Today we are going to answer the question, Can I afford that?  The price point is approximately $300,000.  Since this is a minimal price for single family home, we need to answer the question, "How high can we go?"  The target is to keep the payment at about $2,000 a month.

We have already ascertained that the house will likely be a 3 bedroom, 1 bath rambler style with a big lot and great schools.  When looking at payment, we first have to subtract the monthly cost for real estate taxes and fire insurance.  Each area may have different taxes.  Today we are looking at Arrowhead Elementary where the annual taxes are expected to be $2,900 to $3,200 a year.  We will set aside $300 a month for taxes and fire insurance, leaving $1,700 for the principal and interest, mortgage payment.

The First Mortgage is for 80% of the sale price.  Let's put the sale price at $330,000 to open up the options a bit.  80% of that is $264,000.  As of yesterday the rate for this situation would be 6.125%.  That would put the payment on the First at $1,604.  Whoops!  Already getting close to the total!  Let's look at the Second at 10% of Sale Price and a rate of 8.25%, that would be $33,000 and a payment of $247.92.

$300 T&I + $1,604 + $247.92 = $2,151.92 Total Payment at $330,000 sale price.

I am still amazed at times at my instincts :-) When I first met Mr. and Mrs. Adrianna, I told them to prepare to be $150 over the $2,000.  I swear I hadn't looked at any property or done any of the numbers yet and LOOK AT THAT!  $151.92 over the bogey!  It scares me how accurate instincts become over 16 years of doing this stuff.

So if we can keep the taxes and insurance costs a little under $300 a month and the price at or under $330,000, we should be just fine.

Tomorrow...how much cash do we need to close.  Stay tuned!