How much can I afford to pay in rent?

[Cubswin]

Get an adjustable rate mortgage for a lower rate/payments

Thats just bad advice.

[turnipmonster]

so you have an effective budget of 1500 for all your expenses, and you're looking at places that are 900/month?

[StevieG]

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it's nothing compared to the complete butt-f*cking you would have gotten paying rent.

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This logic is no longer true in a good number of markets at this moment.

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High quality post, cubs.

<font color="white">I originally sent this as a PM, but cubs is over the limit</font>

[Cubswin]

yeah.. i missed that the first time around. if you are a typical american male figure $500 a month for food alone and you are quickly outside your $1500 budget.

[dcasper70]

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Get an adjustable rate mortgage for a lower rate/payments

Thats just bad advice.

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Feel free to elaborate.

Based on your other post (very good BTW), your argument for rent vs. own is quite good for many markets. And I'm sure you'd agree that this is not the case in every market across the country.
I was not attempting to compare rent to own, rather ARM's vs fixed.

My argument:
1) ARM's have lower rates compared to fixed. In CT the avg difference is over 1/2 %, hence lower payments.
2) OP insinuated a desire to be able to move within a few years. A 3/1 or 5/1 ARM would be fine in this situation.
3) If I bold it, my criticism must be right, is actually just plain annoying...
4) OP has yet to inform us where he is looking to live.

[Cubswin]

Ive been meaning to clean out my PM box... its been full for quite some time. [img]/images/graemlins/crazy.gif[/img] Anyone know what is the max number of PMs you can have saved?

[jaydub]

dcasper,

Your arguments are naive except for #3.

Here are my arguments for why an ARM is not good right now.

1. Interest rates at a relative low and are likely to increase in the coming years. I will caveat that I have not looked at actual interest rates recently and if this has already occured, my argument sucks.

2. The housing market in many areas is due for a downward turn and this could devastate someone who took an ARM expecting to be out in a couple years. The choice of leave and take a big loss of equity vs pay a much higher, possibly too high, payment is an ugly one.

And no bold either.

J

[Cubswin]

ARMs do have a lower interest rate but rates are arising and will continue to do so for the foreseeable future. The .5% difference with a ARM as compared to a fixed rate mortage will quickly disappear and your monthly mortgage payment could balloon to an ugly number.

The promblem that I have with ARMs is that people are using them because they barely have the means to afford a house. Through ARMs, people are over extending themselves and buying more then they can afford. If you are already over extended when you first buy a property, it can get really ugly when interest rates start moving in an unfavorable direction. Before you know it, your mortagage payment nearly doubles and your left unable to make payments.

[jaydub]

cubsalwayslose,

The house beyond means with ARMs is one reason why the housing market will likely crash but that is not a reason against using one.

J

[Cubswin]

So you dont think the possiblity of someone's mortgage doubling is not a good reason for cautioning someone against an ARM? The fact is, home buyers tend to overextend themselves. Just look at how much lenders are willing to give borrowers and you can see why this is the case. If someone is overextended on day 1 of a mortgage, what happens 1 year down the road when Mr McMansion owner doesnt get that correspnding raise in income to cover the cost of that nice, new, increased mortgage payment?