How Much Home Can You Buy with $97K Income with a Low Down Payment

The Seattle City Council recently passed a ban on evictions during winter months in Seattle. I’m all for protecting people when the weather is hazardous, however winter in Seattle is often quite mild. I’m actually very concerned about this legislation and how it may impact the rental market. I’m betting we will see more people decide to sell their Seattle investment property and move to other cities that are friendlier to landlords. Especially once you factor that Seattle laws prevent landlords from being able to screen potential tenants (it’s first come/first serve despite criminal history) and that landlords can only collect up to 1 month’s rent (plus 25% of one months rent if they accept pets) which can be paid over six months. Landlords are really in a risky position if the property is under Seattle’s regulations.

There are some exemptions to the eviction ban legislation, including income limits. It appears that in order to qualify for the eviction ban, you must have income lower than the median per household. Based on current limits, if you are a single person, the income limit is $76,000. If you are a family of three, the income limit is $97,750. One extra kiddo will raise the income limit to $108,600.

I often see in social media threads people upset about how high their rent is or that it keeps increasing and I wonder why they don’t buy and start investing in THEIR future instead of the landlords. I thought it would be interesting to share how much home one could buy assuming they make roughly $97,000, assuming they don’t have much saved up for down payment and their credit is not perfect.  The scenarios in this post will be based on a low-mid credit score of 620 with a household of 3.

After crunching some numbers, it looks like an FHA loan would probably pencil out the best for someone with credit scores of 620 needing a low down payment. However, if you have served our country, a VA loan is an EXCELLENT option! Contact me for more info.

This scenario compares rent to buying a home priced at $500,000 with a minimum down payment using an FHA mortgage. With a 620 credit score, the total mortgage payment comes in lower for this scenario. Higher credit scores could make a conventional mortgage more appealing.

The first column is factoring in a monthly rent payment of $2500 plus $20 per month for renter’s insurance. Net monthly payments are factoring tax benefits, assuming married filed jointly. The last section is estimating potential net worth with appreciation of the home, plus paying down the mortgage to create additional equity. NOTE: Please contact your CPA for tax advice, I am not a tax professional – I am a strictly a mortgage professional. 🙂

Here’s a link to the report where you can dig in a little deeper to this report.

Back to the summary section, with an FHA 30 year fixed mortgage (second column) the interest rate could be priced with more points to lower the rate, my intent was to keep the cost down for this scenario. The total estimated payment is $3,114.24 with roughly $28,339 estimated funds for closing, including the down payment. This is based on a rate of 3.875% (apr 4.971%).

The last column is using down payment assistance, which is eventually paid off when you sell or refinance the home. The estimated payment is $3,220.96 with estimated funds for closing at $6,336.50. This is based on a rate of 4.250% (apr 5.298%) on the first mortgage and a note rate of 0% on the down payment assistance/second mortgage. NOTE: When the down payment assistance exceeds the actual down payment, it is applied towards closing cost and reserves.

Rates quoted are as of February 12, 2020 at 1:00 pm and are subject to credit approval. 

About the funds for closing with these scenarios… FHA allows the down payment to be gifted by a family member. The seller can potentially contribute towards allowable closing cost and reserves if negotiated in the purchase and sales agreement.

If you are considering buying a home… even if it’s in the next year or two, I HIGHLY  recommend that you contact a licensed local mortgage professional to help you create a game plan. Things that are common sense to you and me may not be the best steps in the home process – such as paying off or down debt vs saving up for a down payment.

Of course, if you are considering buying (or refinancing) a home located anywhere in Washington state, I am happy to help you!

2020 FHA Loan Limits for homes in Washington State

Here is a complete list of FHA loan limits for all counties in Washington for 2020. The new loan limits go into effect on FHA case numbers issued January 1, 2020 and after. [Read more…]

Breaking News: 2020 Loan Limits Announced from HUD

HUD has released the FHA loan limits for 2020.

Seattle – King County, Tacoma – Pierce County and Everett – Snohomish County all have higher loan limits at $741,750 for a single family home.  Homes located in King, Snohomish and Pierce Counties qualify for a higher loan amount as the counties are considered “high cost”. 

FHA mortgage loans are not limited to first time home buyers and do not have income limits. Loan limits do vary by the county the home is located in. Here is a complete list of 2020 FHA loan limits for in Washington State.

If you’re interested in buying or refinancing a home located anywhere in Washington state, I’m happy to help!

 

 

When should you refi a low FHA mortgage rate?

Beautiful luxury home exterior at twilightMany homeowners are hanging onto very low mortgage rates when they should perhaps consider refinancing the mortgage for a higher rate. What??? [Read more…]

2019 FHA Loan Limits for Washington State

HUD had just announced the FHA loan limits for 2019. Homes in the greater Seattle area, including King, Pierce and Snohomish counties, will have a higher loan limit, often referred to as an FHA jumbo. Not all counties received higher loan limits for 2019. Clark, Island, King, Kitsap, Pierce, Skagit, Skamania, Snohomish, Thurston and Whatcom counties have increased loan limits for 2019.

Here is a complete list of FHA loan limits for all counties in Washington. [Read more…]

BREAKING NEWS: 2019 FHA Loan Limits for Greater Seattle

HUD had just announced the FHA loan limits for 2019. Homes in the greater Seattle area, including King, Pierce and Snohomish counties, will have a higher loan limit, often referred to as an FHA jumbo. The FHA loan limits match those of conforming high balance loan amounts in these counties.

The 2019 FHA Loan Limits for homes located in King County, Snohomish County and Pierce County are:

  • One Unit: $726,525
  • Two Unit: $930,300
  • Three Unit: $1,234,475
  • Four Unit: $1,397,400

Stay tuned for a follow up post which will include all counties in Washington state.

 

Common Misconceptions about FHA and Conventional Mortgages

I just received a newsletter from a local real estate agent which had an article about whether buyers should opt for a conventional or FHA loan. I’m pretty certain the real estate agent didn’t write the article, however the author, whoever they are, got a lot of things wrong regarding these two mortgage programs. Many of the items that were wrong are what I think are fairly common misconceptions with these two popular mortgage programs. So I thought this was a grand opportunity to write a post to correct them…I’ll skip the fine hairs 😉 [Read more…]

Rehab Mortgage Loans for Remodeling Your New or Existing Home

Want to build an ADU on your garage? Are you having a hard time finding a home that has your dream kitchen? Whether you are buying or refinancing a home, you may want to consider a “rehab” mortgage. At Mortgage Master Service Corporation, we currently have a couple options available. [Read more…]