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Archive for the ‘Home and Home Improvement’ Category

Five things I learned about mortgages during our closing you probably want to know

Wednesday, October 15th, 2008

mortgage
It really hasn’t been that long since I closed on my first home loan so you might think I would draw on that experience to help with the new closing yet somehow the memory of it and how it all works went the way of the dodo…completely and totally extinct. Of course there were a bunch of years of college and beer to block out anything useful. Regardless I learned a few new things along the way.

1) The lender is not your friend. He/she is going to do whatever they can to maximize the money they make. They do not have your best interests at heart. Just ask all the people with ARMs that are resetting now.

2) Most mortgage companies are the same. Rates and costs tend to even out, they are all fairly equally sharkish in their practices.

3) Your loan is probably going to be sold. If mortgages were a pile of dirt (and with all junk going on lately in the mortgage market, some of them really are) the big banks would be giant vacuums sucking up most of them.

4) Its easy to forget the costs of buying a house are not just the purchase price. Closing costs are huge. We had thousands in closing costs including: appraisal, inspections, broker fee, rate lock, underwriting, title search and examination, survey fee, and a bunch of other crap.

5) The rates you see assume great credit. Most people do not have good enough credit to qualify for the absolute top rates…especially as lenders are cracking down on it.

Bonus: Be careful when you “lock in” your rate. With the market turmoil last week the rates went all the way from 6.25% down to 5.75% and back up to 6.7%. We locked in at 6% and were not too thrilled when the lender would not let us relock when the next day rates went down a quarter point. On the upside, we actually got away pretty cleanly since rates went up considerably since then.

How we’re countering the (slightly) low ball offer we just got on the house

Monday, August 18th, 2008

housing market

As you all know we have been in the ultra fun *cough* house selling market for a few months now. I would say about half of all the showings we have had have been in the middle of the workday. Obviously its a little bit less than ideal peacing out in the middle of the workday to go get a house ready for a showing, and I am always skeptical when someone is looking at houses during the workday. So this Saturday we had a showing that was setup a few days in advance; a real rarity compared to the usual “Hey people are coming to look in half an hour.” So this kind of gave us hope since they were obviously interested in the house to plan ahead to come look at it. As it turns out they they came over and stayed in the house for about 20 minutes. Thats a good sign. Then they wanted to come back and look again on Sunday. Even better sign. They brought a ton of people with them this time and stayed in the house for 30 minutes. Awesome. So last night we’re at my parents house for my sisters birthday and the phone rings: we got an offer. At this point we’re both super excited until we hear the offer details and it gets a little harder:

They want:

-Over 5% off the asking price, which is over 10% off the true value of the house.
-The excluded appliances including brand new stainless steel fridge and the washer and dryer
-The curtains
-Broncos season tickets

Ok, just kidding about the season tickets (got my own wants mixed up there) but they really did ask for the curtains.

We really need this deal to work out so we are negotiating with both sides. Lauren and I had a rough plan outlined for what to do in case we needed to bargain but Lauren and our realtor Vicki Lairson, who has been excellent, came up with a specific plan to get what we need by giving both sides enough incentive to close the deal. Hopefully it will go down as follows:

We offer our buyers:
-The extras they asked for
-Meet halfway on price

Try to get from builder:

-The appliances that we are now out
-A small amount more off the price

This gets everyone what they need. Our buyers get a smokin deal: the house for basically what Lauren bought it for plus appliances, a huge patio, beautiful landscaping including a fountain, central A/C, garage door opener, and all the other work we’ve put into the house (which is a ton). We get the amount we need for down payment, the payment we are comfortable with, and the appliances. The builder gets to close a deal and have our house off their hands and into ours…and they still get to make money. Its impossible to say for sure but several people we know that are in the building industry we have talked to have given us good ballpark figures of what it costs the builder so by those estimates they still get to make decent money. Its a win-win-win for everyone.

So now we just have to hope it all goes down. Ill let everyone know. But now I know some of you are wondering
“Well, what do I do if I get a low ball offer on my house, and Im just trying to sell and I don’t have somewhere else to make up that money?”

Glad you asked.

Be as informed as possible.

The best way to deal with these kind of offers is to know your facts like Bo knows football. The real trick is understanding the market as a whole, the market as it pertains to your area, and how your property fits into the bigger picture. In bad market times like we are in right now it may be that the low ball is really not a low ball at all: its a fair offer considering the market. It all depends. The real truth is that the more information you have, the easier it will be to negotiate on your terms.

