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What in the world should we do?
We live in a very expensive area and just learned the rental program at our current condo is ending (decision the HOA board made). We are renting for 1080 a month, when typically 2 bed condos rent for 1500. So do we continue renting, assuming the market stays the same for 1500 a month, or try to buy?
Option one buy something: We qualified for a 250000 FHA loan (would like to stay at 200,000), but would need help with closing costs if possible from the seller. For that price we could get a decent condo in an area we love. The mortgage would stay around what we have now and would allow us to divert more into savings.
Option two: Use the savings we have to pay down credit cards and pay off my car. Then work towards hubby's car. We would continue to rent. We would have a lot less a month to save due to the increase in cost of living.
Background: My husband and I are 27 and have a 15 month old son. We both have stable jobs and have paid off almost all credit card debit. We have massive amounts of student loans (1200 a month because we cannot consolidate the private loans).
Thanks in advance for your opinions and help!
Re: What in the world should we do?
How much are the condo fees on average in your area? If your mortgage were increased by the avg. amount of condo fees how much could you afford then? You should consider that. It might actually be worthwhile to buy the more expensive house, if it equals the same monthly cash outlay as the inexpensive condo + condo fees.
Also, do you qualify for any down payment assistance programs in your area? do you qualify for a low income rental? How long is the wait-list for subsidized housing in your area?
What metro area are you in?
There's a lot of information I would need before I could begin to give an intelligent answer, but I am not one opposed to FHA/VA financing, at all. Actually, given the historically low interest rates, I think it can be very smart to use one right now and keep your cash in your pocket. But again, I need to know more about where you are, your market, etc... before I can get an intelligent answer.
No way is a $200,000 loan going to be close to 1,080 a month unless you have a large down payment you aren't mentioning. If you don't have a 20% down payment expect to pay mortgage insurance in addition to your mortgage. There are also property taxes, etc as well. What are the HOA fees?
Are you saying that a $200,000 loan is going to be way more than $1,080/month? How are you figuring that? We just purchased a home for 189,000 and our monthly payment is $1236. We put down 3.5%, so our loan was for around $185,000. That monthly payment also includes our property taxes ($2100 for the year), the PMI, and our insurance (roughly $800 for the year).
TTC since June 2012
We put 20% down on our house, which was purchased for $184K (so only mortgaged about $147K) and our payments are $1100/ month with taxes and insurance. I agree that the payment on a $200K condo are going to be way more than $1080 (especially if you add in PMI, HOA fees, etc.).
OP is correct about the monthly debt service, those who said the $1080 does not include the condo fee are also correct.
Here are the results from a mortgage calculator. For a home worth $200k, a loan amount of $195k, interest rate of 3.5%, property tax of 1.25% and PMI assumption of 0.5%.
Mortgage Repayment Summary
$1,086.15
Monthly Payment$391,013.62
Total of 360 Payments$113,051.12
Total Interest PaidFeb, 2043
Pay-off Date$75,000.00
Total Tax Paid$7,962.50
Total PMI PaidMonthly PMI
98 Monthly PMI Paymentsof $81.25 Each
May, 2021
PMI Pay-off DateMonthly vs Bi-weekly Payment
$1,086.15
Monthly Payment$543.07
Bi-weekly PaymentFeb, 2043
Monthly Pay-off DateApr, 2039
Bi-weekly Pay-off Date$113,051.12
Total Interest Paid$95,494.81
Total Interest PaidI wholeheartedly disagree with this. There can be numerous reason, especially now that money is SOOO cheap, to not put down anything, let alone 20%.
If you are conservative and don't want to purchase without 20% down, I understand that. But sometimes, it makes a lot of sense.
I find that these calculators are often off...
Well they certainly don't make up for a real amortization table, lol. Is there a particular calculator that you prefer? Is it it giving you different results?
There's no way a $200,000 condo would cost around $1080 per month with an FHA loan. FHA requires that you put down exactly 3.5%, so you can only put down 7k. By the time you add on PMI and taxes, you'll be paying a couple hundred more than your current rent.
A mortgage of $1300 is better than rent of $1500, though. It will depend on how long you plan to live in the area and all that, but if this were me, I'd rather buy.
I didn't read all the back and forth but a $200k mortgage (principal and interest alone) would probably be in the $1100 range plus condo fees and insurance and property taxes and PMI.
However, the above is not true. FHA requires a MINIMUM of 3.5% down. You can do 4% down or 18% down (although I don't know why you would do that and pay higher PMI). You could also get a conventional for 5% down (sometimes they will have 3% down programs as well). I also agree with whomever said its not always the best idea to put 10-20% down. We bought a fixer upper, put 5% down and paid for renos in cash.