Does this mortgage payment sound realistic?

What’s the amortization? If you’re working with a mortgage broker then you should be able to trust what he says your payments will be as long as your ok with the amortization.

I have no clue what that word even means.

I do trust our lender, but I’m a worrier and I lose sleep over stuff like this. When it seems too good to be true, I assume it is, especially when everyone around me agrees it is.

You can’t go by what someone tells you that you can afford. They apparently aren’t taking into account what you will be paying out in groceries, utilities, gas, food, entertainment. “They” pre qualified me for 150,000 and I knew I couldn’t afford that much of a payment at that time in my life. If you are going for 30 years, your payment at 3.5% with pmi insurance will be almost 800.00. Then you have to include escrow which is your insurance and taxes. That should be at a minimum another 150.00. So you will be paying at a minimum, 950.00 a month. You can get out of this by cancelling the deal, but you will lose any deposit you made. That seems like a lot to lose, but it is better than trying to pay a house payment you can’t afford.

The amortization is just how long you’ll be paying that mortgage for. Here in Canada you can’t have an amortization of longer than 25 years but the rules may be different where you are.

@tranquilsea Oh, it’s a 30 year fixed loan. Does that answer the question?

It really depends on how much the insurance goes for in that area, also how much you would be paying in taxes. Each of those will make the payments more or less than a calculator can estimate.

Our original mortgage on our house was for $140,000 and our payment was about $750 amortized over 25 years. We had to pay insurance and taxes on top of that which was about another $200 but that amount is completely dependant on where you live.

Were you pre-approved for $140,000? And did you subject your offer to financing?

@tranquilsea Yes.

Your mortgage lender may be pulling some strings for you due to the relationship your husband has with him. I know as my hubby is my banker and he gets us the best rates you can have lol.

@tranquilsea Well the rate is 3.5%.

Mortgage Calculator Look at this mortgage calculator. I think it more closely resembles what your true payments will be. So it does say your payment will be around 800.00. Does that help your peace of mind?

@chyna That one says $774/month, which we can do. We could do up to $1000/month, but it would be VERY tight. We’d only feel comfortable at $850 or less.

I’ve just heard horror stories about people closing on a house thinking their payment was one thing and then, once the mortgage company sold the loan to a bank, the payments end up being much higher. At that point, you’re screwed.

At this stage I’d just go back to the mortgage broker and have him put the numbers together and then make a decision there whether you can afford it or not.

You need to do homework.

First, Google “amortization calculator” and run your own numbers so you have some confidence.

“Amortization” is a fancy word that means “payoff”. According to a simple calculator that I ran, $140,000 @ 3.5% for 30 years will result in a monthly payment of $628.66. On top of that you’ll undoubtedly be paying for mortgage insurance for some years, and you’ll probably have your local property taxes and home insurance included in escrow. (That’s another word for you to look up.)

So figure what your home insurance will cost per year, then figure the monthly payment for that on top of the mortgage. Ditto property taxes. I don’t know what insurance will be, but I wouldn’t expect it to be more than $15 – 20 per month; that’s basically a life insurance policy in case the primary breadwinner dies, and the lender will probably insist upon that.

The only reason this “looks too good to be true” is because it’s a relatively low payment compared to many who have loans with higher interest rates.

Your monthly payment should include three components:

1) the mortgage payment, which is based on the principal, the term, and the interest rate.

2) the mortgage insurance, which will depend on rates in your area, and

3) the real estate tax amount, which also depends on rates in your area.

The first you can calculate in any spreadsheet or financial calculator. The other two are unknowable to those who don’t know where the house is.

As to what you can afford—that depends on your current debts (how much you carry on your credit cards), your income and your expenses (of which debts are a part). As a rule of thumb, I’ve heard people say your spending for your monthly housing payments should not be more than one-third of your monthly after-tax income. Others say it can be a bit higher. It kind of depends on your income and your other expenses.

What kind of car do you drive? How many cars do you have? What are the payments on the cars? Do you spend a lot on food? Clothes? Entertainment? Vacations? Etc, etc?

My suggestion is that you be conservative about your spending. Also be conservative about what you can afford.

It is unusual, in this day and age, to finance one hundred percent of a house. Your relative may think he’s doing you a favor, but I think the traditional wisdom of putting down 20% on the house is a good idea. It protects you from market fluctuations. Maybe you are buying a house that has already seen a big drop in value, but that’s no protection. You don’t know if the economy could get worse (as it surely will if Romney is elected) and you could quickly find yourself upside down on the house (the mortgage costs more than the house is worth).

So I would be very cautious about your mortgage. Draw up a budget. Put all your expenses in. Then increase them by 20%. If you can afford the house under those conditions, I would feel safer about buying it. But if that would be a problem, then I would back out. Also, you have to think about how secure your income is. Could you or your husband lose your jobs and still be able to pay your mortgage? Or could one of you lose a source of income? If not, how stable are your jobs?

You are nervous and rightly so. But there are answers to your questions. You just have to do the budget. Frankly, I’m a little worried if you haven’t done a budget already. This shows you are unprepared. Usually people do this when they first start thinking about buying a house, not much later on when they are about to close.

So do your homework, as @CWOTUS just said, seconds before I submitted this.