Low offers are very common in real estate and its not something to take personally. That is the biggest mistake a lot of people make is to take it personally. If you have done your research and you know that the offer is nowhere near market value make your counter offer near your original price or simply do not even counter. There is no reason to work with a buyer until they are working with you. The less informed you are, the more likely you are to take a low offer.

Selling your house – how to get an edge on the competition in a bad market

Wednesday, August 6th, 2008

The following is the first post from my beautiful and brilliant fiance Lauren about our ongoing battle to sell her house so that we can get into our new house that we are building:

Selling a house in a bad market
house livingroom
So Jesse and I are doing something I don’t recommend to most of you right now (but if not us, then who would you get advice from what not to do on?). Buying high and selling low. We each owned houses before we got engaged and decided his was in a great location to be a college rental, but mine was newer and not in a college area and therefore decided to sell mine to finance a down payment for our new house that we are building. Very risky idea especially in the current market conditions.

My house has been on the market for 90 days. I have had about 15 showings and 1 open house. All the feedback we have received is “such a beautiful well maintained house”, “immaculate house”, “beautiful decorations”, only to lead to let downs of, “we don’t like the area”. Unfortunately, 1 year ago when I bought my house, I was looking for a new house and settled on one that was 15 minutes out of the way. For me, that was okay, but I didn’t consider I would be selling it in a year and that other buyers might not be that flexible.

So why can’t my house sell if it is immaculate!?
In our case, it is because of the area. My realtor at the time oversold me on many features in the neighborhood that have since either not been funded or were just pure lies to get me in to the house. So, what am I doing to compensate for “location, location, location” (the biggest factor for most buyers )? DECORATE DECORATE DECORATE! I have to admit, it has become somewhat of my hobby keeping my house in order and buying nice decorations and accents, but never did I imagine it would all pay off someday (well hopefully). Of the potential buyers we have had, my house is always at the top of the list because it looks like a model home and buyers can imagine themselves living in it. I am convinced after doing some “market research” that my house beats the competition in my area within the same price point hands down. Here are a few tips for getting your house model home ready if you are as crazy as Jesse and I are right now:

1) Clean Your House and Remove all Clutter!

I mean, spotless, you don’t want a water spot anywhere. I know it sounds excessive, but buyers will notice . It might take a weekend to do, but it’s worth it. If your realtor is listing your house online, make sure there is no clutter for the pictures. When I say clutter I mean TV remote controls, magazines, dog/kid toys.

2) Maximize the Amount of Livable Area
Maximize the amount of room/space each room has to offer especially kitchen counter tops and bedrooms. You want buyers to imagine their personal belongings in these areas, not how they can work around your mess.

fountain3) First Impressions Matter!
If your front yard doesn’t match the inside, buyers won’t even consider stopping in. Make sure your lawn has been perfectly manicured and if you have plants make sure they aren’t looking dead. Just a quick cleanup can add to your curb appeal. On that note, make sure that your neighbors have curb appeal too. Most communities are protected by HOAs and therefore you have the right to make your neighbors get their act together as well.

4) Design on a Dime (it’s a good show on HGTV)
I get a lot of my decorating ideas from HGTV and my mom. You would be surprised at how inexpensive a lot of decorating ideas are. You don’t have to empty your wallets to get your house model home ready.

5) Treat every showing as your one shot to sell
It has become quite tedious keeping the house in order constantly (you can’t help rushing out of the house without making your bed sometimes), but realtors will sometimes only give you 20 minutes notice that they would like to show your house! Typically they will give you about 2 hours, but when the conditions are as bad as they are, you cannot say no! My advice is making sure that your house is in order the night before or before you leave for the day. I am lucky that I have a flexible job that allows me to leave on a moment’s notice, but if you do not have that luxury, you will want to make sure the house is spotless.

These are just a few tips that have helped me get an edge on the competition. I am not a professional realtor but I am a professional marketer, so I know how important it is to beat the competition. We just found out today that we might (fingers crossed) have a potential buyer. I will keep you all informed on that!

PMI, the nasty little blood sucking leech thats hard to get rid of

Tuesday, June 17th, 2008

Every once in a while I decide to go and have a little look at the status of my house and check what my mortgage balance looks like.  I don’t look at it that much because, hey, Ive got 25 years left on the loan and nothing has changed much but as I look through transaction after transaction I can’t help but cringe every time I look at the !@#$ PMI payment.  It sort of reminds me of leach.  It sucks a very small amount of blood on any given day, but man is it annoying and over the course of a lifetime really leaks a lot of blood.

