Re: When should one buy a house?
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a downpayment of 20% compared to a downpayment of 0% signifigantly changes the outlook of buying a house. With a larger downpayment, you are more likely to be financed at either a better rate or with less points charged to the mortgage. Just some numbers for comparison:
100k house price, 0% downpayment 6% APR 30 years
Monthly Payment = $599.55
100k house price, 20% downpayment (making principle 80,000) 6% apr, 30 years
Monthly Payment = $479.64
So not only are you paying $120.31 less on your mortgage per month, but consider this.
With the 0% down mortgage, you are paying:
115,838.19 in interest
100,000.00 in principle
215,838.19 over 30 years, assuming no additional monthly payments, making all payments on time, and 12 minimum payments each year.
With the 20% down mortgage, you are paying:
92,670.55 in interest
80,000.00 in principle
172,670.55 total, assuming the same from above.
So in conclusion, by paying a 20% down payment, you are saving $43,167.64. Of course you have to consider the $20,000 up front, but that doesn't factor into mortgage and interest costs. Also, monthly payments typically include Homeowners insurance that is NOT included in these mortgage calculations.. so keep that in mind as well. If anyone sees any errors here, please let me know.
Additionally, with a 35k salary, you probably shouldn't buy a house that costs $200,000. Even with a 5% rate and 20% down, you are looking at a monthly payment of $858.91. $35,000 annual (pretax im assuming here, but lets just say this is your net income for sake of argument).. would be $673.08 per week, or $2692.30 per month. Looking at the ratio of mortgage payment to monthly income, it comes out to 31%. Above we showed that 33% would be a solid point for living expenses(gross), or 25%(net) so this would be very hard to justify, because you would ceartinly go over this 33% ratio when all expenses are figured. Feel free to ask more questions if you have them.
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Good stuff. I appreciate it.
This wasn't really meant to be a question about me however, but more of a general inquiry.
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