Why isn’t my mortgage payment what I thought it should be?

The first step for a homebuyer is to figure out how much you really can afford. You must have a budget to start with. If you don’t have a budget and want to buy a home, you have to crack down and put your thinking cap on and develop a budget. Making a budget is important. It shows you the actual expenses that you have and lets you know whether the expense of home buying will work for you. Let’s say that you have your budget in line and now you have your monthly dollar amount that you can use to spend on a mortgage. Let’s also say that it is $250/mo. above your current rent. O.k. now live within your budget. Start by setting aside into savings the additional $250/mo. Try it for 3 months. How did it go? If it went well you might have the right amount. Now unless your income qualifies you for the USDA 100%* loan or you are a veteran, you are going to need cash in a savings account (min. 30 days) to use for closing costs and a down payment. At this point you should pray that you do qualify for one of the two no down payment programs. Here’s why. The minimum down payment will be 3.5% with F.H.A. financing. That is actually a pretty minimal down payment considering the total amount of money borrowed. For a $200,000 home you would need $7,000. Let’s continue to look at that sales figure since there are some homes in that price range. It is definitely lower than the county average but quite doable. For a loan at 5% and the balance, after the down, will be $193,000. The monthly payment will be $1,036.07. Not too bad. Now don’t forget to add the taxes each month. With local bonds and other Mello-Roos projects I normally do well at computing them at 1.1%. That would be $2,200 per year, or $183.33/mo. in addition to your monthly principal and interest payment. Also, you need to add hazard insurance. Normally you can take the purchase price and multiply by .35%. That number is $700 per year or $58.33/mo. Also to be added. Our total monthly payment is now $1,277.73/mo. If you have to use conventional (NON-FHA) financing you’ll have to deal with mortgage insurance on top of hazard and taxes and it can be quite costly. This article doesn’t allow space to even cover the many ways to fund or pay for that. That insurance covers the difference between your purchase and 80% of the homes value. With a 95% purchase you are looking at coverage for the 15% remainder. This mortgage insurance can be added to your monthly payment or put in escrow to be in addition to your closing costs. I’ve seen it as much as 3%, so it really can be costly. If you can avoid it please do so. Any financing takes a lot of patience on your part. It takes communication with a lender that can get the answers for you. It takes commitment on your part to get the home of your dreams. As always if you have questions, please call me. I’m here to answer them. Bob Wilson 209-532-6610 WWW.financialaccessinc.net * A family of 4 can qualify on the “Direct” program with an maximum income of $46,000 (this loan may help with the monthly payment). A family of 4 can qualify on the “Guarantee” program with a maximum income of $70,750