Whoa whoa Jesse, what the hell is PMI?

It stands for private mortgage insurance.

It’s what most lenders make you have if you don’t have 20% down payment on your house. What makes 20% the end all be all of lending? Well,mortgage companies have found that if you have less than 20% equity you are are more likely to default on the mortgage. So the good news is that PMI allows you to get into a house sooner such as in my case where I was in college and had a good paying job but not much saved up.  The bad news is that it is money going down the drain.

As it is I pay roughly $70/month in PMI and I have 15% equity in my home.  I would need an extra 15k as of right now to get to 20% equity.  At my current rate that will happen in 2012.  I did some calculations and three years of an extra $70/month would cut off an extra year, an extra $200/month would make it 2 years of paying to cut off the next two.  Thats assuming no house appreciation but at this point who knows with the housing market.  As it stands that additional money would be much better spent on other things, like high interest student loan and getting ready for the new house.  Not to mention my renters (article coming soon) pay the entire mortgage so its just plain easy to let things be.

So in my case guess the leach gets to keep on suckin.

Yes, sucks to be you Jesse, but how about if I do pass the 20% mark?

In that case then yes, you can drop your PMI.  Call your lender to find out who you need to talk to that can get it done.  A lot of times the mortgage company will not drop your PMI on its own, you have to be proactive.  Not only that, but they may try and delay you and/or tell you no.  If it comes to it there was a law passed  a while ago that says that you must be given a written statement as to when you’ll be allowed to cancel your PMI AND the lender must allow you to cancel PMI when your equity is 22% or higher.  So get out there if you’re to that point and save yourself some money!

PMI

Renting out my house – how Ive been doing it

Saturday, May 24th, 2008

As you all know there has been all sorts of stuff going on lately.  I thought about writing about the crazy tornado that came through here, less than three blocks away this week but I will wait on that until we go take some pictures today.   In the meantime, there has been an ongoing effort to rent out my house.  Its been quite an experience, thats for sure.  Here is a collection of things I have learned:

1) If you go with a management company it may be easier on you but it may not be worth it.
The absolute cheapest I could find was 9% of rent per month, they hold $400 for “possible maintenance”  regardless of the fact that I will be doing all of the maintenance and they hold renter’s deposit for the entirety.  Considering I am renting my house out for about $1250 per month, add in the “bank charge” and that is approximately $115 per month in rent lost.  Now lets add $120 for lost interest on the $1650 they are holding.  That comes out to $1500 loss per year.  That was a lot for me to swallow.

2) Nothing is a done deal until its actually in writing
I have had 3 different renters so far that have been “sure” only to have things come up.  Nothing is a done deal until it really is a done deal.

3) Try to find people you know
The easiest tenants to find are those that you know need a place.  In my case I have been  attempting to go through my brother to get his friends into the house.   The jury is still out but hopefully the guys that are interested work out.

3) Advertise Advertise Advertise
I underestimated  what it would take to get people into my house…I figured “its a college town and my house is better than most” which is absolutely true…the problem is that most students are going through management companies so none know about my house. Sign out front, ads in the paper, ads on facebook, ads at the college, the list goes on and on.  If you’re not into the “property scene” you are facing bigger hurdles.

5) Keeping your house in showable condition is tough
Especially when there are people living in it.  Its a constant job to keep things in the proper condition.

Anyone else been through trying to do this?  Any additional tips? Thoughts?

We’re building a house! (and how to negotiate with a builder)

Thursday, May 8th, 2008

One readers email reads: “Jesse, you post less than half the time anymore. I love Matt but are you forsaking us?” As many of you know by now, I got engaged this month. Well I have some other big news: we are building a new house. Thats also why I haven’t been able to post as much lately.

I hadn’t posted on it yet because there has been a ton of haggling and shinanogans going on to make things work. The short story is that my fiance lives a ways outside of Fort Collins, while I live in the college area of Fort Collins. We are remedying this by compromising: building a house right outside of town in a brand new development area. Its a seven step process:

1) Find plot we like
2) Have BBQ and drink beer
3) Negotiate with builder
4) Have BBQ and drink beer
5) Sell Lauren’s house & rent out Jesse’s house
6) Build house
7) Have BBQ and drink beer

First the plot we liked:

Its hard to see there, but behind us is the mountains with a great view. Ill have to put up another pic sometime. Next we picked our house:

evans

Next the negotiation:

Something to keep in mind when you are negotiating when building a new home particularly in the case of a semi custom home is that the builder probably has pre-arranged incentives that may or may not be flexible. For national builders a lot of times they are not too flexible on what they will do simply because they deal in so many masses that it is not worth it to try and bend to every potential buyer. But here are my tips that we used successfully to get roughly $32,000.00 off in incentives and add ons.