@wundayatta I’ve done a budget. I know how much I feel we can afford based on our income vs. our bills. Like I said, we’d be most comfortable with the mortgage/insurance/taxes being $850 or less. I’m not unprepared in that aspect. I’m just not familiar with mortgages and insurance and taxes and everything that goes into buying a home.

No, we could not afford the house payment if we lost our jobs and I honestly don’t know anyone who could. I’m actually a student and I work part-time, but my job is stable. My husband has a good job and he’s been there for almost 2 years. We believe it’s stable, but there’s always a chance someone could lose their job.

This stuff just makes me really nervous because “what ifs” basically rule my life. We fell in love with this house and it would really suck to have to walk away and live in an apartment or something.

Right now we’re paying $900/month because our rent is $500 and we’ve been paying a $400/month dental bill for the past few months. Money is tight, but we’re not broke or anything. That dental bill will be paid in full before our first mortgage payment is due.
Our first payment won’t be due until November.

Right now I’m not working – I’m an unpaid intern. However, I am technically employed as a bank teller, but I’m an on-call floater. I can come and go as I please basically. I’ll be working full time for one month from mid-December to mid-January. I will bring home an extra $1200 at that time. After that, we’ll be getting our income tax returns back, which will help us out if those first few months wipe us out while we’re adjusting. After that, I’ll be working about 15–20 hours per week at the bank while I’m in school and full time during breaks.

Like I said, my husband could always lose his job, but that can’t keep us from living our life. If he lost his job, he’s the type of person that would work as many jobs as he could to make up for the money he was losing, and I will do the same even if it means taking night classes and working full time. By December, I’ll only have 3 semesters of school left before I graduate. Once I’m working full time, we won’t have a problem paying the mortgage.

It all works out in my head, but I just keep imagining a letter coming in after we close on the house saying that our payments aren’t $750 or even $850, they’re $1200. We’re visiting our lender for dinner tomorrow night and I plan on asking him about the PMI and what the percentage is that we’ll have to pay in taxes. If it all adds up after that, we’ll continue. If I’m still this worried, we’ll have to step back and really think about what we’re going to do next.

QUESTION: Do you have to pay PMI and regular insurance each month or just PMI?

You have to pay both. PMI is insurance for the bank that you won’t default on your loan. If you do, they are insured for your loan. Regular insurance is for YOU to insure your house against fire, theft, damage, etc.
PMI insurance is only due if you don’t pay a 20% down on the amount of your accessed value of your home. So when you have paid your load down to 20% of the accessed value, it will come off of your payment. You may have to call the people that have your loan to remind them to take it off though.

Purchase Amount 140,000.00
Estimated Taxes 2,800.00
Down Payment 0.00
Estimated Insurance 1,400.00
Interest Rate 3.50%
Payment 626.83
Term in Years 30
Escrow 350.00
Payments per year 12
Full Payment 976.83

I’m amazed that you are getting a mortgage without anything down. Is one or both of you veterans?

Also, @livelaughlove21, I remember another question you asked recently where you mentioned that you have to get all of your financial paperwork together to present for your loan. Is that correct?

@bkcunningham No, we’re not veterans. It was something about if you have a credit score of 640 or higher, he could get us 100% financing through the FHA or something. I don’t know. But the house is also rural housing eligible, which qualifies it for 100% financing as well.

And yes, that’s true.

@livelaughlove21, are you looking at a fixed-rate mortgage or an adjustable rate mortgage?

@bkcunningham Fixed

I just saw where you are looking at a fixed interest rate. Sorry about that.

Are you looking at a USDA Section 502 loan? Does that sound familiar?

The USDA part sounds familiar, but not the section 502. I’m not sure.

You must meet a certain income level to qualify for this type of low income loan guarantee program.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=pageLoad&requestInfo=DirectProgramInfo&NavKey=loan@11

@livelaughlove21, you work part-time as a bank teller. You have a fantastic resource available at your fingertips through the people you work with at the bank. Educate yourself about loans and mortgages through your fellow employees.

Please, please, please don’t borrow money and not be 100 percent certain about what you are doing and what you are signing. Purchasing a home is very exciting and can create a great deal of stress for a couple. It is the number one purchase you will make in your life and will influence everything about your finances and personal life for many years to come.

@bkcunningham I’m not sure. It may just be because our lender is my husband’s uncle and he’s doing us a favor. He told us if our credit score was 620 he could approve us for the loan, and if it was 650 he could get us 100% financing. I was told by a couple of realtors awhile back that if a home is rural housing eligible, you could finance all of it. And our house is. We’re also getting most of our closing costs waived, the builder is paying 2%, and most of the rest is being taken care of through a lender credit.

I spoke to our lender last night and I feel much better about all of this. He says our PMI is low because of the program we’re going through. It’s about $38/month. He spoke to our county’s tax estimator and got a monthly tax payment of $62. The homeowners insurance will run at $45/month. That, in addition to the bank’s payment, will be around $777 each month. He says it’ll make a lot more sense when we go over the paperwork, but he’s been doing this for 10 years so I’m sure it’ll all work out.

I just worry about everything. I’ll take something someone says, even if I know they aren’t educated on the topic, and lose sleep worrying about if they’re right. I did need some education on the mortgage, but now that I’ve got a little of that, I feel much better about this process. It all seems to add up, and even if it were to go up to $850 for some reason, we’d be tight but fine, espeically once I start working.