Mr. Belonger has written another wonderful post about payment versus rate and that got me to thinking about a client of mine or 2.
About a year ago this young couple came to be and they wanted to get start the process of looking to buy their first home. So we pull their credit and lets just say that a year later we are ready to go.
So I ask the question what payment range will you be comfortable in.....
the response well we are paying $1100 in rent right now and the home we are renting is in foreclosure and we would like to buy it ( keep in mind that I am only speaking with the wife as the hubby is the sole breadwinner for this lovely lady and their 4 wonderful little girls) We really haven't talked about what we can afford and this all came up a little faster than we expected.
(she continues on) the home is listed for $270,000 so what are we looking at ........
Approximately, $2000 with insurance and taxes and MI (I can see the wind just deflate out of her sail).
Sigh, we can afford that, but...........
We spend the rest of our time together roughing out a budget and talking about the time frame for the foreclosure process. The court hearing that is coming up and she as the tennet will be attending. We worked through differnet price levels and what the payments would be, I showed her on the listing page that she had where the taxes were and what insurance might run per month. We worked up what every $10,000 would cost them on a monthly basis and if rates drop or went up just how that would make the payment move (an .25% move is approximately $44 on $265,000. She was shocked at how little it really was)
As we parted ways, her last comment was
it looks like we will be sitting down tonight and working up a budget.
As, I have written before in I dont care what my rate is and Mr. Belonger's point about shopping and shopping for that lowest rate and what it might cost you. Is an 1/8 th of a point that big of a deal or in other words is $20 worth losing your earnest money over becuase you can't close in time?????
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