1)  Ask about incentive programs
Many times the builder will have some sort of program where they will take money off of the base price of the house if you use their lender.  The trick here is to make sure that if you do use their lender, make sure to insist that the builder also pay closing costs.  The reason for this is that if they are not paying closing costs you may end up with very high closing costs due to the lender knowing you are “stuck with them.”  If the builder is paying the closing costs (which 90% will agree to according to my credit union) their lender will have a harder time trying to tack extra points onto closing.

2) Ask for more
In our case to upgrade the basement from 740 feet to 1500 feet it was an $8000 upgrade.  The builder wouldn’t budge on this but they did offer an extra couple of grand at the design center (non structural upgrades).

3) Have other options
If you are willing to walk away from the builder, many times they will do extra to get you to come back.  Having real alternatives gives the ability to play one builder against another.

Ill be adding and updating as we go along in the process, things are heating up!

Reverse Mortgage: good idea, bad idea, or just an idea?

Monday, May 5th, 2008

Even though things are correcting right now, a lot of people have seen the value of their home double or more over the last eight years, creating an interesting alternative retirement plan for those who did not previously have one.  Great, if you are in that position.  The money train is arriving.  But the most important question for those who are planning not only to live in their house, but to live off of it is, what is the best way to get to my equity?  An interest only home equity is no good, that adds another bill and the interest rate is going to be higher than my rate of return on the money I pull out.  It also doesn’t get rid of any existing mortgage debt.

For some of the more “senior” Americans in this position, the reverse mortgage has become a popular solution to all of these questions.  But what is a reverse mortgage, how does it work, and is it really a good idea?

What is a Reverse Mortgage?

A reverse mortgage is, “a special type of loan used by older Americans to convert the equity in their homes into cash. The money from a reverse mortgage can provide seniors with the financial security they need to fully enjoy their retirement years.”

Just like a traditional mortgage it is a loan against your house, but unlike a traditional mortgage, it is not used to purchase the property, but to extract the equity in either the form of a line of credit or a monthly payout.

How does a Reverse Mortgage Work?

The concept of a reverse mortgage is surprisingly simple.  It is the opposite of a traditional mortgage (forward mortgage).  In a traditional mortgage a loan is issued to the homeowner, generally for the purchase of property, and payments begin immediately, allowing the homeowner to pay the principal down over a period of time.  Assuming we are talking about fully amortizing loans, the homeowner will be able to pay the mortgage off in full at some point in the future, commonly 30 years.

A reverse mortgage also issues a loan to the homeowner, however the homeowner does not make payments on this loan.  Ever.  Instead a first position lien is placed on the property, and the homeowner may receive either a line of credit for some portion of the equity or annuity like payments that will be guaranteed for life.  Interest accrues on the loan and is never paid off.  Rather the balance continues to grow every month.  Upon the death of the homeowner, the mortgage company takes possession of the house unless the heirs make arrangements for repayment of the debt.

What are the benefits to a Reverse Mortgage?

1. If the homeowner is at or near retirement age and continues to struggle to make end meet due to the burden of a mortgage payment, this will relieve them of the monthly payment.  This is a big relief to many retirement age homeowners wanting to retire, but worried about their mortgage payment.
2. This allows the homeowner to use the equity in their house as a retirement fund without having to sell and move.  Many older homeowners have spent the greater part of their lives in their final house.  Many have seen their children grow up there, and have deep roots in the neighborhood.  Selling the house would be a painful option.

What are the drawbacks to a Reverse Mortgage?

1. The interest rate is typically 1.5-2% higher than traditional mortgage rates.  Anyone thinking about using a reverse mortgage should consider comparing the cost and benefits of using a cash out refinance traditional mortgage.
2. The other costs are fairly high.  There is an origination fee which will be the greater of $2000 or 2% of the maximum qualifying amount.  There is typically a mortgage insurance premium equal to 2% of the lesser of the value of the house or the maximum qualifying amount in the first year and 0.5% of the loan balance annual after that.  There are also appraisal fees and a litany of closing costs.
3. The likelihood of keeping the house in the family after the death of the homeowners is unlikely.  However, for anyone considering a reverse mortgage, the likelihood is low under any other option as well.

