Real Estate Bargains

4 Responses to “What Should I Warn My Friend About Regarding Buying A New House?”

1. bull_roo on December 4th, 2009 at 11:47 pm

   Some good solid advice is, don’t buy the place unless they really can afford it. An aggressive mortgage broker (or even bank loan officer) will take all his info and then try to get an applicant to buy a house for as much as the formula says they can afford. Still the formula’s aren’t perfect and alot of people are being foreclosed on because they got in over their heads. This is less of a problem today because the excesses of just a few years ago have caused the mortgage industry to really tighten up their standards – but I assure you it still can happen (he can get a loan that he really can’t afford to pay).
   Specific advice on how to avoid this is, first off get a fixed rate loan (so his payments won’t go up 20% a year or so down the road). Figure out what the monthly payment will be for all costs (bank or mortgage broker will figure out this and give him the info) and compare the costs to his current income and decide for himself if he truly can afford this. Also, no reason to buy the most home he can afford. If the banker says he can afford 250K look for something in the 200K range.
   Best luck.

2. Stephanie C on December 5th, 2009 at 1:20 am

   Simple formula: your total housing costs should not equal more than 40% of your gross pay (your before taxes pay). This includes not only the mortgage, but the insurance, and the maintenance as well.
   The foreclosures recently are due to people who were given adjustable rate mortgages – and then when their rates were adjusted, could no longer afford to pay them. Tell your friend that the way to prevent this is to get a fixed rate mortgage.

3. Alterfem on December 5th, 2009 at 1:37 am

   Just be sure his lender is legit, check your state’s commerce department for any complaints.

4. Paige B on December 5th, 2009 at 8:00 am

   well, he should have been pre-approved for a loan. He needs to find out exactly what type of loan he is getting, whether it is a fixed rate or not, and how much his mortgage insurance payments are going to be. If he can afford all of that then he should be alright.