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My partner is looking to buy a house. He wants to put an offer in for $ 55,000 on a particular house, and is willing to pay up to $ 65,000. (house listed at $ 70,000. Bank owned, Michigan.)

He makes about $ 30,000 a year after taxes ($ 2,500 a month). He pays $ 150 a month for car insurance and cell phone bill. Other then that, no debt, and he currently lives with his parents. He has $ 19,000 saved up solely for purchasing a home (about $ 8,000 otherwise, 23 yrs old), and has a good credit score. He has been approved for a $ 100,000 mortgage. He wants to put down 20% (11k-13k), and he wants a 15 year mortgage, and hopes to secure an interest rate around 5.0%. This particular home’s taxes are about $ 2,500 a year (=$ 210 month). Neither of us have owned a home, but we are guessing we will pay around an additional $ 300 a month in utilities(?). Not to mention home insurances. We both live fairly frugally.

I am still in college, owe $ 3,000 in student loans ($ 50 a month min payment). I expect to accumulate another $ 10,000 : / of student debt in two years time. I make about $ 700 a month. I pull my own weight as far as personal expenses. I’m kind of unsure about my career, (business, but idk what) so I’m not going to bet on making much more than minimum wage for a couple years. I currently have little sayings due to college expenses (about $ 2,000), but live with my parents now and have no other bills.

His name will be on the title, with his parent’s co-signing. If they accept the offer, we hope to spend a few months painting and such. Eventually I will move in. (I know, not married, not engaged, but we have been together 6 years and are committed, and just want to wait till we are older to get married.) He is buying the home, and probably wouldn’t be in so enthusiastic and intent on doing so if the markets weren’t as buyer-friendly as they are now. He will pay the mortgage, taxes, etc, and I am hoping to help out on groceries and some furnishings, maybe a utility bill. The house was built in 1986, and has a new roof, water heater, AC,and furnace, and is updated with the exception of the kitchen. The windows are in good shape, and there is nothing we determined would need immediate repair per our inspection. We would hope to eventually remodel the kitchen, when we are financially stable. Also, we want to paint. As neither of us have furniture, we will need to eventually furnish the whole house, but will need to buy the basics to move in, as well as household items and appliances. So much to buy! We won’t be having kids any time soon.
Wow that was long. Do you think we can afford the house, the whole thing? If not, why, and what do you think we could afford? Thank you

4 Thoughts on Do you think we can afford to buy a first home?
  1. Reply
    February 4, 2014 at 8:30 am

    Sounds like a probability. One thing to consider. Don’t buy as much of a home as you can afford. Try to leave some wiggle room as far as payments go.Look for what you NEED, not want.

  2. Reply
    Gaytheist Buddha
    February 4, 2014 at 8:46 am

    The issue has to do with debt ratios. A rule of thumb is that you can afford a mortgage that is 3 to 3-1/2 times your gross annual income (before taxes).

    In general, lenders will let you spend between 28 to 33% of your gross monthly income on your mortgage payment (including property taxes and insurance).

    Your total debt load (mortgage plus car payments and minimum payments on revolving balances) must not exceed about 38 to 41% of your gross monthly income.

    These numbers are realistic but general guidelines and your situation could be different.

  3. Reply
    Ask Me Anything
    February 4, 2014 at 9:19 am

    Sounds like HE can afford the house, but what do you intend to do with all this furniture and the sweat equity you intend to put into HIS house when you break up?

    Courts have a hard time splitting that stuff up.

  4. Reply
    February 4, 2014 at 9:42 am

    Hopefully you are looking at the answers to the same question you posted previously…;_ylt=Ar6QYhpnkQaVLvKzDYDlv8nsy6IX;_ylv=3?qid=20090401120612AAD7tiT&show=7#profile-info-1DsjAhuyaa

    Making $ 30k after taxes he should definitely be able to afford this by himself, and if you can afford to pitch in your own weight or a little more, you shouldn’t have any problems at all.

    I would consider doing a fixed rate 30yr FHA loan and only putting 3.5% on as downpayment. The issue there is that if he puts down 20% (13,000) and pays closing fees, another couple thousand, you end up with much less in liquid assets. It could be worse, but if it were me, personally, I would prefer to go with a lower downpayment amount. Even if your interest rate ends up a little higher, and you pay some mortgage insurance, you gain the benefit of having a nice big security blanket – if you lose your jobs, you have plenty of time to live on your savings while you find another, and don’t need to worry about foreclosure being on you so quickly. It also leaves you some breathing room for making renovations, or fixing things that you may not have thought of needing to fix.

    The reason I say 30 yr loan is because you can always pay extra directly to principle (unless it’s otherwise stated on your loan agreement) to shorten the length of your loan. However, if you go for a 15 yr loan, and find yourself strapped for cash, you can’t send the bank less, to stretch your loan out longer.

    That’s just peace of mind that I would prefer to have, and something you should both think about. Either way, I’d say you can definitely afford it, it’s just about how much breathing room you want to give yourself.

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