Is a Reverse Mortgage a good solution?

As an absolute last resort if you are completely desperate.  The high closing costs mean you will lose out on large chunks of equity so you are better off selling and moving into a smaller house or apartment if possible.  There are also various government programs for seniors that want to keep their houses (aside from SS, there are property credits, etc).

Epic battle: Is your house an investment? Matt VS Jesse dueling opinions

Monday, April 21st, 2008

duelMatt:

Real estate is not an investment, it is a liability. Getting rich through real estate is completely based on your ability to distinguish between “good” and “bad.” That, Jesse my friend, is called speculation. But even taken a step further: your home is real estate, real estate is not an investment…you get the picture.

When you buy real estate at the market price, what exactly makes you think you will make a profit at some point? Is it because you think the home will appreciate in value? What makes you think that? The common answer of “because it always appreciates” is the sort of soft logical fallacy a lot of the banker lemmings used to decide to loan money to anyone with a pulse (and some without pulses). What makes you think that with any improvements you make your outcome will be greater than your investment (time + money) put in? Ah, whats the word for that again? Oh yeah, speculation my friend. A mutual fund is an investment, your home is not. And yes, this line of reasoning works…I know you are going to say “but mutual fund increasing over time is based on historical data” but one particular piece of real estate is akin to one particular stock: may or may not increase.

All of that aside, the definition of an investment is something that puts more cash in your pocket than it takes out on a consistent basis. So something that you put money into every month, including interest that goes directly down the drain, is not only not an investment but the antithesis of an investment.

Lets get back to that speculation thing. When you go to sell your house in ten years there are three outcomes: you sell your house for less than you bought/built it for, you sell your house for comparable to what you bought it/built it for, or you sell it for less than you bought it/built it for. When you factor in transaction costs, that means you are throwing away thousands no matter WHAT you sell it for.

Another thing we can’t forget is that you don’t even REALLY get to own your own land/house. Don’t pay your property tax? Now your stuff is the government’s stuff. Even worse news, you can pay your property tax on time for 100 years and the government wants to build a road through the middle of your house? Now your stuff is the government’s stuff (This is called eminent domain).

Jesse:

Well Matt, I know you’re pretty clever for an economics major (just kidding all you eco majors out there) but really, if pessimism was a sport you would be Babe Ruth. Just to set the record straight the definition of investment is actually “the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.”

I understand your line of thinking about appreciation, but lets use some common sense here: when was the last time the average house depreciated over the course of say, 10 years. Your argument may work on flipping real estate but when applied to your HOME it disintegrates faster than a UN resolution in Iran.

The thing is, I can’t remember the last time I lived in my mutual fund. I’m pretty sure I won’t be able to convince my girlfriend that my well diversified portfolio is a great place to come lounge around and I don’t think my friends will like it much either. This alone should be enough to put the argument to rest but lets look a little deeper anyway. Over the course of time you can either be building equity for yourself, or for someone else. So basically you either have some degree of speculation while building equity (buying) or you have a guaranteed negative return (renting). Which one of those two sounds better? Not only that but lets say you have other people living in your home (as I do) that pay you rent. Now they are building you equity too.

Then there is that little tax thing. Ah yes, taxes. Turns out, you can deduct a whole ton of things (you do read my articles, right Matt? 😉 ) if you own a home.

What shall we talk about next? How about capital gains. I love talking about how much I hate capital gains. Every bit we make on our mutual funds we get to pay out a piece in capital gains taxes. Guess what, gains made on your home sale are capital gains free. Thats right, 15% bonus my friend.

Finally lets take a worst case scenario, lets say there is a massive economic collapse. Which is more likely to hold up, your stocks or your land/home? Thought so.

It should be noted both Jesse and Matt own homes and understand there are pros and cons on each side.

Top 5 mortgage deductions I love

Friday, April 18th, 2008

Having finished my taxes I was thinking about just how nice it is to own a home. If I did not own one I would have owed the government money, as it is I got a refund. So what exactly are my favorite tax deductions for home ownership? Glad you asked:

1. Mortgage Interest

You can deduct all your interest payments for your home (up to a certain amount which I have not reached). This is the biggest deduction and the one that makes the biggest dent in my taxable income.

