I feel kind of naive asking about this so that's why I'm going anonymous. We have never had a mortgage so we don't know much about how it all works. There is a house that we're interested in buying. It is a four bedroom two bath and costs $86,600. Now we haven't looked at the house yet so I don't know if we'd be interested in buying it or if it needs any work done to it. So using price of the house I mentioned above we'd have around a $240 a month if we had a 30 year mortgage. Does this sound about right or is there other things added into the monthly house payments like taxes and home owners insurance or any of those kind of things? I know a 15 year mortgage would be better because of the interest we'd be spending over the 30 years, but we're looking at a 30 year mortgage right now because we don't want the monthly payments to be too high. Also what if we find a house that we like but it needs a little work or we want to do some things to it, could we just add that onto the loan for the mortgage or how would something like that work? Although we're going to try to find a house that is move-in ready and doesn't need any or much work done to it.

By Colette on Wednesday, April 23, 2008 - 09:48 pm:

property tax is usually included but not always, in a mortgage. You will have to pay it either way, so you need to factor that and insurance into it.

By Debbie on Wednesday, April 23, 2008 - 10:14 pm:

If you don't put down 20%, most mortgage companies will make you include your property taxes in your monthly mortgage payment. Also, you will have to pay for homeowners insurance. Other then that, you will have normal monthly expenses, such as electric, gas, etc.

If the house needs work, you can get some bids for the work, and sometimes the mortgage company will let you include that with your mortgage. It can't hurt to ask when you are applying for your loan.

By Pamt on Wednesday, April 23, 2008 - 10:16 pm:

I don't understand where you are getting $240/month. I just entered $86,600 at a 6.5% interest rate for 30 years into a mortgage calculator and got $547.37/month. Yes, you will have homeowners insurance, property tax, and also PMI insurance unless you put a down payment of more than 20% on the house. PMI can really increase your monthly payment. Before you buy a house you would have the house professionally inspected and put in your contract that certain things need to be repaired before you buy. Other things that you may prefer to do yourself can be added into your mortgage, but then you will be paying interest on that money too and I wouldn't recommend doing that personally.

Depending on where you live, property taxes, insurance rates, etc., I would imagine that you would probably be paying around $800ish a month.

By Yjja123 on Wednesday, April 23, 2008 - 10:17 pm:

It will not be $240 unless you are putting a huge down payment down.
Look up "mortgage calculator" and type in your specifics.

For a 86,600 loan with no money down it would be:
Monthly payment: 30 Years
Interest rate: 5.750%
Loan amount: $ 86,600.00
$ 505.37 a month
You need to add in property taxes and insurance which varies by state.

By Yjja123 on Wednesday, April 23, 2008 - 10:20 pm:

I have always gone by the idea that you end up paying $100 for every 10,000 in your loan.
So 86,600 would be close to 860.00 in a loan payment.
That works out in my mortgage but we have very high property tax and insurance rates here.

By Yjja123 on Wednesday, April 23, 2008 - 10:21 pm:

here is a mortgage calculator

http://www.mortgage-calc.com/mortgage/simple_results.php

By Debbie on Wednesday, April 23, 2008 - 10:36 pm:

I think you got the $240.00 because you didn't calculate interest. So, your interest rate will also determine your payment amount.

By Anonymous on Wednesday, April 23, 2008 - 11:39 pm:

Thanks for the help on this. I didn't think about figuring in the interest rates. This will be a lot harder than we thought because we don't want a monthly payment of $500-$600. But we're going to begin looking at foreclosures soon, so hopefully we find what we're looking for at a reasonable rate.

By Dawnk777 on Wednesday, April 23, 2008 - 11:58 pm:

Our property tax and property insurance is built into our mortgage. We only had 15% down, at first, so had private mortgage insurance (PMI) for a few years, but have been done with the PMI, for a long time already. We also bought a house that was at the lower end of the range of prices that the bank said we could afford and now are really glad we did that.

We also started our loan with a 3-year ARM, and refinanced to a fixed, at the end of that 3-year term.

By Ginny~moderator on Thursday, April 24, 2008 - 06:04 am:

The mortgage calculator site that Yvonne listed is a good one, and I suggest you use it. And yes, taxes and home-owners insurance will almost certainly be added into the monthly payment (at an rate of between 100% and 110% of the total of taxes and insurance divided by 12 to get the monthly payment - your local taxing body can tell you what the taxes are on a property). Even though we made a 20% down-payment, we had to pay an additional 1/4 point in order to NOT have taxes and home-owners insurance payments required and escrowed. And, your home-owners insurance will have to show the mortgagor as a payee on the insurance.

