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Jan 2015

  • My wife and I were in the market to buy a home and we got preapproved. The credit pull revealed a negative mark on her credit report (sub-600 FICO score) which was for a student loan that went into collections. We ended up using a sizeable chunk of our downpayment to settle the debt under the condition that the negative mark was removed, and we postponed buying a home. At that time, we had a household income of $95k with about $2300 in monthly expenditures.

June 2015

  • We moved to another state to pursue a job (same line of work) for a 60% bump in pay. Wife received a promotion at her old job (she was allowed to work remotely) - our household income jumped up to $134k.

August 2015

  • We sought a financial advisor who pulled my wife's credit, and her score had jumped up to 720, and there was no record of the negative mark. My credit score has stayed consistent between 710-730 during this time.

December 2015

  • We've been using online resources to compare recently sold homes and we're happy with single family homes that fall in the $240-$275k range in our area.

Questions:

  • Is a $250-275k mortgage realistic with a monthly gross income of $11400 and monthly expenditures around $2200-2500 (mostly for student loans)?

  • Is it a good/bad idea to get preapproved again within 1 year or should we wait longer?

  • We've tried to recuperate as much of our downpayment as possible, but we've only been able to save $15k. Should we sit/wait through a market that is super hot?

  • How will the recent paybump and job change affect our chances of obtaining the mortgage we want?

Appreciate your help and welcome brutal honesty and advice.

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  • Is a $250-275k mortgage realistic with a monthly gross income of $11400 and monthly expenditures around $2200-2500 (mostly for student loans)?

Can't really answer the question unless you provide a net income. My concern is that you seem to have a more than adequate household income, however your have only saved $15k. If a third of your income is going in tax, and you're covering $2.5k in student loans, you should still have approx $6k for monthly living expenses. It seems to me that you should be able to save more like $2k - $2.5k a month on this income. So by now you should have enough for a 10% deposit, or should have within the next 6 months.

  • Is it a good/bad idea to get preapproved again within 1 year or should we wait longer?

Given that rates are historically low, wouldn't you want to lock in a fixed rate mortgage for 5 years at a rate now? Rates are going to come under pressure and only have one way to go, and that's up. Borrow as much on a fixed rate now and pay off the mortgage as fast as you can to get the maximum benefit of the cheap money.

  • We've tried to recuperate as much of our downpayment as possible, but we've only been able to save $15k. Should we sit/wait through a market that is super hot?

Recuperate? Did you lose it? Don't you just mean "save" as much as possible. With your good credit score and above average ihousehold income I don't think you should have too much problem getting a 5% deposit down mortgage.

if the market where you are is "super hot" does that mean that it is in recovery mode? I'd be buying into a rising market, and if you get your ducks lined up and look for a good purchase situation (without letting your emotions carry you away) you should be able to secure a decent place at a good price in a rising market, with cheap money.

  • How will the recent paybump and job change affect our chances of obtaining the mortgage we want?

My guess (and without you knowing your net income that's all this can be, a guess) is that you should be able to afford $2-2.5k a month on your income - using a mortgage calculator you can easily afford a $260,000 loan over 30 years. In fact unless you have high living expenses, with your income, you could easily look at a shorter mortgage.

Mortage Calcator http://www.realestateabc.com/calculators/PITI.htm

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  • Thanks @garth. Reason why our downpayment isn't bigger is because of 1) the settlement for my wife's loan, and 2) from unexpected complications from our new baby's delivery. Instead of taking the funds out of our emergency fund, we opted to take it out of the downpayment savings. You are correct - we are saving $2-2.5k every month now. As for the housing market in my area, it's a seller's market. The area we live in (Research Triangle Park) has been grown considerably over the past 15 years and projected growth of the area is very promising. I appreciate your insight. Thanks for the help!
    – hopeful_homebuyer
    Dec 22, 2015 at 5:58
  • Frankly, while every primary house decision involves inspection of the finances, and being judicious in regards to what you can afford and the timing entering the market, this sounds more like a lifestyle decision. You have a family, you like the area, you want security and a place to call your own - no brainer. The only time renting is better than buying is when the market is going down, and buying your own house is still a good idea in a flat market, simply because you are paying equity into your own house. It's a no brainer. Best wishes on your impending purchase.
    – garth
    Dec 22, 2015 at 6:53
  • @hopeful_homebuyer if this has adequately answered your question, please select it as the accepted answer. This will remove it from the unanswered questions list, though others will still read and possibly add more.
    – garth
    Dec 23, 2015 at 3:48
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2 more points to add to Garth's analysis:

1) How long would you plan to stay in the current area? The rough estimate for break-even calculation between renting vs. buying is 5 years in a property.

2) You get to "keep" any amount that you pay down in principal borrowed... assuming property prices at least stay flat. At the same time, you take the risk of the property values in your area declining. If you've got $15K, that's about a 5% down payment for your house and you could end up stuck if prices go south.

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  • 1) My wife and I are settling down in the new area, and we probably won't be more than 15 miles away from where we live now. The area has a large number of opportunities for my line of work, and we both love the quality of life here. 2) We've been warned about this from friends/family as well, but (knock on wood) I am confident property values will trend upwards for a long time. Even so, my wife and I are leaning toward FHA so that we can hold onto the extra cash and use it to pay off our student loans.
    – hopeful_homebuyer
    Dec 22, 2015 at 6:03

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