I have 5yr ARM at 2 years old, a balance of $307K at 5.75%, and a home equity balance of $41K at 5.54%. I think my my 3 bed & 2.5 bath california townhome is valued at $490K. My salary is $113K, liquid assets are $40K, and FICO (Equifax) score is 737. I also have access to $150K cash in family gift money if I needed it. I have two credit cards that I pay in full every month, two car payment totaling $900/mo and one student loan at $59/mo. My stay at home wife wants a larger home because of 4 month old baby, and I am willing to consider it because of low interest rates. My wife likes homes in the same county selling at around $750K. Before I go putting hard inquiries on my credit report, will banks offer me a loan for homes in this price range? Should I refi my home equity line for a larger amount to add more cash to downpayment on new home? Should I sell my home completely, or should I rent it out as investment? From the lender's perspective, should I sell off one of my cars to lower my monthly debt? My wife is OK with this. Do you think mortage rates will stay under 6% for rest of year? Thanks for your opinions and advice.
you keep saying "my wife wants" but what do you want? do you want a larger payment? you would need to figure out what your monthly payment (PITI) would be know if it is doable enough. usually what i tell my clients is to figure out what their monthly net income is, subtract living expenses, savings, and debt payments. what is left over is what you can afford for a monthly payment (PITI). that is the best way to determine if you can afford it. most lenders will do jumbo loans that large. try talking with your current mortgage company to see what they can do for you (especially if you have a good history with them).
Doesn't matter what I, or anyone thinks. Rates will do what they do. Given how low they are, there's a very good chance they will go up. I took a fast spin at your numbers, and I think at this time, when lenders are happy to lend you money, you can probably pull this off. The *real* question is - will you be happy with the results? The question was raised about what YOU want. I would worry that your numbers are right on the edge. I assumed you had $150k of equity, from the net of your sale and some extra money you'd put in. That gets you out of PMI, 20% down. A $600k loan at 6%/30years is 3597. That's right on the edge of the 38% TOTAL debt ratio. There are lenders who will do more than that, but obviously you'd have to get rid of your monthly debt. If either of the cars has a year or less to go, that won't be counted. But you'll have to lower your monthly or put more down. It might make sense to pay off your car loans, since you have cash to play with. There might be higher interest rates on the cars and if you get rid of monthly debt, you'll qualify anywhere. I would suggest NOT looking at an ARM unless you know you'll be moving within 5-7 years. The appeal of the rate today will vanish when your rate goes up on that amount... Do you want to live that much on the edge of what you might be able to afford? How stable is your income?
Our household income is about $50K higher than yours, car payments less, but a little bit more in CC debt. And we're in the deeeeeeeep south so our cost of living is still pretty cheap. Still, we have house payments on about $300K, and we find ourselves stretched. Kids cost A LOT of money, more than you know with a 4month old. Bigger houses cost more to maintain, property taxes could rise (in our last house a rise in property taxes added almost $400 to our mortgage in an 18 month period)...there are so many uncertainties out there. I would personally advise against buying a much more expensive house - better to be cramped for space for a bit than to find yourselves stretched to the limit on your debt and all of a sudden get an unexpected expense that does you in. Just because you CAN pay more doesn't mean you should. As I recall, you're in CA...I would be nervous overextending myself out there with the double whammy of the job market and the fiscal state of the state (ha!). If you have access to $150K, you could invest it for 5 years, let your house appreciate more while your household income increase (here's hoping AHNOLD), and then put down 40-50% and keep your mortgage payment the same. Just my free opinion, worth exactly what you paid for it. Poochie