2. Property Taxes aka real estate taxes

Property taxes are fully deductible from your income. You can’t deduct escrow money held for property taxes until the money is actually used to pay your property taxes. A city or state property tax refund reduces your federal deduction by the same amount.

3. No Capital Gains

Ok so this isn’t really a deduction, but its even better. As most of you know by now I love capital gains like I like a swift kick to the face. Thanks to the Taxpayer Relief Act of 1997, buying a home can be a tax shelter. Married taxpayers who file jointly now get to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the last five years. Single people get to keep up to $250,000 tax free. Since I won’t be making $250,000 profit on any home sales anytime soon, I think I can forget about that cap for the time being.

4. Points

Your mortgage lender will charge you a variety of fees, one of which is called “points.” A point is calculated at 1% of the loan principal. At least one point is fairly common and it adds up. One point on a 200k loan is 4 grand. You can fully deduct points associated with a home purchase mortgage. You cannot deduct a mortgage broker’s commission. Refinanced mortgage points are also deductible, provided they are amortized over the life of the loan. Homeowners who refinance can immediately write off the balance of the old points and begin to amortize the new.

5. Home Improvement Loan Interest

If you take out a loan to make substantial home improvements, you can deduct the interest on this loan. There isn’t a dollar limit on this deduction you have to actually be adding something to your house. A good example would be finishing the basement – not just repairing broken things.

How much house can I afford?

Monday, April 7th, 2008

How much house can you afford? I recently set out to figure how exactly how much house I can afford and found out its a more interest question than you might think.

First piece for how much house you can afford: Income
The most general rule about how much house you can afford is to multiply your annual gross income by two and a half traditionally. I personally think multiply your income by 3 is a little more realistic for most people. Theres factors that raise or lower this but its a great baseline to see what your general range is. For example if you make 60k a year, you can, in general afford a house around 150-180k. If you are a couple and make say 100k combined you could afford 250-300k.

Second piece for how much house you can afford: DTI and HER
To determine how much house the bank thinks you can afford they use guidelines called debt-to-income ratios and housing expense ratios. Thats a fancy way of saying “how much you make vs how much you have to pay out every month on. Its the percentage of your month gross income before taxes that is used to pay your monthly debts. Because there are two different ratios they are written in a slash format. Front ratio vs back ratio. The front ratio is the % monthly gross income that is used on housing costs. The back ratio is the same thing except that it includes all of your debts. Thats great and all but the truth is that it is flexible and doesn’t necessarily the best indicator of how much you really can afford- one way or the other.

Third piece for how much house you can afford: Credit score
This might seem obvious but it makes a huge difference in price range. If you have great credit, you can get the best rates. If you have poor credit you cannot get near as good of rates if you can get a loan at all. Fort example taking the best rate today on my credit unions website for a 30 year fixed loan: 5.75%

Lets say you have perfect credit and get 5.75% rate on a $250,000.00 30 year fixed loan. Your monthly payment aka how much house you can afford would be about $1458.00 per month. Lets say you have a credit score a little lower, say 689. Still good, but not perfect…your rate would be more like 6.3% which would give you a monthly payment of $1547. Thats right, almost $90/month more per month for 30 years!

Some other factors to consider:

Mortgage type – If you can only afford it using an ARM, this is more house than you can afford.

Utilities – How much do you anticipate spending on utilities? Remember, the bigger the house, the more utilities are going to cost.

Maintenance – HOA fees can have a large impact on how much house you can afford

Closing Costs – how much house you can afford is actually a little less than you think simple because there are closing costs that include taxes, title insurance, financing costs, realtor costs etc.

Repairs/Remodeling – Does the house require changes once you DO buy it

Furniture etc – Filling out the house can be VERY expensive

Property Tax – There are taxes levied by city county etc that you will have to pay.

PMI – Private mortgage insurance. If you can’t come up with 20% of the purchase price you will generally have to pay PMI which can be 50-200 bucks a month.

Something for couples to consider:

Should you use both salaries in your “how much house can I afford calculations” and mortgage qualifications?

Only if you’re sure both of you will continue to be employed. If one of you becomes disabled or decides to stay home with the children, you’ve cut your income significantly. When it happens, you’ll be happy if you qualified for a mortgage using only one of your incomes. On the other hand if you are both working good jobs and are planning on building your careers then yes absolutely especially if it gives you the quality of life that you are looking for.

So how much house can you afford Jesse? 
Well I am not going to tell you that 🙂  But I will say that the house I like is right on the border and depends on a bunch of other factors.