Our team at I Love OC Homes has been getting a lot of questions lately about what people can afford when it comes to purchasing a home. Our goal is always to show customers what they can and can't afford to get the ball rolling on their home buying process.
This week, we sat down with our team’s trusted Loan Officer to go over some common numbers for you to compare your current situation.
When it comes to living at the beach, it’s common that instead of purchasing a house, you could be interested in buying a condo. In the case of a $400k condo with HOA dues of $400, a minimum down payment going with the conventional loan can be 5% down. This is a TOTAL payment of $2,715 per month including the PITI and HOA dues, with NO PMI. This would need around a $75k per year income to qualify, assuming not too much other monthly debt.
It’s also possible that someone who makes $60k per year could own the same condo with a co-signer as co-signers no longer need to live in the property. If there is not enough income or a large number of funds from a parent, the parent can be a non-occupying, co-borrower. For the $60k per year buyer, the maximum payment from a qualifying standpoint is about $2,200 per month. To drop a payment from $2,715 to $2,200, the transaction would require a down payment of approximately $75,000. Down payments can be a total gift from a parent.
Another small point - a lot of condo projects have a higher percentage of tenants than owner occupants. We do not care if there are 10% owners and 90% tenants. As long as your buyer is going to live there, we don't care about this percentage.
Lately, our team has been putting a lot of people into 5% and 10% down products at higher price points. We just closed a couple who lives in Long Beach that bought a second home for $900k in the Temecula wine country putting 10% down. This included a first mortgage for 80% of the price and a second mortgage for 10% of the price. An 80/10/10 combo is another way to avoid having PMI with less than 20% down.
A $750k home with 5% down of $37,500 on a non-PMI loan, with good credit, is a total payment of $4,626 per month. The needed income would be $10,000 per month or $120k per year. If you did a loan with PMI, the payment would be about $350 more per month, even though we can offer a lower rate. The no PMI loans have slightly higher rates whereas loans with PMI have a higher monthly cost. There is also the potential of lowering the rate by having the seller pay some of the closing costs.
Our 7/1 ARM programs have great low rates that we can usually qualify based on pricing and credit score! So if someone is having a qualifying issue, this program can help, but not without a 20% down payment.
We know that looking at these numbers can be overwhelming, so if you are looking at purchasing a home give us a call at (562) 881-8252, and we will run them for you.