden and start generating equity sooner by making a smaller down payment, but your interest expense will increase significantly. There are quite a few tools online one can use to estimate mortgage payments given a set house price and interest rate; these can be used to estimate the total interest cost over the life of the mortgage. Generally, the cheapest option is a down payment >20% (particularly if your country has mortgage default insurance for low down payments), but it depends a lot on your individual expense assumptions (your available interest rate actually makes a BIG difference).
That doesn't make sense to me. Say you put a down payment of 10K for a house valued at 200K. After the housing market crashes, the house is valued at 100K, you will still owe the bank 190K. Your loan balance will not be lower because of the market crash.. so why not put more towards down payment to avoid PMI and pay less in interest??
the idea of a 30year is if your spouse lost there job you could still pay the bills. but like you said if you take a 15 year mortgage your making good money and pay it all off in 9 years you will NO LONGER pay the bank all you will pay is $10000 a year in taxes you will be making out good it comes down to do you want to pay a 30 year loan and sleep better at night knowing if you lose your job you will be ok or do want to be better off and have a afoul 9 years not doing anything it comes down to the person that's it
I'm confused 🙁
Here's my advice… do what you think you should. Waiting for a house to go up in value or come down to afford will easily eat up 10 years of your life!! Live life and enjoy and dont worry about this crap. Its all temporary.
as dave ramsey says 100% of people that own their house outright never get forclosed, look at interest rates which is the only way they can go?first time i ve ever given you a thumbs down for a start your advice can be contradictory, you say have mortgage payments of 1/4 what if by putting 50% down you can achieve this?
no different to having bank shares in 2008 , i had lloyds bank £5 a share now 65p, reduced house 80k to sell it , its now recovered 60k of that, interest rates are low high mortgages invites rising interest rates breaking you
Hello, could you please clarify. 1/3 of your monthly income? Thanks.
Great video! I'm a real estate geek and typically agree with most of what you're saying. A general rule of thumb is to buy a home a home not more than 3 years times one's annual salary. At the same time, in the current market place (Summer 2017) that may not always be realistic. So an adjusted rule of thumb is to not exceed 5 years times one's annual salary. Equally important to note that lenders look at person's debt to income ratio with intense scrutiny… Obviously they want to ensure the borrowers have the ability to repay and they are federally regulated not to exceed certain debt to income ratios based upon various loan types. I chat more about this on my channel if you want to check it out.
Either way, thank you for the insightful video from a financial advisors stand point. Very good advice! =)
Enjoy a great day,-Your Real Estate Geek, Andrew Finney
Thinking of buying a small house instead of an apartment when I move out. Kinda like the idea of freedom that comes with a house.
Basically it seems like you optimizing for foreclosure damage control.
Could've been a better video
You didn't mention pmi
This advice is terrible, putting a large down payment allows you to avoid paying PMI and gets you closer to a paid off home. Depending on how much renting is in your area, having a paid off house is a huge benefit, you'll always have a place to live even if you lose your job or have some large expenses crop up. In most cases, houses will hold there value or at least recover to their previous peaks over time. If a house seems too expensive or overpriced (even if that's what other houses are going for), don't buy it! wait until you can find something affordable.
great video ,I subscribed ! I am buying house right now and scare me ,this is my first house and I am not to young ,I am 47 🙁 no kids only my wife and me ,but is my wife dreams a house ……let see what happens ,all this is new for me .