Points are a payment you make at closing, as part of the "closing costs". They are, in essence, a fee paid to the mortgage company for giving you a mortgage, and come on top of any processing fees. A point is 1% of the mortgage amount.

So when you figure what you can afford, you have to figure the monthly payment of combined principal, interest, and tax and insurance escrow. You also have to figure out how much cash you have to have at the closing to pay the processing fees and points, as they have to be paid in cash or certified check at that time. Three points is not unusual, so on your $86,600 house, you would need nearly $2,600 in cash to pay points, plus the various fees. And you will have to pay for title insurance (usually a percentage of the selling price of the house), and will almost certainly have to deposit an amount equal to the taxes that will be due for the next tax payment. If taxes are due in September and you go to settlement in May, you would have to reimburse the seller for all the taxes the seller put into escrow PLUS paying into escrow yourself for the remainder of the taxes due in September. Mortgage companies generally want to escrow taxes and insurance a year ahead (which is one of the reasons I paid the extra 1/4 point to not have to escrow).

All in all, you might need between $2,000 and $5,000 in cash when you go to settlement. And, you may need to make a deposit with the various utility companies to get the utilities put into your name.

On top of that, you should have at least a couple of thousand available for anything that might come up in the first year. If the house has oil heat, you'll need to fill the tank before heating season starts. If you don't have a lawnmower, you'll need to buy one. You should change the locks to be sure no one else has any keys to the house you buy. And on and on.

I urge you to make a list of all of the things you will have to pay for when you buy a house, and think seriously about it. The sad fact is, you may not yet be in the kind of financial shape that will make it possible for you to buy a house.

By Vicki on Thursday, April 24, 2008 - 06:42 am:

You can also call around to some banks etc in your area and talk to their loan officers. They would be able to give you a great idea of all the closing costs etc for your area as well as talk to you about first time home buyers programs etc that might be out there to help you out. They can also take all your information and pre approve you for a loan so that you might have a better idea of where you can "afford" to start looking as far as price range. It is their job to explain the entire process to people and they deal with people daily that have never had a mortgage. I do urge you to talk to several different loan officers though when you actually get ready to purchase. You would be amazed at how much wiggle room there is in the numbers when you have two or more people competing for your business!

By Debbie on Thursday, April 24, 2008 - 08:46 am:

It is good to get preapproved! A lot of sellers will not accept an offer until you are. However, remember, that the amount you are preapproved for, doesn't necessarily mean it is the amount you are comfortable paying. I know we are always preapproved for more then we want to spend.

By Anonymous on Thursday, April 24, 2008 - 09:28 am:

We bought a house within the last 2 years and our payment is $527.13 that's including mortgage insurance,homeowners insurance and taxes this is a home that we purchased for $41,325 and it has a interest rate at 7.245% this is also for 30 years.

By Ginny~moderator on Thursday, April 24, 2008 - 09:30 am:

Anon with the 7.245% interest rate, I do suggest you look into refinancing in the next year. That's a high rate, from my perspective.

By Reds9298 on Thursday, April 24, 2008 - 05:02 pm:

Not all mortgage companies use points though. Although I've not personally done this, you can also take out a piggy back loan that's for your down payment. Then you use that loan to make a down payment on your mortgage principal, thus eliminating the PMI. My sister is a banker and told me that many people do this to eliminate PMI. Ditto on 7.24% being a high rate - ours is only 5.25%.

Closing can also be paid by the seller, depending on your negotiations. You can also put your closing into the mortgage if needed, but that means you'll be paying interest on that as well which isn't the smartest but may be necessary for you.

When you escrow your taxes and insurance, your house payment WILL be variable keep in mind. It will change every year, and property taxes and insurance rarely if ever go down. The bank takes more than what they need so you are paying them through the year, just to possible get a small refund at the end of the year or owe because your increase didn't meet what they were taking. By making a 20% down payment, you take care of your own taxes and insurance, the way you want to, and not have to pay the bank an inflated amount each month or watch it vary from year to year in your monthly payment.

Ditto Vicki! Also ditto Ginny (I think said it) that your pre-approval will likely be waaay more than you can actually afford. Ours has always been much more than we felt comfortable with, so don't get caught up in the bank's number. Stick with your OWN budget and what YOU think you can afford based on your other expenses.

Also keep in mind that owning a home is EXPENSIVE! There is ALWAYS something to fix, upgrade, or repair.
Good luck!

By Dawnk777 on Thursday, April 24, 2008 - 11:00 pm:

Yeah, Deanna. When the bank told us what they thought we could afford, we thought they were crazy, and stuck to the very low end of that range.

By Anonymous on Thursday, April 24, 2008 - 11:35 pm:

our bank told us we were preapproved for $120,000 i don't think so lol.I'm going anon because i'm the one with the high interest rate. = (